Total expense of freight, commissions, etc., for delivery to manufacturer in England or Continent.. (1) Total expenses of distribution (2) Cost at farmer's warehouse in North Carolina. (3) Gross cost in foreign manufacturer's hands.. $22.50 32.50 $30.00 to 50.00 $62.50 to 82.50 From these figures it appears that the cost to the foreign consumer of this low grade of leaf tobacco laid down at his factory ranges from $62.50 to $82.50 per hogshead, according to the price paid to the producer, which ranges from 3 to 5 cents per pound. Out of this amount of gross cost $32.50 is to be taken for expenses of distribution. Whatever the price paid the producer, between these limits, the distributing expenses remain constant; that is, whether it be 3-cent tobacco or 5-cent tobacco, the distributing expenses are substantially the sam The balance goes to the producer. The proportion of producer's to distributer's part in the gross cost is as follows: Evidently the producer's proportion of the market value to the manufacturer increases directly with the price he receives for the tobacco; while the higher the price paid to producer, the lower the proportion that goes to the distributers. (b) Expenses of exporting a 1,000-pound hogshead of leaf tobacco. Rent, superintendence, interest, taxes, wear and tear, etc 7.50 Total expenses f. o. b. cars inland market... 12.50 Cost of shipping (freight), selling, etc., to manufacturer in England or 26.00 (1) Total expenses of distribution. 38.50 (2) Cost at farmer's warehouse in North Carolina or Virginia at 7 to 9 cents per pound..... $75.00 to 90.00 113.50 to 128.50 (3) Gross cost in foreign manufacturer's hands. On the basis of this statement the gross cost to consumer of leaf tobacco of this grade, laid down at factory in Europe, is apportioned between producer and distributers in the following manner: It appears again that not only does the producer's proportion of the gross cost to the consumer increase with the increase of the latter value, but that with each increase in value to consumer the proportion to the producer increases and the proportion to the distributers decreases. (c) Expenses of exporting a 1,000-pound hogshead of leaf tobacco. Cost of shipping (freight), selling, etc., to manufacturer in England or Continent... 28.00 Total cost of distribution.. 43.00 Cost at farmer's warehouse in North Carolina or Virginia at 12 to 22 cents per pound $125.00 to 225.00 168.00 to 268.00 Gross cost in foreign manufacturer's hands. On the basis of this statement the gross cost to consumer of this grade, laid down at factory in Europe, is apportioned between producers and distributers in the following manner: If, in summing up, we compare this series of proportions, we notice that with each rise in gross cost to consumer, or in consumer's value, there is an opposite tendency in the producer's proportion compared with distributer's proportion, into which this gross value is divided. With each rise in consumer's valuation the percentage to the producer increases and the percentage to the distributers decreases. Tobacco in the Southern States, in passing from the farm to the factory, goes through two separate sets of hands-the warehouse and the packing house. Usually the farmer brings it from the tobacco barn to the warehouse, when it is divided into small heaps on the basis of quality. Here it is auctioned off at a small auction fee to buyers, who are either manufacturers and their agents or buyers, whose business it is to work over varied lots of leaf in preparation for manufacturers in different parts of the world. The largest manufacturers in the United States have their own buyers located at the leading leaf markets. The thousands of smaller factories, however, depend on the buyers who purchase leaf at farmers' warehouses, work it over, and put it up in hogsheads, according to the requirements of the trade. (1) The warehouse charges amount to about 64 per cent of the value of the tobacco on the warehouse floor. The following details indicate the system of charging for the transactions involved at the public warehouse: Charges for selling farmers' tobacco from wagons on warehouse floors:1 Unloading and weighing, 10 cents per 100 pounds, 24 per cent on gross amount of sale; on lots weighing less than 100 pounds, 15 cents auction fee; lots weighing 100 pounds and over, 25 cents auction fee. Last season Kinston, N. C., sold 9,234,000 pounds tobacco at an average of $6.30 per 100 pounds, probably sold in lots averaging 150 pounds. Total number of pounds, 9,234,000, at $6.30. 24 per cent on amount of sales 10 cents per 100 pounds. 61,560 lots of 150 pounds, at 25 cents. $581, 742.00 $14,544.55 39, 168.55 Cost $39,168.55 to sell $581,742 worth of loose tobacco, or 64 per cent of the farm price. (2) Among the elements of expense in handling leaf tobacco in the South and West must be reckoned that of extra care required in packing, according to the quality of the leaf. The cost of packing low-grade leaf in the South and West averages 75 cents per 100 pounds in the packing houses; for average grades of tobacco it is $1 per 100 pounds, and for wrappers it is $1.25. These figures are practically true of the preparation of tobacco both for domestic and for the export market, but the usual charge for working high-grade leaf for export is as high as $1.50 per 100 pounds. (3) The relation of the largest tobacco manufacturers to the producer has been the subject of much controversy. It has been alleged that in the United States the effect of the tobacco trusts upon prices has been to depress them. According to recent statistics gathered by a contemporary journal, it was shown "that about 240,000,000 pounds of tobacco were sold on the warehouse floors in Virginia and North Carolina, to say nothing of South Carolina, which sold about 20,000,000 pounds, making an aggregate of about 260,000,000 pounds sold on the warehouse floors of the three States. Of this amount the American Tobacco Company purchased about 35,000,000 pounds, or less than one-seventh of the amount sold. Now, how can any firm or corporation dictate prices of a raw article when that concern purchases only one-seventh of the amount sold? As regards this market (Danville, Va.), it is the largest bright loose-leaf tobacco market in the world, the annual sales of which amount to 50,000,000 pounds, and is really the market by which prices on other markets are gauged. On this market the American Tobacco Company buys on the warehouse floors less than oneninth of the total sales, with several independent firms each buying fully as much as the American. The presence in market of buyers representing the large manufacturing interests on the one hand and the individual buyers on the other, results generally in a high degree of competition. There are few localities in the South in whose more important leaf markets there is not quite as much competition as there is in the cotton markets. In the case of tobacco, as in that of cotton, a large enough proportion of the crop is always destined for export to prevent any particular interest from having its own way to such an extent as to fix the price. However much to an outsider it may seem that a large buyer may control the market, it is not what other buyers find to be the fact when they enter the market for their own supplies. Neither the care required in handling nor the warehouse expenses of sale nor the relation of large buyers to the market seem either singly or severally to be accountable for the downward tendency in the prices received by producers for tobacco. Nevertheless, the fact of such tendency, coupled with a more or less constant national yield, is placed beyond dispute. It is also true locally that markets whose total sales have been practically constant have suffered a more or less steady fall in farm prices paid for tobacco. (4) Fall in farm value of tobacco.-One can see how much the farm value of leaf tobacco has fallen by comparing the averages for a series of years at a given market. At Winston, N. C., the following sales were made for the 10 years. 1Figures furnished through the kindness of H. J. Bass & Co of Kinston, N. C., to represent expenses of marketing at a smaller market. It is to be noted that though the quantity has kept pretty constant, the total and the average values have tended to decline. Within the period considered the average price fell from $11.11 per 100 to $6.32 per 100, or 43 per cent. This, too, in one of the best manufacturing markets in the country. The cost of distribution was not to any appreciable extent increased in this period. If anything, the competition of warehouses for the sale of the producer's crop reduced the expenses of marketing. Nor have the railway charges been increased. Some other cause or causes than expenses of distribution must be sought to account for the decline in prices of leaf tobacco at this market, in the 10 years from 1887-88 to 1896-97. It may possibly in part be found in the crusade against the use of tobacco by the youth-a movement which would logically not stop without affecting adult consumers generally. But this alone is not an adequate explanation. 166A-01-21 PART NINTH. THE DISTRIBUTION OF WOOL. 1. The distributive situation of the American wool producer... 2. Number and capacity of woolen mills, by States 3. Standing of the United States in the world's production. 4. Range and variety of wool prices. 5. One main cause of low prices... 6. The divided policy of sheep husbandry. 7. Apparent effect of tariff of July 1897, on producers. 8. Shrinkage as a factor in distribution.. 9. The methods of marketing wool.. 10. The expenses of distribution. 11. Expenses of marketing wool at St. Louis.. 12. Eastward rates on wool.. 13. Wool receipts and shipments at Chicago. 14. The wool trade of the Pacific coast 15. Local consumption and farm prices 1. THE DISTRIBUTIVE SITUATION OF THE AMERICAN WOOL PRODUCER. The productive area of woolgrowing in the United States has steadily widened westward and is now spread out north and south over the States grouped along the Rocky Mountains, with a tendency to concentrate in the Northwest, in the Southwest, and along the Pacific coast. The centers of consumption tendmores and more to concentrate in the Northeastern States. In 1890, 98 per cent of the wool consumed in the United States, including domestic and imported wools, was manufactured by the 8 states of Massachusetts, Pennsylvania, New York, Rhode Island, Connecticut, New Hampshire, Maine, and New Jersey. Among the centere of manufacture Philadelphia ranked first, Providence second, Lawrence third, Lowell fourth, and New York fifth.' It will be seen that the distribution of the domestic wool product involves the accumulation of the greater portion of an annual yield from the most western parts of the country and its disposition among the consuming centers in the most eastern part of the country. Stretching between the principal centers of consumption and the principal areas of production lies a minor group of productive States, consisting of Pennsylvania, New York, Ohio, West Virginia, Michigan, and Wisconsin. These States, all lying east of the Mississippi, yield but 14 per cent of the total domestic product, some portions of which are consumed in local mills. The greater portion of the annual wool crop has to be carried across the continent from the producer beyond the Mississippi to the consumer on the Atlantic coast. Somewhat more exactly stated, about three-fourths of the washed and unwashed wool product of 1898, excluding pulled wool, was grown west of the Mississippi River and one-fourth in the States east of the Mississippi River. The problem of distributing the annual yield is practically a transcontinental movement and partakes of the general nature of this trade and traffic from West to East-that is, the wool clip is first collected at western points of accumulation within the productive areas, thence it is gathered into larger interior points, such as Chicago and St. Louis, or shipped directly East by manufacturers' buyers where the visible supplies are accumulated; from these points the manufacturing stocks in the East are replenished, so far as domestic wool is a factor in the annual consumption by home manufacturers. For the fiscal year 1897-98, 389,000,000 pounds were retained for consumption out of imports and domestic yield; 259,000.000 pounds was the domestic yield, less than half a million pounds of which were exported; hence domestic consumption relies upon the home product for twothirds of its wool. This indicates in a general way the relative importance of and foreign domestic wool supplies in the American market. 1 Census of 1890, Manufacturing Industries, Part III. 2 Sixth Annual Report Montana Bureau of Agriculture, 1898, page 110 |