University of California
College of Agricult\u?e
Agricultural Experiment Station
Berkeley, California
An Experiment in Poultry Marketing
The Petaluma Live Poultry Auction
by
J, C. Abbott and E. C. Voorhies
June 1951
Contribution from the
Giannini Foundation of Agricultural Economics
Mimeographed Report No. llU
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LIBRARY
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TABLE OF CONTENTS
Page
Introduction and Background ~ 1
Origin '. - 9
Changes and Developments - - l5
Auction Volume .■ - 17
Period for Analysis 17
Variation in Auction Supplies 18
Weekly Averages 18
Straight Line Trend 20
Seasonality Comparisons with Other Markets 20
Composition of Sales ~ 22
Changes in Proportions of Different Clagses - 2^
Seasonal Changes in the Importance of Different Classes 25
Grading Policy - 28
United States Grades _ 28
Difficulties in Practice 29
Grade Proportions 30
Comparison with Los Angeles Results 33
Seasonal Variations in Grades 3U
Prices - 39
Average Prices ho
Seasonal Movements ^1
Grade Price Differentials k3
Seasonal Changes in Grade Differentials hh
Comparative Price Levels— San Francisco and Petaluma Auction h7
Leghorn Hens - hi
Leghorn Broilers 52
Colored Fryers ^2
Colored Hens - • ^3
Sales from the Ranch 5U
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Page
Auction Buyers 56
I Desirable Features in Buyers Frequenting a Market 56
Buyer Attendance 56
Locational Factors 57
Character of Auction Buyers 57
Large '/Jholesalers „ 57
San Francisco Retailers 58
Bay Area Retailers 59
Local Hucksters 60
Mature and Volume of Purchases „ 61
Quality Distinctions 63
Smaller Buyers 6k
Stability in Buyer Relationships 65
Value of Auction to Buyers 67
Producer Appraisal „ 69
Origin of Auction Poultry 69
Seasonal Variation 72
Producer Opinion 7k
Large Uniform Consignments 75
Small Mixed lots 76
Attitudes Toward the Marketing Function 76
"Hard Bargainers" '. 77
Distant Producers 78
Psychology and Personalities 78
Summary and Conclusions 80
Appendices ...„ „ „ 88
iii
A cloiowl ed gnien t s
Many persons, firms and organizations furnished information and data
which enabled the writers to carry out this study. Only a few can be mentioned
heree Poultry Producers of Central California made available to the writers
all of the data concerning the Petaluma Live Poultry Auction. iVIrs. Alyce W.
Lowrie, formerly manager of the Poultry Department of this concern and now
Administrative Assistant in the same organization, siippleraented the auction
data with pertinent information amassed during her period of close contact
with the trade and assisted generously with answers to the numerous questions
that arose during the course of the study.
Appreciation is expressed for the helpful cooperation of the poultry
producers in the area served by the Poultry Producers of Central California.
Members of the wholesale and retail poultry trade in the San Francisco Bay
area gave generously of their time and were most cooperative in furnishing
information which materially contributed to the study.
^- ■ - ■■ ■■^■)i^ci->iJh'r^'^m0 ■ • . ■ Oils
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1.
An Experiment in Poultry Marketing:
The Petaluma Live Poultry Axiction
1/ ?/
by J. C. Abbott^ and E. C. Voorhies-^
Introduction and Background
This study was undertaken as part of a research project in the marketing of
farm products. For many years past, producers and others have been concerned
about the conditions governing the marketing of poultry in California. Com-
plaints by the poultrymen in the Los Angeles area have been especially bitter.
These have turned pre-eminently on bargaining weaknesses in the producer
position resulting from the absence of any central market place or adequate
market information. This constitutes a serious obstacle to the setting up of
appropriate price-grade relationships between different ].ocations and different
stages of progress from producer to consiimer. Some of the results of work on
these problems have already been published. 3/ Likewise, they have been the sub-
ject of papers and discussion at meetings of the California Poultry Council, the
California Farm Bureau Federation, Poultry Producers of Central California, the
VJestern Farm Economics Associationk/ and other bodies. This report offers a
treatment of the same basic issues from the aspects most prominent in northern
and central California generally and in Sonoma County and the San Francisco Bay
area specifically. At the same time, this investigation is closely related to
a study by the Western Livestock Marketing Research Technical Committee con-
cerning the efficiency and usefulness of livestock auctions.
The scope of this report is confined within relatively narrow limits. It
is based largely on sales data supplied by Poultry Producers of Central
1/ Research Assistant in Agricultural Economics, University of California.
2/ Professor of Agricultural Economics, Agricultural Economist in the
Experiment Station and Agricultural Economist on the Giannini Foundation of
Agricultural Economics, University of California.
3/ Naden, Kenneth D. Poultry Pricing in the Los Angeles Area . Berkeley,
19^9. 33p. (Calif. Agr. Exp. Sta. Mimeo. Report 101)
Naden Kenneth D. and George A. Jackson, Jr. Chicken Receipts and Per-
Capita Consiamption in Los Angeles, 19h9 » Berkeley, 1950. 9pT (Calif. Agr.
Exp. Sta.) Processed.
Naden, Kenneth D. and George A. Jackson, Jr. Techniques and Methods
Used in Western Regional Poultry Project W. M,-7; Retailing of C hic kens in the
Los Angeles Area . Berkeley, 1950. l6p. "TCalif . Agr. Exp. Sta.") Processed.
Naden, Kenneth D. and George A. Jackson, Jr. "Quality of Fresh Chicken
Meat. Causes of Dovm-grading of Chickens Handled in the Los Angeles Market
Revealed in Representative Survey." Calif. Agr. Exp. Sta. Californi a
Agriculture , vol. 5, no. 2, Feb. 1951, p. 10-11, l6.
h/ Western Farm Economics Association. Proceedings . Twenty- third annual
meeting, June 28, 1950. Pullman, Washington.
i
2.
California relating to the Petaluma Live Poultry Auction which was in operation
from June, 191^8 until April, 1951.
The operational procedure and achievements of the auction constitute the
core of the study. From this base it approaches tentatively toward both
producer and consumer. Leads furnished by the auction records were followed
up with personal interviews. An attempt has been made to determine the outlines
and limits of the marketing pattern in which the auction constituted an important
element and exercised significant influence. This involved some research into
types of production and the marketing requirements devolving out of them into
significant consumer tastes and demands for poultry meat, and into the means
available for their satisfaction.
Nevertheless, a detailed study of the wholesale and retail poultry business
about the San Francisco Bay is still needed.!/ This report was not undertaken
with such an objective. It deals with the San Francisco market, Bay area
retailers and the country buyer as environmental to the auction, for the purpose
of determining the function of the auction within the wider marketing system and
formulating some statements as to the extent of its influence. Conclusions in
this latter respect must remain tentative awaiting completion of the second part
of the project.
The map on page 3 gives some indication of the significajit distances and
transportation relationships. The highways are marked together with major
cities and towns. Mountain ranges running approximately north and south once
constituted important barriers to communications between the Central Valley and
the Coast and between the longitudinal valleys north of the Bay. One of
Petaluma 's original advantages in location lay in its river outlet permitting
easy shipment to San Francisco or to Oakland, the railhead for the East, Hovr-
ever, today modern road engineering has made truck travel easy and the highway
system transcends most physical barriers to transfer over time and space. The
percentages appearing after the names of the cities, towns or geographical
divisions represent the proportions of the auction receipts originating in those
areas (for exanple, Petaluma, ijS.lj Hayward, 0,h', San Joaquin Valley, 3.7, etc.)
during the first year of the auction's operations (see page 3),
Climatic controls, such as rainfall and temperature, have not the signif-
icance in the San Francisco Bay area and Sonoina County that they might have in
some other parts of the coimtry. In the Central Valley periods of extreme heat
in the summer result in a certain mortality among poultry and would be an
obstacle to long-distance hauls of birds confined in coops during the middle of
the day. Natural controls show up most in the type of poultry kept most widely
by California egg producers and the traditional preference patterns this has
established among consumers. The predondnance of the Leghorn fowl and the popu-
larity of the white egg by reason of long usage ovres m^ich to the tendency of the
colored breeds to accumulate body fat and go broody early under the stimulus of
high spring temperatures, a characteristic from which the Leghorn is virtually
immune .
1/ A general discussion of the problems affecting poultry marketing in Cali-
fornia was made during the late 1930 's and the results vdll be found in Tinley,
J.M. and E,C. Voorhies. Economic Problems Affecting Poultry Marketing in
California . Berkeley, 19W. 20l;p, (Calif, Agr. Exp. Sta, Bui. 6U2)
i
a.
Ground conditions vary markedly and do not seem to affect the location of
poultry enterprises. At Petaluma large flocks have been concentrated on steep
hillsides and heavy adobe soils as well as on sandy loams.
Location of production in relation to centers of population with a high
rate of consumption is the basic consideration in marketing analysis. In this
respect the Bay area stands out for its clear-cut contrasts. The original
center of the poultry industry was Petaluma in Sonoma County, much vaunted as
"the egg basket of the world." Since the spanning of the Golden Gate, the dis-
tance to San Francisco, the largest city in central and northern California,
has been cut to hO miles of excellent highway. Large-scale poultry raising has
spread more widely in later years and considerable subconcentrations have grown
up north of Petaluma, northeast of Sacramento and in the central part of the
San Joaquin Valley. The older established areas in the vicinity of Hayward and
Santa Cruz have declined in relative importance. On the consumption side, the
sharp increase in population during the war years has been the most notable
feature. It had a disturbing influence on existing arrangements to equilibrate
supply and demand. Additional distortion resulted from the imposition of price
ceilings when many were prepared to patronize illegal sources when normal trade
channels were unable to satisfy their desires. Nevertheless, although urban-
ization has extended into the East San Francisco Bay area and southward from
San Francisco on its peninsula, many of the old market relationships still hold.
The distributive system still stems from the San Francisco market which has
become the price determination point for an urban population of more than three
millions .
Two features characterize the consumption pattern of San Francisco and,
to a lesser extent, the surrounding cities. The first is a very high per-capita
consumption of poultry meat, primarily chicken. The second is a special prefer-
ence for the fresh killed New York dressed bird with some emphasis on the
Leghorn broiler. Such preliminary data as have been collected would indicate
that the average consumption of poultry meat in San Francisco households in
19U81/ was 30 pounds per head. That for the whole country was estimated to
have been 25. U pounds, and for Los Angeles it was estimated at l6 pounds, 2/
The total movement of poultry into San Francisco in 19hB amounted to 35 million
pounds. Of this, approximately half were live and half dressed, 3/
Prices of poultry meat have generally been higher in San Francisco than in
other parts of the country. For the characteristic by-products of the Sonoma
County egg industry, the Leghorn hen and broiler, it has consistently offered
an especially favorable market. Contributory factors in this include the high
percentage of the population living in hotels or eating in restaurants and the
1/ U, S, Bureau of Human Nutrition, Eggs and Poultry in City Diets ,
Washington, D.C, Commodity Summary k, October 19U9,
2/ This estimate may be inaccurate. See Naden, Kenneth D, and George A,
Jackson, Jr, Chicken Receipts and Per-Capita Consumption in Los Angeles, 19^9 .
Berkeley, 19^0~ 9p, (Calif, Agr, Exp, Sta,) Processed.
3/ Including supplies redirected to other cities, to ships in the harbor
and to military establishments.
I
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5.
continuance of European tastes and attitudes in a large proportion of the city's
inhabitants. Both favor the purchase of the chicken plucked without eviscera-
tion or eviscerated by the store employee at the time of sale. Professional
cooks and housewives, accustomed to take a certain amount of trouble in order
to prepare a tasty meal, prefer the chicken whole. The restaurateur and the
small family find in the broiler and lighter type of hen respectively, a con-
venient main course for one meal. However, it is becoming increasingly notice-
able that a rather larger type of bird is gaining popularity over the traditional
Leghorn broiler.
This preference for the New York dressed bird is the more noteworthy in
that the general trend for the country points toward increased purchasing of
chicken packaged or cut up into parts. Flavor is jeopardized and higher costs
are incurred for the sake of personal convenience in preparation, dependable
quality and homogeneity of product. This movement has gone much further in
Los Angeles and in southern California than in San Francisco,
Thus, the Sonoma County poultryman is fortunate in having a natural market
as well adapted to the type of bird he normally sells. Up to the last decade
or so, the chief emphasis here was on eggs. Pre-eminent in this enterprise
was the White Leghorn. Its freedom from broodiness is a trait originally
developed by the Romans — their maricets were the first to be supplied with large
white eggs in bulk and for two thousand years the Leghorn remained the only
breed with a consistently good laying record. This popular breed of Mediter-
ranean origin found a new home in the comparable climate of California. Even
after the last half century of scientific advance in poultry breeding, egg pro-
ducers of Sonoma County, California, are still overwhelmingly loyal to the
Leghorn with its high egg yield proportionate to its feed intake. Producers
have become more conscious of this advantage as local feed requirements outran
supplies and California grain and feed resources had to be supplemented via the
long haul from the Middle West and elsewhere. Second only to his interest in
egg sales, the Petaluma poultryman looks for an opportiinity to dispose of the
associated by-products, young Leghorn cockerels, and hens culled from the
laying flock.
Fryer production as a specialized industry is fairly new to California.
Only during recent years has any considerable proportion of the poultry commun-
ity in the North Bay area looked to the meat bird as a principal source of
income. High meat prices, during the war when supplies were limited, and high
incomes favored the development locally of an industry which had been estab-
lished much earlier on the East Coast and in southern California where the urban
population had grown rapidly and poultry specialists were not confined to egg
production. New Hanpshires, Barred Rocks and Cornish Crosses are among the
favored meat bird breeds and, together with the dual-purpose Austra Tlhite, have
given a new aspect to the range of poultry marketed in the Bay area. Demand
for the heavier meat bird is strong and specialized raisers are still relatively
few. More progress has been made in this respect in the Central Valley where
the large meat packing houses have made arrangements with producers facilitating
in many cases the provision of capital and guaranteed sales outlets. North of
the Bay regular marketing procedures for this type of bird have yet to be
established. In particular, the egg producer who fills spare houses with
broilers and fryers as a supplementary venture continues to seek a suitable
market. It is this type of production that has posed the most difficult
problems .
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6.
Existing channels of trade are essentially the children of individual
enterprise and historical growth. No attempt has been made to provide special
marketing facilities for poultry or to guide the process of natural development
beyond the provision of the Federal-State Market News Service and some sanitary
regulations at the processing and retail stages.
Normally, central California poultrymen with birds for sale would be able
to choose between the following outlets. They could sell directly to individual
consumers, or to hotels and restaurants so far as such contacts could be estab-
lished. However, San Francisco chefs preferred to deal with large wholesalers
able to meet precisely formulated demands at the exact convenience of the buyer.
Well-known ranches in areas where flocks were fairly concentrated would be
approached regularly by local dealers or hucksters who lived in their midst,
local retailers who were well acquainted with producers in the district and pro-
fessional buyers for the large San Francisco wholesalers. The latter were
interested primarily in large, uniform lots of standard quality and, so far as
the smaller producers were concerned, preferred to act through hucksters who
would assemble full loads and truck them into the city plants. Poultrymen were
free to do this themselves, but unless there was some prearranged understanding
as to the basis of the sale, they might find themselves in a very weak position
for bargaining.
In effect, Petaluma poxilrymen were approached regularly by prospective
poultry buyers and the ensuing competition for business explains why no organized
marketing machinery has yet been established. Sales of live poultry have not
constituted a major source of income to the industry in this area where pro-
ducers have been preoccupied with the movement of eggs. Hens and broilers were
disposed of with a minimiim of trouble, and producer complaint has been directed
not so much against the absence of any opportunity to sell but the handicaps
fsirmers bore in bargaining over quality and price.
Their chief aid lay in recourse to the reports of San Francisco wholesale
prices published by the Federal-State Market News Service. In a maelstrom of
conflict, producers clung to these for stable guidance. All the prerequisites
for an appearance of veracity militated in their favor. In consequence, most of
the deals concluded in the area took the San Francisco quotation as a base sub-
ject to deductions for conventional margins, transport costs, shrinkage loss
and deviations in quality from that described in the San Francisco report. This
latter was a frequent source of argument. Having compromised on the base price,
dealers generally attempted to downgrade as many birds as possible as part of
the bargaining process and to make deductions for inferior quality. It was a
frequent observation on the part of producers that this type of grading was
purely arbitrary, dependent almost entirely on relative bargaining power on the
day of sale. Before the dealer's truck reached the premises of the next inter-
mediary the birds graded down at the ranch would be put back with the regular
run. The whole process of argument would begin again between hucksters and
wholesaler. Hucksters usually claimed 1-^-2 cents per pound for assembly and
haulage and tried to pass on as many birds as possible at the going price for
the day. The Market News prices for No. 1 quality birds purports to refer to
federal grades "AA" and "A". "B" and "C" would be No. 2 quality. In most trans-
actions such distinctions were academic. These grades were not part of everyday
parlance in the trade, and parties to a deal would have no precise grade
descriptions for application to the different classes of birds they handled.
7.
Apart from this vagueness in application, which is more the result of
entreprenurial neglect than a fault of the Market News Service itself, two
other serious obstacles have stood in the way of its becoming a satisfactory
base for efficient price making. On the one hand, copies of the Market News
Service reports delivered by mail come into producers ' hands one or two days
late. The latter are unlikely at the time of sale to be aware of up-to-the-
minute trends and have to bargain on the basis of the previous day's dealings.
Thfe handicap is most crippling on Monday morning when producers have still only
Friday's transactions for reference. Yet, Monday is precisely the day vxhen
poultry buyers do most business. The professional buyer generally acquaints
himself with the current market feeling either by telephone or personal con-
tact with those of like concern.
The second weakness lies in the tenuous relationship the published price
bears to the real price even on the day the report was made. The situation is
superior to that prevailing at Los Angeles, where only a small percentage of
the total volume of transactions ever comes within the purview of the reporting
service, but some of the inadequacies noted therei/ were present in similar form
at San Francisco. Here, too, the prices published only refer to purchases at
the plant by large wholesalers and give no information as to the level at which
processor-retailers buy though this could be of vital concern to poultrymen
dealing with such outlets. Likewise, only a few buyers are contacted each day
and some of these are themselves in the habit of buying on agreement with prices
based on the reports and new marketing developments and are , thus , in no posi-
tion to say what the going price of the day really is.
An inportant difference between the San Francisco and Los Angeles poultry
markets is that the former is far more concentrated. The bottleneck which is
noteworthily absent in the southern California metropolis, ty its very nature
a conglomeration of decentralized urban units, is characteristic of the San
Francisco market where it is estimated that 90 per cent of the poultry going
into consumption there passes through the hands of three or four large processor-
wholesalers situated within a few blocks of each other about the produce market.
Nevertheless, this situation presents its own difficulties. The Market
News report depends on the daily cooperation of three or four firms and calls
for rare tact and perseverance on the part of the Market News reporter. In
practice he can be as much embarrassed by a politic waiting for his own conclus-
ion followed by immediate acceptance of it as the price for the day, as by
intentional misquoting for the purpose of deceiving rival buyers. The first
leaves him in the invidious position of having to determine the price he should
report. The second suffers from the weakness that stated prices have to be
discounted according to past experience of trade bias. There are manifest dis-
advantages to both.
The publication of prices paid at Petaluma and Stockton for poultry sold
under the auspices of Poultry Producers of Central California serves as a very
valuable supplement to the San Francisco data in providing inland prices for
1/ Nad en, Kenneth D. Poultry Pricing in the Los Angeles Area . Berkeley,
19h9. 33 p. (Calif. Agr. Exp. Sta. Mimeo. Report 101)
r .
(o
8.
comparison.!/ It is, thus, possible to check type and grade price relation-
ships even though the equilibrium level may be lower than that attained in
San Francisco. The difference between these levels provides some measure of
the margin taken out for transport, shrinkage and entrepreneurial risk. In
many respects the position occupied by Poultry Producers of Central California,
a farmers' cooperative, is quite \inique. Its growth reflected the need for an
organization to ship out of the state the eggs produced in Petaluma (and near-by
sections) surplus to the requirements of the Pacific Coast populations of years
ago. Beginning in 1926 it reinforced this position by shipping in grains and
protein supplements necessary to augment local production. Dependence on its
assistance in marketing eggs during the flush season especially when large
quantities were held in storage, enabled it to achieve a dominant position in
the egg market. It has long acted as a price leader for the rest of the trade.
The key to this development has lain in the need for an organization to dis-
pose of a surplus which could not be marketed locally. 2/ The comparable
cooperative in southern California failed to achieve parallel status partly
because the increase in egg supplies never outran (except for very short per-
iods) the rise in population. Poultrymen in a deficit area did not experience
the same difficulties in marketing their produce.
Much the same conditions have been experienced by the Poultry Department
of Poultry Producers of Central California. Of secondary importance to most
members, the type of poultry turned out by an essentially egg producing industry
is not such as to warrant extensive transportation and distribution to distant
population centers. Most egg producers have, however, felt the need for a con-
venient and trustworthy outlet through which they could dispose of cockerels
and older hens no longer economical as layers. This feeling gained added weight
with the recent turn towards the meat bird as such and recognition that the
chicken has become an integral part of the average American's diet. Producers
looked to the cooperative for the paternal assistance befitting one which had
grown so sturdy on their patronage. In 1926 Poultry Producers set up a poultry
department to purchase and process members' poultry. Morally obliged to accept
whatever types and qualities of bird members offered for sale, it labored under
severe handicaps in competing against more flexible enterprises devoid of such
obligations. It was under such circumstances that the auction plan was proposed
early in 19^8, Poultry Producers recognized that the current shape of demand
for poultry meat in San Francisco was such as to offer higher prices relatively
for fresh New York dressed birds than could be expected anywhere else in the
country. To ameliorate the conditions under which these special demands and
supplies came together. Poultry Producers established the Petaluma Auction.
1/ From November 19U9 the Federal-State Market News Service has published
a new series from Fresno, Paying Prices for Live Poultry F.O.B. Ranch ,
San Joaquin Valley .
2/ This position no longer holds good. From 1938 California has been a net
importer of eggs.
9.
Origin
The institution of an auction market at Petaluma on June iS, 19U8 marked
the first significant occasion of the employment of this method of disposal of
poultry in America west of the Mississippi. This is the more remarkable in
view of the long-standing concentration of commercial poultry in California and
the continued association of auction sales with poultry marketing both in the
eastern United States and in Europe. Admittedly, specialists in the production
of laying stock and meat birds have rarely favored this type of outlet. Sub-
stantial businesses of this character have generally preferred to make direct
sales through advertisement and personal recommendation. The local auction has,
however, in England for instance, provided an established opportunity for ven-
dors of small and varied lots to present their produce at markets where buyers
foregather at regular intervals and bid against each other corapetitively. These
auctions may be found all over England situated in local centers not more then
twenty miles apart.
Many factors would seem to favor the successful establishment of an auction
at Petaluma. It is the geographical and economic center of an extremely dense
concentration of poultry flocks specifically directed towards egg production on
a large scale. Large quantities of poultry meat are turned out as the natural
by-product of the industry. Egg production is dominated by the White Leghorn
breed of fowl. There is, therefore, a seasonal outflow of young Leghorn
cockerels, known locally as broilers, and a fairly continuous culling of hens.
Many years of keen competition have pointed the poultryraan's skill in producing
eggs at the minimum cost. Since expenditures on feed supplies and labor con-
stitute by far the most weighty element in his cost structure, and since this is
a function of the number of birds in the flock, there has been a marked trend
towards continuous culling as birds cease to be profitable layers. Albeit that
proceeds from the sales of eggs are their major source of income, producers have
sought to minimize the depreciation on their working capital equipment, so to
speak, by selling culled hens for the highest possible price.
The individual rancher absorbed primarily in the business of egg produc-
tion is at a disadvantage in his dealings with the traveling huckster "armed"
with special contacts and "grapevine" information. Fair marketing conditions
under which sources of information and relative bargaining povfer could be more
evenly matched demand a central market place where birds could be graded im-
partially and buyers could be brought together in open competition. Since
Poultry Producers of Central California already bought eggs from and supplied
feed to its many members in this area, much pressure was put upon it to provide
a suitable outlet for culled hens and broilers. For its own part, a prevailing
opinion was that it had some obligation to its members in this respect.
Yet, direct purchase from members had not proved satisfactory in the past.
The San Francisco market offered good prices for fresh-killed birds of all kinds,
but the Association's poultry department was always handicapped by extreme fluc-
tuations in the volume of the particular types and grades of bird offered. This
impeded the maintenance of appropriate retail outlets and put the Association at
a disadvantage in competing with smaller buyers aided by more flexible trading^
policies, low overhead costs, and labor teams in which members of the family did
most of the work. There was, too, something of a carry-over from the O.P.A.
period when few good birds ever came into the hands of the Association since it
observed the regulations more strictly than most private traders at a time when
the demand price for poultry far exceeded that set by law.
10.
Financial losses during this period resulted in an inquiry and search for
a new approach to the Association's problem in marketing its members' poultry.
Continued discussion resulted in the commissioning of Mrs, Alyce W. Lowrie,
Analyst, to study eastern auction markets and bring forward a new plan. In
consequence, the Association proposed the discontinuance of direct buying and
the establishment in its place of open purchase through an auction sale held
under its own auspices. In this way, members were to obtain the benefits of
competitive bidding by dealers who specialized in the handling of warm dressed
poultry. In addition, the Association's requirements would be reflected as a
demand on the auction and would prevent selling prices going unreasonably low
if supplies should exceed outside buyers' normal requirements. It would also
permit the Association to acquire chickens for its own distributive trade at the
same average prices as were paid by others who bought on the auction. Theoreti-
cally, since the auction sales were completely open and the ranges of prices
obtaining there were published weekly in the newsletter distributed to all mem-
bers, transactions through rival marketing channels in this area should tend to
approximate to the same scale of prices.
The auction certainly had the full advantage of Poultry Producers of Central
California's organizational machinery behind it during the period of inception.
Members' meetings were held. It was publicized in the press, and the Weekly
News Letter of the Association, buyers were contacted individually and a num-
ber of firms, including one of the leading San Francisco wholesale houses,
jiLedged their support. Some opposition from local hucksters and nonmembers was
only to be expected. Furthermore, the Association arranged for the assembly
of birds at outlying branches and for their transporation to the auction
premises. Coops were supplied to members by the Association and trucking facil-
ities were arranged for points as distant as Ukiah, 78 miles north of Petaluma,
Storage and feed facilities i^ere available for birds delivered on the day
previous to the auction.
Method of Operation: The actual process of selling birds presented diffi-
culties if buyers were to obtain a fair njnpression of the quality offered in
particular lots mthout having to spend a lengthy period of time away from their
business. Chickens offered for sale in English auction markets are usually set
up in open wire cages where buyers can see and feel them before making their
bids. This does, however, involve considerable labor in making transfers between
coops and becomes impracticable where very large numbers are involved. At Peta-
iToma all buyers had an opportunity to inspect birds already present prior to the
sale and lots were arranged so as to permit access to the coops at that time.
During the actual sale, the class and grade were announced by the auctioneer.
It was left to buyers to associate the lot number with their previous obsenra-
tions. Because birds in coops were difficult to evaluate and fear of unevenness
in quality might have been an effective deterrent to speedy sale at maximum
prices, the Association undertook to grade all lots before they were offered
for sale. This was carried out by its own employees, either at the point of
loading when the birds were picked up by the Association's trucks or upon arrival
at the auction when they were delivered in producers' ovm vehicles.
Three grades were established~"good," "fair," and "as is." "Rejects"
(birds with tumors, water on the abdomen, etc.) were removed from coops graded
"good" and "fair." Birds obviously unfit for human consumption were removed
11.
from coops graded "as is."i/ Suffice it to say here with regard to auction
practice that whereas birds arriving well before the tirae of the auction could
be graded fairly effectively. The same thorough attention could not be given
to crates arriving just before or during the actual sale. This operated to the
disadvantage of both buyer and seller.
A tag listing the class j grade, ajcid weight was attached to each coop. On
this, vspace was also provided for recording the final bid and the name of the
buyer. Each member's poultry was sold as a separate lot but in contradistinction
to practice at auctions laying emphasis on quality, no publicity was given to
the name of the producer. From some points of view, this might well be regretted
since the highest prices at auction sales are generally paid for lots dispatched
by producers whose names have been associated with unfailing quality and dependa-
bility in the past. Lots normally consisted of from one to five coops, with a
maximum of twelve since small quantities were likely to appeal to the largest
number of buyers.
All sales took place on a cents per pound basis and the coops were weighed
immediately after the final bid on scales located at the side of the auctioneer's
rostrum. Undoubtedly, some shrinlcage was inevitable especially in the younger
birds, and producers were anxious that buyers should take into account in their
bidding this loss of weight since leaving the ranch. One test showed that a
sample of colored fryers lost 1^1 per cent of their weight between leaving the
ranch at 9:00 a.m. and going onto the scales at 11:00 a.m. This lapse of time
would not be a matter of serious concern but undoubtedly many birds spent a
much longer period after their last timo of feeding.
Bidding was very rapid and lots were dealt with apace. Frequently, U00-500
coops were disposed of in less than two hours. The auctioneer followed the
usual methods of stimulating the bidding and was aided by a r epresentative from
the Association, but there was no specific provision for the acceptance of re-
serve prices below which producers would not sell. Whereas, abuse of this
safeguard may lead to buyers deserting a market altogether, as when the vendor
and his friends waste time i^unning up bids, yet, do not allow their birds to
be sold, nevertheless most auctions allow the owner the assurance of one bid
made either in person or by arrangement with the auctioneer. Presumably, pro-
ducers might attend the auction and buy back their own birds subject to paying
the auction charges. At any rate, numerous comments from producers indicate
that the absence of any definite reserve policy deterred them from offering
their best quality birds. They preferred not to shoulder the risk of a sudden
drop in a market from which there v:as no convenient withdrawal. Clearly, a
sale at which no transactions take place because of high reserves would be self-
destructive iJi the long run, but even the additional expense of moving birds
back to the ranch ajid offering them for sale again would prevent too irrespon-
sible a use of this safeguard.
Some recognition was bestovred on the need for a way of determining the
minimum price at which lots would be sold when the Association experimented with
a blackboard in the auction room on which bids and offers might be posted.
According to this plan, producers with flocks of good quality, colored fryers
1/ Instruction to members of Poultry Producers of Central California,
Weekley News Lettex- , June 9, 19li8,
12.
for exajnple, who might be chary of entrusting them to the day- by-day vagaries
of the auction, might describe them on a blackboard and state the price they
sought. Buyers present at the auction could then append their bids and it was
hoped that sales could be transacted upon this basis under the supervision of the
Association, A commission was payable so that the auction itself should not be
prejudiced by unfair competition. The scheme did not attract continuous support
and little use was made of it.
That little scope was envisaged for the placing of reserve bids may be
attributable to the role which the Association saw for itself as support buyer
on behalf of its members. Though always regarded as auxiliary to its egg
business, once its poultry department had established outlets to retailers,
there was a continuous need for a fairly even flow of produce to keep them open.
It was hoped that the majjitenance of this trade could be coordinated smoothly
with a buying policy of leveling out price movements at the auction consequent
to sharp changes in the supply of particular qualities and grades. Since the
Association had access to cold storage facilities and would, thus, be able to
buy on days of over supply and refrain therefrom when offerings were short,
this had all the promise of being a very satisfactory arrangement. Undoubtedly
a part of the auction's early success may be attributed to it. Much of the
risk, however, of buyers withholding bids until they secured birds at unwarrant-
ably low prices was precluded by the practice of the Association in buying at
every auction a quantity roughly proportionate to the supply, "Although the
producer cannot be assu.red of a specific price on poultry consigned to the auc-
tion the presence of the Association's representative bidding on the floor will
prevent any unfair practices."!/ Similarly, on days when auction receipts vrere
restricted in volume, the Association limited its purchases accordingly in order
that other buyers might not be discouraged from attendance at the sale by their
inability to purchase at least a proportion of their poultry requirements for
that day,
^As a further insurance against the price depressing effect of an exception-
ally large supply upon a group of buyers whose needs were relatively constant,
the Association took pains to secure the attendance at the auction of at least
one direct representative of the large San Francisco wholesalers. It was im-
portant to have present buyers able to absorb varying quantities of produce,
A great deal of the initial success of the auction was due to support of this
kind and even after this buyer ceased to attend regularly the Association still
bought on behalf of his firra on days when it seemed unlikely that the buyers
present could cope with the volume on offer.
Choice of the most appropriate days of the week for the sale raised issues
interesting in themselves for the light they cast on trading conditions in the
area, Tuesday and Thursday were selected originally but were opposed by the main
body of buyers attending the auction. Thursday was considered too late in the
week for the purchase of large stocks since they would not arrive in San Fran-
cisco until late that afternoon. This left only Friday, a busy day, in which to
kill and dress the birds if they were not to be held over the week end. Smaller
dealers most numerous in attendance at Petaluma had not the facilities for hold-
ing birds any length of time and would be obliged to purchase lightly on
1/ Poultry Producers of Central California, Weekly News Letter , June l6,
19UH,
13.
Thursday. This would mean that Monday would find them out of birds altogether
and eager to buy. It was common knowledge that large quantities of poultry were
trucked out of the Petaluma district every Monday morning. Producers' evidence
is available that buyers were keenest to take birds early in the week whenever
they could do so.
Poultrymen, on the other hand, disliked Monday. Delivery of birds at
an auction by the middle of the morning entailed preparation the previous day,
Sunday, or very early rising on Monday, or both. They felt themselves at a
disadvantage since trends in the market situation maturing over the week-end
would not be known to them. Information either from the Market News Service
reports, newspapers or other sources was rarely available to the rancher until
later in the day or even the one following, whereas buyers, specialists in their
profession of poultry dealing, made it their business to know of any changes in
the price situation which had taken place before they set out in the raoi'ning.
Thus, producers' decisions on whether or not to sell were based perforce on
observation of price and demand relationships obtaining several days earlier
than those governing buyers' decisions whether or not to buy.
If hens had to be culled from a large flock immediately before loading,
and this is quite customary since poultrymen do not wish to handle birds tv;ice,
then delivery to the auction on Monday morning was inconvenient. If there was
a further factor of transportation over relatively long distances, then it be-
came impossible. When Monday and Wednesday were adopted as the sale days, the
quantity received on the second day was generally double that received on the
first. Important elements in the total quantity sold, particularly in terms of
quality, were the shipments from Poultry Producers of Central California branches
in northern Sonoma and Mendocino counties and the Napa valley. (See map, page 3,
for percentages furnished.) The mere problem of distance precluded the arrival
of much of this produce on Monday. Buyers complained in consequence that Monday,
the day when they most needed to buy, offered little opportunity of doing so.
By and large, prices ran higher at Monday markets, especially in the lower grades
most sensitive to the pressure of demand. All through the year those sponsoring
the auction were urging local producers to send their birds to the Monday market
so they might take advantage of the demand situation then prevailing and mitigate
the danger of oversupply on the Wednesday sale to which birds from more remote
areas were consigned by necessity.
Sale through the auction was confined to members of Poultry Producers of
Central California. This limitation may have excluded some poultrymen who would
otherwise have availed themselves of the auction's facilities. As a major feed
supplier, however, and outlet for half the eggs sold off farms in central
California, the Association certainly claimed the allegiance of most egg pro-
ducers within range of Petaluma although the specialized meat bird raisers saw
less to gain in such ties.
No restrictions were imposed on either the quantity or type of poultry
handled. Members were warned, however, against offering for sale miscellaneous
produce—ducks, geese, squab, etc. The Association's protective buyj-ng policy
was confined to poultry for which the Association had ready outlets and did not
apply to miscellaneous varieties. These, it advised, should be marketed through
other channels.
The financial procedures of the auction were established as follovrs: The
majority of sales were conducted on a cash basis. Strict credit regulations
; lit.
requiring pronpt pajment were in force. Buyers paid or signed at the auction
office before removing their purchases. Producers received a check from the
Association by mail withjn a day or two of each sale. This amounted to the
buyer's price less a deduction of two cents per pound. No charge was made to
buyers. Of the two cents, one-half cent was credited to the Poultry Capital
Fund of the Association, Against this, members received certificates bearing
interest at h per cent per annura. The remaining one-and-a-half cents was used
to defray the operating expenses of the auction. Most of it was absorbed in
payment for services provided by the Association, The auctioneer, an experi-
enced member of a local livestock firm, vras remunerated from this margin accord-
ing to agreed percentages of the gross turnover.
Members availing themselves of the Association's transport facilities for
picking up and conveyjjig birds to the auction were charged for this separately
at the customary rates. At one time, poult rymen in the vicinity of Ukiah brought
their birds into Poultry Producers of Central California branch there on Tuesday
whence they were hauled to Petaluma and fed overnight for the Wednesday sale.
One-half cent per pound was charged for this additional service. Small lots
assembled at branches other than at Petaluma and involving local branch handling
instead of merely direct shipment to the auction also bore an additional charge
of one -quarter cent. 1/
1/ From February' 23, 19k9
15.
Changes and Developments
The first auction started with splendid support from producers. Five
hundred and eighty coops holding up to 100 pounds of poultry each were sent in
for sale on June 15, 19)48. This was publicized as the largest quantity of
poultry handled at any auction in the nation.
Changes after the first few weeks turned on the choice of day and size
of lot. Buyer intervention led to the substitution of Monday and Wednesday
at 10:00 a.m. for Tuesday and Thursday. Lots were not to be larger than would
suit the convenience of small retailers who were frequently responsible for
the best bids. Active buyers numbered ten to twelve during the late summer
of 19U8j others attended in order to obtain the "feel of the market." They
were increasingly aware of the part the auction played in determining poultry
prices in the Bay area. Even those interested in buying few if any birds at
the auction found it to their advantage to be present.
Criticism during the first six months was directed in the main against
the prices received for colored fryers. These tended to come forward in large
lots and on such occasions supply exceeded demand at expected prices. Thus,
bids for early and later lots of the same type of bird showed a disconcerting
width of range. This led to the suggestion that offers and bids should be
posted for meat birds. The Association defended its support policy saying
that large quantities of broilers were already being bought for current sales
and that colored fryers were a type of poultry which it was unwise to freeze
and put into storage. Purchases, therefore, could only be made at prices com-
patible with resale without loss through available current outlets. In an
attempt to deal with this situation the Association planned to operate an
eviscerating and freezing plant on its San Francisco premises.
In response to discussion at the Association's annual district membership
meetings, price ranges at the auction were compared x^ith those published by
the Market News Service in San Francisco for birds of comparable quality.
Evidently, the range was considerably wider and there was disappointment that
the competition of buyers in open auction did not tend to focus the price at
or near a given level as had been anticipated. Part of this price range may
be attributed to differences in quality within a given grade either because
hurried grading had left some inferior birds in an otherwise good lot or because
of too inclusive an interpretation of the boundary of the higher grade. The
average weight per head might also become a differential between two lots of
birds of comparable quality.
Much prominence was given in the Association's vjeekly and monthly publi-
cations to the need for a steady supply of good quality birds at the auction
so as to maintain a keen buyer interest. But, clearly, egg producers selling
only cull hens or pullets could not conform to this. All through it seems
that the vendors of off -grade birds benefited most, often obtaining relatively
higher prices at the auction than had been received through a private bargain
for the better grade birds at the ranch. All these factors were part of,
and helped to further the trend toward concentration on hens and broilers
with a diversion of the better meat birds into other channels.
Yet, on March 2, 19lj.9 at a meeting in Haytjard, (see map, p. 3), 85 Poultry
Producer 'members asked for help in solving their poultry marketing problems. _
Their request was for specific action either by the establishment of an auction
■jci
16.
or direct purchase and dressing by the Association in their area. Committee
members^ however, advised against the setting up of a second auction and pro-
posed that poultry should be dressed in the vicinity but only with the support
of a long-term exclusive contract, the enforcement of which would be a local
responsibility.
The auction at Petaluma continued to provide an excellent outlet for
Leghorn fowls, broilers and such colored hens as were forthcoming, but for
colored fryers it seems to have been unreliable. From March 1, 19U9 on, the
Association made it known that it would make direct purchases of lots offered
by members, a course which had been in abeyance since its inception. Throughout,
the Poultry Department was endeavoring to serve the Association's members as
well as possible and to try whatever methods offered most promise of affording
them satisfaction.
Prices during June 19li8 were much higher in California than in the rest
of the country and the auction continued to attract an Increasing volume of
business. The sale of August 2h, 19hQ when 30,000 pounds of poultry were
offered was the heaviest since those immediately preceding and following the
winter holiday period. Two old complaints were reiterated about this time,
however. Grading practice had again been subjected to criticism. Producers
were urged not to send in their birds so late that they arrived during the
course of the sale. Timed originally to begin at 10:00 a.m., it had gradually
been put off to 10;30 a.m. The major part of the weekly total volume was still
being concentrated into the Wednesday sale which was characterized by shipments
from the more outlying areas. Receipts from the Petaluiaa district were falling
off relative to those of the same season in the previous year. This geographi-
cal difference in appreciation of the facilities provided by the auction was
natural enough. In the Petaluraa area, situated wj.thin two hours trucking time
of San Francisco, producers had numerous outlets for their birds among locally
known hucksters and the Bay area retailers themselves. In other areas, where
poultry ranches were more scattered, buyers were scarcer and the bargaining
power of the producer considerably less. The Association provided, moreover,
a convenient transport service to the auction point and protected the sale of
birds when they arrived there. Undoubtedly, this was much appreciated in
Mendocino and northern Sonoma County.
From the fall of 19U9 business at the auction declined. Since the
Association handled 3.6 million pounds of poultry in 19ii9 as against 3.7 million
pounds the Drevious year, it must be assumed that direct purchases from members
were stepped up proportionately so that the total volume of purchases by the
Association remained at a fairly constant level. On March l5 the Weekly News
Letter announced that, whereas members were not all fully aware of the Associ-
ation's direct buying policy, it was actually only buying at the auction the
minimum quantity necessary to support it and the dressed poultry operations at
Petaluma depended upon direct purchases.
A further reduction in the volume of sales at the auction was noted during
the winter and attributed to seasonal circumstances, but when it never picked
up again, it was decided that the auction should be held once a week on
Tuesday only.
Auction Volume
At the first auction held on June 15^ l9hQ ^ a total of hi, $62 pounds of
live poultry was sold. Subsequent offerings did not exceed this until late in
September but ranged from an upper limit of some 35,000 pounds down to 15,000,
with a tendency towards stability at 30,000. The arithr;ietical average over
the first three months of operation, covering 28 auctions, was 28,223 pounds
per day of sale. If producer attraction cari be measured in tMs way, then the
auction was a success from its very outset.
Excluding auctions influenced by the holiday periods of Thanksgiving and
Christmas, the volume of sale per auction continued on much the same level
through to the end of January, 19^0. On January 12, 19h9 over 55,000 pounds
of poultry were disposed of through the Petaluma auction, an all-time peak.
Sales fell off during the spring months. This period was, nevertheless, one
of continued success for the auction's sponsors and average sales during the
six months, September through March, v;ere maintained at well over 2}; ,000 pounds
per auction. Total sales for this period run to approximately 1.2 million
pounds .
Through the summer of 19h9 the trend was dox-mward. Sales of 25,000 pounds
came to be regarded as substantial and the total for the period April to Sep-
tember, 191^9, did not reach one million pounds. During these months the average
sale was only 17,000 pounds. Though total sales of poultry in California in
19ii9 showed no marked decline from 19lt8 levels, the auction business continued
along a lower level. Reduced offerings during the winter of 1950 were attri-
buted to seasonal influences, but when early summer witnessed no significant
revival it was decided that only one auction should be held each week.
Total auction sales for 19ii9 amounted to l,8lii,l52 pounds as compared with
l,li87,lU3 pounds during the six-and-a-half months from its inauguration in June
19U8 to the end of the year. Handlings for the first quarter of 1950 totaled
275,575 pounds, averaging 12,000 pounds for each of 23 sales, only half the
volume of the previous year.
Period for Analysis . — The cooperation of Poultry Producers of Central
California made it possible to study the workings of the auction more compre-
hensively and in greater detail than is normally practicable. Careful records
were kept by the Association's poultry department and proved to be an invaluable
source of information.
Mainly technical features determined the selection for analysis of the
twe].ve months following September 27, 19U8. During this period, auction records
were kept in the form most suitable for careful analysis. Only for this period
were transactions in the different class grades carefully distinguished. Pre-
viously reports centered mainly on prd.ces obtained for the best birds in each
class. From September 27, separate price ranges were quoted regularly for
grades "good," "fair," and "as is" in each of the major classes, Leghorn hens,
Leghorn broilers, colored fryers, and colored hens. This practice continued
until the following September when efforts to distinguish clearly between three
grades were relaxed and intermediate categories "good and fair," "fair and as
is," "poor," etc., appeared on the records. One hundred consecutive auctions
representing a complete year, inclusive of all the different seasons, were
reported imder one standard procedure.
18.
These data comprehend the class, quality grade, net weight, price per
pound, the name of the purchaser and the location of the branch of which the
vendor of each lot was a member. The number of coops in each lot is available
but not the number of birds in each coop. Little can be done, therefore, in
the way of analysis in terms of poultry numbers or of average weight per bird.
It is, therefore, all the more important that volume and price by weight can
be studied with such exactness.
Figure 2 gives visual expression to the gross turnover per auction sale
over the twelve-month period. It varied sharply from auction to auction through
most of the year and fluctuated violently during the holiday periods of Thanks-
giving and Christmas. Much of this variability, together with the unfortunate
consequences it had for buyer and seller alike, must be attributed to the
practice of holding two auctions per week under circumstances which led to one's
being patronized more intensively than the other. These factors were discussed
previously (p. 16). The extent of their influence is reflected in the number
and size of the breaks in the sales curve.
Variation in Auction Supplies .— The mean quantity sold per auction was
20,621 pounds. The average deviation from this mean over the whole year vras
6,kS8 poxinds, amounting to 31.3 per cent of the mean quantity sold. That the
quantity sold at each should fluctuate by one-third seems significant with
reference to the matching of supply with demand. The range of deviation was
much more. On December 20, 19l|8, 32,000 pounds of poultry were offered, on
the sale following only 2,000. By this latter date producers had dispatched
whatever they intended to send to the auction before Christmas and were occupied
with other interests, n.uctuations at other seasons of the year are less easily
explained but were almost as disturbing, nevertheless. Sales on March 10, 19U9
amounted to l6,609 pounds, on March 21 to 0,^27, and then jumped to 30,765 on
March 23. The tendency was, however, for the fluctuations to become less
severe during the summer. During this part of the year, producers tended to
offer birds for sale more as a regular matter of course than in response to
special temporary changes in the demand price for poultry or eggs. VJhereas
the average deviation from the annual mean was 3h.6 per cent during the months
September to March, it was only 26.2 per cent for the svimmer period, April to
September,
Weekly Averages .— Since the practice of holding two auctions per week was
subject to recognized difficulties and may be regarded as an institutional ex-
periment rather than a constant factor wliich could not be changed, an attempt
has been made to consider the supply situations which might have arisen if only
one auction had been held per week. Sales volume for xjeeks carrying twin
auctions were summed and halved as averages per auction week. Those weeks in
which only one auction was held owing to interruption by legal holidays (for
example, those containing November 21;, February 22, May 30, and July h) con-
tinued to carry the volume for the auction actually held. The purpose of this
maneuver is to remove the intraweekly variation and distinguish fluctuations
resulting from external supply conditions from those brought about by details
in the institutional setting. The resultant figures appear in table 1 and
are reflected as the broken line in figure 2.
The fluctuations are still considerable albeit not quite so extreme as
they were previously. Those experienced during the late spring would probably
not be unduly upsetting to buyers' and sellers' expectationsj those of the
winter period still appear severe. The average deviation from the mean computed
■>1
FIGURE 2
PETALUMA POULTRY AUCTION
TOTAL VOLUME HANDLED 1948-49
20.
on this weekly basis was 2)4,9 per cent. This is still considerable but markedly-
less than that existing where auctions were held tv;ice weekly. Much of this
must be attributed to the six siwimer months, lilhereas from March to September
deviation from the annual mean averaged 20,1 per cent, during the previous six
months it amounted to 29.8 per cent. This latter figure is of the same order
as that obtained for the weekly auction system and suggests that the concen-
tration of business on one day per week would have done little to iron out the
fluctuations in supplies during that period of the year. Blame for this must
still be laid on the disruption of the marketing pattern brought about by the
special marketing conditions associated with Thanksgiving and Christmas.
Straight Line Trend . — A straight line was fitted to the graph of average
weekly auction sales for the period September 27, 19U8 to September 21, 19ii9
by means of the "least squares" method and has been reproduced in figure 2.
The trend is steadily downward according to the formula;
Y » 28.65 - .31^8 X
where Y = average weekly auction sales in thousands of pounds and X = a time
unit of one week commencing September 27, 19U8. This may be interpreted as
indicative that from an initial turnover of 28,6^0 pounds, auction handlings
tended to decline by rather more than 300 pounds each week of operation. This
did not happen regularly. The fluctuations above and belov; the straight line
stand out very clearly in the figure.
Subject to occasional exceptions the chart does indicate the existence of
definite periodvS when auction receipts tended to rise above, or fall below,
the trend line. From mid-November to the second week in January they were
below except for three consecutive auctions terminating six days before Christmas.
Through January, receipts stood well above the trend. From February 2 until the
end of May they remained steady, somewhat below it. Thence, to the end of the
twelve-month period they lay above it, except on very few occasions. Diminish-
ing support for the auction is perceptible in the small sales towards the end
of September, since this had been a peak marketing period in the previous year.
The last reading on the trend line is 12,000 pounds, a decline of over $0 per
cent from the level at which it began.
Seasonality Comparisons with Other Markets .— The validity of such com-
parisons is limited by the different character of the markets and more speci- ■
fically by the types of birds sold therein. The Petaluma data can be set beside
that published for middle western primary markets, since both represent offer-
ings at the producer Ir/el. Yet, whereas the former reflects production con-
ditions in one specific geographical area, the other is a composite of purchases
over all the middle western states. Few other markets would carry such a high
proportion of Leghorn hens as wood Petaluma, San Francisco figures are also
available but these refer to wholesalers' purchases for sales to retailers in a
market especially noteworthy for its pre-eminent interest in fresh poultry. If
due allowance is made for these influences, it should be illuminating to com-
pare sales variations at Petaluma with those in the middle western series.
Table 2 demonstrates that the monthly variation in supplies to the
Petaluma auction was of the same order as the weekly variation. The difference
between the two Petaluma coefficients, 26.2 per cent and 22.8 per cent, is
insignificant by comparison with the difference between these and the other
series. Clearly, the seasonal variation at the middle western primary markets
•1 :
TABLE 1
Total Sales Adjusted to Weekly Averages Per Auction: Petaluma Live Poultry Auction
September 27, 1948-September 21, 1949
Sale dates
1948
Average
per auction
per week
Sale dates
1949
Average
Average
Average
per auction
Sale dates
per auction
Sale dates
per auction
per week
1949
per week
1949
per week
1,000 pounds
1,000 pounds
1,000 pounds
16.25
Mar. 28, 30
19.1
July 6
18.1
40.3
Apr. 4, 6
22.55
11, 13
13.2
30.35
11, 13
19.0
18, 20
13.0
27.15
18, 20
12.6
25, 27
24.55
22.8
25, 27
13.65
Aug. 1, 3
16.95
18.4
May 2, 4
17.55
8, 10
12.65
18.1
9, 11
15.35
15, 17
14.7
23.3
16, 18
14.7
22, 24
16.8
13.1
23, 25
19.55
29, 31
15.65
15.15
June 1
26.2
Sept. 7
19.2
18.05
6, 8
18.85
12, 14
20.95
19.65
13, 15
20.55
19, 21
9.5
19.1
20, 22
15.65
27, 29
20.95
1,000 pounds
Sept. 27, 29
Oct. 4, 6
11, 13
IS, 20
25, 27
Nov. 1, 3
8, 10
15, 17
22
29, 1
Dec. 6, 8
13, 15
20, 22
27, 29
35.9
29.0
28.9
30.25
23.55
28.85
26.65
27.8
15.0
22.1
1B.75
34.95
17.4
15.25
Jan. 3, 5
10, 12
17, 19
24, 26
31, 2
Feb. 7, 9
14, 16
23
25, 2
Mar. 7, 9
14, 16
21, 23
28, 30
... , , ^
t.
■,
1
' J'
■' ♦
- ■- ' ' ' 'j
■ . 1
22.
was nearly double that at Petaluma, but at the sane time more symmetrical in
its development through the year. It would be the easier to predict. The
steady increase in marketings through the middle western primaries, from a low
point in March to a pealc in September, and the subsequent steady decline reflect
the hatching and development cycle of the chicken bred under "natural" condi-
tions. The irregular movements between months at Petaluma reflect the pressure
of factors not influencing the former series. A high proportion of laying hens
introduces the economic ratios as on egg to feed prices and egg yield to main-
tenance cost as factors determining the times when egg producers step up their
rate of culling. The Petaluma data lack the smoothness of a series compiled
by averaging the returns of a number of plants and some of the sharp contrasts
between months (for example, January- February , June- July,) may be attributable-
to purely local or accidental circumstances. October and November were peak
months in both series, but whereas receipts at middle western primary markets
fell off sharply through December and January, handlings at Petaluma continued
to rise.
The San Francisco series provides a salutary contrast in that it represents
the seasonal distribution of consumer demand insofar as poultry meat wholesalers
were able to anticipate it from their experience of the market. The regularity
and evenness of the San Francisco wholesale series are all the more striking
in that they refer only to fresh birds. Thus, periods of deficit have been
supplemented but little by drawings on frozen stocks. Offerings of fresh birds
have been so high during the months of short supply (for example, January to
March as shown in the middle western primary markets series) that current
demand could still be met from fresh stocks. The corollary to this is that
during the seasons of ample supply, the San Francisco vfholesalers can only have
kept receipts down to the level of consuaaer desaand they anticipated by refusing
to accept a large proportion of the live birds offered. This observation would
still be relevant if the Petaluma series were characteristic of the California,
supply situation and there are few grounds for assuming that it is. This has
implications with respect to selling conditions at Petaluina, ;^hich will be
discussed more fully later (p. 56). Suffice it to say that during substantial
periods of the year, buyers who planned to satisfy a fairly constant retail
demand were faced with much larger offerings of birds than they could absorb,
even if they had relied upon the auction for a definite portion of their
requirements .
Composition of Sales .— The conclusions of the preceding section pointed
to the desirability of ironing out week-to-week, month-to-month fluctuations
in the volume of poultry offered at Petaluma. Further insight into the funda-
mental causes of this situation may follow an examination of the proportions
of the total supply to the auction contributed by the major classes of poultry
and the way in which they varied seasonally over the twelve-month period.
In table 3 the total sale of chickens has been broken down into classes so
far as this was profitable. Leghorn fowls constituted the greatest proportion
It cannot be overemphasized that the Petaluma auction represented first and
foremost an attempt to facilitate the disposal of older birds after they had
ceased to be profitable layers, Leghorn broilers stood next in importance,
amounting to rather less than one-quarter of the gross turnover. This also is
probably a unique feature. Some practical method of introducing to the meat
market the young cocks which are the natural by-product of breeding Leghorn
hens has been a dire need in this area. Even so, only a part of the flow of
young male chicks from the hatcheries was fed for meat. Leghorn broilers are
i
23.
TABLE 2
Seasonality In the Marketing of Poultry:
October 19U8 -September 19h9
By Months
Month
October
November
December
January
February
March
April
May
June
July
August
September
Total by weight
Petaluma
monthly
totals
San
Francisco
raonth].y
receipts
223
199
199
2^1
123
171
130
126
179
120
16U
100
1,000 pounds
Central Western
primary markets,
weekly average
per plant
l,it00
1,392
1,525
1,620
1,295
l,6Ul
1,519
1,U62
1,578
l,Uh2
1,6U7
1,663
30.3
20.1
13.).;
8.1i
10.0
8.5
10.1
11.8
17.6
20.5
29.5
35.5
Coefficient of variation (per cent)
Index
100 = monthly average for year
Petaluma
135
120
120
151
77
103
79
76
108
72
99
60
22.8
San
Francisco
92
92
101
107
86
108
100
96
loU
95
109
110
6.5
Central
Western
primary
markets
168
112
7h
U7
56
kQ
56
66
98
llU
I6ii
197
U2.5
Sources;
Petaluma monthly totals: sales at Petaluma Live Poultry Auction.
San Francisco monthly receipts: Federal-State Market News Service.
Summary of Egg and Poultry Markets. VJeekly. San Francisco,
California, Processed. The receipts represent live chickens of
California origin.
Central Western primary markets. U.S. Bureau of Agricultural ii^conomics.
Poultry and Egg Situation. Washington, D.C. Eight times per year.
Processed. The receipts represent live chickens, weekly average
per plant.
TABLE 3
Composition of Total Sales: Petaluma Live Poultry Auction
September 27, 19U8-September 26, 19h9
Class of bird
Total vxeight
Percentage of
total sales
by weight
by value
1,000 pounds
per cent
Leghorn hens
765.8
37.1
35.0
Leghorn broilers
U61.9
22. ii
23.1
Colored fryers
365.3
17.7
19. ii
Colored hens
111.2
5.U
6.7
Roasters
ei.ii
3.9
li.3
Crossbreds
19.7
1.0
1.0
Other classesV
Unclassified^
173. U
8.U
7.8
83.7
ii.l
2.7
a/ Roosters, pullets, rejects, etc,
h/ Excluded from other classes owing to inadequate data with
respect to weight, price, etc.
j?* Wl-ia^ ■*-*.
*
> ■■ . -■
C. ■' :„
* ■
1
f
I
■ ■ I-
r ■
p •■
25.
carried to weights of l|-2^ pounds by producers with the facilities to house
and feed them. Beyond this age they tend to becone "staggy" and marketing
is difficult „ A vital concern to the rancher in this branch of the industry
is that broilers attaining the desired weights should be sold at their optimum
stage and vacate the houses needed for the next batch ordered at the hatchery.
Colored fryers weighing from pounds represent a greater investment
of producers' capital and of their feed and time. In California, fryer pro-
duction is a specialized business, usually conducted on a fairly large scale.
By the nature of its product, it is dependent on contacts with the more sub-
stantial and higher priced outlets. Colored fryers amounted to 17.7 per cent
of the volume of poultry marketed. Together, these three classes (colored
fryers Leghorn broilers, Leghorn hens) comprised over three-quarters of total
handlings and the success of the auction depended upon its efficiency in moving
them.
Crossbreds between light and heavy breeds might well have been included
with the colored fryers, since they constituted only one per cent of sales.
Careful analysis of price relationships demands, however, that they should be
kept separate and this distinction has been adhered to throughout the study. _
Colored hens and roasters were most in demand at the auction, a condition which
prevails throughout California. The published data do not enable one to state
whether these deviations exceed or are less than those customary at other
markets. But it is clear that Leghorn hens and broilers were supplied much
more evenly than the colored birds, and of the two foregoing, offerings of hens
were the more stable. Thus , buyers of these types of birds could have more
confidence that they would be able to meet anticipated requirements than those
interested in the other classes.
Changes in Proportions of Different Classes .— In figure 3 are set out the
three major classes— Leghorn hens, Leghorn broilers, and colored fryers— and
the remaining groups combined under one heading as percentages of the total
supply over a twelve-month period. Leghorn hens tended to form some 30-UO
per cent of the total supply of birds during October and early November but
became a less important element thenceforward until the beginning of April.
This period is coincident with that of the peak lay for birds hatched under
natural conditions. Egg producers would be culling out fewer birds at this
tijne than at any other. The heavy breed hen is much sought after for family
dinners, yet scarce because as layers the light breeds have a long-standing
monopoly. Colored hens and roasters amounted to less than 10 per cent of the
total sale by weight at Petaluma, though showing up more prominently in terms
of value.
The group "other classes" made up 8 per cent of the total handlings. It
comiDrised a motley collection of sub-categories of which no single one had the
magnitude to influence the course of the market. A buyer might be as interested
in buying old cock birds as a breeder would be in selling them, but to neither
could transactions in this restricted field form a significant part of his
business.
Seasonal C hanges in the Importance of Different Classes .— It has been shown
that although supplies to Petaluma fluctuated less than those going to some
other first buyers, the variations were such as to exceed the degree acceptable
to processors in a major market. Therefore, it would be interesting to knm if
these fluctuations devolved from a particular class or classes of birds and
1
FIGURE 3
PETALUMA POULTRY AUCTION
MAJOR CLASSES AS PERCENTAGES OF TOTAL VOLUME HANDLED 1948-49
27.
which, if any, exercised a stabilizing influence. The percentage deviation
from the mean quantity offered at each auction furnishes useful evidence in this
context. It has been computed for the three major classes as follows:
Class of bird
Deviation from the mean
supply per auction
Leghorn hen
Leghorn broiler
Colored fryer
per cent
h$
51
76
Thus, for example, buyers of Leghorn hens could expect an average varia-
tion in supplies at different auctions approximating to h$ per cent with the
possibility that the range between specific sales would be very much larger.
In this way an auction in which Leghorn hens made up a substantial proportion
of total sales would be more stable than one dependent on colored fryers for
the bulk of its supplies.
From May onward, the proportion of hens rose steadily to well over half
and showed no signs of falling until the following September.
Relatively, broiler sales were most important to the auction through Novem-
ber to Christmas and again through January. During the summer, their proportion-
ate weight diminished steadily, being interrupted only by a brief rise towards
the end of August.
Colored fryers made up a steady 20 per cent of auction business for the
first six months of the year studied and reached a peak in March. From this
point they fell off sharply. Sporadic shipments from specialized producers
brought large quantities to the auction at scattered intervals but the months
of August and September saw them playing a relatively insignificant part.
Some hesitation should precede any assertion that the changes in the pro-
portions of the totals contributed by the different classes were indicative
of long-term trends in the character of the auction. This would presuppose the
possibility of distinguishing fluctuations due to seasonal changes or other
recurrent influences from those attributable to a switch in the sales outlets
employed by different types of producers. If there were any tmith in this
latter conclusion, then it would support the view that at this time the auction
was becoming increasingly dominated by Leghorn hens at the expense of broilers,
and still more so at the expense of the colored fryer.
1
J.
28.
Grading Policy-
Quality grading which has become a conventional practice in the marketing
of eggs is not paralleled in the marketing of live poultry. Standards are less
well established and more difficult to apply. The vrork is time-consuming and
tedious. Decisions are open to question. Of all aspects of poultry marketing,
this is one of those most needing attention.
Accurate grading is very important. It benefits both buyer and seller in
facilitatii:ig the appropriate pricing of each lot traded. Nothing is more exasper-
ating to the seller than seeing superior quality buried iinder a blanket of
mediocrity. In few ways is a buyer more effectively deterred from expanding
his purchases than by finding "rejects" and "seconds" ai;iong birds acquired on
the assumption of even quality throughout. This is especially important where
a buyer's business is built up on supplying different types of markets with
specific grades of poultry. Even where buyers are able to dispose of all types
of chickens without difficulty, it is still more convenient that allocation
between outlets be preceded by some process of quality segregation.
In formulating their final bids, buyers of ungraded lots tend to make
allowances for risk of how many poor birds will be in the lot. This may exceed
the cost of grading. This deduction is lost to both auction and producer. Many
of the larger dealers, moreover, decljjie the risk altogether. Competition
between buyers would be reduced proportionately if grading were not attempted.
Recognition of the intrinsic value of grading leads to problems of applica-
tion. Both in America and Europe techniques of grading live poultry are still
experimental. The bases of grade distinctions and their usefulness in different
circumstances remain obscure. Little attempt has been made to correlate the
standards applicable at different marketing stages. At present, retail cus-
tomers would have great difficulty in associating counter grades at the store
V7ith those used by the dealer in bargaining at the farm, |
Those setting up live poultry grades at the Petaluma auction were pioneers
in this particular field and the way their ideas developed under the strain
of continued experience should amply repay investigation. The first approach
will be to study in the various classes handled, the proportions of the total
volume which fell into the grades they established. This should furnish evi-
dence both as to the character of the market and of the birds supplied to it,
and of the suitabilj.ty of the grade specifications adopted and the efficiency
vjith which they were applied. Flexibility, in accordance with seasonal fluctua-
tions in supply, is another aspect woi-thy of careful study. Since so little
live poultry is graded in California, the experience gained at Petaluma is of
moment in suggesting the directions of future development. j
United States Grades .— In the marketing of poultry, the size of the unit is
so small, relative to the number of imits handled, that grading in lots becomes
vitally important. There must be a common language of quality if buyers and
sellers are to discuss prices in terms of objective criteria and make true
comparisons between the various alternatives open to them. The wider the area
over which these criteria hold good, the more satisfactory the marketing system.
Unless there are fundamental differences in the character of demand between
different localities and regions, it would be preferable that these standards
hold good over the whole country. To this end the U, S, Government has published
specifications of quality standards for individual live birds on the basis of
-.•rr
29.
the following factors: health and vigor, feathering conformation, fleshing, fat
covering, defects. For the detailed specifications see Appendix I, page 88.
It will be appreciated that the application of such detailed tests could
only be carried through with favorable conditions for handling, transference into
different coops, etc., and would involve the exercise of careful judgment on the
part of the grader. A steady flow of fairly uniform birds through a packing
plant would probably offer a suitable opportunity, but not the physical and
psychological environment of a crowded auction yard. Wiereas a packing plant
might employ a professional grader and arrange for special viewing, handling
and separating points, the sale yard staff was faced with a heavy overload for
a few hours twice a xreek. Similarly, the auction trackers out collecting birds
from surrounding ranches were expected to allocate birds into their different
grades as part of the process of loading, Scanlan and Lennartson reported, in
a survey of egg and poultry auctions before the war, that only one had adopted
the United States standards for live poultry.!/ Most were compelled to compro-
mise on cruder and more approximate techniques.
At Petalma, birds were divided into three grades— "good," "fair," and
"as is." These are probably appropriate to the circumstances and approximate
to the New Jersey grades which have been used widely in the East where the
Poultry Producers went for the lessons of experience,!/
To qualify as New Jersey No, 1, live birds must be full fleshed, full feath-
ered, straight keeled, soft meated for the class, free from tears, bruises, de-
formities and external evidence of disease, with extremely large abdomens or
broken bones not permitted.
To qualify as New Jersey No. 2, live birds must be fairly well fleshed,
fairly well feathered, free from tears, bruises, deformities, broken bones and
external evidence of disease (small blisters not exceeding one and one-half
inches and/or slightly crooked breastbones allowed) ,
"As is" would include any birds excluded from the first two grades but
which were not classified as "unsa].able . " At Petaluma it was expressly stated
that "only birds obviously iinfit for human consumption will be removed from
coops graded 'as is,'" *
Difficulties in Practice .— In practice, the grading of live poultry is sub-
ject to a high degree of huinan error. The feather covering masks bodily defects,
twisted breasts, blisters, etc., likely to impair the marketability of the bird
when plucked. The depth of flesh can be estimated only by feeling each bird.
This is laborious and difficult in coops holding large numbers. In consequence,
undue weight may be given to visual impressions. There is a popular suspicion
that battery-bred chickens hc?ve often been kept in overcrowded forcing conditions
which had an adverse effect on their health. This view, however, has no regard
1/ Scanlan, Jolm J. and Roy W, Lennartson. Cooperative Egg and Poultry
Auction Associations . Washington, D.C, U, S. Farra Credit Administration, 1940.
lOlp. (Bui. 377"^
2/ Todd, Leon. The Poultry and Egg Auction Markets of New Jersey , New
Jersey, 1937. lOp. (New Jersey Dept. Agr, Circ, 273)
30.
for the possibility'- that their meat may be the more tender for the absence of
muscle and sinew. Producers bore witness to the fallj.bility of the grading
system at Petal^jma and affirmed emphatically that birds dravm from the same
quality level might be placed in a lower category one weclc than another if
handled by a different grader. Many cooperatives have hoped that members would
assist by grading their birds during the process of loading at the ranch. Some
could be trusted to do this^ but most organizations have encountered such funda-
mental divergencies in human judgment that they have had to check all lots
before assessing the final grade.
A prime impediment to success in grading was the hurried nature of the
operation when many lots arrived around the time the sale was about to begin
or while it was actually in progress. Under pressure of this kind, inferior
birds escaped detection in lots claiiaed to be top quality by the seller. As a
corollary to such deception, coops arriving late from the same source on a
future occasion might be downgraded as a group when they actually included enough
superior birds to make up a coop of "good." The Petaluma auction made no
specific claim as to tolerances, merely reaffirming from time to tine that it
recognized the weaknesses in its grading system, was doing its best to overcome
them, and sought the cooperation of all its members. Tiiis approach was purely
negative. Initially, the establishment of a completely new institution pre-
sented a fine opportunity to set up an "A plus" or "super" grade. Produce,
awarded such a mark of distinction, would reap the benefits of the accompanying
publicity. The auction would attract buyers supplying the more expensive
markets. Instead, after the purchase had been corapleted, buyers were allowed
the privilege of throwing out from crates graded "good" or "fair" birds with
tumors, vjater on the abdomen or other defects v/hich render them "inedible."
Subject to concurrence of opinion vdth a representative of the auction, payment
would not be required for birds rejected in this way. No provision was made
for rejection from the "as is" category. These birds were bought as seen
and all risk was assumed by the purchaser.
Grade Proportions . — The quantitative analysis of grading results at Petaluma
which follox^s (table I4) is couched in terms of the weight handled in the four
major classes— Leghorn hens, Leghorn broilers, colored fryers and colored hens.
The less important categories — roosters, crossbreeds, etc. — were graded the
same way. It seems justifiable to assume that the conclusions derived for the
bulk of the trade should be applicable to them also. Table h shows the over-all
division of sales betvreen the various grades. Over half of the total was
classified as "good"; one third, "fair"j and less than 10 per cent, "as is."
If these figures are acceptable, then the suggestion that the auction dealt
mainly in off grade birds stands refuted. There is, however, the qualification
that more second-quality birds might be offered here than in other markets,
especially more than might appear in the supply schedule facing a buyer drawing
only from selected ranches. It could be contended that the birds sent to the
auction did not constitute an imbiasecl sample of the over-all supply. Frequently,
the better birds in a flock were sold privately and only the culls were sent to
the auction.
The proportional distribution of grades among the different classes of
birds may be viewed in this light. Over ha3.f of the Leghorn hens were rated
"fair" with quite a large proportion "as is." Since there were no pretensions
that these birds were anything but culls from laying flocks which had passed
their peak yield, there appears to be some reason for expecting that the majority
would fall into this category. However, comparison with the grading percentages
31.
TABLE h
Grading, Petaltima Live Poultry Auction
September 27, 19U8-September 26, 19h9
Grade
Sales Qf four najor classes of birds
VTeight in pounds
per cent of total
Good
9^7,^80
56.2
Fair
3I4.U
As is
161,006
9.h
Total
l,70l|,2itO
100.0
for colored hens reveals a significant discrepancy/. Unless it is maintained that
Leghorns are kept in the laying pens to a point where their condition is actually
lower relative to their prime than that of the average run of colored hens when
sold, it vrould appear that the definition of quality is influenced by the weight
per bird. Leghorns have a nore efficient egg feed conversion ratio than the
heavy breeds which use up a portion of tlieir feed consuinption in adding fat.
There are, nevertheless, no real grounds for ass-oming that Leghorn hens in good
health mil actually lose weight during the period of egg production if they are
properly fed. Leghorns stand up well to artificial conditions insofar as their
meat quality is not appreciably irapaired by strict confinement.
On the other hand, the ultimate criterion of vjhether a bird is salable or
not is the amount of edible meat it bears. Since the breast proportions of a
bird comprise the most iiaportant single element in grading decisions, some ten-
dency ro rate off grade colored birds above equally low-grade Leghorn hens is
difficult to avoid. Inferior light birds seem exceptionally light by comparison
with the colored breeds. Allowance should be made for the absence of abdominal
fat. This adds considerably to the weight of many colored hens. Thus, Leghorns
in normal condition for the breed should not be graded dovm siraply because they
do not appear so meaty as a colored bird of the same age.
Certain absolute criteria inust be established. It should be made perfectly
clear from the opening of a market whether all poultry will be graded by refer-
ence to an "ideal" meat bird or by reference to the generally accepted standards
for the particular breed, sex. or a</e class to which they belong. It would seem
that only the latter is sufficiently specific to be meaningful.
Eighty-seven per cent of the Leghorn broilers were rated "good" and only 1,8
per cent was relegated to the "as is" category (table 5), There are no specific
reasons for asswiiing that these would be other than straight-run birds and in
this particular class poor quality birds would have little hope of survival.
Since the per-capita value of the young Leghorn cockerel is negligible, producers
do not continue to feed any which show signs of lagging behind the normal rate^
of gro^rth. Since they are a joint product vxth the pullet chicks needed to main-
tain the egg industry at Petaluma, the auction should have been a natural source
for Leghorn broilers.
I ' ' -
J
i
i
I
TABLE 5
Quality Grades for Live Poultry, Petaluma Auction
Distribution
by weight
Distribution by v.'eight
Class
Good
Fair
As is
Total
Good
Fair
As is
Total
1.000 pounds
per
cent
Leghorn hen
Leghorn boiler
Colored fiyer
Colored hen
275
402
223
58
388
52
98
47
103
8
44
6
766
462
365
111
35.8
87.0
61.1
52.2
50.7
11.2
26.9
42.3
13.5
1.8
12.0
5.5 .
100.0
100. 0
100.0
100.0
33.
In discussing colored fryers, other factors have to be taken into account.
Fryers are fed prim.arily by specialized meat-bird raisers who purchase chicks
for this specific purpose. They are among the highest priced products in the
poultry market and the final sale price represents the total return to the
rancher for his investment and trouble. Yet, the proportion of "good" birds is
only 61 per cent as compared with 87 per cent in the class of broilers. The
birds are older, admittedly, when marketed but should not have been subject to
such influences that 26 per cent fell back one grade and 10 per cent was only
classed "as is," It is unlikely that severest standards would be applied to a
class which constituted one of the auction's most valuable products, the more
so since there were so many older birds to point the contrast. It would seem,
therefore, that the fryerc sold through the auction vxere belovj the average run.
Fryer specia]is-ts customarily sold their birds at the ranch or by contract for
the flock. Rather than accept less than the agreed price for birds rated below
the average in quality, the rancher would withhold them from the bargain and
send them to the auction. The generality of this practice jjnplies that even
the birds graded "good" at the auction might have been someone else's "seconds."
Comparison With Los Angeles Re suits . --Since it is difficult to evaluate
the grading at Petaluma without some yardstick for comparison, the results of a
series of tests conducted in Los Angeles County have been summarized in table 6.
No figures comparable to the Petaluma grading reports are available for the San
Francisco area and the above table of data has been used in the absence of
material from any source nearer at hand. However, production conditions in
southern California are not markedly dissimilar from those prevailing in the
North,
TABLE 6
Dressed Poultry Grading Tests — Los Angeles
(U.S. Grade Specifications)
Grade as per
cent of c3
.ass
Class of bird
A
B
c
No grade
Leghorn hen
76 ,
20
2
1
Leghorn broiler
77
20
2
1
Colored fryer
82
15
2
1
Colored hen
85
lU
1
Source of data:
Naden, Kenneth D. and George A. Jackson, Jr. "Quality of Fresh
Chicken Meat. Causes of Dovmgrading of Chickens Handled in the Los
Angeles Market Revealed in Representative Survey." Calif. Agr. Exp.
Sta. California Agriculture . Vol. 5, No, 2, p. 10-11, I6, Feb. 195l.
These figures are considered provisionally since they represent the applica
tion of United States grade specifications to birds drawn from a limited geo-
graphical area. They are not accompanied by any measure of statistical signifi-
cance. Moreover, detailed information on the relationship betx/een live and
I'.
L
3li.
and dressed grades awaits the conclusion of further research,
"live" bird graders clairii there is little difference.
In the meantime
These Los Angeles data indicate the following conclusions. If the grade
standards applied at Petalmaa were proportional to the United States specifica-
tions, then the general level of quality was low in three major classes of birds
sold at the auction. Alternatively, Petaluma graders were governed by a concept
of the ideal meat bird and adhered, in effect, to a different system altogether.
The high proportion of Leghorn broilers graded good at the auction is noteworthy.
The evidence points to the auctions being an exceptionally good market for this
class of bird. Apparently fryer raisers were turning out a better class of
birds than those sent to the auction and the Los Angeles readings included a
larger proportion from this level. Fewer colored fowl were graded good at the
auction than were marked "A" in the tests. If lower-than-average quality birds
were in fact sent to the auction, then suj.table recognition was granted at the
point of grading.
Proportionately fewer Leghorn hens were graded "good" and many more "fair"
and "as is" at Petaluma than in the Los Angeles "tests." Either Petaluma graders
were exceptionally exacting in their standards or they were meting out consistent
treatment to a lower quality product. The latter alternative would imply that
even in the class of Leghorn hens the best birds did not appear at the auction.
The absence of a lower quality limit for "as is" birds may have encouraged the
sale of trash which the dealers cooperating in the Los Angeles tests irauld not
accept at all.
Seasonal Variations in Grades . — This aspect of the subject exhibits two
facets, neither of which can be discussed without far-reaching assumptions as to
the other. It would be very useful to buyers to have some idea of the seasonal
pattern in the distribution of birds between grades at different markets. They
also need to know whether grade standards themselves moved up and down under the
influence of seasonal changes in demand and supply. It is difficult to distin-
guish the relative parts played by variations in proportionate quality distribu-
tion within constant grade intervals and by seasonal deflection of grade inter-
vals with quality proportions constant. Figures U, 5 and 6 do not provide a
complete answer but demonstrate interesting relationships when studied in conjuc-
tion with figure 3 showing the volume offered.
Grade proportions for each class were charted for the series of one hundred
auction sales covering the various seasons of a complete year. This method was
followed for the three most important classes but ceased to give satisfactory
service when the number of birds in the class was small or fluctuated sharply.
IiJhere only one or two lots were offered in a particular class on some sale
days the grade assigned to them would be given luidue importance. This happened
frequently in sales of colored fowl and, in certain seasons, in sales of colored
fryers. Thus, single observations, out of keeping with those adjacent, should
be discounted if the volume represented is only small.
Thus, the grade percentages for Leghorn hens remained fairly constant
through the year. The average deviation from the mean proportion approximated
to 38 per cent for grade "good," 23 per cent for "fair" and kl per cent for
"as is," The proportion of good birds was highest in mid-October when most young
pullets were coming up to take their places; in the spring from late February to
April when egg prices were low and producers were occupied with young stock and
50
FIGURE 4
WEIGHTED AVERAGE PRICES : LEGHORN HENS, 1948-49
0 I I ■ ■ ■ ■ I I I I
9/27 10/4 1 1/1 12/1 1/3 2/2 3/2 4/4 5/2 6/1 7/6 8/1 9/7 9/26
Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept.
FIGURE 6
GRADES AS PROPORTIONS OF EACH CLASS
LEGHORN BROILERS
lOOl
90-
Oct. Nov. Dec. Jan. Feb. Mor. Apr. May June July Aug. Sept.
38
needed additional space for breeding. "Good" birds were less plentiful during
the summer and very scarce around Thanksgiving and Cliristmas, It was at such
periods that "as is" birds vrere most numerous. The bulk of the class fell in
the intemediate grade which had a coefficient of variation of 27 per cent.
This is low for a market where supply was completely \ancontrolled and it would
appear that regular buyers of these birds were quite well served.
Good quality Leghorn broilers also appeared with satisfactory regularity
varying only an average l5 per cent from their mean proportion for the year.
Since they constituted such a minor part of the supply of this class, the
variation in the lower categories has not much significance, "As is" coops
were offered but rarely and the percentage graded fair only became large when
few birds were offered for sale. Such results speak well of the auction's grade
policy. Standards were not relaxed in order that the grade "good" should always
be represented.
The auction offered little encouragement to the buyers seeking specific
grades of colored fryers. Coefficients of variation for colored fryers were as
follows: grade "good," 50 per cent; "fair," 814.5 per cent; "as is," l6$ per
cent. Comparable figures for the class of colored hens would be very much higher
still. There were, however, periods when the grade breakdorai of colored fryers
retained some consistency. The proportion of "good" quality in the total supply
did not fall below 55 per cent between September 27 and mid-November and was
again very high through February and Ilarch. IXiring these times the auction
seemed to be the more satisfactory outlet, since San Francisco prices vjere low.
Outside these periods all the birds might be "good" one week and none the next.
Such a development would not be likely to attract a substantial regular buying
clientele. Rather, it would encourage the speculative type of dealer prepared
to attend auctions with little to offer in the expectation that desertion by
rival buyers would leave him free to purchase good birds at low prices when such
consignments came along. Once such a tendency becomes crystallized and widely
knot-m, an auction is bound to go downhill. Buyer and seller alike are deterred
from depending upon it for their transactions and it becomes a point of congre-
gation for birds on which producers have least to lose and buyers with the
minimum to give.
I
t
39
Prices
Producers turn to new markets with high expectations. They look for an
immediate increase in average returns. In the eyes of individuals, the auction
stood or fell by the prices it realized for their birds. One direct measure
of their approval over the course of time lay in the volume of produce offered.
In this the prevailing trend was downwards during the period under study and
continued in the same direction subsequently. Thus, other things being equal,
general producer dissatisfaction with the market at Petaluma is clearly in
evidence. This is the over-all verdict.
A valuable contribution towards some more precise formulation of the
grievance and diagnosis of its true causes would be prior agreement on some
more exacting criteria for the evaluation of price levels. Judgment waits upon
detailed examination of the different segments of the market and the interre-
lationships which linic together the whole. Here the issue at stake is what
requirements should be met by the price structure for it to be indicative of
a good market.
Results would be considered more satisfactory and complaints be substan-
tially reduced if certain general price relationships were maintained with
reasonable regularity. Relative levels are not easily recognized. In general,
hoi'/ever, producers would be more contented if they could rationalize price
differences in terms of proportionate divergences in quality. If a grading
system is employed, then prices should follow fairly closely the gradations it
establishes. Mhere they do not, producers should know which of the various
different interpretations of the factors behind these price discrepancies were
supported by a scientific study of the available data.
Likewise, producers expect prices at the market they patronize to compare
favorably with those obtained for similar products in competing markets. If
differentials exist, then the prices should reflect some real advantage in time,
place or form utility. A perfect market cannot be expected in the real world
but the points of departure therefrom should be laid bare. This is a necessary
preliminary to any proposal for their alleviation. A major locational differ-
ential is the cost of transportation to a consumer market and of depreciation
en route. If poultry sold in the Petaluma auction were customarily transported
to San Francisco for consuinption, then a price in Sonoma County lower than
that prevailing in the Bay area by the appropriate freight charge and shrinkage
allowance would be quite acceptable. Theoretically, buyers and sellers would
adjust the relative volume of purchases and sales in the different markets until
this condition was obtained. VJhere they failed to achieve an approximate balance
of supply and demand, speculative intervention for the profits of arbitrage
would adjust prices accordingly.
Facilitation of such equilibrating machinery requires that both buyers
and sellers have at tlieir disposal reliable information on grade prices at all
related markets. This is the function of the Market News Service as vrell as
the private and more sensitive channels developed by professional dealers.
Here is one source of rigidity in the matching of supply and demand. Because
it is not the major part of their business, producers are, for the most part,
amateurs in the techniques of bargaining. They are handicapped by difficulties
in switching their product over time and place. They need not also be faced
with such unnecessary obstacles as lack of market infomiation outside their own
immediate environment. It is within the scope and resources of the Market News
Service to furnish such up-to-date and specific information that in this attri-
bute, at least, buyer and seller might bargain on approximately equal terms.
lo 6v stf blirdrie ao,
9;-,' ■U^i.sJiUiqc- At^-fili,!
ho.
Average Prices , — The annual average prices received for the four leading
classes of birds have been summarized in table 7 both by grades and for the
class as a whole. The mean price per pound was weighted by the quantity sold
at each auction in the process of dividing the total return for a particular
category of birds by the total quantity sold. This type of average differs
from one obtained by summing the average prices ruling at each auction and
dividing by the number of sales, VJhereas the latter might conceivably be a more
instructive guide j.n selecting the most favorable market, the former reflects
more closely the impact of prices on returns from the transactions which actually
made up the auction's business.
TABLE 7
Weighted Average live Poultry Prices
Petalvima Auction, 19h8-h9
1
Weighted Average price
All sales
Class
Good
Fair
As is
combined
cents ]
Der pound
Leghorn hen
29.2
26.1
20.3
26.h
Leghorn broiler
31.2
26.6
20.0
30.h
Colored fryer
3U.8
30.3
2h.8
32. h
Colored hen
38.6
36.3
23.3
36.8
The figures in table 7 are self-explanatory. It may, however, be helpful
to emphasize some aspects with interesting iiTiplications. Heavy breed hens, as
a class, were sold at a premium over Leghorn hens of more than 10 cents per
pound over the whole year. Whereas the former averaged 36.8 cents per pound,
Leghorn hens only made 26. h cents per pound. The younger birds sold for prices
generally falling within this range. They were nearer to the colored fowl than
to the Leghorn prices but at no time approached at all closely except in the "as
is" grades. Thus, colored hens two or more years old were selling at prices
h-6 cents per po\xnd higher than young colored fryers, a feature of the auction
which merits close attention.
Leghorn broilers averaged over 3 cents per pound more than Leghorn fowl
mainly because a larger proportion fell into the top grade. They did not main-
tain this differential at comparable levels of quality.
The highest average price during the year for grade "good" colored fowl
was 38,6 cents per pound. Fryers in the same quality category ran some k cents
per pound below this. The highest average price for "good" Leghorn broilers
was 31.2 cent per pound. They usually sold for 2 cents per pound more than the
best Leghorn hens. Average prices for Leghorn hens and broilers were much the
same for the other two grades. Lower grade colored fryers maintained a price
level some h cents per pound above that of comparable quality light birds.
"Fair" colored fowl made an even 6 cents more than colored fryers of like grade
but the few colored hens graded "as is" made a little less.
hi.
Seasonal Movements . —Figure 7 records the average prices obtained for
different grades of Leghorn fowl during the period September 27, 19i|8 -September
26, 19h9. The absence of dealings in all qualities of Leghorn broilers and
colored fryers at some sales and irregularity in the supply of colored fowl
precluded the construction of meaningful charts for those categories. Prices
for all classes were some 10 cents per pound lower in September 19h9 than a
year earlier. This decline was less serious, relatively, in prices of Leghorn
hens than in those of the three other major classes distinguished at the auction.
However, this trend is not out of line with that in the San Francisco prices for
the same types of poultry and can thus be attributed to over-all supply and
demand conditions in the area rather than to circumstances deriving from the
auction market alone.
Prices for Leghorn hens were lower in September by 8-9 cents. They rose
some ^-6 cents from late October to the end of December, fell back gradually
through January and February, but straightened out in March and remained higher
than prices of broilers and fryers until May. For six or eight weeks during
this period, prices for all classes were confined within the same narrow range.
The first weeks of July, hov^ever, saw a defnite divergence. Leghorn hen prices
continued to drop back slowly while the others experienced a rise. Peak prices
for Leghorn hens came in late October (38 cents), late November and December
22-29 IkO cents) when, however, very few lots were on offer. Suppliers kept
such birds off the market at this time, a policy which broiler men should have
had in mind when they purchased their chicks. The lowest prices for good
Leghorn hens (approximately 22 cents) were recorded in July.
Prices of Leghorn broilers and colored fryers pursued very similar courses
through the year, except for two periods of approximately two months each.
From December to February and from May to July, colored fryers were higher by
6-8 cents, rising on occasion to 10 cents. Broiler prices reached a peak of
k9 cents in September 19U8, This height was not approached again until the
same period a year later. This was clearly the best season for broiler producers.
Sharp falls in price implied a complete absence of interest in such produce at
Thanksgiving and Christmas. The highest prices obtained for colored fryers
were lj.6.7 cents on September 27, 19U8, Ul cents at the beginning of December
and again towards the end of June.
Days of exceptionally low prices occurred at intervals during the spring.
Explanations for these phenomena may be found in special supply and demand
relationships revealed by the sales records. On January 12 a reduced quantity
of "good" flyers averaged 6 cents less than "good" birds the previous week owing
to a great increase in the quantity of "fair" birds available on the same day.
Prices for "good" and "fair" were very close together at this time. Evidently
"good" and '"fair" fryers were effective substitutes for each other and the
respective demands were directly interrelated. Low prices on February Ih
reflected a trebling of the market supply on that day as compared with the
previous auction. The fall of 5 cents in the price of "good" birds between
May 2 and May k may be attributed, however, to precisely the reverse effect.
Buyers must have overbouj^ht on May 2 when U,000 pounds were sold since they
bid 5 cents less for one-tenth as many birds two days later. Supplies of lower
grade birds showed no significant change between these two dates, so presumably
their influence was neutral.
Colored fowl were not marketed in sufficient bulk and regularity to furnish
bases for more than tentative conclusions. Evidently, they were always worth
10 cents more than Leghorn hens. This margin rose to 12 cents in the spring.
FIGURE 7
GRADES AS PROPORTIONS OF EACH CLASS
LEGHORN FRYERS
U3.
Offerings wore most irregular at this time when most hens were in full egg pro-
duction. During the smimmer, prices of colored fowl tended to coincide with
those for comparable classes of broilers and fryers but exceeded them by 3-h
cents from late August through to_the end of September. During this period
of keen competition for the available supply, prices for "fair" quality birds
were forced up to that of "good 'one of the surest indicators of unsatisfied
demand.
Prices declined from September to December by approximately the same
proportion as supplies increased and straightened out again as supplies fell
off during the winter. The upturn in prices from June onwards may be related
to a slackening off in supplies to the auction during this period.
Most of these variations in trend reflect recognized changes in supply.
Leghorn hen prices stood at a high level during the months when egg prices
were at their peak and declined steadily as the rate of culling quickened with
the seasonal fall in the value of eggs and the end of the natural laying season.
Movements in the prices of fryers and broilers cannot be interpreted as easily. ^
More information is needed on seasonality of demand for table birds in California.
Apparently, competition with the turkey during the holiday seasons of Thanks-
giving and Christmas was a major disturbing influence. At the same time, fluc-
uations in the supply of birds sent to the market on particular days of sale
were responsible for some of the more extreme instances of price instability.
This tendency was especially important in the sale of colored fryers. Certainly,
the charts of grade prices and sales volume furnish ample evidence of inverse
correlation between supplies and prices in accordance with accepted economic
theory. The movement of prices at the auction reflected both external trends
and the auction's own intraweekly supply pattern. Siipply changes seem to be
the dominant factor, certainly in the short run. Groimds have already been
advanced for assuming that demand in this region was relatively constant (p. 22).
TABLE 8
Grade Price Differentials
Petaluma Auction 19U8-U9
Class
Differential
Cents per pound
Good/ Fair
Fair/ As is
Leghorn hen
Leghorn broiler
Colored fryer
Colored hen
3.11
hSQ
U.51
2.31
5.77
6.5U
5.U7
13.03
Grade Price Differenti als.— The figures set out in table 8 have been
derived from the data presented in table 7. They are differences between
weighted average prices for all auction sales during the year. This is in con.
tradistinction to a simple arithmetic mean of the average differential at each
individual sale. The latter method would exaggerate the iuiportance of sale
days when only a few birds of the relevant grade were on offer. This informa-
tion should serve as a useful measure of the weight attached by buyers to c las,
grading at the auction. In an ideal framework, the differentials should be
• ■ , J-
'] • , •< ■
hh.
directly proportional to the difference in utility expressed by the grade.
They would also be relatively constant over time, subject to some narrowing and
widening in response to changes in demand, vis-a-vis, available supply.
Differentials between "good" and "fair" grades were narrowest among the
older birds, especially the colored hens, A spread of only 2.51 cents per
pound is additional evidence of the strong demand for heavy hens. In regions
where Leghorns comprise the bulk of the fowl population, this special demand
for the heavy meat bird is a recognized feature. 1/ Though still narrow compared
with that found in the younger classes, the differential between "good" and
"fair" Leghorn hens was 35 per cent wider.
The comparable quality premiums for Leghorn broilers and colored fryers
at U.58 and U.5l cents, respectively, were very close. These differentials,
which showed remarkable consistency, speak well for the efficiency of the grad-
ing in these classes carried out at the auction under peculiarly adverse
conditions.
As might be expected, the average differentials between "fair" and "as is"
grades were generally wider. Because the lowest grade was almost all-inclusive,
a wider range of quality was foimd there than in other grades with more specific
requirements. Even here the effective pattern was quite consistent. In view
of the small volume of sales they represent, only limited significance should
be attached to the wide gap of 13 cents between "fair" and "as is" colored hens.
If accepted at their face value, the data support the remark of one prominent
buyer of heavy hens who suggested that consumers of this class of birds were
only interested in those carrying plenty of rich fat meat. For birds conforming
to this requirement, there was a special market at prices considerably higher
proportionally than those paid for other types of poultry with equal quality
ratings. If, however, the birds did not conform, then the buyers dealing in
this market ceased to be interested. The outlets available would be the same
as those open to low-grade birds of lighter weight and the price would be
reduced accordingly.
Within narrow ranges, the differential between "fair" and "as is" prices
was greater for Leghorn broilers (6.5U cents) than for Leghorn hens and colored
fryers. This may be indicative of a tendency for supply to surpass demand and
thus place more emphasis on quality distinctions, since buyers had an ample
supply of birds from which to make their choice. The data for Leghorn hens
suggest the opposite situation. A margin of 5.77 cents between "fair" and
"as is" is not large whereas, many producers bargaining at the ranch sold their
lowest grade birds at only half the price agreed upon for the general run.
Seasonal Changes in Grade Differentials .— The spread between the price
lines on figure 7 reflects the magnitude of the grade differential and presents
a very clear picture of the situation prevailing for Leghorn hens. The differ-
ential between "good" and "fair" widened from 3 to i; and 5 cents occasionally
at individual auctions until the middle of January, From this time onwards,
prices were always slightly on the downgrade and the margin widened to 5, 6 and
7 cents. This relationship continued until mid-April when the price of lower
l/ Naden, Kenneth D. Poultry Pricing in the Los Angeles Area , Berkeley,
19k9. pp. 19, 30. (Calif. Agr. Exp. Sta. I-Iimeo. Report lOi;
j-Ct-'-'-v.
noqo
grade birds swung up to within 1-2 cents of that for grade "good" and maintained
this level for almost two months before settling down again at a regular 3-cent
differential.
The same observations do not apply to changes in the "fair"/"as is" dif-
ferential. Through fall and winter "as is" prices were from 8-12 cents below
those of grade "fair" at a time when the price for the class was at is maximum
for the year. In February, "as is" prices swung up with the class as a whole and
remained for the remainder of the year in much closer proximity to "fair."
Weekly changes in grade differentials within the other classes cannot be
interpreted so expeditiously since frequently the volvune of birds offered was
too small to give them stability. The differential between "good" and "fair"
Leghorn broilers fluctuated wildly during the period of disturbed marketing
preceding Christmas, levelled out at 2.3 cents during January and widened again
in March before returning to its January stature through the summer. The
differential between "fair" and "as is" also varied sharply under the influence
of marked fluctuations in supply at this grade level.
On occasions, lower quality supplies were bid up to and above the price
paid for lots assessed at a higher grade. Such a tendency was disturbing to
both buyers and sellers. It became evident when supplies of good quality
produce were restricted or were offered only during the earlier stages of the
auction. Buyers holding off these initial lots as a matter of policy might
have definite commitments which later compelled them to compete for lower grade
birds of the same class and bid them up to unexpectedly high prices. Further,
"good" birds then arrived late after bxiyers' fixed requirements for the day
had already been met and were sold at prices disproportionately lower than their
quality deserved. Such reversals of logical economic relationships could
usually be attributed to timing in the order of sale, miscalculations of
expected supply and the like hazards.
Table 9 exhibits several examples of this phenomenon. The differential
between "good" and "fair" ranged from over 10.0 cents per pound to -3.70 cents.
It was negative on three separate occasions and there would be other instances
which have been obscured in the process of averaging. Subject to such irregu-
larities, the average prices for "good" and "fair" maintained a stable relation-
ship all through the year. On the other hand, the differential between "fair"
and "as is" prices fluctuated significantly. "As is" prices went far below
those of the better grades in late September, for a long period in December,
from May to July when they failed to rise with the others, and continued on the
same approximate level to the end of the year.
Exact measures of the over-all degree of variation in these differentials
can be computed statistically and some pertinent figures are presented in table 9,
The differential between "fair" and "as is" Leghorn fowl prices was clearly
the most consistent with a variation of only one-third. That between "good"
and "fair" Leghorn fowl is of the same order and is followed at some distance
by those for colored fryers. Broiler differentials varied rather more, especially
those between the two lower grades. "Good"/" fair" and "fair"/" as is" differen-
tials for colored fowl fluctuated by average percentages of 126. U and 105.1,
respectively.
This information is important to producers making plans on the basis of
expected price relationships. I'Jhereas an average deviation of less than 50
per cent might not seem excessive, one exceeding 100 per cent might give
«
TABLE 9
Variations in Price Differentials Between Live Poultry Grades
Petaluma Auction 1948-49
Number of readings
Average margin
Average deviation
Coefficient of variation
Leghorr
99
1 hen
Fair/As is
99
Leghorn
Good/Fair
64
— —
broiler
Fair/As is
44
Colorec
Good/Fair
69
I fryer
Fair/As is
67
Colo
Good/Fair
52
red hen
Fair/As is
42
3.11
1.29
1
f— 1 ~
5.77 i 4.58
2.0 i 4.05
!
cents ]
6.54
8.81
Der pound
4.51
3.59
5.48 i 2.31
3.77 1 2.92
13.03
13.69
1 41.5
t
1 i ] i
j 34.7 1 88.4 } 134.7 1 79.6
68.8
——————
126.4
105.1
_— _ -i
05, j^^qjcTSe
hi.
producers the impression that prices for particular lots could vary so much
between auctions that planning would be hopeless, that the range of variation
between successive sales would be unpredictable and marketing through the auction
was a matter of luck. To producers dependent on poultry sales for their total
income such a conclusion would constitute good grounds for seeking alternative
outlets. Evidently many broiler and fryer raisers whose livelihood derived
from sales of live birds considered the risk too great,
VJhereas this state of uncertainty prevailed for some categories of produce,
prospects for Leghorn hens were much more stable. In part this seems to be a
function of the volume of produce offered at each sale. Successive increases
enabled the auction to approach more nearly the attributes theoretically
desirable in a successful market.
Comparative Price Levels — San Francisco and Petaluma Auction . — In this
section of the study, the prices paid for live poultry in the city of San
Erancisco are compared with those paid in the main center of production. The
San Francisco price refers to bargains between the larger wholesale processors
and hucksters, and producers who deliver their birds to the killing plant. At
Petaluma some producer-OTrmed birds were sold by auction to hucksters who would
truck the birds into San Francisco for resale and also to dealers carrying a
porportion of direct retail business. These latter could afford to pay a higher
price than the wholesaler expecting to sell again in bulk. Excluding the
influence of this factor, the "recognized" differential between Petaluma and
San Francisco has been l-l| cents per pound in recent years. The primary
interest lies in seeing how far this differential is maintained between the
realized prices in these markets over a twelve-month period.
The "approximate" character of the prices available must, however, limit
the possibility of exact conclusions. The Petaluma prices are weighted averages
for all the birds of the designated class and grade sold on the specified day.
They are subject to seasonal variations in the number of birds allocated to
different grades and to variations between auctions in the proportions of retail
and wholesale demand bearing upon the price level. On some days prices were
bid up exceptionally by buyers with specific commitments.
On the other hand, the San Francisco figure is the arithmetic mean of a
published range of prices which purports to cover the likely meeting of supply
and demand whether or not actual transactions take place. It refers to number
1 quality birds, graded "AA" and "A" according to the United States schedule.
Although standards showed some flexibility by season and quantity of birds
available, this flexibility probably reflects much the same pressures as at
Petaluma, In any event, if comparison is to be attempted at all, it will have
to be made between number 1 quality at San Francisco and grade "good" at
Petaluma.
The auction prices at Petaluma have been charted against the San Francisco
price of the same day for the four major classes traded. They appear as figures
8-10,
Leghorn Hens . — Table 10 summarizes in average form the differential between
Petaluma and San Francisco prices for comparable grades of poultry on the days
when auction sales were held. Two prices for Leghorn hens are issued by the
Market Mews Service; namely, for birds under four pounds in weight and for those
weighing four pounds and over. The latter averaged 1 cent more. Both followed
.1 -5a x^'^
I. ■;
Ii8.
the same general trend in prices through the year. The price for the heavier
bird has been charted against the Petaluina prices. Since half the Leghorn hens
sold at Petaluma were graded "fair," those graded "good" would tend to fall in
the heavier weight category. The information available does not permit calcu-
lation of average weights for the birds sold through the auction.
Characteristically, the San Francisco price series tended to remain on the
same level for long periods as compared with Petaluma prices. More variation
can be expected in series determined by competitive bidding for small lots than
from one based upon the bargains concluded by a sriiall mamber of large operators.
Nevertheless, it raises the question of sensitivity in the reporting of the
San Francisco prices. Are the terms of real transactions accurately reflected
or should they be regarded as cautious estimates made by people who preferred
to state the previously published price without change? They may not have
intended to adhere to it themselves but did not wish to tal<:e the lead in setting
a new level which would immediately become known to all their coinpetitors and
thus affect their bargaining position in current or immediately imminent
dealings.
If these prices constitute a fair statement of the market, then a feature
which stands out immediately when any comparison is made is the seasonal change
in the relative position of the two price levels. Over the whole year, the San
Francisco price stands 1 cent higher than that prevailing at Petaluma and this
might be regarded as a fairly accurate reflection of the transport and resale
margin between producing and consming centers some fifty miles apart. During
the six months, September 19)48 to Marh 19h9 , Petaluma prices frequently ran
much higher, however, than those prevailing in San Francisco and averaged 0.12
cents per pound more over the whole period. From then until September they
were consistently below San Francisco levels, often by several cents per pound.
The mean difference during these six months was 2.39 cents to the advantage
of San Francisco. In part, this was a direct consequence of closer proximity
to the influence of movements in the price of eggs through the year. Culling
was continuous in highly cominercial areas such as Petaluma, but its intensity
was heightened x^hen egg prices fell. During the months when egg prices were
at their pealc, prices for hens in Petaluma were higher relatively than in
San Francisco. Months when eggs declined in value displayed precisely the
opposite relation,
A distinct lag between the San Francisco and Petaluma series can be discerned
in the charts portraying the movement of Leghorn hen prices, especially during
the first half of the year. City prices rose and fell a few days later than
prices at Petaluma. Generally, they moved in the same direction but rarely so
far. Part of this tendency may be attributed to the method of formulating the
San Francisco published price; part may reflect an economic situation where,
in the short run, supply was much more variable than demand. City processors
catering to a fairly constant and predictable consumption pattern were slower
in changing their prices than dealers drawing on supplies which varied markedly
from sale to sale and which, once thrown onto the market, could not easily
be withdrawn.
The general tendency for Petaluma prices to vary much more than those
reported in the Market News for the San Francisco wholesale market must be
attributed to the peculiar character of the auction market. Numerous producers
decide independently to market specific quantities and types without any
0 . . viiu-^W a;
FIGURE 8
LIVE POULTRY PRICES : PETALUMA AND SAN FRANCISCO
LEGHORN HENS
50 I —
^ 20
10
9/2710/4 11/ 1 12/1 1/3 2/2 3/2 V4 5/2 6/1 7/6 8/1 9/7 9/26
Oct. Nov. Dec. Jan. Feb. Mar. Apr. Moy June July Aug. Sept.
FIGURE 10
LIVE POULTRY PRICES : PETALUMA AND SAN FRANCISCO
COLORED FRYERS
10
9/27 10/4
Oct.
I I/I
\z/\
Nov.
Dec.
1/3
2/2
Jon.
Feb.
3/2
4/4
Mar.
Apr.
6/2
May
6/1
7/6
June
July
8/1
Aug.
9/7 9/26
Sept.
?2.
knowledge of their fellow suppliers' decisions in this respect. Few are pre-
pared to take the trouble to arrange for the re-purchase and return to the
ranch of stock once it has been transported to the auction^ even if the bids
were unsatisfactory.
Leghorn Broilers . — The Market News Service issued only one price for
Leghorn broilers covering all birds under 2^ pounds in weight. This tended to
maintain a steady 2 cents per pound premium over the Petaluma price. This
figure is larger than the accepted differential for transportation from Petaluma
to San Francisco. If there are no special attendant circumstances to advance
in explanation, then dealers were taking a larger margin for the function of
transfer from production to consumption center than was warranted under normal
competitive conditions. Admittedly, the processing of broilers for resale
involves higher labor costs per pound weight than are incurred in handling
larger birds. Size of bird, however, does not affect the cost of transport.
On the other hand, shrinkage between farm and killing point was a weightier
consideration with broilers than with older birds. Most of the processors kept
young broilers in feeding pens for three or four days before killing them in an
attempt to recover their lost weight or, if possible, make some gain.
Apparently, seasonal factors played a less important part here in deter-
mining the differential between producing and consiiming center. Both price
series declined from September through November, rose again in midvrinter to
drop back slightly in March before pursuing a steadily upward course for the
remainder of the summer. Hatching and consumption characteristics assist in
interpretation. The sharp falls in Petaluma prices during November and late
December coincide with the popular interest in turkeys for Thanksgiving and
Christmas, Broilers thrown onto the market at such times had an exceptionally
depressing effect on price since the main demand for poultry meat was concen-
trated elsewhere. Other periods when the price at San Francisco was significantjy
higher than at Petaluma after allox^ance for transport costs include early
October, late February, May and June, There were, on the other hand, periods
through March, early May and early July when the differential disappeared.
Influential in achieving this, however, was the intraweekly fluctuation in
supply to the auction. Those instances when the Petaluma price exceeded that at
San FVancisco occurred on days when broiler supplies had been cut to one-third
of those at the preceding auction and were concentrated almost entirely in the
"good" grade. Buyers with fixed commitments in this class were unable to make
up their orders even from birds of lower quality.
Colored Fryers . — The Market News Service reports prices for two categories
of colored fryers, those weighing between 2r and 3 pounds and those from 3-U
pounds. The lighter birds generally ran 1 cent lower in price than the heavier
but for one-third of the days charted the same range applied to both. In con-
sequence, the differential between the two weight categories only averaged
0,78 cents per pound. Both made higher prices in San Francisco than grade "good"
at Petaluma, the heavier birds by 1.59 cents per pound, the lighter by 0,81
cents per pound. For the sake of simplicity only the prices for birds weighing
3-U pounds have been charted against those of grade "good" at Petaluma. The
two series follow much the same pattern apart from a period during December
when Petaluma prices were U-5 cents per pound lower. Incompleteness in the
Petaluma series makes comparison in detail extremely difficult.
It is,; however, noteworthy that both series followed a characteristic
pattern which was quite distinct from those observed in the other classes. The
53.
trough of low prices in the spring when hatchings are most numerous terminated
in May. A steady rise through June produced a second peak in the year almost
as high as that in the fall,
Petalvima prices fluctuated more than those ruling in San Francisco but
rarely exceeded them and then only by a fraction of a cent and for a very brief
period. San Francisco fryer prices ran on a significantly higher level (U-5
cents per pound) all through December. The impact of the holiday demand for
turkey which had such a disturbing influence at Petaluma made much less impres-
sion in San Francisco. Apparently, those handling the supply side made adjust-
ments to discount this temporary diversion of demand. Petalima suppliers lacked
the experience of professional poultry dealers.
On February l6, prices of all classes of birds at San Francisco fell below
comparable levels at Petaluma. Since the auction was not achieving higher prices
at this sale than at those preceding and following, this must be an instance
where a change in the market at San Francisco was carried back to its supply area.
Colored Hens .— Only one price at San Francisco is published for colored
hens and this refers to all weights. Half the colored fowl offered at Petaluma
were graded "good," but trading in this category did not take place on 30 of
the 100 auction sales studied and this limits the validity of averages dravm
from the available data.
Such sales as were made at Petaluma averaged 0,20 cents per pound more than
the prevailing prices at San Francisco. From September to March this differen-
tial was as high as 0,5l cents per pound. For the remainder of the year, there
was little difference in the average, but individual sale days at Petaluma showed
very wide deviations from the San Francisco price which declined steadily. In
contrast, Petaluma prices ranged from hi to 30 cents per pound during this
period. Irregularity in supply may well be the dominant factor in thisi
discrepancy.
The even pattern of the San Francisco price over the whole year is remarkabLe,
The extreme ranges reported never fell below 31 cents per pound or rose above
I16 cents. Movements between these figures were smooth and gradual,
TABI£ 10
Petaluma and San Francisco Live Poultry Price Comparisons. Excess of
San Francisco "No. 1" Quality Over Petaluma^ Grade "Good."
X Irrespective of weight
Lef^horn hens
Leghorn
broilers
Colored fryers
Colored hens
Period
Under j
k pounds
U pounds
and over
Under
2t pounds
2r-3 pounds
3-h pounds
All weights
cents per pound
6 months
September/March
-1.06
-0.12
2.15
0,87
1.76
-0.51
6 months
April/September
1.12
2.39
1.73
0,73
1.35
0,05
12 months
September 19lt8/
September 19U9.
0,001
1,07
1,96
0.81
1.59
-0.20
Sales from the Ranch . — Since most producers have to decide whether to sell
their birds through the auction or accept the offer of a dealer buying from the
ranch, they will be interested in some analysis of the relationship between
auction prices and those arrived at by private bargaining. These deals comprise
the bulk of the first sales of poultry in California, Sales conducted on a
cash basis with the assistance of the buyer in loading and grading relj.eve the
producer of much work. At the same time the buyer may traverse additional miles
in search of his clients, but he gains in securing substantial loads with their
attendant economies in transportation and overhead costs.
Most of these sales are based on some agreed differential from the published
San Francisco price for the most appropriate class and grade. This facilitates
comparison since the San Francisco prices have already been set alongside the
auction data (see table 10), In such circumstances interest centers on the
differentials employed and the supplementary conditions associated with the
bargain. Precise estimates under specified marketing conditions are rarely
obtained. Nevertheless, producers situated in different geographical zones from
San Francisco generally concur on the margin customary in their area. In a
zone extending as far as Petaluma, the price rujis 2 cents below San Francisco.
In Ukiah and Sacramento it is 3 cents below. The latter situation is surprising
since the latter city with its population exceeding 100,000 constitutes a
considerable market in itself. Producers go so far as to attribute to Sacramento
dealers the fraudulent practice of deducting 3 cents from San Francisco prices
when buying and adding 3 cents to these published prices when selling. The
dealers imply thereby that birds passing through their hands travel to San
Francisco and back again even if some are disposed of into local consumption.
The proportion of the producers' flock taken at this price must also be
taken into account. Many dealers take the bulk of a flock at an agreed differ-
ential from the lower of the two published San Francisco prices for the class
since they do not grade in detail and wish to allow for variations in quality.
The buyer does, however, segregate birds with obvious defects and classes them
as rejects to be accepted only at a very low price.
At the auction the same lot of birds might be distributed between the
three grades "good," "fair," and "as is," Very few would be classed as complete
rejects. On the other hand, auction sales incur a deduction for expenses of
l|- cents per pound and transportation charges amounting to g- or 1 cent per
pound. This means that, other things being equal, the producer could accept a
flat price at the ranch 2-2|- cents per pound belov; that prevailing at the auction
and obtain the same net return.
It would seem that actual producer receipts via these alternative methods
of marketing did not differ significantly.]/ This was likely to continue so long
as the auction remained in operation. Noticeable divergence would lead to pro-
duce being switched from one to the other until an equilibrium was regained.
Just what effect removal of the auction will have on producer bargaining power
is the crucial issue.
l/ The senior author was an observer at a transaction which took place on
a poultry farm at Rio Linda, Sacramento County, California on January 30, 19^0,
The prices quoted for Leghox-n hens are listed together with prices paid at the
Petaiuma Live Poultry Auction and Market News Service quotations at San Francisco
for the same day.
55.
Ranch, Rio Linda
Auction, Petaluma
San Francisco
Market News Service
Grade
Per
cent
Cents
per
pound
Grade
per
cent
Cents
per
•Dound
Grade
Cents
per
pound
Average flock
(weight 5-^3 pounds)
Rejects
Proportion of flock
Average bird
Rejects
Offer for limited
quantity for local
sale
93.6
6.U
Ih.O
2.5
15.0
"Good"
"Fair"
"As is"
Estimated
weighted
average
Weights :
"good"
"fair"
"as is"
30
58
12
17.75-20.5
12.25-18.0
9.00-11.25
15.72
Birds
weighinj
over h
pounds
17.0-
18.0
56.
Auction Buyers
When the primary purpose of an instit\ition is to bring together supply and
demand and set up a favorable environment for the establisl-iment of an equili-
brium through the operation of the price system, the way in which local demand
finds effective expression is an important consideration in its success. The
object of this section is to examine how far the buyers congregating at the
Petaluma auction comprised an adequate outlet through which the supply of
poultry concentrated there might move into appropriate marketing channels for
the maximization of both producer and consumer satisfaction.
Desirable Features in Buyers Frequenting a Market . — These would be regu-
larity in attendance, interest in a wide range of produce, and capacity to take
up varying quantities and redistribute them over time and place to the greatest
advantage. Their bids shouD.d also represent fairly the demand price at the
time of sale for different classes of poultry, and for the various quality
grades within these classes. Finally, they should be able to pay promptly for
all purchases. Important disabilities which sponsors of a market would try to
avoid would include the negations of the foregoing, luidue concentration on
lines of produce not proportional to those actually offered for sale, unrelia-
bility in attendance and settlement of accounts, and business instability.
All auctioneers face the problem of combatting monopsonistic pressure by the
buyer, that is, domination over the market by one firm, or by a group of firms
colluding to act as one, such as would enable the buyer group as a whole to
control prices to their advantage and exact special favors in return for con-
tinued attendance.
At least some of these factors lay within the control of Poultry Producers
of Central California. It had the power to select the location most likely to
appeal to and assist the poultry-buying community. It could arrange sales
days and starting tidies so as to maximize their convenience. It could adjust
procedure to suit their tastes. It could carry out all this, subject to a
fair consideration of producers' needs and some constraints as to operating and
handling costs. Finally, it could publicize the auction to all prospective
buyers and exert as much influence as possible to secure the regular attendance
of buyers representing demand of such strength as to absorb whatever quantities
and types of poultry as were likely to be on offer. |
The realized endeavors of Poultry Producers to further these objectives
have already been discussed. It remains to measure, insofar as available data
permit, the changes and developments which occurred on the demand side of the
market and the part they played in forming its character, and thus ultimately
to estimate the degree of success in achieving its purpose.
Buyer Attendance . — Some dozen buyers attended the auction as a matter of
routine practice. These were not always the same people. Since the statistical
measure of attendance was an entry on the i*ecord of purchases, it is very prob-
able that more potential buyers were present on each sale day than those actually
listed. They were not, however, making a valuable contribution. The specu-
lator who looked on critically and only made a bid vjhen prices were especially
favorable, that is, when they were so low as to show a profit on the risk of
bujd.ng lots for resale in another spatial or temporal plane, served to keep the
market on a comparable level with prices prevailing in other areas. But since
the function of arbitrage could only be paid for in reduced returns to the
J.
57.
supplier, it would not be an inducement responsible for a large proportion of
the transactions there, without ultimately diverting supplies into the market
where the speculator would have resold what he acquired at Petaluma.
During the course of the year, 18 different firms, including the Associ-
ation's own Poultry Department, each purchased at the auction 10,000 pounds or
more of live poultry. Within the four major classes of birds, the total
quantity taken up by these 18 buyers amounted to 55.3 per cent of the gross
volume sold. The small or less regular buyers \iho took up the remaining h.7
per cent will not be discussed at length since their share in price determina-
tion was not influential. The range in the number of different purchasers at
a single sale ran from a minimum of seven up to eighteen. This latter number
relates to the day when the record volume of 55,000 pounds of live poultry was
handled. Generally, the number of buyers rose and fell with the quantity of
poultry on offer though not necessarily in exact proportion. Primarily, this
rise and fall tended to coincide with the intraweekly fluctuation in supplies.
Locational Factor s.— The map (p. 3) will explain the location of Petaluma
relative to the main centers of production and of consumption, and indicates
the arterial highways which link them together. Strategically, the site is
exceptionally well chosen. Highway 101 leads directly from the north through
Sonoma County across the Golden Gate Bridge to San Francisco, home for 800,000
potential consximers of chicken meat, and distribution center for many more.
The main alternate route from the north over the Carquinez Bridge near Vallejo
also branches from Highway 101 at Petaluma. It skirts important industrial
and shipping communities and leads through the Contra Costa County cities to
Oakland, the East Bay residential districts, and San Francisco. Petaluma is
within two hours' truck journey of all these Bay cities and has no agnificant
rival production center with any competitive advantage. It has the advantage
of proximity to populations with a high consumption of poultry meat and the
well-developed wholesale and retail agencies associated with it. Because it
has been a center of the industry for many years, a considerable number of
dealers have established themselves in Petaluma itself. Some bought regularly
on the auction and, thus, lent it support albeit for their own advantage.
Most considered their own business threatened by its operation and their profits
likelj^ to vary inversely ;d.th its popularity. They regarded it, in effect,
as a direct competitor.
Character of Auctio n Buyers .— The regular buyers can be classified under
four headings with some overlapping. For convenience they have been entitled
large wholesalers, San Francisco retailers, Bay area retailers and local
hucksters. Attributes in which these firms differed include size and type of
business geographical location and range of connection. The headings do not
purport to be mutually exclusive. They are based on some common characteristxcs
without regard for the possibility of discordance in other respects.
Large Miolesalers .— The large wholesalers comprised the Association's own
poultry department aiid one of the largest San FVancisco poultry processors and
distributors. The forraer can properl;y- be included in this category since it
bought 18. i per cent of the poultry sold on the auction, operated a full-scale
killing and dressing plant with limited packing facilities on premises adjacent
to the auction, and sold the whole of its product in wholesale and retail
channels rather than to consitmers. Poultry Producers was prepared to buy all
kinds of poultry, subject to the observance of regular quality standards and
some homogeneity within them, so that once wholesale outlets had been opened up
58.
they could be maintained on a regular basis. The breadth and scale of its
operations in the egg business gave Poultry Producers special prestige and
reputation in the provision trades. It was in a good position to make favorable
contracts with mass buyers , the chain stores for example^ which also took its
eggs. On the other hand, the size and impersonal character of its organization
resulted in higher labor and overhead costs in processing poultry and only
promised positive returns when the flow of birds through the plant was up to
capacity and relatively homogeneous in character. This could not easily be
attained without the aid of exclusive contracts. Producers remained free to sell
vjherever they wished^ yet Association purchasing was limited to member suppliers.
The other large wholesaling firm had long experience in various branches
of the poultry business from quantity purchases of frozen birds in the Middle
West to small-scale retailing in favorably located San Francisco markets. Its
sales outlets ranged from large government orders to ship's stores^ San
Francisco hotels and restaurants, other dealers and individual customers at
retail markets. Ample cold storage and handling facilities were available and
this firrn was well equipped to take up whatever produce came on offer at Petaluma
and dispose of it over a range of time and place not possible for many other
buyers. It was for such reasons that special efforts x^ere made to have it repre-
sented at the auction. During the early part of the auction's life, purch&ses
on this firm's behalf played an influential part in insuring its successful
establishment as a going concern. The wholesaler probably saw advantages in
the opportunity to acquire large quantities of poultry in a short time since
the task of assembly from various ranches into one conveniently located center
had already been perfonned.
San Francisco Retailers .— The group designated San Francisco retailers
was comprised of seven fims located in the city and selling mainly by retail.
The largest of these concerns sold about half its produce over the counter to
a clientele composed predominantly of lower, middle-income groups with a strong
European character, and half to small retail stands in mixed food markets, con-
cessions, etc., which had no processing facilities of their own. This concern
killed and dressed some 8,000-9,000 birds per week and would be rated substantial
medium size by San Francisco standards. Stocks of poultry could be kept alive
in batteries, or dressed held in cold storage. Its trade was relatively con-
stant in character throughout the year except during December when turkeys
became more important than chickens.
The next San Francisco retailer in importance to the Petalma auction also
maintained an element of wholesale business. Ordinarily, it haaidled some
50,000 birds each month. Of these, 75 per cent went into direct retail sale
to consumers in an important residential area. The wholesale side grew out of
a tendency for some lots purchased to exceed immediate retail requirements for
that particular type of produce and from economies associated iri.th the fullest
use of the firm's modern and well-equipped killing and processing plant. The
retail side of the business had been expanded on a considerable scale to dispose
of chicken in all forms over a large part of the city. Young birds comprised
the bulk of the firra's year-around turnover. Older pullets and hens sold best
during the winter for fricassee and broth which were not so popular in warmer
weather .
Two businesses to the south of the city properly belong to this group.
The first was dominantly retail with a special interest in good quality for a
regular clientele. It handled some 1,500-2,000 birds per week including all
59.
classes with some emphasis on fryers and little interest in the cut-up trade.
Here J also^ hens and roasters x^ere sold more freely in winter than sumiaer when
smaller birds were the more popular. Facilities for killing, processing and
storage were convenientlj'' adjacent to the store.
The second of these two concerns handled much the same volume of trade,
namely, 6,000-8,000 birds per month in a district which was, however, subject
to greater economic fluctuations. During the war, earnings in this industrial
center had been very high and poultry meat ceased to be regarded as a luxury.
The impact of relative stringency in purchasing power during the postwar years
had been one of concentrating retail sales of chicken towards the end of the
week and elevating considerations of price to greater significance than those
of quality alone. Leghorn hens comprised the bulk of the business although
colored birds were preferred. Only small quantities were wholesaled out to
other retailers, but the business had its own killing plant capable of handling
the moderate-sized lots appropriate to a concern of this size.
Three other firms made up this group of San Francisco retailers. Two of
them did a small amount of wholesaling as seemed to be the tendency wherever a
private killing plant was attached to the store. City health ordinances re-
strict the handling of live poultry to specific areas and prohibit it within
stores selling other types of food. This means that the chain stores and new
type super markets with poultry concessions cannot kill on their own premises
and must buy from wholesalers able to carry on this operation legally. These
two firms were situated in business districts. One turned over some 1,800 birds
per week, the other 1,^00. The first of the two dealt in a variety of lines
but preferred the colored types. Quality ranges were fairly wide though 75 per
cent of the trade was in younger birds. The second divided its business between
wholesale and retail outlets, was expanding currently, and proposed opening up
a new retail store to handle much of the produce that hitherto had been resold
in bulk. It handled most types of birds aiid faced demand schedules said to
remain fairly constant throughout the year. Both firms maintained their own
killing facilities.
The last of the San Francisco retailers was quite different in character.
Situated in a special community district with a taste for good quality heavy
colored hens, this was a purely retail business disposing of some hOO chickens
per week in conjunction wxth other meat. The poultry business had formerly
been much larger. Apart from the usual seasonal interest in turkeys, it did
not fluctuate to any great extent.
All the San Francisco poultry businesses considered were operated mainly
by I tali an- Americans with close familj- interconnections in several cases.
Although various individuals in the different concerns were probably aware of
their rivals' policy, there was little evidence of collusion at the selling end.
Each one laid emphasis on the cut- throat character of the competition which
prevailed in the trade. Nevertheless, the possibility of ad hoc, short-nm
agreements and understandings at tlie auction room itself for the purpose of
promoting the buying interest as a whole against a separate section of the in-
dustry is not completely precluded, |
Bay Area Retailer s. — The other Bay area retailers differed from their San
Francisco counterparts in location and size rather than in kind. Ti-^o retailed
from smaller premises in the East Bay cities and bought medium quality produce
for their relatively low income clienteles. The other three were scattered
60.
about the northern and eastern shores of the Bay in closer proxirdty to Petaluma
than those firms discussed hitherto. Situated in smaller cities, they tried to
handle varying proportions of the different classes and grades of produce so as
to be able to satisfy the tastes of a mixed clientele. One retailed in Vallejo,
one in Martinez, and the third represented a poultry business in San Rafael
selling approximately three quarters of its business by retail and one quarter
by wholesale. All made their own arrangements for killing and dressing.
Local Hucksters .— The elements included in the fourth group do not conform
to one pattern so closely as the others. Classification under the loose heading
"local hucksters", while provocative, does not seem inappropriate since it
emphasizes a feature which they all had in common. They were uniformly based
upon the Petaluina production center itself and thus had ample opportunity to
build up intimate contacts with individual ranchers in the area. The prime
objective of the huckster was to search out bargain lots of chickens and dispose
of them advantageously to wholesale and retail outlets. In this respect he
stands apart from the buyers previously discussed because they were mainly
interested in the physical functions of processing and retailing. Even though
all might buy from individual ranches, or employ representatives to do so on
their account, the major part of their business could be conducted satisfactorily
even if the auction were to act as the first intermediary and assembly point.
Professional hucksters, on the other hand, could not look upon the auction
as anything but a direct competitor and an intruder into what had previously
been entirely their own domain. If successful, it would replace them in per-
forming the functions of concentration in terms of time and space and of resale
for distribution in accordance with consumer demand as reflected through
retailers' channels. This group included the two largest hucksters in Sonoma
Coimty, men with established connections in both producing and consuming areas.
A third was a professional dealer in live poultry who was also a Petaluma
member of the Poultry Producers. Rather different in character was another
firm which was quite large for Petaluma. It sold widely through Sonoma and
Marin Counties and in San Francisco and was regarded as a real and direct com-
petitor. The group is completed with the inclusion of a local peddler and a
dealer in laying hens who derived an unconventional profit from purchasing large
lots of culls. These were segregated into hens which had best be sold for
immediate consumption and others which the dealer believed could be stimulated
into further laying by means of a high protein feed and forcing lights, 'iflaen
the latter ceased to be economic as layers they also were sold for meat^
Buyers of this latter group could not be e:!q5ected to contribute much to
the financial success of the auction. 'IVo interests governed their attendance
at the sale ring. The auction offered a convenient reserve from which loads
could be made up and commitments met, which direct purchases from producers had
not covered satisfactorily. Secondly, they wished to study the movement of
prices and current trends in demand and supply and to profit by any temporary
maladjustments which would enable them to make purchases below the going demand
price for the region as a whole. Hucksters frequently bought up surplus lots
and resold them in higher priced markets. Clearly, they were unlikely to bid so
closely to San Francisco prices as to leave themselves with no margin in excess
of transport and shrinkage costs. Yet, producers would not expect the long-run
differential from San Francisco prices to exceed this amount and would react
strongly against any such discrepancy.
noxcr;
■■3 '
bsss di-
61.
The chief counterweights to this depressing influence were the local
retailers. Proprietors of their oxra business, in the main, they were prepared
to pay prices approaching the wholesaler to retai.ler level. Since the auction
offered a wide range of choice in conveniently small lots, it frequently enabled
them to stock up their stores without recourse to another intermediary. They
bore the inconvenience of appeai^ing in person at the auction, the risk of not
finding the birds they wanted, and the necessity of arranging transportation to
the killing point. Nevertheless, these drawbacks were not such as to prevent
their bidding above the normal wholesale price in order to obtain lots which
were especially suited to their needs.
Nature and Volume of Purchase s.— Table 11 sets out the quantities of poultry
bought at the auction in the four major classes, light and heavy hens, broilers
and fryers. These figures x^ere summed for purposes of comparison, but the
column entitled total does not purport to include all the purchases made at the
auction by these buyers but only those within the four major classes. Plowever,
correction to include roasters, cock birds and miscellaneous produce would not
affect markedly the significance of the figures as now presented.
Thus, the San Francisco retailers bought almost half of the produce offered
in these categories, the large wholesalers rather less than one-third and the
Bay area retailers and local hucksters ^proximately one-tenth each.
TABLE 11
Purchases of Different Poultry Classes
by Types of Buyers — Pctaluma
Auction, 19U3-U9
Type of
buyer
Purchases by weight
Leghorn j Leghorn : Colored | Colored
hens 1 broilers \ fryers i hens
Tota
1
Large wholesalers
San Francisco retailers
Bay area retailers
Local hucksters
Large wholesalers
San Francisco retailers
Bay area retailers
Local hucksters
thousand pounds
200
368
53
116
158
199
U3
ho
93
152
71
25
19
58
23
9
U70
777
190
190
per cent
26.1
US.l
6.9
15.1
1
3h.2
U3.7
9.3
8.6
25.5
hi.6
19. U
6.8
17.1
52.2
20.7
8.1
28.
U7.
11.
11.
i
9
7
7
7
No one firm was in a monopsonistic position \n.th respect to prices since^
the largest buyer took only 20.2 per cent of the total. But a large unit buying
an average of one-fifth of the produce in a market frequented otherwise by
numerous small units could carry considerable weight as a price leader whose
t
1 — '
62.
bids other buyers might respect for fear of retaliation when they wished to
malce their oim purchases. Hoxj much of this was done in practice cannot be
stated. Certainly, this particular buyer could be observed in the midst of a
group of dealers during sales and the auctioneer looked to him to take a lead
when the bidding was slow. The auction staff would also be chary of doing
anj'thing which might offend the buyer personally and lead to his deserting the
auction in consequence. Fortunately, perhaps, the influence wielded by this
buyer was almost directly counterbalanced by that of the Association itself
which purchased approximately the saine quantity. j
The next largest purchasers at the auction were a considerable distance
behind. No others bought as much as ten per cent, but within this group the
decrease in amount purchased was comparatively smooth and gradual. Four firms
each bought between five and ten per cent of the auction sales. Nine bought
between one and five per cent. The least influential units included in the
analysis, buying some 11,000 pounds of poultry each, together handled two per
cent of the auction throughout.
Monopsonistic pressure might not be feasible over the whole range of pro-
duce sold through the auction, but could conceivably be exerted over specific
parts of it. An inverse price discrimination bolstered by quality and age dif-
ferences segregated the markets for the various tj'pes of produce. If such a
tendency existed, it would be evident in table 12. There is little indication
of undue concentration of purchases of a particular class of produce in the
hands of any one group, let alone an individual firm. The large wholesalers
bought relatively more Leghorn broilers than the other groups. Both the retail
groups laid emphasis on colored hens which were neglected by the wholesalers as
too high-priced. Local hucksters bought more Leghorn hens relatively to the
other types. This may not, however, be typical, owing to the unusual interest
shown in culled hens by one particular firm.
From the buyers' point of view, table 12 furnishes a clearer demonstration
of the special interests of the different groups. Taken together, the large
wholesalers' purchases were comprised of two-fifths Leghorn hens, one third
Leghorn broilers, one-fifth colored fryers and only four per cent colored hens.
It is apparent that the latter category sold at prices too high for resale
within the trade. For the Bay area retailers, on the other hand, colored hens
constituted twelve per cent of their total purchases as against seven per cent
for the San Francisco retailers. Colored fryers were much more important to
this group than to the others since they amounted to 37. ii- per* cent of the group's
auction business but never as much as 30 per cent of tliat of any other group,
TABLE 12
Distribution of Purchases by Types of Buyers
Percentage of total auction purchase
s
Type of
buyer
Leghorn
hens
Leghorn
broilers
Colored
fi'yers
Colored
hens
Total
Large wholesalers
San Francisco retailers
Bay area retailers
Local hucksters
per cent
U2.6
U7.14
27.9
61.1
33.6
25.6
22.6
21.1
19.8
19.6
37. U
13.1
. , , .
U.O
7.U
12.1
U.7
10
10
10
10
0
0
0
X.'r,J>
63.
It seems quite clear that those who were buying for resale to the final
consixmer were more interested in the colored birds, generally the most sought
after ajid highly priced on the market. This would be consistent with the
wholesalers' complaint that prices at the auction ran on too high a level for
this type of produce. They and the San f'rancisco retailers bought large
quantities of Leghorn hens. The local hucksters also concentrated upon these.
They were sufficiently numerous for a proportion, at least, to be left to the
dealers whose business it was to effect an arbitrage with other markets, Petaluma
hucksters generally trucked them directly into San Francisco, |
Table 13 set out the same data in terms of two additional classifications.
"Colored" reflects weight per bird and flesh-to-bone proportions. "Age of bird"
distinguishes fryers and broilers from the culled hens. The larger groups of
wholesalers and retailers evinced little differential interest in the white and
colored birds as groups. But it is notable that the Bay area retailers bought
19,7 per cent of the colored birds and only 7.8 per cent of the white, whereas
the local dealers bought 12,7 per cent of the white and only 7,1 per cent of
the colored,
TABLE 13
Analysis of Purchases by Type of Buyer
Percentage of total class auction purchases
Type of
White
Colored
j Mature
Young
buyer
birds
birds
1 birds
birds
Large wholesalers
29.2
23.5
1
25.0
30.3
San Francisco retailers
U6.2
hh,l
U8.6
I1I.5
Bay area retailers
7,8
19.7
8,7
13.8
Local hucksters
12,7
7.1
lU.2
7.8
\lhen sales of these four major classes are allocated to the buying groups
under the headings "young birds" and "mature birds" as in table 13, marked
propensities for one group or the other show up very clearly. The large whole-
salers bought rather more young birds as compared with San Francisco retailers
who were primarily interested in the old. Bay area retailers, however, bought
almost twice as many young birds as old and local dealers the reverse proportions.
Quality Distinctions . —Differential interest in quality distinctions would
be reflected to some extent in the above analyses. It stands out more clearly
in tables ih and l5, which classify the same purchase data under the Petalvima
grade headings "good," "fair," "as is." Some interesting divergences in business
policy become evident immediately. The large wholesalers especially Poultry
Producers concentrated almost exclusively on the best quality produce; 72.8
per cent of their purchases vxere draxm from within this category and only 1.5
per cent from the "as is" grade. The basis of this position would seem to be
that the function of intermediary involved their holding produce and eventually
reselling the birds whole to retailers who were equally experienced in detecting
and drawing attention to quality defects. The risk involved in purchasing birds
which might be diseased was more serious for the wholesaler; in that it might
prejudice a greater voluiTie of produce and in that he sold to large buyers whose
6h,
detraction from the reputation of his wares would lead to serious repercussions.
Since these were the two large buyers of good quality produce^ the fact that
one ceased to buy halfway through the year left the Poultry Producers of Central
California as the sole mainstay of the xdder market for the better quality birds,
TABLE lU
Purchases of Quality Grades by Types of Buyers
Purchases by weight
Type of
buj'-er
Good
Fair
As is
Total
thousand pounds
Large wholesalers
San Erancisco retailers
3h2
121
7
ii70
393
288
96
777
Bay area retailers
92
66
32
190
Local hucksters
90
80
20
190
per cent
Large wholesalers
72, B
25.7
1.5
100
San Francisco retailers
50.6
37.1
12.3
100
Bay area retailers
hB.k
3U.7
16.8
100
Local hucksters
hl.h
1-I2.1
10.5
100
The San Francisco retailers on the other hand, increased their proportion
of auction purchases as the quality declined. Their position was in reverse
of that occupied by the wholesalers. Consumers attached much weight to quality,
but if the quality differences were not obvious, they tended to buy the lovxer
priced of two altei-natives. In competitive marketing retailers aimed at dis-
playing an attractive commodity at the lowest possible price. One approach was
to buy the lowest priced birds and make them appear attractive to the consumer
by skillful processing. Since the latter was not usually a skilled buyer, he
need only be shown the more desirable parts of a bird. j
The atti tilde of the Bay area retailers was not dissimilar. The proportion
of the "as is" broilers taken by them was twice that of "good." At the same
time it was only one-sixth of their own total sales. Almost half were comprised
of grade "good" even though they only bought one-tenth of the "good" quality
birds sold through the auction. Their contribution to the determination of
price at the auction was significant in depth. Limited capacity prevented its
ranging over a wide sector of the market.
The Petaluma buyers made kl per cent of their purchases in grade "good,"
h2 per cent in "faj.r," 10.5 per cent in "as is." This differs from a distri-^
bution proportionate to the average quantity in each grade by an undue emphasis
on grade "fair." Measured in terms of percentage of grade sales through the
auction, the purchases of these Petalvima buyers had less influence on the
formation of prices in the upper than in the lower quality brackets.
Smaller Buyers .— The last line in table l5, "purchases by unclassified
buyers," depicts the share of the market talcen by the small or occasional buyers
which have not been distinguished individually since they bought less than
i
l:
.1 ')
65.
10,000 pounds per year each. They numbered 31, Together they bought not more
than 5,3 per cent of any one grade and tended to buy less of the better quality
and more of the lower than would be proportional to the volume in the respec-
tive grades. Some operated poultry businesses on a large scale and were
influential in their own localities. None bought large quantities at the
auction as a regular practice.
TABLE 15
Percentage of Each Grade of Poultry Sold to Different Buyers
Type of buyer
Good
Fair
As i:
Large wholesalers
35.7
20.6
u.:
San Francisco retailers
itl,l
h9.1
59. <
•
Bay area retailers
9.6
11.3
19.i
?
Local hucksters
13.6
12.1
Unclassified
U.2
5.3
3.'
I
Total
100.0
100.0
100. (
Another important issue is the extent to which the dealers using the
auction were dependent upon it, what it meant to them in terms of their total
supply of live birds, and the over-all scope of their business. One indication
would be the ease with which they could supply their needs from other sources.
Since most wholesalers, and retailers especially, base their business on regular
margins from a steady turnover, they must have reliable sources of supply or
knowledge of where they could obtain substitutes if necessary. It might be
assumed that no difficulties would be incurred in such a district as Petalvima;
but most producers are already attached to some existing outlet. Competition
with institutionalized contacts of this kind would compel a newcomer to offer
more than the going price or better terms in some other respects.
Stability in Buyer Relationships , ~-Poul try Producers of Central California
bought steadily all tliroiigh the year, partly on a support basis, partly to
maintain its own regular outlets which, at this time, were supplied solely from
auction purchases. The other large vfholesaler purchased more than all the
other buyers put together during the initial months of the auction, but suddenly
broke off attendance one week before Christmas. It was resumed for a month in
mid-January and thenceforward sporadically until May when it ceased altogether.
There could be no question as to the relatively minor part played by auction
purchases in the activities of this firm which drew from as far afield as the
other western states and Oklahoma, ^
The major San Francisco retailers were stable customers by comparison.
The proportion of total auction sales bought by the leader of this group rose
steadily through the yearj not so much because the volume of this firm's pur-
chases was increased, but that they remained constant while auction sales de-
clined. This concern found the auction a very satisfactory source of supply.
It was, in the words of one partner, "an excellent institution because it brought
a variety of birds together at one center even if the buyers' requirements were
66.
not met exactly on every occasion." According to the writer's estimates, this
important buyer obtained between one-quarter and one-third of his supply from
the auction over the twelve-month period, j
Three San Francisco retailing concerns buying 100^000-1^0,000 pounds of
poultry at the auction were next in order of importance to the auction. Two
bought regularly tlirough the year, missing only a dozen or so auctions. The
largest followed suit until August 19h9 , when its name ceased to appear on the
sales records. Up to that point it had been buying 8-10 per cent of its birds
at the auction, but had maintained, meanwhile, a wide contact with outside
dealers and producers operating on such a scale as to warrant a personal visit.
This firm had always tended to buy its younger stock from outside sources.
The second of these city retailers declared that it was convenient for
him to visit the auction regularly whether he intended to mal^e definite purchases
or not, and that their extent depended entirely on the price advantage between
the auction and alternative sources. Evidently, the auction was satisfactory
in the main since purchases therefrom were estimated at over kO per cent of his
turnover. Poultry Producers of Central California valued him as a substantial
buyer. The third of the larger San Francisco retailers was thought of still
more highly in that his bids were associated with many of the highest prices
paid at the auction. It is estimated that this concern, which attached great
weight to quality, also bought through the auction some UO per cent of the
chickens it sold. j
None of the three remaining San Francisco retailers played a significant
part at the auction until 19h9, Two began to attend regularly only in the
second half of the year when they rose to be the sixth and tenth most important
buyers. At this time they began to cover it by a complementary alternation
in purchasing. Since the two concerns were situated in much the same district
of San Francisco and run by people of similar background, it would be surprising
if this alternation were purely coincidental. During this period the larger of
the two bought hO per cent of his produce at the auction. In his view it was
a very useful institution. Purchases from city wholesalers and country dealers
were supplementary. The other probably bought only 16.5 per cent of his poultry
turnover through the auction. A representative stated that the firm could not
depend upon it because "there were too many other buyers there," They preferred
to buy from farmers and hucksters and truck in to San Francisco with their
own vehicles.
The final member of this group specialized in heavy colored birds for
customers always prepared to pay high prices for rich fat meat. He bought on
a basis of suitability for anticipated commitments rather than according to
considerations of economy in outlay. His name appeared at one-quarter of the
sales. No clear pattern could be discerned in either the distribution of his
purchases or the variations in their volume. |
Of the other Bay area retailers, one bought very heavily at everj' auction
during the first two quarters, but his purchases declined both in regularity
and magnitude during the second half of the year. This indicates a diversion
of purchasing power to alternative sources. Three others apparently drew from
elsewhere for their retail needs during the earlier part of the auction's life,
but turned to it in the winter of 19h9, The final buyer in this group made
purchases which might have encompassed the bulk of his limited turnover. They
were, however, interspersed at irregular intervals through the year and totaled
21 occasions all told.
i
67.
Only one of the Petaliima dealers using the market displayed any semblance
of regularity in b\iying through the auction. This was only for the first
quarter of the year when he made large purchases of all types of birds. As
has been explained already^ these buyers sought a margin between the auction
price and that which could be obtained from wholesalers and retailers in the
city. Their profit originated in the hazards of the auction method. If the
channels to which these dealers served as tributaries were sure of satisfying
their requirements at each sale they would corrjnission their own representatives
to buy at the auction directly. One of the largest city wholesalers did this
for a time. The other three large-scale processing and distributing houses had
loose working arrangaiients with Petaliwia dealers to cover the auction and bring
in produce suitable for their trade. In return for performing this service ,
there was a conventional margin of l|--2 cents per pound. In this way it could
be said that the other three large-scale processors and distributors were
effectively represented at the auction^ even if these indirect purchases did
not constitute an important element in their over-all turnover.
The second of these important connecting links with the San Francisco
market bought heavily during the period from September through to January 26,
after which sale his name disappears from the sales record for six months to
appear again, but sporadically, in the late summer. The cessation on practically
the same date of p\irchases by these two "go betweens" and the large San Francisco
wholesaler who bought directly meant that, in effect, three major purchasing
agencies withdrew their support at one and the same tirae. It says much for its
reputation and usefulness that the auction was able to withstand such a loss
and attract other buyers in replacement.
Two local Petaluma concerns bought fairly heavily on occasion during the
first half of the twelve-month period under study, but cut their purchases
dovm to insignificance thereafter. One of the largest Sonoma County hucksters
bought at the auction sporadically, but undoubtedly regarded it as a competitor,
Onl;^'- the entrepreneur who put culled hens back to lay before reselling them
for meat, took significant quantities from the auction all through the year.
V alue of Auction to Buyers . — Since they resided in the heart of the produc-
ing area and knew most of the poultry men personally, the auction can hardly
be said to be performing any valuable function for the local dealers. In no
sense were they truly dependent upon its facilities. It might reduce the amount
of time spent bargaining. It limited the vendor's control over the terms of
the sale. But at the same time it brought the deal out into the open, thus,
inviting competition from rival buyers if it should deviate too far from the
going price of the day. Thus, irregular buyers, small restaurants and producers,
were afforded the satisfaction of knovring that the price paid was not out of
line with other transactions in the market area. The final price was attained
only because rival buyers were prepared to go as far as the penultimate bid.
For others it provided a temporary solution during the period between the
termination of set trading arrangements with individuals and the establishment
of new contacts and understandings. To mai^ buyers, a real virtue of the
auction lay in its continuity. It functioned, in the short run at least,
automatically so far as they were concerned. It was a permanent standby if
their relations with other suppliers became exacerbated by hard bargaining.
Variation in the level at which the price mechanism equilibrated supply
and demand did not hurt buyers so much as producers. The latters' decision to
transact business tlirough the auction was loss frequent, yet had perforce to
68.
be made before the price level of the day had become known. It was more impor-
tant to them because disastrous if misjudged. The buyer considering himself
as a processor^ whose income depended on volume of handlings^ could at least
vary the extent to which he became involved financially after the exact price
relationships between grades , classes, and markets had been revealed. He was
subject only to the more flexible limits set by the specifically anticipated
requirements of a regular clientele. In contrast to dealings with producers
and hucksters, transactions on the auction were impersonal. The purchase of
produce at low prices did not prejudice relations with the seller directly,
nor would abstention frorn buying, because prices were too high. Buyers could
still return to the next auction and meet exactly the same reception as before.
Experienced professional buyers found advantages in bargaining power and
economies of scale in handling large standard lots from individual ranches.
They were, in consequence, reluctant to give the auction the whole of their
attention. Yet, few of than would watch the auction disappear without mixed
feelings, appreciating as they did the valuable role it played as an institu-
tional price regulator and supply reserve.
69.
Producer Appraisal
Much of the information handled in this final section of the study will
bear on subjects already treated in some detail. In this sense, there will be
some repetition. Attention will be focused, however, on a different aspect.
Emphasis on the producers' point of view will assist in rounding off the
analysis.
Two additional sources of data are drawn upon at this stage. The weekly
reports on sales through the auction did not record the names of suppliers.
Since, however, they were all members of a cooperative association, their member-
ship numbers were entered in the report in conjunction with each sale. These
numbers were coded according to the branch to which the member had been attached
for organizational purposes. They constitute a fairly accurate guide as to the
approximate geographical origin of the poultry coming into the auction. It can
then be analyzed in terms, not only of volume, but of type, quality, and seasonal
distribution through the year.
Nevertheless, there are limits to the profitable exploration of ex post
data in search of significant relationships. There may be indications that
certain events occurred at the same time and were, in all probability, linked
together in some way. Yet, the precise bases of the association, the reasons
why supplies fell off at a certain time, or why a certain percentage of patrons
redirected their business through other outlets, are not determined. The raw
statistical data of volvime, grade, and price may suggest adequate reasons for
these associations. Ultimately, however, there must be some recourse to
individual interviews with the persons who actually made the decisions. Other-
wise, it remains uncertain which reasons were the real ones, and whether it was
not on some altogether different issue that the poultryman transferred his
allegiance. [
To this end. Poultry Producers submitted the names of poultry growers
representing various production, type, and locational points of view. As many
were included who had once patronized the a^^ction and ceased to do so as had
supported it loyally. The motives of the latter group included both material
advantage and belief in the cooperative ideal. All responded readily when in-
vited to describe their attitude towards the poultry auction and to comment
freely on its method of operation.
Information gathered in this way was supplemented by discussion with other
poultrymen who represented special interests of significance to the study, or
who had individual experience of poultry marketing institutions in the Bay
area as a whole. The bulk of the supply area was covered. In terms of their
average flock, the size of enterprise represented ranged from 18,000 layers down
to 2p00-n,000, Some of these producers had considerable experience in rep-
resenting local or professional opinion. Others had none at all.
Origin of Auction Poultr y. — Information as to the source of production of
the poultry sold through the Fetaluma Auction is presented in table l6. The
figures should be related to their locational background. As an assistance to
readers, percentages of the total supply have been incorporated in the map
appearing on page 3, The territorial divisions employed in the table follow the
Association's branch organization code, subject to some condensation. The
component areas are listed in the notes at the foot of table l6. Since distance
from a suitable market was the factor whose influence these data were expected
to illuminate, classification was simplified by the consolidation under one
ill ;. I
L
70.
heading of branches which lay in much the same geographical relationship, vis-
a-vis, Petaluma and the Bay cities. Three months, January, May, and September,
were selected for summarization in the table in order that seasonal variations
in production might be reprasented at equidistant intervals. The three columns
in table l6 were arranged so as to cover, respectively, yotmg birds produced
entirely for meat, older fowl which had finished laying, and both types of
birds together. The figures are percentages of the total sale.
Just under half the total quantity of poultry handled during the period
studied originated in the Petaluma area. The Santa Rosa district was the next
most important, followed at some distance by Ukiah and the Sonoma Valley. Rather
more than two-thirds of the total quantity sold, however, derived from farmers
located not more than 30 miles from the auction. This certainly proves that it
was sited in the midst of the main producing area. The first four districts
recorded in table 16 may be regarded as the immediate vicinity of the auction and
together they supplied 80 per cent of its poultry. A higher proportion of hens
(81.6 per cent) than of younger birds (78.9 per cent) originated in this area,
but the difference is not very significant.
TABLE 16
Origin of Poultry Sold at PetaD.uma Auction:
January, May, September, 19i;9
Averages of
Percentages of total supplies by weight
District
Broilers, fryers, and roastei^l Hens | All birds
per cen t
a/
Petaluma—', /
Santa Rosa-'
Sonoma Valley
[Japa Valleyc/
Ukiah£/
Fort Bragg^' „ ,
Sacramento Valley-'
San Joaquin Valley
Santa Cruzi/
/llainedah;/
53.5
18.7
2.3
3.9
5.0
0.9
U.l
7.2
3.1
0.8
li2.9
20.7
10.0
8.0
8.3
2.9
2.1
5*1
U8.1
19.6
.ii
.9
.6
.9
.1
.7
UL3
0.1;
Total
Total weight
100.0
219,985.0
100,0
2lU,68iuO
100.0
1;3U,669.0
a/ Petaluma, Novato, Penngrove, Cotati
b/ Santa Rosa, Sebastopol, Healdsburg
c/ Napa, Calistoga, St. Helena
d/ Ukiah, Middletovjn
e/ Fort Bragg, Eureka, Mendocino
f/ Fairfield, Dixon and Sacramento Valley branches
£/ Santa Crua, Watsonville, Salinas, Hollister
h/ Hayward mainly
1 < <
JO z
71-.
The second area, for which the auction provided a valuable outlet, was that
immediately to the north of Santa Rosa, a:iong either side of the main highway,
U, 5, 101, Supplies flowed down to Petaluma from this country, not so much
because it was an important production center well endowed with feed supplies
under conditions especially conducive to poultry rearing, but rather birds
were sent down the 80-mile drive from Ukiah because there was no other satis-
factory outlet for supplies surplus to local needs. The permanent population in
this region was quite small. Development as a tourist area coupled with the
general meat shortage during the years following the war had provided an incen-
tive for some large-scale production,
A weak competitive position rendered producers in this area extremely
vulnerable to changes iia poultry meat price levels. Those broiler and fryer
raisers who had outlets such as hotels and restaurants under their control
did not fare so badly. Those less fortunate in this respect were being com-
pelled to quit the business about the time this study vjas entertained. Con-
siderations influencing these Ukiah poultryraen in patronizing Petaliuiia in
spite of the distance were threefold in number, |
Primarily, they were attracted by the services the cooperative was able
to offer. They bought its feed and earned a good dividend thereby. The branch
at Ukiah formed an organizational center able to furnish information and assist
in fostering their welfare. The poultry sent in from Fort Bragg was assembled
by another cooperative association inspired primarily by men of Finnish ex-
traction. Naturally, its sympathy lay with the Poultry Producers as an outlet
for produce rather than with an independent competitor. Most jjnportant, perhaps,
in bringing these birds dowii to Petaluma was the provision of convenient trans-
port arrangements with a regular truck service from the Ukiah branch in accord-
ance with producer requirements.
This service was the more appreciated in that without it, poultrjmien offer-
ing birds situated at some remote ranch were in a very weak bargaining position.
One dealer from the Petaluma area was in the habit of follotring this route.
Support for the auction probably gained by appreciation of the degree of mon-
opsonistic pressure he might have exerted if there had been no other practicable
outlet. Few of the ranchers in this area would ordinarily be selling so much
at any one time as to make it profitable to transport their own birds to a
favorable market.
Customary practice previous to the provision of the Poultry Producers*
transport service had been either notification of the aforesaid Petaluma dealer
when enou^ birds were ready for sale to constitute a full load, or the develop-
ment of such an arrangement as that once obtaining in Lake County, where one
producer was paid to carry his neighbor's birds to market a].ong with his own,
to dispose of them in the best way possible. One such man with a long history
in the trade remarked that experience and contact with the buying end brought
great advantages. He stated that he was able to secure prices 2-3 cents higher
for a fairly regular supply of good poultry than could be obtained for similar
stock by another person less v:ell knoxm and accepted in the trade. Of the
poultry sold at the auction, 8.S per cent originated in these northern counties.
Hens were more important than younger birds. Of the older categories, 11,2
per cent fall under the Ukiah and Fort Bragg headingsj of the yo\mger, only 5.9
per cent.
For the last four areas in the classification in table l6, the auction
would not appear to have afforded an obvious convenience. From Santa Cruz and
I
i
i
i
i,
i
72.
Alameda counties, birds passed through the main consumption center only to be
brought back again from Petaluma, 70 miles to the north. It is difficult to
conceive of any long-run economic justification for such procedure. Only an
extraordinaiy imperfection in the market could render it financially profitable
in the short run. The most useful purpose it could serve irould be that of
deterring independent buyers from discriminating against producers situated in
localities distant from any sympathetic outlet. In all probability, these ship-
ments were associated with the proposal to establish a second auction at Hayward.
The good work such a threat might do would be reinforced by concrete evidence
that producers were prepared to take drastic steps in order to place their birds
in more favorable chajinels,
Sirailar motives may have governed the shipments from the Central Valley.
In the San Joaquin Valley other large-scale organisations, such as the big meat
packers, undoubtedly offered more convenient sales points for local production.
On the other hand with its population of over 100,000, Sacramento itself con-
stituted an important consumption center in the northern valley, likewise
Stockton, vjhere Poultry Producers made regular purchases. Prices paid for dif-
ferent grades of poultry at Stockton were published in the Weekly Newsletter and
served as a guide to quality, type, and price relationships for the central part
of the valley (p, 8, note 1, Fresno prices). Nevertheless, h,^ per cent of the
poultry offered at Petaluma was shipped in from this direction over distances
which would involve considerable tirae in traveling. Such birds must needs have
left the ranch either the previous day or very early in the morning. They would
suffer the quality losses and shrinkage resulting from a long period of movement
and discomfort even though the Association might arrange to have them fed and
watered upon arrival.
The bulk of these birds, from the San Joaquin Valley especially, were young
colored fryers. They arrived in large batches at irregular intervals. The
effect upon the price mechanism at the auction was disruptive.
It was resented by smaller producers who sent in regular supplies from other
areas and vrere dependent on the auction for their income. The sporadic nature
of the supply from this source and the fact that colored fryers were usually
turned out in regular volume by specialized meat bird raisers suggest that this
was not the owners' normal method of disposal. More probably they were reacting
against poor returns from regular buyers in the locality of origin. Quality was
not notably high in some of these lots. They smack more of a defiant gesture by
producers faced with "take it or leave it" offers from their usual outlets than
of a genuine attempt to establish a continuing program based on regular mar-
keting the auction way.
Seasonal Variation . —Table 17 shows the proportions of broilers, fryers and
roasters, and of hens originating in the various supply areas during three
different months in the year. Such data are only available for one year. Thus,
it is difficult to distinguish clearly between long-term trends in the attractive-
ness of the auction to producers in different districts and seasonal fluctua-
tions in the supplies originating from these areas. However, since relatively
uniform techniques are pursued throughout the region as a whole, there is no need
to attribute much weight to the latter factor. Segregation of the meat bird and
laying fowl data adds to the interest of this approach.
Subject to such qualifications, table 17 indicates the process of change in
the geographical sources of the poultry meat sold through the auction. Examina-
tion of the background of each consignment, and determination of the type and
J
73.
size of production unit from which the birds were drawn, would be another much
longer task. Measurement of changes in the proportion of the total quantity of
poultry produced in the areas sold through the auction presents similar diffi-
culties. A dissatisfied meat bird raiser hazarded an estimate of 5-7 per cent.
Statistical data concerning total sales in the San Francisco market suggest that
it would not exceed 10 per cent.
The most striking feature of table 17 is the increasing degree of emphasis
that it places on supplies drawn from the near-by districts, Petaluma, Santa
Rosa, and the Sonoma and Napa valleys. All except Santa Rosa raised their
percentage of the total sale during the year. The decline in the case of Santa
Rosa was far outbalanced by the remarkable increase in the proportion of Petaluma
birds from U3,3 to 71,h per cent. Taking these four districts as one unit, it
becomes clear that, whereas in January they were responsible for rather more
than two-thirds of total sales, in September their share was 95.1 per cent. The
amounts forthcoming from the outer zones were falling away into insignificance.
TABLE 17
Origin of Broilers, Fryers, Roasters and Hens Sold at
Petaluma Live Poultry Auction
January, May, September, 19h9
District
Percentages of broilers,
fryers, roasters, by weight
Percentages of hens,
by weight
January
May
September
January
May
September
Petaluma
ii3.3
62.9
71.U
UU.7
1;6.7
37.6
Santa Rosa
20.5
16.2
16.9
15.3
23.8
22.8
Sonoma Valley
2.6
2.9
3.1
h.O
8.0
18.0
Napa Valley
3.3
5.3
3.7
9.1
9.0
6.0
Ukiah
7.9
i.U
1.3
12.2
7.8
ii.9
Fort Bragg
1.3
0.0
1.0
1.0
3.2
ii.6
Sacramento Valley
2.U
9.6
0.0
6.1
0.0
0.0
San Joaquin Valley
13.0
0.0
0.0
d.o
0.0
0.0
Santa Cruz
U.7
0.9
2.6
7.6
1.5
6.1
Alameda
1.0
0.8
0.0
0.0
0.0
0.0
Total
100.0
100.0
100.0
100.0
100.0
100.0
Total weight
1,000 pounds
123
60
37
73
69
72
0.0
> .r
7li.
Sharply declining prices for meat birds increased the relative burden of
transport costs and administrative problems vrhich remained constant per unit of
volume. Recognition that an alternative outlet was giving active competition
improved producer bargaining power and induced local buyers to offer more
attractive prices. The decline from 7.9 to 1.3 per cent in the proportion
supplied by Ukiah marks the disappearance from business of specialized meat bird
enterprises in that district. Others faced an increased demand from caterers to
the tourist trade. Changes in transport arrangements also contributed to the
dealers. Some reference has already been made to the large consignments which
arrived from the Central Valley frora time to tiii;e. In January, 13,0 per cent
of the supply of young meat birds came from the San Joaquin Valley, yet none at
all in the later months. In hay, Sacramento Valley producers sent in 9,6 per
cent as compared with only 2,i| per cent in January and none at all in September,
High temperatures may have been a deterrent to long-distance transportation of
live birds in the summer months. However, it is difficult to regard these loads
as other than experimental. Observations of a similar character might be made
concerning the shipments frora Santa Cruz, However, they figure in the column
for each of the three months, albeit with sharp variations. Supplies from
Alameda never exceeded 1,0 per cent and had ceased by September,
The sharp decline in the actual quantity of broilers, fryers, and roasters
marketed during these months is noteworthy. In each case, totals for the latter
two were only half those for the month immediately preceding.
The second half of the table presents a picture in complete contrast. The
volume of hens going through the auction remained on a par throughout the period.
That 73}lh-l pounds in January should be succeeded by 69,133 pounds in May and
72,lliO pounds in September spealcs very highly of the auction's service as
measured in producer popularity. The material presented in this table confirms
the conclusions attained earlier as to the differential success achieved by the
Poultry Producers in its efforts to provide a suitable outlet for its members'
poultry. The contrast in attitudes between the meat bird specialists and egg
producers with old stock for disposal could find no more specific expression.
The relative supply of hens from, the Petaluma locality fell in September
from a fairly constant level in January and May. Those coming from the Santa
Rosa district, immediately adjacent, rose by much the same amoimt between January
and I-iay and fell back only slightly in September, The proportion of Sonoma
Valley hens increased remarkably during this period, in response to a more
favorable trucking service, Napa Valley contributed the same proportion in the
first two months but it had fallen by a third in September, The contribution of
these four areas together increased by rather more than 10 per cent.
Fowl consigned from the Ukiah and Lake County areas declined in importance
over these months, whereas those from Fort Bragg increased in spite of the 120-
mile journey to Petalum.a. Sacramento Valley fowl amounted to 6,1 per cent of
the total sale in January but made no further appearance. No fowl came up from
the San Joaquin Valley, Poultrymen attached to the Santa Cruz branch apparently
had good reasons for sending their birds all the way to Petaluma in spite Of
the marketing paradox it implies. No Alameda hens were sent to Petaluma during
these months.
Producer Opinion , — The comments received during the course of this survey
were analyzed and classj.fied according to the "interest" they represented and
to whether they touched upon fundamental issues in the marketing of poultry
75.
under contemporary conditions or upon specific details in the operation of the
auction.
The most throughtful discussion centered on the economic usefulness of the
poultry auction as an institution and the basic problem of whether the coopera-
tive should attempt to handle poultry at all. It was pointed out by both dealers
and producers deeply interested in the cooperative movement that relations between
Petaluma poultry dealers were those of cut-throat competition. An exceptional
concentration of poultry flocks and of the various intermediaries between pro-
ducer and consumer resulted in very slim margins. The chief reason why coopera-
tive intervention in the poultry business was not successful was that profits
were only achieved by dishonesty— short weights, misrepresentation of quality
and tricks in bargaining. In conclusion, producers were not so much cheated by
dealers in a way that could be ameliorated, but both groups toiled for low re-
vjards. Consumers reaped the benefit if, in lower prices at the retail store,
they were more efficiently served than by clearer distinctions in quality.
This approach goes on to note the higher rate of profit from cooperative
handling of turkeys where the labor input per bird constitutes a smaller percent-
age of the final price. In the fresh poultry business, higher administrative and
labor costs find no compensation in a greater capacity to hold stocks in storage.
Thus, the cooperative suffered competitively from the preference for the New
York dressed bird which characterized the San Francisco market. Any hastening
of the trend towards the presentation of poultry in cut-up form, packaged in
parts or frozen after evisceration, which has gone further in other parts of the
country than in the Bay area, would be to its advantage. This method of sale
offers less opportunity for "chiselling." The reputable brajid would be able to
command a higher price. Moreover, the producer's organization would have the
same opportunity to surmount temporary booms and recessions in demand prices by
holding substantial reserve stocks in storage for sale at the most favorable
opportunity that it has had in the marketing of eggs. Thus, it would be able
to exercise a far more effective influence on the market than in the present
environment. In practice the auctions served primarily to bring price levels
into the open and moderate their extremes rather than to stablize them with a
substantial measure of control, |
Large Uniform Consignments , — A second consideration of a fundamental charac-
ter was that sale via the auction necessarily involved much double handling.
By their very nature, poultry present special problems in physical transference.
Each bird must be caught while alive and moved into coops to the accompaniment
of much noise, nervous excitement and actual corporeal bruising. This occupies
much labor and offers little opportunity for economy no matter how large the lot.
In consequence, even those whose trust it was to direct the cooperatives' affairs,
felt that large lots of birds originating on a single holding should be trans-
ferred directly from the ranch to the killing point by the most direct route and
without change of container.
Experience had shown that large quantities of a single type of bird depressed
the auction price for that specific categoiy. Average receipts over the whole
lot might not exceed the price obtained at the ranch through private bargaining
by enough to cover the additional transport and sale charges. It must be remem-
bered that in the Petalxuna district the huckster's rate for transportation, etc,,
from the ranch to San Francisco was often identical with the auction commission.
Loss from shrinkage and transportation charges from ranch to auction and auction
to processing plant had still to be covered when birds were marketed through
this channel.
76.
Furthermore, the eleraent of risk in marketing by auction increases at a
rate more than commensurate with the size of the individual seller's consign-
ment. Not merely does he dispatch his birds for sale without knowing the price
he will receive J but the more he sends of one class of bird the more his re-
ceipts vrill be depressed if demand is low. Likewise^ there is a greater likeli-
hood that he vdll spoil even a good market if demsnd should be strong for a
specific quantity only, of his particular type. This latter position frequently
occurred. Single cases of misfortune with large consignments were among the
most frequent reasons for producers turning away from the auction. They sought
other outlets where the price was settled before the conclusion of the sale.
Small Mixed Lots . — On the other hand, all agreed that the auction offered
the ideal outlet for small or mixed lots and culled birds. Dealers who would
send a truck and pay well for large offerings of uniform quality only accepted
the "inconvenient" categories under pressure and at very low prices. The auction,
however, provided a center where smaller traders with low cash reseirves could
pick up just the quantity and type of bird which, after plucking and eviscera-
tion, might offer a reasonable return. This enabled them to pay good prices by
comparison with those received for larger volumes of regular flocks.
Those who supported the auction were all prepared to recognize that it
brought real benefits in elevating standards of marketing behavior. There was
little hesitation to sell through an auction operated by an organization with
such high prestige and financial backing as Poultry Producers. Its fundamental
objective was their own welfare. They had the further assurance that the Poultry
Department's buying policy would not permit prices of "good" quality poultry
to fall far below the prevailing level for the region. Additional benefits
accrued from the publication of price ranges for all the more important grades
and classes. They gained still more, perhaps, indirectly, by the very fact of
the auction's existence. They received fairer treatment and higher prices from
outside buyers precisely because their bargaining power was enhanced by the
presence of a convenient alternative outlet, ^
This leads to the tliird fundamental issue, the tendency for cooperative
intervention in agricultural markets to benefit most, not so much those members
who support it by trading regularly through the chaxuiels it provides, but
those who sell outside it in the more favorable environment resulting from its
efforts. This was in the mind of the man who regarded the auction as a very
valuable experiment, but one conducted at its supporters' expense. Those who
backed it with their custom were holding up an umbrella under which others took
shelter without making any contribution towards its support. |
Attitudes Toward the Marke ting PXinction . "-Conversation with poultrymen
confirmed the existence in the Petaluma district of two distinct and contrasting
attitudes to marketing procedure. Many of those most attached to the cooperative
principle did not wish to concern themselves with marketing at all. Some were
preoccupied with their function as specialists in the production of eggs or
poultry meat. Others had interests which left them with little time to devote
to seeking out and bargaining with prospective buyers. Many simply found hag-
gling distasteful. They looked to the cooperative to take care of this unpleas-
ant side of their business. Most egg producers vievjed the disposal of culled
layers in this light and would be glad to have them taken off their hands without
worry. To men so inclined, the auction service was most welcome. Its most loyal
supporters came from these groups.
77.
At the same time there were to be found in the Petalvmia area numerous
poultrymen whose character and background were quite different. They were never
satisfied with a deal until they had fought over the last cent on every bird.
Such men liked haggling for its own sake and their basic criticism of the
auction stemmed from their inability to retain control over their birds once
they had left the ranch. Sale through private bargaining permitted them to
observe the process of sale in its entirety and adjust it frequently for maxi-
mization of their advantage. Thus, it was pointed out in illustration, that,
if a chicken sneezed while waiting to the auction, buyers would make a point of
drawing attention to it and would discount the vall.ue of all the birds associated
with it in the same lot on the grounds that they might also be sick. On the
ranch, however, the ow:ier might have an opportunity to detect a sick bird, remove
it, and sell the bulk of the birds at a higher price. Similarly, when no good
bids were forthcoming one week, the poultryman handling his own sales could hold
off for a time until conditions improved. Some processing firms took options
on described lots at specific mj.nimum prices with provision for supplementation
if the going price should be higher than was expected. In contrast, birds sent
to the auction were released at the final bid, however low, unless the o™er was
prepared to sustain commission and transport charges in bringing them back again.
The grading process at the auction was like■t^dse outside the seller's con-
trol, or purported to be. The verdict of the paid auction employee had to be
accepted. On the ranch, however, some defense might be made. The owner could
resort first to argument, and then refusal to sell at all, knowing well that
once the buyer had traveled to the ranch and loaded some birds he would be re-
luctant to call off the whole transaction. It was always open to the seller to
segregate birds which were downgraded by the buyer and sell them elsewhere.
Frequently these off grade birds brought a higher price at the auction than
would have been averaged by the better birds if all had been sent in together
on one day,
" Hard Bargainers ". — It was usual for the "hard bargainers" to be in the meat
bird section of the industry rather than in egg production. Admittedly, the
services afforded by the auction were more in the egg producers' interest than
theirs. Nevertheless, their predatory outlook can hardly be reconciled with any
form of organized marketing, however carefully it might cater to their needs.
The meat bird producers were legitimately interested in some kind of guaran-
teed minimum price, since their vrhole livelihood depended upon the results of
their sales. At one time they planned to boycott the auction in the hope of
forcing the association to make such a guarantee. The blackboard experiment
(page 12) and eventual return to direct purchase by the Poultry Department came
partly in response to pressure from this group. Other buyers sometimes made prom-
ises regarding future purchases of given lots. Yet, only a few of these poultry-
men appreciated the point that the auction was ob3.iged to move all the birds
offered on any announced day of sale. On the other hand, dealers pinned down
to an agreed price not uncomiaonly found that "they could only take a certain
quantity that week," would 'Tae away on vacation" or made some other excuse to
limit their liability if the price had moved against them. Such delays in accept-
ing birds when they were offered were especially inconvenient to broiler and
fryer men. Their operations usually revolved around a continuous flow of chicks
through a given number of houses from hatchery to market. If the expected
capacity could not be vacated at the date planned, then there iTOuld be no space
for new chicks already ordered.
78.
Soon after the war, a cooperative society was established in the Petaluma
area for the specific purpose of marketing meat birds. The failure of this
venture was attributed to the selfish, and perhaps shortsighted, independence
of its members. It was designed carefully to match the tectmical needs of
the business. The guaranteed price was a part of its program, in conjunction
with quantity regulation at the selling end by means of cold storage, and at
the supply end by controlled acceptances of members' produce. They were al-
lotted quotas based on reported purchases at the hatchery. Apart from problems
of administration, of quality maintenance in Nevr York dressed birds held in
storage, and of discriminatory competition from existing traders, the coopera-
tive found its members unwilling to gix'e the loyal support it needed for suc-
cess. Instead they strove to sell their own birds at the most favorable time,
falsified returns of stocks in hand and were rarely prepared to bear individual
short-run losses in the interest of ultimate mutual gain.
Distant Producers ,— Those producers remote from consumption centers, who
sold their birds through the auction, voiced no general complaint. Their loca-
tional position was such as to put them at an extreme disadvantage if t hey made
their own sales bargins. Their criticisms reflected resentment at their help-
lessness over detailed inequities in price and grade relationships between con-
signments and overhead sales charges. They felt they could do nothing in cor-
rection. In dealings with other traders this feeling might well be even more
pronounced.
Psychology and Personalities ,— Many poultrymen ceased to sell through the
auction for reasons which might be termed purely psychological as opposed to
economic in character. It is surprising how easily, for example, a single "bad
deal" can outv/eigh a long period of reasonable returns, be magnified in the mind
of the victim and lead to his resolving never again to entrust his birds to the
auction. A story is told of one producer who gladly switched to the auction
because his previous outlet had persistently downgraded his poultry. Later he
returned to this buyer following a quarrel with the auction. On being approached
again as to why he had gone back to the man who had cheated him previously, he
replied, "He does not do it now because he loiows I should send the birds to the
auction if he did."
Personalities play a vital part in these psychological relationships. Some
producers felt certain that one grader rated their birds more highly than another
and were grieved if they could not secure his services. Others spoke of drivers'
carelessness, mislabelling and the classification as rejects of birds which they
declared to be in quite fair condition, A more important aspect of this was
revealed by the attachment of some producers to former members of Poultry
Producers' staff. One the most powerful local competing firms derived its
strength from direction by men who had become well known and popular among
poultrymen by reason of their work on the Association's behalf.
Another interesting human aspect is reflected in the suggestion of one pro-
ducer that the auction be operated by a neutral organization such as the Farm
Bvireau, Poultry Producers' Poultry Department would continue meanwhile to pur-
sue its policy of price stabilization by means of a representative bidding on
the auction floor. Under this arrangement, it was maintained that he would
no longer be follotrmig so many conflicting ideals, those of helping producers
obtain good prices for their birds, of not driving prices so high that buyers
rebelled and made their purchases elsewhere, and of rigid adherence to a strict
79.
honesty and impartiality throughout. Poultry Producers* representative re-
sponsible to so many objectives would face a well-nigh impossible task. Never-
theless, it is difficult to envisage how the introduction of another organization
to manage the auction woxild alter the situation materially. The level of prices
at which the Association made its purchases would still be the main concern.
80.
Summary and Conclusions
The poultry auction is still something of a novelty in California and
has not yet been accepted. Nevertheless, there are substantial arguments in
favor of adopting it as a permanent market institution. The concentration of
poultry keeping enterprises in the Petaluma area has long been sufficiently dense
to support some organized machinery through which its poultry meat output could
be channelled into consumption. Poultry Producers of Central California met
this need in respect to eggs but found in the handling of live poultry an ex-
ceptionally prickly problem. At the same time, most producers on their own
ranches were in a weak bargaining position relative to that of potential buyers
armed with superior market information and numerous opportunities for unfair
dealing. Any system which incorporated into the sale process concentration at
a convenient center, irripartial grading, open competitive bidding by buyers with
established consumer clienteles and appropriate processing facilities, under the
supervision of an organisation with high prestige and a genuine interest in its
members' welfare, would seem to be an advance on the conditions previously
prevailing, |
The auction opened with important initial advantages, A large proportion of
the poultryraen in the area were members of Poultry Producers of Central Califor-
nia and would be likely to patronize it at least until some evidently more favor-
able alternative was put in their way. It had the full benefit of the Associa-
tion's powers and experience in organization and publicity. Elaborate care was
taken to satisfy the convenience of potential buyers or sellers subject to the
limitation that in some respects there were latent incompatibilities. The hour
and day of the week on which sales were held and the purchasing policy followed
by the Poultry Department illustrate this very clearly. Producers were able to
employ the Association's transportation service to the auction. The attendance
of important buyers was secured in spite of the disapproval expressed in some
quarters. Risk of unreasonably low prices was limited by the Association's
undertaking to buy, on behalf of its own poultry department, as much to counter-
act the effect on prices of local changes in demand and supply, as to satisfy
its own requirements on a commercial basis, ' |
Dissatisfaction with existing market channels found ample demonstration
in the largo qusuritities of produce handled by the auction in its first year,
A peak volume for a single sale was achieved on January 11, 19l'-9, when 5^,000
pounds of pot\ltry passed through. The average sale for the first three months
approximated to 28,000 pounds, for the months of September to March 19149, 2i;,000
pounds and April -September 17,000 pounds. Transactions via the auction fell
off through the year both absolutely, and relatively to the total sale of
poultry in the state, which stayed on much the same level,
^ Variation in the quantity of birds offered proved a deterrent to buyers
with other important business and a source of loss to those producers who sent
in valuable consignments on days when supplies were excessive. Over the hundred
auction sales analyzed, the average deviation from the mean was 31 per cent,
but the range was much wider. Part of this may be attributed to the practice
of holding two auctions each week and could be predicted. Even after correction
into weekly averages the mean variation was 2k.9 per cent during the months
September, 19ij.8, to March, 1914-9, a figure in which exceptionally severe fluc-
tuations about Thanksgiving and Christmas played a m.ajor part. Nevertheless,
over-all seasonal fluctuations at Petaluma were less severe than where they
were a direct reflection of the "natural" breeding cycle. Poultry sales to
81.
"Central Western Primary Markets" displayed a much wider siring, albeit with a
recognized symmetry. Petaluma supplies^ in contrast, were governed by the com-
bined operation of two cycles, that of young meat birds leaving the hatcheries,
and of older layers held for their egg potential during the period of scarcity
in the fall, but culled out severely when their rate of lay declined in the
summer, |
However, there was no likelihood of the seasonal flow of birds through
the auction matching the movement of consiomer demand. The index of shipments
to San Francisco indicates that the presence of wholesale buyers able to store
against consumer requirements was an essential part of a satisfactory market.
Performance of such services was not within the capacity of small retailers and
hucksters who bought only for current requirements. This same obstacle might
conceivably be overcome by careful planning on the part of producers or by direct
control over deliveries through a marketing association. On the other hand,
the experience of the meat bird cooperative in Sonoma county just after the war
is partial evidence of the difficulties associated therewith. It lay within the
power of producers themselves at least to moderate this source of friction and
loss. The unexpected diversion to the auction of large batches of fryers which
were usually handled elsewhere, was responsible for much of the uncertainty
attached to this sector of the market. Fluctuations in the supply of Leghorn
hens were moderate by comparison with the other classes. In all categories
variation was less during summer than winter.
The institution of a grading program at the producer level was one of the
most original and praiseworthy steps in the history of poultry marketing in the
West despite its recognized limitations. For most unbranded commodities it has
been recognized as a prerequisite to intelligent and equitable exchange. A
fair bargain concerning the terms on which ownership should be transferred
presupposes accepted standards by which to measure relationships of prices and
quality in this and other markets. The additional cost of grading can be dis-
counted against reduced allowances for risk on the part of intermediary buyers
and enhanced consumer confidence in the end product at the "retail outlet."
Grading practices at Petaluma were scrutinized with a view to detecting
any tendency towards undue concentration of birds in the higher grades, and
for flexibility in standards with variations in supply. The conditions under
vrhich live birds were graded before the auction sale began, impeded the detailed
application of United States grades. Those employed by the auction would have
been satisfactory' if applied evenly throughout the sale. In practice, however,
consistency was impeded by the chronic tendency for birds to arrive late, while
the sale was actually in pro,^-ress.
The emphasis on grading at the auction was pre-eminently negative, that
of removing the evidently defective from the apparently good. This might be
appropriate for the handling of culled layers, but certainly displayed lack
of imagination when applied to the youjiger classes. Setting up a super grade
with which producers' names could be associated publicly would have fostered
the selection of the best quality birds for this type of open sale and attracted
buyers of the caliber most likely to benefit the auction and its supporters.
A comparison with tests conducted at Los Angeles does not indicate that
the grade standards required at Petaluma were unduly low. They can be used,
therefore, to evaluate the general quality of the birds sold at the auction.
Among the older birds it seems to have been as high as could be expected. Host
82.
producers sent in the full range of birds culled from a flock of layers. Though
sorae, admittedly, sent birds rejected by other buyers, these did not form a
notable proportion of the total sale. It seems to be the general opjjnion that
in the fryer class the contrary"- obtained. Average quality varied sharply be-
tween sales. Unreliability was another factor contributing toward the auction's
failure to establish a satisfactory market for this class of bird. Broilers
were mostly good.
Sales data for a series of 100 auctions were examined with a view to dis-
covering ho\-j far they were indicative of a departure from the tenets of a per-
fect market. Criteria employed included proportionality between average grade
prices and the quality levels they reflected, and approximation to prices for
comparable products in the markets after due allowance for transportation and
shrinkage ,
It appears that equitable relationships of this nature were easily upset
by temporary changes in the balsxice of supply and demand. Ilaladjustment in this
respect has an exaggerated effect on price making under the auction method,
since there are no limits on the upward and doimward movement of prices beyond
those set by open bidding. At this time colored fowl were much sought after and
earned a premiura over Leghorn hens of 12 cents per pound and over colored fryers
of ii-6 cents per pound. The special market for heavy, fat hens was open to
even the lowest ranges of quality in this class.
Seasonality in consujtiption patterns was significant in the substitution
of turkey for chicken at Thanksgiving and Christmas and reduced interest in the
older birds during summer when fricassee and soup were less in demand.
Some criticism may be directed at the reversal of price grade relationships
which occurred occasionally as a result of some fortuitous sequence in sale
order. However, the quantities involved were invariably small since the payment
of higher prices for lower grade birds was a result of the apparent paucity in
offers of the higher grades. Certainly, inferior birds sold better at the
auction than they would have done elsewhere. It brought together a wide range
of produce and allowed buyers to select more nearly just what they wanted.
Sales at the ranch were usually concluded under the assumption that the buyer
took the whole flock offered. Thus, a dealer interested only in the better
quality birds would himself have to find other outlets for those below standard.
At the auction small retailers prepared to process lower grade birds and sell
them in their most attractive form, were able to purchase precisely those lots
which would bring them the maxiraum advantage. Average margins between grades
were equitable over the range of classes wherever the quantities handled were
large enough to absorb the influence of individual loads. It is clear from
these data that stability and predictability in all these respects rose in pro-
portion to the volume of produce handled.
Prices at Petaluma followed very much the same pattern as those reported
for the wholesale market at San Francisco, For good Leghorn hens the Petaluma
average was one cent per pound higher. This is less than the customary margin
of l-r?-2 cents for transfer between these markets, and reflects the influence
of buyers vjith direct retail outlets. Producers bearing a commission charge
of l^- cents per poimd were thus receiving only one-half cent below the San
Francisco level.
83.
The San Francisco broiler price ran two cents higher than that averaged
at Petaluma incorporating a wider margin for slirinkage and risk. Prices of good
fryers were more variable at Petaluma in accordance with fluctuations in supply.
Since prices tended to vary inversely with volurae, the weichted average fell
several cents below that at San Francisco. This also reflects a difference in
average quality. |
Careful study of figures 8j 9 and 10 suggests that the city price tended
to follow the directional changes in Petaluina prices after a lag of several
days. The latter were the more sensitive. Demand was a more constant factor
than supply and Petaluma was nearer to the supply end of the marketing chain.
Prices obtained at ranch sales were generally based on the same city
market quotation less the accepted margJji for handling and transfer. Therefore,
the same considerations would apply, subject always to this adjustment and to
the significant qualification that where sales were negotiated on such terms
the crux of the bargain switched to the appropriateness of the quotation, the
proportion of the flock thrown out as rejects, and the size of the deduction on
this proportion.
Eighteen looultry dealers bought 10,000 pounds or more of poultry at
Petaluma during the year under detailed study. But at any one auction only ten
to twelve made actual purchases. No one buyer was in a position to exert mono-
psonistic pressure on prices or to control the bidding at the auction. As a
corollary, hoxvever, it had not the continued support of any firm with such a^
capacity for distribution a:id storage as to absorb, without effecting a signifi-
cant change in the price level, such exceptional offerings as occured from time
to time in the class of colored fryers. The large San Francisco wholesalers
bought indirectly through Petalujna hucksters who looked for transfer costs and
a profit between the city price and that paid at the auction. Some ten per cent
of the volume was taken up by this group of buyers. The bulk of the purchases
outside went to Bay area and San Francisco retailers whose wholesale contacts
were limited. |
The Petaluma hucksters resented the existence of the auction since it per-
formed their own fuction of assembly and concentration for redistribution to
specialized buyers. Their concern is evidence of the service offered by the
auction to the medium sized wholesaler-retailer and the smaller men in enabling
them to select their purchases from a varied presentation of birds arranged in
conveniently sized lots.
These buyers tended to have a disproportionate interest in the lower grades
and in colored birds. Neither Poultrj-' Producers' poultry department nor the
other large wholesale buyer was interested in such produce. They sold again to
professional buyers. Inclusion of lower grade produce along with the good would
be detected and would detract from their business reputation. |
An additional advantage of the auction from the dealer's point of view lay
in its continuity, irrespective of the contribution made by the individual buyer.
Those who bought there customarily adduced arguments of economic advantage and
convenience in so doing.. When dealing with private individuals they found that
the maintenance of good will and personal contacts constituted a definite limit-
ing factor in determining the pressure advisable in direct bargaining.
The market area from which birds were sent into the auction extended up to
100 miles north, east and south, and reached to the sea on the west. Two-thirds
81i.
of the total quantity originated in the Santa Rosa-Petaluma area and this
proportion increased during the year. Nevertheless, the service provided by the
Association in shipping birds to Petaluma from outlying branches v;as much
appreciated by producers in such districts. They suffered, however, from dis-
advantages implicit in the system. The auction accepted for sale all deliveries
made to its premises. Shipments from sources not contributing regularly tended
to upset the balance of supply and demand, to have a depressing influence on
prices and, thus, to deter the shippers from repeating the experiment. This
happened most often with broilers and colored fryers, types generally sold in
uniform lots,. Producers agreed that some form of regulatory system to supplement
the poultry department's buying policy would have beneficial effects. Yet, the
experience of the ill-fated Petaluma meat bird cooperative is evidence of the
problems involved in operating such a program,
if Two characteristic attitudes of poultrymen tovjards marketing practice can
usefully be distinguished. Men interested primarily in production and lacking
the time or inclination for personal assumption of marketing functions were glad
to avail themselves of the auction service. Others were reluctant to relax
control over their produce until they had haggled over the last cent on individ-
ual birds. They switched their custom between different outlets as the particu-
lar defects of each received the emphasis of recent patronage. The former
tended to be most interested in the egg business, the latter in meat bird
production. This is a more fundamental division of opinion than those deter-
mined by bitter memories of a single bad deal, by private animosities and attach-
ments to individual personalities. Together with other factors it finds reflec-
tion in the maintenance over time of stability in the numbers of older fowl
passing through the auction in contrast to the shaip decline evinced in the
quantity of fryers.
There are sound economic arguraents behind this too. Large lots of young
birds of uniform quality are best sold from the ranch. Sale through the auction
involved additional handling and transport charges without commensurate increases
in buyer satisfaction.
An interesting proposal was that the auction proper should be administered
by a neutral organization in whose impartiality both producer and poultry buyer
would have confidence. Poultry Producers of Central California would continue
to shape its buying policy towards insuring members against unreasonable falls
in price so far as was compatible vdth the need to cover its own costs. It
would not undertake the additional obligation of maintaining the auction's
popularity with potential buyers. Yet it is difficult to see how this would
effect any material change. Any action directed tovjards raising the price level
would drive away other buyers if it precluded their making a profit no matter
under whose auspices the auction was conducted,
V The auction failed to provide an appropriate outlet for young frying
chicken of high value and uniform quality. There are cogent reasons why it would
be unlikely to do so even after supply regulation and storage facilities had
been established. Small lots, on the other hand, and offgrade birds generally
sold best when concentrated at some convenient center and handled by auction in
such a way as to attract the retail buyer and those whose requirements included
a wide range of types. . As stated in the 19h9 report on the activities of Poultry
Producers of Central California poultry department, "By and large, member con-
signors have found they can obtain considerably more for offgrade poultry,
particularly Leghorn fowl, by selling through the auction than they normally
(
85.
obtain tlirough other market outlets,... Competition in the bidding for certain
lots often resulted in prices considerably above those which the Association
or any other buyer would be willing to pay on a given day for poultry of compar-
able grade. Restrictions on the size of lot were influential in attracting the
smaller buyers. Ten or eleven coops comprised the maximum quantity in one sale
unit. Many were not so large. The auction provides the most rapid possible
method of selling poultry. The regular attendance of San Francisco buyers at the
auction is primarily because it enables them to buy a wide variety of poultry
in one place in a relatively short period of time." j
^ On March 6, 19 5l Poultry Producers of Central California announced that the
poultry auction would be suspended. They declared that "the principal reason for
suspension of the auction was lack of sufficient volume of poultry to justify
the labor and other costs incidental to the activity. The Association's facili-
ties for handling poultry at Petaluma, we believe^ are fully ample to handle at
least three times the volume of poultry received." The steady downward trend in
volume of birds handled per auction sale continued through 19 50 and early 19 5l.
During the fall of 19U8, liOO-500 coops of chickens were offered at sales held
twice weekly. Two years later sales conducted once only per week were handling
an average of 250 coops. Tlirough November, 1950, average sales declined to
l50 coops. They rose again to approxijiiately 18U in December but fell back again
to l50 in January and February. Auction sales of live chickens totalled
892,601 pounds in 1950 as against l,8lij.,l52 the previous year.
At these levels of turnover Poultry Producers of Central California experi-
enced difficulty in retaining the services of a good auctioneer and were compelled
to allocate the burden of fixed costs over an ever diminishing volume of through-
put. The auction continued to cover its costs until the winter of 1950-5l.
Table 18 relates its financial profitability over the whole period of operation
to changes in the volume of business transacted.
TABLE 18
Income and Expenditure — Petaluma Poultry
Auction, 19l;8-195l
Period
Average
monthly volume
Gross
margin
Operating
expenses
Net
margin
thousand pounds
cents per pound
19li8, July-December
I9I4.9 , January-De cemb er
1950, January-December
1951, January-February
245
151
7U
38
1.50
1.U6
1.50
1.50
1,00
0,86
1.3U
1.65
0
0
0
-0
.50
.60
.16
.15
Higher efficiency following the early months of experience permitted the
auction to cut its per-unit expenses during 19U9 in spite of the decline in
business. On this showing, some reduction in service charges might have been
86.
practicable with a view to meeting supplier criticisms,-' The Association had,
however, reversed its policy of buying only through the auction and offered
members the alternative of direct purchase. This contributed materially to the
decline in the auction voluiae. The auction also lost its managerial head at
the end of the year {19h9) j and changed auctioneers shortly afterwards. Contin-
ued decline in the volume handled during 19^0 had its inevitable effect on costsj
and expenses were barely covered. From November 19^0, each month showed a loss
and the trend of business offered no prospect of recovery. [
The financial position of the poultry department had long been an erabarass-
ment to the directors of the Association. They did not wish to deprive members
of its facilities, yet felt that it could not continue to be subsidized by other
activities. Results during 19U9 and 19^0 were especially unsatisfactory. The
loss of '>13,262 on the chicken division actually indicated some improvement upon
the 19U9 deficit of ?pl8,068, but offered no prospect of transformation into a
credit balance within the immedj.ate future. On April 6^ 19^1, it x-^as announced
that poultry dressing at both Petaluma and Stockton would cease altogether.
The directors emphasized the weight of strong competition in cutting the
margin available between buying and selling prices, a situation which could only
be borne if the cooperative had been able to derive economies of scale from a
large and regular turnover. They were further discouraged by the government plans
for ceiling prices on poultry products. Price control in the face of excess
consumer demand during the war had diverted trade from the cooperative, which
observed the regulations, to other channels xAich vxere not so scrupulous. In
any event, the auction process is in direct conflict with the observance of
predetermined grade price ceilings,
A fundamental factor in the failure of the auction and one which has received
less attention is that of human psychology, a simple loss of confidence. In
auctioneering more, perhaps, than in other realms of endeavor, nothing breeds
success like success. A leading personality, able simultaneously to "talk up"
the auction publicly as well as found it on sound administrative bases, could
have made an immense difference. Doubts arising in the minds of the directors,
as the volume fell, and a manager who devoted the major part of his attention to
other phases of the po\iltry department's operations contributed to the groi-rbh of
a negative attitude. As an institution, this particular auction was finally
doomed by unfortunate management and too narrow insistence on a dollars and cents
profit, I
The discontinuance of the weekly auction at Petaluma is a loss to the poultiy
industry of the Bay region. It may not have handled such a volume and quality
of birds as to set the price for the San Francisco market. Nevertheless, to an
area interested primarily in egg production it offered sales facilities for which
no equally flexible and efficient substitute can easily be envisaged.
1/ The prevailing view was that this surplus should be retained by the
cooperative in anticipation of a deferred payment to patrons.
See Appendix 2 for detailed breakdown of operating costs in 19U8 and 19h9,
Note, for example, the credit on transportation account for 19U9.
1
87.
Not the least of its valuable services was that of bringing the going price
out into the open and of publicizing the conditions under which real sales were
transacted. There can be no doubt that, excluding the effect of changes in over-
all national demand, poultrynien and the smaller retailers are in a much worse
position mthout it. Paradoxically enough, the decline in the volume of poultry-
passing through the auction has been a measure of the improvement wrought in
marketing conditions in the area as a whole. Its presence as an alternative out-
let enhanced the bargaining power of individual producers and enabled them to
exact terms from outside buyers which would not otherwise have been possible.
88.
Appendix I
United States Grades Specifications
Live Poultry
Quality A or No. 1,
Each bird shall (l) be alert and have bright eyes and other conditions
indicating health and vigor; |
(2) be well feathered, with feathers showing luster or
sheen and quite thoroughly covering all parts of the
body;
(3) be of normal physical conformation. It may have a
slightly curved breastbone or other slight abnormality
in its shape if it does not interfere with the normal
distribution of the flesh. A dent in the breastbone
shall not exceed one -fourth inch in depth for turkey
classes and one-eighth inch in depth for other classes
of poultry. The bird may also have a slightly crooked
back; |
ik) have a well-developed, moderately broad and long
breast, well fleshed throughout its entire length,
and thighs and legs well covered x^rith flesh according
to sex and age. There shall be no appreciable toughen-
ing of flesh if tender meat is a class requirement,
{$) have breast, back, hips, and pin bones, in the case
of classes of yoiong chickens, shovdng fat, and in
other classes have these parts well covered with fat,
A fowl shall not have excessive abdominal fatj
(6) be free of tears, broken bones and external evidence
of disease. It may have slight scratches, slight
bruises or callouses, any of which must not materially
affect its appearance, especially the breast, when
feathers are removed. It nay also have slightly scaly
legs.
Quality B or No. 2 ,
Each bird shall (l) be of good health and vigor;
(2) be fairly v/ell feathered, that is, some feathers may
be lacking on some parts of the body, and there may be
a moderate number of pin feathers;
(3) be of normal physical conformation but may have slightly
crooked breastbone if it does not seriously interfere
with the normal distribution of the flesh. It may have
a moderately crooked back and slightly misshapen legs
or vjingsj
89.
ik) be fairly well fleshed in relation to length and depth
of the body with all parts fairly well covered with
flesh according to age and sex. There shall be no
appreciable toughening of flesh if tender meat is a
class requirement J
(5) have sufficient coverage of fat to prevent a dark
appearaiice, A hen nay have excessive abdominal fat,
(6) be free of tears, broken bones and external evidence
of disease, slight breast blisters, heavy callouses
and seriously scaly legs.
(1) be lacking in vigor j
(2) have large niuabers of pin feathers over all parts and
no feathers on the backj
(3) have crooked breastbone, himchback and other definite
deformities; j
{h) have poorly developed, narrow breast and thin covering
of flesh over all parts of the bird; j
(5) have only small amount of fat in feather tracts and be
completely lacking in fat on back and thighs j
(6) have large skin bruises, small flesh bruises and
severe breast blisters;
(7) be slightly crippled.
It must be free of broken bones and of external evidence of disease or
other conditions which vjould render it unfit for food.
Reject .
Any bird below C or No. 3, that is, a bird that shows evidence of disease
or that has large flesh bruises, severe discolorations, severe injury,
emaciation and other similar conditions which will render the bird unfit for
human food.
Tolerances ,
The recommended tolerance policy would allow that 10 per cent of the birds
in a coop should be of the grade immediately below that assigned, except
that no rejects should be permitted in Mo, 3. Tolerances with respect to
the quantity of food in the birds* crops are also specified.
Quality C or No, 3 ,
Each bird may
'in
90.
Appendix 2
Operating Ebcpenses — ^Petaluma Live Poultry Auction,
July 19li8-December 19k9
!
Proportion of
Expense
operating margin
July-
January
July-
January-
December
December
December
December
Operation
19U8
19ii9
19Uo
19U9
cents per pound
per
cent
Auctioneer's fee
.2lii
.123
IU.26
8.ii3
Labor— receiving
.1;82
.3U7
32.IU
23.75
-office
.173
.lUi
Ip.oo
7.8U
Travel
.006
,002
.39
.11
Repairs and supplies
.0^9
.061
3.25
ii.l7
Utilities
.006
.018
.Ul
1.21
Rent
.032
.06)4
2.IU
i+.Uo
Depreciation
.137
9.U0
Reserve for credit losses
.016
,02$
1.10
1.73
Pro rata general
.058
U.18
U.Ol
association overhead
.063
Total expenses
l.Olil
.9li9
69. U58
65.05
Less credits-transportation
.002
.058
.11
3.95
-feed charges
.039
.030
2.U6
2.03
Net expenses
1,000
.861
66.88
59.07