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selling price must double the purchase price in order to meet losses. As the retailer receives the goods he again adds 100 per cent or thereabouts to the cost to the consumer. It is easy to see how high costs necessarily follow such methods of marketing. If, in addition to these costs, terminal-storage and cold-storage charges are added, as is often necessary in order to maintain even distribution, and the retailer sells the goods by telephone and delivers them by horse or motor vehicle, all of these so-called conveniences must ultimately be paid for by the consumer. Under the present system it is possible for some of the common perishable products to carry eight distinct charges before they reach the consumer, all of which are legitimate; and as these charges on perishable products must be high in order to fortify the owners against loss, the reason for high prices for standard vegetable crops is easily explained. So long as society is constituted as it is and demands the services it now requires of the tradesman, little relief can be expected after the products are delivered to the dealer.
THE COOPERATIVE SYSTEM.
REGULATION OF PRODUCTS.
A system of marketing, based on cooperative action rather than on independent action, has been developed in some localities and at the present time is attracting much attention in others. Up to the present cooperative activities have been confined almost exclusively to the fields of production, transportation, and first sales. It is difficult for the producer to go beyond the first change of ownership unless he has a cooperating consuming public. Now that the consumer really feels the stress of high prices and has come to realize and appreciate some of the factors which enter into them, it is clear that the task of solving the problem of cheaper food products lies with him as much as with the producer.
Cooperation among growers solves the problems of the package by making it uniform and standard, it guarantees the pack by employing competent inspectors, and insures uniformity of grade. Cooperative action enables the cooperators to act as an independent individual, and since they employ a uniform package, a standard pack, and uniform grades a given product of a community can be shipped in carload lots at a lower rate than is possible by local freight or express, thus effecting a decided saving. A uniform package and a standard pack and grade give a product a standing in the market which enables it to be sold for what it really is, because the guaranty of the association is behind it.
Another advantage which often follows is a local or direct sale, f. o. b. shipping point. In the eastern portion of the country the
f. o. b. sales have been made on the basis of New York prices current. The distribution of products to many consuming centers rather than congestion in a few is one of the most valuable results secured by cooperative action. Cities which are large enough to handle a single commodity in carload lots when it is purchased from the producer receive their goods direct rather than by a diverted shipment or by reshipment. The product reaches the market quicker and in better condition, and as the dealer in the small town must of necessity pay for the reshipment of the product from the distributing center it is quite as economical in most instances to purchase the product f. o. b. shipping point and pay freight as it is to purchase f. o. b. distributing point and pay freight. The price to the consumer or to the handler in the small town is reduced by one freight charge and sometimes also by the cost of commission or jobber's profit. One association has been able to sell over 90 per cent of the truck handled by it f. o. b., and this has resulted in a saving of over $150,000 annually on a $2,000,000 business. In other words, the freight charges were paid by the purchaser instead of by the producer, thus saving to the community the cost of transporting their products to the centers of consumption or distribution.
Towns too small to handle "straight" cars of a single commodity, with the possible exception of potatoes, can be served in the same manner as large towns by a system of loading which has been devised by some of the railways receiving products from the trucking districts. This system consists in loading mixed cars to order, so as to supply the needs, as near as may be, of the town to which the shipment is made. This method of handling mixed cars accomplishes a very desirable result, in that it widens the distribution of the product by reaching towns too small to handle solid cars of a single commodity and enables the dealers to purchase direct from the producer, thus insuring all the advantages of direct shipment possible by any other system of carload shipments. By the adoption of a carefully planned cropping system in the several producing centers from which such shipment is to be made a very satisfactory arrangement for both the producer and the consumer can be worked out.
If the products of various centers are to follow in succession to the same markets and are to be handled on the basis of sales f. o. b. shipping point, the producers must not only maintain standard packs and grades which are uniform, but they must also be in touch with the markets in such a way as to insure prompt and satisfactory disposal of their products. At present this is accomplished by wideawake, active dealers who know the markets and the producers as well, and by purchasing in one locality in January, in another in February, and so on from season to season, thus keep their customers supplied from the beginning to the end of the period. Neither inde
pendent producers nor associations of growers with fixed fields of production can do this. They reach the market only during the period their crops are moving. What is accomplished by the independent dealer might, however, be accomplished by cooperation among various local associations of producers. Through a federation of such associations a marketing expert might be maintained who would move with the season from one center to another. By so doing the markets would deal continually with the same individual, the grades and packs would be calibrated, because censored by the same authority at each loading point. In this way the community might accomplish for itself what is now taken advantage of by shrewd and wide-awake dealers.
REGULATION OF PPICES.
Under the system of independent action producers are creatures of circumstances over which they have no control. At harvest time they have little conception of the competition they will have to meet in the market, unless the crop is so short that it has become a matter of comment. As a rule the dealers see to it that the reports on crop prospects are high enough to enable them to buy the harvest at a reasonably low figure. It is never discovered that the crop is a little short until after it has all left the hands of the grower and is safe in the storerooms of the dealers.
Dealers keep an accurate forecast of the crop and as a rule have a good basis for their action. Growers have not done this except in a few instances, and then with marked advantage. Cooperative growing associations should establish through some central organization a plan by which accurate forecasts of crop prospects can be furnished. These forecasts should begin with the acreage in each crop zone and end with a statement of the harvest. These reports should be made at frequent intervals and should be based on accurate personal canvass by competent judges. A few seasons' records for any given locality will suffice to furnish a basis for determining the safe acreage for that section and to fix the planting and harvest dates, as well as to indicate the normal product which may be expected from a given acreage. Statistics of this character would provide a basis for working out a rational system of crop rotation and crop production.
Cooperative action with products which can be stored enables the producer to distribute the product throughout the consuming period in such a way as to meet the requirements of the market without overloading it and depressing prices. With vegetable products, such as Irish potatoes, sweet potatoes, and squashes, this is a very important consideration; the trade quickly determines the center of supply, and as soon as the markets create a
demand the spy at be fetxeting in a regular, systematic manner, so as to cause the least loss to producer, handler, and consamer. Under this system storage produs shoald never be compelled to beg a market: the demand will always find the supply. The chief advantages, therefore, of cooperative action are standard grades, standard packs, mifiem packages, shipment in carload lots, £ a b sales, a controlled rate of dispersal, predetermined destination, dispatch in the settlement of claims, and regulation of rates of transportation and of sales, so as to give each producer a standard price for a standard product.
To accomplish this is a difcult task. Human nature is the most variable and the least controllable commercial commodity. Cooperation means united action, and true cooperation in the sense in which it is used in this connection means united action for the benefit of all concerned-the producer as well as the consumer. Experience has demonstrated that the results derived from true cooperation are sufficiently important from a commercial standpoint to justify the method even though no other result were obtained.
Cooperation which involves financial risk and financial responsibility has never proved successful when based on fraternal agreement alone. To succeed in any business enterprise which requires the concerted action of individuals of different training and different temperaments, there must be a common bond of union of sufficient importance to give them a common interest. This can be secured in the business world only through a money consideration. In order, therefore, that cooperative action involving the growing, handling, transportation, and sale of perishable products may be successful it must carry a financial obligation sufficient to command the interest of the cooperators. It is true that in an association of this character the participants place at stake the return of their labor in the form of the crop produced, but in order to insure the patronage and the loyalty which is necessary to the stability of any cooperative action a membership requirement must be made sufficiently large to prevent a member withdrawing from the association for slight cause. A method which has been successfully used in some of the associations is to require a cash membership fee sufficient to raise the required capital for conducting the business of the association.
The amount of capital stock will vary with the character of the association, whether it be a growing and distributing organization or a growing, distributing, and purchasing organization. In order to purchase supplies for its members the organization will require a much larger capital than will be necessary for a growers' and distributors association only. The minimum capital for a growers'
and distributors' organization would be in the neighborhood of $2,000, while the stock necessary to add the purchasing and handling feature must be from $10,000 to $50,000. The cash membership fee should in few instances be less than $25. If the requirements of the association demand larger capital the membership fee must be increased proportionately. In addition to the cash membership requirement a bond should be given in the form of a promissory note executed by each member in favor of the association, this bond to be held in trust as long as the member remains in good standing, to serve as a guaranty for faithful adherence to the constitution and by-laws of the association. If the organization be a producing and distributing one only, this bond will never need to be used except for the purpose of personal guaranty. If, however, the organization purchases supplies for its members, these personal bonds may be used by the association as collateral to guarantee short-time loans which from time to time may be needed to cover the expenses of purchasing fertilizer, packages, or other consumable supplies.
The association should in no instance lend money to its patrons or members for permanent improvements. Its business should be confined to providing consumable supplies. By this method the community represented by the association becomes security for the loan which is needed, and by this method so-called dynamic money or short-time loans can be secured for the benefit of persons who at the present time can secure money only with the greatest difficulty and at the highest rate.
Besides the benefits. to be derived from cooperative growing, marketing, and purchasing, there might also be included banking and cooperative insurance, which is already an important factor in many rural communities. The bond which has already been mentioned in connection with the obligation of members can be used as the basis of the reserve or guaranty fund for the insurance feature. In a community where the cooperative insurance plan is already in operation the other features needed by the society might be gathered about it, as the parent society. Where cooperative growing and marketing organizations exist, they can be extended to include the purchase, loan, and insurance features. In most instances it will probably be wisest to inaugurate one feature of this comprehensive plan and develop it to a high state of perfection before adding the others.
The benefits of cooperative action in growing, transporting, and selling farm products can not be fully realized unless the members of the association each and severally consider themselves delegated to protect the interests of the association from criticism or dissension from within which would tend to limit the usefulness of the association, and they should also safeguard their community interests by discouraging the formation of competing associations. Cooperative