farmers of Iowa, that is a very costly operation. I can't for the life of me understand why those packers would deliberately throw away that advantage that they have unless there was some sort of an agreement to that effect.

The practice at the concentration point is peculiar in that they put what they call the board price, chalk up the price on the board each morning what they will pay for the top grades. If that price be 3 cents a pound, it means that the farmer who brings a wagonload of hogs into the market is paid 3 cents a pound for the quality that is adjudicated as of that quality; but to a trucker or buyer 50 miles away, who makes a practice of hauling to this point, that may mean $3.30. That 30 cents additional is justified by them in that manner, that the longer haul means more shrink, and they can therefore afford to pay more. Any practical stock buyer or farmer knows that it is impossible to look at a hog section out of a truck and tell whether it has been hauled 5 miles or 50. The practice, in my opinion, is designed for only one purpose, that of absolutely controlling the territory that they seek to control, and pay to the buyer out at the far edge the same net price that the farmer receives 5 miles from the plant. Those facts are undenied. I have a letter from one of the packing houses that might interest you, addressed to the Governor of Iowa, while this legislation was in process of passage, Jacob E. Decker & Sons, of Mason City.

Senator POPE. Did you pass the legislation?

Governor KRASCHEL. The Senate passed it with only four dissenting votes. I must say much to the discredit of all of us out there, the lobby moved right over to the House and prevented it coming out of the sifting committee, even though we had reached an agreement. They didn't live up to their agreement.

Our original bill provided for State checkers, official weighers, and graders at each point to do exactly what is proposed by this act. We finally modified that because they objected to the price, and we granted them--and I will leave a copy of the bill with you for your information. All the bill required was that they provide our secretary of agriculture daily with the prices that they paid. All we asked for was an absolute record of the facts of what they did pay, and their lobby defeated that.

Mr. Decker under date of January 5 to Governor Herring states-
Senator NORRIS (interposing). Who is Mr. Decker?

Governor KRASCHEL. Mr. Decker operates a packing house at Mason City, Iowa, Jacob E. Decker & Sons. This letter is referring to a newspaper article that had been written by a proponent of the direct-buying plan. You will note in the article he says:

We pay as much at Emmetsburg as we do in Mason City. This may seem strange to you but there is really nothing strange about it.

You understand Mason City is the location of their plant.

It has always been my contention that hogs out of first hands, and that is off the farm, bring the same price anywhere in the State of Iowa. Today our board price at Mason City and in all of our buying stations is 3 cents a pound for top hogs, and it is our experience that a total buy for any one day will cost about 15 cents a hundred more than our board price.

Which, if this letter be taken at its face value, would indicate that even a wider margin would be paid for hogs coming from the extreme limits of the territory, because he says that a 3-cent price on top

hogs means a 3.15 average for the total day's buy, evidently including lower-grade hogs as well.

The only other statement that I wish to make to you is that a few years ago in Iowa-and I might say that Iowa and the adjoining States, that portion of the adjoining States that border on Iowa is the most fertile field for direct buying. It is the only territory in the country where the hog population is concentrated sufficiently to make it profitable. Until 10 years ago, the cooperative shipping associations over the State were very numerous, and so long as 2 or 3 hundred farmers banded themselves into a cooperative association and employed a manager to sell their product to the best of advantage, that constitutes direct selling and is designed for the benefit of the farmer.

But when the packer comes along and buys that equipment, and maintains an operator to buy from the farmer-not at the highest possible price, we know that-it is designed to benefit the packer and not the farmer.

Senator FRAZIER. They buy at the lowest possible price?

Governor KRASCHEL. Certainly. That is why they employ a man to operate that big point. May I point out this fact to you in absolute contradiction of what is claimed by the proponents of the direct buying? It costs a Chicago packing house more money to buy hogs direct than it does for them to absorb all the marketing charges of the old-fashioned normal system, going through the central market.

He pays the same freight from an Iowa concentration point. He has the same loss from cripples and sickness and death. He pays the yardage in the Chicago stockyards. He doesn't pay a commission charge, but as against the commission charge, he pays for the maintaining of a concentration point and a buyer out in the country. He has at least done this, if nothing more: He has converted what was once a commission man working for the farmer into a direct agent for the packer, working for him and buying the product.

The loss of cooperatives in our State has been terrific. The choice method of putting them out of business was the packer coming in and operating alongside of them, possibly for a while paying more than the market justified until they were discredited with their own people and the farmer had proven to him-in answer to your question of a minute ago-that they could pay more money by direct buying. That put the cooperatives out of business. I have letters to that effect in my file that I would like to leave with you.

Senator POPE. Do you believe the same conditions exist in the intermountain section of Idaho and Utah and so on, so far as direct buying is concerned?

Governor KRASCHEL. Senator, I am not so familiar with that territory. My work in the livestock industry has covered 26 or 27 States. I would like to make this statement for the record: That while we in Iowa are particularly interested in the direct buying of hogs, we see a rapid increase in the method as it applies to cattle. I think 52 percent of our calves are now being purchased direct. It is rapidly reaching cattle. It is going into the poultry products. going into the dairy products. The packers own practically all of the produce houses in our State, so that the movement-while it is directly affecting hogs today-is very rapidly engulfing all of the meat and dairy products of our State.

Senator NORRIS. We are very much obliged to you.
The next witness is Mr. N. K. Carnes.

STATEMENT OF N. K. CARNES, GENERAL MANAGER CENTRAL COOPERATIVE ASSOCIATION, ST. PAUL, MINN.

Mr. CARNES. I am now and for more than 3 years, have been general manager of the Central Cooperative Association, and for the preceding 8 years was Assistant General Manager of that Association. The Central Cooperative Association, with offices at the public market at South St. Paul, is a nonprofit, cooperative livestock marketing agency, wholly owned and controlled by producers of livestock. Its members are cooperative livestock shipping associations and individuals, located and residing in Minnesota, Wisconsin, North Dakota, South Dakota, and Montana, and representing over 125,000 individual producers. It is the largest single livestock selling agency in the world. It has been in existence since August 1921 and has handled a gross business of over $335,000,000, and has refunded to its members, out of earnings, from 30 to 35 percent of the total commissions collected, amounting to more than $1,318,000.

Under the Agricultural Adjustment Act, it is the declared policy of the Congress of the United States to establish and maintain such balance between the production of hogs and the consumption of the products of hogs and such marketing conditions therefore, as will reestablish prices to farmers at a level that will give hogs a purchasing power with respect to articles that farmers buy equivalent to the purchasing power of hogs, which existed during the base period, August 1909 to July 1914.

There are, undoubtedly, several factors responsible for the depressed livestock prices. Among the many influences affecting hog price level, four major factors are operatign today that have never before been in effect all at the same time. In my opinion, these are:

1. Restriction of export outlets.

2. Low consumer buying power-a result of the depression; people out of work, working part time, or for lower wages.

3. Direct buying.

4. Concentration of large volume purchases of meats in the hands of a few buyers-as a result of the development of chain stores.

The administration has launched upon a program designed to increase hog prices for producers by adjusting hog supplies to the demands for pork and pork products, which now exists at home and abroad. In the face of the present acute emergency, such a program is the first and most important step to be taken in the establishment of a sound foundation upon which parity prices for hogs may be built.

The third factor is the one about which we are concerned today. During the base period, about which we have all read and heard a great deal during recent months, agriculture was on a basis of economic parity with other lines of business enterprise. During that time, a very high percentage of all the hogs produced in this country was being marketed through the open competitive markets where the law of supply and demand was allowed to function practically wihout restrictions. At that time, I think that the public markets could have been defined as the "crucibles in which livestock prices are hammered out in the white heat of competition."

Local livestock markets, concentration points, direct buying points and reload stations, and so forth, appeared in the Corn Belt States

at the turn of the century, but not much direct buying was done until within the last 10 years. Since the early 1920's, these points have increased in importance.

DEPARTMENT OF AGRICULTURE, BUREAU OF AGRICULTURAL ECONOMICS, Washington, D.C., February 12, 1934. Memorandum to all offices re sources of livestock purchased by wholesale slaughterers in the United States

In view of the interest being shown at this time in the subject of direct marketings of livestock, it is thought that the accompanying tabulation, designed to indicate, on a percentage basis by years, the slaughter of livestock purchased in public stockyards and the slaughter of livestock purchased at places other than public stockyards, will be of interest and value to all offices of this Division.

The figures in this table are based on monthly reports to this Bureau from most of the wholesale slaughterers in this country. These reports show packer purchases at public stockyards and their purchases from "all other sources" for slaughter. The latter are interpreted by us to be "directs". From these reports computations are made to determine the percentages of each class of livestock bought "direct" and at public stockyards each month by this group. These percentages are then applied to the monthly federally inspected slaughter figures. The monthly figures thus obtained are totaled and the ratios of these yearly totals to the total yearly federally inspected slaughter are the percentages shown in the attached table. These percentages differ slightly from those published in Crops and Markets and in the Department Yearbook because of slight differences in the method of computation.

The yearly percentages that have been published in Crops and Markets were arrived at by using as the base figure the total number of animals slaughtered by the reporting concerns during the year, rather than the total inspected slaughter. In other words, the yearly percentages in the attached table have been weighted by the figures representing monthly federally inspected slaughter, whereas the yearly percentages published in Crops and Markets are simple averages of the totals of the firms reporting.

The advantage of weighting by the federally inspected slaughter is that by this method the monthly accumulation will equal the yearly total.

It is our present plan to include the information carried in the attached tabulation in an annual edition of the weekly statistical report released by the Washington office of the division entitled "Market Reviews and Statistical Summaries of Livestock, Meats, and Wool." This annual edition will be released some time in March.

Very truly yours,

C. V. WHALIN,
In Charge Livestock, Meats, and Wool Division.
Sources of livestock purchased in the United States (percentage basis)

NOTE. The above tabulation was prepared to accompany memorandum G-481 to field offices. See memorandum names for explanation.

From the best information available, it appears that from 200 to 250 local livestock markets, not including local packing plants, were operating in the 10 Corn Belt States by early 1933. A report issued by the Bureau of Agricultural Economics of the United States, Department of Agriculture, a copy of which is attached hereto and designated as exhibit no. 1, shows that during that year, 43.85 percent of the hogs marketed in this country were marketed direct; 16.52 percent of the cattle; 26.32 percent of the calves; and 21.28 percent of the sheep and lambs. These figures demonstrate that livestock marketing operations are being rapidly decentralized.

To further emphasize this statement, I would like to call your attention to a few facts brought out in a statement made by Prof. R. C. Ashby, associate chief of livestock marketing, University of Illinois.

In 1925 there were only two local livestock markets in the State of Illinois... These two points were Savanna and Keithsburg. By early 1933, there were 19 local markets and 17 local packing plants, not counting those in Chicago, Peoria, and East St. Louis. Additional local markets have been put into operation during 1933.

There were 60 such markets in operation in Iowa by early 1933 in addition to the 6 large and important packing plants commonly referred to as "interior packers."

Indiana had 80 local livestock markets and 27 local packing plants (excluding the 5 cities having federally supervised stockyards).

Ohio had 16 local livestock markets in operation in 1925 compared with 50 points by early 1933, and, also, 22 local packing plants, excluding the 4 cities having federally supervised stockyards.

In Minnesota 9 important local livestock markets were in operation by early 1933. Nine were in operation in the Dakotas; 11 were operating in Nebraska; and 5 in Missouri. Recently, local markets have been opened at several points in Michigan, and several others in the State of North Dakota.

Several reason have been suggested by Professor Ashby as explaining the establishment of so many local livestock markets in a relatively short period of time. The major reasons are:

1. Freight rate advantages at local markets (terminal markets at a distinct disadvantage because denied "in-transit" rates). This is particularly true of interior packers.

2. Packer competition, for the purpose of either (a) getting first chance at the most desirable hog areas, or (b) raising the price of hogs to their competitors. (Doubtless the primary purpose of the big packers in establishing direct buying points in Iowa during the 1920's was to increase local buying competition and thus raise the price of hogs to interior packers.)

3. Construction of improved roads and rapid increase in volume of livestock transported by truck have contributed in two ways to the development of local markets: (a) Motorization of livestock transport has made possible assemblage of livestock in volume at local markets; (b) trucks have taken much livestock traffic (terminal market consignments) from the railroads. Some railroads have actively encouraged the establishment of local livestock markets on their respective lines as an effective means of meeting truck competi-tion. Other railroads competing for their share of the traffic, have sought to locate offsetting local markets on their own lines. It is conceivable that railroad officials, even railroad systems, may become interested in the development of local markets to the disadvantage. of the terminals.