must be carried on continuously in order to maintain preference for one commodity over another of similar usefulness. Those who advocate the increase of the use of various food commodities by the advertising medium should recognize that the human appetite has certain limitations. Consumer attitudes and preferences, as well as the purchasing power of the housewife, play a most important part in the consumption of fruits and vegetables, especially during times of depression, when cheaper or lower grades of many products actually seem to receive preference over the higher grades. A high percentage of the consuming public must calculate carefully the cost of food, fuel, and other necessities for sustenance. The food value of such commodities as potatoes and apples probably does not change as between low- and high-grade products. Diversity of use may provide a means of increasing distribution of certain commodities, but at the same time may bring these products into more direct and deadly competition with others in the fruit and vegetable field. Those products which may by processing be diverted to other uses, are temporarily removed from immediate competition with other goods in their class, but they must at some time come into direct competition with other agricultural commodities. CONCENTRATED BUYING A survey made by the United States Department of Agriculture discloses that in 1936, of the fruits and vegetables sold in 40 cities 23.1 percent was handled by chain stores. The percentage of these products handled by the chains varied all the way from 1.5 percent in St. Paul to 47.5 percent in Rochester, N. Y. More than half of the chain-store purchases of these products, or 17 to 20 percent of the total volume handled through all types of retail stores, are made upon a volume basis through subsidiaries or agents. Chain-store groups claim that before they organized subsidiary buying units, difficulty was experienced in securing their needs upon a reasonable basis through regular trade channels. They also contend that the appearance of their buyers upon the street frequently resulted in arbitrary and unjustified advances in market prices. In other words, as they claim, the offer to purchase one or a few cars of a given commodity makes no special impression on the market; whereas, if a purchaser makes inquiry for 20 or 30 cars, the impression immediately prevails that there is a scarcity, and there is a quick advance in price. Following a rather widespread disapproval on the part of the public— especially producers of the practice of chain stores in making “loss leaders" of agricultural products during periods of plenty, a move was 8 CROW, W. C. WHOLESALE MARKETS FOR FRUITS AND VEGETABLES IN 40 CITIES. U. S. Dept. Agr. Circ. 463, 142 p., illus., 1938, p. 140. FARM (REDIT ADMINISTRATION made by the cooperatives in 1936 to induce the chain-store groups to me & more friendly attitude toward grower-owned and-controlle marketing associations. On several occasions coordination between the activities of the chains and the cooperatives has been mutually beneficial. Through close cooperation between the cooperatives and the chainetore outlets in this country, more efficient distribution could be obtained to an even greater extent than is possible in some of the foreign countries, where consumer cooperatives perform practically the same functions as the chains in this country. On the one hand we have the cooperative representing the grower in the production of quality products, grading, packing, and standardizing in a thoroughly efficient and economical manner; on the other, we have several large chain-store groups and a number of smaller ones, highly efficient in retail distribution, handling, in the aggregate, around 29 percent of all food products consumed in this country. By linking this program with the efficient and highly specialized outlet channels, the producer should be able to obtain a favorable return without unduly burdening the ultimate consumer. Growth of Cooperative Marketing FARMERS' marketing associations in the fruit and vegetable field at first were more or less informal local groups. The purpose usually was to assemble considerable quantities of the products so as to facilitate grading, packing, and marketing. The success of certain organizations handling large quantities of citrus fruits first attracted widespread interest of growers to the possibilities of cooperative marketing for other fruits and vegetables. A pronounced increase in the number of associations marketing fruits and vegetables began about 1900. Many of the present cooperatives in this field have been in operation more than a quarter of a century. Of the 10,752 farmers' cooperative marketing and purchasing associations which were operating in the United States in 1936, 1,104 were fruit and vegetable associations.10 These 1,104 associations had a combined membership of 141,696 and did a business of $274,406,000 during 1936. As already mentioned, successful cooperatives frequently lead the #U, H. DEPARTMENT OF COMMERCE. ВТАТЕН. CENSUS OF DISTRIBUTION. BUREAU OF THE CENSUS. FIFTEENTH CENSUS OF THE UNITED RETAIL CHAINS. 19 HYRE, FRENCH M., and POWELL, WHITON. A STATISTICAL HANDBOOK OF FARMERS' COOPERATIVES, 1936. Farm Credit Administration Bull, 26, 1938. way in advances for the industry as a whole. A group of producers' organizations in the Northwest led the way in the improvement of quality, grade, and pack of apples from that section and in other progressive programs for the industry. For example, in 1936 four of these organizations combined their efforts in the development of a coordinated advertising program. A master brand was adopted which did not replace nor minimize the importance of the well-established association labels. A sizable advertising fund was created by means of an assessment on each package marketed, an expert was employed, and a sales promotion program carried out upon a rather extensive basis. Such measures are usually slow to evidence results, but there was unmistakable proof of the efficiency of this venture. As an illustration of the task involved in carrying on an advertising campaign sufficiently intensive to have a majority of leading brands of a commodity carry through to the consumer or even to the retail handlers, we need only note that during the two seasons 1936-37 and 1937-38 over 200 brands of Northwest apples were sold on the Chicago auction. This does not include various other brands sold outside the auction. Thus, it becomes evident that the program of developing a master brand and concentrating upon advertising it is a more practical means of making customers appreciative of the northwestern apples as a commodity than trying to develop a trade-mark consciousness. Cooperatives handling citrus in California and Florida have for many years combined advertising with dealer service and other sales promotion work. The increase in the per capita consumption and the maintenance of a profitable price level for the industry over a period of years, in the face of rapid and large increases in production, has furnished ample evidence of the efficiency of this work. Some of the brands of the citrus cooperatives are as well known as any of the commercial trade marks in agriculture or allied industries. In the vegetable industry we find many instances of successful cooperative endeavor. Likewise, producers of berries of various types and varieties avail themselves of this method of handling in an effective way. The cranberry industry affords an outstanding example. When we consider the amount of business transacted by a few of the larger associations, it appears that hundreds of the small cooperatives must be too small to carry on similar operations efficiently. In fact, many of these are little more than assembling agencies for commission houses. Yet the picture has its bright spots. Failures among cooperatives have been relatively few and, despite all hazards surrounding their operations, many cooperatives with a modest beginning have steadily increased in efficiency of operation and volume of business transacted. 84534°-38---5 FARM CREDIT ADMINISTRATION Functions of the Cooperative STABILIZING PRODUCTION OOPERATIVES frequently have been the most powerful agencies in the stabilization of production. Members and officials of these organizations are experienced and are thus in position to exercise wise judgment; whereas some distributors and commission houses in the markets, with little or no practical experience in the production field, but strongly influenced by the desire to acquire tonnage to handle, are inclined to speculate. This encourages rapid and unreasonable expansion of acreage. As an illustration, the potato acreage in the Hastings, Fla., district, where cooperatives are dominant distribution factors, has remained rather constant except as reasonably influenced by market outlook and other measurable factors; whereas, in south Florida, an area of limited cooperative activity, the acreage has increased many fold during the last few years. be In general, where growers are left to determine acreages uninfluenced by promoters, distributors, or other interests, vegetable crops may expected to fluctuate within narrow limits and to be held upon a reasonable basis. Vegetable production has been described as the "poker game of agriculture." Growers have short memories. High prices one year, increased acreage with low prices the next, and so on alternately by seasons, so long as outside or artificial influences are barred, is the usual pattern in this industry. When outside influences come in and assume a portion of the speculative risks, growers are influenced to increase acreages unduly. If someone is willing to assume a considerable share of the hazards, a larger operation appeals to the grower. When credit is obtained through regular channels, and the grower is responsible for repayment, the temptation to take the long chance is greatly reduced. On the other hand, if a strong grower cooperative is active in an area, there is still greater likelihood that a rational program will be followed year after year. Through the production credit associations sponsored by the Farm Credit Administration, producers have available a dependable source of production credit. It is true that certain adaptations will be necessary to make this system of practical value to producers of highly perishable crops. The hazards of production are so great as to render it impractical to extend credit solely upon the margin between the cost of money and the interest rate permitted by statute. Hence, it is necessary to develop some means of establishing reserves as a safeguard against losses incident to production and marketing hazards. As has been demonstrated, this probably can be accomplished best through a cooperative arrangement between the local production credit associations and the cooperatives. STANDARDIZING QUALITY While the commercial handlers of fruit and vegetable products have steadfastly championed the cause of improvement in standardization, it has remained for cooperatives actually to perform this most difficult task. When the individual producer grades and packs his own commodity, his judgment is naturally influenced by the sense of ownership; whereas a cooperative, operating a central packing shed or an unbiased inspection service, is in a better position to offer products of uniformly high quality in attractive volume. Under certain conditions elasticity in the utilization of grades and standards is necessary in order that producers may obtain the greatest possible returns from their investment and labor. During abnormally unfavorable producing seasons, for example, the quality of a product may be so reduced as to make it impossible to put on the market goods comparable with those offered during more favorable seasons. Usually such quality conditions are accompanied by reduced production; hence, there is a demand on the part of the consuming public for the commodity and necessarily the producer has need for the revenue. Under such conditions it is to the advantage of both producer and consumer to allow the crops to move to market and sell for whatever they will bring. Many of the well-established cooperatives have not only developed grades and standards of the most exacting nature but have established trade marks and, through advertising and salesmanship, have built a reputation of inestimable value. Since there is no organized method FIGURE 8.-FEDERAL INSPECTOR AT WORK. Highly trained, impartial representatives of the Department of Agriculture inspect thousands of shipments of fruits and vegetables annually. |