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TRUE CO-OPERATIVE MARKETING 
 
 Aaron Sapiro, Legal Counsel for Wheat Growers Association, Tells Difference 
 Betifeen Rochdale, oi the Co-Operative Elevator System Now Used 
 in Midwest States, and the True Co-Operative Plan. Reprint- 
 ed from the Journal of the American Bankers Association. 
 
 Agriculture is the greatest busi- 
 ness in America, but it is conducted 
 with the least efficiency of all com- 
 mercial activities. 
 
 In no line of industry is there so 
 little coordination as in the market- 
 ing of farm products. As a class, 
 the farmers have seen commerce 
 progress broadly in the last genera- 
 tion in every line — grading, field 
 and character of distribution, crea- 
 tion of demand, proper packing, mar- 
 keting and credits; but the sale of 
 farm products by the farmer himself 
 has hardly changed in any important 
 particular in all these years. 
 
 The farmer sells his products to 
 
 buyers and does not understand how 
 
 the price is made or why it varies 
 
 from season to season or from day 
 
 to day within the season. He takes 
 
 what is offered; and he is helpless to 
 
 change, it, or even to understand it. 
 
 Dumping an Evil 
 
 The farmer borrows money on his 
 
 farm and on its products. Neither 
 
 the farmer nor the banker knows 
 
 B what the collateral is really worth. 
 
 \ % They do not know when some out- 
 
 * side action may destroy the loan 
 
 value of the commodity; and by such 
 
 destruction, also lower the value of 
 
 the land and its value as security. 
 
 The farmers of America, generally 
 speaking, dump their products on the 
 markets of the world. Last fall, when 
 the price of cotton was sliding down, 
 hundreds of thousands of farmers all 
 over the country began to fear that 
 thej' would be left with cotton on 
 their hands. They brought their cot- 
 ton into th" local markets in quan- 
 tities, far greater than the commer- 
 cif,:' V. otin (.c-j"<i p- ":tly absort at a" 
 fair price. The buyers were literally 
 ; swamped with cotton. Naturally, they 
 did not offer the highest possible 
 price when the growers were urging 
 "them to take the cotton at any price, 
 so long as they would take it. The 
 price began 'to slide more rapidly. 
 ^ The growers broke the price of cot- 
 
 ton by dumping cotton against cotton 
 at a time when the world markets 
 could not absorb any large quantity 
 of cotton. 
 
 Unquestionably the^rice of cotton 
 would have come down from its top 
 level. The extent of the decline from 
 approximately 43 cents to 11 cents, 
 and' the rapidity of the decline, are 
 the results of dumping by the grow- 
 ers. Manipulation by the speculative 
 interests in cotton had far less to do 
 with the collapse of the cotton mar- 
 ket than the action of the farmers 
 themselves in dumping cotton by the 
 hundreds of thousands of bales, with- 
 out any orderly or intelligent market- 
 ing program. 
 
 In the sale of manufactured prod- 
 ucts, the usual commercial procedure 
 is to merchandise the products, to 
 move the commodities in a sane and 
 orderly way into any of the markets 
 of the world that will absorb them at 
 a price, fair under current commer- 
 cial and credit conditions. 
 
 This is the exact opposite to a sys- 
 tem of dumping products. 
 
 The leaders of the comrhercial in- 
 terests of this country have failed to 
 develop the marketing of farm prod- 
 ucts along the line of intelligent mer- 
 chandising, although they have intro- 
 duced this system into the handling 
 of all other products throughout the 
 world. 
 
 In all industrial production, the 
 world is committed to the policy of 
 group production (embodied in the 
 factory system). Group production 
 demands group capital and involves 
 group marketing. This in turn per- 
 mits the merchandising of the manu- 
 factured products. 
 
 In order to enable industry to carry 
 out this program of group production 
 throueh erouo canital. reslilting in 
 group marketing, the various states 
 have created the corporation, as an 
 artificial entity, which can act like an 
 individual, sue and be sued, exercise 
 distinct legal powers, and possess def- 
 inite legal rights, all in the interests 
 
 920805 
 
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of great commercial progress. 
 Individual Production 
 
 On the other hand, agriculture is 
 characterized by individual produc- 
 tion. We not only recognize this sys- 
 tem of individual production as a 
 fact, but we universally deplore the 
 system of tenantry which dilutes the 
 individual system, tainted by a rem- 
 nant of feudalism. Economists en- 
 courage the development of small 
 farms owned and operated by the 
 farmer residing thereon. 
 
 Agriculture is essentially a matter 
 of individual production. Agricultural 
 products, however, cannot be intelli- 
 gently sold without regard to what 
 the other man has raised; the general 
 production and condition of that 
 product; power of absorption in the 
 domestic and foreign markets; gen- 
 eral trading and credit conditions. 
 
 The marketing of farm products is 
 a group problem. The farmer, in 
 order to merchandise his products in- 
 telligently, must act with other farm- 
 ers as a group. 
 
 With individual production and 
 group marketing, cooperation is the 
 one means to accomplish for agricul- 
 ture what the corporation has done 
 for other industries. 
 
 In California, where cooper- 
 ative marketing has been most 
 successful, financing of farm- 
 er~, ""id c^rrv •rr'! is done alrT ct t 
 entirely through local baniceis 
 or correspondents. The ciop 
 mortgage is rapidly disappear- 
 ing and funds are provided 
 through promissory notes, se- 
 rial promissory notes, bankers' 
 acceptances or drafts drawn 
 by growers and accepted by 
 the cooperative o'-ganizations 
 against non-perishable products 
 stored in public warehouses. 
 The California plan as it now 
 functions shows that it is un- 
 necessary for farmers to estab- 
 lish their own financial machin- 
 ery, when, through proper or- 
 ganization it has been proven 
 that banking methods need not 
 be upset or a new financing 
 medium found. Successful co- 
 operative marketing is the re- 
 sult of cooperation between, 
 growers, bankers, editors, edu- 
 cators and other leaders. 
 
 What is cooperative marketing? 
 ?here have been so many false and 
 
 unbusinesslike attempts at coopera- 
 tive marketing that it is difficult to 
 define the term. Cooperative mar- 
 keting is not a patent medicine or 
 cure-all for the ills of the farmer. It 
 is a scientific system, designed to 
 minimize speculation and waste and 
 to merchandise the products of the 
 farm. 
 
 The aim of cooperative marketing 
 is the sane and orderly marketing of 
 farm products without unnecessary 
 internal competition and with an 
 equal return to every grower for the 
 same quantity, quality and grade of 
 product. 
 
 The method must depend, first 
 upon the legal frame-work, which 
 varies according to the laws of the 
 state, and second, upon the character 
 of the commodity. 
 
 One method may be perfect for 
 perishable products and fail com- 
 pletely with a non-perishable product. 
 With perishable products, such as 
 fruits, there is great variation in pack- 
 ing and grading; and also need for 
 immediate and rapid care of the fmit 
 Therefore, local packing houses are 
 justified for receiving and grading the 
 product. A centralized marketing or 
 distributing system must, however, be 
 created as the selling machine. 
 
 With perishable products, the chief 
 problem is routing, so that the vari- 
 ous consuming markets may receive 
 all that they can absorb at a fair price, 
 without periodic gluts and famines. 
 
 With non-perishable products, a 
 highly centralized system has proved 
 most successful, where all growers 
 deliver the specific product to one 
 association. The central association 
 takes title to the commodity; then 
 grades, pools and markets the prod- 
 uct through one central office. 
 
 With non-perishables, the primary 
 problem is storing, financing, and 
 gradual distribution so that the mar- 
 kets will have a sufficiency at all 
 months of the year, without allowing 
 stocks to be piled up by speculative 
 dealers for manipulative purposes. 
 
 With perishable products, an agenc^ir 
 contract may be - ^fcient; with non- 
 perishable products, title should pass 
 CO the central association under the 
 pale and resale contract to permit the 
 use of the commodity as bank col- 
 lateral. 
 
 Different methods must be applied 
 to products which can be harvested, 
 packed and shipped every month of 
 the year, such as oranges, and prod- 
 ucts that are harvested once a year 
 
but are put into consuming use all 
 through the year. This is one of the 
 marketing differences between eggs 
 and wheat. 
 
 The same method cannot be applied 
 to a product which is sold to the con- 
 sumer in the same form in which it 
 leaves the producer and to products 
 in which a manufacturing or other 
 process intervenes between producer 
 and user. 
 
 The method may further depend 
 upon points of competition within the 
 United States or in foreign markets; 
 or it may depend upon the necessity 
 for localized distribution. Organiza- 
 tions for handling milk must be built 
 around a main city center which needs 
 a steady and sufficient supply of 
 whole milk. But for the handling of 
 the surplus milk in manufactured 
 form, such as butter and cheese, local 
 associations are insufficient and must 
 federate with associations supplying 
 other localities for the intelligent 
 marketing of the milk products. 
 Experts Needed 
 
 Cooperative marketing associations 
 must be correct in their operations. 
 They are sure to fail if they have the 
 wrong aim or the wrong method. 
 But with the right aim and the best 
 methods, they are also sure to fail if 
 they disregard the need for experi- 
 enced and broad-gauged men to con- 
 duct the business; or ignore the me- 
 chanics of operation that parallel mod- 
 ern commercial and banking methods. 
 
 There have been more failures than 
 successes with coop'erative marketing 
 efforts in the United States. Many 
 of these failures were due to wrong 
 aim. The alleged cooperative ele- 
 vators throughout the Middle West 
 failed to merchandise wheat because 
 they were organized from the wrong 
 standpoint, and have hardly yet 
 learned what merchandising means. 
 
 But more failures have been due to 
 management by men who do not un- 
 derstand the technique of coopera- 
 tion; who have had no previous ex- 
 perience in the marketing or mer- 
 chandising of products; or who pl&ce 
 their own personal ambition as a lim- 
 itation on the enterprise; or who ad- 
 vance methods which involve class 
 war instead of coordination of all ele- 
 ments of the community. 
 
 There is necessity for careful study 
 by experts of the particular com- 
 modity and of all the commercial con- 
 ditions affecting it before any specific 
 plan can ever be r ecom mended as 
 the right method of cooperative mar- 
 
 keting for any particular farm prod- 
 uct. 
 
 A vast body of experience serves 
 to guide and to provide precedents 
 for the proper methods and opera- 
 tions of cooperative marketing asso- 
 ciations. The movement is found in 
 every civilized country in the world. 
 
 In the United States, the move- 
 ment has been most successful on the 
 Pacific Coast. In California alone, 
 there are about 80,000 farmers or- 
 ganized into cooperative marketing 
 associations, each built around a par- 
 ticular commodity, handling an aggre- 
 gate of over $250,000,000 worth of 
 farm products annually. 
 
 These associations cover perishable 
 products, such as strawberries, pears, 
 grapes, apples, oranges, lemons, milk 
 and eggs; semi-perishable products, 
 such as potatoes and storage eggs; 
 relatively non-perishable products 
 such as prunes, raisins, dried peaches 
 and apricots; non-perishable products 
 such as walnuts, almonds, small beans, 
 lima beans, canned fruits, baled al- 
 falfa, bottled honey, and grains. 
 
 The experience of California covers 
 a period ranging from twenty-five to 
 three years in the various associations, 
 in all phases of cooperative market- 
 ing — receiving, grading, packing, pro- 
 cessing, standardizing, storing, adver- 
 tising, marketing and- financing these 
 various types of crops, each with its 
 own peculiar difficulties. 
 
 The California experience is suffi- 
 ciently broad to permit a basic analy- 
 sis of the reasons for failure of many 
 specific variety, grade and quality 
 cooperative efforts and for the suc- 
 cess of the surviving enterprises. 
 
 It is safe to assume that associa- 
 tions, which had at least three years 
 of successful opeiation under varied 
 commercial conditions, while prices 
 were going up as well as on the 
 down grade, under liberal credit con- 
 ditions, and under financial stringen- 
 cy, justify critical analysis to discover 
 the fundamental things which should 
 be copied in setting up any coopera- 
 tive enterprise. Such an analysis of 
 the successful cooperative associa- 
 tions in California indicates the fol- 
 lowing essential principles as to 
 methods and activities: 
 
 Pooling Resources 
 
 (1) Cooperative marketing associa- 
 tions must be organized to sell by the 
 commodity and not by the locality. 
 The man who buys a product does 
 not care where it comes from; he is 
 
interested only in a commodity of a 
 certain variety, type and grade. He 
 does not want wheat from Lamed, 
 Kansas, or from Hutchinson, Kan- 
 sas, or from Wichita, Kansas; he 
 wants No. 1 hard winter wheat of a 
 The purchaser of agricultural prod- 
 ucts does not buy geography; he buys 
 a commodity. 
 
 Locality is a problem of production. 
 The commodity is the problem of 
 marketing. In handling perishables, 
 an association may be organized into 
 locals for receiving and grading; but 
 the locals must federate into a central 
 agency for selling. 
 
 With non-perishables, it is J.dvis- 
 able to organize the commodity into 
 one association within the practical 
 limits of each state, and then federate 
 state organizations, if the product is 
 raised on a national scale. 
 
 State lines should usually be ob- 
 served. St^te laws differ, enforce- 
 ability of contracts may be affected; 
 banking methods and customs may 
 differ. From the standpoint of ease 
 of management and recognition of 
 practical difficulties as well as senti- 
 ment, the state is usually considered 
 the limit of organization for any com- 
 modity. The national marketing 
 problem is then solved by federa- 
 tion of state associations handling 
 that particular commodity. 
 
 Fundamentally, it is impossible to 
 merchandise a farm product unless 
 the organization is built from the 
 commodity viewpoint and not the lo- 
 cality viewpoint. Throughout the 
 Middle West there are thousands of 
 grain elevators which call themselves 
 cooperative, built on the Rochdale 
 plan, handling the grain from their 
 neighboring localities on a method 
 which is exactly the contrary to real 
 cooperation. The Rochdale sys- 
 tem, as developed in England, ap- 
 pears to be successful for handling 
 consumers' cooperative problems. It 
 is necessarily localized and necessar- 
 ily works on the basis of patronage 
 dividends. It is, however, exactly the 
 wrong system to apply in farmers' 
 marketing problems. It is impossible 
 to merchandise a farm product 
 through localized Rochdale elevators. 
 Each one of the local elevators be- 
 comes a competitor against every 
 other local elevator. There is no co- 
 ordination and no general selling 
 plan. The marketing of grain through 
 local elevators is very little better 
 than the marketing of grain by the 
 individual farmers. Both systems ab- 
 solutely prevent a merchandising 
 
 program and thus defeat the primary 
 aim of intelligent cooperative mar- 
 keting. 
 
 Successful cooperative marketing 
 associations must be organized to sell 
 by the commodity and not by the lo- 
 cality. Of course this commodity 
 viewpoint must be colored by the 
 specific practical problems of that 
 commodity. Milk cannot be organ- 
 ized like cotton; wheat cannot be or- 
 ganized like oranges. But in every 
 single instance, the commodity view- 
 point instead of the locality viewpoint 
 must be dominant or the enterprise 
 may fasten the pockets of selfish pro- 
 moters, but it can never serve to 
 lighten the burden of the farmer. 
 
 (2) Successful cooperative market- 
 ing associations must be organized by 
 and for farmers only. A landlord or 
 lessor who receives all or part of his 
 rental in crops qualifies as a farmer. 
 They must, however, exclude politi- 
 cians and promoters. They must in- 
 clude only men who have an abso- 
 lutely similar problem, and therefore 
 a unity of viewpoint. 
 
 Cooperative marketing is an eco- 
 nomic remedy for economic ills. Po- 
 litical remedies for economic ills are 
 a snare and a delusion. These associ- 
 ations must be kept free of politics 
 and untried theories. 
 
 (3) Cooperative marketing associ- 
 ations must be established along def- 
 inite business lines. The associations 
 do not need capital. They are organ- 
 ized to market product. They must 
 therefore have the certainty of prod- 
 ucts to market. Thi? depends upon 
 contracts. The basis of successful co- 
 operative marketing is the contract 
 with the grower. These contracts, as 
 developed in California, usually pro- 
 vide that the grower must deliver his 
 specific product, such as prunes, to 
 the association for a term of years. 
 
 One-year contracts or contracts with 
 an annual right of withdrawal are de- 
 manded by the laws of a few states. 
 These contracts are generally defens- 
 ible only when the association has 
 had a long prior experience of suc- 
 cess, and has therefore eliminated the 
 speculative competitor. 
 
 With new associations, a long-term 
 contract is essential. These contracts 
 may range from three to fifteen years, 
 under California experience. The 
 long term gives an opportunity to 
 engage able met^ and make good 
 commercial connections. No great 
 business can be built on a one-year 
 basis. It is practically impossible to 
 engage men who are already in good 
 
^positions; or to >work up a new mar- 
 '^keting demand or new selling connec- 
 tions or new credit methods, except 
 over a term of j-^ears. 
 
 The contract between the grower 
 and the association should be abso- 
 lutely tight. A rope of sand is use- 
 less. The California associations tie 
 the growers with ropes of steel that 
 have been tested in the courts and 
 have been almost universally ap- 
 proved. The contract should contain 
 careful provisions to prevent breach; 
 and these provisions should anticipate 
 not merely liquidated damages but 
 the enforced delivery of the product 
 through equitable remedies. 
 
 The Conditional Minimum 
 
 In many of the California contracts 
 a conditional minimum is provided, 
 without which none of the contracts 
 go into effect. With the prune asso- 
 ciation, no contract was effective un- 
 less the contracts were signed by 75 
 per cent of the total production of 
 California. This provision for a guar- 
 anteed minimum is a unique Califor- 
 nia development, exactly correspond- 
 ing to the demand for the subscrip- 
 tion of a certain amount of money to 
 the capital stock of a bank before it 
 can become operative. 
 
 This minimum guarantee insures to 
 the cooperative association sufficient 
 business to warrant the employment 
 of able men; sufficient funds to war- 
 rant the payment of its overheads 
 without too great a burden on each 
 particular individual; and, most im- 
 portant of all, a position of impor- 
 tance in the markets of that commod- 
 ity from the very day that it enters 
 business. This minimum guarantee 
 differs with the commodity; but it is 
 always calculated as sufficient to en- 
 able the association to have a voice 
 in the market; to have a share in 
 making the price instead of merely 
 taking a price on the current markets. 
 
 The contract, the long-term, en- 
 forceable contract, with a guaranteed 
 minimum, is the basis of the Califor- 
 nia business method. 
 
 Capital is needed only for the erec- 
 tion of physical facilities, such as 
 warehouses or packing plants. This 
 should always be done through sepa- 
 rate subsidiary corporations. Coyken- 
 dall, the brilliant manager of the Cal- 
 ifornia Prune and Apricot Growers' 
 Association, has worked out a plan 
 for financing the erection of plants 
 through a subsidiary corporation, 
 under which the public puts up the 
 money at the start, the marketing as- 
 
 sociation' guarantees the investment 
 with all of the crops that move 
 through it and the growers amortize 
 this investment over a period of from 
 five to seven years out of the pro- 
 ceeds of their crops, through the Asso- 
 ciation, with very little expense to 
 each individual grower. 
 
 The Coykendall plan of finance has 
 been adopted and approved through- 
 out the United States by associations 
 organized to handle cotton, wheat, 
 peanuts and many other products, 
 and is considered one of the great 
 contributions to the development of 
 the cooperative idea. 
 
 (4) Cooperative associations must 
 be non-profit and cooperative in char- 
 ter. The association must make r» 
 profit for itself. It must simply de- 
 duct the cost of doing business and 
 normal commercial reserves and pay 
 the entire balance over to the farmers. 
 The heart of the cooperative idea in 
 California is the internal pool. No 
 successful cooperative association in 
 California buys products from its 
 members at a definite price. The prune 
 growers illustrate the best standard 
 method. About 12,000 growers deliver 
 prunes to the association at approxi- 
 mately forty-two different points in 
 California. The association accepts 
 and grades these prunes by variety, 
 size, and quality, and delivers to the 
 grower a grade receipt showing the 
 number of pounds of prunes he has 
 delivered to the various pools. Each 
 pool contains all the prunes delivered 
 to the state association of any partic- 
 ular variety, size and quality. There 
 may be almost one hundred pools of 
 prunes in the association in any one 
 season. If a grower puts into any 
 specific pool 1 per cent of the prunes 
 in that pool, he gets 1 per cent of the 
 net proceeds. He may have prunes 
 in forty or fifty pools. 
 
 The pools are sold from time to 
 time in various quantities, in any mar- 
 ket of the world. As sales are made 
 proceeds are distributed back to the 
 growers, with sufficient retained to 
 equalize and average the sales 
 throughout the season. At the end, 
 every grower receives the same as 
 every other grower for the same quan- 
 tity, variety, size and quality of 
 prunes. 
 
 One Standard Basis. 
 
 Th California associations handle 
 nothing from non-members. They han- 
 dle the products of their members 
 only; and all of those products are 
 handled on the same standard basis 
 
Every director is a grower. His 
 products are in the same pools with 
 the other members. If the director 
 wants a good price for his own prod- 
 ucts, he has to help get it for the 
 products of every other member. If 
 he wants to impose a charge against 
 the other man's fruit, it likewise has 
 -to go on his own products. 
 
 iH^he California associations there 
 is an absolute community of interests 
 between the directors and the grow- 
 ers. There is no possible conflict of 
 interest, and no possible method in 
 which the power of the association 
 or its merchandising ability or the ef- 
 ficiency of its managers can be used 
 against the interest of any one person 
 and for the interest of any other 
 person. 
 
 Without this internal pool and the 
 resulting community of interest, it is 
 a sacrilege to call an association a co- 
 operative marketing enterprise. The 
 elevators throughout the Middle 
 West represent local mass action; 
 they do not represent cooperative 
 marketing. They buy at fixed prices., 
 and never with the intention of losing 
 money on the transaction. They use 
 the common knowledge and supposed 
 efficiency of central management 
 against the individual grower and not 
 for the grower. They buy from one 
 grower at one price and from another 
 grower at another price. If they make 
 profits at the end, they may declare 
 patronage dividends to their mem- 
 bers, or otherwise. But the patron- 
 age dividend may give some of the 
 returns to the growers at the bottom; 
 it does not equalize the season's oper- 
 ations. 
 
 The Rochdale Plan 
 
 The local elevators of the Middle 
 West, operated on the Rochdale plan, 
 lack two great fundamentals of co- 
 operative marketing. They do not 
 possess the primary aim of coopera- 
 tive marketing, namely, the merchan- 
 dising of farm products. They do not 
 embody the primary result of cooper- 
 ative marketing, namely, the distribu- 
 tion of proceeds so that every person 
 receives exactly the same as every 
 other person for the same quantity, 
 quality, variety and grade of product 
 _ (5) Cooperative marketing associa- 
 tions do not speculate. They must 
 buy nothing from outsiders or from 
 members at a fixed price. The pur- 
 chase of products from outsiders 
 taints the legal standing of the associ- 
 ation and is an economic blunder. 
 The purchase of products from vari- 
 ous members at different prices de- 
 
 stroys any idea of cooperation as 
 such, and simply provides mass action 
 instead of cooperative marketing. 
 
 (6) Even if a cooperative associa- 
 tion has the right aim and the proper 
 method, it will never be successful 
 unless it operates through experts and 
 is conducted on the best established 
 commercial principles. 
 
 There is no place in a cooperative 
 association for an amateur. The in- 
 dividual farmer is essentially a pro- 
 ducer; he is not an expert marketer. 
 In California the farmers, who are un- 
 questionably as able and independent 
 and intelligent as any other group of 
 farmers in the United States, recog- 
 nize that marketing farm products is 
 an expert specialty which demands 
 talents and experience different from 
 that of the ordinarj' farmer. There- 
 fore, they pool their products, elect 
 directors who have an absolute com- 
 munity of interest with them, and 
 then leave the sale of the products 
 completely to those directors. The 
 directors then hire experts — experts 
 for marketing, warehousing, process- 
 ing, storing, financing. They pay ad- 
 equate salaries. The California farm- 
 er does not ask for a fair price for 
 prunes and deny a fair price for 
 brains. 
 
 The California associations do not 
 commit the blunder of engaging a 
 man who is expert at organizing non- 
 commercial farmers' organizations to 
 administer the marketing activities of 
 their selling associations. The Califor- 
 nia groups search throughout the 
 United States for the ablest men. 
 They never say, "How chean": thev 
 simply say, "How expert." The grow- 
 ers recognize that agriculture is the 
 most important business in California. 
 They have organized agriculture as a 
 business, and they employ the ablest 
 experts they can find to conduct that 
 business. The California farmer 
 throws out his chest and boasts that 
 he has a $12,000 or a $20,000 a year 
 man working for him, selling his 
 products on an intelligent, orderly 
 basis. 
 
 Without experts, cooperative mar- 
 keting associations are a failure. 
 
 (7) These associations when organ- 
 ized must work parallel with all com- 
 mercial elements. They must be com- 
 munity builders. 
 
 The association merchandises the 
 crop through its experts. It uses the 
 existing warehouses, packers and 
 others necessary in the process, 
 wherever they will work with the as- 
 sociation. 
 
It is essential to provide adequate 
 financing, so as to make advance pay- 
 ments to the growers on the delivery 
 of their crops. The bankers in Cali- 
 fornia have worked out several 
 methods to enable the associations to 
 "make these advance payments on a 
 large scale. In every instance the 
 financing is done through local bank- 
 ers or through the corresjiondents 
 whom the local bankers invite into 
 the problem. 
 
 The Pacific Coast bankers have 
 provided funds at wonderfully cheap 
 rates, through bankers' acceptances, 
 serial promissory notes, ordinary 
 promissory notes, or drafts drawn by 
 growers and accepted by the associa- 
 tions against non-perishable products 
 stored in public warehouses. They 
 have developed a technique of financ- 
 ing under which the bankers have been 
 enabled to tap the resources of the : 
 Federal Reserve Bank for the grow- 
 ers and the associations. 
 
 The bankers have helped the co- 
 operative associations to work out 
 methods under which the associations 
 secure funds for their members in 
 liberal quantities and at amazingly 
 low interest rates, without upsetting 
 or changing a single banking method 
 or creating a single new financial 
 channel. 
 
 The California experience has 
 proved conclusively that if the grow- 
 ers will organize their own business 
 intelligently, the mercantile and bank- 
 ing elements of the community will 
 be absolutely parallel and coordinated 
 to their needs. 
 
 The California experience has dem- 
 onstrated that it is absolutely wrongi 
 as well as unnecessary, for the farm- 
 ers to attempt to set up their own 
 financial machinery. The existing 
 banks and the existing methods have 
 proved amply sufficient. The farmer 
 in the Middle West has not^yet suc- 
 ceeded in managing his own business; 
 and he should go slow before he tries 
 to set up a new financial system and 
 manage a business utterly foreign to 
 him. 
 
 Cooperative marketing associations 
 have been built up in California as 
 community enterprises. The bankers 
 and merchants and editors and public 
 thinkers have all helped the growers 
 not merely to form the associations 
 but to keep them successful. The re- 
 sult -is that industries which were 
 practically dead have become live and 
 prosperous. The raisin industry which 
 left deposits in the Fresno district in 
 1910-1912 of approximately $1,000,000 
 
 a year, in 1918 brought deposits iato 
 the same district in excess of $24,000.- 
 000. This was done without the aid 
 of the Prohibition Amendment. 
 
 In other rural districts where co- 
 operative marketing associations cen- 
 ter, the increase in bank deposits and 
 in the value of the land has been al- 
 most 300 per cent greater than the 
 normal increase in bank deposits and 
 in land values in unorganized sections 
 and unorganized commodities of Cal- 
 ifornia. ' 
 The cooperative associations of Cal- 
 ifornia have unified communities. 
 They have brought all classes to- 
 gether. They have shown how the 
 growers can help and serve each 
 other; how the growers can con- 
 tribute to the prosperity of the mer- 
 chants and the merchants to the well- 
 being of the growers. They have 
 shown how the banking system, as it 
 now exists, can help the growers 
 merchandise their crops and insure 
 regular and permanent prosperity to 
 the great agricultural districts. 
 
 The cooperative associations of 
 California have standardized products 
 both as to quality and value. The 
 associations have created demands for 
 products which were constantly in 
 fear of over-production. They have 
 searched the globe for markets; they 
 have found new uses for the commod- 
 ities; they have compelled the world 
 to absorb huge crops year after year 
 and still come back for more. 
 
 They have learned how to handle 
 supply; how to store and carry over 
 non-perishable products; how to feed 
 their commodities into the markets 
 in a sane and orderly fashion so that 
 the public, the grower, the merchant 
 -and the banker get the benefit of sta- 
 bilized distribution instead of specu- 
 lative and unintelligent dumping. 
 
 Above all things, the California as- 
 sociations have created a new stand- 
 ard of rural living for the farmers, 
 with resulting prosperity to the rural 
 towns. 
 
 Last year, over four out of five of 
 the farmers in California cooperative 
 associations made profits on their 
 crops. At the same time, over four 
 out of five of the growers of the 
 United States, with superior crops 
 and more universal commodities, lost 
 money on their production. 
 
 The crop mortgage problem is al- 
 most disappearing in California. The 
 erowers are primarily depositors. 
 They use the banks just as the small 
 merchants do. There is a new spirit 
 in the agriculture of California, and_ 
 
that spirit has fused together all ele- 
 ments of the community into one 
 great prosperous whole. 
 
 Cooperative marketing is not a 
 whim or a fancy. It is no particular 
 formula; it is the application of a 
 group of proved principles to any par- 
 ticular farm commodity. Its results 
 are obvious and its methods are 
 simple. 
 
 The farmers, however, can neve* 
 adopt cooperative marketing except 
 through the guidance of leaders. The 
 bankers are the primary guides and 
 leaders of the farmers of this country. 
 It is their responsibility as well as 
 their privilege to show the American 
 farmer what to avoid and what to 
 adopt. The bankers must show the 
 farmer how to avoid the systems that 
 breed class antagonism; that make 
 the farmer distrust all other elements 
 of commercial life; that induce the 
 farmer to set up big banking and 
 financial corporations and to try to 
 play the other man's game before he 
 has mastered his own. 
 
 The bankers must set themselves 
 openly against false farm leaders and 
 
 against false farm systems. ^ 
 
 As the responsible guides of the 
 commercial life of America, the bank- 
 ers should study critically the cooper- 
 ative movement in America, and 
 adapt the proved principles of suc- 
 cessful cooperation to the commod- 
 ities which they finance. If the bank- 
 ers want to keep the farmer produc- 
 ing; and to enable him to adopt a de- 
 cent standard of living and to avoid 
 tenancy, there is only one proved 
 means to accomplish this end. Co- 
 operative marketing associations for 
 long periods of years have demon- 
 strated that they can merchandise 
 farm crops; and by merchandising ^ 
 farm crops they can make enough for 
 the farmer 'without increasing the j 
 cost to the consumer, to encourage j 
 the farmer to continue production; to ; 
 adopt the most reasonable and pro-^ 
 gressive forms of living and standards , 
 of comfort and culture; and to grad-: 
 ually work into commercial independ-; 
 ence and breed the type of farmer; 
 that is good for American citizenship.^ 
 and American ideals. < 
 
tX ,*..,. - "^ 
 
 :x<i^. K.ilJ:' liKiiiN CE ROOJVl 
 
 Your 
 
 American 
 
 Farmer 
 
 Organizes 
 
 for 
 Business 
 
 //oze' He Is Changing Himself from 
 
 the Hapless Victim of Markets 
 
 Into the Master 
 
 Merchant 
 
 By Aarox Sapiro 
 
 Issued by The Department of Information 
 
 American Cotton Gro^irers 
 Exchange 
 
 Dallas, Texas 
 
A M E R icAN Cotton Growers Exchan'ge 3 
 
 I 
 The Kind of Movement This Is 
 
 YOUR American farmer is organizing for busi- 
 ness, and the accent is on the "business." I 
 am using the word in its literal sense, mean- 
 ing trade, commerce. The more popular inference 
 that he is organizing "to get things done" also ap- 
 plies, but it applies without any intimation of threat, 
 menace, or radical measures of any sort. 
 
 For your American farmer is organizing for 
 business because he has found out that his methods 
 of doing business, as they have been conducted 
 heretofore, are the real cause of his troubles today, 
 far beyond any political discrimination that he may- 
 think has existed against him. 
 
 The co-operative marketing movement among 
 American farmers today is purely economic, with- 
 out any political aspects whatsoever, and therein lies 
 a distinction which the general public in consider- 
 ing this movement should bear in mind. 
 
 To say that co-operative marketing leaders do 
 not sympathize with the sounder political aspirations 
 of the farmers, that they do not feel gratified by 
 every new strength which he acquires in the govern- 
 ment of this country, and that they do not look 
 with a certain friendly favor upon the general type 
 of farm organizations which is quasi-political, as 
 well as educational, in its activities, would be folly. 
 Co-operative marketing associations owe much to 
 the help of such organizations as the Farm Bureau, 
 the Farmers Union, and others in the education of 
 farmers to the need for co-operative marketing. 
 
 Further, they have found, as an indispensable 
 factor in their present success, the education of the 
 banking interests of this country by the War Fi- 
 nance Corporation, a credit agency of the United 
 States Government, to the fact that the co-operative 
 marketing associations are safe and sound from a 
 financial standpoint and are fully entitled to the 
 vast credits which they require in their operations. 
 
 But the point is that Government aid and the 
 support of other farm organizations have no part 
 
4 American Cotton Growers Exchange 
 
 in the permanent aims and operations of the co- 
 operatives, once they are set up. They are designed 
 to function completely within our social structure 
 as it exists today, and without requiring any radical 
 change except in the present speculative system of 
 distributing farm products. 
 
 The whole idea of modern co-operative market- 
 ing is to stop the "dumping" and substitute therefor 
 the "merchandising" of farm products. 
 
 Of what we mean by merchandising I shall try 
 to give some idea in a later article. Meanwhile, if 
 we are to understand the co-operative movement at 
 all, it is necessary to realize at the outset what we 
 mean by dumping, and to show that this evil of 
 dumping is at the root of the farmer's ills today. 
 
 Every man knows, or should know, that the 
 farmer receives, on the average, a smaller percent- 
 age of the consumer's dollar than the producer in 
 any other line of American industry. He works 
 harder and longer hours than anybody else, and 
 yet his standard of living today, except in certain 
 marked communities where co-operative marketing 
 has for some time been successfully applied, is a 
 generation behind that of his city brethern. 
 
 Everybody also knows that when the great crash 
 in values began in the fall of 1919, whereas other 
 commodities as a rule declined more or less gradu- 
 ally, and other businesses were able to adjust them- 
 selves to a process of deflation covering many 
 months, the prices on farm products crashed far 
 below the levels indicated by the law of supply and 
 demand almost immediately, and the average Ameri- 
 can farmer found himself practically ruined over 
 night. 
 
 All this is due to one fundamental difference 
 between the farmer and other producers. Other 
 industries are organized, through the factory sys- 
 tem, for group production, and even more highly 
 organized, by the combination of many factories, 
 in many instances, into great mergers of one sort 
 or another, for group selling. 
 
 The farmer has never been, and, because of the 
 inherent nature of his calling, which scatters him 
 
Ameri can Cotton Growers Exchange 5 
 
 in millions of complete production units all over 
 the face of the land, never will be, organized for 
 group production. And, until the coming of co- 
 operative marketing, which is the only thing that 
 makes possible organization for group selling witlv 
 out organization for group production, he has never 
 been organized for group sellng. 
 
 The result of the situation has been as follows: 
 that, whereas other industries, through a few gigan- 
 tic selling organizations, deliver their product gradu- 
 ally, throughout the year, under expert merchand- 
 ising and financing guidance, to the markets of the 
 world as those markets will absorb them, the farmer, 
 producing throughout the year, has heretofore sold 
 the entire fruits of his year's labor within seventy 
 days, on the average, after harvest, each of the in- 
 dividual millions of farmers, knowing nothing about 
 market conditions, knowing nothing about sales- 
 manship, dumping his product in competition with 
 each one of his fellow farmers in that one brief time 
 without regard to the absorption powers of the 
 markets of the world. 
 
 Speculative interests acquire this farm produce 
 for what they choose to give for it and then deliver 
 it to the consumers of the world more or less gradu- 
 ally after deducting as many profits in innumerable 
 turnovers as can be made. 
 
 That is what is the matter with the economic 
 condition of the American farmer today, and that — 
 this dumping process — is what co-operative market- 
 ing is designed to stop. 
 
American Cotton Growers Exchange 
 
 II 
 
 A Little History and Evolution 
 
 A MODERN co-operative marketing organiza- 
 -^*- tion is a highly technical form of business 
 institution. It is devised for the most successful 
 marketing of farm products in the interest of its 
 member farmers, and for nothing else. It bears 
 slight resemblance to any other form of American 
 business organization, and has nothing to do with 
 "consumer co-operation," or co-operative buying, 
 which is a cat of an entirely different color. 
 
 In the next article I propose to give a brief out- 
 line of the fundamental principles of such an organi- 
 zation. Meantime let us have a look at the pro- 
 cess of their evolution. 
 
 No more ridiculous idea can be conceived than 
 that the highest type of co-operative marketing 
 organization, as it exists today, has sprung full- 
 fledged, within the past two or three Aears, from 
 the brain of any one man or group of men. It is 
 the fruit of a long and infinitely varied experience 
 and the evolution of a successful form has been 
 gradual. 
 
 Co-operation, very close to our newest type, while 
 practiced on a lesser scale, has been practiced in vari- 
 ous countries in Europe for the past half century. 
 Co-operation of a less efficient character has been 
 gradually growing among American farmers for 
 fully that period of time. 
 
 For centuries, the farmers of the world have been 
 organizing, in one way or another, with the end in 
 view of acquiring for themselves "middlemen's 
 profits." This is only a part aim of modern co- 
 operative marketing, whose fundamental purpose of 
 eliminating the dumping process has only been under- 
 stood and evolved within the past few years. Fur- 
 thermore, we now recognize the usefulness of the 
 distributive, as distinguished from the speculative, 
 middleman. Therefore past efforts have been 
 mostly inefficient, but they have tended in the right 
 direction. 
 
 The dairy farmers of Switzerland have been co- 
 operating for the past three hundred years. All over 
 Europe, during the first half of the last century, 
 there sprurig up among farmers various forms of 
 co-operative banks and co-operative stores. The 
 success of the famous co-operative store of the forty 
 weavers of Rochedale, in England, which was in- 
 
American: Cottox Gro wers Exchan'ge 7 
 
 stituted about 1840, rapidly spread its story all 
 over the world and resulted in innumerable efforts 
 at co-operative selling upon the Rochedale plan, 
 which, being a plan of consumer co-operation and 
 not a plan of producer co-operation, has produced 
 as many failures as successes. 
 
 The older farm organizations in this country 
 began, shortly after the Civil War, to set up local 
 co-operative wheat elevators and co-operative cream- 
 eries based upon the Rochedale plan which now 
 dot the middle west of the United States by the 
 thousands. 
 
 Sometimes they have been successful and more 
 frequently they have been complete failures. In 
 the majority of cases they have been neither suc- 
 cesses nor failures. That is to say, they have man- 
 aged to operate without either marked profit or 
 loss to their member farmers. In all cases they have 
 had no effect whatsoever upon general market con- 
 ditions, for these little isolated locals, acting inde- 
 pendently, have no way of making any impression 
 whatsoever against the dumping process referred 
 to in my last article. In fact they take part in it. 
 
 IMeantime, an event of world importance, then 
 unrecognized, was taking place in the little Euro- 
 pean country of Denmark. When, about 1866, 
 Prussia took Schleswig-Holstein from Denmark, she 
 deprived that little country of the wheat fields that 
 had been the main source of income from export 
 for her people. The Danes were thrown back for 
 support almost solely upon their dairy products — ■ 
 products which were also raised in practically every 
 country in Europe. It was up to the Danish farmer, 
 then, to devise a means of marketing his dairy pro- 
 ducts so that they could compete with foreign dairy 
 products in foreign lands. He did it by compact, 
 large scale co-operative marketing organization, with 
 merchandising as its aim. And the Danish farmer 
 receives, today, a larger percentage of the con- 
 sumer's dollar than any other farmer in Europe. 
 
 He had evolved the plan of co-operative market- 
 ing, the essentials of which, I will present later. 
 Through it, he has made Denmark the land with 
 the smallest percentage of tenantry and the most 
 prosperous agriculturial country on the face of the 
 earth. 
 
 Meantime, his experiment was not known to 
 American farmers until very recently and the 
 American farmer has worked out his problem inde- 
 pendently, within the past twenty years, in the great 
 
8 American Cotton Growers Ex change 
 
 laboratory of California. During that time, two 
 or three notable co-operative successes were worked 
 out in fruit and dairy products elsewhere in the 
 United States but they were few and far between. 
 
 The California farmer, twenty or more years 
 ago, w^as as badly off, if not worse off, than the 
 average American farmer today. He had, for the 
 most part, perishable specialty crops to sell to 
 markets two or three thousand miles away. He 
 had a freight rate that broke his back. He had a 
 group of speculators on his neck that came very 
 near to putting him out of business. 
 
 During the past twenty years, having learned the 
 fundamental principles from the Danes only since 
 1913, these California farmers organized, through 
 failure after failure, for co-operative marketing, 
 until they had, in the crash year of 1919, giant co- 
 operative marketing units selling twenty-eight dif- 
 ferent types of farm produce, from oranges or 
 prunes to eggs or alfalfa, to the tune of $250,000,- 
 000 of business a year. 
 
 When the crash came, it turned out that, while 
 the average American farmer was ruined, over eighty 
 per cent of the farmers of California made some 
 profit in 1919-1920. With that astounding fact 
 to attract their attention, the farmers of the whole 
 country, including those producing the great staples 
 of the land, began to take their leaves out of the 
 book of Denmark and California, and on the very 
 first page of their new volume is written the organi- 
 zation history of the giant tobacco, cotton, wheat, 
 dairy product and innumerable specialty crop co- 
 operatives that have sprung into being since. 
 
I 
 
 American Cotton Growers Exchange 9 
 
 III 
 
 A Unique Form of Business Organization 
 
 T has been said that the form of organization for 
 a modern farmers co-operative marketing assoc- 
 iation is a very technical matter. Furthermore, the 
 technique has to be varied slightly for each different 
 commodity or type of commodity to which the 
 organization plan is applied. 
 
 For instance, you can't have exactly the same 
 type of contract for a strict perishable like oranges, 
 in which the chief problem is one of rapid and effi- 
 cient routing; as you have for a semi-perishable like 
 eggs, where the principal problem is one of proper 
 processing storage, or packing; or a strict non- 
 perishable like cotton, in which none of the afore- 
 mentioned problems are of very great importance 
 and the chief problem is one of financing over long 
 periods of gradual sale. 
 
 In the organization of all types of commodities, 
 however, certain fundamental principles hold good, 
 and it is a rapid fire outline of these which I pro- 
 pose to give in this article. 
 
 Of late, co-operatives being newly set up in this 
 country usually meet all requirements of this plan 
 at the outset. There are many strong co-operatives, 
 however, which have gradually transformed their 
 form of organization over long years of experience 
 until it now meets these requirements, even though, 
 for some of them, there are apparent differences 
 which do not really exist. Whether, through gradu- 
 al evolution from a bad start, or by recognition of 
 these principles at the outset, all except one or tw^o 
 of the larger co-operative marketing associations of 
 the country fit the five fingers of ■ the following 
 glove : 
 
 1. Organization upon a commodity basis. 
 
 2. Organization under long term binding con- 
 tracts with member growers. 
 
 3. Purely co-operative control and pooling of 
 all produce of -x like grade and variety. 
 
 4. Organization upon a large scale. 
 
 5. Employment of experts. 
 
10 American Cottom Growers Ex change 
 
 Your modern co-operative is organized upon what 
 is now commonl}' called the "commodity plan" of 
 organization because of its primary principle that it 
 is organized about one commodity, or closely re- 
 lated group of commodities, only, without greater 
 regard than is absolutely necessary to locality. We 
 do not organize sections, we do not organize farms, 
 we do not organize farmers. We organize com- 
 modities, and that is all. 
 
 These organizations may or may not have capi- 
 tal stock. The newest and biggest are organized 
 today without it. Where they have to buy ware- 
 housing or processing plants, they organize subsi- 
 diary corporations, controlled by their member 
 farmers, to purchase or build such property. In- 
 stead of capital stock these organizations possess the 
 greatest credit backbone in the world — a guaranteed 
 volume of business. They are organized under long 
 term, binding contracts, covering a stated period 
 of years, during which the member farmer agrees 
 to deliver outright to his association every bit of 
 the commodity that he raises. 
 
 That means that his association can conduct 
 financial operations with these groups of the com- 
 modity as collateral, far beyond the reach of the 
 individual farmer. It means that they can be relied 
 on to fill orders for good customers over a period 
 of years. It means that the next year's crop further 
 guarantees the perfect security of any credit ad- 
 vanced upon the commodity. And it means that 
 speculative interests undertaking to lose money to 
 see that farmers outside the organization receive 
 more than those on the inside, with the idea of thus 
 destroying the unit, have a long and practically im- 
 possible job ahead of them. Whether they have 
 capital stock or not, all commodity organizations 
 have these binding marketing contracts. 
 
 The organizations are purely co-operative. In 
 the conduct of their aflfairs, every member has one 
 vote, and only one. By districts, the members elect 
 a board of directors from their own number, one 
 director from each district, and each one of whom 
 is a grower, since no one except growers can be- 
 
A merican' Cottom Growers Exchan'ce 11 
 
 come members. This board runs the association. 
 The association makes no profit as such but returns 
 to the members all receipts from sales after the 
 actual selling cost has been deducted. 
 
 The products of the members are graded, and 
 pooled by grade, each member's commodity of the 
 same grade and variety going into the same pool. 
 The individual member no longer owns the partic- 
 ular bales, or bushels, or tons, of the stuff that he 
 delivered. He owns an interest proportionate to the 
 amount which he delivered in the pool covering that 
 grade, and every time a sale is made from that 
 pool he gets his share of it. All members that want 
 it, are paid an advance equal to the loan value on 
 the commodity, at the time of delivery. Subse- 
 quently, they receive, in gradual payments through- 
 out the year, the average price received by all mem- 
 bers of the association for the particular grade and 
 type of material which thej' delivered. 
 
 The next principle is organization upon the largest 
 possible scale. The organization need not have a 
 monopoly of the particular commodity which it is 
 handling, but it should be the largest single dealer 
 in its particular field. In other words, it should be 
 big enough to be watched by other dealers in the 
 trade for fair prices, just as in other industries the 
 eyes of the trade are always turned toward certain 
 leaders. Beyond this, large-scale organization is 
 necessary for the greatest efficiency at the lowest 
 cost per capita. It is only with a comparatively 
 large scale of organization that the organization is 
 able to fulfill the fifth and final requirement of 
 the greatest experts obtainable to conduct its tech- 
 nical affairs. 
 
 Your modern co-operative is governed by a 
 farmers board of directors. But its business is 
 actually carried out by the finest merchandising, ad- 
 vertising, warehousing, transportation, financing, 
 insurance, and other experts that money can buy. 
 
12 American Cotton Growers Exchange 
 
 IV 
 
 What Merchandising Means 
 
 "\7'OUR farmers producing a certain crop have 
 -■- set up their organization. They are organized 
 upon a big scale, compact and powerful. Now, 
 what do they do with that organization ? Set out 
 to stop dumping? Yes. But that is only the nega- 
 tive end of the process. The positive end is that they 
 set out to merchandise their product after the most 
 advanced methods of big American business. 
 
 The large manufacturer, the merchandising ex- 
 pert of magazine and newspapers, the big merchant, 
 will know instantly what we mean by merchandis- 
 ing. The average American business man probably 
 has an idea of the word that nowhere approaches 
 adequacy. "Oh, yes," he says, "they probably mean, 
 first you advertise like the dickens and then you put 
 a new line of pep talk into your force of salesmen." 
 
 Well, that isn't so bad at that; though it is a 
 first glimmering and nothing more. Advertising 
 does play a tremendous part in the game. Anybody 
 who reads the magazines and newspap:rs today and 
 sees certain brands of California or Florida citrus 
 fruits, raisins, and other food products advertised in 
 magnificent and costly displays, ought to know 
 without being told that the co-operative marketing 
 associations which are handlers of the products in 
 question are among the foremost believers in adver- 
 tising in this world. Three California co-operatives 
 are alone spending $4,000,000 this year for adver- 
 tising. They swear by it. But it is only one part 
 of the game. 
 
 Merchandising is a bigger and deeper thing than 
 that. Merchandising is everything that enters into 
 the business of increasing permanently the demand 
 for your product. Merchandising by a certain 
 co-operative marketing association has increased 
 b\' six times the American consumption of one well- 
 known California food crop within the last ten 
 years alone. Advertising did a lot of it, but adver- 
 tising did not do it all. 
 
American Cotton Growers Exchange 13 
 
 The first thing that good merchandising requires 
 is to make the supply of the product as attractive 
 as possible. You will find the co-operatives chang- 
 ing completely the grading systems for the goods 
 that they handle the instant they enter the field. 
 You will find them spending large sums and tre- 
 mendous energies in the education of their growers 
 to the production of better and better quality. You 
 will find them improving the packing and the pro- 
 cessing of goods. You will find them developing 
 new uses for these goods. 
 
 The first year the California Associated Raisin 
 Company, now the Sun-Maid Raisin Growers, in- 
 troduced the use of raisins in the baking of bread; 
 more raisins, it is said, were baked in bread by 
 American bakers than had been consumed by the 
 entire country before that co-operative organization 
 came into existence. Last year, almost as many 
 more were sold in the form of a new five cent 
 package. ; 
 
 A certain California Poultry Producers Associa- 
 tion sells eggs in the markets in New York City at a 
 premium of 3c a dozen over eggs raised right in 
 New York State, because of the use of certain 
 packing processes which they have evolved, which 
 assure a better and more reliable product. 
 
 Merchandising means the improvement of distri- 
 bution to existing markets, both as to time and to 
 place. It means the avoidance of glutting one 
 market while another is starving for the goods. It 
 means the development and use of storage methods to 
 carry over such portions of the crop as cannot be 
 disposed of immediately at any given time. 
 
 It means the constant creation of new markets, 
 new places where the goods can be sold as well as 
 the development of new uses. It means the develop- 
 ment of manufacturing processes and uses for by- 
 products. It means, as I indicated at first, every- 
 thing that tends to increase the total consumption of 
 the product. 
 
 And above all, merchandising includes that com- 
 plete and skillful generalship over the distribution 
 of the product which has for its aim the gradual 
 
14 American Cotton Growers Exchange 
 
 feeding of the commodity to the market onlj' so 
 fast as the market will absorb it and in a way that 
 will tend to maintain as steady a price level as 
 possible. 
 
 This process, requiring the completest knowledge 
 of market conditions and the highest type of skill, 
 is nothing more nor less than the positive antithesis 
 of the dumping evil which the whole system is 
 designed to remedy. A wise control over the flow 
 of the general supply of a product to the market 
 means that, once it becomes general, the prices of 
 farm products will be determined by the balance 
 of supply and demand at the point of consumption, 
 as is the case with other merchandise today, and 
 not by the balance of wildly flunctuating demand 
 at point of consumption against a known supply for 
 the year at the point of production. It is this last 
 state of affairs which gives us the absurd and harrow- 
 ing fluctuations from month to month, from week to 
 week, and even from day to day in such a product, 
 for example, as cotton, whose real value cannot 
 possibly change within twenty-four hours to the 
 extent that it sometimes appears to change in our 
 market quotations. 
 
 Your co-operative marketing association mer- 
 chandises, and merchandises to an extent unequalled 
 by any other form of business organization in the 
 world. It has got to. It must make this contri- 
 bution to progress and civilization or defeat its 
 own ends. Why, I will show later. 
 
American Cotton Growers Exchange 15 
 
 V 
 
 JVhat It Does For The Farmer 
 
 HERE, then, is a process designed to transform 
 the farmer from the slave and the hapless vic- 
 tim to the merchandising master of the markets of 
 the world. Furthermore, it is a process which has 
 attained its ends wherever it has been consistently 
 applied. 
 
 A dozen years ago, Fresno, California, a town 
 which one might call the capital of two of the 
 biggest co-operative marketing associations in that 
 State, was down and out. Traveling salesmen had 
 quit "making" the place because the credit of its 
 merchants was not any good. The little city, like 
 many moderate-sized communities, most of which 
 don't realize it, was absolutely dependent upon the 
 welfare of the surrounding agricultural population, 
 and the surrounding agricultural population was 
 dead broke. 
 
 Today, your last census will tell you, Fresno, 
 California is the richest place for its size of any 
 town in the United States, Of the fifty richest 
 agricultural counties in America, ten are in Cali- 
 fornia. The first two are in California and five 
 of the first ten are in California — and California 
 is the land of specialty crops between two and 
 three thousand miles from its principal market, 
 with irrigation problems, the competition of Japan- 
 ese farm labor, and other limitations that do not 
 apply to many of the other rich agricultural sections 
 of the United States. California stands first in 
 rural roads, first in rural schools, and first in the 
 salaries paid to rural school teachers and rural 
 ministers. 
 
 Co-operative marketing did this — did it prac- 
 tically all. 
 
 Now such a development as this is the fruit of 
 many ^-ears of correct co-operation, but sometimes, 
 the effect of proper co-operative marketing is almost 
 instantly apparent. 
 
 Down in the white Burley Tobacco districts 
 of Kentucky, Ohio and Indiana where Judge Robert 
 Bingham, with the help of other far-seeing leaders. 
 
16 American Cotton Growers Exchange 
 
 organized the tobacco farmers almost overnight into 
 the Burley Tobacco Growers Association, which 
 sold about 70% of the entire Burley tobacco crop 
 in the first year of its operation, there are families 
 of Kentucky tobacco farmers that have bought shoes 
 for the feet of their children this fall for the first 
 time in three years! 
 
 It does not always work anything like that. You 
 don't usually control a crop to that extent in the 
 first year of operation. You have the mortgage 
 difficulty to overcome, vast numbers of more or 
 less ignorant farmers to educate to a loyal support of 
 their organization. The American Cotton Growers 
 Exchange represents this year, the second of its 
 operation, only between one-fourth and one-fifth of 
 the American cotton crops and it can't get hold 
 of all of that because so much of it is under mort- 
 gage, but it is functioning efficiently and the cotton 
 co-operative movement is running forward by leaps 
 and bounds. The new wheat movement is not even 
 this far advanced. 
 
 The great majority of specialty crop organiza- 
 tions, in the localities where they have been set up, 
 are meeting with genuine success at the outset ; but 
 every once in a while there are hideous blunders of 
 a costly nature. I know one specialty crop organi- 
 zation in the East, properly organized and controll- 
 ing nearly half of the product, v/hich almost came 
 a cropper in the first year of its organization through 
 trying to handle business before it was prepared to, 
 then being horribly mishandled by a grossly incom- 
 petent manager, and, in addition, being tricked into 
 huge losses by a speculative group which formerly 
 controlled the industry. Fortunately, however, 
 these tumbles, very frequent in the past, are rare 
 today and recovery is prompt. The organization in 
 question is on its feet again and doing business this 
 year. And all over the country new organizations 
 ^re springing up almost every day. 
 
 They mean, as immediate results for the farmer, 
 tetter prices, steadier prices, opportunity for greater 
 
American Cotton Growers Exchange 17 
 
 production, direct sale from producer to consumer, 
 the elimination of speculative waste, and cheaper 
 money. 
 
 All but the last may be called the direct results 
 of proper merchandising. The last is the fruit of 
 these results together with the fruit of organization 
 in a form that can approach sources of credit un- 
 available to the individual farmer, and approach 
 them with a security for loans of much higher 
 value than the individual farmer can offer. The 
 value of the crop is not greater than when it is in 
 the hands of the individual farmer, but that value 
 remains steadier and is backed by the valuation of 
 succeeding crops when it is being handled by co- 
 operative organizations. Some of the co-operatives 
 are today borrowing 4^2 /C money for their farmers, 
 and the same machinery which thus makes safer 
 distribution credits will eventually prove the means 
 of changing the production credits systems of the 
 country to meet the farmers' needs without strain 
 upon our banking interests. 
 
 But, more, again, of this in the subsequent articles. 
 Here we have, to summarize, a great boon for the 
 farmer, a solution of his problems. It is a powerful 
 solution, a solution dealing with the distribution 
 of products that are a life necessity to every man, 
 woman and child, and therefore, a solution in which 
 the consumer is as vitally interested as the producer. 
 The suceeding articles of this series will deal with 
 the effect of this co-operative marketing process 
 from the non-farmer's viewpoint. 
 
18 American- Cotton- Growers Excha nge 
 
 VI 
 
 Jf'hat It Can't Do to You 
 
 NOW, let us talk a little about the effect of 
 this business upon the consumer. Farmers 
 and their families, and the tiny rural communities 
 which are dependent almost entirely upon their sup- 
 port, themselves constitute nearly half of the con- 
 sumers of this country. Nevertheless, we will bar 
 them from this particular phase of the discussion. 
 The consumers who are to be considered here are 
 the non-farming half of the consuming public. 
 
 Admittedly, these new co-operative marketing 
 associations are compact and powerful in form. 
 Nay, more, a few of them control the sale of more 
 than half of the commodity in which they are opera- 
 ting, and all of them are striving to become as large 
 as possible and obtain control of a dominant portion 
 of their crop. These crops are necessities which you 
 and every other man must buy to eat and clothe 
 yourself. Therefore, it is possible that, before you 
 understand, you view this movement with alarm 
 and say to yourself, "Good Heavens! What is this 
 — another group of terrible trusts which is spring- 
 ing up to turn Mr. Common People upside down 
 and shake the last nickel out of his pocket?" 
 
 Nothing could be further from the actual truth, 
 which is that these co-operative associations have got 
 to make themselves a positive benefit to you, the 
 consumer, or go out of business. 
 
 The Supreme Court of the United States not long 
 ago had before it proceedings to dissolve the United 
 States Steel Corporation, which sells something like 
 fifty per cent of the steel produced in the United 
 States. In spite of our anti-trust laws, the Supreme 
 Court refused to do this, holding that the United 
 States Steel Corporation might be a practical monop- 
 oly, but that it was a beneficial monopoly and not a 
 trust in the offensive sense. It did not, found the 
 Court, indulge in pernicious practices to raise prices, 
 it did not put competitors out of business, and, in 
 general, it tended to do good to the general public 
 by its stabilizing influence in the steel market, and 
 not to do harm. 
 
American Cotton Growers Exchange 19 
 
 That decision was based upon the way in which 
 the United States Steel Corporation was being 
 managed. At any time, it might conduct itself 
 differently and come under the provisions of the anti- 
 trust laws. The case with your co-operative market- 
 ing association is very different to that. The co- 
 operative marketing association has not the power 
 to become an offensive trust, even if it wanted to, 
 and here is the reason in a nutshell: 
 
 A co-operative marketing association, no matter 
 whether it controls 10% of the crop or 95% of the 
 crop, cannot control production. 
 
 This is not the case with your industrial trust 
 or even with a perfectly organized labor organiza- 
 tion. Your trust can shut down its factories. Your 
 labor union can call its workers out on strike. But 
 no co-operative marketing association can make the 
 American farmer strike, or shut down the American 
 farm. 
 
 Please note that I am not saying that the co- 
 operative associations do not do this, I am saying 
 that they cannot do it. It is beyond their power. 
 
 One reason is that they are specifically given no 
 such power in their contracts with their member 
 farmers. If they were, they would become illegal 
 as being in restraint of trade, just as any other 
 monopoly of similiar size would come under the com- 
 mon law governing restraint of trade. They have to 
 take in any farmer who wants to join on the same 
 basis as every other farmer, and they have to handle 
 every bit of the product which he produces. 
 
 Another reason is that even if they were given 
 the nominal power to control production they could 
 not exercise it. Attempts to make the farmer cut 
 down acreage or otherwise curtail production in 
 the face of higher prices have been made again and 
 again by farmers' movements of a different type. 
 They have always failed. The only production 
 reducer on the American farm is production at a 
 loss; and then the farmer, hoping always to win 
 "next year" in the \vild gamble that now character- 
 izes his business, produces in the face of loss to a 
 greater extent than any other t3pe of producer. 
 
20 American Cotton Growers Ex change 
 
 Therefore, it follows as a matter of economic 
 law, that the instant the co-operative associations 
 secure better prices for their farmers, barring the 
 vicissitudes of nature, you are going to have a 
 greater production the following year. The funda- 
 mental law of supply and demand always holds in 
 the long run as the iron law of prices, and that means 
 that unless consumption of the product has been in- 
 creased, lower prices must follow increased pro- 
 duction. 
 
 So you can see that it is absolutely necessary for 
 the co-operatives to increase consumption so that 
 the increased consumption will absorb the greater 
 supply of the product which the benefits they 
 confer upon their farmers bring into being. You 
 cannot make the consumer buy things in greater 
 quantity than he bought them before. You can only 
 induce him to increase his purchases. And the only 
 method of inducing him is to give him greater value 
 for the money that he spends. Thus j^our co-opera- 
 tive association cannot hold up the consumer, but 
 must actually benefit him, or defeat its own ends. 
 How it benefits him will be the subject of the next 
 article. 
 
American Cotton Growers Exchange 21 
 
 VII 
 What It Does Do For You 
 
 THE co-operative association, then, has got to con- 
 fer a benefit upon the consumer, to take care of 
 the increased production following upon every bene- 
 fit which it confers upon the producer. It does this 
 in many ways. 
 
 By eliminating the purely speculative middle- 
 man and dealing directly with the consumer, the 
 legimate distributor, or the manufacturer, the big- 
 gest part of the profits — an entirely unnecessary 
 part — now taken out in the present sj'stem of dis- 
 tribution, is saved to the farmer. By combination 
 into great sales units much of the present legitimate 
 overhead expense of distribution is saved. By the 
 ability of these units to secure cheaper money for 
 distribution credits for the farmer, the difference 
 in interest is saved. By efficient distribution, doing 
 away with the glutted markets and their conse- 
 quences of rotting food both in the markets and 
 in the fields other great wastes are saved. By proper 
 warehousing, proper processing, proper forms of 
 transportation, the present complete destruction of 
 much wealth each year, due to inefficiency in these 
 matters, is saved. 
 
 The extent of these savings in many instances 
 can be imagined when it is truthfully told that co- 
 operative associations have frequently succeeded in 
 doubling the farmer's return for a given product 
 without raising the price of that product to the 
 consumer one cent. The result in these cases has 
 been a double production and the consuming world 
 has absorbed that production for the reason that 
 the co-operative association can and must share 
 some of its savings with the consuming public. 
 
 There are various ways of doing this. It is true 
 that in only a part of the cases will you find the 
 consuming public given cheaper prices on the pro- 
 duct. While frequently the case, that is only abso- 
 lutely necessary where the product has already been 
 merchandised, by competent manufacturing interests 
 of a non-speculative character, to its fullest values. 
 Very few, if any, such products exist. 
 
22 American Cotton Growers Exchange 
 
 The way in which the sharing is mostl}* done is 
 by increasing, through good merchandising, the value 
 of the product to the consumer. He does not neces- 
 sarily pay less money, but gets a thing of greater 
 value for his money. Otherwise, as I have tried 
 to drive home again and again, he would not in- 
 crease his use of the product. 
 
 When you grade a product so, for example, that 
 the consumer can get exactly what he wants and 
 does not have to take with it a lot of junk that he 
 does not want, you are increasing the value of that 
 product to the consumer. When you make it whole- 
 some and attractive in form, when you furnish 
 guarantees of quality with it, when you educate him 
 to a score of uses that lie in that product which he 
 did not know before, you very distinctly increase 
 its value to him. And unless you can make him 
 recognize that increase of value by such methods 
 you must give him the product for less money. 
 There is no other way out. 
 
 Remember this: The co-operative association, 
 being composed entirely of producers, has got to 
 sell all of the crop. The speculator does not care 
 whether the crop is sold or not — he is interested only 
 in the part he cares to handle. For all he cares, 
 it can rot in the producer's hands and the consumer 
 can starve, a situation which, in fact, helps him to 
 pay the producer little and charge the consumer 
 much. He is not interested in volume; he is inter- 
 ested only in the profit margin. 
 
 But perhaps the greatest contribution of all that 
 co-operative marketing makes to the value of the 
 product, from the consumer's viewpoint, is its tend- 
 ency to stabilize those values. Your manufacturing 
 consumer, for example, will use the product to much 
 greater extent, and- can afford to manufacture it 
 for final consumption on a much narrower margin 
 of profit, when he can place greater reliabliity upon 
 the probable cost of his raw material than he is able 
 to place today. 
 
 It may not be generally known, but the American 
 Cotton Manufacturers Association, for example, at 
 its last conventien roundly and unequivocably in- 
 
American Cottom Growers Exchange 23 
 
 dorsed the cotton co-operatives, saying that the 
 manufacturers association "commends the co-opera- 
 tive marketing idea in the South's greatest crop as 
 a step that will tend to assure an adequate supply 
 and at fair prices." 
 
 Taking part of the gamble out of the manu- 
 facture of farm products means taking part of the 
 gamble out of the life of the ultimate consumer. 
 The whole tendency of co-operative marketing is 
 to stabilize prices all down the line, and no greater 
 blessing can be conferred upon the average American 
 citizen, who is in real distress frequently through 
 the violent fluctuation in prices that we have today 
 on the commonest necessities of life. 
 
 If a shirt, for example, is to cost $1.00 or $3.00, 
 no great harm results if the shirt will only stay 
 very close to that price, because, our whole economic 
 structure, wages, rents, everything else, adjusts itself 
 gradually to any fixed value for a necessity of life. 
 There is real hardship when the shirt jumps up 
 and down more rapidly than such an adjustment 
 can take place. 
 
 Even without consideration of the fact, to be 
 dealt with later, that almost every consumer is a 
 producer as well, and the farmer part of his market, 
 co-operative marketing is still a great blessing to 
 the consumer, strictlv as a consumer. 
 
24 American Cotton Growers Ex change 
 
 VIII 
 The Only People Who Don't Like It 
 
 I SPOKE, in the last article, of the hearty indorse- 
 ment with which the co-operative marketing 
 associations frequently met from the manufacturing 
 interests preparing the raw product with which 
 they deal for final consumption, and gave a good 
 hint of the reasons lying back of their attitude. 
 
 People still governed by the antiquated idea that 
 the main slogan of co-operative marketing is, "elimi- 
 nate the middleman," will be amazed to learn that 
 your modern co-operative marketing association more 
 frequently than not has the hearty sympathy of 
 many middlemen in its field. In the majority of 
 cases, due to the superiority of the product which 
 their merchandising methods evolve, the co-operative 
 association is looked upon with decided favor by the 
 retail merchant, and frequently by the wholesaler 
 and the jobber who supplies him, and by the non- 
 speculative broker. 
 
 That is because modern co-operative marketing 
 draws the distinction, which I indicated in a previ- 
 ous article, between distributive and speculative 
 middlemen. There is no such thing as totally elimi- 
 nating the legimate middleman. He is himself an 
 essential producer. He produces a service which is 
 necessary in the distribution of a product. Where 
 he is a legimate merchant he himself is engaging, 
 to a certain extent, in the merchandising methods 
 which make for the increased and wider consump- 
 tion that is the aim of your producer's organization. 
 In order to perform that service for itself the co- 
 operative association would have to acquire the 
 property and the skill represented by these men. 
 To acquire it, it must spend money, and to borrow 
 this money one must pay an interest thereon equiva- 
 lent to a legitimate profit. Sometimes, the co-opera- 
 tive associations do this, but they pay fair prices 
 for plants which they take over, and fair salaries 
 for the services which they displace. 
 
 The only people who are deprived of anything 
 by co-operative marketing are the speculators, a 
 
American Cotton Growers E xchange 25 
 
 class tremendous in wealth and power, but limited 
 in number, and little known to the general public 
 except through the operations of some of them upon 
 the big exchanges; because your real speculative mid- 
 dleman, not being a merchant, but purely a gambler, 
 seldom, if ever, advertises. As a matter of fact he 
 rarely ever handles, frequently has never even seen, 
 an actual specimen of the product in which he deals. 
 
 Your distributive middleman is a man who oper- 
 ates upon a fixed charge for services rendered ; or, 
 if he buys and sells the product, figures only to make 
 a fixed profit, equivalent to such a fair charge, that 
 increases only with the volume of business which 
 he handles. Your speculator, on the other hand, 
 is the man who buys and sells a product with no idea 
 of actually moving that product, but merely with 
 the idea of selling it again, without the performance 
 of any service, on the highest possible profit margin. 
 It is an essential of his business that markets fluctu- 
 ate as widely and as rapidly as possible, that there 
 should be as many sales and resales of the product 
 as possible, and there should be a surplus at the 
 producing end from which he buys and a shortage 
 at the consuming end to which he sells, as marked 
 as possible. 
 
 The speculators, as a class, have interests inimical 
 to all other classes, and they are the only class that 
 is hurt by co-operative marketing. Even in their 
 case, co-operative marketing confiscates no property 
 which they may be using as legitimate distributors 
 on the side, and confiscates no past profits. It mere- 
 ly says, "If you have got to gamble, you will have to 
 do your gambling elsewhere. We have decided to 
 change this field into a business desk instead of 
 a poker table." 
 
 As large as are the profits which these speculative 
 interests have in the past taken out of our farm pro- 
 duce, I wish to point out again that these profits 
 themselves are merely a very minor part of the 
 saving \\-hich co-operative marketing effects by mak- 
 ing it possible to ignore the speculator. I wish I had 
 the opportunity, which the space afforded me here 
 does not give, to take the price stabilizing eficct alone 
 
American Cottom Growers Exchange 
 
 of powerful co-operative marketing associations and 
 analyze its values to the various different phases 
 of American business. 
 
 For example, just think of what they mean to 
 conservative financial interests. Agricultural loans 
 today absorb a tremendous part of the fluid banking 
 resources of the country in the form of that money 
 which seeks a high profit making rate of interest 
 because it can afford to take some chances to attain 
 it. Agricultural loans today are, for the most part 
 out of the field for the investment of that class of 
 money which refuses to take any chance and is now 
 locked up in limited classes of bonds and in real 
 estate. 
 
 These co-operative marketing associations are 
 tending gradually to establish agricultural loans as 
 a field for absolutely safe investment. They are 
 gradually drawing out into circulation the capital 
 that is now static by investment in unproductive 
 values, and releasing, for the development of all 
 American industry, part of the profit-seeking funds 
 that are now absorbed in financing speculative opera- 
 tions in agricultural products. 
 
 This is deep economic water and I am going to 
 get out of it and stay out of it for any further re- 
 marks in a series intended for popular reading like 
 this. But I hope this little journey into a by-path 
 may have given a hint to the scientific economist 
 that will lead him into an independent investigation 
 and comment upon co-operative marketing that will 
 establish in the scientific mind an appreciation of 
 the overwhelming importance and promise of this 
 movement. 
 
American Cotton Growers Exchange 27 
 
 IX 
 
 Unii'orked Gold Mines For You In American 
 Agriculture 
 
 THE average mone.v income of the million or 
 more cotton farmers of the South for the five 
 years ending in 1920 was about $320.00 a year. 
 The average income of the tobacco farmers was less 
 than $400.00 a year, of which about $240.00 came 
 from tobacco, and the rest from truck raised upon 
 the average farm. How would you like to support 
 a family of five upon that? 
 
 And that is not the question that you are to be 
 chiefly interested in here. How do you expect to 
 sell goods in a strictly agricultural section of the 
 United States where the average income is as small 
 as that? And the Southern farmer while he is the 
 poorest of the lot is not the only poor farmer in 
 America. All the farmers, except those that have 
 been lifted out of the slough by correct co-operative 
 marketing already, are comparatively poor. 
 
 There are wealthy farmers, but in practically 
 every instance it will be found that they have made 
 their money, not from farming, but in some other 
 field of business, or over a long period of years, 
 from the increase in land values which has come 
 about, not because of any increased prosperity in the 
 farming industry but because of the industrial or 
 transportation development of nearby communities. 
 
 On the whole, as I have said before, the average 
 standard of living for the farmer is tw"enty years 
 behind the times. If you want to know^ the great- 
 est benefit of co-operative marketing to you, the con- 
 sumer of farm products, then stop long enough to 
 reverse the attitude of regarding yourself strictly 
 as a consumer. \ ou are also a producer, and the 
 farmer to you is your consumer — nearly 50% of 
 your consumer in these United States. 
 
 Co-operative marketing, which, as I have shown, 
 takes nothing from your own welfare, is the only 
 thing that can improve the material prosperity of the 
 farmer and make him a worth-while customer for 
 j'our goods. 
 
28 American Cotton Growers Exchange 
 
 Here is another thing to be considered. I'he 
 principal export commodities of this country are 
 agricultural commodities. This is especially true of 
 the great staples. Cotton is far and away the lead- 
 ing export product of the United States. This 
 means that the increase in the producer's return, 
 which he will receive through co-operative market- 
 ing, docs not come solely from this country, but 
 from the ends of the earth. And since the only thing 
 that the farmer can do with his money is to spend 
 it, that increase in return is poured out over the 
 whole United States, which includes you, in a 
 golden flood. Surely this is simple enough a propo- 
 sition to require no further explanation or demon- 
 stration. 
 
 There are other important matters to be con- 
 sidered, however, in this regard. It is not only that 
 co-operative marketing tends to increase the price 
 return on exported agricultural commodities but it 
 tends to increase the export volume of commodities 
 and particularly those commodities which are less 
 frequently sold for export today. The improved 
 processing and other merchandising methods that 
 are the necessary accompanient of co-operative 
 marketing appeal to the foreign consumer as well 
 as to the consumer at home. Some of your modern 
 co-operatives do extensive foreign advertising and 
 are steadily building up a large foreign market for 
 themselves. They succeed in doing this often even 
 where there is an extensive and cheaper foreign sup- 
 ply, through the superiority of the product which 
 they put out. As I pointed out before, the present 
 agricultural prosperity of Denmark is due to the 
 ability which the Danish co-operatives have given 
 the Danish dairy farmer to compete with his pro- 
 duct in the markets of the outside world. 
 
 And, again, you, as a manufacturer, as a merchant, 
 as a worker in one field or another, if you are a 
 progressive citizen and a sincere contributor to civili- 
 zation and progress, are interested not only in the 
 money return to you, at the moment, from the field 
 of work that you live and are engaged in, but are 
 interested in the development of new opportunities 
 
American Cotton Growers Exchange 29 
 
 for the extension of your own line of endeavor. 
 The agricultural prosperity of an agricultural sec- 
 tion does not mean merely the development of its 
 agriculture, but the development of all kinds of 
 commerce within that realm. And there are sec- 
 tions of this country today depending chiefly upon 
 agriculture, and now in abject poverty for that 
 reason, which are capable of development into the 
 garden spots of this earth. 
 
 The South, practically crushed by the Civil War, 
 has never really risen from that blow. Those of the 
 North and West do not and cannot appreciate this 
 until they have spent the time among the rural dis- 
 tricts of the South that it has been my privilege 
 to spend within the past three years. Your far- 
 famed "Dixie" possesses the greatest agricultural 
 possibilities on this earth and is in addition blessed 
 with practically every other natural resource to 
 man. Its development into the greatest market of 
 this country awaits only the full development of 
 its agriculture through successful co-operative 
 marketing. 
 
30 American Cotton Growers E xchange 
 
 X 
 
 Creating The Highest Type of Rural Jrnerican 
 Citizenship 
 
 THE Georgia cracker sometimes reveals a sar- 
 donic sense of humor. One of them, approached 
 by a stranger with whom he deigned to carry on a 
 laconic conversation while guiding the footsteps of 
 his only mule through his cotton patch, was asked 
 *'Tell me, Bill, what do you raise in these parts?" 
 
 "Wall," he drawled, "just about three craps." 
 
 "What are they?" 
 
 "Cotton, niggers, and hell." 
 
 Your American farmer is never by nature a "hell- 
 raiser." Down in his heart, he is fundamentally 
 the most docile and least radical being on earth. 
 He listens to radicalism, he is comparatively radical 
 in American politics today, and he carries a grouch 
 and a slight tendency to go off after wild leader- 
 ship, only because heretofore constructive leadership 
 has offered him nothing substantial, and the radical 
 always presents to the untutored mind the more 
 glowing vision of hope, coupled with the larger 
 element of entertainment. 
 
 The city man is prone to complain of wild theories 
 regarding money, strange political nostrums, sus- 
 picion and surliness of attitude, and unwillingness 
 to lend himself to constructive remedies, on the 
 part of the farmer in some sections of this country. 
 As a matter of fact, the farmer is less radical and 
 less unapproachable now, considering the stage of 
 poverty that he is in, than any other class of our 
 American citizenship. This co-operative market- 
 ing movement, sound in aim and conservative in 
 method, as well as difficult for the ignorant mind to 
 understand, has, in the very extent of its recent 
 strides, proved the fact that all that is needed to 
 make the American farmer fit to be the leading citi- 
 zen, as he should be, o-f a fundamentally agricultural 
 country such as this, is education, and education 
 can only come after, not before, the prosperity 
 necessary to purchase it. 
 
American Cotton Growers E xchange 31 
 
 Many big business leaders, many big statesmen, 
 but not enough, realize that in its tendency to destroy 
 the need for radicalism alone, this co-operative 
 marketing movement among farmers is the real 
 salvation of this country. 
 
 It is the real and solid solution of many grave 
 problems, the present congestion of some of our 
 industrial centers, our immigration and our Ameri- 
 canization problems, among them. 
 
 We are told that America would welcome a 
 larger per centage than it receives of the Nordic 
 type of immigrant that used to go straight to our 
 farms. We are told that it would welcome other 
 tvpes of immigration provided that immigration 
 did not, as it is alleged to do today, concentrate 
 itself in more or less foreign communities in our 
 great cities, and would hie itself to the American 
 farm. 
 
 You can accomplish both these things. You can 
 solve our immigration problem if you will once again 
 make the American farm a field for successful en- 
 deavor and not merely a lonely gate to ruin. 
 
 No man wants to immigrate himself into an in- 
 dustry the fruits of which are a standard of living 
 twenty years behind of his fellows. No man, who 
 has once tasted good wages, city hours, city pleas- 
 ures, wants to take himself back to the gruelling 
 rural life, when the rural life does not offer a 
 living wage. That is where your congested indus- 
 trial centers come from. That is why, for the first 
 time in our history, our last census revealed that 
 our rural population had become less than our urban 
 population. That is why tenantry is increasing so 
 rapidly upon the American farm, and what is left 
 of our rural population is being pounded down into 
 a class of serfs comparable to that of feudal times. 
 
 Goldsmith said it once and for all in his lines that 
 cannot be quoted too often: "A bold peasantry, 
 their country's pride, when once destroyed can never 
 be supplied." I have heard a paraphrase, however, 
 that is also worth thought. It runs: "A bold peas- 
 antry, their country's pride, when once aroused will 
 never be defied." 
 
32 American Cotton Growers Exchange 
 
 The destruction of the American farmer will 
 not come because it cannot come. The whole world 
 needs him for its food and clothing. But unless he 
 is to be destroyed, something has got to be done, 
 and done immediately, to bring him material pros- 
 perity. 
 
 Shall it be some wild upheaval that he leads 
 blindly but in the might of his misery and his wrath ? 
 Or shall it be this safe, sane, road to prosperity, 
 destroying nothing, benefiting everybody, of co-oper- 
 ative marketing? 
 
 Is it any wonder that my own heart and soul, 
 and that of thousands of other far-seeing American 
 citizens today is wrapt up in the attainment of 
 this goal — safe, sound, powerful — the one great 
 economic advance of our times! 
 
 Illlllllllllllinillllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll iiiiiiiiiiiiiiiiiiiiiiiiiiiiiuiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii:hi 
 
 AMERICAN COTTON GROWERS 
 EXCHANGE 
 
 General Office: 
 Dallas^ Texas 
 
 Sales Office: 
 Atlanta, Georgia 
 
 Carl Williams President 
 
 B. W. Kilgore Vice-President 
 
 C. O. Moser Secretary-Treasurer 
 
 iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiHiiniimiiiiiiiiiiiiiiiiiiiiiiiiiiii I iiiiiiiiiiiiiiiiii iiiiiiiiiiiiiiiii iiiiiiiiiiiiiiiiiiiiHiiiiiiiniiiiiiiiiiiiiii iiiiiiiiiiiiiiiiiiiiiiimiiiii 
 
 DEPARTMENTS 
 
 Legal Aaron Sapiro, General Counsel 
 
 Sales C. B. Howard, General Sales Mgr. 
 
 Offices at Atlanta, Ga. ; Charlotte, N. C; Green- 1 
 
 ville, and Spartanburg, S. C. ; Boston, Mass.; 
 Bremen, Germany; Liverpool, England; Havre, j 
 
 France. 
 
 Representatives at Barcelona; Rotterdam; 
 Copenhagen; Vienna. 
 
 Field Service C. O. Moser, Director 
 
 F. R. Shanks, Chief of Eastern Division. 
 J. D. Coghlan, Chief of Western Division. 
 
 Systems D. G. Hill, Jr., Director 
 
 W. R. McCullough, Assistant. 
 F. B. Webster, Assistant. 
 
 Information L. F. McKay, Director 
 
 Chas. M. Morgan, Field Representative. 
 
11^ 
 
 ) : 
 
 Ontario Department of Agriculture 
 
 ADDRESSES 
 
 ON 
 
 Co-operative Marketing 
 
 BY 
 
 MR. AARON SAPIRO 
 
 San Francisco, California. 
 
 HON. MANNING W. DOHERTY 
 
 Minister of Agriculture for Ontario. 
 
 HON. E. C. DRURY 
 
 Prime Minister of Ontario. 
 
 TORONTO : 
 Printed and Published by Clarkson W. James, Printer to the King's Most Excellent Majesty 
 
 1922 
 
MR. AARON SAPIRO AND HIS MESSAGE 
 
 Duriiiu' \\'v week oL' IMarcli 
 6, 192'^, a :;orie.s of addresses on 
 co-operative marketing were de- 
 livered in the Province of Ontario 
 by Mr. Aaron Sapiro of San 
 Francisco, California, and the 
 Minister of Agricnltnre for 
 (Ontario. 
 
 As is well known, co-opera- 
 tive niarketino- has been devel- 
 oped to the highest point of suc- 
 cess on the Paciiic Coast during 
 the past few years. An organiza- 
 tion on a commodity basis with 
 three to five year contracts con- 
 trolling a large ]^ercentage of the 
 commodity has lieen tbe plan 
 followed. Ill thi< way ])roducers 
 have effected the marketing of 
 ihcir own i)roducts to ihc extent 
 of Ibi'i'c hundred million dollars 
 aiinnally, and the result has been 
 not only, satisfactory to the pro- 
 ducers but to the consumers and 
 to the country in general. One 
 of the most outstanding men in bringing about the organization and successful 
 operation of many companies is Mr. Aaron Sapiro. He has assisted in the 
 organization of a great many of the companies, and has acted as legal and general 
 adviser so that he has become recognized as one of the most reliable authorities 
 on co-operati\e marketing under present day conditions. Added to this great 
 store of first hand information and experience, he possesses a lucid aiul attractive 
 style of deli\ery. His addresses on co-operative marketing in this province. ther(?- 
 "fore, constitute" a very important addition to the current literature on the subject 
 and are deserving of the careful study of thousands of people who could not 
 bear his personal message as well as by those who were fortnnate enough to hear 
 bim. Accordingly, two of the addresses which arc lypical of the information 
 aiid sngg'Ostions offered, arc herewith pre.'^ented. 
 
 i 
 
BENEFITS OF CO=OPERATION DEFINED 
 
 Merchandising Rather Than Dumping is Keynote of California Plan Which Would 
 
 Also Apply in Ontario 
 
 111 his address in. Convocation Hall, TorontO; Mr. Sapiro said: 
 When the average city man hears about co-operative marketing his first 
 thought is, ''That is another of those farmer things,'^ aud he dismisses it from 
 his mind, and doesn't waste any more thought on it. And just because of that 
 attitude the average man is responsible for the slow development of co-operative 
 marketing both in Canada and in the United States. It takes the thinking man, 
 or the man who has had calamity, to realize that the United States and Canada 
 are both primarily agricultural countries, and that they cannot be prosperous uti- 
 less agriculture is prosperous. 
 
 A Great Awakening 
 
 Our American business men have suddenly awakened to the fact that in order 
 for them to have prosperity they have to help the farmer to become prosperous. 
 But the farmers of the United States are not asking the business men to do any- 
 thing for them. They are asking the business men to step out of the way so that 
 they can organize themselves, so tliat they can do something for themselves and 
 bring themselves up to the same plan of 'business efficiency and business organiza- 
 tion that the ordinary industry now has. 
 
 WTien your business men and the people in the cities begin to realize that 
 the farm problem is their problem, you are going to find a change in the type of 
 agriculture and a change in the handling of the problem;3 of agriculture. If the 
 people of the cities refuse to recognize that their interests are inseparable from 
 the interests of agriculture it will hold your Province back and hold the whole 
 of Canada back. Look at what happened in the United States? We were so 
 very slov/. Xearly every civilized country in the world has had co-operative 
 marketing by the farmer for more than two generations. The United States 
 and Canada happen to be the two baclcward ones. In countries like Deiwuark 
 they have had co-operative marketing of farm products for more than fifty years. 
 In the dairying industry more than ninet}' per cent, of their farmers are com- 
 pletely and co-operatively organized, and in poultry and livestock they are or- 
 ganized to the extent of over 85 per cent. In Germany, France, Australia, Italy. 
 Switzerland, even in Russia and Roumania the growers have learned how to co- 
 operate, not merely to co-operate in marketing but to co-operate in credits and other 
 rypes of problems. 
 
 But for years the United States and Canada, nations that are characterized 
 by strong individuality, stood back and let the Danish farmers take the cheese 
 market of England away from the Ontario farmers, although the Ontario far- 
 mers boast that they produce the best cheese in the world. 
 
What Happened in the Cotton Industry 
 
 'J'iikc wlial has happpciicd in the cotton industi-y. We liave in tlie United 
 Stah's ii'i iiiiliistry liy whiili we produce two-thirds of all the cotton in the world, a 
 staple non-perisihahle ai'ticie li'ivino" us what would amount to a conmu^'cial mono- 
 |)olv of this lii^u'ii tvpe product. Wv ha\e Ikhmi |)roduciii^u' it decade after decade 
 and in tiu' same districts. Vou would inia.^iiie that these larniers must have 
 made some money hecause the men who sell you cotton g'oods ^i'et a I'airly good 
 price, and you have known of cotton exchange nullionaires and mill men who 
 have left enormous fortunes for their children. Cotton lias proliahly always .meant 
 wealth to vou. 1 would like you to see the cotton farmers. There are several 
 millions (d' them in the southern section of the I nited States, and they live in 
 a statue of poverty such as you never dreamed of — a stage two generations hehind 
 what you have Ivere in the city of 'I'oronto. You can go to South Carolina and 
 see homes where the whole fannly li\es in one room where perhaps for the whole 
 year no one has a pair of shoes or stockings ; ; where they have to take the little 
 children and put them out to work in the field and caniu)t give them any sc^iool- 
 ino-. There are districts where the wliole county cannot raise enimgh in taxes 
 to put in a decent road or a school, or put up a decent church : where to family 
 after family all their days are passed in gloom and lu>pelessness ; where tenantry 
 is increasing, where the standard of living is going down. And yet these very 
 people are producing one of the greatest agrieuiltural crops of tlie world which 
 makes millionaires every single year in New York, in Xew England and in old 
 England. You avouM think it a most amazing thing to realize that the average 
 familv income in South Carolina, in producing cotton, is less than $301) a year, 
 including the higher war years, for the last ten years. It is the most amazing 
 thing I have ever known in my life to realize how this great and valnahile crop, 
 one of the greatest on the North American continent, can create so nnich wealth, 
 can take .so miich out of the consumer and leave so little, either in money, in 
 happiness or in decency of living for the man who ])rimarily created that wealth. 
 
 Producers Have Been Stung into Action 
 
 Now, in the United States we ha\e heen stung into the net-essity for studying 
 that prohlem. We have seen the po|)ulation moving from the country to the city, 
 and the 11)"30 census showed for the first time that the urhan population of the 
 United States was greater than tlie rural po])ulation. Young men and women 
 will not stay on the farms hecause it not only does not pay them anything, not 
 to speak of wholesome recreations or an^dhing that means ordinary comfort. They 
 will go anywhere except stay i^n the farm. Tenantry is inoreasina' all ov"r th{' 
 United States, and in this day when we hoast ahout our freedom we have to 
 recognize the fact that the drift in that country is toward a system of practically 
 feudal farming, in addition to that the standards of living are going down in 
 the farming districts instead of going up. 
 
 You must not think that hecause a large numher (d' American fanners (^wn 
 Fords that they have automohiles in the siense that citv peojde have. The Ford 
 to the farmer is simply his street car, his ])ul)lic utility. The farmers are 
 separated and in order to get around they must have some kind of a wagon or 
 some kind of a Ford. Do not think that because Ford can sell cars to a gr-at 
 many farmers in the Ignited States that the farmers are living on a high jjlaiie. 
 Much more than one-half of the farmers in that countrv are living on a jilane 
 A^diich is at least one generation below the idaiie of the average trained worker. 
 
in the small American cities. That is the situation in the United States, and 
 I speak of the United States because I know more about it, and not because the 
 United States exclusively has that problem or lia.s that situation to face. 
 
 What Happened in California 
 
 , Now, we had that situation in California, in fact we had it worse than in 
 all the other States of our Union because we were so far away from markets. 
 We were away on the Pacific coast, and everything we produced had to be carried 
 thousands of miles to those who were to eat it. We had the problem to a worse 
 extent than anywhere else. The farmers had begun to think that the only thing 
 they could do was to live on the climate and on the tourists attracted by the 
 climate, but they realized that it was hopeless to try and live on a California 
 farm. But some of their leaders — the farm leaders not the state leaders — began to 
 study and ask, "Isn't there some way out, something that farmers have done some- 
 where or learned that Ave can use for our California farms and save ourselves from 
 absolute ruin?" It so happened that some men did know about Denmark and a 
 section of Piedmont in Italy, and about France and Germany, and so they began 
 to experiment as to what they could do toward farmer's co-operative marketing. 
 Some of the men abo knew what the English people had done in a co-operative 
 "way. They soon learned that you can not have the same kind of co-operation in 
 a producing country that you have in a country that is chiefly a consuming one. 
 Some started the consumers' stores, that they might make tiny savings in pur- 
 chases; but we have learned that consumers' stores are just scratching the prob- 
 lem. The chief thing is to give the farmer a purchasing power so that he stands 
 in the same position as others and can buy in the markets of the world at a fair 
 price. So we ?4;arted out under the Rochdale system of consumers' stores and 
 failed. We had hit on nothing fundamental. Some of the farmers who had 
 heard about Denmark's experience began to think whether that system could be 
 adapted to Californian conditions, and gradually they worked out certain plans 
 under which they could adapt the Danish system of selling dairy products to the 
 California system of selling fruit. California became a huge laboratory for Avork- 
 ing at this marketing problem. We had at least ten failures for every success, 
 and we had to experiment a great deal to figure a way to incorporate; there was 
 the question of tying the growers to long term contracts, and so on. All our Cali- 
 fornia work was pure experiment for many years. Take the orange growers. They 
 started a movement in 1894 by forming a few local associations in which the 
 growers of oranges in that vicinity would get together, erect a joint packing house 
 and grade their oranges. They would then elect a manager who was supposed to 
 be the greatest man in that locality, and would then start to sell oranges. 
 
 It Took Twelve Years to Correct a Blunder 
 
 It took us twelve years to discover the fatal blunder of that system, because 
 these local associations sprang up like mushrooms all over the state, and we had 
 all these local managers trying to market their products co-operatively. They 
 would hear that the orange market in Kansas City was low in supply and that in 
 Chicago was pretty full, and the local manager in Los Angeles and Santa Anna, 
 etc., would scratch his head and say: "I am going to be a smart manager; I am 
 going to ship my oranges to Kansas City, and I won't say a word to the other 
 managers so they won't know what I''m doing." Of course every other manager 
 would get the same information, and every wise local manager would reach the 
 
same conclusion, and within the next twenty-four hours they would all be ship- 
 ping into Kansas City. They would all get their oranges to Kansas City within 
 forty-eight hour of each other and the Kansas City market would collapse utterly. 
 They would not he able to get the cost of freight out of their shipments, and the 
 oranges would rot on the cars while the Chicago market would be absolutely bare. 
 Do you know our farmers were so slow that they had to be bumped like that for 
 twelve years before they suddenly realized that they had the wrong type of co- 
 operative marketing. The local association is good for the consumer association, 
 but when you start out to market your product you have to organize by the com- 
 modity and not merely by locality. 
 
 Organize on the Basis of Commodity 
 
 We learned that first great principle that when you have to sell something 
 you must organize on the hasis of the commodity. Our growers woke up and 'be- 
 gan to federate all these locals together, and to-day the California Fruit Grrowers 
 Association has more than twenty local federations in the twenty districts, and 
 more than 73 per cent, of the oranges leaving California are routed out through 
 one office in Los Angeles. In a moment they will tell you how many carloads- of 
 oranges there are in any city in the United States and Canada. They know a 
 city's capacity, and if a city's capacity is twenty cars in one week and there are 
 five cars there and Florida has ten cars moving into that city, and they have ship- 
 ped ten carloads to that city, they will only let five carloads reach there and will 
 divert the other five to some other city .so that no city gets either a 'glut or a 
 famine. They keep moving into every one of these cities just what these cities 
 can absorb at a price that is fair under current market conditions. 
 
 But what they have done with oranges is only one thing. They decided that 
 the system would work with other products, and so you have organized in Cali- 
 fornia strawberry exchanges, oranges, lemons, grape fruit, pears, apples, peaches, 
 cherries, dried fruits, prunes, small beans, lima beans, walnuts, alfalfa, honey, 
 milk, cheese, butter, olives and perhaps a few other things I am overlooking. 
 Except in live stock we have practically started organization work in every com- 
 modity produced in California except those controlled by the Japs. 
 
 California Farmers Handle $300,000,000 ^^ orth of Products Arnually 
 
 California farmers are to-day handling more than $300,000,000 of products 
 every year through this form of marketing associgitions without a single dollar 
 of stock in outsiders' hands, without a single dollar of outsiders' products and 
 without a single non-farmer in any of these associations. They have learned how 
 to handle agriculture, and the 80,000 farmers in California, Avho have learned 
 how to co-operate, have become practically the most prosperous group of farmers 
 in the United States. Here is a rather interesting test of how prosperous they 
 are. Each year the United States Department of Agriculture published a list of 
 fifty counties in the whole of the United States that have had the highest net 
 value of agricultural products, and the States consider themselves lucky if they 
 have two names in the whole list. California has thirteen eounties out of the 
 first fifty in the entire United States, and we have first and second place, and 
 four other places in the first twelve. In short, with products that we admit are 
 not always - tlie very best, and with everything we raise from two to three thou- 
 sand miles away from the consuming markets, the California farmer has a larger 
 proportion of net return from his products than in any other three States of the 
 
"United States combined. The California fanners are the one group of agricul- 
 turists in the United States who managed to weather the storm of 1920-1921, as 
 more than eighty per cent, of our growers actually made net profits from their 
 year's work, while more than eighty per cent, of the balance of the farmers of 
 the United States actually lost money on their crops. There was no miracle in 
 this. The California farmers learned the method by which this can be done, and 
 those who have been studying the process are trying to find out what are the 
 fundamental reasons; and we now believe we can understand why it is the Cali- 
 fornia farmer has created prosperity while the other farmers in other sections 
 remained poor and helpless.' 
 
 The reason is, first, that we recognize the special character of agriculture. 
 (Agriculture is characterized by individual production and all other industries 
 the characterized by group production. Everything you need is character- 
 ized by group production under the factory system except agriculture, 
 and because the farmer was an individualist in production he thought he had to 
 be an individualist in distributing and marketing. So he tried to market as an 
 individual. But marketing is not an individual problem, it is a group problem; 
 because no man can market intelligently without knowing first what other men 
 have produced, without knowing the absorbing power of the market, without 
 knowing credit conditions, without knowing how a crop should be held and orderly 
 ^distributed, without understanding and making available for himself existing 
 tVansportation facilities. ISTo individual farmer can ever do that. It can only 
 be done by the group, and the farmer who does not realize that marketing is a 
 igroup problem will be a failure as a marketer all his life. 
 
 That was one of the first things we learned in California — that all other 
 types of industry are characterized by group production, and therefore they 
 normally had group marketing; but that farming which is characterized by in- 
 dividual production has to have co-operation to induce it to do group marketing. 
 
 "Dumping" Stopped and Merchandizing Substituted 
 
 Then we discovered one outstanding principle: That the great contribution 
 of co-operative marketing was that it stopped the dumping of agricultural pro- 
 ducts and substituted merchandizing of agricultural products. What do we mean 
 by dumping? Let us take the cotton farmers again. And when I speak of 
 farming I hope 3^ou will be thinking of cheese and butter and some of the things 
 you know about a good deal more intimately than I do. The farmer raises 
 cotton and picks it over a period of two or three months. He may pick a bale 
 now and another in two months and another in three months. Each farmer, as 
 soon as he picks his cotton and has a bale, brings it to the street buyer to sell. He 
 Jmows nothing about the grade of the cotton, nothing about its quality or tensile 
 strength or any of the factors that enter into its value. He comes there and throws 
 his cotton on the market against every other farmer bringing in cotton that day. 
 The street buyer may only want to buy two or three bales of cotton, and fifty farm- 
 ers will be fiocking around urging him to take their cotton. He quotes the lowest 
 price he can because each farmer has dumped his cotton on the market and broken 
 the price, against each other. The American farmers usually throw on the mar- 
 ket within a period of ninety days more than seventy per cent, of the entire cotton 
 crop, although they know that it is used by the spindlers in an average even ratio 
 of one twelth each month. They throw on the market about 75 per cent, of their 
 crop during a period when they know the spindlers are ready to absorb only about 
 thirty per cent, of that crop. 
 
What Breaks the Price of Cotton 
 
 It is not the speculator who breaks the price of cotton. It is the grower. 
 >Eaeh man dumps his cotton against the other man's cotton, and the speculator 
 sim^ply takes advantage of the situation. He merely sits there and takes what the 
 grower gives him, and that is just what you or I would do if in his place. We 
 would let the grower break the price and buy in at the cheapest possible cost. The 
 grower is to blame, and yet he cannot do anything differently when he stands alone. 
 He is in just the same position as your cheesemaker— }'our little local cheese fac- 
 tories that you have throughout the Province, making their cheese and throwing 
 it on the market and then wondering why the price breaks seven cents a pound — 
 from twenty-one cents to fourteen cents — as it did from April to June last. They 
 had a good flow of milk and production of cheese and overloaded their own market, 
 dumpling their cheese and breaking the price against themselves. The speculator 
 is not the man to blame for that. The growers unintentionally are their own 
 worst enemy. That is what we call dumping crops, and that is what these local 
 managers did when they all threw their oranges into Kansas, oranges from all 
 these producing points breaking the price against each other. That is dumping 
 crops. That is throwing crops against each other. 
 
 - If there are fifty men trying to sell something to one buyer the buyer always 
 names the price, but if there are four buyers trying to buy so^mething from one 
 seller, you can easily see who will name the price. So we have stopped dumping 
 agricultural products in the State of California and have substituted the merchan- 
 dizing of agricultural products. That means centralized control of these crops 
 so that they move to such markets of the world, and at such t^'mes, as the markets 
 can absorb the crops at a fair price. 
 
 What Merchandizing Means 
 
 I am going to explain the merchandizing of agricultural products in detail, 
 60 that you will see how thoroughly different it is from the dumping of agricultural 
 products. Ths merchandizing of crops means that you have to get people to take 
 the whole crop, to eat all of it. If we were talking about the merchandizing of 
 Ontario apples, of which, I have heard it said that sometimes one-third of the crop 
 rots on the trees— and that doesn't help either the grower or the consumer — we 
 would say that the whole of that crop had to be moved to the market. The first 
 point to consider is, can that crop be moved to market if the quality is not right? 
 The first point in merchandizing is to create crop inspection that will improve the 
 quality of the crop. You have to start away back to make sure you have the proper 
 quality. Even in things like chickens we have associations in California. 
 
 A Lesson in Handling the Egg Trade 
 
 There is the Poultry Producers' Association of Central California, which han- 
 dles twenty million dozen of eggs on a purely co-operative basis, and we grade every 
 one of these eggs. In fact we decided we would start before the egg was laid. We 
 had to discourage the men who were egg sellers from hatching their own eggs, 
 and now we have a great majority of the men in that association buying day old 
 chicks. The hatching is done by experts in that line. The farmers buy these 
 day old chicks and we can guarantee all our eggs as infertile eggs and fit for stor- 
 age purposes. They get men to put in a high type of flocks. There is a man who 
 is a specialist in judging flocks by appearance, and if you are wise you run your 
 flock before him and he will tell you which chicks you should cull, which will be 
 
good layers, and which are not. If you have him inspect your flocks you will have 
 an average of twelve dozen eggs from each hen instead of ten. We standardize. 
 We have almost wholly White Leghorns, which are the best layers we have in Cali- 
 fomda, so that our eggs are of the same general type of pure white eggs. We 
 standardize, and constantly keep raising the quality of our products. That is why 
 we send our eggs to New York. They have to travel eighteen days to get there, 
 and yet we get a premium for those eggs over eggs raised in Long Island of almost 
 three cents a dozen, because they are the best graded eggs by carload lots in New 
 York city. They know that every egg is the kind of egg named, Pentaluma Extra, 
 infertile, and we stand behind that guarantee. The first step in merchandizing 
 is to make your grading quality perfect. That is why I have been so proud of 
 the courage and foresight of Manning Doherty in insisting that the Government 
 see that the dairy products be standardized as high as can be and tliat the greatest 
 care shall be taken in merchandizing agricultural products. 
 
 The Package is a Most Important Factor 
 
 The next thing is packaging — to get a package that looks good, that will help 
 to sell the product, that will stand travel and suit the commodity and the house- 
 wife. Some of our crops are put in packages in which we sell by the dozen in- 
 stead of the twenty-five pound boxes we have been pushing the two pound package, 
 stead of the twenty-five pound boxes we have been pushing the two pound package 
 which is a size the housewife likes, and keeps the prunes absolutely clean and right. 
 We spend a great deal of time in preparing the right sort of packages. We ex- 
 periment to see how one and two pound packages will look in the store, to see how 
 they will keep, and if they will keep as long as the twenty or forty or sixtv 
 pound package. 
 
 The third thing is that we try to extend our markets . We extend markets in 
 two ways, first by extending the time of marketing, and secondly by extending the 
 place of marketing. Let us take eggs, for instance. In the latter part of Feb- 
 ruary, March, April, and the first half of May the eggs would be dumped on the 
 San Francisco market and break thelm down to ten or eleven or twelve cents a 
 dozen, and some of the wise men would buy them and put them in cold storage and 
 market them later in October or December at an advance of about thirty cents a 
 dozen; and the cost of holding them, including insurance, storage and everything 
 ebe, would be less than four cents a dozen. Of course that simply meant that we 
 were dumping our eggs as soon as they were produced, although we knew there 
 would be a famine period every fall. Now our producers' association stores its 
 eggs, stores between two and four million dozen, and then we re-sell in the fall so 
 that we have an extended period of marketing .spring eggs from three to nine 
 months. We have extended our markets by extending the time of marketing, 
 We not only keep them off the San Francisco market in the first place so that we 
 don't break the price of eggs, but we put them into cold storage and distribute to 
 the growers at a good storage profit in the fall and winter. That is what I mean 
 by "extending our markets by extending the time of marketing." 
 
 How the Market Place is Extended 
 
 Then we extend our markets by extending the place of marketing. We send 
 men all over the world to find out where we can sell our products. We had a man 
 go to Japan to figure on how to sell prunes and raisins there. We send a man 
 anywhere in the world. The Prune Growers' Association maintains an agent right 
 here in Toronto who has an office for Canada, and every month we know the ab- 
 
10 
 
 sorbing power of Canada for prunes. If a district isn't eating enough prunes 
 we go in and find out why. For example, Toronto is not eating enough, for yes- 
 terday there was an advertisement for Sunsweet prunes. That is because you are 
 not eating enough prunes and we want you to eat more. 
 
 We study the situation all over the world. Ju5t take the little group of farm- 
 ers up in Oregon, in Tillemuth county. They produce cheese which they claim is 
 better than the cheese you produce in Ontario. We produce cheese in California. 
 We used to blow about that because we thought our herds were the best in the 
 world, and we thought our cheese must be the best in the world. But these Tille- 
 muth men, better organized in cheese than we are in California, are selling Tille- 
 muth cheese right under our noses in San Francisco and California and getting 
 two cents a pound more for their cheese than we get for California cheese in 
 our own state. They have specialized in the marketing of cheese, and are beating 
 us in our own markets for a certain grade of cheese. They are so proud of their 
 cheese that they have the name "Tillemuth" on every inch of rind around the 
 cheese and they sustain the quality of that cheese so that it has a market right 
 in the State of California. 
 
 Selling Cheese in California 
 
 You would think that the last place a co-operative group would want to sell 
 cheese would be in California, but they get away with it. They are doing ex- 
 actly what I said about extending markets by finding places to market. They will 
 come to Ontario and sell cheese, because they know that no one can beat them in 
 quality, just as you here in Ontario, who boast of the quality of your cheese, sell 
 it in London and let the Danes take the cream of the market away from you be- 
 cause you don't absolutely grade and keep up the quality of your cheese. You 
 should put the maple leaf brand on every inch of your cheese so that the man who 
 eats it would know it is Canadian cheese. You would then start to take a pride 
 in it, and will keep up the quality of everything you produce when you put your 
 brand on it and send it into the markets of the world. 
 
 You have to go all over the world and find these markets. If you find the 
 Danes and the Irish can beat you in the markets of England you have to get some 
 other country to eat as much cheese as they do. Show the French that if they 
 ate more cheese they would be better off, and show the Germans that if they had 
 more of the right kind of cheese, instead of Limburger, they might not have been 
 60 warlike. You have to do what the good merchant does. You have to study 
 the whole world and see if you can find markets or create markets to absorb your 
 products. That is the third great step in merchandizing. 
 
 There Must be Centralized Control 
 
 The fourth great step is to bring your products under centralized control. 
 In this Province you raise $100,00'0,00'0 of dairy products, you produce fifteen 
 to twenty million pounds of cheese and quite an amount of butter. Your cheese is 
 produced in a lot of little factories eadh one of which sticks up its nose to the next 
 one, and there you have your cheese offered on the market by all kinds of small 
 units each competing against the other. Of course you cannot control the flow of 
 cheese in that regard, because each locality has its own manager. I understand 
 that thirty of them have the one salesman, but generally it is a case of one against 
 the other. There is nobody to control the flow of that product to the market, no 
 one to determine what market it should go to, and no one even thinking that there 
 is an ultimate market. Thev think that the onlv market is the local cheese board, 
 
11 
 
 or the cheese exporter in Montreal, when the markets are really in England and 
 all over the world. The only way you will get real success in cheese marketing i5 
 by studying the ultimate markets, and controlling the flow so that your cheese will 
 only go to the cheese markets of the world at times when those markets can absorb 
 it. In short, you will apply this great principle. 
 
 Selling'Cheese in Ontario 
 
 As you people sell cheeese now and as we used to sell it in California, we used 
 to let the price be determined by the supply at the point of production, the worst 
 blunder ever made, because the price ought to be determined by the supply at the 
 point of consumption. As long as the growers stand for that system, as they are 
 doing here now, they and not the public get the worst of it, or, more correctly, 
 they as well as the public are getting the worst of it and only the speculators are 
 getting benefit from that system. 
 
 Let me illustrate that with cheese : in April, May and early in June when the 
 cows are giving the most milk you have the most cheese made. In 1921 the price 
 of cheese collapsed within seven days from twenty-one cents to fourteen cents, and 
 then kept around fourteen cents until the rush of cheese was practically over. You 
 had an enormous quantity of cheese at that time, and the factories threw it all on the 
 cheese market. The cheese was not eaten in these month.?. It was stored in 
 Montreal, or shipped to England and stored there. That cheese was eaten in 
 August and September and October, even in Noveml)er : it was eaten in months 
 when the cows produced less milk and the cheese factories produced less cheese. 
 Xow the public in England paid a high price for their cheese. They paid on the 
 basis of the high price for cheese in September and October at the time they ate 
 it. It had left the grower's hands at a price fixed on the basis of supply at point 
 of production and whenever that happens the grower lose'. Suppose the grower 
 liad moved on the markets in April, May or June only about one-fourth of that 
 cheese supply, that the growers had an association po that they could store the 
 balance of the. cheese until August or September, that on the supplies they put 
 in storage they borrowed motfey to give some money to the growers — because they 
 always need money, for few of them have surplus funds in the bank. I suppose 
 they do borrow this money and carry over this cheese until the factories are pro- 
 ducing a smaller quantity, what happens? Instead of selling three-fourths of the 
 crop at a low price they would have sold the whole crop at a fair to high price, 
 so that they would have made a profit and the consumers in England would not 
 have paid one more cent for that chee-e in the long run. It would have made a 
 difference to two or three hundred men, none of whom are assisting in the develop- 
 ment of Canada or England, and it would have made a difference on the favorable 
 side to a few thousands of growers and a great many con.sumers, all of whom are 
 contributing to the prosperity of both Canada and England. 
 
 A Summary of Wise Salesmanship 
 
 Do not forget these principles. The merchandizing of agricultural products, 
 to summarize, means the following: 
 
 First: Inspection and grading to improve quality. 
 
 Second: Getting the right and proper type of box. 
 
 Third: Extending the marketing period, first as to time and next by extending 
 the markets as to place and location ; next by controlling the movement of the crop 
 and controllig that by considering supply at the point of consumption instead 
 of at the point of production. 
 
12 
 
 We have discovered that these things will work in California, and they will 
 work with any type of product grown, perishable, semi-perishable and non-perish- 
 able. With perishable products the primary problem is routing so that no market 
 gets a glut and no market a famine. With the semi-perishable and non-perishable 
 products the problem is storage and financing. 
 
 There has been a technique worked out to take care of -any kind of commodity 
 that is grown. I will not detain you to give you the technique of building ma- 
 cliines to achieve these things, but I do say that if you will only get the view that 
 co-operative marketing is intended to stop dumping and substitute merchandizing 
 you will have the kernel of the whole California movement. 
 
 That is why we say that for growers to band together simply to save a little 
 by co-operative purchasing and things of that kind does not amount to enough. 
 That does not help them to merchandize their crops, and if the growers will help 
 each other to merchandize their crops they can make enough out of that process 
 so that they can pay the same as anybody else for what they want to buy, in city 
 or town. They Avill not have to think of that type of saving except in the same 
 way that the city man thinks of it. The growers have one aim to accomplish, 
 and that is to merchandize their crops instead of dumping their crops. 
 
 It has succeeded in California, and to-day the cotton men are imitating it. the 
 tobacco men are imitating it, the grain men are imitating it. All over the United 
 States this movement is spreading like a prairie fire. AVhat does that mean to the 
 grower? What does it mean to the community, to the coiisuming public and to 
 industry as a whole? 
 
 California Growers Now Look Prosperous 
 
 First, for the growers it has meant a complete change in their whole method 
 of living. The California growers look different to the growers in any other part 
 of the United States. They don't have worry written all over their faces. They 
 are not hopeless any more. They have had steady incomes for a few years, and art 
 beginning to think of life in the same terms that other men think of life. They 
 are beginning to think of physical comforts in living, of decent schools and 
 churches, and so on. That is why, if you look through the California rural dis- 
 tricts to-day you will see homes that are homes — homes with running water and 
 bathrooms and everything homes should have, even electricity. We find they 
 can pay enough taxes to get good roads and California roads are supjDosed to be 
 the best in the United States. They can pay enough taxes so that the California 
 rural schools are the best rural schools in the United States, although our city 
 schools are known to be notoriously poor. They can pay enough taxes so that they 
 can have real rural libraries, and in centres not big enough to have libraries they 
 pay enough taxes so that they can have travelling libraries. You cannot go any- 
 where in the co-operative districts without seeing good churches, little movie houses 
 and all the things that indicate good clean recreation as well as good comfortable 
 living; and if you look on the roster of the University of Califorina you will find 
 that it is the largest in the United States — I am not saying it is the best, but the 
 largest — and you will find they have more farmer boys and girls on their rolls than 
 in any other two States in the United States. 
 
 The Boys and Girls also Get the Benefits 
 
 Our farmers send their boys and girls to the high school and, where they can, 
 to the university. They have learned how to make money, and with this money 
 they have bought enlightening education and decent living. They buy life in?ur- 
 
13 
 
 ance at the rate of five to one over the best Southern states, and three to one over 
 the best of other agricultural states. The California farmer looks on living from 
 the same viewpoint that you or I look upon life. The California farmer does not 
 need to make his boys and girls work on the farm between school hours. He does 
 not send his wife to work on the farm, as is done in so many States in the South. 
 The California farmers live on tlie same standard of living that you and I think 
 is right for a city man with a small factory at this particular stage of civilization. 
 The finest citizenship in California is on the California farm. The finest type of 
 men and women is on the California farm, and it has been done within the last 
 fifteen years. It has all happened since the California farmer learned to be in- 
 dtpendent — learned to run his own business in a dignified, sound way. To the 
 farmer this co-operative movement has meant his first chance at life, his first chance 
 ai comfortable, sane living, his first chance at giving his family an opportunity for 
 a higher type of living that you and I, in our better moments, think is due every 
 nian and woman today. To the California farmer this has become a gospel, and 
 that is why these associations, which started out with a control of fifty per cent. 
 of some particular commodity, now, with the strawberries and things like that, 
 have ninety per cent, of the entire crop sold through one office ; the raisin growers 
 have 95 per cent, of the growers in one association, the prune growers have 88 
 pej* cent, of the growers in one association, the almond growers have almost 90 
 per cent, in one association; because our farmers have seen through co-opera- 
 tive marketing they achieve everything that modern civilization holds. It is the 
 one great movement to them, the one thing that has really worked and is working 
 now in a sound, permanent way. 
 
 What it Means to the Community 
 
 What has that meant to the community ? First these farmers have got more 
 money than ever before. I have in mind a district that in 1912 had a net return 
 from raisins of less than $1,000,000' annually. That meant that the growers liad 
 a spending power of lass than $1,000,000 a year from that industry. Up to 1918 
 — and that was before the prohibition movement which changed the raisin in- 
 dustry in some regard — they had increased the return from raisins in that district 
 alone to $23,000,000 a year. They had more than trebled the crop and were sell- 
 ing every pound of raisins they produced. They had increased the purchasing 
 power of those farmers to about $23,000,000 a year. What did that mean? It 
 meant that the farmers stopped buying their wives "mother hubbards" and let 
 them buy decent dresses. They stopped buying overalls and started buying decent 
 suits of clothes, decent shoes and all things which mean an easier way of living. 
 iThey had better food, and they built better homes. In short, they spent that in- 
 come right around in the town. The merchants who sold them the things made 
 deposits in the banks or made investments. This and other towns began to thrive, 
 and that is why in 1918, going to Fresno and those little towns around there, we 
 are among the most prosperous cities in the world for their size. If you go to 
 Fresno you will wonder from where this prosperity comes. It is the centre of 
 three great co-operative organizations, the raisin, the peach, and the fig growers, 
 and tops all cities in Babson's list of prosperous small cities of the world. All 
 that out of agriculture and not out of manufacturing. That same story can be 
 told of other little towns that are centres of the co-operative movement. The.^e 
 towns are away above the small farming towns of the north-east in average pros- 
 perity and wealth. "VMiat did it? The growers did it and the communities helped, 
 because in our California communities, the financiers, the merchnnts, the lawyers, 
 
14 
 
 the travellers, all recognized that if agriculture is not prosperous the community 
 does not prosper, and these men came out and helped the growers form these as- 
 sociations. The first money ever gathered together to help California growers 
 organize was $26,000 donated hy Santa Anna merchants. When the raisin grow- 
 ers organized, $30i0',000 in cash was got from the merchants of Fresno and sur- 
 rounding cities. The men in business h^ave realized that the life of the community 
 is the life of surrounding agriculture, and they go out in their waggons and 
 machines to help the growers get signatures to contracts for these associations. 
 What it Means to the Consuming Public 
 What does it mean to the consuming public? I know that a great many 
 thinkers believe that if the grower gets more, the consuming public must pay more. 
 There are two sides to that. Even if it did mean that the consumer had to pay 
 more money, still the movement would be justified. J^o consumer has a right to 
 say that he should have cheap goods if the price he gives means that he is keep- 
 ing his heel on the neck of his brother. No consumer has the right to ask any 
 •grower to produce cotton, for instance, if the price that grower gets for his pro- 
 duct is keeping him in something absolutely as bad as the old-time slavery. But 
 it does not work that way. We do not ask for more money from the consumer in 
 the long run. Take the case of oranges. You are getting better oranges to-day 
 than you dreamed of when the association Avas started. You get good graded 
 oranges every day in the year. Where they used to have a three months shipping 
 season; now by scientific planning they ship oranges every day in the year. They 
 have extended the shipping period from three months to twelve months, and 
 those oranges are actually costing you less to-day by twelve per cent, than they 
 used to cost you before the orange growers were organized. And the ornnge 
 growers are making more money. Why? Because they are selling all the orangea 
 they raise. In the old days they sold perhaps one-third of their crop, and the other 
 two-thirds rotted as your apples rot here in Ontario. If you could move all your 
 apples to market you could afl'ord to take a pretty fair price for those apples, 
 and make your profit depend on volume and not on the margin. The speculator 
 depends on the margin, the merchandizer depends on buying, on the volume. 
 What Cabbage Co=ordination Did 
 
 The people of N"ew Yor"k Avere paying for cabbages twenty to twenty-five 
 cents for these cannon-ball cabbages. In the Eio Grande field in Texas they were 
 offering the growers $8 a ton for those same cabbages, a price, it was felt, that 
 would not even pay the freight to take those cabbages to ISTew York Avhere the 
 people wanted cabbages. If those growers organized and, co-ordinating their ef- 
 forts with those of the growers of California, could have got together, they would 
 not have needed to sell to the buyers down in the Rio district or in California, 
 but would have managed to get them to the market in New York; and if they 
 could have delivered those cabbages in 'New York they could have sold them for 
 seven cents each, paid the freight, and paid the cost of production and could have 
 made more than $10 a ton for those cabbages. 
 
 As it is in practice, the whole crop of cabbages rotted in the Rio Grande, and 
 in the fields of California which are not organized, because most of these cabbages 
 are controlled by Japs — efficient farmers, only we wish they would farm some- 
 where else. 
 
 With perishable products the consumer suffers, and even the grain grower, 
 by having non-co-operative marketing. If you will only study what happens in 
 this country and how much of the crop stays in the growers hands, you will 
 
15 
 
 realize that the consumer is the great sufferer for the lack of organization among 
 the growers; and with non-perishable products I wonder if you think it makes 
 so much difference to the consumer if the grower gets his share? Wheat was 
 dumped by your Canadian farmers when wheat was at one dollar a biLshel, yet 
 at that time every student of grain knew that according to the statistics grain 
 had to come up. Your people had to dump their wheat, they could not hold it. 
 They were not organized to put it into elevators. They were not accustomed to 
 doing that sort of thing because they were not organized for co-operative market- 
 ing.' But in Washington, as in Idaho and Montana, there is a little wheat growers' 
 association. They sold a little wheat and then they decided that the market was 
 not normal, so they put the wheat they had into elevators and warehouses, and 
 they finally sold it at a price ranging from $1.40 to $1.60 a bushel in average 
 return for the growers in the State of Washington. 
 
 Who Gets Most of the Wheat Profits? 
 
 On the Marquis wheat their average return will be more than $1.40 a bushel, 
 where the average return on Marquis wheat in Canadian districts — wheat which 
 you Canadians originated for us, wheat just as good if not better than theirs, and 
 grown with just as much skill — averages less than $1.10 a bushel. Your farmers 
 lost 30 cents a bushel on more than 250,000,000 bushels of wheat. Your farmers 
 lost it, but do you think you a^ consumers are paying less for the bread you eat 
 on that account ? Do you think you get the benefit of it ? That wheat was stored, 
 and one firm in Chicago is today long more than 40,000,000 bushels. That firm 
 is making a clean-up this year. You are not making that benefit. That firm 
 knew something about statistics, and were willing to take a chance on it. They 
 have that wheat in storehouses today, and they are going to sell it at perfectly 
 good prices. Some think wheat is going to $1.90 or $2 a bushel, and they are 
 hol'ding the wheat, and you and I are going to pay for it and pay the price they 
 choose to sell it for through the miller. The public does not get any benefit on 
 that particular kind of transaction, and the growers lose an enormous amount of 
 money. And because the grower loses that amount of money that means a less- 
 ened purchasing power by the grower. Every merchant in the community loses 
 that business. That merchant buys from the wholesaler in Toronto, and the 
 wholesaler also loses from that sort of proposition. Wherever you have specula- 
 tion instead of merchandizing the public loses and the grower loses, and some- 
 where in between we manufacture a few more millionaires with a, limited pur- 
 chasing power except for pearl necklaces and the sort of things you read about. 
 
 True Co-operation Does Not Stick the Consumer 
 
 The gi'e&t aim of co-operativ? marketing is not to stick the consume-. The 
 great aim is to merchandize that product so that the consumer's dollar can stay 
 where it formerly did but so that the grower can get his share out of that con- 
 sumer's dollar. In California, in dried fruit?, we used to get eight cents out of 
 the consumer's dollar, but now the California co-operatives get forty-eight cents 
 of the consumer's dollar without increasing the dollar. In dairy products we have 
 gone up a little more than 14 per cent, in the share of the grower out of the con- 
 sumer's dollar. Our aim isn't to stick anybody. It is to introduce a system which 
 prevents waste, to introduce a system which prevents speculation and to introduce 
 a system which means that the man who produced farm products shall have a 
 chance to merchandize that product and make a real living, a civilized living, out 
 
](J 
 
 of that product, so that from the standpoint of the grower, the st9,ndpoint of 
 the community and the standpoint of the consuming public this co-operative 
 (marketing movement has more than justified itself. 
 
 Co=operation Develops Better Citizenship 
 
 And then there is another phase that we have to think about. Do you think 
 you are producing good citizens out of men who feel that everything they do is 
 manipulated, and that they are losing out of it. Do you think you are producing 
 good citizens when you make a man feel there is no fair industrial basis for their 
 living? From the standpoint of citizenship this co-operative movement has been 
 the most valuable thing we have ever had in California. It has united classes. 
 It has not .separated the classes in California with bitterness. It has united them 
 in the State of California. It has built up the finest type of citizenship which 
 the State has ever knowai. And it has gone fuii:her than that. It has entered 
 into the life of every man who participates in it. He comes to realize that the 
 other man is a man just like hiniself, that he is doing something with the other 
 man. They have recognized that. You can see it in their faces. That is why 
 we have these wonderful managers in the co-operatives constantly being offered 
 doubled salaries if they would leave the co-operatives. They never think of leav- 
 ing the co-operatives because the sense of service has got into their blood. They 
 realize they are doing a big constructive thing. There is a different spirit in our 
 farmers since co-operative marketing has become more or less universal. I have 
 seen that happen. I have seen men who couldn't be gotten together for any other 
 purpose, once they have got together for co-operative marketing they will ^ get to- 
 gether for clubs or to build churches or schools or any other purpose for which 
 men can properly and wisely get together. There is a spirit that grows from co- 
 (operation that you will never find anywhere else. 
 
 Encourage Co=operative Selling Because it is the Right Thing 
 
 I want your interest in co-operative marketing, not because it is a matter of 
 dollars and cents in the pockets of the grower or the pockets of the merchant or 
 the community at large. I do not want your interest in co-operative marketing 
 on that account. I want your interest because, in the first place it is the right 
 thing, and because it is the one great permanent moveiuent by which a new and 
 fuller spirit of citizenship ha?' been created on the farms of the United States, 
 on the farms of Denmark, and the farms of every country in the world in which 
 the growers have learned to work together intelligently on their primary in- 
 dustrial problem. And, men and women of Toronto, I hope yoit feel with me that 
 it is not only a farm problem. It is a problem for you as well as the farmer, and 
 you will not be doing your full duty as citizens unless you give moral support 
 and more than moral guidance to the development of this movement in Ontario. 
 We have done a thing in California which you can do in Ontario, and since you 
 can do it, I know yoti are going to see that it is done. (Applause). 
 
ir 
 
 ENDORSED BY THE PRIME MINISTER 
 
 Co=operative Marketing is Task Urgently Demanding the Best Thought of the 
 
 People of Ontario 
 
 Hon. E. C. Drury : I did not come here to-night to talk but to listen, and 
 1 have been abundantly rewarded for my coming here in the words I have heard 
 and in the vision that has been given. I do not know how the speaker managed 
 to know so much of our conditions here in Ontario. 
 
 ^ 
 
 **v. 
 
 An Interested Student of Co=operative Work 
 
 As the chairman said, I have for years been interested in thi^ matter of co- 
 operation. I have been interested because I think I see in it a great means of im- 
 provement in a field that it is of national moment should be improved. I think 
 perhaps our agricultural conditions here have not fallen to the status they have in 
 certain parts of the Union. I think that perhaps a larger proportion of our land 
 is in the hands of owners than in some of the prosperous American States, and 
 I tliink perhaps our standards of living have heen maintained more nearly level 
 with other classes in the community. But while that is true there is still a tremen- 
 dous work to be done. We have here in full evidence the remarkable flow of 
 
18 
 
 population from the rural districts to the large centres. Just think! About 
 one-sixth of the whole population of Ontario is within five miles of this building 
 to-night. Our best agricultural counties are losing population, not because 
 modern machinery is displacing men — that never had been true in this country 
 though it was true in the older countries where agriculture had already fully 
 developed before the introduction of machinery. It was never true in thi£ coun- 
 try, because agriculture was developing and is still developing with the introduc- 
 tion of labor saving machinery. We have places on the farm for three times the 
 agricultural population we have there. 
 
 Co=operative Effort will Keep more People on the Land 
 
 They have left the soil because of economic conditions. I remember three or four 
 years ago saying at a luncheon that it was a field we must look into, and 1 remem- 
 ber the superficial comment that was made on that statement by a city daily, 
 that it was useless to complain of the population leaving the farm, that the man 
 who used to swing the cradle was now in the factories making binders. 
 
 If this Province is to go aliead in the production of wealth we must have 
 more jieoplc on the farms, more intelligence on the farms, more production on 
 the farms and more pro.sperity on the farms. You cannot get it in any otlier 
 way. After all, the members of our community, our Canadian community, who 
 go out into the world and earn the family income are in our basic industries — 
 agriculture, mining, lumbering and fishing. The rest of the family merely wait 
 in a domestic way on those four. They go out into the world and earn the family 
 income and pay their brothers and sisters for the little housekeeping chores for 
 the main members of the family. And the biggest of these brothers is agricul- 
 ture, and agriculture must continue to be the great earner of the national income 
 for years and years to come ; so that our national growth, our national prosperity 
 and our national well-being will depend on the prosperity of that great basic in- 
 dustry, agriculture. 
 
 That is a pleasant vision our friend has given us of a prosperous country- 
 side of the finest kind of homes with a land that is tilled because it pays to till 
 it, of men who are prosperous and can do good business by working together, a 
 country of churches and schools and wholesome amusements. It is a most en- 
 trancing vision. And it means another thing of great importance, and that is 
 keeping the right kind of people on the chief material asset any country can have, 
 and that is agricultural land. 
 
 The Farm Character Tinges^The^Nation 
 
 It is a very common saying, and I think it is true that the quality and 
 pharaeter of a nation's population is found on the farms. It is a thing that is 
 well accepted that no population centred in great cities can maintain itself. It 
 is also a fact, and cannot be questioned, that the welfare and the very life of our 
 people depends on the producing land, depends on the quality and quantity of 
 the food that can be produced and the quality and quantity of other things that 
 can be produced on the land. That being the case two things are important. In 
 the first place we must keep the best of the people on the land, fit for the task of 
 maintaining the standard of national population and in the second place we must 
 keep the right sort of people on the land in order that they may keep the land in 
 .condition to serve the generations to come. You dare not allow the land to get 
 into the hands of people of low intelligence, of low standards of living, and in 
 order to do that you have to maintain rural prosperity. 
 
 It is the problem not of the farmer only or of the man in the small town, 
 it is the problem of the nation. I like that vision given us, and if it can be 
 
19 
 
 applied in California, which, as Mr. Sapiro has told us is three thousand miles 
 from its markets, what can not be done in Ontario, because Ontario is in absolute- 
 ly the finest position in America from the producers' standpoint, the nearest to 
 markets in all directions. It is the most southerly point of Canada convenient 
 to European markets, with water transport, and it is also thrust like a wedge into 
 the chief consuming centre of the United States. If these things can be done in 
 iCalifornia what can we not do in Ontario? We have been trying to do a little 
 along this line for years, but I think we have only been playing. 1 think perhaps 
 we have not got down to the basic principles underlying it — 'got down, as the 
 Scotch Presbyterian would say) to the root of the matter. 
 
 The Movement Deserves Support 
 It ought to he our task, having in view the large issues I pointed out of 
 
 national interest in farm prosperity, better farm homes, better farm people, bet- 
 ter tilled land and living attractive enough to hold the people on the land — it 
 ought to be the task of every class in the community to build up a movement 
 which means ao much to agricultural prosperity. Mr. Sapiro has pointed out 
 very clearly that it does not mean higher prices to the consumer. I think the 
 iCalifornia producers have adopted a good plan. They make the people eat their 
 Jproducts. It is a strange thing that in a country producing some of the best 
 cheese in the world the cheese eating habit should be almost absent. We send 
 that excellent food to other quarters of the world. We may have to take that 
 sort of method, but whatever we do it will be abundantly worth while. I do not 
 mean to the speculators, because I do not care what becomes of them, the sort 
 of man who merely sits as the miller I once knew did. He had, in a certain 
 spout in the mill through which the grain ran, a little hole and out of that little 
 hole ran a little pile of grain that did not go into the bag of the man who brought 
 the grain to the mill. We have, unfortunately, certain people who are not useful 
 to the community who are merely the hole in the spout. The product on the 
 way from the producer to the consumer leaks out and forms a nice little pile of 
 easily obtained but not earned wealth. Now, if this programme hurts that class 
 of people I am not going to cry, and no one should cry because no one in the com- 
 munity should be interested in protecting the profits of anyone who does not earn 
 them. If we can see that the profits and rewards go to those who earn them we 
 will be doing well, and if a few dozen people find their incomes injured, we won't 
 worry. 
 
 Co=operation is an Enemy of Waste 
 
 The great thing is this; that by means of this method wa^te is cut out and 
 increased production is followed by lower prices to the consumer, because the pres- 
 ent method which discourages production, ultimately increases the price to the 
 consumer. By means of methods of that sort in California they have been al)le 
 to put the producer on a new basis, a prosperous, seH-respecting, contented basis 
 and in doing that they have been able to produce what is really a wonderfully 
 jmvigorated national life. 
 
 I respect and admire the people of California for what they have done. They 
 have done a great thing. But I have self conceit enough in our people in the 
 Province of Ontario to believe that what they have done done in California we can 
 do in Ontario. As I started out to say, this is a task to which we must set our- 
 selves, and we must not be content until we have carried through a movement 
 that means so much not only to the farming class but to the good of the whole 
 nation. ( Applause) . 
 
MARKETING IS BIG PROBLEM OF ONTARIO FARMERS 
 
 Minister of Agriculture Shows the Need and Points Way to Effective Organization 
 
 Speaking at Ridgetowii, Hon. Manning Doherty said : 
 
 I am particularly pleased, on this occasion, on account of the fact that I have 
 been able to bring with me to address you, Mr. Sapiro, of San Francisco, Cali- 
 fornia. For many years I have followed with interest the work which was being 
 done in the United States by Mr. Sapiro. I have admired the uniform success 
 which has attended the various associations which he has been largely responsible 
 for bringing into existence. Many years ago I made the statement, and have re- 
 
 HON. MANNING DOHERTY. 
 
 peatcd it time after time .since, and I more than ever now believe it to be true, 
 that the salvation of agriculture on the continent of America was to come through 
 the development of safe, sane, proper, co-operative marketing associations of far- 
 mers themselves. 
 
 What Farmers Have Done for Themselves 
 
 Mr. Sapiro will tell you, this afternoon, of the story of what the farmiers 
 of California have done for themselves, and his .story will be as a romance to 
 you, and I want you, all the time the story is being unfolded, to keep this in mind 
 
 20 
 
»1 
 
 — the words are not dropping from the lips of someone who has read of the theory 
 of the development of agricultural associations. You are going to listen to some- 
 one who has not had a dream, but to one who has ax3tu)ally done these things time 
 after time, and by realizing this, the true force of the story that will be told 
 will be brought home to you. And 'Mr. Sapiro will tell you what the farmers of 
 California have done we can do in this Province and are going to do, in the next 
 five years. 
 
 Now, Canada is faced with very many serious problems, and problems that 
 are comparatively new to us. We know, as a result of the war, that our foreign 
 obligations have been vastly increased. Our national debt is between two and 
 two and a half billion dollars and for our small population that isi a big load, but it 
 is going to be paid and discharged, and it can be discharged only in one way, ana 
 that is by increasing our production and increasing our exports to the various 
 markets of the world. The foreign indebtedness can be discharged in no other 
 way, practically, than by exporting products of the country. 
 
 Importance of Agricultural Production 
 
 Agricultural products form a very large percentage of our exports. Over 
 sixty per cent, of Canada's exports come from the soil. That being the case, 
 it behooves us to see to it that our exports of agricultural products are increased 
 and increased until we reach the point where we can discharge our obligations 
 with ease. Increased exports mean this: — that we have got to retain the markets 
 we now already enjoy; and not only have we got to do that, but we have got to 
 go f-orward and get new markets and we have got to get a higher percentage of 
 the markets into which we noAv already ship. We have to extend our markets. 
 What does that mean? We can extend our markets, in my mind, in 
 only one way. We have got to see to it that our products going on to the markets 
 of the world go onto those markets in the shape and form demanded by the market 
 we are attempting to gain. We have to come to putting into practise the policy 
 of grading our farm products if we are going to hold our position in the world. 
 We are being crushed out of the market today by countries that were never placed 
 by Providence as we are placed. We can grow the finest products in the world. 
 We have shoMTi in exhibitions that we can, and yet these other countries crowd 
 us out of our foreign markets. They are going into those markets with their 
 industry organized. They are going in there in a sane fashion. They are going 
 in with their goods standardized as to grades and we have got to do the fame 
 thing, and do it in the next few years, if we are going to hold the markets we 
 already enjoy. 
 
 Co=operative Associations an Actual Necessity 
 
 How are we to do that? In my mind there is only one effective, economical 
 way, and that is by the development of the style of co-operative associations that 
 I spoke to you about a few minutes ago. I know you are not directly or imme- 
 diately interested in dairy products as they are going into the markets of Great 
 Britain, but let us all realize, even although you may be growing tobacco or corn 
 or other things that you are interested in it, and must see to it that every branch 
 of agriculture is prosperous and substantial. We have enjoyed the markets of 
 Great Britain for a great many years for our cheese and our dairying export 
 products. We annually produce one hundred million dollars worth of dairy pro- 
 ducts. It might just as well be two or three hundred million, because we can 
 produce them and we can produce the proper quality. We have been shipping our 
 
22 
 
 cheese into the markets of Great Britain. We were in the exporting business long 
 before any other country, and we had practically a monopoly so far as the British 
 cheese market was concerned. 
 
 New Zealand and the Cheese Industry 
 
 Then, in 1916, when there was a great demand for cheese and the price was 
 high, NeAv Zealand, one of our sister dominions, of which we are very proud, 
 which had for years been largely producing butter, started to make cheese, and 
 she started to ship cheese, of course, to the cheese market of the world, which is 
 Great Britain. Since 1916, when she made her first cheese for export — and 
 that is only about five years ago — since that time she has increased her produc- 
 tion, because she found she could make good cheese and make money out of it, and 
 she has gone on and developed it, and she has increased her production of cheese 
 in that time by four hundred per cent. She is shipping it right into the market 
 where we had been shipping for years and years. South Africa saw what New 
 Zealand was doing, and she said : ''We can make cheese." She went into the 
 production of cheese, and before 1917, South Africa was an importing country, 
 but since that time she has become quite a considerable exporter, particularly of 
 cheese, to Great Britain. Now, in New Zealand, the marketing of agricultural 
 products is highly organized. You cannot ship a pound of cheese or butter or 
 anything out of New Zealand to the markets of the world unless it goes through 
 the hands of the Government graders, with the result that the merchant in Lon- 
 don when he orders a ton of No. 1 cheese or Extra fine cheese, he knows exactly 
 what he is getting, and that there will be no trouble ahout it. It is the same with 
 their meats and everything that goes out of the country. 
 
 Must See that Quality Gets Better Price 
 
 We have been selling our cheese as cheese, just as we have been buying our 
 hogs as pigs. We have been talking quality. We have gone up and down the 
 highways of this Province for thirty years, and our men from the Agricultural 
 Colleges, and myself among them, twenty years ago, telling the farmers what to 
 do to produce the very best. But when they went out to sell they got the same 
 prices as the fellow who produced something that was not the best. So you can 
 see how far we have gotten in the last twenty years. And I say, it would be a 
 calamity if we fail to look ahead three or four years and see what is going to 
 happen. If New Zealand and the other countries go on and increase and increase 
 and push us back, we will find ourselves in regard to cheese just the same place 
 as we find ourselves today in regard to bacon. 
 
 Danish, Irish and Canadian Bacon 
 
 We find today Danish and Irish bacon selling from twenty to thirty shillings 
 per cwt. higher than ours. We produce some of the finest bacon here that is pro- 
 duced on earth. I have seen load after load of Irish and Danish bacon unloaded, 
 and our bacon was equal, if not superior, to any that they can produce, but our 
 bacon goes over there simply as bacon; all grades of it. We have got to waken 
 up and realize that the reputation of our products in the markets of the world 
 is a great national asset. (Hear, hear!). No country depending on production 
 for the payment of her obligations can afford to let any man, firm or corporation 
 make or break the country's reputation. Canada has got to see to it that no one 
 can play lightly, when the market is good and prices high, when you can sell 
 anything, to allow any man, firm or corporation to bring in inferior stuff and 
 
23 
 
 put it on the market as Canadian goods. It is a crime. And this country has 
 got to waken up and waken up fast. It makes no difference how big the corpora- 
 tion may be or how strong, they are not as big as this country. 
 
 Now, my speaking in regard to these dairy products was all leading up to 
 the fact that there is a tremendous work to be done, and done in the immediate 
 future, and I believe, my good friend Mr. Sapiro believes, and he will show 
 you, there is only one way of doing it and doing it effectively. 
 Ontario Grows Choice Farm Products 
 
 We can produce in this country the finest quality of products; and we pro- 
 duce fairly economioally, but there is always scientific work to be done and in- 
 vestigation work to be done especially with the corn crop in this part of the Pro- 
 vince and the other crops peculiar to this district. We cannot work with these 
 special cxops in any of our other stations. There is a great work to be done in 
 the department of production, and we hope to make this station here a centre 
 for the farmers' organizations in this portion of the Province. And we want to 
 make this institution one of force in the Province, because we feel, and I have 
 no doubt of it, in the next few years you are going to see the farmers of Ontario 
 thoroughly organized as regards marketing of their products. 
 
 I went over to the Old Country recently. I knew what apples were selling 
 for here, because I sold mine before I went. Good hand-picked apples in barrels 
 were selling for five and six dollars a barrel here. I went over to England and 
 saw Englishmen paying from $21 to $26 a barrel. And I said, '^We have apples 
 going to waste while people in England cannot afford to pay for apples at $31 to 
 $26 a barrel. If they could get them for $10 a barrel it would be better for them 
 and better for us." I talked to them about it and they said : "You must realize 
 that the fruit trade here is in a very tighly organized ring. If you can break 
 that ring you have some job." I looked it over, and I said: "This problem can 
 be solved, but the first work must be done at home. We must have our own folks 
 at home thoroughly organized and then the next step is to handle the ring." 
 Urging Co=operation upon Niagara District Fruit Men 
 
 I came back and I pointed out to the fruit men in the Niagara district what 
 advantages would come from organization. That year there were hundreds of 
 thousands of baskets of peaches rotting in the Niagara district. Yet people could 
 not get peaches in some localities. One day they would ship peaches into Toronto 
 until they could not give them away, and they would rot and spoil, and then 
 they would have none. These growers had the experience, and they agreed to 
 Jorganlze. They got their organization in operation, I think along fairly safe 
 lines. Mr. Sapiro has made some suggestions for changes which I think are 
 highly admirable. We were amateurs. We had not anybody to advise us. We 
 had to U5e our own knowledge and form up as strong an organization as we could. 
 The Association was organized and has been going one season. It did not get into 
 operation until May 9th, but they handled last year, over one and a half million 
 dollars' worth of fruit. There has been no glut on the market and the fruit has 
 gone to Winnipeg, Halifax and the other cities, to suit their respective require- 
 ments. 
 
 A Lesson with Asparagus 
 
 I was talking to one man in Port Arthur. I saw some asparagus for sale. 
 It was Niagara Peninsula asparagus. And I asked the man how he liked the 
 stuff he was getting from there. '^Oh," he said, "it is ifine. It is all nicely crated 
 .and we get it every day, enough to keep us going. Before we never could get it 
 
24 
 
 that way. There would be a carload and then nothing more, and it would spoil 
 on us. But now we get it every day.^' I was talking to a man in Toronto. He 
 asked me how the crops were going to be this year. I replied they looked as if 
 they would be very fair. "Well," he said, "Asparagus is a failure, isn't it?" I 
 asked him why. He said, "We always could buy asparagus cheap. We could get 
 it and buy it up cheap and send it out to the canners, but this year we can't get 
 it. There can't have been as big a crop." But this year was the biggest crop of 
 asparagus we have ever had, but with the organization, it was distributed to meet 
 the demand. Consumers should always realize that it is not in their interest that 
 products, should be wasted. It is not in their interest that at any time any man's 
 products should be forced to sell below the cost of production. I am not going 
 into the proof, but it can be proved beyond disipute. 
 
 The fruit men are going on next season and they are going to take in apples 
 and inside of two more years they will be doing a business of from five to ten 
 million dollars. I went into a store two weeks ago to-night and asked for some 
 Northern Spies. I had this year only a few barrels myself. I was told they hadn't 
 any. Right in front of me was box after box of my friend's oranges from Cali- 
 fornia. You can go into any store and see the same thing, and 90% of the fruit 
 you see on display there doesn't come from Canada at all, but from California, 
 Oregon and Washington. 
 
 Canadian Apples Win in England 
 
 We sent some apples over to England last September, and took, not only 
 the £100 trophy now on exhibition in the Parliament Buildings, but we took 
 four or five silver medals, against all the world. That is true of apples. I must 
 tell you about cheese. I saw Australia carry off the trophy for the best cheeSe 
 exhibit, and I said: "That has got to stop." So we took a space and made an 
 exhibit at the Dairy show last fall, and we took the first four places for our entry 
 of cheese. So it shows what we have got. We have the apples. Why is it we 
 haven't got the market? I sent one of our men to Scandinavia to look over the 
 possibilities of trade with them. The first store he went into in Denmark and 
 Sweden were displaying British Columbia apples. 
 
 I have a letter from a friend of mdne, sent by the Manager of the Co-opera- 
 tive Association of British Columbia, to his growers. He was writing this letter, 
 and he was telling me what they were doing and what the Association were doing 
 and he says in the letter — it was very nice reading for an Ontario man — that 
 they had succeeded in getting the market of the three prairie provinces which 
 we formerly had control of, and then he said: "You will also be interested to 
 know we are also shipping apples into the old apple Province of Ontario. Last 
 month we shipped thirty carloads to Ontario, and we shipped fifty carloads of 
 apples through Ontario into New York City." He headed this paragraph 
 "Carrying Coal to iSTewcastle." 
 
 We Have the Goods— We Must Get the Markets 
 
 That is a nice situation! We have the product and cannot get the market. 
 WTiy? Because we are not organized to hold our place in our present markets 
 and to get new markets. The Fruit Association will go after it and get their 
 apples and peaches not only in the Ontario markets, but they will get a higher 
 proportion of the Western trade and put our fruit in the mouths of Englishmen 
 at a better price, and then it will pay you and pay me to keep five acres of orchard, 
 because we will know the crop will be moved of! rapidly and carefully. I had a 
 
25 
 
 meeting in Dresden last fall, and the next day I drove down to London, and I 
 met a farmer and we were chatting at his gate. And I said: "You have a nice 
 orchard." "Yes," he said, "but I cannot sell them, and the hoys and I go out 
 and pick what we want for ourselves and shake the rest down for the pigs." 
 Organization a National Necessity. 
 
 It is necessary for us to organize our agriculture in order to get those mar- 
 kets and to hold those markets. I have the belief that it is a national necessity 
 that we get these markets and hold them, and increase our markets — extend our 
 markets. It can be done not by G-overnments, but it can be done by you and you 
 alone. The Government can help and assist and direct, but anything that goes 
 from the top down and you shove down the farmer's throat will never amount to 
 that, but something that the farmers build themselves will stand. The farmers 
 have got to organize themselves. They must realize tliat selling of goods is a 
 special line of business and it is just as important as production. No manufacturer 
 will build"^ a factory and manufacture his goods and then pile them up and say : 
 '■'What am I going to do with them?" No. As soon as he had the machinery, 
 he would get his selling staff organized and when he was making the stuff the sale 
 would be provided for. Now, we have got to do that in this country. I hope to 
 see the farmers of the country come to realize this, too, that when you sell some- 
 thing off your farm your interest in that product does not cease. The man who 
 is interested and interested alone in satisfying the Englishman when he is eating 
 cheese and in creating in the Engldsh mind that it is good cheese, is the man on 
 the back concession here, milking his ten or fifteen cows. He is the man and the 
 only man who is interested. The man in between, no matter whether the price 
 goes up or down, his margin of profit will be the same. But if the men eating 
 our cheese or apples are not satisfied with the quality or price, they won't con- 
 sume them and the market will be lessened. When the market is lessened the 
 producer of the stuff is the man who is hit. So you and I have got to realize 
 we are interested in our stuff from the time it is produced until it is landed in 
 the consumer's hands, and there is only one way we can see to it; that our goods 
 go to the consumer at a proper price and that is by the farmer controlling the 
 channels to him. The wheels that have been already set up do not need to be 
 destroyed, but the control must remain in the hands of the producer. 
 A Personal Tribute to Mr. Sapiro. 
 
 Mr. Sapiro is and has been giving me a great, great help in my work because 
 he also realized, out in his State of California, when his farmers had their backs 
 to the wall, fighting for their existence, he realized that the man who had been 
 given a chance, the same as he had been given by his parents, and the same as I 
 was given by my parents — no credit to me, it is theirs — should realize his duty to 
 his fellow men. And the time is at hand for anyone who can do it to step out 
 and do it. because this country to-day has the right to dtanand the best of any 
 man in the country, to try to see that we can, in a few years at the longest, enter 
 into an era of prosperity in Canada greater than we have before seen. This is 
 the last meeting in Canada at which Mr. Sapiro will speak, and I want publicly 
 to state that I am indebted to him beyond words, and I wish Divine Providence 
 will be kind to his children and family from whom he is separated for weeks at 
 a time in fighting the battles for his own country. If I can reciprocate at any time 
 T shall consider myself indeed fortunate. I know you are going to be fully re- 
 warded for your attendance, in the address you will hear from ]\Ir. Sapiro. (Ap- 
 plaiKse). 
 
POINTS IN THE CALIFORNIA PLAN 
 
 Mr. Sapiro Tells About **Pools," Five Year Contracts, Qrading, Financing and Other 
 Features Which Have Brought Success 
 
 In the closing meeting of the series at Eidgetown, Mr. Sapiro said: 
 The Minister of Agriculture has shown you very clearly that what you need 
 for Ontario Agriculture is a right type of co-operative marketing organization, 
 and I think every man in the room agrees with me and knows that this is the only 
 thing that Ontario needs. But it is not enough to have a certain desire. It is not 
 enough to want co-operative markets. You -first have to understand what co-opera- 
 tive marketing really goes after, and after you understand that you have to be able 
 to understand how you build up the right type of co-operative marketing organi- 
 zation. Everything that comes under the name of co-operative marketing is not 
 necessarily co-operative marketing, and a great many things which are called 
 co-operative are sure to fall through because they have not taken care of certain 
 essential experiences or elements that have been proved necesary in co-operative 
 Imarketing organizations. So I am going to discuss with you this afternoon the 
 principal things that you have to go after when you build a co-operative marketing 
 association, and then I am going to explain to you the things that you have to 
 have in your machinery if you want success, and if you know of any association 
 which does not correspond to that particular recipe, you can rest pretty well as- 
 sured that that co-operative marketing association cannot work and will not work, 
 because our California farmers have been through this for many years. 
 
 California Products Have to Travel Far to Market. 
 
 In our State, away over on the Pacific shore, farther down than British 
 Columbia, we do not raise anything in the State that does not have to go two or. 
 three thousand miles to find a consumer. We have no location like Ontario, with, 
 the population of half of Canada right within your selling radius and right at the 
 door to export to England. Everything we raise has to go across the continent and 
 pay transportation and icing costs, and still be sold somewhere at a profit .so that 
 the growers can stay in business and keep their families alive. 
 
 Our growers had found they could not do that. They became desperate. 
 They found they were going lower and lower in the scale of living and they had 
 to find out how they could keep themselves alive and still keep in agriculture. 
 Some of them had heard of co-operative marketing and they said : "We'll go ahead 
 and form co-operative associations.^' Some of the men knew all about the co- 
 operative associations in England, the Rochdale Associations. They did not re- 
 alize that the English co-operative was a consumers' organization. What they did 
 in England was to sell for local consumption. They have the greatest consumer 
 co-operative association- which is known in the world. But after all, our people 
 were composed of a few Danes, and a few were Germans, and a few lived in the 
 
 26 
 
27 
 
 Piedmont section of Italy, and some, again, came from Belgium, and all of these 
 knew something about the co-operative systems in the old land, particularly the 
 Danes. They knew they had worked out the right type of organization, which 
 applies not to consumers but to farmers. The^e men went about and said : ^'There 
 is a way out. All we have to do is to learn the Danish system, and see if we can 
 apply that system to California conditions.^' AVell, we didn't have any Doherty 
 in California. If we had had Doherty in California it would have meant at least 
 one hundred million dollars to us, and I will tell you why. 
 
 Early Co=operators Had to Stumble Along for Twelve Years 
 
 Our farmers out there had no guidance at all, and they had to stumble along 
 for more than twelve years, with failure after failure, because our State gave us 
 no guidance and our coUege gave us no guidance. 
 
 What our growers did was this: They would start an organization and fail, 
 then they would study that organization. They would not get the idea that so 
 many men have — here is an organization we have built up and it must be right 
 because we built it. No, they studied its failure and saw why it didn't work and 
 made a new start. They would try to ascertain whether the failure was in the 
 kind of organization or in the contract, and in each case they achieved something 
 better and something better, but it took them twelve years to do it, but they did it. 
 But when the twelve years were over the California farmer had learned how, and 
 since 1910 those California farmers have developed a technique for the handling 
 of these commodities so that they know what is the right form for perishable 
 products and for semi-perishable products and what is the proper and correct 
 form for non-perishable products. 
 
 We handle over three hundred million dollars worth of goods every single 
 year through our eighty-three different associations. We handle strawberries and 
 peaches, grapes, cherries, dried fruits, currants, raisins, pears, apples, prunes, 
 apricots, olives. Then again, canned fruit, small vegetables, beans, lima beans, 
 walnuts, alfalfa, barley, poultry, eggs, butter, milk, figs, in fact, everything ex- 
 cept live stock and the things that are controlled by the Japanese. Our farmers 
 have learned how; they have made California a big laboratory. They have learned 
 how to organize co-operative marketing associations, and to-day, if you go to any 
 of the clever California leaders or any of the real California farmers, they can 
 give you the points you have got to have in any co-operative society and if you 
 do not have them in the co-operative you can not possibly expect it to work. 
 
 I will give vjou those test points, because you are going to have these move- 
 ments developed in this country, and while I know Mr. Doherty is going to lead 
 you right, you men have to be equipped to do leading yourselves and to do testing 
 yourselves. 
 
 What Are Co=operative Associations Organized For? 
 
 The first thing you will think of is: What in the world do men organize co- 
 operative associations for? Wliat is the thing they aim at? In California here 
 is how we put it : We say the aim of co-operative marketing is to stop the dumping 
 of agricultural products. By dumping we mean this : You just throw it on the 
 market as fast as you can. You do not think about what the other man has or 
 is likely to bring to market; you do not know the absorbing capacity of the im- 
 mediate market. You do not know whether Detroit or Cleveland or Buffalo can 
 take more; you do not know how far your products can be carried and still sell; 
 
28 
 
 you do not know the marketing conditions of your product, so you just bring it 
 in to the nearest man you can find, or commission house or whatever it may be and 
 you throw your product at him. What happens? Each grower throws his pro- 
 duct against the other man. It isn't the speculator who breaks the price of agri- 
 cultural products, it is the grower who breaks the price. The speculator stands 
 aside and picks up things at the low price which the grower makes by dumping. 
 We stopped that in California. Instead of dumping, we saw that the fanmers 
 have to learn to merchandise their products. And by that we mean to control 
 the flow of their products, that they flow into the markets of the world in such 
 quantities and at such times that the markets can absorb them and at a fair price. 
 
 Principles in Co=operative Methods. 
 
 We say in merchandizing the first thing to do is properly gnade your pro- 
 .•djuots. Grade it upwards, and make sure the thing you are selling can have a 
 brand name put on it, and it is always the highest quality of that product that is 
 brought on any market. We spend hundreds of thousands of dollars in inspecting 
 everything that is delivered to the co-operative associations. We go hehind that, 
 we go to the farmer and try to get him to begin to produce high class things. 
 
 The second step is that your package has to be perfect. You have to figure 
 out a package that will stand the travel to the markets at which you expect your 
 product, not to be sold but to be eaten, and then your package has to be one that 
 is convenient to the person who is going to use the product or commodity when 
 he gets it. Take, for example, things' like celery. Our growers used to put it in 
 packages which were perfectly all right until they got to San Francisco and the 
 ^commission men got them, but we got rotten prices and we wondered why, and 
 then we discovered they weren't packed right. They were packed to reach San 
 jFrancisco but they didn't reach Chicago all right, and Ave lost piles of money 
 through that carelessness. They bruised. Take prunes. We learned that people 
 did not like to buy prunes out of twenty-five pound boxes. They were exposed in 
 the stores and the dirt blew in on them and the women did not care to buy them. 
 So we put them up in two pound boxes which is the unit people like to buy so 
 you can buy prunes, sealed in two pound boxes and you can know it is just as 
 good and clean as when it left California and the packing house there. The first 
 step is to pay attention to grading and quality, and the second is, to the package, 
 60 that it will reach the consumer in the right condition. 
 
 Markets Must be Hunted Up. 
 
 We went all over the world to find markets for our products. With perish- 
 able products we found out how far it was possible to go. We figure how many 
 days any of these things can travel and then we find every single market within 
 that circle, and then we get a big map and draw a circle around and include 
 every city that can possibly take our perishable products, and we say : '""WTiy 
 aren't we selling them there ?" If we find someone else is selling a better product 
 at a cheaper price we throw our hands up, hut if we find they did not take them 
 because . they didn't know about them^, or if we find someone else is putting a 
 poorer thing in there or something we can match we go in and compete. In 
 one case we extended from twelve original points to three hundred and twenty 
 points of sale. We search out as far as our product can go. We find the markets, 
 and if we can't find the markets we create them. We sent to Japan and to 
 England, and find out how we can increase the consumption of certain of our 
 products. We noticed that English people eat more canned pears than canned 
 
29 
 
 peaches. So we tried to bring about consumption of pears in American cities 
 equal to the consumption of peaches. So we put on an advertising campaign 
 in the city of Boston, and through the newspapers urged the people to eat canned 
 pears. We increased the consumption of canned pears in the city of Boston this 
 year by a litle more than three hundred per cent, just by putting on the right 
 kind of merchandizing campaign. Our Association did that, not the canners, 
 although they had sold our fruit to the canners. But we can go to the canners 
 and show them it is possible to increase the market for pears, when they told 
 us we could not. We have shown them that there was a market, and we are going 
 to get a much better price for our pears this year than we did last year, and 
 last year we made a profit on our pears. 
 
 Some Markets Must be Actually Created 
 
 In short, we actually search out not only where we can find markets but where 
 we can create markets. We sell our pears all over this country, either as fre=h 
 pears, canned pears or dried pears, and we investigate each type and the con- 
 sumption possibilities of each type so we can move everything we raise into 
 the farthest and greatest number of markets of the world we can possibly reach. 
 So, in merchandizing you must understand your markets and extend them by 
 time and by place. But it is no use doing that unless you learn how to control 
 the flow of your products so they go through a single channel. It is no use 
 having eight hundred cheese factories in one part of the Province of Ontario, 
 each one of these fellows selling when he feels like it. There is no use of 
 finding great markets or developing a great market unless there is a central office 
 that controls the flow of the market. Remember, with perishables the great aim 
 is to see that every market gets as much as it can absorb, and that no market 
 has a glut and no market has a famine. Individuals cannot handle it, individual 
 commission houses cannot handle it. You have to have the crop moving under 
 central guidance so it goes out in the right amounts and each and every market 
 gets what it can properly absorb. Then, when you improve your market by 
 advertising, fully, what do you strive for? 
 
 The Placing of Prices 
 
 Do you fully understand what I mean when I stay the price should be made 
 by supply at the point of consumption, and not at the point of production? When 
 we set out to form a California co-operative we say the thing we are going to do 
 is to merchandize the products and in merchandizing it these are the principles. 
 First, grade it and make the quality and standard perfect. Second, pack it right. 
 Third, extend the time and place of marketing. Fourth, move it out through 
 a central channel so that each place gets as much as it can absorb at the particular 
 time and no more, and then the price will fix itself on the basis of supply at the 
 point of consumption instead of supply at the point of production. 
 
 Of course, we help that out by advertising. Four of our Associations alone 
 spend more than two million dollars a year in advertising. We get people to 
 eat our products. And so these are things we admit are not as good as your 
 Ontario product^, but we get better net returns for our prodaicts in California than 
 you men do with your superior products and right at the door of the English 
 markets, because you have the products but we have the products plus merchan- 
 dizing organization. Therefore you must set out and merchandize your product. 
 If you have any little savings in mind, for fertilizer or such like, it isn't worth 
 anything. 
 
30 
 
 Local Competition in Stores Not Desirable 
 
 I do not object to economy, but I object to people putting their energies into the 
 wrong channel. Do not set up stores in competition with those that are already per- 
 forming their work in a good way, to get little cheap economies, but first solve the 
 great big problems and the others will take care of themselves. I do not object 
 to consumers' stores, but where farmers establish stores, they must do so as con- 
 sumers and not as producers. They are solving little problems by setting up far- 
 mers' stores. But do not let people get you off the main drag. You must have 
 a leader who will show you how — you need an organization to stop you from 
 dumping your products. You have one kind of machine for perishable products 
 and another kind for semi-perishables and still another kind for non-perishable 
 products. With non-perishables the problem is storage and finance, with perish- 
 ables it is routing. 
 
 Importance of Incorporation 
 
 The next lesson was that you have got to incorporate every association under 
 some sort of co-operative marketing law. We decided that the only kind of organ- 
 ization that was right for co-operative marketing was a pure business type, usually 
 \vithout capital stock, usually on a non-profit basis, without a cent of investment 
 going in on the part of the growers. We organized them on the non-profit basis 
 so the Association cannot make a cent for itself, and prohibiting the Association 
 from handling anything for outsiders. They will not even let a lawyer in one 
 of these Associations; they are pure farmer and nothing more, all the way through. 
 Then these Associations are organized like a business, non-profit, non-speculative, 
 and farmers only, and the basis of production is a written contract with the grower. 
 Some men go around thinking that all they need to do is to incorporate it, and have 
 some good fancy by-laws, and then stand back and watch it work. You never heard 
 of a business man working that way. He sees he has a proper organization to 
 sell something and then he will tie up every man with a contract, to deliver his 
 product to the Association. Do not get the idea that because you have in the 
 by-law that every man is bound by the rules and regulations, that you can make 
 him deliver. 
 
 See That all Contracts are Clear and Binding 
 
 The contract has to be clear and plain in all of its terms, and tell just what 
 the obligation of the grower is and what the paying obligation of the Association 
 is, and it should tell all those things as far as it can be foreseen. We wouldn't 
 dream of organizing an association in California to-day without a definite, ex- 
 pressed contract between the grower and the association, telling exactly what the 
 rights and duties of each are and what the privileges of the association would be, 
 and we would not think of organizing under one year contracts any more. We 
 use five year, six year and eight year contracts. We realize if the growers are going 
 into the organization they are going into it on the right basis, to give it a chance 
 to develop the right men and the right financial connections and right mercantile 
 connections. If you go to a man with a five year contract, he will deal with you 
 when he would not deal with you for one year. When he knows you have the. growers 
 tied up for five years he deals with you, because he does not want to run any risk, 
 and he knows in five years you can set up a competitor if he gets too rambunctious. 
 We do not deal any more with fly-by-night markets. We do not believe in ropes 
 of sand; we believe in ropes of steel. We have contracts that the growers cannot 
 
31 
 
 break. Some people have come in and thought they could break their contracts. 
 Then we go after them. We are the fellows from whom they get it, and we not only 
 get liquidated damages, but we get injunctions to prevent them from delivering to 
 anybody else, and we get decrees for non-delivery and then we make them pay the 
 costs of chasing them up. And that is not a law of the State of California. That is 
 a law as we have worked it out on English equity decisions. So we worked out 
 these strong and forceful contracts. If a grower signs a contract he delivers the 
 goods. "We know in advance what the welcher will do. He will deliver and he will 
 pay all our costs in making him deliver. 
 
 How the "Pool" Works. 
 
 One other thing. We always provide in California for an internal pool. 
 Take tohacco. We would provide that any man who shall receive the same net 
 price for that one year as any other person delivering the same quality or grade 
 in that one year. You all know about the pooling law and you want to have it 
 in your contract, because if it isn't in there will be trouhle. Do not leave anything 
 to chance. Eemember that good motive is not anything. You must have the right 
 technique and method. 
 
 Must Have Long Term Contract. 
 
 So you must have, in a good co-operative, a long-term contract, a strong 
 enforceable contract, a contract that provides for pooling, and albove all a contract 
 that gives you a chance of financing your product. If it is a perishable, you do 
 not care so much, because all you do is ship it and get your money back within 
 a circuit of ten or twenty days. If it is a non-perishable you have to put up that 
 product as a collateral and let the Association borrow money on it. Suppose you 
 were a banker, and a man came to you with a co-operative proposition and said 
 he wanted you to lend him money on this thing. Suppose the contract did not 
 say anything about title passing or pooling, what would you say? You would 
 say: "I don't think I can lend you money." And he would say, ''Why?" And if 
 you wanted to he perfectly frank and tell him what was wrong you would say : 
 ''How do you know you have title to the products? How do I know that if you 
 don't pay that I can sell the things?" In this Province a hanker has not the 
 assurance that title passes. But the banker is not your enemy, becauses he refuses 
 to lend you on those contracts. Perhaps it is we who are at fault and not the 
 banker. But we get furious because he will not do something v/hich he as a banker 
 does not dare to do, and we are at fault because we did not provide for it away 
 back and give him something safe to lend money on. 
 
 We went after that year after year, in California, until we hammered out 
 the way in which we could guarantee our product and make it sure, so the banker 
 would be satisfied with the contract. So you want the right kind of contract. 
 You sign that contract — you won't have to sign it more than the once — and it will 
 stand up in the banks and in the courts and you have a real Association. 
 
 Get the Right Man to Run the Business. 
 
 After you have the organization completed, you must be dead sure you have 
 the proper man to run it. We say it is the biggest industry in California, and 
 we will not treat it as a step-child. We will get the best men to handle our busi- 
 ness we can. We do not get men who have been trucking. We get the best men 
 we can and we pay them decent salaries to serve us and to serve us alone. Why, 
 
32 
 
 we go to the railroad and get traffic managers ; we go to the newspapers and we get 
 publicity managers; we go to the business world and we get salesmen. We have 
 no amateurs. Our growers have learned that they, as individuals can't sell agri- 
 cultural products and stand together, but organized and standing en masse, their 
 mo2iey can hire the best brains in the country to serve them. And so they run it 
 in just the saime way as any big business is run in your land or in my land. We 
 have learned that the whole thing is to put business methods into agriculture, 
 and we have to organize with the right machinery and employ specialists to run 
 the machine. That is theoretical. Will you be patient while I tell you what we 
 have done in one year with one big industry in the United States ? 
 
 Tliis thing originated with us in California, but it spread all over. Tlio 
 cotton men began to organize and the tobacco men began to organize, and even the 
 maple syrup men in New York State. It is a natural consequence all over the 
 country. 
 
 The Great Tobacco Co=operative Campaign. 
 
 You are tobacco men. In Tennessee, Indiana, West Virginia and part of Miss- 
 ouri they grow Burley tobacco which is not any better, if it is as good, as you men 
 produce in Ontario, and your average production is about two hundred pounds 
 heavier per acre than the Kentucky district. We will assume you grow good Burley. 
 Now, these growers were pretty well broke by the buyers. Down there there were 
 warehouses all over through these districts, great big auction warehouses, and the 
 grower would trade his tobacco and dry it and tie it together in hands and bring 
 it in to the big warehouses and put it out on the baskets and the buyers would 
 go out and buy it. There are only a few big firms who are really buying : Liggett- 
 Meyers, United States Tobacco Co., Lorillard Company, and each one of these 
 companies Avould have a man at each one of the warehouses and the buyers would 
 simply walk down the rows in the warehouses and they Avould pretend to grade 
 the tobacco and pretend to compete against each other, and they would buy in 
 at the rate of one basket every four seconds, or an average of fifteen sales to the 
 minute. You cannot tell me any individual could grade tobacco, going through 
 at that rate. You and I know they would simply make a guess, figure the average 
 against the farmer and make a bid. In two seconds they knew the limit as to 
 bids and they operated then as one buyer buying in the crop. These men would 
 go up and do-wTi and perhaps buy all the tobacco. 
 
 Tragedy of Former Tobacco Days. 
 
 Tliese growers would raise between 230 and 250 million pounds for the mar- 
 ket. They simply dumped their tobacco against each other, and the result was the 
 tobacco growers were the poorest farmers in all the country except a few of the 
 cotton growers. They came down to such a tvpe of poverty as I hope vou will 
 never see. They became desperate; they did what they called night riding, and 
 would go and destroy the crops of people who would not stand in with them. 
 Finally they went to Judge Dingan, the editor of the Courier, and he is the fiiiest 
 leader of any kind we have in the South. He never knew that the people of 
 Kentucky lived as these people explained to him, or in Tennessee. He was very 
 much interested, and he went to New York and took it up with certain bankers 
 there, and they said there was only one way to it — send somebody to California 
 and see if they could work out a plan like ours for their tobacco. Judge Dingan 
 did it. 
 
33 
 
 How the Clouds Were Lifted, 
 
 This plan was presented to them in March of a year ago, and they did not 
 do any contracting until late June or July. They got every Burley grower they 
 tould to sign the agreement that he would deliver all the Burley tobacco he could ; 
 that the Association would grade it and put it into bales and sell these bales 
 and take the cost of doing business out of the funds, and return the net earnings 
 to the grower so that every grower would get the same price for the same quantity 
 and quality. The directors would go in the same pool, and if they wanted to put 
 a charge on some other man's tobacco the charge had likewise to go on their own. 
 That is the principle of internal pooling. No advantage. There is no capital 
 stock, it is a non-profit association, to be composed of only Burley tobacco growers, 
 and they get it signed -up in Ohio, Indiana, Kentucky, Tennessee and West Vir- 
 ginia and everywhere Burley is grown. It is a long contract and a strong contract. 
 
 They had a plan whereby they could buy up separate corporations and these 
 separate co-operatives would have all the money and guarantees for the ware- 
 housing co-operatives that they would buy in the properties over a period of five 
 years by a small, moderate taxation upon the returns of the growers. They were 
 limited to two-fifths of one cent per pound each year. That is the old method 
 by which the growers gradually acquire the property they need from deductions 
 from sales. 
 
 Do Not Mix Warehousing and Marketing. 
 
 You must never have your warehousing association the same as your marketing 
 association. The warehousing association has to be in a position to issue legal 
 receipts upon which you can borrow money, and they cannot issue warehouse 
 receipts on their own products. So we have to establish the organization and 
 guarantee the produce in the warehouse, the tobacco that moves through to the 
 marketing association, and we have to agree to pay up to 2/5 of one cent per 
 pound every year towards the purchase of these necessary buildings. That is the 
 limit, we don't have to go that high, and probably will not need to go that high, 
 in Kentucky. The contracts were for five years, plus 1921, if they could get 
 organized by November 15th, 1921. Then they appointed a committee of grower? 
 to see if they could do this work and get the signatures. 
 
 Long Time Agreements Important. 
 
 Judge Dingan was the Doherty of Kentucky. He acted as Chairman of that 
 committee. He worked out the plans for that sign-up campaign, and the result 
 was that before November 15th, they had signed up much more than seventy-five 
 per cent, of the entire Burley acreage in Kentucky. Ohio and Indiana. As a 
 matter of figures, they had 55,710 contracts with individual Burley tobacco growers 
 under which every one of those members has to deliver his tobacco to the asso- 
 ciation for the year 192-1 and five years thereafter. The association was then 
 incorporated. Do you know, Kentucky did not have a good law for that, so they 
 even had to put a law through so they could incorporate it i;nder the laws of Ken- 
 tucky. In the meantime we incorporated it under the laws of North Carolina 
 so we could operate. You are lucky here. Your laws are easy enough to enable 
 you to do anything you need to in the way of organization. "We have forty-eight 
 great States but no two of them have the same laws. 
 
34 
 
 Settling the Warehouse Problem. 
 
 But we did this, and then came our problem: How are we going to get this 
 tobacco, how are we going to grade it, how are we going to warehouse it, how are 
 we geing to dry it, and above all, how are we going to give the growers some 
 money on the day they deliver their tobacco? Because they have to have money, 
 unless the co-operative association harms them more than it helps them. As we 
 said, we have got the places in which to receive the tobacco — we believe receiving 
 points must be arranged at every local point where the growers needed them. They 
 must be made convenient for the growers to deliver their product. So we got 
 the warehousemen's contract. We said: ''^^e'll be frank and fair, we are going 
 to make a proposition to every warehouseman in the Burley district to pay for his 
 room for five years, and we will pay a good price, but it will only be for the fair 
 value of his physical property as reached by arbitrators.'" So we drew out a con- 
 tract fair to both sides, as we thought, and we called a meeting of the warehouse- 
 men. We held four meetings of warehousemen and we signed up 117 warehouses 
 in that whole Burley district. Only 13 warehouses in all that Burley territory 
 refused to come in with the growers. We took immediate possession of these ware- 
 houses under those arrangements. We put managers in charge, usually the old 
 warehouse managers who knew the men, and generally, the men thought they 
 were fair — put those men in charge and got ready to receive the tobacco. 
 Getting Over the Grading Difficulty. 
 
 We had always been told that tobacco couldn't be graded by the growers. That 
 is true, but you can get men who do know how. We located Mr. James Stone, 
 of Lexington, and secured him as our general manager. He was not chiefly a 
 farmer. He was a warehouseman who had been a tobacco buyer, and who was a 
 director of banks, and a man who believed that he could not only be of national 
 service but be a big man in his own territory. He sent for some of the best men 
 he knew. He said : "I want to set up a set of grades so that I will know just what 
 the tobacco is this man delivers to me, so I can give him a receipt showing to the 
 dot what his credit is." They worked it out, and in about a week they set up a 
 new grading, the first scientific grading ever known on this continent. They have 
 fifty-two grades. They took it from the ground up, on the stalk, on the type of 
 leaf, and as it is in color. Then they have a series of numbers telling the color 
 and condition of each of these leaves. They have a series which absolutely covers 
 the grading field. Then Stone advertised for graders, and men came who thought 
 they could grade. Then he sent around for tobacco leaves and he put these men 
 to school to learn how to grade. He gave them examinations and those who got 
 eighty per cent, were kept, and those who couldn't make make eighty per cent, 
 were dropped out, and others taken on. No grader grades tobacco in his own 
 home district. No grader grades tobacco knowing whose tobacco he is grading. 
 We announce to the growers when they could deliver the tobacco, and on the day 
 that the grower delivers at the warehouse there is a technical grader ready to 
 take his tobacco and tell him he has 75 lbs. of our grade 1 ; 84 lbs. of our grade 
 2; and so on. Before the grower goes away that day he has a complete appraisal 
 or receipt telling Just- how much of each grade of tobacco he has delivered and 
 the grades are the same in Tennessee as in Kentucky — universal grades. 
 Banks and the Co=operative Men. 
 
 The third big job was how we were going to get the money to give the growers 
 an advance payment on the day they delivered the tobacco. We got our grading 
 
35 
 
 fixed, and then we called for a meeting of representatives of the banks. We said : 
 "Here's what we are doing, we are setting up this thing and we are going to be good 
 and business-like about it, we want you bankers to see just what we are doing.'' 
 They said, "Yes, yes, it looks very nice." We said, "We are grading the tobacco." 
 "Yes," they said, "but what does it all amount to ?" "We are grading the tobacco 
 so that when we ask you to lend us money you will know what this means. You 
 don^t know whether tobacco is worth 60c. a pound or 45c. a pound because you 
 don't know its grade, but we are setting up a system of grading so we will be able 
 to tell you just what every hogshead is worth, so when you make the loans on that 
 you will know you are safe." The bankers were interested in that, and they sent 
 their men down to see what we were doing. But when we wanted to borrow 
 money, they said, "Have you got title?" "Yes," we said, and we showed our con- 
 tracts to sell in pooling quantities. The bankers went away and they wrote a let- 
 ter and asked us what we wanted. We said : "We want you to send your tobacco 
 men down to see what you will lend on each type of tobacco, 40c. a pound on C.3., 
 60c. a pound on C.4. (cigar wrappers) and such and such a grade." These bank- 
 ers thought about it and hesitated. We then met with a group of city bankers 
 and went over that proposition and showed them- that they were lending that money 
 to the dealers, and we wanted them to lend it to us and it would be loaned more 
 safely because we had the tobacco to put up as collateral. The result was the bank- 
 kers agreed to lend us one and a half million. And then a smart lawj^er got busy 
 with them. This thing was unconstitutional under the Trust Company laws. We 
 admit he was a much greater lawyer than any we had connected -^vith our associa- 
 tion, but he couldn't convince his own banker that he was right, and Mr. Brown, 
 one of the biggest bankers there, got up and said : "I believe this thing is sound, 
 and I am ready to lend them half a million no matter what any of the other bank- 
 ers think." And we found we could get one million from the bankers in Louisville. 
 
 More Money was Needed and was Got. 
 
 But that was rotten! We needed at least $l,30'0',0i00 to $1,500,000 for one 
 week's delivery and at least three weeks in which we would redry that tobacco and 
 'convert it into other security and then borrow money from outside banks if we 
 had to. So we had to have four million for immediate financing. 
 
 I went to Cincinnati to see the bankers there, and tliey said they would help, 
 but it did not seem enough, so we sent wires to the bankers in the Burley district 
 and had them come to Lexington. We told them what the Louisville lawyer had 
 said and what the answer was, and said, "Mr. Brown's giving half a million. We 
 need $3,60'0,0'0i0. What are you men going to do ?" The answer came like a shot. 
 One little fellow got up and said : "My bank's only a little bit of a fellow, and 
 my legal limit is $3,000, but I will go my legal limit." That made my heart glad. 
 Then Judge Dingan got up and said in his personal capacity, "I believe inthis 
 Association, and I know it is right, and I- will give you a million if it is nceessary.'* 
 And before we closed books that day we had $4,300,000 subscribed for immediate 
 financing. 
 
 And Still More Money was Available. 
 
 Then we figured we had to have more money than that. (Laughter.) We 
 must have 120,00'0,00i0 pounds delivered, but we did not want to have to be forced 
 to sell it, even if we were sure we could make sales, but we didn't want to rush 
 our sales. The easiest way to make a sale is to be able to carrv your stuff. So 
 
36 
 
 I went to New York to some of the bankers who had been lending to the California 
 farmers. "Sure," they said ;" You get your stuff in proper shape and in the ware- 
 houses and if your contract is the right kind of contract we will look after you." 
 "But," they said, "don't go to the War Finance Corporation. We would rather do 
 it for you." So we wondered why they did not want us to go to the War Finance 
 Corporation, and we went to see them at Washington, and they said they would 
 let us have up to ten millions, at six per cent, the money to be taken any time we 
 needed it and paid back any time before December this year, and our security to 
 be our warehouse receipts the same as at New York. We have not had to use one 
 dollar of War Finance Corporation money. But the funny part is, the New York 
 banks think Ave should borrow from. them, the Chicago banks want some of this busi- 
 ness, the S't. Louis banks want some of this business. Why, the United States' 
 Banks, who used to be absolutely opposed to co-operative business, are now on their 
 toes to get our business, because they understand it now, but chiefly because they 
 know that we put our collateral before them. We show the grade of the product and 
 we have it in independent warehouses and we give them everything the old dealer 
 used to give them and a good deal more. So our banking standpoint is fairly 
 healthy in that association. 
 
 Then each grower on the day he delivered, would get a draft on the Associa- 
 tion for so much per pound, depending on the grade he was delivering and he 
 would deposit his draft on the local bank and get his money right there and then, 
 and then the bank would send it in to the Trust Company at Lexington, not en- 
 dorsed by any grower or director. No one person puts his personal credit. It is 
 simply the credit of the Association on proper collateral. 
 
 The growers started to ship in and it was perfectly wonderful how they rolled 
 in their stuff. Then we had to redry it. We never parallel a man's plant if we 
 can arrange for its use. We simply want to make some money for ourselves, do- 
 ing it, if possible, without his losing anything. So we started to make contracts 
 with re-dryers, before we fin shed we had a contract under which we had options 
 to go in and re-dry up to eight million pounds a week, at terms which were abso- 
 lutely fair to us, and satisfactory. 
 
 How the Selling Problem Was Solved. 
 
 Then we said, "Now, we'll talk about selling." So we sent our cards to the 
 big four. We sent our complete list of grades and said we would like to have 
 them call and see our plant. AVe called on them personally, too, to show them 
 we were not wild growers, but that we were good enough business men to do busi- 
 ness with them. We said to one of them: "You have 2O0' buyers. Suppo.>e we 
 can show you where you can send one buyer to us and save not only the salaries 
 of 199 men but know that you are getting what you ask? Besides." I said, "I 
 know your buyers differ, and one firm had to put 18% of tobacco they could not 
 use back on the floors and sell it at a distinct loss to themselves. So," I said, 
 "you can eliminate everything but just what you want." They said, "That in- 
 terests us. We will look through your grades." 
 
 We left them. Then we sent a telegram stating we were ready, and the Vice- 
 President of Liggett & Meyers came down and saw Mr. Stone, and he shot out 
 a big order sheet and said: "Tliis is what we want, 10(>,0'00 lbs. of your grade 32, 
 1 million 200 thousand poundsi of your grade D.7," and so on, a total of more 
 than 20 million pounds of tobacco. 
 
37 
 
 A Wakeful Eye is Ever Necessary. 
 
 Ill the meantime we had not Ixx'U sleeping. We nuuh' a suinniarv from tlie 
 sales of Burley tobacco made the winter before. We knew that there were other 
 smaller buyer? in the field, and we knew that the big four would bid big prices 
 to keep them out of the Association, so Ave explained that those sales would be our 
 basis of sales and on those sales we had iixed the price which was fair to the grow- 
 ers. Xow, Liggett & Meyers" order included very little of the high grades but a 
 great deal of the low grades. And this was tobacco sold green. I am not privi- 
 leged, to give you the net price we are getting for the average, but it is quite a 
 few cents more than the twenty cents a pound net for green tobacco to the grow- 
 ers. I am told you have made good sales, or what you call good sales. You net 
 about eighteen cents a j)0und to the groovers but onr ]>ercentage on your grades 
 is about six cents a pound higher than yours. 
 
 The companies took delivery of the tobacco, and it began to move out. Then 
 Mr. Stone said, "I understand from the way things are going along t'lat the tobacco 
 crop is going to be short." So, after we had sold about thirty-six million pounds. 
 Mr. Stone withdrew the price list and increased it. and to date we have sold about 
 fifty-five million pounds of t(»bacco at prices made by the Association and satis- 
 factory to the Association. 
 
 There is a Time to Stop Selling 
 
 Then we closed down. We are not selling a pound just now. We are re-drying 
 everx bit of the toliacco, 'l)ecause w'e believe the crop is rather short and we are 
 not going to sell another pound until every delivery is in and until we know 
 accurately what we ought to charge for the balance of the crop. Our guess is that 
 the growers will net at least ten cents a pound more than the outside grower plans 
 to get in Kentucky, perhai)s a little more than what you men have been getting 
 for your Burley tol)acco which you say is as good as ours and has a larger pro- 
 portion per acre and therefore costs you less to produce. 
 
 The trick was turned in sixty days, without any war. without any type of 
 abuse, with all classes co-operating with us. Mr. Stone is to-day the chief of 
 that industry, a high-class business man. He has sold fifty-five million pounds. 
 We have paid for every cent of the original loan, and we have not used a penny 
 of the War Finance Corporation's money, and we are in a good position to sell 
 the balance of the crop at what we say is fair. Our growers are thoroughly satis- 
 fied, because the advance payment they received this year was about equal to the 
 payment they got from their entire crops last season, and they know they will i^ei 
 about twice as much again as the advance payment which has heretofore been paid 
 to them. 
 
 The Lesson of one Brief Year 
 
 In short, in a period less than one calendar year, the entire Burley tobacco 
 industry of the United States has turned over a new leaf. It has ceased to be a 
 burden to the growers. This year our growers will nud<e money on their tobacco, 
 and we believe, on the California ])recedent, that every year hereafter these grow- 
 ers wuU make money on their Burley tobacco. 
 
 The Burley men made so well on it that the Light fellows started. Now thev 
 have sixty thousand growers in North and South Carolina and Virginia, and that 
 Association is going to run this year. And there is another Association for the 
 dark tobacco type. The next week we put on a big sign-up campaign in the 
 
38 
 
 Dark Tobacco districts. 1 cxpcH't in li'2y tliere will be about two hundred thou- 
 sand growers of tobacco in the United iStates in tjiese three types of Tohacco Organi- 
 zations, and they will handle about eighty-five per cent, of the Rurley crop, about 
 seventy-five per cent, of the Light Tobacco and something over two-thirds of the 
 Dark Tobacco crop produced in that country. All this was done in a period of 
 less than OJie year. Nobody performed any miracle. They had a good leader. Judge 
 Dingan. 
 
 A Leader is Nothing without Followers 
 
 But a leader is no good unless he has plenty of followers. In Kentucky th>iy 
 developed the followers. The growers decided they had stuck to the buyers too 
 long. They threw it over and in one year they converted the tobacco business 
 from a real gamble into a real industry. They have done nothing yon cannot 
 do here. I know what you have done with your tobacco and your other commodi- 
 ties . 1 think your tobacco organization did a big thing when they organized the 
 commodity. T think you can make certain little nn'nor changes in your associa- 
 tion and build up an association here that will be just as good for Canada as the 
 Burley Association has been for Kentucky and Tennessee and the other States 
 down there. 
 
 We decided that we wouldn't always be at the mercy of the big four, so we 
 sent out notices to other men who we knew from time to time bought tobacco. 
 Quite a few of these men are exporters of tobacco to Holland, Denmark, Sweden, 
 and some of it moves hy way of those countries to Germany and some to England. 
 We talked to those men and said: "We are going to sell yon tobacco on the same 
 basis as we sold to the big firms, T^/iggett and Meyers and the others. We want 
 more customers. You come out and figure out what you can do with your E'nglisli, 
 Dutch or Swedish trade and come in and talk business with ns." They came 
 and brought ns in orders for one million pounds at our prices. They are inde- 
 pendent men who are trying to grow. We have put that industry on a fair, safe 
 foundation foi- the first time in more than seventy years of the tol^acco industry 
 in those States. 
 
 Ontario Tobacco Conditions are Not Critical 
 
 You have a real opportunity here. Your iUirley situation isn't by any means 
 hopeless, and even if you are carrying your last year's crop, just hold on to it a 
 little. It is the shortest Burley crop they have had in eight years, and do not be 
 frightened when they tell you they are all stacked up with Burley. They have 
 to age their tobacco. They know it, and you know it. and if you are businesslike 
 and not mad. T am of the opinion they will deal with you just as they dealt with 
 us this year. 
 
 N"ow, I have a special message. I told Mr. Stone 1 was coming up because 
 Mr. Doherty had written me a good survey of your idustries here, and Mr. Stone 
 said. "Any time you need anything from the American Association it is yours. 
 (Applause.) I will come up here any time you want me, I will sit in conference 
 with your Board. If you send somebody down to talk real business with me. 
 I will even put you in touch with some people who can get you foreign sales. 
 You are Canadians and T am an American, and we fought together not so long 
 ago." (Applause). We are not going to let speculators break you men any more 
 than we can help, any more than you would let them break us if you could help 
 us. 
 
39 
 
 Ontario has Wonderful Possibilities 
 
 I cannot tell you how deeply I luive been impressed with this Province, your 
 commercial side, and your wonderful scope of products. Not only have I been 
 carried away by the fine leadership of Mr. Doherty, your extraordinary Ao-ricul- 
 tural College, but I am very dee]ily impressed with the type of farmers. You 
 do not sit ahead of me, as so many I'nited States farmers do. You have not lost 
 voiir hope, your eves are keen, and yoii arc still on both feet, still ready and alilc 
 to take care of yourselves. 
 
 Co-operative marketing means more money to the farmer, l)ut more than 
 that it means a better manhood and womanhood and better citizenship in the rural 
 (districts of whatver State adopts it. We have not done, in California, anything- 
 more than you can do in this Province. You have better leadership, and you have 
 the example of what California failed at. as well as what it has succeeded at, and 
 you have the example of Kentucky. You have the finest type of men to build 
 with, and there is no excuse for slow action in this Province, and still less excuse 
 for any kind of failure. i\Ien of Ontario, if you want to make your agricultural 
 industry permanent and |>rnsperous, the whole world is at your feet. (Applause). 
 

 AN ANALYSIS 
 0/ MARKETING 
 
 Fundamental Principles of Co-operation 
 
 = BY = 
 
 AARO^^' SAPIRO 
 
 An Address Delivered 
 on December 11, 1923 
 at the Fifth Annual 
 Meeting of the American 
 Farm Bureau Federation 
 Motel Sherman, Chicago, III. 
 
 Published by the 
 
 American Farm Bureau Federation 
 
 58 E. Washington St., Chicago 
 
An Analysis of Marketing 
 
 Within the last year there has been some real accomplishment^ in co- 
 operative marketing, but the chief accomplishment^ is the fact that around 
 the country there is a general clearing up of the idea of what co-operative 
 marketing means. We are beginning to learn hovir to define the terms that 
 are used in co-operative marketing, and we are beginning to make distinct 
 the viewpoints that are fundamental in co-operative marketing. 
 
 If I were to have to state what the chief accomplishment of the last 
 year has been in the entire subject of co-operative marketing, or marketing 
 of farm products, I would say that the real achievement has been the defin- 
 ing of ideas and the setting out of definite viewpoints. 
 
 I am going to review some of those this morning, because there has 
 been a haze of material scattered around this city, and this conference, on 
 co-operative marketing, and perhaps a mention of different points will help 
 clear up issues in our own minds before this day is over. 
 
 We are learning not to merely use words, but to analyze down behind 
 the words and strike certain ideas. The first thing we are learning, for 
 example, is that co-operative marketing Is a totally distinct thing from co- 
 operative manufacturing. If you get a lot of farmers together and get them 
 to deliver all their milk to one point, where there is a cheese factory, and 
 then if they own the cheese factory, or if they lease a cheese factory and 
 engage a cheese maker, and then if tliey make cheese, that is not co-operative 
 marketing, that is co-operative manufacturing. Co-operative marketing 
 would come only if you took the cheese manufactured in these co-operative 
 cheese factories and then co-ordinated the production of one factory with the 
 production of another, and made some intelligent arrangement for selling or 
 marketing that product. 
 
 We have learned to distinguish between co-operative manufacturing, co- 
 operative buying, co-operative packing, co-operative grading, and co-opera- 
 tive marketing as such, and if we can keep that one distinction in our minds 
 we are going to accomplish something real on the entire matter of co-op- 
 eration. 
 
 Now co-operative marketing is distinct from all these other activities, 
 because co-operative marketing is simply an attempt to put the business 
 principles of marketing into the business end of the farm. It has nothing 
 to do with production except in an indirect way in the sense that production, 
 as to supply, affects marketing. It has nothing to do with manufacturing, 
 except in an indirect way, in that through manufacturing you get a product 
 which is capable of being sold or marketed. 
 
 But co-operative marketing as such is concerned with one thing, and 
 that is to do intelligent merchandising instead of dumping of a farm product. 
 The thought is this: The farmer knows that he is a good producer. In spite 
 of things that have been said out of Washington, the farmer is using intelli- 
 gence in production. But with all his intelligence in production, when it 
 comes to actual selling or marketing of that product, he finds himself fairly 
 helpless to have anything to say about the price of that product. And the 
 old school says to him, "Supply and demand fixes that price, and you can't 
 have anything to do with it." And the new school says to the farmer, "Sup- 
 ply and demand does not fix the price. There are two movable things in 
 supply and demand, and those movable factors are supply where, and sup- 
 ply when, — time and place are the two determining things which fix price 
 value within supply and demand of any given product." 
 
 So we have learned to teach the farmers that the only way in which 
 they can fundamentally affect a price is by somehow getting in the position 
 where they can control the flow of the supply of any given product into the 
 markets of the world at any given time. Controlling the flow of the supply 
 
cannot be done by an individual farmer, and it cannot be done by a single 
 local association, except where the entire marketing problem is local. Con- 
 trolling the flow of a supply of the product can only be done where you stop 
 individual selling, which is dumping, and where you substitute for dumping 
 the organization of that commodity, so that out of some central group, con- 
 trolled wholly and exclusively by the farmers, you can get a control of the 
 place and the time and the quantity of the flow of that given supply. 
 
 Now co-operative marketing sets out to control the flow of supply as 
 to time, place, and quantity, and in order to do that it has to stop individual 
 selling. That is the one big thing we have really learned in the last few 
 years, that the aim of co-operative marketing is to merchandise in that way 
 instead of dumping in the old method of individual selling. 
 
 We have learned that the farmer, as an individual, is a splendid pro- 
 ducer, but that the farmer, as a merchandiser, must meet his group problem 
 as a group. Marketing is always a group problem. You cannot market a 
 single thing under the sun intelligently unless you know first what the 
 other man is producing at that time, what he is moving into the market into 
 which you want to sell, and what the absorbing power of all those markets 
 might be. Those things depend on the other fellow, therefore, they are 
 group problems, and cannot be solved by the individual farmer using his 
 own discretion as to time and place and method or quantity of production 
 or sales. 
 
 So the big thing we have found in co-operative marketing is, first, to 
 clear up the purpose. Co-operative marketing is a system under which 
 farmers by proper organization, can learn to merchandise a commodity and 
 control the flow of the supply as to time, place and quantity, and thereby 
 have something to do with affecting the price value on that product. Co- 
 operative marketing is not the making' of cheese in a co-operative cheese 
 factory. Co-operative marketing is a step which follows co-operative manu- 
 facturing. It is a step which follows co-operative packing or co-operative 
 receiving, and it is not co-operative marketing unless the aim is distinctly 
 the stopping of individual selling and dumping, and the substitution of mer- 
 chandising, control of flow and supply, as to time and place and quantity. 
 
 Now you know you have often heard it said that there are six steps to 
 merchandising. I am just going to name tlj^ steps and then go on to our 
 next point. The steps in merchandising are, first, grading, — ^standardizing, 
 raising quality, branding, standing behind your brand. 
 
 The second step is care of the package, — perfecting the package so it 
 not only carries the commodity, but carries it in good condition, and in the 
 unit that the consumer likes to handle. 
 
 The third step is the extending of markets by time and by place, — by 
 time in that you sell over a long period instead of dumping in the first sixty 
 days after harvest; by place in that you study geography and get the largest 
 possible distribution of that commodity. 
 
 The fourth step is increasing the use of the commodity, increasing the 
 use of fluid milk by advertising, for example, increasing the use of any com- 
 modity which deserves to have its use increased among consumers. 
 
 The fifth step is the control of the actual flow. With perishables that is 
 a problem of routing, seeing that no market gets a glut, and no market 
 gets a famine. With non-perishables it is a question of storage and finance, 
 storage so that you put the non-perishable in the storehouse or warehouse, 
 borrow money on it to the extent that the farmer gets as much as possible 
 immediately upon delivery, and then keeping your period of ten months or so 
 for the orderly marketing of that commodity. 
 
 The sixth step is to make your price depend upon the supply that you 
 move into the points of consumption instead of letting your price depend 
 upon supply at points of production. 
 
 All of those six points are the steps in merchandising. Not a one of 
 them can be done by individual farmers. Every single one can be done by 
 a co-operative that is rightly organized. 
 
 Now our whole aim in co-operative marketing, then, is to substitute 
 merchandising as against the old system of individual selling or dumping. 
 
and merchandising has those six steps that I outlined to you, not a one of 
 which an individual unit or an individual person can accomplish, and every 
 one of which can be accomplished by groups rightly organized. 
 
 Now the second big thing we have learned in co-operative marketing is 
 this. You have got to keep your eye on the particular commodity. You 
 cannot organize strawberries in the same way that you organize cotton. 
 Each commodity must be studied by itself. First you separate them into 
 perishables, then semi-perishables, then non-perishables. If it is a perish- 
 able, your problem is routing. If it is a semi-perishable like eggs or pota- 
 toes, your problem is partly routing and partly storage and finance. If it is 
 a non-perishable like wheat or cotton, your problem is wholly a problem of 
 storage and finance. 
 
 Then you have got to study the commodity from other viewpoints. If 
 you are dealing in fluid milk, your unit of organization is a metropolitan 
 area. If you are dealing with cheese, your unit of organization should be 
 the commodity as widely as it is ranged. For example, with cheese you 
 would want to take all the co-operative cheese factories in Wisconsin and 
 federate them together into one federation, and then have that federation 
 join hands with an Iowa federation, a Minnesota federation, an Illinois fed- 
 eration, so as to get a full commodity viewpoint on cheese. But with milk 
 you would want to organize milk as they have done in New York City, around 
 the needs of that metropolitan area, stretching the- organization back as far 
 as any shipper ships milk for fluid use into New York City. 
 
 You have got to distinguish between beans that are planted each year, 
 and prunes, that are raised on trees, that are already there and will produce 
 year after year. You have got to distinguish between things like pears, 
 which can be sold either in fresh form, can be dried, can be canned, can be 
 sold locally or shipped all the way across the continent, distinguish between 
 things like that and things like oranges, which are sold primarily in only one 
 form. 
 
 You have got to distinguish between things like tobacco, which can be 
 sold only to certain big firms, and a few large speculators, and things like 
 cotton or wheat, which can be sold at any moment at some market in the 
 world, at some price, — but can be sold, at any moment, somewhere. In 
 short, no matter what the commodity is, we have learned that there is no 
 universal rule, and no universal plan which can be applied for co-operative 
 marketing. You have got to study that commodity and you have got to 
 study the peculiarities of that commodity. 
 
 Take eggs. Eggs in California can be organized in one easy, distinct, 
 method, because your egg producers have fairly large flocks, standardized 
 down to white leghorns, they raise mostly in-fertile eggs, therefore the best 
 eggs for storage, the collection of the eggs is frequent and easy and cheap, 
 and the standardizing, the putting out of a branded product is one of the 
 easiest of all problems on the Coast. 
 
 Take your middle Western sections, where the farmer gives some hens 
 to his wife and his wife raises the hens for dual purposes, and she gets 
 brown eggs and she gets white eggs and practically most of the eggs are 
 fertile eggs, and she gathers them in when she pleases, and she doesn't get 
 them in case units. Why, your whole method of organizing eggs in the 
 middle West will not only be totally different from the method used in the 
 far West, but the cost of organizing eggs, of actually making your collec- 
 tions of eggs, of grading your eggs, and of standardizing your eggs and of 
 selling your eggs will probably be three times as great in some of these 
 states as it is on the Pacific Coast, where they have these large, standardized 
 flocks, and they carry on egg production as a primary work on the farm. 
 
 I hope I make myself clear on this. But what I want to emphasize is 
 that every commodity must be studied by itself, not only as a specific com- 
 modity, but under the specific conditions under which it is being produced 
 and being marketed. You have got to study even further than that. You 
 have to study the history of organization in that particular area. If you 
 are going into a section where they have had wrong methods of co-operation, 
 where they have confused co-operative manufacturing with co-operative 
 marketing, where there have been personalities who have been absolutely, — 
 
well, have absolutely embodied the wrong system, and suddenly come up 
 against a new idea in co-operative marketing, — you cannot organize in the 
 same way, you cannot organize with the same purpose in sight, that you do 
 in districts where there are either big men or where there is a clear field 
 to work on. 
 
 In short, first, this year we have learned to define the purpose of co- 
 operative marketing. Second, we have learned to concentrate attention on 
 the commodity as against other commodities, and as against local conditions. 
 We have learned that we have got to analyze each particular thing in its own 
 back yard and work up the system of organization around that commodity 
 under its localized situation. 
 
 Now the third thing we have learned is that we have got to know more 
 about the technique of co-operative marketing. You remember what they 
 always say, — it is not enough to know where you are going, you have got 
 to have a machine that can take you there, — and the building of the ma- 
 chine is the technique of co-operative marketing, and in the last few years 
 we have learned where the farmers were weak in technique on co-operation, 
 and I believe that that particular phase of it is of real importance here, and 
 if you will pardon the liberty, I am going to go into some phases of detail 
 on the technique. 
 
 The first thing we have learned is this, that you have got to have a 
 right law under which you should not merely incorporate your co-operative, 
 but under which you can stand on your contracts, know the kind of con- 
 tract that will stand, and know the remedies under that contract, and you 
 have got to give your growers the right to bind themselves, — you don't 
 make them bind themselves, but if they want to do it, you have got to give 
 them the right to bind themselves as tightly as possible to each other. 
 
 I want you to know that what I consider one of the greatest Farm 
 Bureau achievements was the fact that two years ago the Texas Farm Bu- 
 reau Federation evolved a co-operative marketing act and passed it in the 
 Texas Legislature, as a Farm Bureau Federation activity. That law has 
 since been copied by 29 other states, so that today in 30 states of the Union 
 there is a co-operative marketing act which absolutely belongs to the Farm 
 Bureau Federation, and which has now been generally conceded as the 
 standard co-operative marketing act of the United States. 
 
 Then you have got to incorporate. You must not let farmers go ahead 
 any longer with unincorporated groups. Unincorporated groups mean that 
 if twelve men get together and agree to do something informally, they have 
 a co-partners' liability, and if anything happens there, the one out of the 
 twelve who has any money will be soaked for the entire responsibility or 
 obligation tliat is raised. 
 
 Then we have learned you have got to organize, and must organize 
 locals to receive and grade and store and pack and manufacture, but you 
 must federate all these locals when it comes to marketing. Everything 
 that the farmers have done in the Middle West on the creation of local ele- 
 vators and local cheese factories and local creameries, everything they have 
 done has been absolutely right. They needed those local plants, and if 
 they had not framed those local plants, they never would have been able to 
 get to the point of true co-operative marketing. 
 
 But they did only the first step. They organized locals to receive, 
 grade, store, manufacture, and pack, but when it comes to selling or market- 
 ing, you have got to federate them all into a commodity plan, — otherwise 
 how in the world can you control the flow of supply or do anything which 
 fundamentally affects the price? 
 
 Remember, the aim of co-operative marketing is not to fix prices, — 
 that can't be done unless you have absolute control of an industry. The aim 
 is to control flow of supply as to time, place, and quantity, so that you have 
 something to say about the conditions that affect price values. You cannot 
 do it as individuals, you cannot do it as local units, but if you take the local 
 units and you federate them from a commodity viewpoint, then you can do 
 something to affect the price. 
 
 Let me give you an illustration. We have got a lot of apple co-opera- 
 
 6 
 
tives throughout the United States. Take in the Northwest, there is a group 
 in the Wenatchee Valley, there is another group in the Yakima Valley, two 
 in the Yakima Valley, there is a group around the Willamette Valley, another 
 in the Hood River, another in the Roseburg section, — there are several dis- 
 tinct groups in the entire Northwest District; there are three other groups 
 in California; there are some groups in Michigan; there is a group in Illi- 
 nois: there are several groups in New York; there are several groups in New 
 England, and there are some very small groups in Virginia, organized rightly 
 from local standpoints. But what happens? Well, each of these locals has 
 its own general manager, and each of these general managers figures that 
 he is the smartest man in the world when it comes to selling apples, so he 
 does not tell the other man what he is going to do, he doesn't tell the other 
 man where he is going to ship, — and here is the result, — -more than sixty 
 per cent of all the apples handled by the co-operatives in the United States 
 are sold in the one city, in New York City. More than sixty per cent, — -al- 
 though New York represents less than ten per cent of the population of the 
 United States. But the Yakima fellows, the Wenatchee fellows, all the 
 groups in the Northwest, all the groups in New York State, lots of the 
 groups in Michigan, simply keep their eye on that one single market and 
 plump everything there. The result was that about a month ago they were 
 selling the best boxed apples, with the biggest size, out of the Northwest, 
 for a dollar sixty cents a box on the Erie Pier, which would bring to those 
 farmers a net of about eighty-five cents to ninety cents a box on the best 
 apples that they were sending out, — apples which, because of their culling 
 and their high production cost, must have actually stood an expenditure to 
 them of over two dollars a box before they ever left the Pacific Coast. 
 
 Why? Not because they haven't some organization, but because they 
 haven't completed the organization. They are organized by locality, and they 
 are doing fine grading, fine packing, fine receiving, but when it comes to 
 controlling the flow of the supply and thereby keeping the New York market 
 from getting glutted and breaking, why they are an absolute and complete 
 failure, because they have not organized by the commodity instead of the 
 locality. 
 
 Now I want you to remember that, because that has now become a 
 great current issue in the Northwest, and the bankers are calling these men 
 in and saying to them, "We are advising you, as outsiders, from the business 
 standpoint, that your method is disastrous, that all you are doing is really 
 fooling yourselves, that you can't accomplish a real purpose by localized 
 organization, and we, for the sense, for the good of the locality, for the good 
 of the whole community, are urging you men to organize on the commodity 
 plan." 
 
 Now that same principle applies likewise to wheat, applies to livestock, 
 applies to cotton, applies to tobacco, applies to anything you mention under 
 the sun. 
 
 Remember this. You cannot make a price by co-operative marketing. 
 But there isn't a thing raised on the farm that you cannot merchandise more 
 profitably than you can dump. Now you can dump either as individuals or 
 as whole units, but in whichever way you dump, it is still dumping, and you 
 break your own price by dumping. 
 
 Now if you can stop dumping, first, by individuals, and second, by these 
 so-called local mass units, and get a commodity viewpoint and a commodity 
 organization, then you have some chance to affect price values, and you have 
 some share in making the price value of your own products. That is the 
 biggest thing to keep in mind on the technique of co-operative marketing. 
 
 Then you have got to keep the commodities separated. You can or- 
 ganize oranges in one association. You can also organize grapefruit and 
 lemons with that association. But that is because they are related com- 
 modities. But never put a non-perishable with a perishable, and never put 
 two perishables together that are sold into different channels of trade. 
 
 Let's take an illustration. The California Prune & Apricot Growers' 
 Association handles prunes and dried apricots. It doesn't handle one fresh 
 apricot, because the fresh apricots are sold either for the commission house 
 trade or to the canners, and there is a totally different channel of trade, 
 
and a totally different financial problem. Dried apricots and dried prunes 
 are sold to exactly the same persons, and have exactly the same type of finan- 
 cial problem to meet, so we can combine them. But I am told, for example, 
 that men around are trying to combine grains and livestock in one associa- 
 tion. It is an absolutely fatal error. You cannot even combine corn and 
 wheat intelligently in one association, because they are sold through differ- 
 ent channels, for different uses. Why, with wheat the man who raises the 
 wheat, you know you can compel him to deliver, you can lend money on his 
 wheat when he puts it into an elevator, you can make him bring it to the 
 elevator, advance him money against that. But corn, why the man doesn't 
 even know whether he is going to sell his corn or whether he is going to 
 feed his corn, so he keeps it in his crib, and rightly so, until he makes up his 
 mind which is going to give him the greatest return. You cannot borrow 
 money while the corn is in his cribs on his own farm, because you don't 
 know if he is going to be compelled to deliver or if he is going to have the 
 option of feeding it. Wherever you have a commodity which differs in 
 channel of sale, or which differs in financial problem, from another com- 
 modity, never combine them into one association. 
 
 Then, your associations must be formed of farmers only. Never allow 
 a lawyer in them, unless he is a bona-fide producer of that commodity. Just 
 farmers, and farmers only. And have the farmers who are raising the 
 things that that association is intending to sell. Don't have cotton men in 
 tobacco associations. Don't have tobacco men in apple associations, unless 
 each man can qualify and join that association in the same relation as every 
 other producer who is in that association. 
 
 Don't be afraid to have your people join nine different associations. I 
 know one man who is a member of nine different marketing associations, 
 and in each case each of his nine commodities is being handled by a special 
 commodity association that is built around that commodity, and that special- 
 izes on the problems and the marketing of that commodity. 
 
 Then, you must be democratic in control. One man, one vote, no matter 
 how big you are or how little you are, — one man — one vote. Proxies ought 
 to be forbidden by law in co-operative marketing associations. You should 
 stick completely to one vote — -one man, and if the man can't attend the 
 meeting, then make some arrangement for voting by mail. 
 
 Then you should teach them how to district for directors. Never let 
 any one section control a directorate. If you have less than 5,000 members 
 in a co-operative, it is best to have direct elections, districts so that you have 
 about five or six hundred in a single district, and have each district elect a 
 director who lives in that district and grows his products in that district. 
 Don't allow a system of absentee landlords to ever control any co-operative 
 association. Take men who both live and grow the commodity in the dis- 
 trict that they are chosen to represent. 
 
 When you get co-operatives with over 5,000 members, then you may 
 have to use the system of delegate voting, just as you use in the American 
 Farm Bureau Federation. Under that take with our Burley Association, — 
 we have 21 districts, each district elects about eight to ten delegates; each 
 delegate represents about 1,000,000 pounds of tobacco; and then those dele- 
 gates select the director from that particular district, — but he has got to be 
 a man who both lives and grows Burley Tobacco in that district. That is 
 an example of the delegate system of electing directors as against the direct 
 system of electing directors. 
 
 But, in either case, you start out with a democratic control, one vote — 
 one man, with voting by mail instead of proxies, and you end up with dis- 
 tricting for directors, so that no one section can ever control. 
 
 The next point in technique is a point over which there has been much 
 controversy. It is the question of contracts. Let's give you an illustration 
 of how our minds were built up on that. I remember in California at one 
 time they got a warehouse down near Stockton and organized a bean grow- 
 ers association and organized it on the right lines, co-operative lines, non- 
 profit, democratic control, and had districting for directors, and they got 
 in their Secretary and they set up everybody in the place and started in to 
 do business. Suddenly a man, a farmer, began to drive in with a good, big 
 
load of beans, and when he got near Stockton he was stopped on the road 
 by the buyer for one of the speculative concerns at San Francisco. This 
 buyer said to him, "Where are you going with those beans?" 
 
 He said, "I am going to the co-operative; I am going to deliver the 
 beans there." 
 
 The fellow said, "How much are they going to give you for those 
 beans?" 
 
 He said, "I don't know, but I guess I will get around five cents anyhow, 
 because the market is around five cents, but of course you can't tell exactly, 
 because we are pooling, and you cannot tell exactly until the end of the year. 
 But they are giving us three and one-half cents a pound as an advance 
 payment." 
 
 The buyer said, "Let me look at some of those beans. Why, those are 
 wonderful small whites. You sure are a great farmer, John, you produce 
 wonderful stuff. I will tell you what we will do. You have always been a 
 good friend of ours, and we have always been a friend of yours. If you will 
 sign a contract to turn over all these beans and all the other beans that you 
 and your tenants will raise this year on your farm, we will pay you six cents 
 a pound straight for all those small whites, even though the market is only 
 five cents a pound today."' ■ 
 
 And you know what^happened, John would break a leg to get over there 
 and put his John Henry on the contract agreeing to sell everything to this 
 buyer. Then what would happen to the co-operative? Why, your co-opera- 
 tive would sit there all dressed up with no place to go, and in about thirty 
 days they would have every farmer who was driving in with beans met on 
 the road, a similar proposition made to him, and in thirty days your co-op- 
 erative would have to close its doors and absolutely go out of business. 
 
 So we learned there that when you form a co-operative you have got to 
 be absolutely sure that you are going to have something to sell. Co-opera- 
 tive spirit is one thing, but somebody might interfere with the spirit before 
 the time comes for the actual delivery of a commodity. So we use the co-op- 
 erative spirit to have the man sign a contract, and then we say the spirit 
 will move into the contract, and when once the contract is signed, we rely 
 on the spirit plus contract. Remember, that spirit has even been relied on 
 by the old-time co-operatives that started in to scoff at contracts. I will 
 show you how they have relied on it. 
 
 Have you ever read any of these by-laws that these co-operatives use? 
 Why, those by-laws are contracts, they don't rely on spirit either. All they 
 do is rely on spirit plus loose contracts, in by-laws, and we men have learned 
 to rely on spirit plus tight contracts that are put out for what they are, 
 namely, definite, written, legal, valid, enforceable agreements which state in 
 detail the obligation of both parties. 
 
 So we have learned absolutely that co-operation which depends solely 
 on spirit is beautiful but not enforceable, and that co-operation which de- 
 pends on spirit plus contract is equally beautiful and more dependable. So 
 that is why we now come to the point that most all of the co-operative 
 leaders, not only in the United States, but in Canada and Europe, have now 
 determined, that written contracts in some form are essential for true co- 
 operation. 
 
 What is the best form of those contracts? Why, there isn't any best 
 form. You have got to get the contract that best suits the commodity. If 
 it is a perishable product, you have no financial problem, you use an ordi- 
 nary agency agreement. 
 
 If it is a non-perishable, where you have a financial problem, then you 
 have got to pass title to your co-operative under a sale and re-sale contract 
 so that the co-operative can put the commodity into storage, get warehouse 
 receipts, borrow money on those receipts, distribute the money immediately 
 to the farmers, and then do orderly marketing with that commodity. Each 
 one has got to be studied by itself. In most all cases the limit of your con- 
 tract should be a state, because in practically every big section of the United 
 States you will find a situation where a contract legal in one state is abso- 
 lutely invalid or illegal in another state, so the best big unit is your state 
 
 9 
 
unit, and your contract should be built up with the laws of each state in 
 mind, so that you will know it will be enforceable in every one of those 
 states. 
 
 Now the pet contract of the so-called non-perishable groups is the pool- 
 ing agreement, under which a man agrees to turn all his cotton into a state 
 association; the association agrees to grade and class that cotton and then 
 to pool it by grade, and then to sell it, deduct the cost of doing business 
 only, no profits, and no commissions, and then distribute the net returns so 
 that each producer gets the same as every other producer for the same quan- 
 tity, quality, grade, staple length and class of cotton, and the directors 
 have got to be in the sapie pools as the other members. If he wants a good 
 price for his cotton he has to get that very same price for the smallest man 
 in the entire association. If he wants to put a charge on the other man's 
 cotton, he has got to put that very same charge on his own cotton. 
 
 Now there is a community of interest, in which every man has exactly 
 the same relationship to the co-operative. There can't be any favoritism, 
 the manager can't do a better thing for the director than he does for the 
 smallest member. He cannot shoot the director's stuff into a high market 
 and shoot the little man's stuff into a low market. He has got to recognize 
 the community of interest. And I want to tell you frankly that without 
 pooling it is all baby talk to talk of merchandising any non-perishable 
 product, because whose stuff will you hold? Who will you favor? Who will 
 you disfavor by shooting it into the export markets as against your local 
 market? With a non-perishable you cannot merchandise unless you pool. 
 With a perishable that is capable of exact grading the same rule applies; 
 either you pool in contract, or you pool by routing and get the effect of 
 pooling by your routing. 
 
 I consider pooling on commodities that are non-perishable or semi-per- 
 ishable in character absolutely the heart of the entire co-operative marketing 
 arrangement. Then those contracts must be enforceable. Contracts are not 
 ropes of sand. Contracts are ropes of steel. If one farmer signs up with 
 his fellow farmer, it is ridiculous to talk about not enforcing the contracts. 
 I have heard a lot of these farm leaders raise their brows and say what a 
 terrible thing to make a man keep his contract. Well, my God, every man 
 makes the farmer keep his contract when the farmer signs a note for pay- 
 ment of money, when he signs a mortgage, when he signs a deed of trust, 
 when he signs an agreement to sell to the outsider — everybody makes the 
 farmer keep the contract. Why are the contracts that are against the farmer 
 oh, so sacred, and the contracts that the farmer makes for himself,— why 
 are they to be simply ropes of sand? I tell you that the farmer of the 
 United States, when he makes a contract with his fellow farmer and pools 
 with his fellow farmer, has the absolute moral, as well as legal, right to get 
 complete enforcement of that contract, and we are going to stick at this, 
 you and I, between us, because the Farm Bureau Federation is the key to- 
 the right law on this subject, until every time a farmer signs a contract with 
 his fellow farmer in a co-operative, that contract has got to be upheld, up 
 to the top court in the United States. 
 
 And I will tell you what has been happening. The courts of the United 
 States in the last two years, barring my own State of California, have been 
 really acting with the farm interests instead of against them. In North 
 Carolina, in Mississippi, in Texas, in Oregon, in Washington, Wisconsin, and 
 Kansas in the last year there have been decisions holding not merely that 
 you can get liquidated damages, that we can get in practically every state 
 except one in the Union, but we can also get injunctions to stop delivery 
 outside, and get decrees for specific performance to make the farmer deliver 
 to the co-operative. 
 
 In California our Superior Court — not our Supreme Court — has lately 
 given a decision that we cannot get an injunction, that, in the face of the 
 fact that we just passed the Farm Bureau Federation Law in California 
 which says we shall get injunctions there, — so we are going up on an appeal 
 and it is my opinion, privately, that we will reverse that court, as we did in 
 Texas, and have the Supreme Court give us complete enforceable rights on 
 those contracts. 
 
 10 
 
But I want you to agree with me on these things. It is no use asking a 
 farmer to sign a contract and then have some speculative buyer show him 
 the way to avoid that contract. If he signs the contract with you and you 
 sign it with him, you know that, as men, you want that contract enforced, 
 for his good, as well as your own. If you thought that the contracts were 
 not enforceable, you never would have gone to the trouble and expense of 
 ever building the co-operative in the first place. 
 
 We are having our troubles on enforcing, but we always and invariably 
 stand for enforcement, and I don't know a single real co-operative in the 
 entire United States today that doesn't believe in tight and complete enforce- 
 ment of its contracts with its own members. I have heard rumors of cer- 
 tain farm leaders who are against that type of contract, but never any 
 such statement from any co-operative association that is a real co-operative 
 in the entire United States of America. So bear that in mind. That is 
 necessary in the technique of co-operation. 
 
 Then there is one other point, among others, that is necessary to keep 
 in mind on technique. A contract that doesn't provide a minimum, without 
 which you won't start, is a contract that is going to invite more trouble than 
 anything else under the sun. You know all about our troubles in California. 
 You know that California has had every single failure that any other state in 
 the Union has ever had, and we have embodied every one of those failures 
 in our experience. We have done things in twenty years which we should 
 have done in one year, if we had enough intelligence to understand co-opera- 
 tive marketing at the start. But we simply didn't know, because it hadn't 
 been analyzed and hadn't been worked out. So we would start along like 
 little pikers and create a little co-operative and the co-operative wouldn't be 
 able to do more for the farmers than any ordinary commission merchant, and 
 then the farmers would get dissatisfied and would break up the co-operative, 
 and we would stand there and wonder where we had failed. 
 
 Here is where we failed. You have got to have a regular minimum. 
 You have got to be certain of a definite delivery to you, and that delivery 
 must be enough to enable you, first, to pay your overhead for good men, 
 without costing too much per dozen, too much per bushel, or too much per 
 box. Second, you have got to have a large enough minimum so that you 
 are an important factor in that market from the day that you open your 
 doors. Merely being another commission house isn't worth a single thing 
 to the farmer, although It may mean some jobs to some of the farmer repre- 
 sentatives. Merely being another thing doesn't solve a problem. You have 
 got to be a different thing, and the different thing that you have to be is a 
 unit which has enough in quantity to make the control of the flow of that 
 supply really mean something. 
 
 I want to say to you point blank, there is no fixed minimum. Some- 
 time it might be thirty per cent, sometimes it might be fifty per cent, some- 
 times it might be seventy-five per cent, — the minimum must be determined 
 by studying the commodity and its local conditions, but any co-operative 
 which forgets and starts without a minimum is committing a fatal blunder 
 right there, and is either going to take twenty years to accomplish what 
 could have been done in one year, or it is headed straight for the rocks. 
 And, by the way, there is really the whole technique of co-operative market- 
 ing, all that you need to bear in mind as farm leaders when it comes to 
 advising your own people who rely and depend on you. That is what we 
 have learned of the technique in the last few years. 
 
 What is the next thing we have been defining. — because I told you the 
 accomplishment in co-operative marketing is that we are learning to define 
 ideas? We have learned we have got to have expert personnel in co-opera- 
 tive marketing groups. We have learned that a smooth tongued man who 
 can talk well is the man you must always avoid when it comes to actually 
 trying to market your product. We have learned that a man may be the best 
 farmer in the world on production and not know a blamed thing under the 
 sun about real merchandising or marketing. We have learned that you have 
 got to get expert marketers to do the technical job of marketing, you have 
 got to get expert trafl[ic men to do the technical work of transportation, you 
 have got to get expert production men to do all the things that take care 
 
 11 
 
of the actual physical handling of the commodity. You have got to get 
 expert banking men to guide you on the right banking and financial chan- 
 nels. You have got to use experts, but the experts have got to be your 
 hired men, just as much as the fellow who works for four dollars a day or 
 three and a half a day is your hired man to help you with production on 
 the farms. If he doesn't suit you, you have got to throw him out, but, in 
 each case your aim is to get an expert instead of an amateur to run a co- 
 operative marketing association. 
 
 You have got to teach your people, also, not to be afraid of paying these 
 men, these technical men, high salaries, if you must, to get them. Don't 
 pay a ten thousand dollar man twenty thousand dollars, and don't try to get 
 a twenty thousand dollar man for five thousand dollars. The best invest- 
 ment that the growers' co-operatives can make is technical men who know 
 tobacco, technical men who know wheat, technical men who know cotton, 
 technical men who know apples, — not lawyers, technical men, who know 
 marketing and commodities, — and if the farmers will learn to spend some 
 of their money directly for such men instead of spending it indirectly, as 
 they are, to those very men to exploit them, if they will get some of those 
 men as their hired men and have a co-operative rightly organized, with the 
 right aim, then I tell you there is real daylight for the farmer, as far as 
 marketing problems are concerned in the United States. 
 
 That is really a summary, — a summary of the whole story of co-opera- 
 tive marketing in the last few years. 
 
 We have learned to get rid of a lot of fears. We have learned to look 
 problems squarely in the face, and to try to distinguish and make distinct 
 what co-operative marketing tries to do, how it tries to accomplish it, and 
 who it gets to run the machines. 
 
 There are just a few more things I want to bring out. 
 
 The Farm Bureau Federation has a very great work in this respect. For 
 example, we are all engaged now in trying to see that the Federated Fruit 
 & Vegetable Growers gets a real place in the sun. During this year we 
 don't pretend that the Federated accomplished as much as it is going to ac- 
 complish in the next couple of years, because all it was doing was to find 
 out where the problem is. We have discovered, for example, that instead of 
 our spending our time trying to sell apples for a group of these local associa- 
 tions, we have got to go out through the American Farm Bureau Federation 
 and get apples organized in the United States on a national commodity line, 
 organized in each local point, federating the locals into state organizations, 
 federating the state organizations into three big district organizations, then 
 federating and co-ordinating those district organizations into one national 
 apple growers' exchange that will sell through one centralized channel, will 
 export through one centralized channel, and gradually control the flow of 
 those apples all over the country, so that no market will be glutted, no 
 market will have a famine, and so that the farmer will not get a net of 
 eighty cents a box for apples that cost him more than two dollars a box to 
 produce. We are just beginning to realize what the problem is, and the first 
 thing to do is to see the problem, next is to work out a solution for the 
 problem. We are seeing the problem in cotton, we are seeing the problem 
 in tobacco, we are seeing the problem in wheat, — separately, we are seeing 
 the problem in corn, — separately, we are seeing the problem in small grains, 
 we are seeing the problem in livestock, we are seeing the problem in vege- 
 tables, we are seeing the problem on potatoes, — separately. In short, we 
 are seeing our problems. 
 
 We won't solve those problems for years. It is going to take us from 
 five to ten years to take any of the great major commodities and actually 
 undo all the wrong system of the last two or three generations. But if we 
 can take some of the primary commodities in the United States, and by the 
 right type of organization actually introduce intelligent marketing instead 
 of dumping, and if we can do that within a period of five or ten years, it Is 
 going to be the greatest piece of permanent work that the American Farm 
 Bureau Federation has ever laid its strength and endorsement and personnel 
 to in its entire history. 
 
 12 
 
Now our first problem in all of this is to see the difficulties, is to see 
 the thing that needs solution. Our first problem in all of this is to see the 
 thing that needs solution. That is going to need clearness of brains, and 
 you are not going to have clearness of brains if you come into the subject 
 of co-operative marketing loaded up with a lot of prejudice that come 
 either out of bad history or come out of ill-famed report, or that come out 
 of things which mean your own personal lack of experience with co-opera- 
 tive marketing. 
 
 Do you know that you can't do anything in real co-operation unless 
 there is a real consecration of your spirit to co-operation yourselves. Men 
 who go into co-operative marketing and have simply an idea that "Here is 
 a chance to get a job," or, "Here is a chance to get something for them- 
 selves," those men will die under that work, because there is no strain in 
 the world like going through the attacks that are made on co-operative lead- 
 ers. Why, you think you have seen attacks made on men? You go read 
 what they say about every man who has ever been engaged in co-operative 
 marketing. And do the speculators make the attacks themselves? Never. 
 They work through their puppets, they work through farm men who are 
 sincere — -always,- — always innocent of what is being pulled on them, but 
 who nevertheless do more to destroy the work of co-operative marketing 
 that all the real leaders of co-operative marketing can build up in ten years. 
 
 I want to tell you that the great danger today in co-operative marketing 
 in the United States is, first, darkness of mind instead of clearness of brain; 
 and the second is prejudice instead of understanding, prejudice instead of 
 courageous intelligence. 
 
 Now we men who are in this work, we are not blind to the things that 
 are said of us, we are not blind to the things that are not only said of us but 
 are written to us, constantly, under anonymous letters, or the things that are 
 written to our wives constantly, under anonymous letters. We know that. 
 We know our worth, we know our value, we know that this thing is right, 
 and that there is no more fundamental work in the United States than true 
 co-operative marketing, and all the speculative men in the United States, 
 and all their conscious or unconscious agents will not swerve one of us from 
 the work on which we are engaged. 
 
 I don't speak for myself, I speak for the whole group. No group of 
 men has ever been humiliated by the type of attacks that they have made 
 on our group. But we don't quit, we don't think it is our need to turn aside 
 and kick every dog who barks at our heels. We pay no attention to the 
 personal attacks, but we know them, and in spite of knowing them, we still 
 go ahead. Why? Because we know this work is right, we know this work 
 is sound, we know that the men who are teaching the farmers true co-opera- 
 tive marketing are doing a far greater service to agriculture than the men 
 who have misled the farmers on false co-operative marketing for the last 
 thirty years. W^e know that most of these men have been sincere, we give 
 them all credit, not only for sincerity, but for doing the best that could 
 have been done in their day and under their circumstances. But we grow, 
 we progress, the thing that was best to do twenty years ago may not be the 
 thing that is best to do today. And we try to be the interpreters of today 
 as well as the analysts of yesterday. We try to be the prophets of tomorrow 
 as well as the interpreters of today, and, God willing, we will stand in the 
 same place and teach the same things, and go through the same energy, go 
 without a day of rest in nine years, to do that same work until death, and 
 not infancy, takes us out of the field. 
 
 There is not enough prejudice in the United States, there is not enough 
 meanness in the United States to overwhelm the men who are engaged in 
 co-operative marketing. And I will tell you why. You may think in terms 
 just of marketing. — but I know that you don't, I know that you are seeing 
 through co-operative marketing, and instead of seeing wheat or livestock or 
 corn or tobacco or cotton or apples, you are seeing little boys and girls on 
 the farms. So are we. We see those children growing up, either as futile 
 serfs, or as independent Americans. If we don't give them a chance at in- 
 telligent co-operative marketing, they are going down and down in the 
 standards of living on the American farms, and the children of American 
 
 13 
 
agriculture will grow up weaker in soul, weaker in body, and weaker in 
 hope, because of our failure in leadership. 
 
 I tell you the problem of co-operative marketing is not more money in 
 the bank, it is more money to spend on decent standards of living in the 
 United States of America, — on better schools and better roads and better 
 teachers, on better churches, on all the things that make first for inde- 
 pendence, and second, all the things that make for hope and social progress. 
 Why, there are not enough powers in the United States to stop the mouths 
 of the men who intend that the boys and girls on the farms of this country 
 shall have as good a chance for a clean, hopeful life as the boys and girls 
 in the most favored city of this entire country. 
 
 Men, let's get together on this work. No one of us is essential, — run 
 over those of us who are not essential, root us out, if you think we are not 
 necessary, but in our place, if you root us out, put in yourselves, and give 
 your entire spirit and your entire soul to the teaching of co-operative market- 
 ing. I tell you that next to religion, next to determining your relationship 
 with God, there is no worthier thing under the sun to which you can con- 
 secrate yourselves than the work of teaching the American farmer how to 
 pull himself up on his own feet, how to adjust his business to the business 
 of the rest of the community, how to do by his own efforts the things that 
 will give him a decent standard of living in his home; how to accomplish 
 things, so that by his own VN'ork, his children will stand with their heads up, 
 with a chance for real education, with hope in their faces and become the 
 finest, cleanest citizens in the entire United States. 
 
 Men, I beg of you, stand with us in this work of building citizens. 
 Keep the American Farm Bureau Federation doing community work, doing 
 home work, building up the whole background of rural culture, and at the 
 same time giving its great leadership to intelligent direction, so that the 
 farmers of the United States, by their own effort, can create fheir perma- 
 nent prosperity and their own high standard of living. 
 There is the story of co-operative marketing. 
 
 ^4^ 
 
 14 
 
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