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Full text of "Investigation of concentration of economic power; monograph no. 1[-43]"

^^3d Sessfon^^} SENATE COMMITTEE PjRINT 

INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



TEMPOEAEY NATIONAL ECONOMIC 
COMMITTEE 

A STUDY SUBMITTED BY A COMMITTEE APPOINTED 
BY THE SECRETARY OF AGRICULTURE, TO THE TEMPO- 
RARY NATIONAL ECONOMIC COMMITTEE, SEVENTY-SIXTH 
CONGRESS, THIRD SESSION, PURSUANT TO PUBLIC RESO- 
LUTION NO. 113 (SE\T:NTY-FIFTH CONGRESS), AUTHORIZING 
AND DIRECTING A SELECT COMMITTEE TO MAKE A 
FULL AND COMPLETE STUDY AND INVESTIGATION WITH 
RESPECT TO THE CONCENTRATION OF ECONOMIC POWER 
IN, AND FINANCIAL CONTROL OVER, PRODUCTION 
AND DISTRIBUTION OF GOODS AND SERVICES 



MONOGRAPH No. 23 
AGRICULTURE AND THE NATIONAL ECONOivIY 



Printed for the use of the 
Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1940 



TEMPORARY NATIONAL ECONOMIC COMMITTEE 

(Created pursuant to Public Res. 113, 75tb Cong.) 

JOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman 

HATTON W. SUMNERS, Representative from Texas, Vice Chairman 

WILLIAM H. KINO, Senator from Utah 

WALLACE H. WHITE, Jr., Senator from Maine 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL EEECE, Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorne;' General 

•WENDELL BERGE, Special Assistant to the Attorney General 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

•SUMNER T. PIKE, Commissioner 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

*EWIN L. DAVIS, Chairman 

Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

»A. FORD HINRICHS, Chief Economist, Bur-^au of Labor Statintics 

Representing the Department of Labor 

JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel 

•CHARLES L. KADES, -Special Assistant to the General Counsel 

Representing the Department of the Treasury 

, Representing the Department of Commerce 

LEON HENDERSON, Economic Coordinator 
DEWEY ANDERSON, Executive Secretary 
THEODORE J. KREPS, Economic Adviser 



MONOGEAPH No. 23 

AGRICULTURE AND THE NATIONAL ECONOMY 

ALBERT L. MEYERS 



REPRINTED 
BY 

WILLIAM S HEIN & CO., INC. 

BUFFALO. N. Y. 



1968 



ACKNOWLEDGMENT 

This monograph was written by 

ALBERT L. MEYERS 

Senior Economist, United States Department oj Agriculture 

The Temporary National Economic Committee is greatly indebted 
to this author for his contribution to the literature of the subject 
under review. . 

The status of the materials in this volume is precisely the same as that of 
other care-fully prepared testimony hen given by individual witnesses; it is 
information submitted for Committee deliberation. No matter what the 
official capacity of the witness or author may be, tht publication of his 
testimony, report, or monograph by the Committee in no way signifies nor 
implies assent to, .or approval of, any of the facts, opinions or recommenda- 
tions, nor acceptance thereof in whole or in part by the members of the 
Temporary National Economic Committee, individually or collectively. 
Sole and undivided responsibility for every statement in such testimony ^ 
reports, or monographs rests entirely -upon the respective authors. 
(Signed) Joseph C. O'Mahoney, 
Chairman, Temporary National Economic Committee. 



TABLE OF CONTENTS 



Page 

Letter of transmittal vii 

CHAPTER I 

The Agricultural Situation 3 

CHAPTER II 

Concentration of Control in Agricultural Production 9 

Factors tending to increase concentration of production 13 

Factors tending to retard or reduce concentration 13 

Control of production by means other than ownership 14 

Control of production by Government agencies 14 

CHAPTER III 

Concentration of Control in Marketing Agricultural Products 17 

Concentration of control at local shipping points 17 

Credit control and market freedom 19 

Restrictions on trade in terminal markets 19 

Barriers to internal trade in farm produce 21 

Concentration of control in food processing 22 

Concentration of control in retail outlets 25 

CHAPTER IV 

Concentration of Control in Supplies Purchased by the Farmer , 29 

Concentration of control in retailing to the farmer 30 

CHAPTER V 

Methods of Reducing the Farm Market Spread . 33 

Marketing agreements 35 

Methods of reducing prices farmers pay 36 

CHAPTER VI 

The Farmer and the National Economy 37 

Bibliography • 43 

Index ' .. 45 

V 



SCHEDULE OF TABLES 

Page. 
1. Average per capita consumption of principal agricultural products, 

1920-37 3 

"2. Harvested acreage of crops for the United States, 1924r-39 4 

3. The changing relative importance of domestic and foreign demand for 

farm products , 6 

4. Percent distribution of number of f^rms, by size of farms, in various 

census years and changes in distribution 9 

5. Percent distribution of all land in farms, by size of farms, in various 

census years and changes in distribution. - 10 

6. Farms, 500 to 999 adres and 1,000 acres and over, as percent of regional 

total farm acreage 10 

7. Estimated number of growers and approximate annual farm value of 

crops for which marketing-agreement programs were in effect during 

the fiscal year 1939 12 

8. Commercial-trucking rates for hauling specified fruits and vegetables 

from railroads or docks to principal wholesale markets within the 

city L 20 

9. Percentages of various types of farm machinery sold -by largest com- 

panies in 1936 ... 30 

10. Indexes of industrial production, agricultural production, and ratio of 

prices farmers receive to prices farmers pay 39 

VI 



LETTER OF TRANSMITTAL 



Hon. Joseph C. O'Mahoney, 

Chairman, Temporary National Economic Committee, 

Washington, D. C. 

My Dear Senator: I have the honor to transmit herewith a study 
on Agriculture and the National Economy, by Dr. Albert L. Meyers, 
Senior Economist, United States Department of Agriculture. 

This report has been submitted to the Temporary National Eco- 
nomic Committee by a committee appointed by the Secretary of Agri- 
culture, consisting of Messrs. Louis H. Bean, Mordecai Ezekiel, 
Donald E. Montgomery, and Frederick V. Waugh, all of the Depart- 
ment of Agriculture. 

The report was written by Dr. Meyers under the supervision of the 
above committee. Dr. Meyers is one of the foreniost authorities on 
monopolistic com.petition in the United States. He is the author of 
"Elements of Modern Economics" and "Modern Economic Problems." 

The report deals with the present situation of agriculture as a part 
of our economic system and m.ore specifically with monopolistic prac- 
tices and inefficiency in the marketing system for farm products and 
for the products farmers buy. The impact of monopolistic restriction 
of industrial output and employment upon farm income, farm popula- 
tion and fai"m economy in general is extensively discussed. 

Dr. Meyers wishes me to extend liis thanks, to wliich I must add my 
own, to tiie committee named above for the extremely generous gift 
of their time and the valuable suggestions which they made for im- 
provements in the report. 

Respectfully submitted. 

Theodore J. Kreps, Economic Adviser. 

October 16, 1940. 

vn 



AGRICULTURE AND THE NATIONAL ECONOMY 



A REPORT SUBiMITTED TO THE TEMPORARV NATIONAL 
ECONOMIC COMMITTEE BY A COMMITTEE APPOINTED 
BY THE SECRETARY OF AGRICULTURE CONSISTINCx OF 
LOUIS H. BEAN (CHAIRMAN), MORDECAI EZEKIEL. DONALD 
E. MONTGOMERY, AND FREDERICK V. WAUGH, ALL OF 
THE UNITED STATES DEPARTMENT OF AGRICULTURE. 

THIS REPORT WAS PREPARED UNDER THE SUPERVISION 
OF THE COMMITTEE BY ALBERT L. MEYERS, SENIOR ECON- 
OMIST, UNITED STATES DEPARTMENT OF AGRICULTURE. 



iO—tO — So. 23- 



CHAPTER 1 
THE AGRICULTURAL SITUATION 



Tins report is an attempt to trace the relationship of agriculturo 
to the national economy both in the effects of agriculture upon the 
rest of the economy and in the impact of the economy upon the farmer. 
Wliile attention is focused upon monopoly and concentration of con- 
trol wherever these aspects are relevant, it has often been necessary 
to make the discussion considerably broader in order to obtain the 
proper perspective. Monopoly and concentration of control of pro- 
duction are of necessity discussed in terms of individual products, 
but whether the purchasing power of farmers can be increased by 
more prociuction at lower prices, whether unemployment both urban 
and on farms can be reduced b}* increased farm production, depends 
upon the effective capacity of the Nation as a whole to consume more 
of all farm products, not merely more of some and less of others. 
It depends also upon whether there is an expanding foreigii market 
or a eonti-acting one. 

A striking difference between th'^ national and the commodity 
aspect of agriculture is to be found in the record of per capita fqpd 
consumption. One of the most surprising facts with which we are 
confronted is a very nearly constant per capita consumption b}^ weight 
of total foods. Table 1 shows this consumption for various periods- 
in which business conditions are widely different. 

Table 1. — Average per capita consumption of principal agricultural products,. 

1920-37 1 
[Pounds per capita per year] 



Commodily or group 






Average 






1920-24 


1925-29 


1930-33 


1931-37 


1920-37 


Cereal products 

.-^11 potatoe-; ._ 


229 

178 
106 

315 
40 

179 

isS 

138 
28 
U 
44 
16 


226 
164 
118 

334 
45 

192 

148 
133 
32 
14 
47 
17 


211 
156 
107 

337 
46 

184 
5 
164 
129 
32 
16 
47 
18 


196 
157 
110 

328 
49 

189 
6 
169 
126 
30 
16 
45 
19 


217 

Ifo 


Dairy products: 

Milk and cream 2 


32S 


Marnifactured' 


45 


Fruits; 

Fresh 3 


186 


Dried 


6 


Vecc-u;blcs< 


151 
132 




30 


Beans, oeas. nuts 


14 




46 


Coffee, ten, «:pices, and chocolate 








Total food 


1,425 


1,476 


1,442 


1,440 


1,446 


Wool 


.1 


.■5 
29 

20 


8 
12 


5 
26 
9 


5 


Cotton : 

Tobacco i 

Flaxseed 


26 
9 
15 



1 Consumption of foodstufl's in terms of estimated weight available for sale in retail market. 
■ ^yhole milk and cream in terms of whole milk. 

' Fresh and canned fruit in terms of fresh fruit, on basis of total population, consumption of watermelons 
and cantaloups per urban inhabitant. 
< Fresh and canned vegetables in term? of fresh, per urban inhabitant. 
' Cocsuraption per person 15 years old or over, or per person of smoking age. 

Source; J. P. Cavin in .Agricultural Situation, Bureau of Agricultural Economics, January 1939. 

3 



CONCENTRATION OF ECONO'DC POWER 



These figuTes exhibit a similar constancy whether measured in 
pounds, calories, or acreages required to produce the crops. While the 
total remains nearly constant, there are, of course, changes m the 
relative per capita consumption of difi'erent i'oods— -vvdiat u e mighi call 
competition for a place in the human stomach. The fluctuations in 
the cost of the food budget coincide maiidy with changes in purchas- 
ing power of consumers. These changes result both in paying higher 
prices for given foods and in selecting higher priced foods as purchasing 
power increases. 

At the same time total agricultural production as measured by total 
acreage harvested or planted to crops has fluctuated remarkably little. 
Table 2 shows ihe acreage of certain particular crops and groups of 
crops for the period since the middle 1920's. 

Table 2. — Harvested acreage of crops for the United States, 1924-39 ' 
[1,000 acres] 



1924 

1925. 

1926. 

1927 

1928 

1929 

1930 _ 

1931 ._ ._-. 

1932 

1933 

1934 

1935 

1936 

1937 _ 

1938 

Average, 1924-39 

Highest deviation 
from average per- 
cent 

Lowest deviation 
from average per- 
cent 



98, 660 
12.1 
10.0 



All wheats Cotton 



Tobacco Potatoes 



52,463 
52,443 , 
56,616 I 
59, 628 
59, 226 
63, 332 
62, 614 
67, 68) 
57, 839 
49. 438 
43,400 
51, 229 
48, 863 
64,422 



S3, 696 
56, 422 



39, 501 
44, 386 
44, 608 
38, 342 

42, 434 

43, 232 
42, 444 
38, 704 
35, 891 
29, 383 
26,866 
27, 509 
29, 755 
33, 623 
24, 248 

35! 303 



26.4 
32.2 



1, 702. 
1, 750. 
1, 628. 

1, 565. 
1,864. 
1, 980. 

2, 121 
1, 987. 
1, 403. 
1, 738. 
1, 278. 
1,437. 
1, 438. 
1, 750. 
1,600. 
1, 942. 
1, 698. 



3, 106. 1 

2. 809. 8 

2. 810. 8 
3, 131. 8 
3. 499. 
3, 018. 7 
3, 102. e 
3, 466. 6 
3, 549. 3 
.% 411.0 
3, 597. 
3, 541. 1 
3. 062. 6 
3. 184. 9 
3, 022. 6 
3,031.7 
3, 212. 3 



ISprinei- 46 crops 46 crops 
palcrops [harvested planted 



330,977 I 
334,952 
333,853 I 
332.468 ! 
336,259 I 
339, 346 I 
342, 420 i 
336, 638 
342, 680 ! 
310, 945 I 
274. 190 I 
309,057 I 
292,603 1 
315,898 i 
314,184 I 
295,612 I 
321. 380 

c o i 



347, 764 

352, 187 
351,061 
350, 577 

353, 632 
356, 989 
381, 101 
357, 374 
363, 609 
331, 929 
285, 936 
336, 470 
315.640 
340, 605 
341. 744 
325, 449 
342. 629 



24. 7 I 12. 5 I 14. 7 I 13. 6 



353,049 
.363, 709 
359. 180 
358,286 
367, 497 

363, 076 
3i)3, 199 
372, 446 
376, 054 
372, 445 
339, 298 
350, 758 
360, 2^0 

364, 662 
356, 052 
344, 086 
361,129 



4.1 
6.0 



> Source: Crops and Markets, U. S. Department of Agriculture, December 1939. 

Even for the individual crops the acreages from year to year are 
generally fairly close to the average for the entire period. The last 
two rows in the table show the highest and lowest years for each col- 
umn as a percent of deviation from tlic average. In considering total 
agricultural production the last 3 columns are of most interesL tc 
us. For the 15 most important crops the highest year was only 6.fi 
percent above the average and the lowest year only 14.7 percent be- 
low the average. For the 46 crops harvested acreage in the biggest 
year v.'as G.l percent above the average and the smallest year only : 3.6 
percent below the average. If we are nicasuring agricultural ofTort 
the last column is most significant because it includes acreage plurited 
and .later abandoned due to crop failiu'e, or other causes. Here the 
year of largest acreage is only 4.1 percent above the average and the 
year of smallesi- acreage only 6 percent belf^w the average. 

The significance for us of these figures is th^it tliey show that we have 
reached the practical limits for the cmDioyment of labor in agricul- 
culture. It is especially noteworthy thjii 'he year of greatest acreage 
for crops as a whole, 1932, is the year of lowest farm income on record. 



CONCEXTRATION OF ECONOMIC POWER 5 

This is also Ibc only year on record since 1920 when movement of pop a- 
iation to the farms exceeded movement from the farms to the cities. 
While farm population has increased smce 1932 it is significant that 
rural unemplovnient has also increased. In 1930, the low point, farm 
population was 30,169,000. By 1937 this had increased to 31,729,000^ 
an increase of 1,560,000. The 1937 Biggers census showed l,i>47,000? 
males living on farms as either totally or partially unemployed.* 
The improvement in farm income which took place during this period 
1932-37 must be attributed portly to the activities of the Agricultural 
Adjustment Administration, paitly to the effect of improved business 
( onditions on prices, and partly to the fact that better business con- 
ations resulted in a net movement from farms to cities of 1,753,000 
ring the period. If this one and three-quarter millions of people 
. (] been forced to remain on the farms as producers, rather than golaf?; 
• the city as consumers, the improvement in farm income per capita 
vould have been substantially less. 

It must be conceded that there is a definite lack of employment, 
opportunities in agricultural production. We can produce enough to 
satisfy "normal" per capita consumption and "normal" exports with- 
out employing any more labor than is now on farms. Indeed it may 
safely be said that, without counting on- any further improvements m 
farm technology, but simpl}^ by a more widespread adoption of the 
best methods now known, it would be possible to release a large num- 
ber of farm laborers for work in the cities if jobs were available for 
them. Production for the export markets no longer atFords the em- 
pioyment opportunities for farm labor that it used to do. The rise 
in production in competing countries, trade controls under military and 
nationalistic conditions, and the ciuTcnt war have drastically reduced 
our export outlet for farm products. Instead of an export market of 
8,000,000 to 11,000,000 bales of cotton, it is not possible to envision 
as much as 2,000,000 or 3,000.000 bales for export. Instead of an 
export market for 200,000,000 bushels of wheat, or 25 percent of the 
domestic crop, we cannot now export more than 50,000,000 to 100,- 
000,000 bushels even with a large subsidy. The relative importanr-e 
of the domestic and foreign markets for farm products is clearly in- 
dicated by the folloAving data (table 3) at 5-year intervals from 1869 
to 1937. The shrinkage in the relative importance of the export 
market is even greater since 1937. 

Without attempting to speculate on the course of farm exports for 
the next lew years, it may be safe to assume that over a longer period 
agricultural exports will continue the trend of declining importance 
wliich has prevailed sinee the 1890's.^ This declining trend has be.m 
due to; the expanding domestic market due to increased population; 
the change in the stattis of the United States from a debioi to a 
creditor nation; expansion of competing production in previous! v 
undeveloped foreign producing countries; and to the American tariff 
policj'. A revival of trade agreements after the war might alleviate 
the last mentioned cause, but the others would still persist. 

For agriculture as a, whole the welfare of the farmers is becoming 
ever more dependent upon the domestic market. In the fuiure it is 
entireh' possible that farmers in general may gain more by improved 

' See also testimony of Dr. Taeuber in the hearings of the La Toilette committee (Senate Committoc or> 
Education and Labor) . 

* See L. H. Bean, The Changing Composition of Gross Farm Income Since the Civil War, Bureau of 
Agricultural Economics, pamphlet. 



CONCEXTRATIOX OF ErHjNOMlC I'OWER 



cmploymont and pay rolls in industrios exporting 
products than by direct exportation of farm products, 



nunud'actured 



Table 3. — The changing relative importance of domestic and foreign demand for 
farm products ' 





Percent of total 
gross income 
from production 
derived from— 


Percent of gross in- 
come from pro- 
duction (exclud- 
ing cotton) de- 
rived from— 




Domestic 
market 


Foreign j Domestic 
market 1 market 


Foreign 
market 




83.4 
83.2 
80.7 

£; 

80.8 
81.6 
83.3 
85.1 
82 4 
82.2 
85.3 
90.4 


16.6 
16.8 
19.3 
15.3 
17.6 
19.7 
18.4 
16.7 
14.9 


91.3 
88.7 
85.9 

§6.3 
87.0 
90.1 
92.4 


8.7 




11.3 


1879 83 


14.1 




9.8 




11.9 


lS9i qs 


13.7 




13.0 




9.9 


19(19-13 


7.6 


1914 )g 


17.6 i 86.0 
17. 8 87. 1 


14.0 




12.9 




14.7 1 91.3 8.7 


1099-33 . 


9.6 1 94.8 ' 5.2 


1934-37.... --.- 


91. 6 1 S. 4 1 95. 3 1 4. 7 



THE CHANQIKG RELATIVE IMPORTANCE OF EXPORT DEMAND 
FARM PRODUCTS ' 


FOR SELECTED 




Contribution of exports to ^rross in- 
come from production of— 




Cotton 


Tobacco 


Pork and 
Wheat pork 
1 product.^ 


1S69-73 -- --- 


71.6 
70.2 
67.8 
67.2 
66.7 
69.2 
67.3 
67.6 
67.5 
48.8 
58.4 
58.7 
56.4 
43.6 


75.6 
62.4 
50.2 
50.1 
42.8 
41.6 
39.8 
39.4 
41.4 
37.7 
44.0 
43.0 

36! 7 


23.8 6.6 
28. 11 13. 


1879-83 - 


37. 8 17. 9 


1884 88 


29.3 , 12.4 




34. 7 1 17. 6 




34.3 1 18.8 


1819 1903 - 


34.5 ! 20.9 


1904-8. .. - — - 


20. 5 1 17. 2 
18.0 1 13.3 


1914 18 - - - 


34.4 1 18.8 


1919-23 -- 


34.9 ' 21.1 




27. 1 12. 4 


1029-33 - 


15.7! 6.9 


1934-37 -- - 


7. 6 • 2. 7 







1 L. H. Bean, The Changing Composition of Gross Farm Income Since the Civil War, Bureau oi .Vgri- 
cultural Economics, pamphlet. 

In this setting we had in 1933 the organization of the Agricultural 
Adjustment Administration. At its inception the Agricultural Ad- 
juRtmcnt Administration represented the outgrowth of an agriculiural 
philosophy which had its origin in prevailing industrial practices. 
Farmers found industrialists restricting output and making agree- 
ments in order to maintain prices. Under the imi)act of large agri- 
cultural surpluses, programs for curtailmerd of new prothiction were 
developed accompanied by devices designed to increase price returns 
to growers. The farmers, however, did not demand unlimited price 
increases. The doctrine of parity prices was propounded as repre- 
senting a sort of "just price" — one which would place agriculture and 



CO^*CEXTRATION OF BOONOMIC POWER 7 

industry on a parity. It is to be noted that parity prices would be 
achieved either by an increase in farm prices or by a dechne in prices 
farmers pay. 

Shortly, however, there began to be a shift from the emphasis on 
parity price to emphasis on adequate or parity income. On the one 
hand, the 1934 drought had demonstrated that parity prices migho 
be accomplished by low farm income. On the other hand, as the 
notion of parity price became ingrained in farmers' minds it appeared 
that there was a danger that pm'suit of this objective in the face of 
industrial imemployment and dwindling foreign markets might lead 
to curtailment of production below domestic requirements. 

To meet tliis situation the newer adjustment programs have been 
developed on the basis of standards that provide for the "normal" 
per capita consumption of the I920's, plus normal carrj'-over, plus 
estimated exports. This really is the principle of the "ever normal 
granary." To the extent that funds are provided, soil conservation 
and parity payments help to care for situations where normal supply 
cannot yield a parity income. It must not be supposed that parity 
income has been attained. The limited funds together with the 
market situations (domestic and foreign) in various crops have pre- 
vented this. The fimds have been distributed as far as possible upon 
the basis of the comparative situations existing for different crops, 
taking into consideration other means of aid which are available. 

Society apparently insists upon a normal agricultural output and 
continuity of employment in agricultural occupations. This naturally 
raises the question as to whether there should not be an equal insist- 
ence on stability in industrial production and employment with due 
regard to a normal rather than an erratic rate of growth. The fact 
that agriculture is by nature more competitive than industry is not 
in itself a justification for a different treatment of the two. 

Subsequent chapters will deal with more specific situations in our 
agricultural economy and in the economy in general as it affects 
agriculture. 



CONCENTRATION 



CHAPTER II 

OF CONTROL IN 
PRODUCTION 



AGRICULTURAL 



Agriculture is usually considered to be the last surviving strong- 
hold of pure ccnnpetitioR. This statement is substantially correct jf 
we are viewing agriculture as a whole and if we confine our attention 
to agricultural production and exclude the marketing and processing 
of agricultural products. 

Even in agricultural production, however, some tendencies may be 
noted toward increasing concentration of control. Table 4 shows the 
percent distribution of farms by size by census yeisrs and the changes 
in these percentages for various periods. It is notable that the only 
groups showing increases from 1910 to 1935 are the two largest groups 
(farms having over 500 acres) and the smallest group (farms under 20 
acres). From the point of view of concentration of control this 
increase in the number of farms in the smallest size group is distinctly 
deceptive The census classes as a separate farm each tract of land 
wliich is operated by a separate individual, regardless of whether he is 
«n owner, cash tenant, or sharecropper. 

T^BLE 4. — Percent distribution of number of farms by size of farms in various census 
years and changes in distribution 



Size of farm (acres) 


Percent distribution of number of farms 


1910 


1 
1920 1 19?5 


1930 


1935 


Under 20. - - 


Percent . 
13.2 
22.2 
22.6 
39.2 
2.0 
.8 


Percent i Percent 
12. 4 1 15. 1 
23. 3 22. 8 
22.9 22.3 
38.1 36.5 
2 3 2.3 

1.0 : 1.0 

1 


Percent 
14.6 
22.9 
21.9 
36.8 
2.5 
1.3 


Percent 


20 10 49 


21 1 


50 to 99 


21 2 


100 to 499 


35.4 


600 to 999 




1,000 and ovei 


1 3 







CHANGE IN DISTRIBUTION (PERCENTAGE POINTS) 





Size of farm (acres) 


1910-20 1 


1910-25 


1910-30 


1910-35 


lTr.der20 -- - 


-0.8 1 
+ 1.1 
+.3 ' 

+.3 1 

+.2 t 

1 


+1.9 
+.6 
-.3 

-2.7 
+.3 
+.2 


+1.4 
+.7 
-.7 

-2.4 
4-. 5 
+.5 


+5 2 


20 to 49 


— 1 ' 


50ro99.. 

100to499_ 




-1.4 
-3.8 
+.5 
+ 5 


1 OOO and over 







Source: StatLstieal .Abstracts of the United States, Department of Commerce, 1937. 

From 1910 to 1930, while the total number of farms as classed by 
the census decreased by 73,000, the number of "'tenants for other than 
cash" (mostly sharecroppers) mcreased by 533,000. The percentage 
of farms operated by croppers increased from 25.8 percent of all farms 
in 1910 to 34.6 percent in 1930. The break-do>va of tenants into cash 
and share groups is not given for 1935, but the total number of farms 
operated by tenants increased from 37 percent of all farms in 1910 to 
42. 1 percent in 1935. The latter figure represents a slight decline from 
the 42.4 percent reported for 1930. 

9 

269990 — 40— -No. 23 3 



10 



CONCENTRATION OF ECONOMIC POWER 



Table 5 shows the percentage distribution of all land in farms by 
size of farm. Here the evidence of a tendency toward concentration 
of control is much more striking. From 1910 to 1935 changes are 
similar in character to those shown for number of farms, but the dis- 
tortion is more marked. The percent of all farm land in farms over 
1,000 acres increased from 19 percent in 1910 to 29.4 percent in 1935. 

The same caution regarding the increase in the smallest size group 
applies here as well as to table 4. Wliile a break-down is not given 
for cash tenants and croppers, the percent of all farm land operated 
by tenants increased from 25.8 percent in 1910 to 31.9 percent in 1935. 

Table 5. — Percent distribution of all land in farms by size of farms in various census 
years and changes in distribution 

I Percent distribution of iand in farms 



Size of farm (acres) 

I 1910 


1920 


1925 


1930 


1935 




Percent 
1.0 


Percent 
0.9 
5.1 
11.1 
49.3 
10.6 
23.1 


Percem 
1.1 
.5.0 
11.0 
48.0 
10.5 
24.3 


Percent 
1.0 
4.7 
10.0 
45.3 
11.0 
28.0 


Percent 


20 to 49 


1 5.2 


4.4 


50 to Q9 


- 1 11.7 


9.9 




1 53.6 


44.3 


500 to 999 


..! 9.5 


10.8 


1 000 and over 


■ 19. 


29.5 


i 





CHANGES IN DISTRIBUTION (PERCENTAGE POINTS) 



Size of farm (acres) j 1910-20 


1910-21 


1910-30 


1910-35 




..' -0.1 


+_0.1 

-.7 
-5.6 
+1.0 
+5.3 


-1.7 
-8.3 

+1.5 
+9.0 


+0.2 


20 to 49 




-.8 




::::::::::;;:::;::::::::! -:6 


-1.8 




.; -4.3 


-9.3 


500 to 999 


+1.1 


-H.3 


1 000 and over 


_ . _.._ 4-4.1 


+ 10.5 







Source: Statistical Abstracts of the United States, Department of Commerce, 1937. 

The degree of concentration of ownership varies by regions and 
according to the type of farming. It is natural to expect tliat range 
land will show a typical farm much larger than that of farms under 
various tj^pes of more intensive cultivation. Table 6 shows the 
percent of total farm acreage in the larger farms by regions. 



Table 6. — Farms 



500 to 999 acres and 1,000 acres and over as vercent of regional 
total farm acreage * 



Region 



New England 

Middle Atlantic 

East North Central. 
West North Central 

South Atlantic 

Eiist South Central. 
We::t South C^enlral 

Mountain 

Pricific 



1,000 acres and over 



Percent 
4.7 
2.4 
1.2 

16,7 



41.1 
52.3 
50.1 



40.3 



17.1 
7.7 
4.5 
41.2 
68.3 
58.5 



.500 to 999 acres 



Percent 
6.9 
2.6 



Percent 
6.0 
2.4 

9 5 
16!l 
7.4 
5 6 
7.3 
16.9 



Compulod from United States Census of Agriculture, 1930. 



CONCENTRATION OF ECONOMIC POWER 



11 



It is notable that the only two regions which show marked declines 
in the acreage of farms in these largest sized groups are the South 
Atlantic and East South Central regions. In other regions the per- 
centage in large farms either remained practically the same or in- 
creased. Aside from the type of agriculture, the fact that Mountain 
and Pacific farms have had less time in which to be divided by in- 
heritance may account in part for the high percentages in large farms. 

One of the most concentrated agricultural areas in the country is 
the Imperial irrigation district of California. The following table 
compiled from exhibit 8904 in the hearings of the La FoUette Com- 
mittee gives some idea of this concentration. 

Owners with 640 acres or more, Imperial irrigation district, 19S8 



Type of owner 


Number of 
owners 


Acreage 




28 

19 
26 


32,930 
12,203 


Local corporations 






76, 061 




Total 


81 


141 727 







It may be noted that corporations and nonresident individuals 
comprised 65 percent of the large owners and owned 77 percent of the 
total acreage of this group. Only 10 of the owners were banks or 
insurance companies. Another remarkable fact is that of this acreage 
22,385 acres were in lettuce, 8,270 acres in peas, 6,707 acres in carrots, 
and 29,081 acres in cantaloups and honeydews, crops which require 
relatively large amounts of labor. The explanation lies in the fact 
that many of the large owners are shippers, handlers, or packers who 
have acquired ownership in order to insure themselves of sources of 
supply. 

Many other parts of the committee's report are worth reading in the 
evidence they develop of "factories in the field" in California. 

Concentration of farm ownership should also be considered from the 
point of view of multiple ownership of farms as well as simply a 
question of the size of individual farms. Unfortunately our data on 
this point are fragmentary. The following two tables represent the 
result of mformation collected in connection with A. A. A. contracts.^ 

Multiple landowners in 1935 



Types of concern 


Number 
reporting 


Farms 
owned 


Insurance company 


111 

170 

3,491 


67 302 


Bank 


21,447 








Total ,. 


3,722 


107, 579 





S. Doc. 274, 74th Cong., 2d sess. 



12 



OONCEVTKATION OF ECONOMIC POWER 
Multiple owners reporting 100 or more farms in 'j.j34 



Farms owned 


1 


Estimated 

acreage in 

farms 

owned 




84 17, 207 
10 10, Oil 
25 I 70,400 


3,338,158 
1 942 134 


500 to 999 




13, 6^)7, 600 




Total 


124 j 97,61? 


18,937,892 





These figures represent only farms which were reported in connection 
with the corn-hog programs. (Not all farms were under contract but 
eiich owner had some of his farm under contract.) An analysis of 
farms of all types would show a much larger number of multiple 
farm owners and a much larger amount of acreage owned. 

Another aspect from which concentration can be considered is the 
fewness of the number of growers engaged in the production of a crop. 
This naturally will be most conspicuous in the case of specialized 
crops which are confined to particular regions. The following table 
shows the number of growers and the farm value per grower in certain 
specialized crops. 

Table 7. — Estimated number of growers and approximate annual farm value of 
crops for which marketing-agreement programs were in effect during the fiscal year 
1939 1 



Marketing-agreement program 



California, Arizona — citrus 

Texas— citnis 

Florida— citrus .__ ,_-.. 

Western Washington— vegetables.. - 

Colorado— vegetables 

Utah— onions 

Oregon— cauliflower 

Florida— celery . 

Mississippi— tomatoes 

California, Oregon, and Washington— walnuts _. 

Florida, Georgia, North Carolina, and South Carolina— watermelons 
California (Imperial County) and Arizona (Yuma County)— canta- 
loups 

Arliansas— grapes 

Eastern Oregon and eastern Wasliington— fresh prunes 

California, Oregon, and Washingtou- fall and winter pears. . 

California— Elberta peaches, Bartlett pears, plums, apricots, and 

cherries 

California— Hardy pears 

California, Oregon, and Washington— hops 

Connecticut— Valley shade tobacco 

Package bees and queen bees... 



Number of Ff,5^^^iyf 
growers ! ^^',^^^01 



20,000 

7,500 

20,000 

1, 300 

250 

180 

300 

385 

2, 750 

14.000 

10,000 

79 

1,000 

600 

3,000 

7,000 
500 

1,274 
54 
250 



Farm value 
per grower 
(dollars) 



43, 412 

6, 190 

35. 155 

1,146 

946 

220 

38 I 

3,VS9 

540 

11,237 

2,518 

i), 113 
192 
377 

1, ooo 

•3. 784 

270 

6,546 

3, C>3R 

•'50 



2,171 
825 



3,784 
1,222 



8,543 
196 



533 

969 

540 

4,353 

67, 333 



1 Source: Annual Report of the Associate Administrator, Agricultural Adjustment Admiuistration. 



It may be noted, however, that these growers applied for marketing 
agreements. In moi-t cases this may be considered a- at least partial 
evidence that they had not been able to exercise any grer.t degree of 
price control acting by themselves. 



CONCENTRATION OF ECONOMIC POWER 13 

FACTORS TENDING TO INCREASE CONCE^JTRATION OF PRODUCTION 

The chief element operating to increase the size of the farm has been 
the introduction of farm machinery. Machine cost is cheaper than 
hand cost only when the machine is used at a sufficient percent of 
capacity so that machine cost per unit of output is small. The 
influence of mechanized farming in increasing the scale of farm opera- 
tion is too well known to need further comment. 

Another factor perhaps as important as mechanization for many 
types of farming is a sufficient supply of seasonal Tabor. Most farms 
of any size need extra labor at harvest time. Ordinarily there is no 
other work on the farm which would employ these workers at other 
seasons of the year. Unless the farm owner can be reasonably sure 
of a supply of this type of labor when needed there is little point in 
raising a crop which he might not be able to harvest. Unless a 
supply of seasonal labor appears certain he" would do much better to 
confine his production to an amount which he, his family, and the 
steadily employed help can harvest. The development of harvesting 
machinery for various crops has, of course, been a material factor in 
lessening the degree of dependence upon this seasonal labor. 

The acquisition of farms by caimers and other processors in order 
to obtain an assured source of supply for their factories might be 
listed as another element working toward large-scale farm ownership. 
This practice has shown its greatest growth among west-coast canners 
but it could spread to other areas if circumstances seemed to warrant 
it. 

In periods of farm prosperity there is a natural tendency of farmers 
to invest som,e of their savings in additional land. Even if the invest- 
ment takes the form of purchase of farm mortgages it may result in 
addition to the farm holdings through subsequent foreclosure of the 
mortgage. 

FACTORS TENDING TO RETARD OR REDUCE CONCENTRATION 

In spite of what we said above about the influence of mechanization, 
one aspect of mechanical progress is tending to moderate the size of 
the mechanized farm. This is the developm.ent of the small tractor, 
the fcwo-row cultivator, and other low-priced, small-capacity farm 
macliinery. The amount of land necessary for economic use of such 
small machinery is naturally much less than that required for the 
larger models which until recently have been the only ones available. 
Even these smaller machines, of course, require a minimum, amount 
of land for economic operation which is somewhat larger than that 
required for straight hand labor. Because of their introduction, 
however, it is likely that when farm mechanization reaches its ultimate 
limits the typical farm will be sm.aller than that indicated by the 
mechanized farms of recent years. 

Another very important factor operating to decrease the size of 
farms is the division of farm lands through inheritance. In the case 
of farms which are small to begin with this division has unfortunate 
results. Each of the heirs may be left mth a farm which is too small 
to support a family and altogether too small for anything approaching 
low-cost operation. 



14 CONCENTRATION OF ECONOMIC POWER 

The work of tfie Farm Security Administration both in providing 
financial aid and in teaching better methods of farm operation is of 
material influence in keeping many small farms in operation. 

CONTROL OF PRODUCTION BY MEANS OTHER THAN OWNERSHIP 

Concentration of land in large farms and concentration of farm 
wealth or farm income and even multiple ownership of farms do not 
necessarily indicate a control over production which may amount to 
an effective price control. In the case of specialized crops these fac- 
tors may contribute to price control but even in specialized crops, with 
a few possible exceptions, such control has not become very wide- 
spread. 

Some degree of control of agricultural production may be achieved 
without actual ownership or operation of the farms involved. One 
of the most important forms of such control is the contracting for the 
purchase of the output either of an entire farm or of a specified number 
of acres by canners or other processors or handlers. 

The extension of credit, particularly of production credit, offers a 
means of control of agricultural production in the conditions which 
may be stipulated for the granting of such credit. As a more or less 
regular practice such production loans as made by canners, handlers, 
and dealers in farm supplies either specify that the product shall be 
marketed through the lender or through an agency approved by him. 

Purely from the production side these practices generally involve 
the maintenance or expansion of production of particular crops in 
which the handler or creditor is interested. Usually no restriction 
of output is attempted. On the marketing side these relationships 
are subject to certain abuses which will be considered later. 

CONTROL OF PRODUCTION BY GOVERNMENT AGENCIES 

Some control of agricultural production has been attempted by 
State programs with varying degrees of success. When one thinks 
of Government control nowadays, however, it is usually that practiced 
under the Agricultural Adjustment Administration. Most of the 
State programs are now either incorporated in, or closely allied with, 
the A. A. A. programs. 

In spite of the fact that A. A. A. programs are designed to increase 
farm income and to do this at least in part through devices to increase 
the price of farm products, including some restriction of output, these 
programs cannot be judged by the same standards as would be used 
in considering monopolistic industrial restriction of output. 

Industrial monopoly is motivated purely and simply by the desire 
to obtain the maximum net return (moderated perhaps by fear of 
Government regulation). A. A. A. programs, on the other hand, have 
had the goal of parity prices, or more recently of parity income. In 
many agricultural commodities, the upper reaches of the demand curve 
are so inelastic that it can easily be demonstrated that true monopoly 
price would be far above the parity price. Parity price, despite com- 
plaints about the validity of its use, does set an absolute limit beyond 
which Government efforts will not be extended to raise the price of 
an individual commodity. In milk marketing agreements feed prices 
and other elements may be taken into consideration. 



CONCENTRATION OF ECONOMIC POWER 15 

A still more important difference may be noted between industrial 
monopoly and A. A. A. control of production; namely, the amount 
of attention given to social considerations. An industrialist who re- 
stricts output, lays off workers, and leaves them as a burden of unem- 
ployment for Government care. The A. A. A. program, on the other 
hand, does not ignore the social consequences of its owti actions. 
Consequently, we find the resort to such devices as minimum acreage 
quotas for small farms, and minimmn soil conservation payments for 
small farms which are much larger proportionately than those which 
go to the larger farms. Serious efforts have also been made to pro- 
tect tenants and sharecroppers and to see that they participate in 
the A. A. A. benefits, although still more action in this direction may 
prove necessary. Also relief measures both on the farm and in the 
cities help to care for those who may be adversely aft'ected. 

From the point of view of the consumer the recent shift to the 
"ever normal granary" concept represents an extremely mild form of 
output control. The goal now in most of the bfisic crops is a total 
supply equal to "normal'' domestic consumption plus normal carry- 
over plus anticipated exports. Where these standards are adopted 
the danger of monopoijytic exploitaticn of the ronsmner is greatly 
reduced. Insterid of limiting production even to the point which 
would yield parity prices, output is designed to give a normal total 
supply. In cases where tliis supply is too great to yield a parit}' inr 
come, farm receipts are supplemented by parity payments and soil 
conservation payments at public expense. Also such programs as the 
5-cent-milk program, the school-lunch program, and the stamp plan 
help to offset the effect of price increases on the lowest income groups. 

Even the land mthdrawn from production of a particular crop can- 
not be considered as "idle capacity" in the ordinary industrial sense 
since such land must be devolved to soil conserving crops and other soil 
building practices must be followed in order to earn the A. A. A. 
payments. 



CHAPTER III 

CONCENTRATION OF CONTROL IN MARKETING AGRICUL- 
TURAL PRODUCTS 

The concern of the farmer in the marketing of agricultural products 
is broader than the mere question of competition or monopoly. His 
interest is in the question of the economic efficiency of the entire 
marketing system. He is adversely affected by unnecessaiy costs in 
the marketing system just as much as if these dements of marketing 
expense represented a profit to someone. Increasing marketing costs 
which are due to higher wages are not a total dead loss to the farmer 
because some part of this will be returned to liim in the form of in- 
creased purchasing power for farm products. 

In observing the widening spreads between farm and consumer prices 
a certain caution must also be borne in mind. Particularly in the case 
of fruits and vegetables, shifts in the regions of production necessitat- 
ing longer hauls will naturally increase that part of the spread which 
is due to transportation cost. This is not necessarih^ a disadvantage 
either to the farmer or to the consumer. It may mean in part that 
southern farmers are growing crops which are more valuable than 
cotton and it means that consumers are receiving fresh vegetables for 
a lor.ger part of the year. 

There are still, however, many unnecessary and unwarranted items 
of cost or profit in the farm-consumer spread. While this chapter 
deals primarily with concentration of control, some other aspects of 
the problem will be considered both here and in later parts of this 
report. 

CONCENTRATION OF CONTROL AT LOCAL SHIPPING POINTS 

Fann products cannot be moved at low cost except in carload or at 
least truckload lots. The typical farm producer of most crops, how- 
ever, does not have a carload of his product available for inaiket at 
any one time. Under these circumstances it follows that someone 
must assume the function of assembling farm produce in carload lots 
at the local sliipping points. In addition to the function of assem- 
bling, temporary storage is often required for some crops at the local 
shipping pouits. Grading and some primary processing for many 
crops are often performed most economically at the local shipping 
point rather than on the farm or at a later stage of the marketing: 
Qperation. 

The volume of farm commodities available for shipment at local 
points sets limits to the number of buyere who can afford to compete 
for this local business. In some small isolated local areas the volume 
is insufficient to warrant the activity of even one full-time buyer and 
the function of assembly is handled as a side line by the local general 
store. Whenever there is only a single local buyer or where the 
number of buyers is extremely small, the advantage in bargainings 
power is heavily on the side of the buyer and against the farmer. 

17 

269990 — 40— No. 



Ig CONCENTRATION OF ECONOMIC POWER 

In general, buyers are much better informed as to market conditions 
than farmers are. Even when the farmer is aware of prices prevaiUng 
in other markets he may, be deterred from shipping to them by the 
uncertainty of price changes between shipment and arrival, by the 
difficulty in obtaining transportation space which may be greater for 
an occasional shipper than a regular shipper, and simply by the in- 
convenience of making his own shipments. Wlierever the farmer is 
selling in small lots the local buyer has the difference between carlot 
and 1. c. 1. rates as an additional margin on which he may operate. 

Common complaints made by farmers against local handlers are: 
Misrepresentation of grades in buying; misrepresentation of market 
conditions and prices; and collusion among buyers to keep prices 
down. 

The development of the motortruck and the extension of farm to 
market roads has been an important factor in improving the bargain- 
ing power of the farmer. He is able to haul his own product to a 
wider range of markets when he has a truck of his own and so may 
become relatively independent of the local buyers. 

The motortruck has also brought with it a new type of buyer, the 
itinerant trucker-handler, who competes with local buyers for the 
farm output. The services of the trucker-handler offer many ad- 
vantages to the farmer. At least one loading and unloading operation 
is generally avoided. By coming directly to the farm the farmer's 
time is saved and during the harvest such time may be particularly 
valuable to him in labor and supervision on the farm. Truck trans- 
portation rates on short hauls and even on some comparatively long 
hauls are lower than rail freight rates and much less than 1. c. 1. rates. 

The trucker-handlers, as distinct from truckers who operate as 
common carriers, are accused, however, of several abuses. In addition 
to the abuses of misrepresentation of grades and market prices cited in 
the case of local buyers there are charges of giving bad checks. In 
general it appears that the itinerant trucker may be more apt to resort 
to these practices than the local dealer, because the trucker is engaging 
in a single transaction only and may or may not come back to the 
same farmer again. The local buyer is more often engaged in a 
repeat business with perhaps some fixed investment in storage space 
and so is more apt to be motivated to secure the good will of the 
farmers. 

It is frequently alleged that the trucker-handlers are the weakest 
sellers on terminal markets. The reason advanced to explain this is 
that they are more interested in profiting by the trucking operation 
itself than they are in a merchandising profit. Consequently they 
will sell at low prices for a quick sale in order to be able to get another 
truckload. In perishable commodities it is claimed that this practice 
tends to "break the market" for farmers selling their own produce at 
the terminal markets and for other handlers who would otherwise 
hold on for higher prices. It is claimed that on the following day these 
lower prices are reflected back to the farmer in lower farm prices. 
Even if this claim could be substantiated, however, it must be weighed 
against the fact that the trucker is actually operating on a much lower 
margin for freight and handling combined than are the other shippers. 

As far as it can be ascertained, the general opinion of farm.ers 
seems to be that the advent of the trucker-handler has been of distinct 
benefit to them but that more control of liis activities is necessary to 
prevent abuses. 



CONCE^•TRATIO^• OF ECONOMIC POWER 19 

CREDIT CONTROL AND MARKET FREEDOM 

One of the important factors operating to decrease the farmer's 
freedom in marketing his crop is restrictions imposed by the agency 
which lends him. production credit. In a "Survey of Conditions 
Affe.cting the Production and Marketing of White Potatoes on the 
Eastern Shore of Virginia," by J. L. Maxton of Virginia Polytecliinc 
Institute and J. H. Heckman of the Farm. Credit Administration, 44 
percent of the farm.ers interviewed reported that their m.arketing 
operations were restricted by the type of production credit used. 
Maxton and Heckm.an state: 

Reviewing these statements, it is seen that there is a distinct relationship 
between the type of marketing, the agency used, and the method of securing 
credit. For instance, 51 or 37 percent of the growers financing their operations 
in a manner not to restrict their marketing program reported that they were 
either doing their own marketing or patronizing more than one sales agency; 
whereas only 12, or 11 percent, of the 109 reporting that their marketing program 
was restricted by their production credit program said that they were using more 
than one agency, and not any were doing their own marketing. In a similar 
manner, 83 of the 85 who secured their supplies on a crop lien or share planting 
basis patronized exclusively the agency from which they obtained their supplies; 
while 55 of this number reported that their contract specifically provided for this 
practice. Growers who finance their crop in this manner feel cramped in their 
marketing program. Some stated that they were permitted to make sales other 
than through the agency furnishing the supplies, provided higher prices could be 
secured, and further provided that the account of the sales and the check from 
such sales were turned over to the supply agency until the grower's account w&s 
settled. In lieu of a definite agreement, there is evidently a general under- 
standing of a moral obligation existing regarding patronage, as a much higher 
percentage of these growers market through one agency then do those who secure 
their supplies either on a cash or an open account basis. It may be stated that in 
cases where supplies are furnished either on a crop lien or a share planting basis, 
the marketing program of the grower is definitely set forth as part of the terms of 
the production credit program. 

When a majority of the output from a given locahty is restricted in 
m.arket freedom there m.ay be a disadvantage to independent farm.ers 
as well as to those who are bound by contract. Outside buyers tend 
to be discouraged from, entering the local m.arket area because of the 
sm.aller volum.e of business rem.aining open to them. The agency 
which has the contracts with the farmers is then assured of a fair 
yolum.e of business for itself regardless of whether it deals with the 
independent farm.ers or not. Consequently, it can afford to confine 
its outside purchases to the weakest sellers am.ong the independent 
farm.ers or to await breaks in the m.arket before making purchases 
from the independents. The disadvantage in bargaining power to 
the independent farm.er is obvious. 

RESTRICTIONS ON TRADE IN TERMINAL MARKETS 

In general the trading on the terminal m.arkets is the most higlily 
com.petitive of any stage in the marketing of agricultural com- 
m.odities. There are large num.bers of both buyers and sellers and a 
majority of each is usually about as well informed as possible about 
m.arket conditions. 

In the m.arketing of fruits and vegetables the cliief complaints 
center around the inadequacy and the physical inefficiency in the 
term.inal m.arkets. A careful study of these m.arket conditions may 
be found in "Wholesale Markets for Fruits and Vegetables in 40 



20 



CONCENTRATION OF ECONOMIC POWER 



Cities", by William C. Crow, United States Department of Agri- 
culture, Circular No. 463. 

With a few conspicuous exceptions this study shows that terminal 
markets for fruits and vegetables in the vast majority of cities are 
antiquated to such an extent that they are unable to take advantage 
of m.odern handling methods. Most of the m.arkets are much too 
small for the volum.e of business handled. In many of them truck 
loading and unloading is seriously delayed. In som.e congestion is 
SQ great that loads must be moved by hand from the truck to the 
warehouse rather than unloaded directly onto the platform. 

In many cities the need for more ro.arket space has resulted in the 
construction of additional markets often at a considerable distance 
from the first one. In come cases the additional terminals have been 
built by railroads. The markets owned by the railroads generally 
refuse space to products shipped by truck and some even confine the 
business to that received over their own lines. 

One of the most serious elements in the handling of produce on 
terminal markets in recent years is the am.ount of racketeering in 
som.e cities. Evidence which is almost prima facie may be deduced 
by com.paring commercial trucking rates in different cities as seen 
in the following table: 

Table 8. — Commercial trucking rates for hauling specified fruits and vegetables 
from railroads or docks to principal wholesale markets within the city 





-Vverage 
distance 
of haul 


Percent of 
produce 
hauled 
in hired 
trucks 


Tracking rates for— 


Do 
charges 
include 
loading 
and un- 
loading 


City 


Apples 
per box 


Cabbage 
per 100- 
pound 
sack 


Potatoes 
per 100- 
pound 
sack 




Miles 

4 

1-3 

1 

!| 

Hi 


Percent 
25 
66 
35 
35 
5 
25 
25 
25 
100 
100 
100 
15 
70 
30 


Cents 
4 
3 
4 
3 

3 
4-5 
2-3 
6-7 

5 

3 

2 

4 

2hi 


Cents 
5 
5 
15 

5 

J 

3-5 
12H 

■i 

5 
5 


Cents 
5 
5 
8 
5 
4 
5 
5-6 
3-4 
10 
10 
C 
4 
5 
5 


Yes. 


BufiFalo 


Yes. 


Chicago 

Cleveland. .. 


No. 
Yea. 


Los Angeles 




Milwaukee 


Yes. 


Newark . . 


Yes. 


New Orleans 


Yes. 


New York 


No. 


Philadelphia 


Yes. 




Yes. 


St. Paul 


Yes. 
Yes. 


Seattle 


Yes. 







Source: Compiled from Circular 463, U. S. Department of Agriculture. 

Costs differ from one city to another but not to the extent repre- 
sented by these wide differences in trucking rates. Poor market 
organization not only makes for higher costs all around but in itself 
contributes to the development of racketeering. Mr. Crow states: ^ 

In some cities costs of distribution are kept unnecessarily high by various 
forms of racketeering. The most common racket appears to be carried on in 
connection with the trucking of produce within some of the large cities. The 
growth of these trucking rackets has been made easier by the lack of adequate 
market facilities or the improper location of the.se facilities. Sometimes these 
rackets take the form of making exorbitant charges for services which could be 
rendered at less cost. In others, inefficient and roundabout methods are enforced 
when the services could be performed much more efficiently in some other way. 

' U. S. Department of Agriculture Circular No. 463, p. 23. 



CONCENTRATION OF ECONOMIC POWER 21 

And in still ott\er cases charges are assessed for the rendering of no service at all. 
These rackets have taken many forms in the different cities, but the purpose 
and result is always the same — the extortion of unnecessary charges in the mar- 
keting of fruits and vegetables. The provision of good markets for proper rail 
connections would eliminate some of the situations which are conducive to the 
growth of these rackets. 

In contrast to the conditions found in the terminal markets for 
fruits and vegetables, the terminal markets for livestock and grains 
are operated with a relatively high degree of efficiency. In the case 
of livestock, the Packers and Stockyards Act must be credited with 
at least a part of the better marketing practices in this industry. 
Various grain warehouse laws may also be a factor in the grain trade. 

Without a great amount of specialized study it is difficult to say 
whether any industry or firm is operating as efficiently as possible. 
It may be that grain and livestock marketing could be improved. 
Nevertheless in the case of the fruit and vegetable markets, inefficient 
practices are so obvious that Mr. Crow's criticisms can stand by 
themselves. 

Apparently, as far as the terminal markets are concerned, ineffi- 
ciency is about as important as monopoly as a cause of poor returns 
to the farmer. However, in the case of the trucking rackets 
monopoly and inefficiency are inextricably entwined. 

BARRIERS TO INTERNAL TRADE IN FARM PRODUCE 

One of the favorite devices in recent years for concentration of 
control or at least for the prevention of free and unrestricted competi- 
tion has been the development of barriers to internal trade. These 
barriers are on a State or local basis. They are often particularly 
onerous in the marketing of farm products. 

These restrictions are so numerous that even to list and classify 
them requires a considerable amount of space. A thorough treatment 
may be found in Barriers to Internal Trade in Farm Products, a 
special report to the Secretary of Agriculture, by Taylor, Burtis, and 
Waugh. Some of the forms which these barriers take are briefly 
discussed below. 

Alotor-vehicle regulations set up barriers such as: Requiring out-of- 
State trucks to take out local State licenses even for one trip, different 
and confficting requirements for lights and other safety devices, 
different size and weight regulations. These regulations may act 
effectively not only to prevent outside trucks from coming into the 
State to do business but even to prevent their passing through the 
State to do business in other States. Lax enforcement of these regu- 
lations on local trucks and strict enforcement on outside trucks may 
make them even more discriminatory. 

Restrictions against itinerant merchant truckers are often even more 
onerous and are also usually on a local city or county basis. License 
fees (for a license to seU, additional to the motor-vehicle license) of 
$200 to $300 are not at all uncommon. In many cases merchant 
truckers are charged higher license fees than local retail or wholesale 
stores. 

Health regulations are usually the basis for confining the fluid milk 
market to the local milk shed area as arbitrarily defixied. Barns of 
dairy farmers outside the area are either refused inspection by the local 
health authorities or inspection is made so expensive for those outside 
the area that they cannot afford it. 



22 CONCENTRATION OF ECONOMIC POWER 

Special State grading, branding, and packaging laws in establishing 
peculiar regulations are often discriminatory against outside producers. 
These laws as well as the health regulations mentioned on milk are 
probably the most reprehensible since they represent the pervei-sion 
of devices originally intended to protect the consumer. 

Quarantines also which have the legitimate purpose of preventing 
the spread of plant or animal diseases are sometimes used as a means 
of discrimination against out-of-State farm commodities, through 
improper application or enforcement. 

These are just a few of the typical practices. The list might be 
extended considerably. In practice some of these regulations tend to 
favor one group of farmers as against another. Many of them are 
designed to favor the commission merchants and brokers in the local 
markets as against both farmers and truckers. 

Most of these practices have invited retaliation until the situation 
has become so serious that the governors of various States are be- 
ginning to hold conferences looking to the removal of sonie of these 
barriers. Unless the States themselves can solve the problem,. 
Federal action will be necessary.^ 

CONCENTRATION OF CONTROL IN FOOD PROCESSING 

Concentration of control has progressed much further in the proc- 
essing of agricultural commodities than in any other stage of the 
agricultural marketing process. In general, however, concentration 
has not achieved anywhere near the degree which exists in some other 
lines of manufacturing. A detailed study of this concentration is 
given in "Large Scale Organization in the Food Industries" by A. C. 
Hoftnian, published as a separate report by the Temporary National 
Economic Committee. 

In most food lines concentration of control is of fairly recent origin. 
With some exceptions the amount of control at present exercised is 
not sufficient to give the manufacturers full control over the output 
or price of the product. In many lines, however, the rapid increase 
in size of the largest firms gives indication that if this rate of growth 
is continued the problems of monopoly and oligopoly will become as 
important in the food industries as they are in some other manu- 
facturing industries. 

Judging by the few companies whose published statements are 
available, the profits of food processing companies do not account for 
any considerable part of the spread between farm prices and consum- 
er's prices of foods. Costs which could possibly be reduced may be 
much more important than profits. In meat packing where concen- 
tration of control has been conspicuous for many years, the net profits 
of the four leading companies averaged 1.76 percent of their sales for 
the period 1927-36;^ and in no single year did they exceed 3 percent 
of sales. 

The greatest concentration of control is found at present in food 
specialties such as the manufacture of soda crackers and the prepared 
breakfast cereals. Here also are found some of the greatest spreads 
between farm and retail prices. In 1939 the farmer received 23 per- 

' Spr also hearinRs before the Temporary National Economic Committee on Interstate Trade Barriers, 
Part 29. 

= A. C. HofTman "T.ar?c Scale Organization in the Food Industries," Temporary National Economic 
Committee Monograph No. 35. 



CONCENTRATION OF ECONOMIC POWER 23 

cent of the consumer's dollar spent for rolled oats, 15 percent for corn- 
flakes, 9 percent for wheat cereal and 7 percent for soda crackers. 

Since most of these products are manufactured by companies pro- 
ducing several kinds of food products, it is practically impossible to 
estimate the part of the fami-retail spread that may be attributed to 
manufacturing profits. Some inferences may be drawn, however, from 
the fact that in 1938 the net profits of the National Biscuit Co. (prin- 
cipal products soda crackers and Shredded Wheat) amounted to 13.3 
percent of their sales. ^ The Corn Products Kefining Co. (corn oil, 
corn meal, and corn starch) reported 1938 profits which amounted to 
18.3 percent of their net sales.* Since part of these profits are due to 
the possession of particularly valuable brand names, it cannot be 
claimed that they are truly indicative of the general level of profits in 
cereal processing. Large advertising expenses, however, which are 
not counted as profits have been instrumental in building up the "good- 
will" of these brand names to a point where they yield profits of this 
size which are really in the nature of monopoly profits on the possession 
of the brand name. 

The profits of these specialized food processors are of more concern 
to the consimier than to the farmer. Since these processors use so 
small a proportion of the total supply of wheat and com and oats, it 
may be doubted whether the complete elimination of their profits 
would raise the prices of any of these crops by as much as one cent a 
bushel. Lower prices of processed cereals, however, might result in 
considerably more consumption. Whether this would mean increased 
consumption of total foods or whether it would be at the expense of 
other foods is problematical. 

As far as the national market is concerned concentration of control 
has not progressed very far in the canning of fruits and vegetables 
except for certain specialized crops. Of much more importance to 
the farmer is the concentration of buying power in local markets which 
is represented by the canning companies. In order to assure them- 
selves of adequate supplies, canning companies cannot afford to locate 
their factories too close to each other. In consequence, there is often 
only one canner and at the most usually not more than three or four 
to whom the farmer can conveniently haul his produce. As a result 
competition in buying is between the canner and the fresh market 
rather than among the canners themselves. 

In local areas where there is more than one canning factory, acreage 
contracts may be used by a well-financed company as a means of 
"freezing out" its competition. If the strong company obtains a large 
amount of acreage (perhaps through granting production credit) it 
may then proceed to bid up the prices on the "free supply" at harvest 
time, forcing its competition either to go without supplies or to pay an 
unprofitably high price for them. 

The place to look for concentration of control in the canning indus- 
try is in the manufacture of cans rather than in the canning industry 
itself. It is entirely possible that the profits of can and tin-plate 
manufacturers are a more important element in the spread between 
farmer and consumer than the profits of the canning companies them- 
selves. In 1939 the profits of the two largest can manufacturers were 
both in excess of 9 percent of their sales. ^ Since these companies make 

< Poor's Manual. Industrial volume, 1939. 
' Ibid. 



24 CONCENTRATION OF ECONOMIC POWER 

other containers it is not possible to segregate the income and sales for 
cans alone. Since the cost of the can constitutes an appreciable part 
of the price of all low-priced canned goods, profits of this amount may 
contribute noticeably to the difference between the farm. and retail 
price of the canned article. 

Quoted prices on cans, 19S9 ^ 
Size of can: Centtpercan 

No. 1 1.393 

No. 2 1.941 

No. 2y2 2.356 

No. 3 2.646 

No. 10 5.834 

• Converted from rates per 1,000 cans given in Almanac of the Canning Industry, 1939. 

Thus on a No. 2 can of tomatoes selling for 8 cents, 24 cents out 
of the consumer's dollar is represented by the cost of the can to the 
canner. If we assume can manufacturers' profits as 9 percent of sales, 
this means that 2 cents of the consumer's dollar spent for these 
tomatoes goes to the can manufactm'er as profit. 

The most rapid growth of large scale food processing and distribu- 
tion in recent years has been that of companies manufacturing and 
distributing milk products. Hoffman found that in 1934 the three 
largest sellers were handling 15.6 percent of all fluid milk; 20.8 percent 
of all butter; 62.9 percent of all cheese; and 44.3 percent of condensed 
and evaporated milk. (These were not the same sellers for all three 
commodities.) In individual large cities the percentages of fluid milk 
handled by the larger companies are much larger than for the country 
as a whole. 

While the profits of some food processors may be large and perhaps 
some are excessive, we can easily be mislead by concentrating our 
entire attention on profits. If large scale organization succeeds in 
reducing the spread between farm and consumer prices, the farmer 
and the consumer are better served than they would be by smaller 
enterprises which made less or no profits. The economies of large 
scale manufacturing are well known. The question is whether these 
economies are being passed on to the consumer in the form of lower 
prices or whether there are certain offsetting diseconomies which 
prevent this. 

Processed agricultural products are now sold almost entirely by 
brand names. To the extent that people can be persuaded to buy 
particular brands, competition ceases to be on a price and quality 
basis. Each seller then has a monopoly of his particular brand. 
All buyers will not necessarily leave him if he raises his price above 
that of other brands or if the price of other brands is lowered. This 
situation is described by Professor Chamberlin as one of monopolistic 
competition. 

Under monopolistic competition the individual firms generally 
attempt to expand their sales by increased advertising and selling 
expenses rather than by lowering their prices. This is often the wisest 
policy from the viewpoint of the individual firm, but it has serious 
consequences for the economy as a whole. The firms which survive 
and expand do so not so much because superior efficiency allows them 
to undersell their competitors but rather because superior advertising 
and selhng methods and greater appropriations enable them to gain 



CONCENTRATION OF ECONOMIC POWER 25 

and hold customers. From the point of view of the general public 
selling expenses which serve merely to entice customers from one seller 
to another are an economic waste. 

It is almost impossible to form an accurate estimate of the amount 
of selling expenses of various firms. In the income and expense 
statements reported to Moodys, selling expenses are usually lumped 
together with some other expenses. Of still more importance is the 
fact that some processors sell to brokers or jobbers, some to whole- 
salers and some to retailers so that varying parts of the selhng expense 
appear in the expenses of these subsequent handlers rather than in the 
statements of the processors themselves. 

With these precautions in mind, we may note the expenses reported 
in 1939 by some of the leading food processors. National Biscuit 
Co. which sells mostly to retailers reports "selling, general, and ad- 
ministrative expense" which amounts to 35 percent of their sales, 
General Mills which sells mostly to wholesalers report "selling, 
general, and administrative expenses" amounting to 17.6 percent of 
sales. Ward Baking Co., selling mostly to retailers, reports "delivery 
and selling and advertising expenses" which amount to 29 percent 
of sales. 

It would be interesting if we could obtain a break-down on cost 
figures which would separate selling costs (costs necessary to persuade 
the buyer' to choose a particular brand) from other costs which might 
be properly termed handling costs. Even in the case of handling 
costs there may be some elements which could be eliminated by a more 
efficient economy. It is difficult, for example, to imagine how the 
bread trucks of the large commercial bakers can move 100 to 200 miles 
from the bakery and still be able to compete with local bakeries at the 
points of destination. 

Even though volmne production yields economies of production 
itself, these economies may be more than offset by the selling and 
advertising costs necessary to push a particular brand. To large 
volume which is achieved by selling at low prices there can be no 
particular objection, unless these prices are merely low temporarily, 
to force out competitors. Large volume for individual firms accom- 
panied by large selling costs and high prices is of no particular benefit 
to the consumer or farmer. Both might be served better by a larger 
number of smaller firms with somewhat higher production costs, but 
which compete actively on h price basis. 

However, if small firms compete upon the basis of competitive 
advertising and selling effort rather than on a price basis no particular 
gain is achieved. The real test is whether the consumer receives 
lower prices or the farmer higher prices or both. 

CONCENTRATION OF CONTROL IN RETAIL OUTLETS 

Retail food distribution has T>een marked by two contradictory 
tendencies — the growth of the chain stores and an increase in the 
total number of stores. For the country as a whole in a rough way the 
chains may be said to have added to the total number of stores rather 
than to have replaced the independents although this does not neces- 
sarily apply to any given locality. 

Retailing has been the least efficient of any stage in the food market- 
ing process. The chains have been accused of some evils in their 



26 CONCENTRATION OF ECONOMIC POWER 

buying practices. Regardless of this, however, they have been one 
of the most important influences operating to reduce the spread 
between farmer and consumer. This influence has been both direct 
through their own introduction of improved selling methods and 
indirect in forcing independents to adopt better methods in order to 
compete with them. 

The advantages of the chains in the mere obtaining of quantity 
discounts are often overemphasized. These advantages are generally 
open to any retailer-owned groups or so-called co-operative chains 
which can buy in similar volume. After purchases reach car-lot size 
successive discounts tend to be less and less important. Other econ- 
omies in store operation may be as important or more important than 
quantity discounts. Elaborate systems of stock control insure the 
chains that they are not carrying large stocks of slow moving mer- 
chandise on their shelves. The cost accounting methods of the chains 
are designed to locate quickly the sources of possible loss so that they 
can be corrected. Advertising and store arrangements and display 
are in the hands of full-time experts in the central offices. 

Most of these methods are available to members of voluntary and 
cooperatively owned chains but there is of course no means of forcing 
the individual stores to adopt them. Many independent grocers are 
not even aware of the importance of proper m.erchandising and 
cost-accounting methods and som.e do not have the ability to put them 
into practice. 

As far as the retailing operation itself is concerned no approach to 
economic efficiency can be m.ade without an adequate volume of 
business per store unit. We must face the fact that there are simply 
too m.any store units in existence. Hoffm.an found that in 1850 there 
was one retail food store for .each 947 people in the United States. 
In 1900 there was one store for 486 people, and in 1935 this ratio was 
one store for 358 people. This is in spite of the recent trend toward 
com.buied grocer}^ and meat stores. 

The retail-grocery business is characterized by a steady stream of 
bankruptcies and failures and a steady stream, of new stores taking 
their places and even adding to the total number. One view would 
consider this a process of competition eliminating the unfit. Even if 
this were the only cause at work we could hardly regard the situation 
as salutary since the steady upward trend oi bankruptcies, interrupted 
only in part by cyclical changes, would then indicate either that the 
unfit are sim.piy replacing the unfit or indeed that the number of the 
unfit is actually increasing. 

The real weakness in this viewpoint, however, is that it is based on 
the assumption that food retailing is a case of pure coro.petition whereas 
in reality it is a classic example of monopolistic competition. Com- 
petition on a strictly price basis would tend to confine the business to 
those stores whose operating costs were lowest and freeze out the 
high-cost operators, thus making for small retail margins and low 
retail prices. Actually, however, the degree of active price com.- 
petition is fairly small. Instead we find among the independent 
stores particularly, there is strong resentment against anyone who 
cuts prices. Independent stores compete among each other mainly 
upon the basis of service, credit extension, store location, dealer's 
personality, and other nonprice elem.ents. Independent stores have 
been most active in sponsoring devices designed to prevent price 



CONCENTRATION OF ECONOMIC POWER 27 

competition: Resale price maintenance laws, "fair" trade laws, 
antichain-store tax laws and similar measures. Such price com- 
petition as has existed has been most actively sponsored by the 
chains. From this stems most of the animosity against them. 

Economic store operation depends upon a sufficient volume of 
business for each store. This has been adequately demonstrated by 
the chains and the supermarkets. At lower prices they make more 
profits than the independent stores. We must face the fact, how- 
ever, that because there are too many retail stores in existence there 
is not a sufficient volume of business to go around even at lower prices. 

It is ai'gued by some people and perhaps with some reason that the 
small independent stores provide an opportunity for self-emplo3mient 
by people who would otherwise be unemployed. Such employment, 
however, often simply means the employment of the whole family at a 
combined wage return less than that considered adequate for a single 
worker plus the opportunity to buy their own groceries at wholesale. 
While there may be some merit in this as a temporary relief measure, 
it is in reaUty an indictment of an economic system which fails to 
provide other jobs so that these opportunities to become the "share- 
croppers of retailing" ^ actually appear attractive. 

The small independent store is also defended as a stronghold of 
freedom of opportunity. There may be some sociological or psycho^ 
logical basis for .this contention, but upon strictly economic grounds 
the argument is rather thin. Freedom of opportunity and indi- 
vidual initiative may or may not be worth the added amount 
which they cost to the consumer in higher prices and to the farmer 
in lower prices due to an inefficient retailing system. The answer is 
largely a question of opinion. 

» A. C. Hoffman, op. cit. 



CHAPTER IV 

CONCENTRATION OF CONTROL IN SUPPLIES PURCHASED 
BY THE FARMER 

Concentration of control in the supplies which the farmer purchases 
may be as much of a disadvantage to him as the conditions restricting 
the marketing of his products. In general the degree of concen- 
tration of control is much greater in the manufacture and sale of farm 
supplies than in the sale of farm products. 

The manufacture of farm machinery since the beginning of the 
century has been subject to a considerable amount of concentration 
of control. The first case against the International Harvester Co. 
was brought in 1912 and settled by a consent decree. After various 
litigations the case was reopened in 1936 and the Government's case 
was dismissed largely on the grounds that "the percentage of all such 
machines that were made and sold by the International Harvester Co. 
has decreased from about 85 percent in 1902 to about 64 percent at 
the time of the decree of November 2, 1918." And the apparent 
belief in the mind of the court that the company was not in position 
to dictate prices. 

The Federal Trade Commission examined the industry again in 
1936. Table 5 shows some of the results of this study. In nearly all 
cases the largest company is the International Harvester Co. In 
most cases the second largest company is Deere & Co. J. I. Case Co. 
is second largest for two of the implements, third largest for seven, and 
fourth largest for nine. Oliver Farm Equipment Co. is largest for two 
of the implements, second largest for two, third largest for five, and 
fourth largest for seven. 

We have here a situation of nearly perfect oligopoly. Two firms 
dominate the industry, 4 firms have effective control of the output 
and 8 or 10 firms control 90 percent of the sales of 8 implements, 80 
to 90 percent of 4 implements and 70 to 80 percent of 5 imple- 
ments. The Federal Trade Commission says: 

The eflfect on prices of this concentration of production is such that, with respect 
to the most important farm implements, the prices established by the leading 
manufacturers, especially International Harvester Co. and Deere & Co., consti- 
tute, insofar as the machines are of closely similar character, the price level which 
all manufacturers observe. 

It is more difficult to obtain information on the concentration of 
control in the manufacture of other farm supplies. The census of 
manufactures lists only 35 establishments making bale ties, 34 making 
barbed wire and 18 making chicken wire. How many of these are 
independents and how many are jointlj owned or controlled is not 
apparent. The Federal Trade Comm^sion is now engaged in an 
investigation of the fertilizer industry. 

In »dditioii to concentration of control in specialized farm supplies 
Hue farmer is subject to the same disadvantages as other consumers of 

29 



30 



CONCENTRATION OF E}OONOMIC POWER 



building materials; processed foods, clothing and household goods 
wherever monopolistic practices exist in those industries. 



Table 9. 



-Percentages of various types of farm machinery sold by largest companies 
in 1936 1 



Implement or machine 



Grain and rice binders - 

Combines (all widths)- - 

Grain threshers (all sizes). - 

Mowers, horse or tractor 

Rakes, sulky, dump 

Rakes, side-delivery combined rakes and tedders 

Hay loaders, all types 

Corn binders 

Corn pickers— field, horse or tractor.. 

Ensilage cutters, silo fillers, all types....- 

Walking plows, moldboard: 

1-horse 

2-horse and larger 

Sulky plows, molding-board, horse-drawn. 

Tractor plows, moldboard 

Disk harrows, horse and tractor 

Spike-tooth harrows 

Spring-tooth harrows, sections 

Corn planters, 2-row, horse or tractor 

Cultivators: 

Walking, 1-row, 2-horse 

Riding, 1-row, 2-horse 

Riding, 2-row, horse-drawn 

Cultivator, tractor-drawn or mounted 

Tractors, all-purpose, wheel-type 



Percent sold by 



Largest 
com- 
pany ' 



56.5 
145.6 
20.4 
53.4 
50.6 
36.9 
38.6 
64.6 
24.3 
22.3 

115.2 
17.5 
22.3 
35.8 
37.5 
26.8 
32.9 

i43.3 

123.9 
40.5 
22.5 
45.7 
42.6 



2 largest 
com- 
panies 



88.2 
61.4 
40.1 
75.2 
69.7 
64.3 
64.0 

45^4 
30.1 

27.3 
34.2 
41.4 
61.4 
59.5 
46.5 
52.8 
76.7 

46.8 
63.4 
35.3 
72.0 



4 largest 
com- 
panies 



95.0 
77.3 
64.9 
87.1 
82.1 
74.9 
73.0 
100.0 
70.8 
32.0 

34.1 
51.9 
60.9 
78.0 
71.3 



8 largest 
com- 
panies 



«95.4 
8 92.0 
8 72.8 

91.7 
8 88.5 
8 78.2 

76.2 



• 72.,8 



'53.4 
8 67.7 
89.5 
80.4 
(>8.4 
8 78.0 
8 90.6 

'91.1 

8 81.4 
8 53.1 



1 Compiled from Federal Trade Commission Report on Agricultural Implement and Machinery Industry. 
' International Harvester Co. except where indicated otherwise by footnote. 
' AUis Chalmers Manufacturing Co. 
< Oliver Farm Equipment Co. 

* Deere & Co. 

• 5 companies. 
' 6 companies. 
e7( 



CONCENTRATION OF CONTROL IN RETAILING TO THE FARMER 

In spite of what has been said about concentration of control in 
manufacturing, the farmer may suffer even more from lack of compe- 
tition in the retailing of the goods he buys. 

Very smaU towns obviously cannot support any considerable 
number of competing retail establishments. The general store and 
the combining of various lines of business such as "furniture and 
undertaking" is characteristic of the efforts of the small- town merchant 
to obtain a sufficient volume of business to cover the overhead of store 
operation. The 5- and 10-cent store, the cut-rate drug store, and the 
low-priced-shoe chain store are practically unknown to the smaller 
rural communities. Farmers, however, are better able than formerly 
to get to the larger trade centers for these articles 

Where the grocery chains have extended to the small villages it will 
often be found that their prices are higher than that of other units of 
the same chain in the larger cities. Whether this is a difference 
actually based on different costs or whether it is due simply to a policy 
of meeting local competition is a question which would require a 
considerable amount of investigation. 



OONCENTRATION OF ECONOMIC POWER 31 

For some products, particularly farm machinery, the paucity of 
retail outlets lends itself to the poKcy of "full line forcing." Concern- 
ing this practice the Federal Trade Commission says: 

Not all dealers handling the products of a large manufacturer confined their 
farm implements to those of one manufacturer, although the other products 
openly handled generally were noncompetitive; and certain retailers handled 
important competing products surreptitiously. However, to the extent that the 
eflforts of the leading manufacturers' salesmen, by coercion, to prevent dealers 
from handling the implements of other manufacturers are successful, each manu- 
facturer of competing products is forced to set up separate dealers to handle his 
products. This imposes great difficulties upon the smaller, short-line manufac- 
turers. The frequent necessity of finding new dealers involves increased selling 
expense, while the setting up of new dealerships, many doing only small volumes 
of business at relatively higia retailing expense, is not conducive to efficiency in 
retail distribution. Any undue expense involved must either be absorbed by 
manufacturers and dealers or passed on to farmers. Both appear to result. Con- 
sequently, not only is the ability of the short-line manufacturers to compete with 
the large manufacturers impaired, but prices to farmers tend to be enhanced. 
To the extent, also, that the ability of short-line companies to compete on a price 
basis is reduced, the dominant position of the leading companies in the industry 
is strengthened and it becomes easier for them to effectively control prices at 
levels profitable to themselves. 

Regardless of whether "full-line forcing" is practiced or not, the 
country retailer cannot afford to carry very many competing lines of 
products. This difRcidty combined with the small number of com- 
peting retaO stores tends to make competition much less effective in 
rural than in urban areas. 

One important source of higher prices to farmers for farm supplies 
is excessive interest charges when these supplies are sold on a credit 
basis. The following table is a compilation of figures quoted b}'' 
Maxton and Heckman in their "Survey of Conditions Affecting the 
Production and Marketing of White Potatoes on the Eastern Shore 
of Virginia," January 1938: 



Xorthampton and Accomac Counties, Va., cash and credit prices 
supplies and credit charge 


of certain farm 


Article 


-Average 
credit 
price 


Average 
cash 
price 


Differ- 
ence 


Credit 

charge on 

yearly 

basis 


Northampton County: 

Fertilizer. 6-(V-,5 .__. .._ton__ 


$32. S^ 
4.74 
.312 

32.36 
.'i.20 
.301 


$27.80 
4.12 

.284 

28.98 
4.37 
.280 


$8.06 
.62 
.028 

3.38 
.83 
.021 


Percent 
29 


Barrels 


34 


Accomae County: 

Fertilizer, 6-6-5 ton.. 


22 
27 


Barrels 


30 







In addition to these charges those who bought on credit received 
on the average about 13 percent less for the sale of their crops than 
those who purchased supplies for cash. 

Wliile conditions on the Eastern Shore may not necessarily be typi- 
cal, the repeated demands of farmers throughout the country for 
better production credit terms (now being met in part by various 
governmental and Government-aided agencies) are evidence that 
credit terms have not been satisfactory. 

The extreme example of monopoly in retailing to farm people is the 
plantation store which sells to tenants and sharecroppers in certain 



32 CONCENTRATION OF ECONOMIC POWER 

parts of the South. In part the plantation store owes its existence 
to the inability of uneducated people to budget a small income which 
would otherwise be presented to them in an annual lump sum. In 
practice the plantation store ranges all the way from benevolent pater- 
nalism to extreme exploitation. It will not disappear until the general 
problem of the sharecropper is solved. 

The spread of hard roads and the development of the automobile 
has made a tremendous improvement in the shopping ability of the 
farmer. Even so the farmer cannot afford to make long trips except 
for the purchase of high priced occasionally purchased articles. Com- 
petition is still fairly restricted for what are called the "convenience 
goods." 

The mail-order house has for years been the chief source of economy 
for the farmer in making retail purchases of most farm and household 
articles. The two chief disadvantages of mail-order buying are the 
necessary delay in receiving the goods and the inability of the mail- 
order house to give local repair service on articles which require it. 
When we consider that each mail order is shipped individually at the 
highest freight rates per unit, the ability of the mail-order houses to 
imdersell the local dealers must be considered a severe indictment of 
our wholesaling and retailing system. 



CHAPTER V 
METHODS OF REDUCING THE FARM MARKET SPREAD 

The spread between farm prices and retail prices may be divided 
into two parts — the costs of the successive handlers of the product 
and their profits. Large profits as a percent of sales may be said to 
be conspicuous exceptions in the handling and processing of agricul- 
tural products. Hoffman and Waugh estimate that for most food 
products probably not over 5 percent of the retail selling price is 
represented by the combined earnings to capital at all stages in the 
marketing process.^ Judging from the reports in the Agricultural 
Income inquiry of the Federal Trade Commission, the combined profit 
margins in cotton goods would amount to considerably less than 5 
percent and the margins for shoes and leather products slightly more 
than 5 percent. Profits on tobacco, however,' would be higher. The 
fact that profits are small as a percent of sales does not mean that they 
are not excessive as a percent of capital invested. It does show, how- 
ever, that little difference would be made in the spread by eliminating 
them. 

Profits, then, are not the main explanation of the difference between 
farm and retail prices. Where excessive profits exist as the result of 
monopoly situations their elimination might aid the farmer but we are 
forced to turn our attention to costs if any material means of savings 
are to be found. 

Wages constitute the chief cost element at every stage of the 
marketing process. A considerable part of the increased spread 
between farm and retail prices in recent years is explainable in terms of 
increased wage rates. In most cases, however, the wage rates paid 
in the processing and handling of agricultural products are not unduly 
high when compared with those prevailing in other lines. High wages, 
moreover, are not inconsistent with low labor costs if labor is used 
efficiently. 

Our problem is to discover the ways in which both labor and capital 
can be used more efficiently in our marketing system. Certain 
economies may be effected without material changes in our marketing 
system. These are: (1) Removal of barriers to internal trade; 

(2) reorganization and modernization of terminal market facilities 
in the large cities; (3) elimination of racketeering wherever it exists. 

Other changes which might be expected to achieve much greater 
economies involve material changes in marketing methods. The 
chief sources of diseconomy in our marketing system as at present 
constituted are: (1) Too many transfers of title to goods involving 
selling and bookkeeping costs at each stage; (2) unfiecessary handling 
of goods due to indirect routing and unnecessary changes of title; 

(3) cross hauling; (4) partially used capacity and facilities; (5) needless 
duplication of facilities; (6) competitive selling costs. 

' U. S. Department of Agriculturfl Yearbook, 1940. 



34 CONCENTRATION OF ECONOMIC POWER 

The remedy for many of these diseconomies lies in more integration. 
There is no doubt as to the economy to be achieved in combining the 
functions of retailing and wholesaling. The average independent 
retailer may spend as much as one-third of his time going to the market 
and in interviewing the various salesmen who call upon him. This is 
a cost both to the retailer and to the wholesalers and processors who 
employ the salesmen to call upon him. The chains, both corporate 
and cooperative, have demonstrated the economies to be achieved by 
combining these functions. The expansion of chains of all types may 
eventually solve this part of the problem. 

An alternative to greater chain-store expansion in the reduction of 
marketing costs lies in the possible expansion of consumers' coopera- 
tives. The chief disadvantage to consumer co-ops in this country as 
compared with England or Sweden has been the fact that chain stores 
here have been much more efficient than the competition faced by the 
co-ops in the European 'Countries. However, with the development 
of cooperative wholesaling the chain-store adv^antage has been con- 
siderably lessened. The co-ops here do have one distinct advantage: 
They are composed largely of members who are intelligent enough to 
buy on the basis of grades or analysis rather than to rely on brand 
names. Savings from buying "co-op" brands rather than advertised 
brands may prove to be the factor which would give the co-ops a 
sufficient volume to lower costs considerably. 

At the farm end of the marketing process the best solution to the 
problem seems to lie in cooperative mari.eting by the farmers. At 
small local shipping points effective competition among handlers and 
economic operation are almost incompatible. Cooperative marketing 
seems to be the only way to obtain a sufficient volume for low-cost 
operation and at the same time avoid exploitation of the farmer by 
the handler. Some producers' co-ops have in the past been charac- 
terized by monopolistic practices. The idea here is simply to carry 
the product out to a point where its price can be established in the 
more competitive terminal markets. 

One of the most interesting questions at present is how far integra- 
tion will take place and in which direction. That is, will the chains or 
consumers' co-ops carry on more manufacturing and processing and 
extend their purchases back all the way to the farmer as some of them 
are already doing in certain lines, or will the producers' cooperatives 
do more processing and marketing to carry the products closer to the 
consumer? There is no set answer to this question. On the part of 
the chains the extent to which they integrate will depend on whether 
they have a sufficient volume of business to warrant doing their own 
processing and on the terms which they are able to obtain from inde- 
pendent manufacturers. Many producers' cooperatives find it 
desirable to provide such services as grading and sacking or crating. 
Whether the cooperatives engage in further processing or marketing 
depends on the volume which a cooperative or group of cooperatives 
are able to assemble and on the degree of satisfaction given by existing 
services. 

One important question will arise if integration becomes more 
general. At present the terminal markets provide the means of 
setting what may be called the basic prices for commodities. Firms 
which are so integrated that their products by-pass the terminal 
markets still use terminal-market prices at least as points of departure 



CONCEXTRATION OF ECONOMIC POWER 35 

in bargaining. As more and more combination and integration takes 
place the prices will tend to be less competitive and more subject to 
negotiation. If results are unsatisfactory it may be that more 
Government control will be necessar3^ 

Integration and combination into corporate, cooperative, and 
voluntary chains will not solve the problem of the excessive number 
of retail stores. Until we are prepared to adopt some system of 
restricting the number of retail stores through licensing or some other 
means we shall have to accept the diseconomies resulting from need- 
less duplication of facilities. Better results might be achieved by 
some form of action that would force manufacturing industries onto a 
full output basis. This would act on the problem from two directions: 
Full employment in industry would offer enough jobs so that people 
would not have to run stores as a means of bare subsistence, thus 
tending to decrease the number of stores; second, by increasing pur- 
chasing power, full employment would mean that the reduction in the 
number of stores necessary to achieve efficiency would not be so 
drastic as would otherwise be the case. The excessive costs of retail 
milk distribution on a competitive basis, however, are alreadj^ causing 
many people to consider whether the distribution of milk should not be 
made a public utility. 

MARKETING AGREEMENTS 

Marketing agreements are made by growers and handlers under the 
supervision of the Secretary of Agriculture in order to improve the 
farmers' returns from particular crops in certain marketing areas. 

These agreements attempt to regulate either the total amount 
marketed or the rate of flow to market within a season, or both. 
Regulations governing the rate of flow of some crops serve to prevent 
temporary market gluts and may result in some increase in returns to 
growers through this means alone. In the case of citrus crops and 
others where the harvest may be postponed considerable spoilage may 
also be avoided. 

Regulations which limit the total quantity of a crop marketed are 
effective only where the demand for the crop is sufficiently inelastic so 
that a smaller amount marketed nets a higher return to growers. 

Grade and size regulations in addition to the actual amount they 
keep off the market may confer a further benefit. Many marketing 
specialists feel that the marketing of culls and other very low grades 
tends to depress the prices of the higher grades by more than the effect 
of their simple addition to the total supply. Dealers buying the culls 
may simply advertise ''potatoes" or "apples" at a certain low price 
and, if customers are not awake to the reason for the difference in 
price, this may force down the price of the No. 1 and No. 2 grades. 
Compulsory grade labeling would, of course, remove much of this 
influence. Under unregulated conditions, however, many produce 
handlers will admit that there is more profit to be made in low-grade 
than in high-grade produce. 

For milk, the marketing agreements specify minimum prices which 
handlers must pay to producers. Many difficulties present themselves 
in the peculiar conditions which prevailed in milk marketing prior 
to the establishment of marketing agreements. There are sharply 
conflicting interests as well as some points of agreement among 



36 CONCENTRATION OF BOONO]\IIC POWER 

consumers, handlers, producers within the milkshed area and pro- 
ducers outside the area. Most agreements represent not an ideal 
solution to the milk problem, but the best compromise which appears 
possible under the circumstances.^ 

At best, marketing agreements must be considered as temporary or 
partial solutions since they do not regulate production. In some 
cases where acreage control is in effect the agreements may also be 
used as a supplementary measure in years when a surplus is occasioned 
by large yields. 

METHODS OF REDUCING PRICES FARMERS PAY 

All of the general efforts to aid the consumer such as information 
service, grades and bona fide standards, informative labeUng, the 
efforts of the Food and Drug Administration, the Federal Trade 
Commission, and the Department of Justice are of course an aid to 
the farmer as well as other consumers. 

The Department of Agriculture in cooperation with State experi- 
ment stations is continually making tests of farm supplies and publish- 
ing the results of these tests for the farmer's benefit. 

Cooperative purchasing appears to offer the most promise of curing 
the defects in the system of retailing to farmers which we noted 
earlier. Wherever retail competition is limited by the small size of 
the local market, cooperative purchasing appears to be capable of 
effecting substantial savings for the farmer. Such savings effected 
by cooperatives now in existence have been particularly important 
in the purchase of fertilizer, farm machinery, gasoline and oil, seed, 
and general farm supplies. Savings also are made in the purchase of 
groceries and articles for the farm household. 

Many cooperatives combine the function of marketing with that of 
purchasing for their members. This may allow the fuller utilization 
of the time of employees and of storage space. The farmer also 
usually finds it convenient to purchase his supplies at the same place 
where he markets his products. 

One of the most serious disadvantages to the farmer in his pur- 
chasing operation has been the high cost of credit for such purchases. 
The cooperative production credit associations, working under the 
direction of the Farm Credit Administration are designed to allow 
the farmer to take advantage of the lower cash prices. In addition 
to allowing the farmer to obtain cash terms when purchasing from 
regular dealers, this type of credit permits the farmer to patronize 
the cooperatives more easily since most cooperatives operate on a 
cash basis only. 

2 See the annual report of the Associate Administrator, Agriculttiral Adjustment Administration, 1939, 
for a fuller discussion of the problems involved. 



CHAPTER VI 
THE FARMER AND THE NATIONAL ECONOMY 

Important and worth-while gains can be achieved for the farmer^ 
in improved marketing methods and elimination of abuses which will 
decrease the farm-consumer spread and reduce the prices farmers 
pay. Other factors in the economy may be still more important, 
however, in influencing the farmer's income. 

Much more important to the farmer are the general forces of supply 
and demand which set the price for his products. In spite of all that 
we have heard about overproduction of farm products, the explana- 
tion of low farm prices and farm incomes is not to be found in increased 
production alone. In 1939 the index of agricultural production was 107 
as compared with the 1924-29 base of 100. The population index for 
1939 on the same base would be HI. In other words agricultural 
production had increased less than the rate of increase of the popula- 
tion. Nor do the figures for individual groups of commodities indicate 
really excessive production as compared with the increase in popula- 
tion. These 1939 index numbers are: Grains 97, fruits and vegetables 
128, truck crops 135, cotton and cottonseed 79, meat animals 106, 
dairy products 117, and poultry products 112. The shifts from grain 
and cotton into fruits, vegetables, truck crops, and dairy and poultry 
products are due in part to acreage restrictions under the A. A. A. 
and partly to changes in dietary habits which were already making 
themselves felt prior to 1933. 

This does not mean than we have not had "overproduction" in 
the sense that too much has been produced for the market to absorb 
at satisfactory prices. Wliat it does mean is that the explanation of 
"overproduction" must be found on the demand rather than on the 
supply side of the market. Prices have been low not so much because 
production increased but rather because of excess stocks due to de- 
cline in demand and because production was not decreased by the full 
amount which would have been necessary to offset this. 

The decline in agricultural exports explains part of the decrease in 
demand for farm products. Several factors have been responsible for 
the decline in exports. Most important has been the American tariff 
policy. Directly, the high tariffs through preventing imports have 
deprived the foreign countries of the foreign exchange with which to 
buy our farm products. Indirectly, our tariffs have been the cause of 
retaliatory tariffs, foreign-exchange restrictions, import quotas and 
barter deals by foreign countries, all of which seriously restricted the 
sale of American farm products abroad. 

Some of the decrease in farm exports has been due to increased pro- 
duction in foreign countries. Part of this has been a natural increase, 
as, for example, the expansion of cotton production in Brazil. Part 
has been occasioned by the desire of countries to make themselves 
more self-sufficient because of growing nationalism and as a means of 

37 



38 CONCEXTRATION OF ECONOMIC POWER 

preparation for war. Crop loans at values above world-market levels 
have also served to "price us out of the market," particularlv in cotton.. 

The Reciprocal Trade Agreements program had begun to make some 
improvement in agricultural exports but the outbreak of the war and 
the spread of the blockade has more than nulhfied these gains. It is, 
of course, impossible to prophesy the course of post-war exports, but 
regardless of the outcome of the war it does not seem likely that our 
farm exports will again reach the levels of the 1920-29 period. 

The real potential market for farm products lies in the imder- 
privileged classes if we can make the economic sj^stem work so as to 
provide them with a decent standard of living. In 1936, according to 
estimates by the National Resources Committee, there were 3,886,484 
nonfarm families on relief. There were in addition 1,564,307 nonfarm 
families receiving annual incomes of less than $500 and 4,020,370 fami- 
lies receiving between $400 and $1,000 annual income. 

It would not seem to be an unreasonable goal to attempt to raise the 
income of these families to $1,250 a year. Bear in mind that this is a 
family income and would allow for more than one member of the family 
working in many instances. If all the added income went to tliis group 
the estimated addition to national income required to raise them to the 
$1,250 level would have been about 12 percent of the 1936 income, or 
$7,461,000,000. 

Studies made of consumer purchases of foods in 1936 by the Surplus 
Marketing Administration indicate that the additional value of foods 
purchased by these low-income groups if their incomes had been raised 
to $1,250 can be roughly estimated at $1,247,000,000. In 1936 the 
farm value of foods was estimated at 44 percent of the retail value. 
Applying this percentage to the added expenditure for foods we arrive 
at a figure of $537,680,000 in additional farm cash receipts. In addi- 
tion to this there would have been about $50,000,000 added to the farm 
income from cotton and an undetermined amount due to the added 
purchases of wool and leather goods. 

These figures are not to be taken as accurate estimates but merely 
as rough guesses. Playing with aggregates can be highly dangerous 
since it ignores so many of the other elements which may be at work 
while changes of this magnitude are taking place. For example the 
increased demand for food might easily have resulted in a higher per- 
centage of the retail price to the farmer not only on these added pur- 
chases but on the entire amount sold. On the other hand if any con- 
siderable part of the increased incomes were in the food-handling trades 
the added wage costs might tend to reduce the percent going to the 
farmer. 

The general dependence of agricultural prosperity upon industrial 
prosperity may be examined in another way. Since 1932 as national 
income has increased agricultural income has tended to increase at a 
more rapid rate than national income as a whole, so that the percent 
of national income going to agriculture has risen from 6.1 in 1932 to 
8.9 in 1937. Only in part can this be attributed to agricultural- 
adjustment programs. In business depressions industrial output is 
curtailed more than agricultural output, consequently the barter 
terms of trade between industry and agriculture turn to the farmers' 
disadvantage. 

The following table shows how the barter terms of trade have run 
against the farmer: 



(CONCENTRATION OF BOONOMIC POWER 



39 



Table 10. — Indexes of industrial production, agricultural production, and ratio of 
prices farmers receive to prices farmers pay 




Industrial 
production ' 


Agricultural 
production 2 


Prices paid 
by farmers » 


Prices 

received by 

farmers 2 


Ratios of 

industrial 

production to 

agricultural 

production 


Ratios prices 
farmers re- 
ceive to prices 
farmers pay 


1929 


100 
83 
68 
53 
63 
68 
79 
94 

103 
80 
98 


100 
100 
106 
99 
96 
93 
91 
94 
108 
103 
106 


100 
95 
81 
70 
71 
80 
82 
81 
85 
80 
79 


100 
86 
60 
44 
48 
62 
74 
78 
83 
65 
64 


100 
83 
64 
54 
65 
73 
87 

100 
95 
78 
92 


100 


1930 


90 


1931 




1932 




1933 


68 


1934 


78 


1935 




1936 


96 


1937 


98 


1938 


81 


1939 









1 Federal Reserve Board Index (1940 revision) converted to 1929 base. 

2 Bureau of Agricultural Economics index converted to 1929 base. 

The table practically speaks for itself. Income necessarily equals 
quantity times price. In the case of farm income during the past 10 
years, the major changes have been in prices, while the quantity 
produced has been very stable. In industrial income, on the con- 
trary, prices in general have been stable, while the quantity produced 
has varied greatly. During the depression years and subsequently, 
periods of low farm income have corresponded to periods of low 
industrial production. By and large, the farmer trades his products 
for the products produced by the city and if the city produces less the 
farmer gets less in the swap. 

The forces leading to restriction of industrial output may be 
divided into two classes. The first class we might call involuntary 
restriction, or restriction of output under conditions where a fairly 
high degree of competition prevails. Under these conditions the 
impetus to reduced output comes entirely from reduced demand. 
Prices are lowered drastically but even at the lower prices firms find 
it necessary to curtail output, not to maintain profits but minimize 
losses. In recent years curtailment of output by many firms in the 
cotton textile industry in downward movement of the business cycle 
might be considered a fair example of this type of restriction. It 
should be noted, however, that this type of restriction may be caused 
at least in part by the second type of restriction to be discussed below. 
Also involuntary restriction of output by one firm or industry through 
decreasing purchasing power by discharging workers may cause further 
involuntary restriction in other industries and in the first industry 
as well. In the downswing of the cycle the effects are cumulative. 

The second type of restriction we may call voluntary or monopolistic 
restriction of output. This type of restriction occurs wherever a firm 
or group of firms is in possession of a sufficient degree of monopoly 
power to be able to fix prices. This type of restriction was practiced 
even at the peak of the business cycle in 1929. The motive, of course, 
is to obtain the maximum amount of monopoly profits. In business 
recessions because these firms or industries are able to set their prices, 
rather than to accept those' fixed by competition, prices are reduced 
less and output and employment are reduced more than would be the 
case if the industry were more competitive. In business depressions 
these firms may also be taking losses but they often find that losses 



40 OONOENTRATION OF BOQNOMIC POWEK 

will be less if prices are maintained, or only slightly lowered, and 
output is sharply reduced. The resultant amount of involuntary 
unemployment in other industries is much greater if the monopoly 
industries happen to be producing raw materials. In this case the 
other industries are faced with rigid costs and falling selling prices. 

Both in periods of prosperity and in periods of depression, monop- 
olistic restriction of output decreases the possible real income of 
farmers and industrial workers. Monopolistic restriction increases 
the price of articles which farmers and workers buy. The restriction 
of employment decreases the ability of workers to buy farm products 
and reduced employment opportunities prevent the movement of 
excess farm labor to the cities. When this is accompanied b}^ a tariff 
policy which both prevents the farmer from buying foreign com- 
petitive goods and restricts the foreign purchasing power for farm 
products, the exploitation of the farmer is obvious. 

When the A. A. A. programs began some of its restrictions 
were roundly criticized. Theoretically such criticisms are sound. 
In a system of completely pure competition, no restrictions of 
agricultural output except those which are truly soil conserving 
could find any defense. There is no reason, however, why the 
farmer should be compelled to operate under prices set by pure 
competition while the prices of most of the rest of the system are 
characterized by monopoly, oligopoly, or at best by monopolistic 
competition. Restriction of output by the farmer is no more and no 
less justified than restriction of output by a trade union or an indus- 
trial employer. 

In 1937 farm population constituted 24.6 percent of the total 
population while agricultural income produced was only 8.9 percent 
of total national income. This is cited by some people as an indi- 
cation of inequitable distribution of income between industry and 
agriculture. It is so in part but it is also an indication of a deeper 
underlying difficulty which is helping to cause this disparity. Due 
to great improvements in every field of applied agricultural science, 
output per farm laborer has been steadily increasing. Agriculture is 
the one field in which all reductions in cost have been reflected in lower 
prices for the product. 

Even with these declines, however, demand has not been sufficient 
to absorb the increased potential output and there has been a surplus 
of agricultural labor available for transference to industrial occupa- 
tions. Up to the depression this transfer was actually taking place. 
From 1920 to 1930 farm population not only declined as a percent of 
total population (29.6 percent in 1920, 24.6 in 1930) but farm popula- 
tion also declined in actual numbers from 31,614,000 to 30,169,000, a 
decline of 1,445,000 people. From 1930 to 1939 as a result of urban 
unemployment we had an increase of farm population of 1,890,000. 

If we remember that from 1920 to 1930, in spite of annual exports 
averaging nearly $2,000,000,000, a declining farm population was 
able to supply an expanding urban population the answer becomes 
obvious. Even for 1930 export levels we have about 2,000,000 too 
many people on farms. The following statement would indicate an 
even greater excess of farm labor: 

Contrary to the persistent long-time downward trend in the proportion of the 
total working population in agriculture, no reduction took place between 1930 
and 1940. It is estimated that both the total farm population and the total farm 
working population increased during this decade about as much as the total United 



CONCENTRATION OF BOONOMIC POWER 4X 

States population and the tota;l United States working population respectively. 
On the basis of the long-time trend, with 21 percent of the total working population 
in agriculture in 1930, there should have been only about 16 percent in 1940 
instead of the present proportion of 21 percent. This difference of about 5 per- 
cent in a total United States working population of about 54 to 55 million is equiv- 
alent to about 2^ million persons. 

This indirect evidence of a surplus farm working population may be contrasted 
with the findings in the 1937 Unemployment Census that total and partial unem- 
ployment in agriculture amounted to about 1,500,000 persons; and also with esti- 
mates already presented (by Dr. Lorimer and others) of an annual net increase of 
about 200,000 farm youths to the farm working population, and of an accumula- 
tion of an excess of 1,886,000 farm males and 2,166,000 farm females in the 15-64 
age group during the 1930-40 decade. i 

An excessive supply of farm, labor acts as a detriment not only to 
hired farm laborers but also to tenants and owner operators of family 
sized farm.s. The principal part of the income of tenants and operators 
of small farm.s com.es from their own labor and that of the fam.ily per- 
formed on the farm.. An excess of farm, labor helps to produce an 
excess supply of the product and so through low prices to decrease the 
returns to sm.all farm, operators as well as the wages for hired labor. 
The large farm, operator may find that low prices are in part offset by 
low wages to hired hands but on the small farm where most of the labor 
is performed by the family this decline in labor income is felt by the 
family itself. 

In order to redress the balance between industry and agriculture it 
will be necessary not only to eliminate the present urban unemploy- 
ment but also for industry to em.ploy an increased num.ber of workers 
so that the excess farm population can be drawn into occupations 
where its earning power will be greater. At present a considerable 
number of the unemployed may be said to be "concealed" on the farm., 
where the small farm incomes are divided am.ong too many people. 
The final balance between agricultural and mdiistrial population will 
depend in part upon the amount of agricultural exports. Unfortu- 
nately, this question will probably be settled by war rather than on 
economic grounds. In any event it would be extrem,ely unfortunate 
if we returned to exporting on the basis which existed from 1920 to 
1929. During that period to the extent that we exported agricultural 
and industrial products without receiving an equal value of goods and 
services in return the amount of excess exports m.ay be said to have 
been given away. So long as we have in the cities people who are 
inadequately fed and clothed and on the farm.s people who suffer 
from the lack of industrial products there is no excuse for this sort 
of trading. 

While parity prices give some measure of the extent of agricultural 
disadvantages we can easily be misled by concentrating too great 
attention on them. Parity prices reflect the conditions which pre- 
vailed in selected base periods (1909-14 for most crops, 1919-29 for 
some others). The result is that parity prices take no account of 
changes in cost of production or of changes in consumer tastes which 
have occurred since those base periods. Parity income, although more 
difficult to compute, should prove to be a much more satisfactory 
standard. There is no reason to freeze agriculture into patterns 
which prevailed in earlier periods. A proper balance in our economic 
system would be likely to find prices of some agricultural products 
much higher than parity and others considerably lower. The most 

• L. H. Bean, testimony before the Senate Committee on Education and Labor. 



42 OONCBNTRATION OF ECONOMIC POWER 

important use of parity prices at present is to set limits at which 
Federal aid will stop. Even in this connection some revision of parity 
prices or use of parity income may be advisable. 

Most of the Government programs for farm aid such as parity pay- 
ments, crop loans, surplus purchases, export subsidies, and the like 
can only be defended as temporary means of relieving farm distress 
which has been occasioned by imperfections in our economic system 
which have been discussed. Extension of special privileges to the 
farmer is not a remedy for the existence of special privilege elsewhere 
in the system but merely a balance of abuses. 

In the long run the farm problem will have to be solved not on the 
farm alone but in the general industrial and economic system whose 
defects have created the problem. Full output and employment in 
industry would increase demand for farm products, would draw off 
the surplus farm population and would lower the prices farmers pay 



BIBLIOGRAPHY 

The Agricultural Situation, January 1939 — U. S. Department of Agriculture , 

B. A. E. 
Agriculture Yearbook, 1940. 

Agricultural Statistics, 1939 — U. S. Department of Agriculture. 
Annual Report of the Associate Administrator, A. A. A. 
Almanac of the Canning Industry, 1939. 
Bean, L. H., The Changing Composition of Farm Income Since the Civil War — 

U. S. Department of Agriculture pamphlet. 
Bean, L. H., Trends in Farm Wages, Farm and Nonfarm Income, Industrial 

Production and Unemployment — U. S. D. A. pamphlet. 
Bean, R. O., and Waugh, F. V., Price Spreads between the Farmer and The 

Consumer, B. A. E. report. 
Crowe, W. C., Wholesale Markets for Fruits and Vegetables in 40 Cities — -U. S. 

Department of Agriculture Circular No. 463. 
Federal Trade Commission — Report on Agricultural Income. 
Federal Trade Commission — Report on Agricultural Implement and Machinery 

Industry. 
Hearings of the Senate Committee on Education and Labor. 
Hoffman, A. C, Large Scale Organization in the Food Industries — Temporary 

National Economic Committee monograph. 
Maxton, J. L., and Heckman, J. H., Conditions Affecting the Production and 

Marketing of White Potatoes on the Eastern Shore of Virginia — Farm Credit 

Administration pamphlet. 
Moody's Manual. 
Poor's Manual. 

Senate Document No. 274, 74th Congress, 2d Session. 
Taylor, G. R., Buftis, E. L., and Waugh, F. V., Barriers to Internal Trade in 

Farm Products — Special Report to the Secretary of Agriculture, 1939. 
U. S. Census of Agriculture, 1910, 1920, 1930, 1935. 

43 



INDEX 

Page 
ABSENTEE OWNERSHIP. See Concentration of Farm Ownership. 
ACREAGE OF CROPS: 1924-39. Harvested acreage of crops for the 
United States: all corn, all wheat, cotton, tobacco, potatoes; 15 principal 
crops, 46 crops harvested, 46 crops planted, percent deviation from 

average; comment and table 2 4 

AGRICULTURAL ADJUSTMENT ADMINISTRATION: 

Agricultural philosophy underlying origin of 6 

Control of production program 14 

Criticism of programs of, summarv of 40 

AGRICULTURAL LABOR. See Farm labor. 
AGRICULTURE: 
Industry and — 

Disparity of income 40 

Recovery ot balance between 41 

One field in which cost reductions have been reflected in lower prices 

for the product 40 

BARTER TERMS OF TRADE. See Prices. 
BRAND NAMES: 

Cereal food, producers' profits due to 1 23 

Monopolistic competition 24 

BRANDS: Advertised v. "co-op" 34 

CEREAL FOODS': Concentration of control 22 

Farm — retail price spread 22 

CHAIN STORES (COOPERATIVE). See Cooperatives. 
CHAIN STORES (CORPORATE): 

Expansion and marketing cost reduction 34 

Influence of, in reducing farmer-consumer spread 26 

CONCENTRATION IN PRODUCTION; 

Mechanization factor 13 

Milk products 24 

Tin cans and tin plate 23 

CONCENTRATION OF CONTROL. See Control Concentration. 
CONCENTRATION OF FARM OWNERSHIP. {See also Imperial 
Irrigation District.) 

Factors, progressive : Seasonal labor 13 

Factors, regressive: 

Division of farm lands through inheritance 13 

Farm Security Administration activities 14 

Small machinery . 13 

1920-35. Percent acreage of total regional acreage of farms 500 to 

999 acres and 1 ,000 acres and over, by regions ; comment and table 6- 10 

1934. 'Number of owners reporting 100 or more farms, number of 
farms, estimated acreage; comment and table _ . 12 

1935. Multiple owners, number of owners, farms owned, by type of 
owner ; comment and table 11 

CONSUMER AIDS 36 

CONSUMERS' COOPERATIVES. See Cooperatives. 
CONSUMPTION: 
Cotton : 

1920-37. Average per capita pounds per year; table 1 3 

Flaxseed : 

1920-37. Average per capita pounds per year; table 1 3 

Food : 

1920-37. Average per capita consumption of principal named 
agricultural products, 1920-24, 1925-29, 1930-33, 1934-37, 

1920-37, pounds per capita per year; comment and table 1 3 

Tobacco: 

1920-37. Average per capita pounds per year; table 1 3 

Wool : 

1920-37. Average per capita, pounds per year; table 1 3 

45 



46 ODEX 

CONTROL CONCENTRATION: Page 

Retailing to farmer 30 

Supplies purchased by farmer 29 

CONTROL IN FOOD PROCESSING. Concentration of control 22 

CONTROL IN MARKETING: 

Credit control 19 

Interstate trade barriers 21 

Local handlers 17-18 

Terminal markets 19 

Trucker-handlers 18 

CONTROL IN PRODUCTION: 

Concentration in tin-can and tin-plate manufacture 24 

Government agencies: 

Agricultural Adjustment Administration program 14 

Processors' contracts 14 

CONTROL IN RETAIL OUTLETS 25 

COOPERATIVES. Combination of marketing and purchasing, advan- 
tage to farmers - 36 

COOPERATIVES (^CONSUMERS). Advantage of 34 

COOPERATIVES (PRODUCERS). Farmers' cooperatives, advantages 

of 84 

COTTON. Crop acreage. See Acreage of Crops. 

Export market. See Market: Export. 
CREDIT CONTROL. 
CROP ACREAGE. See Acreage of Crops. 

DEMAND: FOREIGN v. DOMESTIC. See Market (Export and 
Domestic). 

"EVER NORMAL GRANARY." Principle of . . 7 

EXPORT MARKET. See Market (Export). 

FAMILY INCOME. Minimum level of $1,250, effect of 38 

FARM CREDIT ADMINISTRATION. Function of _.. 36 

FARM INCOME: 

Disparity between agricultural and industrial income 40 

1929-39. Industrial and agricultural production, and ratio of prices 

farmers receive to prices farmere pay; indexes; comment and table. 39 
FARM LABOR: 

Limits of employment reached 4-5 

Surplus, cause and effect of 40-41 

FARM MACHINERY: 

Concentration of control 29 

"Full-line forcings" policy 31 

Percentages of various types of farm machinery sold by largest com- 
panies in 1936; comment and table 8 30 

FARM PROBLEM: 

Government programs for farm aid a temporary means of relieving 

distress 42 

Solution lies in eliminating defects in general industrial and economic 

system. - 1 42 

FARM PRODUCTS: 

Consumption. See Consumption. 

Export outlets shrinkage, causes and extent of 5 

FARM RETAIL PRICE SPREAD: Cereal foods 22 

Chain-store influence in reduction of 26 

Handlers' cost elements and profits 33 

FARM SECURITY ADMINISTRATION. Work of in keeping small 

farms in operation ' 14 

FARM TENANCY. Cash and share groups, number of 1910-30 9 

FARMS {See also Concentration of Farm Census definition ownership): 
1910-35. Percent distribution of all land in farms by size of farms, 

1910, 1920-35 in 5-year intervals; comment and table 5 10 

1910-35. Percent distribution of number of farms by size, in 1910, 

1925-35 in 5-year intervals; comment and table 4 9 

1910-35. Percent change in distribution size of farms, 1910-20, 

1910-25, 1910-30, 1910-85; comment and tabic 4 9 

FEDERAL AID. Limitation of 42 

FOOD CONSUMPTION. 1920-37. Average per capita consumption of 
principal named agricultural food products, 1920-24, 1925-29, 1930-33, 
1934-37, 1920-37, lbs. per capita per year; comment and table 1 3 



INDEX 47 

Page 

"FULL-LINE FORCING" POLICY 31 

GOVERNMENT AID. See Federal Aid. 

GOVERNMENT CONTROL. Expansion of, a possibility 35 

IMPERIAL IRRIGATION DISTRICT. Concentration of ownership: 
1938. Number of owners with 640 acres or more, total acreage, by 

type of owner; comment and table 11 

INCOME: 

Family. See Family income. 
Farm. See Farm income. 

Inequitable distribution between industry and agriculture 40 

INTEGRATION: 

Effect of on pricing system 34 

Factor in greater efficiency of operation of marketing system 34 

INTERSTATE TRADE BARRIERS 21 

Factor in inefficient operation of marketing system 33 

LOW-INCOME GROUPS. See Familv income. 
LABOR IN AGRICULTURE. See Farm Labor. 
MARKET (DOMESTIC): 

Control of production. See Control of Production. 

Real potential market for farm products lies in underprivileged classes. 38 
MARKET (EXPORT): 

Farm exports decrease, causes of 37 

1869-1937. Relative importance of export demand for selected 
products: cotton, tobacco, wheat, pork, and pork products, in 5- 

year intervals; comment and table 3 6 

MARKET (EXPORT AND DOMESTIC). 1869-1937. Changing 
foreign and domestic demand: percent of total gross income from pro- 
duction and percent of gross income from production derived from 
foreign and domestic market; in 5-vear intervals; comment and table 3. 6 

MARKETING AGREEMENTS: 

Application and operation of 35 

Grade and size regulation, additional benefit 35 

Milk distribution. See Milk. 

1939. Estimated number of growers and approximate annual farm 
value of crops, total and per grower, for which programs were in 

effect fiscal vear 1939; comment and table 7 12 

MARKETING FREEDOM. See Control in Marketing. 
MARKETING SYSTEM: 

Chain store advantages 34 

Consumers' cooperatives, advantages and disadvantages of 34 

Cost elements 33 

Efficiency of operation, proposals for promotion of 33 

Integration a factor in greater efficiency of operation __-__ 34 

MECHANIZATION. Factor in tendency toward increase in concen- 
tration of production 13 

MEYERS, ALBERT L. Agriculture and the national economy, T. N. E. C. 

Monograph No. 23. 
MILK: 

Market ing agreements 35 

Public utilitv, a possibilitv 35 

MILK PRODUCTS INDUSTRY. Concentration in 24 

MONOPOLISTIC COMPETITION 24 

MONOPOLY POWER: Restriction of output, effect of 39-40 

MULTIPLE OWNERSHIP. See Concentration of Farm Ownership. 

NATIONAL ECONOMY- Farmer and 37 

OVERPRODUCTION. Explanation of on demand rather than supply 

side of market 37 

PARITY PRICES. Function of : - 41 

PLANTATION STORE. Extreme example of monopoly in retailing to 

farm people - 31 

PORK AND PORK PRODUCTS: Export market. See Market (Ex- 
port) . 
PRICE DIFFERENTIALS: 

Cash v. credit; comment and table 31 

Farm-consumer. See Farm — Retail Price Spread. 



48 INDEX 

PRICE LEADERSHIP: Page 

Power of in periods of depression 39-40 

Terminal markets and ^ 34 

PRICE PARITY -- 41 

PRICES: 1929-39. Ratio of prices farmers receive to prices farmers pay; 

comment and table 39 

PRODUCTION: 

1929-39. Industrial and agricultural production, and ratio of prices 
farmers receive to prices farmers pav; indexes; comment and table. 39 

PRODUCTION (AGRICULTURAL). Restriction by the farmer, jusli- 

fiabilitv 40 

PRODUCTION (INDUSTRIAL). Forces leading to restriction of out- 
put 39 

RECIPROCAL TRADE AGREEMENTS. Effect of 38 

RETAIL STORES. Restriction of number of 35 

SEASONAL LABOR. Factor in tendency toward increased concentration 

of production 13 

SELLING COST 25 

SHARECROPPERS. See Farm Tenancy. 

TARIFF POLICY. Responsible for decline in exports 37 

TERMINAL MARKET TRADING 19-21 

TERMINAL MARKETS: 

Modernization in large cities proposed 33 

Price leadership function of 34 

TIN CAN and TIN PLATE MANUFACTURE. Concentration of 

control 23 

TOBACCO: 

Crop acreage. See Acreage of Crops. 
Export market. See Market (Export). 

TRADE BARRIERS. See Interstate Trade Barriers. 

TRUCKING RATES. Rates and conditions in 14 named cities com- 
pared; comment and table 8 20 

UNEMPLOYMENT. Farm population, 1937 5 

WHEAT: Export market. See Market; Export. 

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