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m LA I -# 



f*gsrs&!. 39? * 






OFFICE OF NATIONAL RECOVERY ADMINISTRATION 
DIVISION OF REVIEW 



OPERATION OF THE BASING POINT PROVISIONS 
IN THE LIME INDUSTRY CODE 

By 
T.K. Urdahl 
Assisted by 
L.J. O'Neill 



WORK MATERIALS NO. 65 



SPECIAL STUDIES SECTION 
MARCH, 1936 



OJFS'ICE NATI NAL HEC' VE.KY AD.JNISTiiAlION 
DIVISI '-' Oj .-. .VIEh 



OPEEATION Oi 1 THE BASING POINT PROVISIONS 
IT THE LI,£ INDUSTRY CODE 

by 
T. K. Urdahl 

Assisted by 
L.J. O'Neill 



SPECIAL STUDIES SECTION 
:AV.CH, 19S6 



9856 



■"■ v / f t . H 






FORE ".." R D 



This study on the "Ox ration of the Basing Eoint Provisions in 
the Lime Industry Code" was made "by Ilr. T. K. Urdahl, assisted by 

r. L. J. O'Neill, of the Specirl Studies Section, i.'r. G. C. Gamble 
in charge . 

Paragraph No. 4 of Amendment No. 2 to the Code of Fair Competi- 
tion for the Lime Industry dated April 1, 1935, reads as follows: 

"(4) Frovided further, that the research and Planning 
Division of the National Recovery Administration and 
the Trade Relations Committee of the National Lime As- 
sociation shall make a further study and report fully 
to the National Industrial Recovery Board on or before 
June 15, 1935, as to the effect, if any, of said mul- 
tiple basing point provisions, since the effective date 
of the Code on ;orices to consumers, and any effects of 
the system in either permitting or encouraging price 
fixing or providing unfair competitive advantages for 
producers, or disadvantages for consumers" . 

The Administrative Order issuing these instructions therefore, 
directed the Research and Planning Division to make a study of the 
following a.spects of the multiple basing point provisions in the 
lime industry code:- 

• 

a. The effects of the multiple basing point code 
provisions on prices to consumers. 

b. The effects of the multiple basing point code 
provisions in encouraging or permitting price 
fixing. 

c. Unfair competitive advantages, if any, to producers. 

d. Disadvantages, if any, to consumers. 

Conferences were held with representatives of the Trade Relations 
Committee of the Lime Association, and informal agreement was reached 
that the Trade Relations Committee should prepare a chapter on the 
Organization and Development of the Lime Industry and that the remainder 
of the renort should be undertaken by the persons assigned by the Re- 
search and Planning Division to make the Study. The chapter prepared 
''oj the representatives of the Lime Association is found in the Appendix 
labeled Exhibit B, to which is added Exhibit C, a report to the Admin- 
istrator as to the effect of the Lime Code on conditions in the Lime 
Industry, submitted on February 7, 1934, by the Executive Officer of 
the Code Authority in behalf of the Industry. 



3836 

-i- 



In the preliminary svirve;"s lender taken to formulate the general 
scope of the study, it became evident that s-tisf actory results could 
not be obtained if the study we.s confined strictly to the code period 
and the period imme&ietely preceding the adoption of the code. The 
evaluation of actual effects of the code provisions necessitated trac- 
ing the prices operating in the lime industry from the years prior to 
the ".."orld "./ar down to the present time. 

Every effort has been made to cover the available source materi- 
als within reach in V/ashington. Valuable assistance and cordial coop- 
eration were given "oy the Bureau of nines, the Federal Trade Coumis- 
sion, the Bureau of Labor, and Interstate Commerce Commission, the 
Bureau of Standards, and the Department of Agriculture. The Code Au- 
thority of the Lime Industry made available the price lists filed with 
the district control committees and the monthly sta.tistica.1 reports filed 
filed by lime producers with the lime code authority. Much valuable 
infornation was secured from replies to a questionnaire sent to all 
lime producers in the country. On the other hand, certain restrictions 
of personnel and field work limited the collection of adequate material 
on several basic problems., Further research will be necessary, there- 
fore, in order to formulate any definite conclusions on several of the 
problems which deserve consideration. A more detailed treatment of the 
need for additional data will be found in the Appendix (Exhibit C). 

There are at least five lines of investigation on <. hich addi- 
tional source materials ere needed: 1. labor costs, wages, hours of 
labor and conditions of labor: 2. the financial conditions of lime 
companies and the corporate structure of the Lime Industry; 3. pro- 
duction costs and markups on lime prod-acts; 4. methods of eliminat- 
ing excessive overhauling; and 5. the historical background of the 
lime districts, the reasons for their maintenance and t-hpir signifi- 
cance in the maintenance of lime prices in the pre-code period* 

At the back of this report will be found a brief statement of 
the studies undertaken oy the Division of Review. 



L. C. Marshall, 
Director, Division of Review 



March 27, 1935 



5836 

-ii- 



TADLE OF CONTENTS 

c;a?ter I 



Paa;e 



THE EVOLUTION OF THE MULTIPLE BASIHJ POIITT SYSTEM III THE LI LIE 

INDUSTRY 5 

I. Price 3asing Methods in American Industry 5 

II. Industrial Background of Basing Point System 7 

III. r . :e Multiple Basing Point System in the Lime Industry 11 

CHAPTER II 

THE HUE INDUSTRY UNDER ITS CODE 07 FAIR COMPETITIOK 27 

I . General Survey of the Lime Industry Code 27 

II. Methods of Selecting the Code Authority and Its Functions 

in the Lime Industry 28 

III. Powers Exercised "by the District Control Committees 33 

IV. Group Control and Limitations on Independent Producers in 

Quoting Hill Base Prices 37 

V. Apparent Lack of Confidence in the "Confidential Agencies" 
of the Code Authority to v/hom Industry is Required to 
Send Eleports 38 

CHAPTER III 

THE EFFECTS OF THE BASING POIITT SYSTEM OK THE LIME INDUSTRY 4-1 

I. Hie Trend of Production and Capacity in Large and Small 

Plants 41 

II. The Extent of Crosshauling Prior to and Under the Code.... 52 
III. Varying Hill-Net Prices as a Hesu.lt of Freight Absorption 

and Other Basing Point Practices 76 

IV. Opposition of Producers in District 5B to the Easing Point 

" System 84 

V. The Attitude of Lime Producers to the Basing Point System, 

Prior To and During the Code Period 90 

CHAPTE R IV 

THE EFFECTS OF THE BASING POINT SYSTEL ON PRICES 93 

I . The Nature of Competitive Prices 93 

II. Competition under the Lime Code Basing point System 94 

III . Analysis of Prices of Lime Products 97 

IV. Effect of the Marketing Provisions of the Lime Code on 

Prices 109 

V. Code vs. Pre-Code Prices 115 

CHAPTER V 

THE EFFECT OF THE BASING POINT SYSTEM ON THE CONSUMER 138 

I. Disadvantages to Consumers Resulting from the Pricing and 

Marketing Policies of the Industry 138 

9836 -iii- 



CHAPTER V (Cont'd) p 

II. Freight-Sail and Truck, as a Means of Increasing Delivered 

Line Prices 148 

III . Discrimination in the Price Structure 155 

LIS"" 07 TADL3S 17 TEE 32P03T PAPRP 

TASLE 

1. Changes in annual shipments 1934 from 1930 14 

2. Delivered orices with respect to location of shipping 19 

3. ITumber of plants which, prior to the Code, used the multiple 

basing point system as a method of quoting prices 20 

4. Evolution of the basing point system 21 

5. Disposition of shipments of plants with less than 10,000 

tons annual capaci ty 25 

6 . Extent of i interstate lime shipments 26 

7. Voting on the ado Dtion of the amended Code as a whole 28 

8. .Annual caoacity oroduction and nercentage of capacitjr 

ooeration o f plants reporting capacity 39 

9. Relative changes in percentages of the total number of 

plants, the capacity and the total production of large 

and small plants by grouns 44 

10. Cnanges in various capacity groups 46 

11. Hunber of slants rr.d production of plants reporting 

production only ■ nd plants reporting production and 

capaci ty ' 49 

12. To:mage and freight revenue from lime products shipped on 

clas s 1 rai lroads 59 

15. Tonnage and freight revenue from cement shipped on class 

1 railroads SO 

14. Production and consumption of lime by regions 69 

15. Freight revenue and average value at plant on lime and 

cement 71 

16. Percent of profit made on sales in the home market 85 

17. Percent of profit made on sales in the home market if 

lowest mill net returns in distant areas represent cost. 86 

18. Average plant net valxie of lime and cement per short ton 

and number of lime and cement plants 101 

9836 -iv- 



X££21 Page 

19. Percent of drop in prices compared with percent of drop 

in production in selector i \C \ stries 105 

20. Ir.de;- of hydrated lime prices Ill 

21. Index of Liason' s lump lime price. 112 

22. Number of price changes for five kinds of lime during 

the coce period in representative districts 114 

23. Index numbers showing trend of plant-net values of lime. 117 

24. Price trends of line and other com; .odities 113 

25. Comparison of xirice list effective January 1, 1928 

with price list of same co. effective Hay 1, 1935 122 

25. Average value per short ton shipped during first six 

months of 1933 and 1934 123 

27 . Volume and value of shipments 125 

28. Importance of various pricing methods among various 

si red plants 129 

29. Opinions as to the effect of the basin- joint system on 

competitors 131 

30. Opinion as to the effect of marketing provisions 132 

31. Importance of various pricing methods 136 

32. Value and volume of shipments classified by attitude 

toward multiple ba.sing noint system of marketing 137 

33. Price comparison of quicklime and hydrated lime 145 

34. Extent of changes in methods of shipmn?;, grouped by 

si ze of plant from 1930 to 1934 154 

35. Percentage of total tons shipped by various methods 156 

36 . Hew England Lime Company, Adams , mass 158 

37. United States Gypsum Co. (As of October 25, 1933) 159 

38. Examples of filed price variations by individual compan- 

ies 161 

LIST 0? CHARTS 
Chart Pa.q;e 

1. Relative uses of lime plant capacity for the years 

1917- '21- '25- ' 29-" ' 33 ". 40 

2. llumber of plants and probable trend, 1909-1943 48 

9836 -v- 



LIST OF CHARTS (Cont'd) 
Chart Pa^e 

3. Examples of cross-hauling, 1929 62 

4. Examples of cross-hauling - Total for three sample months.. 65 
5 . Location of principal plants 68 

6. Destination of chemical lime shipments by one large plant 

in each of several states 63-A 

7. Varying mill net prices per ton 78 

8 . Varying m ill net prices "oer ton - Company "D" 79 

9 . Varying mill net prices per ten - Company "G-" 79-A 

10. Number of plants, capacity, production and average value 

per ton at plant 99 

11. Average plant net value of lime and cement ~oer short ton... 100 

12. Price trends of lime and bituminous coal 103 

13. Surplus and deficit line states , 1933 107 

14. Wheat production, 1928-1932 108 

15. Increase in volume value of shipments, first si:: months.... 126 

16. Production and average value per ton at plant 140 

17. All industrial urices and lime prices 120 

APPENDIX 

Table of Contents 

CHAP TEH I - EXHIBIT A - UNSOLVED LIME INDUSTRY PROBLEMS THAT DESERVE 
FURTHER CONSIDERATION 

I. Further investigations are recommended on the following 

lime problems 164 

1. Labor costs, wages and conditions of labor 164 

2. Production costs and markups on lime products 164 

3. The finances and the corporate structure of the Lime 

Industry 164 

4. Methods of eliminating excessive cross-hauling 164 

5. The orobable effects of enforcing Article VIII, Section 

2b of the Lime Code 165 

9836 -vi- 



APPLi'DIX (Cont'd) 
Table of Contents 



- - r- . w 



II. Additional materials needed to cintinue the investigation: 
Suggested sources and methods of securing the necessary 
data 135 

1. Data that can only he obtained through field work 166 

2. Additional data which nay be secured b -r means of a 

brief questionnaire 166 

5. Available material in Washington which may be profitably 

used in further analysis 166 

CHAPTER II - EXHIBIT B 

(Chapter II has been prepared and submitted by the Trade 
Relations Com ittee of the National Lime Association) 

I. Organisation and Development of the Lime Industry 168 

1. History of the Line Industry and the significant stages 

of its development 168 

2. Present organization of the Industry 171 

3. Factors governing location of plants and geological 

distribution of plants in the Industry 172 

4. Llethods of production and the development of large 

and small plants 174 

5. Characteristics and uses of lime 175 

6. Consumption, consuming areas and markets for lime 

proaucts 175 

CHAPTER III - EXHIBIT C 

I. The effect of the Line Code upon conditions in the Lime 

Industry 182 

1. Introduction 132 

2. Conception of the multiple basing point principle 182 

A. Its effect upon production 184 

B. Its effect on prices 184 

C. Competition under the system 188 

D. . Open price policy 188 

2. Recommendations 189 

9835 -vii- 



List of Tables and Charts 
CHAPTER II - 3XKIBIT 3 
TaMe Pa-ge 

1 Production of Line in the United States, 1907-193", by Uses. 177 

2 Sales of Line in 1931 - Grouped According to Tonnage and 

Companies ( no t plants) 1?8 

3 Lime Sold by Producers in the United States in 1933, by Uses. 179 

Figure 

1. Salient Features of Production, ITumber of Units, and Average 

Value per Ton 170 

2 Location of Plants and Districts 173 

CHAPTER III - EXHIEIT C 

Table 

1 Price Trends of Line and of Other Commodities, 1920 to 1933. 186 

2 Price Trends for October, llovember and December 1933 187 

EXHIBIT D 

1 Interstate Shipments of Lime in Short Tons (During 1929) 

Arkansas , 190 

2. Interstate Shipments of Lime in Short Tons (During 1929) 

Illinois 191 

3. Interstate Shipments if Lime in Short Tons (During 1929) 

Connecticut 192 

4. Interstate Shipments of Lime in Short Tons (During 1929) 

Indiana 193 

5. Interstate Shipments of Lime in Short Tons (During 1929) 

Maine \ 194 

6. Interstate Shipments of Lime in Short Tons (During 1929) 

Maryland 195 

7 Interstate Shipments of Lime in Short Tons (During 1929) 

Massachusetts 196 

8- Interstate Shipments of Lime in Short Tons (During 1929) 

Mi cnigan 197 

9 Interstate Shipments of Lime in Short Tons (During 1929) 

Mi s sour i 198 

9836 -viii- 



Table Page 

10 Interstate Shipments of Lime in Short Tons (During 1929) 

'York 199 

11 Interstate Shipments of Lime in Short Tons (During 1929) 

Ohio 200 

12 Interstate Shipments of Lime in Short Tons (During 1929) 

Pennsylvania 202 

13 Interstate Shipments of Lime in Short Tons (During 1929) 

Tennessee 203 

14. Interstate Shipments of Lime in Short Tons (During 1929) 

Texas 204 

15. Interstate Shipments of Lime in Short Tons (During 1929) 

'Test Virginia 205 

16 Interstate Shipments of Lime in Short Tons (During 1S29) 

Wisconsin 206 

EXHIBIT B 

1 Interstate Shroments of Lime in Short Tons (During Feb. 

1934, April 1934 and Feb. 1935) Alabama 207 

2 Interstate Shipments of Lime in Short Tons (During Feb. 

1934, April 1934, and Feb. 1935) Illinois 203 

3 Interstate Shipments of Lime in Short Tons (Dtiring Feb. 

1934, April 1954 and Feb. 1935) Indiana 209 

4 Interstate Shipments of Lime in Short Tons (During Feb. 

1934, April 1934 and Feb. 1955) Massachusetts 210 

5 Interstate Shipments of Lime in Short Tons (During Feb. 

1934, April 1934 and Feb. 1035) Missouri - West 211 

6. Interstate Shipments of Lime in Short Tons (During Feb. 

1934, April 1934 and Feb. 1935) Missouri - East 212 

7 Interstate Shipments of Lime in Short Tons (During Feb. 

1934, Aoril 1934 and Feb. 1955) Ohio 213 

8 Interstate Shroments of Lime in Short Tons (During Feb. 

1934, April 1934 and Feb. 1935) Pennsylvania - East 214 

9 Interstate Shipments of Lime in Short Tons (During Feb. 

1934, April 1934 and Feb. 1935) Pennsylvania - West 215 

10 Interstate Shipments of Lime in Short Tons (During Feb. 

1934, April 1934 and Feb. 1955) Tennessee 216 



9836 -ix- 



FLh I LTT I-: (Cont 'd ) 
Table Ho. P a 5 e 

11 Interstate Shipments of Lime in Short Tons (During 

Feb. 19S4, April 1934 and Feb. 1955) Virginia 217 

12. Interstate Shipments of Line in Short Tons (Luring 

Feb. 1934, April 1934 and Feb. 1935) ^est Virginia 21S 

SXKIBIT F 

Table Ho. 

1 Varying Hill Net Prices (in a sample month) Company "A" 

Located in Virginia 219 

2. Varying Mill Net Prices (in a sample month) Company "B" 

Located in Uestem Pennsylvania 220 

3 Varying mill Let Prices (in a sample month) Compan^ "C" 

Located in Tennesse 3 221 

4 Varying hill Let Prices (In a sample month) Company "D" 

Located in Tennessee 222 

5 Varying tlill Net Prices (In a sample month) Company "3" 

Located in California 223 

6 Varying Lull l T et Prices (in a sample month) Company "F" 

Located in Illinois 224 

7 Varying mil]. Let Prices (in a sample month) Company "G" 

Located in missouri 224-A 

8 Varying hill Net Prices (in a sairple month) Conipany "H" 

Located in L'assachusetts 226 

LLZILIT G- 
Table No. 

1 Surplus and Deficit Lime States, 1929 and 1933 227 

2 Surplus and Deficit - Wheat States, Consumption of 1930 - 

1928-1932 228 

EXHIBIT II 
Table No . 

1 Evolution o f the Basing Point System 229 



9836 



EXHIBIT I 

Table Ho . P^ge 

1 General Conditions and Terras of Sale - "by Districts 

(does not include minor conditions or exceptions) 230 

EXEI3IT J 



Table No, 



Volume and Value of Shipments, First Si:: Lionths 1935 - 

1934 231 

Average Value Per Short Ton Shipped During First Six 

lionths of 1933 and 1934 232 

Per Cent of Annual Capacity Operations, G-rouped by Size 
of Plant, 1930-1954 (3ased on the Relations of Ship- 
ments to Capacity) 23 



n 



Attitude Toward Multiple Basing-Point System with 
Limited Freight Absorption (10). 
(Article VIII , Section 3 of Anended CoJe) 234 

"CIIilT E 

Original Price List on Lime Products for Districts 7 and 

12 235 

EXHIBIT L 

Questionnaire - Research and Planning 337 



9836 ~ X1 ~ 



„1„ 

TENTATIVE SUMMARY OE 

FINDINGS 

** 

1. The Investigation shows conclusively that the basing point 
system ■(•*) as defined and used. in this report was not in general use in 
the lime industry prior to the code. The practice of quoting prices 
"to meet competition" and the practice of ah sorting freight in so doing, 
which was used "by several producers prior to tne code, may he regarded 
as the precurser of the basing point system, but the industry did not 
have the well established basing points or the well organized price 
filing system which were provided by the code. The code authority of 
the industry attempted, through the code, to induce all producers to . 
adopt this practice by means of a compulsory price filing system with 

a waiting period, by the establishment of definite basing points and by 
defining the low rate marketing areas. 

2. The lime industry was divided on the advisability of adopting 
the basing point system. There is ample evidence to show that the lime 
producers were not unanimously or even preponderantly in favor of the 
basing point system provided in the code. A large group of lime manu- 
facturers - the District 5-3 group in Ohio - vigorously opposed the 
system and voiced their opposition by submitting to the National Indus- 
trial Recovery Board a brief containing an indictment of the marketing 
practices incorporated in the code. Their chief contention as the lime 
products differeed so much in grade and quality that the industry, which 
was generally local in character, was not adapted to the use of the 
basing point system. 

3. The Code of Fair Competition for the Lime Industry seems to 
have been drawn up in such a way that the large producers exercise a 
preponderant influence in its administration. Sixteen out of the twenty 
voting members of the code authority were selected by the National Lime 
Association, which represented only twenty-three percent of the number of 
companies, thirty-two percent of the number of plants and fifty-five per- 
cent of the tonnage at the time the Code was adopted. 

4 Each district, whose limits are defined by the code authority, 
had a governing body called the District Control Committee, which was 
selected by a majority vote of the plants within each district. These 
district committees seem to have exercised considerable discretionary 
powers which tended to produce uniform prices, uniform conditions and 
terms of sale, and the elimination of price competition within their 
respective districts. 



(*) The basing point provisions of the Lime Industry Code constituted 
a plan peculiarly adaptable to the lime industry. Perhaps the 
designation of the basing point plan as a "system" is a misnomer, 
but for the information of the reader, it is here explained that 
the use of the word "system" is not to be confused with the 
publicly accepted meaning of the word. As one get into the study 
the use of the word can be readily understood, and its meaning 
apparent . 

9836 



-a- 



5. The evidence submitted in the report shows that plant capacity- 
increased in the lime industry in spite of the fact that lime markets 
contracted and production decreased. This relatively rapid expansion 
of the industry by means of plant enlargement of large producers can 
only 'be explained as the result of high lime prices coupled with lower 
production costs by highly mechanized plants. The industry's expansion 
cannot be ascribed to the small plants, for these have been disappearing 
steadily since 1908. This process was not arrested under the Code but 
seems to have been hastened because the large plants increased their 
volume of shipments and plant net returns far more than the smaller 
producers. 

6. While other factors may have contributed to accelerate the 
disappearance of small plants, the evidence shows that their markets 
were not diverted by excessive cutting of consumer prices, but by the 
quotation of delivered prices with freight absorption combined with 
high pressure selling campaigns, which enabled the larger producers to 
acquire the natural markets of the small lime plants which "nee dotted 
the countryside. The production of higher quality lime products may, 
however, have had considerable effect on the acquisition of larger 
markets by the large scale producers. 

7. The basing point system recognized and approved a method -f 
price differentiation between different geographical areas which was 
known as "quoting delivered prices to meet competition," The report 
contains evidence of discrimination in mill net prices between different 
geographical areas. The highest mill net returns were invariably ob- 
tained in the areas nearest the producer's plant and the lowest returns 
were found in those areas which were the natural markets of competitors, 
and in these distant markets the producers accepted mill net. returns 
varying from fifteen to eight-seven percent below those obtained in the 
home markets. 

8. The only available price statistics on lime prices over a 
period of years are those compiled by the Bureau of labor Statistics, 
which show that the marketing practices of the industry under the lime 
code resulted in an almost complete freezing of the price structure of 
hydrated finishing lime and Mason's lump lime. Two months after the 
code became effective, price changes, which had been frequent prior to 
the code, disappeared altogether, for the prices of those two types of 
building lime showed not a single price change in eighteen months • This 
picture of rigidity is further illustrated by an analysis of the price 
lists filed with the code authority, which showed that on an average 
the prices of agricultural, building and chemical lime, changed, for 
each company filing, less than once in two years. 

9. TJasteful crosshauling of lime products is responsible for a 
burden of excess freight charges, which in the final analysis are borne 
by the consumers of lime products. The chief causes of such erosshauls 
are the high base or mill prices and the hunger for tonnage due to over- 
expanded plants, which, .in turn had resulted from the quoting of f.o.b. 
delivered prices instead of f.o.b. plant prices. VThile it was generally 
the large producers who engaged extensively in crosshauling in the pre- 
code days, the adoption of the basing point system forced the practice 
upon the smaller producers. 

9836 



-3- 

10. Eeal price competition has 'been almost completely eliminated 
in the line industry and has "been replaced "by the so-called "new com- 
petition," which lias been defined "by the Executive Officer of the Code 
Authority as "competition in quality of product, dependability and 
character of service, and the integrity of the manufacturer." Under 
the basing point system the so-called "integrity of prices" at ,e«ch 
basing point is respected. This appears to mean that m producer may 
reduce prices in distant markets below those filed by local producers 
unless he lowers his home base price sufficiently so that the home base 
price plus freight to destination will not be higher than that which 
he proposes to quote as such destination. This system tends to prevent 
the economies of large scale, highly mechanized productive processes 
from being passed on to the consumer. Much of the alleged competition 
which is said to exist at basing points appears to be pseudo— competition, 
for there is evidence to show the existence of group pressure and con- 
certed action by producers in many lime districts. The code facilitated 
the efforts of producers to secure fixed and stable -nriccs - sometimes 
termed the "integrity of the nrice structure." 

11. There is ample evidence to show that lime prices, --hich, when 
compared with the -orices of other building ..-ate rial?, were maintained 
at relatively high levels during the depression, have been materially 
increased just prior to .and during the code. The average plant net 
returns per ton of the larger producers - those with an output in ex- 
cess of forty thousand tons per a.nnum - were as high during the first 
six months of 1934, as the mill net returns of all producers luring 
1928; and the mill net returns of all prjducers replying to the 1IRA 
questionnaire, were only forty-five cents per ton }.ower than the aver- 
age of all producers during 1928. IThile some of the increase nay be 
attributed to the shorter hours and increased wages provided for in 

the code, yet there can be no reasonable justification for some of the 
increases due to truck differentials and the increased L.C.L. differen- 
tials. Since nearly one third f the entire output of the Industry 
reported to the Bureau of Mines is shipped through other than rail 
carriers, it follows that these differentials have produced material 
increases in consumer j^rices for that portion of the output, "whether 
or not the increa.se in lime ; -rices can be termed excessive will depend 
on the increased costs of production, a problem on which no satisfactory 
source material was available. 

If lime prices had not been maintained at relatively high levels 
throughout the depression, an increase of from 22 to 2Sfo in plant net 
returns might not oe regarded as excessive. However, this increase 
appears in a different light when viewed from the standpoint of the 
pricing policy of the lime producers over a period of yea.rs, for in the 
very deepest depression, lime prices, meacaired in plant net returns, 
were still nearly 57^ higher than they were in the pre-war period. 
Furthermore, from the available statistics of consumers lime prices, 
it is evident that these increased far more than 28$ during the code 
period and the two months prior to the code, during which the code was 
formulated. 

12. The basing point system and the price iiling mechanism "nave 
been urged as a means of relief for lime producer- who have been operat- 
ing at a loss during the depression. It is asserted by the producers 

9836 



~4~ 

that the lime manufacturers are entiled to hi.' her prices and hi. her 
profits t; compensate them for the deficits they have had since 1929. 
The lousiness man argues that' this relief should he granted in order 
thai the. giant plants with heavy "bond issues and capital investment 
may he saved from hanlrruptcy and the lahor force saved from unemploy- 
ment. Prom another point of view, there is evidence that lime pro- 
ducers have invested capital in large plants, when the actual plant 
capacity of the country is three times as large as the country needs. 



9836 



-5- 



CHAFTEK I 

THE EVOLUTION OF THE i.ULTIFLE BASING POINT SYSTEM 

■ IN THE LIME INDUST RY 

I. FFICE BASING METHODS IN AMERICAN INDUSTRY 

YOien one speaks of the price of a commodity the expression has no 
real significance unless it is expressed in terms of specific time and 
place for the transfer of. the commodity. Using this criterion as a oasis 
of classification, prices may he roughly grouped under two Headings: - 
Shipping point prices where the quotation is f.o.b. plant, and delivered 
prices' "'hich are established at destination or delivery point. 

A. Shipping Point Frices . A shipping point price, usually 
defined as f.o.b. origin price, is that of a commodity whose transfer 
of title occurs at the shipping point and whose transportation cost 
from point of origin to point of delivery is borne by the buyer. Many 
prices are classified as f.o. d. shipping point, which are really f.o.b. 
delivery prices. Such is the case where prices are emoted at the plant, 
but where the terms of sale include the provision: "full freight allowed 
to destination." In that case the transfer of title occurs at the 
shipping point, but the seller by absorbing freight,- absorbs the trans- 
portation costs, making the real price f.o.b. destina.tio'n. There may 
also be f.o.b. shipping point prices : which do not include all trans- 
portation costs, and yet do not entirely exclude them. These may be 
illustrated by the quotation "f.o.b. plant .with freight equalized," 
where the locations of the buyer and rival seller determine whether 

any or all of the freight "ill be absorbed by the seller. 

B. Delive re d Frices . Frices quoted f.o.b. destination relieve 
the buyer of any payment of freight, for the transportation charges 
are included in and constitute a part of the actual price ruotation. 
"there the shipper has not prepaid the transportation charges, these are 
paid by the consignee anc ere deducted from the oill before remittance 
is made to the shirker, .There are four varieties of f.o.b. destination 
prices: 

(1) Prices may vary with the transportation charges 
paid by the shipper, but collected from the Duyer. 
This is essentially a uniform f.o.b., mill price 
plus freight. 

(2) They may be uniform for all destinations regardless 
of the distance from the shipping point. 

(3) They may be uniform for certain areas or zones, 
other zones having different prices. 

(4) They mav vary with the effective prices at a 
oasing point plus freight irom the basing point 

. ' in question to the point of delivery, regardless 

9836 



-6- 



of the amount of freight paid on the actual ship- 
ment itself. 

The last variety represents essentially "hat is known as basing 
point prices. 

C. The Basing Foint System -r Definitions . Several attempts 
have been made to formulate a dei inition of a :miltiple basing point 
svstem in such a way as to include all the essential leatures of such 
a system. In the report of the ERA to the President on the operation 
of the basins Mint system in the iron and steel industry, the following 
definition is given: 

"The multiple basing -point svstem in use 
today is explained as a svstem '-hereby prices 
are named for products at specific points, 
not necessarily mills, and billed to in- 
clude freight from those points to points 
where the products are taken and used by 
producers." (*) 

Another effort to formulate a single definition is the following; 

"A multiple basing point system may be explained 
as a pricing method for the quotation 01 de- 
livered prices in which all prices are cuoted 
at one or more points, not necessarily the 
points of origin or production, and billed 
to include freight from the point of price 
cuotation to the destination. 

The Federal Trade Commission, in its report to the President on 
the basing point- system in the iron and steel industry, has formulated 
the following definition: 

"The essence of the multiple basing point system 
in the Steel Industry is to be found in the use 
of a device of calculation whereby buyers of a 
commodity located at any given point are charged 
by the I^custry a definite uniform price for 
delivers at that poi^t, regardless of the point 
of shipment or the actual transportation charges 
recuired to convey the comnoditv to the buvers' 
destination. The svstem assumes a oasing point 
or points employed in com ion bv all producers 
or shippers making use of the system," (**) 



(*) Page 51 - Report of the National Recovery Administration on the 
Operation of the Basing Point System in the Steel Industry, 
November 30, 1934. 

(**) Page 2 - Report of Federal Trade Commission to the Fresident on 

the Basing Foint System in the Steel Industry, November, ly34, 
ri&36 



-7~ 



D. -iasing Fomt Pr ices . basing Bomt prices are considered ?s 
delivered prices. If tht buyer is located £0 aills irom a basing 
point, the price which will be . uoted to hi:a '"ill consist of the 
prevailing price at the basing point plus the freight on the commodity 
over 20 miles of railroad. The seller, however, may oe located hundreds 
of miles away, and Hien quoting the basing point price he virtually 
agrees to pay the freight irom lids own riant to the destination after 
collecting from the buyer the imaginary freight from the basing point 
to the destination, which was included in the price Quotation. This 
does not mean that the seller prepays the -freight, but that the 
commodity is shipped a^o the title to it is usuall r vested in the seller 
until it ri aches the hands of the corsumer. <ren the bill of lading 
arrives at the destination anc is taken up by the buyer, he deducts from 
the bill the amount oi freight -hich he has had to pay before he obtains 
the goods, and remits to the seller tne total, amount less the freight 
so deducted. The delivered price at any destination may not be deter- 
mined ov the rrice at the nearest basing point, because ii a more 
distant basing point has a price sufficiently low so that tne freight 
plus tlie basing point orice is less than that at the nearest basing 
point plus freight to the destination, this amount becomes the delivered 
price at any given destination, 

Ii an industry has but one basing point, prices nuoted by all 
producers for any one delivery point will be identical and be made up 
of the one case price plus freight from that point, regardless of the 
geographical location of plants. If all producers live, up to this 
system it will result in a complete elimination of price competition 
and a partial elimination of the natural advantages or disadvantages 
wnich some plants may have because oi tneir location, iurthermore, 
the tendency Till be to> arc further. centralization of industry in the 
hands of a few large producers. 

II. INDUSTRIAL BACKGROUND Oi BASING FOiFT SYSTEiiS 

A. Operation of the .multiple oasing point system . The base price 
in any area is presumed to be the price to be paid by the buyer located 
at a producer's o?n mill door. No ouye~ is actuall r so situated and as 
a result he either h"s to n-y switching charges or some other trans- 
portation charges to the point at which the price Quotation is. made. 

The sum of the mill price plus the switching charge becomes the 
actual base price '"hich serves as a starting point for computing the 
delivered price to a buyer at a given destination. Tne delivered price 
is, therefore, the sum 01 the actual base price plus the freight from 
the basing point to the point of delivery. The transportation element 
does not always represent the actual cost of hauling the commodity but 
is taken from the railroad rate books which are compiled by the various 
industry associations for >the use of producers in cuoting delivered 
prices. " Should delivery be made by truck, the price paid represents the 
base -price plus a surcharge -rracticallv uniform in each area and appar- 
ently agreed to by rll producers therein. This surcharge for delivery 
by trucks represents," in some regions, an appreciable increase in the 
base oriee for the area near the plant. 

9836 



If the multiple basing point systeia is lived up to bv all producers 
it procuces complete uniformity 01 delivered prices in any given area 
"but dive? sity of prices in the different sections of the country. There 
is no opportunity for the purchaser to shop around and secure lo'-er 
prices in some other sections "here costs are lower and the basing 
point price is cheaper. Tnus, the system neutralizes the effects of 
natural advantages or disadvantages 01 location as an ele lent of price. 
Consumers located near the centers of the lime producing regions reap no 
advantages in the form of reductions in prices due to their favorable 
locations. A consumer so located cannot go outside his O'-n natural 
market and secure more favorable terms from producers at a distance. 
The result is that the chief weapon 01 the consumer in the struggle for 
lower prices is taken a m ay. 

3. The evolution of the Jasmg Point System in the Steel Industry . 
Before the basing point "Drinciple was discovered, the steel industry 
engaged in a long series of efforts to eliminate nrice competition. 
First, they tried ^ools °nd agreements wnich ••ere followed oy a systei 
of zone nrices est; Dlished tnrough concerted acti n and agreements by 
the leading steel producers. i-Ir. Gary of the United States Steel Conroanv 
admitted that the ultimate no^er as to crice -policies for all sub- 
sidiaries wps vested in one central management. The rarud increase 
in size and importance of the United St-^te.- Steel Corporation made it 
the dominant factor in fixing -prices pne, ar.ce ~11 its prices '"ere 
cuoted f.o.b. Pittsburgh, any buyer at a distance raid the Pittsburgh 
price plus freight from Pittsburgh to the delivery point. The so-called 
independents, who "ere sup-oosed to be competitors of th< United States 
Steel, all adooted the Pittsburgh mill price - and even if located 
one hundred miles away charged freight from Pittsburgh to their next- 
door consumer's plant. 

This represents the gensis of "-hat is 1'no 1 n as the Pittsburgh. 
Flus Sytem which was a method of Quotation by T *hich mills outside of 
Pittsburgh sold their products to customers close to their own. plant 
or at a distance at delivered nrices made up of the ittsburgh base 
price plus freight from Pittsburgh to the destmntion, regardless of 
the location of the producing plant. 

In 1924 the system juat described which had been used for many 
years was terminated oy a "cease and desist" order 01 the federal 
Trade Commission in the famous Pittsburgh Plus Case. This case was 
brought agairst the' United States Steel Corporption :n': its subsidiaries 
which instead of appealing the case as it 'as privileged to do, filed 
a reoort of com-cliance with the Commission. 

The single -ittsburgh basing tsOiCt rps, therefore, abandoned and 
in its place the multiple basing *?oint system ves substituted, 'vhen 
the steel code was adopted the administration of the basing r^oint system 
was left in the hands of the directors 01 trie Steel Institute, subject 
to ultimate control verted in the code authority. The Steel Code 
Authority was nracticallv controlled by five concerns '-ho represented 
50 percent of the voting strength oi all the steel producers. The 

9836 



-9~ 



problems growing out of the basing point system in the steel industry 
resulted in two independent investigations 01' the practice; one uy 
the Federal Trace Commission and the other by the Heseprch er\6 Planning 
Division of the NkA. 

C. The Basing Point System in the Cement Industry . Up to 1900 
most of the cement used in the United States »es -produced in the 
Lehigh Vplley district in Fennsylvpnia. Lvon as late as 1S97, 74.8 -per- 
cent of the totpl cement production in the country represented the output 
of the Lehigh mills, pnd the remainder r?s sold ov mills vrbich had been 
built in other sections of the United States. The product was generally 
sold f.o.b. mill pnd freight was -paid oy trie consumer from the mill to 
the p>oint -of delivery. Shipments were made into the northwestern part 
of the United States pnd even as far north as Albert-*, Canada with 
f.o.b. mill prices at Northampton (Lehigh Valley) clus freight charged 
to the ouyer. 

Soon more cement mills were built in trie middle pest pnd at first 
they merely met the prices of the Lehigh olants, which involved the 
freight paid by the customer from the Lehigh ^lpnts to the point of 
delivery. Since the freight from the Lehi ;h District to various con- 
suming centers varied greatly, it was necessary at first for western 
cement producers to quote multiple f.o.b, mill prices xn order to compete 
with the eastern product. Sometimes it pf-s necessary.: t.Q shade the 
Lehigh price a little because of the alleged superiority of the product 
of the old established mills, Even the Lehigh f cement producers attempted 
for a time to use multiple f.o.b. mill prices, for the Alpha Company 
reported as many as three or four different mill prices, depending 
upon the territory into which the cement was shipped. The high freight 
charges on eastern cement delivered in the ; : est, made \he mill prices 
of western mills relatively high pnd tended to speed up construction 
of ne« mills in other parts 01 tne country. 

In order to meet the competition 01 western producers tne Lehigh 
companies therefore auoted a much lower f.o.b. mill price to distpnt 
buyers thpn it die to those located in the home areas. This virtually 
mepnt absorbing freight through lower f.o.b.. mill prices, when selling 
their product in distpnt areas. It also meant relatively high selling 
prices in all the eastern cement markets which helped to make possible 
heavy freight absorbtion on all shipments into distpnt competitor's 
markets. 

The transition from the practice of multiple f.o.b. mill prices to 
f.o.b. destination quotations took place at the turn of the century. 
It appears to have bee' :apde -possible and hastened by price discussions 
at the Cement Association meetings, and by -price understandings as to 
delivered -prices. It is evident therefore, that as early as 190? 
basing points '"ere established in the Lehigh Valley District and at 
Hannibal, Missouri for use in determining delivered prices in many 
different markets. 

In 1907 an attempt was made to secure uniform delivered cement prices 

9836 



-10- 



by means of a licensing agreement signed by 12 eastern cement manufacturers, 
The license granted the right to use the Harry and Seaman" patent for 
using powdered coal in rotpry kilns and contained conditions ore scribing 
minimum delivered prices in certain Atlantic seaboard areas. The agree- 
ment provided that the price for any given delivery point must consist 
of the ! T ortham-oton (Lehigh Valley) plant price plus Northampton all rail 
freight to each delivery point. 

The Association of Licensed ' Cement anufacturers was dissolved 
as ? result of a decision of the United States Court of Appeals, which 
held that the claims of Parry and Seaman ^ere too broad'ano that, co^- 
seouentlv, there was no infringement on the part of non-licensed 
companies using the nrocess. However, the struggle i or uniformity of 
delivered prices was not then abandoned by the cement producers, 'for 
a complete bpsing point system, with uniformity of trade practices 
was graduplly evolved, culminating in practical uniformity of pricing 
methods and trade rractices. 

Back of the basing point practice in the cement industry is the' 
excessive output of large plants v/hich the owners desired to dispose 
of without reducing or breaking the market prices in any given market. 

In the 23 years that npve elapsed since the system was first 
introduced the industry has increased the number of its basing points 
from 2 in 1902 to c9 in 1930. Willie most of 'the "basing points are 
located at or near plants, tnere are t-'O at cement distributing silos. 
Basing point prices prevail in nearly all cement markets of the country 
with the exception of a fe^ seaport towns in which imported cement 
makes its appearance. Here in order to meet this new'Price. competition, 
the basing point rrices are bancored ?nd arbitrary delivery prices sub- 
stituted, which ere low enough to meet the cement prices of importers. 

A cursory investigation of the cement industry oased largely on 
the reports of the Federal Trade Co amission sno'"s that tne industry 
has passed through several stages, each of ":.ic.i represented a further 
refinement in the basing point practices pt\6 fi'pally evolved a perfected 
method of price ouotations which not cly partially; eliminated once 
competition among producers but for distributors as veil, for the 
mark-up oi distributors was regulated by nrescrioing both how >nuch a 
distributor should be allowed to cnarge and the. price below <"hi,ch he 
was forbidden, to sell. 



9836 



-11- 

III. THE MULTIPLE BASIHG POINT SYSTEM IN THE LIME INDUSTRY. 

A. The Scope and Esser.tir.l Nature of tne Bas ing Point System . 
The basing point system in the lime code include, something more than a method 
of quoting prices at different georgraphical centers called basing points. It 
includes all the rules which r-re called "fair trp.de practices" in the code it- 
Bnlf. Article VII, section 2 of the code reads: 

"Each District Control Committee shall establish 
for each manufacturing plant within its district, 
subject to the disapproval of the Board, a basing 
point to govern all rail shipments. " 

It involves the setting up of ce rtain geographi' Cr l points, usually cities or 
as, at whi ch o r in t erms of which all pric es of li me products are quoted. 
This quotation is not an actual price list, for a price represents the amount 
in money paid when an exchrnge transaction takes pla.ee. Usually the amount 
paid by the consumer is actually the same as the amount received by the pro- 
ducer or seller. In the lime industry the lime consumer rarely pays the exact 
amount quoted in the so-called price filing. Usually he pays an amount some- 
what greater than the price quoted. This increase is represented by the amount 
of freight which would have been collected if ihe lime had actually been ship- 
ped by rail from the basing point to the consumer's establishment. Even if 
the consumer happens to be located in the basing point town itself, he still 
has to pay switching charges; or if the product is shipped by true!:, lie usually 
pays a truck differential. In an industry ivithout a brsing point system the 
consumer frequently pays less thrn the list price, for he is usually allowed 
certain discounts based on the qivantity bought and special reduction.3 based 
on the other 'factors. In the lime industry with a basing point system the 
consumer never pays less than the base price. Invariably he pays considerably 
more. This excess charge above base price may represent phantom freight 
trucking differentials, L. C.L. differentials, or imaginary freight from the 
established basing point to destination. 

2. Article VIII, section 26 contains the following: 

"Designate low rate areas governed by each basing point, 
which shall include all destinations to which the basing 
point has low or equal rll rail freight rate for each 
industry product (in the same rail freight classification) 
manufactured by those plants for which the basing point 
was e st abli she d. " 

The basing point system involves in the second place the definition of 
marketing areas and the provisions in the code regarding the uses of marketing 
areas . 

The second, element in the code which must be considered as an integral 
part of the multiple basing point system is the provision in the amended code 
authorizing the District Committee to create marketing areas. 

The establishment of low rate marketing areas tends to permit manu- 
facturers whose basing points carry the lowest freight rate to a common maricet 
to exercise a preponderant influence on prices and terms and conditions of sale 

9836 



-12- 

at the basing points in the common market. This provision, therefore, . 
intensifies the forces tending to fixed price", at any basing point and tends 
to lessen rice competition. No manufacturer, no matter how efficient a pro- 
ducer he is, maj sell in a marketing areas established around a basing point 
at lower prices than those filed by the other producers or on other terms and 
conditions of sale than those formulated by the District Committee for the 
district in question. As long as the outside producer observes the established 
prices at the- given basing point, he may reduce his own mill net returns as 
much as he pleases, but if he dares to file any prices lower than those es- 
tablished by the producers for that basing point, he is required to lover Ms own 
home base price: sufficiently so that his base price plus freight to the 
destination in question does not exceed the lowest prices filed by him in the 
established marketing area.. 

3. Article VIII, section 3 of the code reads: 

"Each member of the Industry shall not later than 
ten days after the effective date of its Code 

file identified lists of all his prices, 

discounts, terms and conditions of sales herein- 
after referred to as 'price terms 1 for each of 
the Industry products manufactured and offered 
for sale." 

This third provision in the lime code whi ch must b e regarded as an essential part 
of the multi-jle basing point system is included in the price filing regulations. 

The filing of prices, therefore, is compulsory on all producers; further 1 -' 
more, subsequent provisions in the code provide that if any change in ..rices is 
made, such changes or revisions of prices must be filed with the District Com- 
mittee and they do not become effective until five days have elapsed from the 
date of filing. During that writing period any other producer may, if he 
chooses, file the same revision, which price filing becomes effective on the 
very same date that the original price filing goes into effect. Anyone, there- 
fore may file "to meet competition" and all such price filings become effective 
immediately; whereas any price filing reducing or increasing basing point 
prices may not be used for merchandising until 5 days after the date af filing 
with the District Committee. 

B. Industrie! Background o f the System . In order to understand the 
reasons for the desire of the lime producers to secure a code with a basing 
point system and a price filing mechanism, it is necessary to study the economic 
forces operating in the lime industry and analyze the causes of the industrial 
situations which prevailed in 1932. 

The history of the lime industry is marked by a gradual but steady disa - 
pearance of the small producers and the gradual emergence of the Large plants' 
producing thousands of tons per month. In the quarter century from 1909 to 1934 
over nine hundred plants have gone to the wall in the struggle for existence, 
and their production has been largely taken over by fifty large concerns whose 
production at the present time equals 62.2 per cent of the total output of the 
entire industry. During and after the war period plant net values of lime had 
soared until in 1920 they reached a point of 165.0 per cent higher than in 1909. 
In 1953 they were still 58.0 per cent higher than the 1913 average plant net 
values. This increa.se in the price occurred in spite of the economies of large 

9836 



-13- 

scrle production of large plants and- was undoubtedly one of the indirect causes 
of the disappearance of the small independent producers. The increased prices 
are also sn important cause of the rapid expansion of the capacity of the lime 
industry. These higher prices made large and still larger plants appear to be 
profitable which in turn required expanding markets- in order to dispose of thej 
surplus production. This meant gradual encroachment on the markets of the 
smaller producers. Finally the lrrge producers became so aggressive in their 
campaign for increased sales, that they were in danger of destroying each othe: 

Many big reducers decided to eliminate ruthless competition among them 
selves by agreeing to rdopt a marketing principle which would enable them to 
compete in merchandising ana in service rather than in price. The basing point 
principle enabled them to do this by means of uniform prices in each marketing 
area together with freight absorption. The Interstate Commerce Commission's 
statistics show that the average freight paid to th- railroads on shipments of 
lime products in 1934 was $3.06 per ton, and the average mill net value of all 
the lime shipped in 1934 was $7.06 per ton. With lime plants distributee, over 
the entire country this amount of freight finally paid by the consumer even 
though absorbed in the beginning by the lime producer, indicates the extent of 
the long distance shipments of la.rge and small producers into each others' 
marketing area. The practice of shipping surplus production to distant markets 
did not orginate in the basing point system. It was evolved gradual y and in- 
volved, at first, the principle of dumping or selling at distant markets at 
lower price than at home. Efforts on the- part of producers to cooperate a.re 
indicated by the organization of the Lime Association which met in its seventee 
annual meeting in 1935. This- Association ap ears to be largely engaged in fur- 
nishing statistical information to its memebers, but it also has a research bod 
to investigate and report on better methods of producing and utilizing lime- 
products and on the extension of lime ma.rkcts. 

It appears to be almost self-evident that the curtailment of production 
which was necessary in order to prevent further declines in lime prices, fell 
largely en the shoulders of the larger producers for even if all the small 
producerc shut down all their plants it woxild have brought about but a. fraction 
of the curtailment needed to keep prices from declining to much lower levels. 
Table 1 on the next page shows thai the production of 47 lime producers replyin 
to the H.F..A. questionnaire declined from 921,000 tons in 1930 to 666,000 tons 
in 1934 a decline of 255,000 tons. Of this amount 169,000 tons were reported 
by six large producers with an annual output of over 40,000 tons. With the lirr 
producers of the country operating at about 30 per cent of their capacity it is 
not surprising that they have adopted as a possible remedy - price control 
through the ba.sing point system with the open price filing mechanism for price 
quotations. (*) 



(*) Attention is called to the discussion of the trend of production and 
capacity of large and small plants in Part V. 



9836 



-14- 
TABLE I 

CHANGES IN ANNUAL SHIPMENTS 1934 FRtii. 1930 
GROUPED ACCORDING TO SIZE DF PLANT 



Size of Plants Animal Shipments Per Cent Change in 

(Based on Shipments Number of (Short Tons) Annual Shipments 

for the year 1930) Plants 1930 1934 1934 from 1930 



Data for 4V identical plants 1/ 
Total 47 921,331 666,594 - 27.6 



Less than 5,000 

short tons 
5, COO and under 

10,000 short tons 
10,000 and under 

15,000 short tons 
15,000 and under 

20,000 short tons 
20,000 and under 

30,000 short tons 
30,0*0 and under 

40,000 short tons 
40,000 short tons 

and over 



9 


21,833 


16,745 


- 23.5 


10 


69,060 


78,580 


/ 13.8 


5 


61,779 


34,333 


- 44.4 


10 


175,640 


111,346 


- 36.6 


3 


72,039 


62,518 


- 13.2 


4 


141,802 


152,443 


j 7.5 


6 


' 379,128 


210,579 


- 44.5 



Source: NBA. Research and Planning Division. Special Confidential Reports 
on the Lime Industry 

1/ Due to lack of data, on shipments, the group of plmts reporting 

partial data could not be shown in this table. 



9836 



-15- 

C» Easing Point Practice Probably Borrowed fron the Steel and 
Cement Incus tries 

The experience of the steel and cement industries probably served 
as a stimulus to induce line producers in certain areas to adopt the 
same practice. In the lime industry the plants -'ere widely scattered over 
the entire country and as long as the plants were snail, each served a 
relatively small geographical area* The larger markets for building lime 
were the Hew York, Boston, Philadelphia and other metropolitan areas and 
for chemical lime the industrial centers near the, Great Lakes area and in 
the iiiddle Atlantic region. These markets were probably served by many 
companies located in nearby areas. Uhen selling in these markets, it 
■'as necessary to meet the prices quoted by iimy nearby competitors rrhich 
were frequently delivered prices re-ore sentin ; : the plan Trice -olus the 
freight from the plant of the Iciest riv,?.l •bi^do* tOf the consumer. In 
meeting the prices of these. rival line producers, the plants had to ab- 
sorb the freight fron their own plant to destination. This ^pricing policy 
of the line industry was therefore essentially the sane as that of hun- 
dreds of industries in which prices '-ere at times ;oroduc d to neet the 
offer of any one rival producer. ■. 

Any industry that wishes to sell in a distant market must lower its 
mill-net price to or belor that of rival sellers. This nrice nay be low- 
ered ~o;f a.osorbing freight or it may be met by means of granting special 
rebates or discounts or by the use of comnercinl bribery. According to 
information received on the field trio, it is believed that this last 
form of competition is still rampant in some parts of the country*- 

Many line producers claim that the basing point system has been used 
in the industry for many years. If they mean by that statement that it 
has been cv.stoma.ry for large u-oducers to meet co -pe bition in distant 
mr.rkets by-quoting f.o.b. delivery prices, it is probably a. true statement 
of facts. If, however, it is asserted thr t a regularly established basing 
point, system ras in existence in the early days and that prices were re- 
gularly quoted in terms of such ba.sing joints, it appears to be a highly 
exaggerated conception of '-hat actually . took place. In the light of the 
replies received in the Lime Questionnaire (see Table 2 on the following 
page( it appears that a. very large percentage of lime producers in the 
country had never used ba.sing joint systems before the codes went into 
effect. On prge one of the report by ?.ir. korman Hough, Executive Officer 
of the Line Code Authority, dated February 7, 1934, it is assorted that 
"the practice of determining delivered prices for lime in given markets 
by the utilization of a basing -joint or basing points plus the prevailing 
freight rates has been a long standing custom in the Industry." Again on 
page t'-o of the same report, i'r. Hough states .that "the multiple basing 
point system of marketing as long applied to the lime industry ha^s evolved 
as a. ^ell developed plan of distribution after years of trial and error 
much as modern engineering practice h c as emerged as a science."- 

D. The System Vas Hot in General Use in the Lime Industry Prior to 
the Code 

A comoination of the replies to the questionnaires sent put by the 
Research and Planning Division (compiled in table 3 on page 20); sho-.7S 
that 34 out of 59 of the lime aroducers re-plying to the questionnaire never 

9336 



-16- 



used the "basing -ooint system at all prior to October 1933, when the code 
went into effect. 

Exhibit E in the appendix which is a table arranged chronologically 
gives the record of the companies who admit that they had tried to use - 
wheit tiiey believed to be a basing point system. In order to secure in- 
formation as to the importance and s'ize of the companies in question, 
the shipments of each company, as of 1930, are also shown* There were 
four companies with shipments 'of over 40,000 tons, three companies re- 
porting shipments of 20,000 to 40,000 tons and the remainder less than 
20,000 tons. The smallest producers who tried out the basing point sys- 
tem before the code, were two companies in Georgia with annual production 
and shipments amounting to seven and eleven thousand tons respectively. 

Since 68 per cent of the plants reporting shipments to the Bureau of 
Mines in 1930 had a production of less than 7,000 tens, it is evident that 
only the relatively large plants had ever at t emoted to even try out the 
new system. The total production of all the plants who reported that they 
had used the basing ooint system amounted to an aggregate of 400,000 tons 
in 1930 and 11.8 per cent of the total production of all the lime plants 
in the country. These statistics show rather conclusively that the basing 
point system was used first by the larger slants with excess production 
which had to be unloaded on distant markets. It is also circumstantial 
evidence proving that the basing point system was out into the code to meet 
the needs of the larger producers in the industry. 

.1. Evidence from the trade conferences held under the auspices 
of the Federal Trade Commission 

In 1929 and in the year prior to 1929 a series of Trade Conferences 
were held under the auspices cf the Federal Trade Commission to formulate 
Systems of Fair Trade Practices for the different industries. In thebe 
conferences representatives of many of the 1 eading industries met in 
Washington to formulate what might be called Codes of Fair Trade Practice. 
In the conferences held by the lime industry, composed of representatives 
from many of the leading companies, there is found no reference whatever 
to the basing point system. It is reasonable to expect that, if this 
method of marketing had been generally established at that time, that 
some mentioned of it would h-ve- been made in the deliberations of that 
body. If, as has been claimed, the lime .producers of the country have for 
many years, been using the basing point principle in marketing their lime 
products, it seems to be almost self-evident that some reference to it 
would have been made in this very important gathering. It is possible, 
however, that the subject was discussed but that no reference to it was 
made in the published reoort. 

2. Evidence from the Federal Trade Commission's ^rice 
bases inquiry 

In 1928, the Federal Trade Commission undertook an investigation 
of the basing point system in the Cement Industry. In order to ascertain 
the prevalence in other industries of the various methods of differenti- 
ating prices in respect to: location, questionnaires were sent to reoresen- 
tative groups of manufacturers in 340 industries. The replies of the lime 

9836 



-17- 

manufacturers uere made available to the Research and Planning Division 
of II. R. A. and the results tabulated. 

In re^ly to the question, "HJhat proportion of your spies '^ere made 
f.o.b. plant, if any, without allowances for freight, carriage and 
hauling, etc?", only one cor.nany located in Arkansas reported as little 
as -10 per cent of its sales f.o.b. plant. Another comwany in Pennsyl- 
vania reported all its sales f.o.b. plant. Still another company in 
Ohio reported 80 wer cent of its sales f.o.b. plant and 20 per cent 
f.o.b. plant with full allowance for frieght. One ccmoany in Illinois 
reported 40 per cent of the sales f.o.h. plant and 60 3er cent on a 
delivered irice form. Another company in Ohio reported 90 per cent of 
its sales with no allowance for freight and also stated: "There are no 
basing points used in marketing our pnaduets," «and' still -.another Ohio 
lime company showed that 90 per cent of its sales '-ere f.o.b. plant 
and numerous lime producers reported that all sales of lime were made 
f.o.b. -olant with no freight allowed, but that limestone was sold with 
such allowances. 

An analysis of the copies of invoiced of lime sales submitted to 
the Federal Trade Commission in 1928, copies of which are held in con- 
fidential files of the Division of Review, reveals the following re- 
sul t s : 

1. company with invoice showing full freight allowed 

1 " " " " delivered lirice 

(freight prepaid) 

2 companies " ■ " " part of freight allowed (20 cents 

• per ton in one invoice. 35-1/2 cents 
' per ton in the other invoice). 

3 " " " " f.o.b. plant (no freight allowed) 

3. Evidence from Research and Planning Questionnaire 

In order to secure accurate information as to the origin of the 
basing point system and the location of basing points used prior to the 
code, the following question was included in the Questionnaire sent to 
lime producers by the Research and Planning Division of U.S.A. ! 

S. Prior to the code (October 1953)' did y"ou use the multi- 
ple basing ooint system as a method of quoting prices? 



(yes or no) 

If so, state the year of origin and location of each 
basing point. 



9836 



-18- 



Kind of lime 



Building 
Chemical 
Agricultural 



Year basing point 

system vras adopted 

(estimate) 



Local on (city and state) 
of basing joints used for 
each kind of lime at tine 
system was adopted. 



Cut of a total of 59 re-olies there were 47 usable replies to this 
question, of which twenty plants reoortedthat they had used the multiple 
basing point system prior to the code, and twenty-four stated that they 
had not had any experience with the basing point system and three failed 
to answer the question. The plants that had employed the system ^ere 
preponderantly large plants. II o less than six of them reported ship- 
ments over 40,000 tons for 1930 and sixteen out of the twenty shipped 
over 10,000 tons of lime in that year. 

The group of plants reporting that the-'- had not used the basing 
point system were generally smaller plants, for fourteen out of the 
twenty-four had made shipments of less than 10,000 tons in 1930. Hone 
of the plants shipping over 40,000 tons in this group and only ten plants 
with shipments ranging from 10,000 to 30,000 tons reported that they did 
not use the basing point system. Table 3 shown below gives en analyses 
of all the replies to this question received from lime producers. 



9836 



-19- 

TA3LE 2 

DELIVERED PRICES WITH RESPECT TO LOCATION OP SEIPPIITG 
POINT DURING PRE-CODE PERIOD (ITUIEER OF PLANTS REPORTING THAT THEIR 

PRE-CODE DELIVERED PRICES UERE 1LADE UP OP RRICES AT ONE OR IIORE BAS- 
ING POINTS, FLUS FREIGHT FROh BASING POINT TO DESTINATION, REGARD- 
LESS OF LOCATION OF SHIPPING POINT) 1/ 



Size of Plant 
(Based on Ship- 
ments for 1930) 



Total 



Number of PI ^n 1 



Location of 
Shipping Point 
Disregarded 



Location of Ship- 
ping Point Con- 
sidered or no. De- No 
livered Prices Used Ansrrer 



Data for 47 identical ulants 



Total 



47 



19 



Less than 5,000 






short tons 


9 


2 


5,000 and under 10,000 






short tons 


10 


4 


10,000 end under 15,000 






short tons 


5 


3 


15,000 and under 20,000 






short tons 


10 


5 


20,000 and under 30,000 






short tons 


3 


— 


30,000 and under 40,000 






short tons 


4 


1 


10,000 short tons 






and over 


6 


4 



27 

6 

6 
2 
5 
3 
3 
2 



Grand Total 



Data for all plants answering question 2/ 

57 24 32 



1/ No data are available on the shipments in 1930 for the ten additional 
plants, consequently the above frequency cannot be -presented for the 
larger number of plants. 

2/ Pre-code period as used in this table is from January to September, 1933. 



9836 



-20- 



TiffiLE 



Number of Plants 7/hich, Prior to the Code, Used the Multiple 
Ba.sing Point System as a Method of Quoting Prices 



Size of Plant 
(Based on Shipments 
for 1930) 



Total 



Used Multiple Did Hot Use 
?• Basing Point Multiple Ho 
System Basing Point Answer 
System 



Data for 47 Identical Plants 



Total 

Less than 5,000 short tons 
5,000 and under 10,000 

short tons 
10,000 and under 15,000 

short tons 
15,000 and under 20,000 

short tons 
20,000 and under 30,000 

short tons 
30,000 and under 40,000 

short tons 
40,000 short tons 

and over 



47 


20 


9 


1 


10 


3 


5 


2 


10 


6 


3 


1 


4 


1 


6 


6 



24 
7 
7 



3 
1 

1 
1 



Grand Total 



Data for all plants answering questions 1_/ 
59 22 34 



1/ ITo data are available on the shipments in 1930 for the 12 additional 
plants, consequently the above frequency cannot be --.resented for the 
larger number of slants. 



Fourteen companies supplied informati n as to the year of adoption, 
the \ : points used and the type of lime so quoted and sold. The 

earl is s lorted example is supplied by a lime co r roany in Kentucky, which 
adcpteJ --.ring point system in 1855 and auote.i prices on Salem, Indiana 
and : ' . ilj Indiana.. Next in chronological order cones a conroany in 
Maiy" : ••. . • :,'n:!rh used a basing point in 1913 quoting -orices on York, Peni- 
sylv , Jjdar Hollow, Pennsylvania; Frederick, Maryland and Union 
Bridge, ' ryland. Two year., later, in 1915, a company in Maine used 
Canaan, Connecticut; T7est Stockbridge, Massachusetts; IV mams, Massachusetts 
and Rockland, Maine, as basing -joints. In 1915 an Illinois conroany re sorted 



9836 



-21- 

the use of Hannibal, Missouri; Springfield, 1'issouri rnc. Mitchell, 
Indiana. Txro other companies located in Missouri reported the use 
of the same basing ->oints as the Illinois company in 1916. In 1920 
trro other Missouri companies reported the sane basing " oints viz., 
Hannibal, Hissuuri; Springfield, Missouri and Mitchell, Indiana. In 
the same year (l$20) one Tennessee company and one California company 
reported the use of basing points. The Tennessee company used six 
basing points, three in Tennessee, one in Alabama, one in Georgia rnd 
one in Virginia. The California company used only San Francisco, 
California and Seattle, Washington* 

Finally, in 1927 one Maine company reported the use of Rockland, 
Maine and Farnams, Massachusetts and in 1931 a Pennsylvania company 
quoted prices based on Belief onte, York and Cedar HoIIott, Pennsylvania 
rnd TToodville, Ohio. This company also used Farnams, Massachusetts; 
Buffalo, Ilevr York; Marblehead, Ohio; Marble Cliff, Ohio md Louisville, 
Kentucky. 

The record of reoorted ~dootions therefore stands: 



TABLE 4 

EVOLUTION OF THE "US IMC- POIiTT 
SYSTEM 1/ 





Net- 3, 


asing Points 




Comi 


ng Into Use 


Year 


Dur 


ing Year 


1885 




2 


1913 




3 


1915 




7 


1916 




2 


1930 




8 


1922 







1927 







1931 




5 • 


No Date 







Companies that have 

Used the System 
Prior to the Code 



Total ITumber of Bas- 
ing Points That 
Have Been Used 



uiven 



1 
2 

4 

7 
10 
11 
13 
14 

15 



2 

5 
12 
14 
22 
22 
22 
27 

27 



1/ Based on 59 returns: - Source: II. R. A. Research and Planning 

Questionnaire. The evolution of the basing point practice in the 
lime industry as reflected by the replies to the If. R. A. Ques- 
tionnaire is shorm chronologically in Exhibit E in the appendix. 



9836 



-22- 

In an endeavor to ascertain the reactions of those producers r.'ho 
had used the system -.rior to the code, the following question uas also 
included: 

(7) Did you ever adopt the "basing -joint system as a 
means for quoting prices on line and lime pro- 
ducts and later discontinue it? . 

(Yes or Ho) 

If so, indicate an proximate dates: 

(a) 3asing point system adopted_ 



(Month and Ye-.r) 
(b) Basing point system later discontinued 



( Llonth and "ear) 



Of the twenty companies trhich had -dopted the system mrior to the 
code, five declared that they later rbar.loned the mractice. Tno com- 
panies, one in Missouri and one in O. lif orni" , adopted the system in 
1920 snd discontinued base prices after eleven years experience. One 
company in Pennsylvania adopted it in 1933 and gave up the practice in 
1935. Another corroany adopted it "long ? ;o" and abandoned it in 1927. 
A California compaaiy adopted the system in 1927 and abandoned it in 
1931. 

It is reasonably certain that all those comornies rho had actually 
used the basing point s;-stem and vrere in favor of its continuance, 
uould have sent replies to a questionnaire and that such replies ^ould 
therefore represent ne~rly 100 ler cent of the corroanies in question. 
Since only t-'enty out of 253 comoanies actually indicated their exper- 
ience it seems to be rather conclusive prodf that less than 10 per 
cent of the industry -ere actually using the basing Point system as a 
regular business or^ctice before the code inmosed it on the entire in- 
dustry. Furthermore, as has oeen explained above the practice reported 
may not have been the modern basin; point system in its entirety but 
probably represented a long established practice used by the larger pro- 
ducers for meeting competition in distant markets. Meeting competition 
did not necessa.rily mean quoting the exact nrice of a rival nroducer and 
adding freight to the moint of delivery from the group freight rate cen- 
ter in -rhich the rival bidders plant tras located, but involved the 
quotation of a price lop enough to secure the business. 

This sort of oractice ua.s in reality a. "mart and parcel" of the 
regular, price competition vhich prevailed in the Industry. Plants xtith 
surplus production had to unload their excessive output and to do so en- 
gaged in the long established practice of dumping. In order to unload 
an excess supply in a distant market it '7as necessarv to Imovr the deliv- 
ered prices of rival mroducers. 



9836 



-23- 



Through a regularly established system of business espionage every 
large producer ascertained the prices, quantities sold and the markets 
of his business rivals -and vn s thus able to quote irices lor enough to 
secure sales in the most advantageous markets. Cress— count 1*7- shipments 
resulting from efforts Of each producer to unload or dump his surplus 
in some other producers natural market led to an -excessive amount of 
cross hauling even before the basing point plan wa.s formally adopted. 
Prior to this time no producer could possibly know exactly what delivered 
prices were ouote 1 . in every district, whereas under the new plan he had 
at his disposal every filed price at every basing point and could there- 
fore more easily select the market in which he could unload his surplus 
at the granted profit to himself. 

Since the consumer was charged the plant 'rice plus freight, 
the sum of these two became the delivered price which had to be met. 
Meeting a competitor's price did not therefore necessarily mean selling 
at the identical price quoted "oy a rival, but frequently involved cut- 
ting below it, which must have resulted in a certain amount of real 
rice competition* 

E a The Importance of the Er.te Pool: in Quoting Prices . 

The freight rate books compiled by the District Control Committees 
play a very important role in the smoth working of the Basing Point 
System. It is usually admitted that the rate book does not always fur- 
nish the exact lowest freight rate on line between two points, but it 
approximates the exact rail freight. The reason for using the rate book 
instea.d of having each traffic specialist or each producer compute his 
own rates is not >rimarily economy in compiling rates. Its real purpose 
seems to be to make possible exactly the same price puotations, no matter 
what plant made the irice. Such identical consumer prices can only be 
secured if all plants use the sane freight rate, for a difference of 2j£ 
per ton may produce apprice lower than the quotations of other bidders. 
If e*ach ilant computed its own freight rrte, it might result in price 
cutting since the exact amount added as freight to the ton price might 
vary considerably and give and advantage to any plant, quoting the low- 
est freight rate'. 

1. The dieted need for rate books to assist small producers 

The significance of freight rate computations was discussed at the 
hearings of the lime code from an entirely different angle. Prom the 
arguments there presented, one might almost conclude that the entire 
system w P ,s written into the code primarily in the interest of the small 
producers for it was alleged that the small producers could not afford 
to en{;p^e traffic experts tc compute for then the exact freight rates 
on lime to their most profitable marke*ts. An interesting example of the 
arguments presented at this heading is found in a brief submitted by a 
representative of the Lime Association. 

In order to show' ho-: necessary a rate book was to the small producer, 
a point was selected in the northwestern part of West Virginia at which 
there wa,s supposed to be a market for large quantities of chemical lime 



9836 



-24- 

of a very high degree of purity. This point WpS sup-oosed to he located 
"ahout equidistant from the lime producing ..-regions of Indiana, Ohio, 
Pennsylvania, Maryland, Virginia and Tennessee." (*) Without the rate 
book under the operation of the basing -ooint system, the small producer 
would he at a loss to know hot? to figure his delivered prices as so 
many producing ooints had to be considered. Thus "unable to figure 
his comoetition he would probably quote the lowest possible price at 
which he could supply the lime. Without exact factual knowledge 
either of his costs or of his competition, the ^rice might be entirely 
out of line with the market and with cost of production, and price de- 
moralization, market collapse r^uld set in." '(*) 

As soon as the code with its basing point system had been approved, 
the District Committees in several of the lime districts immediately 
compiled freight rate books for the use of the members in the districts* 
These rate books supplied the freight rates which were supposed to be 
used in quoting prices from any basing uoint within the district to 
destinations, within and without the district. The freight rate book 
enables all -oroducers to quote exactly identical prices in any given 
area and makes possible the elimination of price cutting which formerly 
had been blamed on different systems of computing freight rates. 

All the available evidence on long dis trance shipments and freight 
rates seems to indicate very definitely that the rate books '-'ere not 
compiled only to benefit the snail producers* The rate book and the 
basing joint system of marketing have also operated in the interest of 
the large producers. Among the many available profits that may be pre- 
sented in support of this statement are the following: 

a. The small plants do not ship widely 

Bearing in mind that less than 58$ of all the lime plants in the 
country reported to the Code Authority in 1935, it is safe to assume, that 
the 119 plants which did not report, were largely small slants. This 
conclusion is borne out by the fact that only 34 out of 165 plants report- 
ing to the code authority had a capacity of less than 10,000 tons per 
annum, computed on a 300 day x>er year basis. An analysis of the shipment 
of all these 34 above named Hants is contained in Table 5 shown below, 
which was compiled from the monthly reports to the Code Authority for 
December 1934. 



(*) l\f. I. R. A. Hearings on the Lime Industry, Vol. 1, Supplement, p. 28, 
May 24 and 25, 1934. 



9836 



-25- 



TA!LE 5 



Disposition of Shipments of Plants with 
Less than 10,000 Tons Annual Capacity 

(during Decenber 1954) 



I lumber of 
Plants 



Sales exclusively within state 17 

Sales to one other stat*e * - • 6 

Sales to tvro other states 4 

Sales to three - other states 1 

Sales to four other states 1 

No sales 5 



:ot; 1 34 



Since one-half of all the small plants reporting to the code auth- 
ority did not sell any lime outside of the home states, it is -probable 
that the great majority of the 119 plants not reporting to the code 
authority confined their sales to the state in which they were located, 

b. Only lroy-e producers en^a^e in extensive interstate 
shipments 

More convincing evidence is found in the monthly reports made to 
the code authority in Decenber 1934. The Table 5 inserted below repre- 
sents a compilation of the average annual capacity of the plants which 
sold in one state only and the plants making shipment 3 to one or more 
additional states. 



9836 



-26- 



TA3LE 6 
Extent of Interstate Lime Shipments 
(By all plants reporting to the Code Authority in Dec. 1934) 



Sales Exclusively 
Within State 

Sales to Various 
Add 1 1. 1 ona.1. States 



1 
2 
S 
4 
5 
6 
7 
8 
9 
10 
11 



and over (*) 



Number of 
Plants 



42 



Percent 
of Plants 



28.0 



:25 


16.7 


19 


12.7 


18 


12.0 


13 


8.6 


7 


4.7 


7 


4.7 


3 


2.0 


5 


3.3 


3 


2.0 


2 


1.3 


6 


4.0 



Average Annual 
Caj^acity l/ 



Total 



150 



100.0 



14,970 



13,720 
21 , 550 
26,550 
40,180 
59,400 
36,890 
29,400 
43,100 
57,490 
37,120 
79,400 



450,000 



(*) Range = 12 to 17 

1/ On a 300 day per year capacity basis. 



The average annual capacity of the plants reporting shipments to 
the home state only, was 14,970 tons whereas the capacity of those plants 
making shipments to eleven or more states was 79,400 tons. If rate books 
are needed by all plants ship >ing to four or more states, it -ill be seen 
that 22 per cent representing the very largest producers were the direct 
beneficiaries of this device. The indirect benefits are, however, far 
more important than direct advantages of a rate book used as a means of 
facilitating the computations of freight to many consumers located in 
distant markets. The indirect benefit, results from the price maintenance 
feature of .the basing point s -stem, for it makes possible absolutely 
identical quotations by all producers using the same bo.se price and com- 
puting the delivered price by including freight to destination. 



9836 



-27- 

CHAPTSR II 

TIIE LIME IIDUSTRY U1IDER ITS CODE 0? FAIR COMPETITIO N 

I. GEHEHA1 SURVEY OF THE LI 13 INDUSTRY CODE. 

The first Code of Pair Competition for the industry ' hich was 
approved by the President on October 3, ,1933, and "became effective ten 
days later, contained 5 articles, 42 sections and one schedule. Articles 
III and IV consisted of 25 sections affecting -orices. Article III con- 
ferred upon each District Control Committee the power to establish basing 
points and article V stated that the Committees "shall be charged with 
the power and duty of supervising and enforcing the provisions of this 
Code and may make such investigations as may be necessary for that purpose. 

Article III, section d provided for the following: "The Trade 
Relations Committee shall, prior to the e:rpira,tion of a four-month period 
herein below specified, make to the President a report and recommendations 
as to the effect of the basing point and average cost provisions of this 
Code upon prices in the industry, upon such other matters as it may deem 
pertinent to properly inform the President upon operations of this 
section, and upon such other matters as raav be requested by the President 
or the Administrator. 

"The foregoing orovisions with regard to basing points and average 
costs herein above described are experimental and tentative so far as 
this Code is concerned, and shall continue in effect for a period of four 
months after the effective date of this Code in order to afford the 
President an opportunity to determine upon the recommendations of the re- 
presentative or representatives appointed by the Administrator to the 

Trade Relations Committee as hereinafter provided a.nd whether such 

provisions are beneficial or detrimental to the industry or to the 
public " 

Pursuant to the above provisions, the code authority for the in- 
dustry submitted a report to the Administrator, on February 7, 1934, 
which was entitled "THE EFFECT 07 THE LIMB COPS UPON CONDITIONS 7ITHIN 
THE INDUSTRY", a copy of which is included in the appendix (Exhibit C) 
to this report. 

The first amendment to the original code v/as approved by the Ad- 
mini strator on February 10, 1934, provided for a. separate code authority 
for the dolomite division of the industry. 

The second amendment to the code approved April 1, 1935, consisted 
of 12 articles, 82 sections and 2 schedules of which 2 a.rticles and- 33 
sections deal with trad.e practices affecting prices, 3 articles and 17 
sections deal with labor and wage provisions, and. article VI containing 
13 sections provider, for the organization and details of cod.e adminis- 
tration. This article authorizes the code authority to use the Trade 
Association "for carrying out any. of its activities provided" in the 

code. This code also authorizes the code authority to divide the country 
U P into lime districts, each of which is to be supervisee" b T - a District 

Control Committee which shall be chosen by all producers located within 
the district, each producer having one vote. 

9833 



-23- 

The marketing provisions of the amended code include the establish- 
ment of a basing point system, price filing provisions with a waiting 
period and orice publication, designation of marketing areas with con- 
ditions of sale which must be observed by producers outside as well as 
within the marketing areas and finally standards of fair competition. 
Section 3 of article XIII also provided for a limitation of the amount of 
freight which may be absorbed in shipping into competitors' territory to 
20$ of the f,o.b. basing point price. This section was stayed subject 
to further consideration and orders by the Board. 

II. METHODS OF SELECTING THE CODE AUTHORITY AND ITS FUNCTIONS IN THE 
LIME INDUSTRY. 

The code authority appears to be a control body representing 26 per 

cent of the industry measured in number of companies and 32 per cent 

measured in the number of plants, for the Lime Association was composed 

of 67 out of a total of 253 companies reporting to the Bureau cf Mines 
In 1934. Through its Trade Relations Committee the Association appoints 

16 out of the 20 voting members. The remaining four voting members are 
supposed to be selected by lime companies who are not members of the 
Lime Association. Whereas the non-members of the Lime Association com- 
posed of 186 companies are permitted to select four members of the code 
authority, at the last election of the code authority onl-"- 9 out of the 
186 voted in the nominations and onl~ r 15 firms voted in the final election. 

The representative character of the code authority is shown in the 
following table which reveals the actual participation of the lime pro- 
ducers in the formulation of the code and indirectly in the selection of 
the code authority. 



TABLE 7 

Voting on the Adoption of the Amended 
Code as a Whole 



Plant Basis Number Per Cent 

Manufacturers eligible to vote 309 100 
11 voting for the 

code 21 26 
" voting against 

the code 28 9 

" not voting 200 55 

Tonnage Basis 1/ Tons Per Gent 

Tonnage eligible to vote 1,912,000 100 

" in favor of code 1,047,000 55 

» opposed to the code 409,000 21 

" not voting 459,000 24 



ij The tonnage figures do not include the dolomite group even though six 
of the eight dolomite producers constituting the dolomite association 
are also lime producers and are subject to the wage and hour provisions 
of the lime code. 

9836 



~29~ 

'The actual votes cast for each article in the code as well as the 
adoption of the code as a whole is reproduced from the hearings on the 
line code (*) in the following: 

Balloting on 

Proposed Admendments of the Code of Fair Competition 

for the 
Lime Industry 
Line Industry Conference 
May 23, 1934 
7,"ardman Par'/: Hotel, ."rshington, D. C. 



Summary of Votes by Pumber ond Tonnage 

Approximate Voting Tonnage 1,456,539 

ARTICLE I 









Affirmative 








ITegative 








I T umber 


Tonnage 


Percent 


Fumber 


Tonncs;e 


Per Cent 


Sec. 


2 


75 


1,001,521.96 


69 




20 


455,107.66 


31 


Sec. 


6 


75 


1,001,521.96 


59 




20 


455,107.65 


31 


Sec. 


7 


75 


1,001,521.96 


69 




2C 


455,107.65 


31 


Sec. 


8 


32 . 


1,139,745.64 


73 




13 


315,783.98 


22 


Sec. 


9 


82 


1,139,745.54 


78 




13 


316,783.98 


22 


Sec. 


10 


82 


1,139,745.54 


78 

ARTICLE 


II 


13 


315,783.98 


22 


Sec. 


2 


32 


1,139,745.64 


78 




13 


316,783.98 


22 


Sec. 


3 


32 


1,139,745.54 


78 
ARTI 3LL 


III 


13 


315,793.98 


22 


Sec. 


1 


32 


1,139,745.54 


78 




13 


315,793.98 


22 


Sec. 


2 


79 


1,030,802.64 


71 




16 


425,735.93 


29 



(*) NIBA Hearings on the Line Industry, Vol. 1, Supplement, pgs. 33 end 
39. Lay 24 and 25, 1934. 



9836 



-30- 

ARTICLE IV 

Affirmative Negative 

Ihunber Tonnage Per Cent lumber Tonnage Per Cent 

Soo., 1 82 1,139,745.64 78 13 316,793.98 22 

ARTICLE V 
(As a whole) 
82 1,139,745.64 78 13 315,793.98 22 

(Adoption of Code as Amended as a Uhole) 
81 1,047,494.64 71.9 14 409,044.98 28 



In view of the fact that 15 out of the 20 voting members of the code 
authority were selected by the Trade Relations Committee of the Lime 
Association, the method of selection of the Trade delations Committee by 
the Lime Association became an integral part of the code itself. This 
was found in article IV, sections 2 and 3 of the by-laws of the Associa- 
tion, which provided for one director from each district and an additional 
director for each 200,000 tons or fraction thereof in excess of the 
minimum. This seemed to leave the selection of the code authority largely 
in the hands of the large producers, since the number assigned to each 
district was based on tonnage rather tnan on the number of producers. 

The net result appears to be that the industry was governed by men 
selected by a relatively small number of large producers. 7/hile the 
Administration was authorized by the code to appoint three non-voting 
members these were only permitted to attend meetings and make recommenda- 
tions and report to the Administration on the functioning of the code 
authority, without exercising much real influence on the code operations. 

The main provisions of the amended code affecting marketing and trade 
practices '.fere formulated in such a way that the powers of the code 
authority and district committees were materially increased. 

The only changes in the basing point -orovisions were: first, the 
insertion of a clause giving any member the right to establish his own 
plant as a basing point and, second, a provision authorizing the district 
committee to designate the low rate areas around each casing point. The 
power to establish basing points for each plant and the additional power 
to determine the low rate area in the district seems to give the district 
control committee considerable importance in promoting or retarding the 
economic well-being of any single enterprise. Although the code gave any 
firm the right to establish its own plant as a basing point, this did not 
always benefit the firm, for the exact location of the external basing 
point often limited the possibility of securing phantom freight on any 
part of its shipments. 



9836 



-31- 

Furtherm'ore, 'if a producer established his own plant as a basing 
point he thereby made his plant a better target for attack by rivals 
located at a distance, since they may file lower basing prices and by so 
doing reduce the mill-net of every ton he sold. 

In addition to the control exercised over basing points the District 
Control Committees appear to have exercised considerable power over sur- 
charges on truck and L.C.L. shipments. Although they nominally served 
merely as transmitters of filed prices and differentials to the trade they 
appear to have exerted constant pressure to bring about uniformity in 
such quotations and also to prevent any plants from filing prices without 
including such differentials. Furthermore, while using its power to con- 
trol basing points, the committee in each district seems to have directed 
its efforts toward securing uniformity in the trucking differentials and 
the other conditions and terms of sale. This scheme of conferring such 
extraordinary powers on a small group of members of an industry within 
the various districts tends to make each district a self-governing and 
almost independent industrial principality. The District Control Com- 
mittee appear to have power to promulgate in form of price filings the 
terms, conditions of sale ape differentials, which are supposed to be uni- 
form in the entire district.. These instructions (see page 2 of original 
price list for Districts 7-12 in the Appendix) state: "The following are 
standard and uniform for all manufacturers or. all price lists filed." 

Article V, section 3. of .the original code provided that: 

"Each District Control Committee may consider and prepare uniform 
merchandising plans to be recommended to the Trade Relations Com- 
mittee containing such provisions as may be d.eemed necessary or 
proper to insure fair selling methods by the manufacturers in the 
district and to nrevent unfair competitive practices* and to con- 
sider and prepare for recommendation to the Trade Relations Com- 
mittee any system of standardization of products necessary or- 
advisable to insure fair selling methods, and to advise with the 
Trade Relations Committee upon any other matter pertinent to the 
purposes or administration of this. Code." 

This provision virtually authorized the District Committees to get 

together with the manufacturers of the districts and formulate, without 

making use of collusion or unwritten agreements, uniform terms and con- 
ditions of sale. Although the amended code did not contain the above 

■ore-vision, it did not materially impair the powers granted in the original 

code, since the c ommittees' ; i& ; question had already acted und.er the former 

authorization and had ; secured the necessary uniformity, further 

authorization was no longer needed' after the system had. been nut into 

actual operation. 

The uniform terms "and; conditions of sale are applicable not only to 
producers operating within 'the district but are expected to be accepted 
by all producers in other districts who d.esire to ship lime products into 
the districts' low rate area. The committee's jurisdiction extends in 
some cases into other districts making possible absolute uniformity of 
terms' and conditions of sale of all lime products brought within the 
district. 



9836 



-32- 

MARKETING AREAS - The amended code -provides (art. Ill, section 26) 
that "The District Control Committee shall also designate the low rate 
area governed "by each "basing point which shall include all destinations 
to which the basing point has the low or equal all freight rate for each 
industry product in the same rail freight classification ... Accepted 
geographic lines may he used as boundaries of such low rate areas, pro- 
vided that the District Control Committee shall -orovide for the use of the 
low basing, all rail freight rate for all destinations." 

This "orovision in the code apneajrs to give the District Control Com- 
mittee no discretionary power whatever, for it is merely authorized to 
draw lines through noints whose freight rates make them equidistant 
between two or more basing noints. Nothing is specified in tho code 
about low rate areas of delivered prices from each basing point. 

If low rate areas are defined as areas in which delivered nrices 
are less or equal to the delivered nrices from other basing noints, the 
work of the Dis trict Control Committee would be greatly augmented for 
any changes in base nrices in any district would comnletely change the 
so-called areas. Low rate preas as defined in the code annear to be 
geographical regions whose boundaries are determined by the fact that the 
freight from one basing noint is exactly equal to the freight from some 
other basing noint. Such low rate areas are established by the freight 
classification and freight rates in the different parts of the country, 
and once established they remain fixed until some change is made in 
freight rates on lime in one or more rail freight classifications. These 
low rate areas with definite and at times arbitary dividing lines appear 
to have been established nriraarily for purnoses of nrice control. In 
the words of the representative of the code authority at the hearings 
held in May 25, 1934 (p. 30): 

"It must be remembered, of course, that marketing areas are in no 
way restrictive as to sales. A manufacturer may shin into a dozan 
such areas if he chooses. In quoting delivered nrices in other 
areas than his own, he may meet the established competition or he 
may establish the market nrice himself, the only limitation being 
that in the latter case his nrice be at least that which he has 
published in his own basing point area nlus basing rail freight rate." 

The real nurpose of the marketing areas is nrimarily to maintain 
basing noint consumer prices in each district. If for any reason any 
one plant decides to ship beyond its own low rate area it must file 
exceptions with the District Control Commit tee and if it lowers its nrice 
in another area the nlant is required to either designate the specific 
quotation of prices which it meets or if not the firm may not under any 
circumstances reduce its nrices in distant territories lower than its own 
filed nrices in the home area plus basing rail freight. 

The only discretionary nower allowed the District Control Committee 
according to a strict construction of the code seems to be found in the 
phrase "accented geographic lines may be used as boundaries of such low 
rate areas". This annears to make it nossible to extend or contract the 
low rate areas so as to follow state or county lines instead of adonting 
the exact boundaries established by freight rates. It was asserted at the 

9836 



hearings by representatives of the code .authority that these provisions 
in the code are "for the 'purpose of avoiding confusion, subterfuge and 
unfair practices", in the marketing of lime products, whereas the real 
purpose seems to have "been to establish greater control over marketing 
practices of individual producers by means of the special powers given 
to the District Control Committee. 

III. POWERS EXERCISED BY THE DISTRICT CONTROL CO'.D.'ITTEES, 

The lime quotations filed with the Dis trict Control Committees in 
the various districts seems to show striking uniformity in the prices 
filed by different producers. While the code does not forbid a producer 
to file any prices he pleases, the fact, nevertheless, remains that all 
quote virtually identical prices in each area. This is, perhaps, partially 
due to the policy of "following the leader." Any powerful producer may 
publish prices and terms which the other producers in the same territory 
will not or dare not cut. 

The extraordinary powers exercised by the district committees in 
same of the districts is indicated by the price schedules and the in- 
structions sent out by the committee to the producers in their home areas. 
In Exhibit G- in the Appendix, are found several examples of such instructions. 
Not only do prices appear to be fixed but numerous regulations and 
restrictions on competitive practices are promulgated which greatly 
resemble decrees and which the individual producer is required to live up 
to. Many of them reveal considerable uniformity in all the districts of 
the country. In others there is a great variety of restrictions applied 
to all the lime producers in each district. In the Appendix, Exhibit F, 
are found the chief general provisions embodied in reports or price lists 
which often resemble instructions to lime producers in the leading districts 
of the country. Many of these provide for extras in the form of charges 
or surcharges ultimately shifted to the consumer in increased prices. A 
brief enumeration of some of these features tends to throw light upon the 
nature and scope of these district committee, instructions. 



9836 



-34- 

A. The District Committee's instructions cover : 

1. Cash discounts The practice of granting disco\uits for 
cash upon. presentation of the invoices has existed for many years in 

the lime industry as well as in nearly all other manufacturing industries. 
The amount of such discounts has, however, varied greatly in different 
sections of the country and at different plants. In the filed prices 
issued "by the District Control Committees the cash discount is every 
where 25 cents per ton hut the discounts per "barrel varied from 2^r cents 
to 20 cents. The 10 cents cash discount is usually for large barrels 
and the discount o'n small "barrels is generally 5 cents while in Districts 
6 and 8 a discount of only Z\ cents per "barrel is allowed. 

2. Consumers differentials Consumer differentials are quoted 
in all the lime districts on the Atlantic seaboard and in the states north 
of the Ohio River as far west as the Mississippi. All the districts 

west of the Mississippi and throughout the south with the exception of 
North and South Carolina and Virginia contain no mention of consumers 
differentials in the terms and conditions of sale. Districts 1, 2, 3, 
5A and 5B charge $1.00 per ton and 10 to 15 cents per barrel whereas 
Districts 4 and 8 provide that dealer prices may be quoted to consumers 
of chemical lime only. Ho specific quotations are filed as to the amount 
above dealer prices which shall be added in sales to consumers direct 
without the intervention of a dealer. In addition to the specific con- 
sumers differentials,- consumers who buy directly from plants must usually 
pay the truck differential if the lime is carried by truck, or the L.-C.L. 
differential, if the lime is shipped in less than carload lots. It is 
, highly probable that the consumer differential would have been gradually 
extended into the western and southern districts if the district control 
committees had continued, to function. 

3. Contractors differentials In the early days in the lime 
industry the larger contractors were frequently given dealer prices on 
carload lots. In course of time the building material associations 
were able to bring pressure to bear on producers selling direct to con- 
tractors and in some localities succeeded in preventing sales at dealer 
prices to any contractor no matter how large were his purchases. In the 
cement industry they succeeded partially in stopping entirely sales to 
private parties except in the case of railroads and political units. 

In the filed prices under the lime code promulgated by 
seven district committees quote differentials of $1.00 per ton and 10 
cents per barrel are quoted while the Texas District provides for a 
contractor's differential of $1.50 per ton. The remaining districts 
have no contractor's differentials; at least none is mentioned in the 
filed price lists. The fact that the District Committees quotations 
do not contain such terms of sale does not necessarily indicate that 
the practice does not prevail, for evidence was secured in the field 
trip of the N.R.A. investigators that dealer pressure had been brought 
to bear on producers who sold directly to contractors at dealers prices. 
It is probable, that if the code had been in operation long enough, such 
differentials would have become uniform and standard throughout the 
country. 



9836 



-35- 

4. Governmental agency differentials Eleven District Committees 
announce that governmental agencies may be given dealer prices. District 
No. 13 specifies a differential of 50 cents per ton or 5 cents per "barrel 
on sales to municipalities and of the remaining districts, 3 and 15 fail 

to mention any differential on sales to municipalities or other govern- 
mental agencies. The tendency seems to "be to make dealers prices to all 
governernental agencies except in Texas and the West. District 13 grants 
municipalities jobbers prices which are usually one-half of dealer prices, 
while in the far west each plant seems to make any terms it pleases in 
its sales to cities or other political units. 

5. Le^s tha n carload lot differentials The freight on lime 
products shiTped ^y truck or in smaller L.C.L. lots cannov be computed 
very accurately in auch a way that they shall conform to the freight rate 
computations in t.«« freight rate book, otherwise they tend to interfere 
with the exact arC uniform delivered price quotations in any area and, to 
that extent interfere with tha smooth operation of the basing point system. 
The L.C.L. as well as the truck differentials appear to be necessary in 
order to prevent any reduced prices to consumers resulting from trans- 
portation costs figured at less that rate book schedules. It is, of 
course, alleged that the differentials merely represent the additional 
cost to producers in making sJjall lot sales and that lime buyers ar^>. in 

no way unfairly penalized by the imposition of a differential of $1.00 
per ton. A quotation of $1.00 per ton and 10 cents per barrel is found 
in Districts c, 6, 8, 9, and 12 while Districts 10 and 11 prescribe $2.00 
per ton and 20 cents per barrel. District 13 absolutely prohibits L.C.L. 
shipments aad the remaining districts make no provision for a uniform 
differential. Shese provisions virtually, prevent small consumers from 
buying fro\i lime plants directly without paying more than the established 
basing point price in their vicinities. 

6. Truck differentials The use of trucks in carrying lime 
has tended to change the mathematical accuracy of quoting delivered prices 
under the basing point system when usi.ng the district committee's rate 
book. Consequently, truck differentials seem to have been introduced as 

a mejj\s of preventing lime plants, using trucks from quoting prices lower 
than 1 he regular basing point prices plus rail freight as computed by 
tru. rate book. In general truck differentials are $1.00 or $2.00 per ton, 
however, exceptional cases jf 75 cents and $5.00 per ton have been noted. 
In District No. 1 the rate was at one time $2.60 per ton. Districts 
4, 5A, 8 and 12 - $1.00 per ton, while in District 5B it "must equal 
rail freight" and in Districts 10 and 11 the rate is $2.00 per ton. 
District 13 permitted no truck snipments whatever. Districts 2, 3, 9, 
14 and 15 do not mention truck differentials. If the truck differential 
is made high enough it will be impossible for plants using trucks in 
delivering lime, to quote prices which will in any way interfere with 
the price fixing mechanism in the' basing point system. As long as the 
truck deliveries involve prices higher than those provided for under the 
basing point system, the truck is not considered dangerous but if the 
freight charged by trucks is lower than the freight on railroads it would 
mean that the truck shippers would be in position to underbid the remain- 
ing producers who use rails for delivery. 



9836 



-36- 



7. Jo"b"bers discounts Almost complete uniformity has "been 
secured in the quotation of jobber's discounts. These provide for either 
a maximum of 10 per cent or else 50 cents per ton and 5 cents- per barrel, 
an amount which represents about one-half the customary dealer prices. 
Districts 1, 2, 3, 5A, 5B and 14 limit jobber's discounts to 10 per cent 
and Districts 4, 6, 8, 9, 10, 11 and 12 allow 50 cents per ton and 5 cents 
per barrel while District 13 permits no jobber's discount whatever except 
to other lime manufacturers and the Facific Coast District fixes no 
standard terms of sale to jobbers. 

3. Consumers of chemical lime and railroads Industrial users 
of chemical lime have, from early days, been in position to bargain with 
lime producers. This bargaining has usually been done without the inter- 
vention of lime dealers and chemical lime prices have as a idle been 
relatively lower, quality considered, than. building or agricultural lime. 
The result has been that such consumers have been allowed dealer prices 
and the district committees quotations show that this practice is almost 
universal. There are only two districts, 14 and 15 in which no mention 
is made of this discount to consumers of chemical lime. 

The effects of the efforts of the district control committees 
in all districts seems to have been to bring about uniformity and stand- 
ardization. The deviations from the generally accepted practices of the 
large companies appear to have been gradually eliminated. In some cases, 
as in the Texas District, one plant filed a truck differential and in a 
few days it was withdrawn. Whether the District ©oramittee or the other 
producers brought pressure to bear on the recalcitrant, cannot be ascer- 
tained, but the fact remains that complete' uniformity was brought about 
by the withdrawal of the differential previously filed. 

The tendency toward uniformity has undoubtedly been manifest 
long before, the cede, but the code authority and district committees 
seem to have hastened movement. ■ Such standardization and uniformity 
are not in themselves objectionable unless, as a result of collusion or 
concerted action, the differentials have been increased and the discounts 
decreased so as to produce an increase in final lime prices. This aspect 
will be discussed later in Fart V dealing with prices and values. 
Suffice it is to say that the district committees have apparently been 
playing the same roles a s did the "condition cartels" in Germany which 
preceded the more powerful price and production cartels of a later 
period. 

It will, of course, be asserted that the district control 
committees exercise no arbitrary power whatever, that they merely serve 
as broadcasters for the individual producers who are at liberty to file 
any prices or terms of sale they please. If prices were based on costs, 
and costs were uniform, it is conceivable that actual price lists might 
conform rather closely to each other. But where - as in the lime industry- 
prices are high enough to enable producers to absorb from one to four 
dollars in freight and still not sell below cost, it is difficult to con- 
ceive of fifteen or twenty producers filing identical prices involving 
fifty to seventy-five quotations, and in addition numerous identical con- 
ditions and terms of sale. 



9836 



-37- 

iv. group control amd limitations 01" ilidsfeitoeilt producers iii 
quoting mill base prices. 

There are no provisions in tue lime code which expressly prevent any 
independent producer from adopting any price that he pleases in his mill 
base quotations. If any producer makes use of the privilege it would 
mean that the different quotations would he made at the mill base and 
delivered prices would differ. In practice, however, mill base quotations 
by independent producers appear to be either identical at the time they 
are filed witn the code authority or they become so almost immediately 
after filing. The identity of mill base prices may either be traced to 
some sort of cooperative action among producers of competitive lime pro- 
ducts or they may be traced to pressure exerted upon competitors whose 
quotations vary from those desired by the majority of the organized group 
or a "follow the leader" policy. The district committee notifies the 
members of the district what is the lowest base price filed, and there 
appear to be reasons based on circumstantial evidence for believing that 
in some districts definite agreements or understandings have been made to 
secure certain mill base quotations. 

If any independent cares to quote lower prices than those quoted by 
the group, his quotations will, it is said, immediately be met by the 
same or lower filed prices by other producers. The independent is in 
danger of having his sales territory invaded by his rivals, in extensive 
sales campaigns and, in course of time, many of his customers will be 
deserting him, because rival competitors will meet his filed prices by 
reducing their won mill net prices and absorbing heavy freight. (*) 
Evidence that the basing point principles have to be supported by moral 
suasion and artificial and unnatural competitive conditions is found in 
the brief filed by the 5A District of Ohio in its protest against the 
use of the basing point principle in the lime industry. "The fact that 
uniform prices must be in effect or filed to make the basing point prin- 
ciple successful and that agreements must be reached by members in a 
district and between districts regarding terms and conditions of sale as 
well as grades and quality, with further agreements as to policy regard- 
ing marketing areas and methods of selling, shows that fundamentally the 
b a sing point principle is the result of moral suasion and artificial and 
unnatural competitive conditions." In the same brief on page 18 is found 
the following statement: "It is based on artificial conditions set up 
to eliminate advantages of low cost or plant location and couid not, in 
the interest of fair competition, become an instrument of the lime indust 
industry." 

It is evident, therefore, that individual producers do not have 
complete independence of action in determining mill base quotations which 
are filed with the district committee. Substantial restraints and re- 
strictions are said to have been imposed upon individual producers through 
pressure by organized groups or perhaps by group opinion following dis- 
cussions of prices to be filed and terms and conditions of sale. Such 
pressure is exercised primarily to prevent the filing of prices which are 
lower than those which the group approves. 

(*) That such measures were actually taken, was admitted by large pro- 
ducers in Pennsylvania to members of the aesearcn and Planning staff on 
tha field trip to the Pennsylvania lime district. 



■■ -38- 



V. APFARE1TT LACK 0? COUEIDEHCE II: THE " C0I 7 E IDEMT I AL AGENCIES" OF THE 
CODE AUTHORITY TO WHOM INDUSTRY IS REQUIRED TO SEED REPORTS. 

Article VII, section 1, of the lima code provides that "each member 
of the Industry shall furnish to a confidential agency of the Code 
Authority promptly and upon forms approved "by the Code Authority com- 
plete and accurate report of shipments, lime capacity and such other 
data pertinent to the administration of the Code as the Code Authority 
may specify. Information pertaining to the operation of individual 
members of the Industry shall be confidential at all times." 

In the lime industry only 170 out of a total of 284 firms reporting 
regularly to the bureau of Mines send reports to the code authority. 
One group of large firms in the Ohio 5B District has, with the exception 
of one or two firms persistently refused to comply with demands of the 
code authority for production reports. Altogether 34 per cent of the 
total capacity of the industry has failed to file production reports 
with the code authority, as required by the code. This appears to be 
partly due to lack of confidence in the code authority, whose confiden- 
tial agent is also the Executive Officer of the Code Authority, and 
Fresident and General Manager of the Lime Association. It is not at all 
surprising that small firms who are more or less at the mercy of the 
large producers should hesitate to lay all their cards on the "table and 
divulge their own confidential operations to the scrutiny of a confiden- 
tial agent who appears to be intimately bound up with the interests of 
the more, powerful enterprises in the industry. This is not in any sense 
a reflection on the character or integrity of the confidential agent of 
the Lime Association, for the same situation prevails in many other 
lines of industry. In a large numbsr of industries, many producers will 
file returns with the Bureau of Mines or the Department of Commerce who 
refuse to divulge any confidential information to their respective code 
authorities or to the confidential agents of the code authorities. 



9836 



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-41- 



CKAPTER II I 

THE EFFECTS OF TK3 BASING POL'T 3YSTEK OH TEE LlrS INDUSTRY 

I. : ' L TPJCT OF PRODUCT 10.: Al) CAPACITY IK LiLE^L AT) _S! ALL PLA.T3 

A. The trend reflected in the nunber of large and small plants 

In order to ascertain what nas taken place in the lime industry, 
a comprehensive study was made of the production in tons, capacity in 
tons and the number of lime plants in the various capacity groups. 
The industry was divided into four main groups: first, the small plants 
with less than 5., 000 tons capacity per annum; second, the 5,000 to 
20,000 tons per annum capacity group; third, the 20,000 to 40,000 ton 
plants; and fourth, the highly mechanized, large plants have a capacity 
of over 40,000 tons a year. 

One of the purposes of the investigation was to analyze the forces 
operating in the lime industry which tend to change its industrial struc- 
ture. Another was to ascertain what has happened to the numerous small '/ 
plants which have disappeared in the brief period from 1909 to 1934. 
The chief source material of the investigation consists of a tabulation 
of the reports submitted by the lime producers to the Bureau of Mines. 

Since the complete record of reports of lime producers to the 
Bureau of Mines was not available for the early years - from 1909 to 
1917 - it was necessary to confine the analysis to the period from 
1917 to 1934. It was decided to prepare a table and a chart to show 
as (See Chart I and Table 8) clearly as possible the structural changes 
which have taken place in the Lime Industry. In. order to do so, weighted 
percentages of capacity, production and percentage of capacity operations 
were computed for the four capacity groups from the reports of all plants 
reporting both capacity and production to the Bureau of Mines, In these 
reports, the producers were requested to supply operating capacity by 
estimating the number of tons that could be produced in a 24-hour day. 
To secure the total annual capacity of these plants, the returns on es- 
timated daily capacity were multiplied by 300, the number of days of 
possible operation generally used in the mining industry. If a 555-day 
operating year is assumed, it will necessarily result in a very great 
increase in the total reported capacity. This has been done by the 
lime Code Authority in its monthly statistics on the amount of industry 
capacity represented in these reports. 

The year 1917, which is the first year used in the table, rep- 
resents a- period of war profits and sharply rising prices in the lime 
industry. During that year there were 599 plants reporting to the 
Vureau of Mines but of this number only 316, or about 53 per cent, re- 
ported both production and capacity, 29, or 9.2 per cent of the plants 



2836 



-42- 



reporting "both production and capacity, consisted of plants producing 
over 40,000 tons per annua whereas 106 plants, or 33.5 per cent of 
those reporting were small plants producing less than 5,000 tons per 
ye ar . 

In 1929 when the percentage of the total plants submitting both 
production and capacity figures was practically the same as in 1917, 
there were only 382 plants reporting, a reduction of 217, or 36 per 
cent from 1917. Of these 382 plants reporting capacity and production, 
only 29 were left of the 105 plants which were formerly in the less 
than 5,000 per year group. 7/hereas, those in the group of 40,000 tons 
and over had increased their number from '29 to 45. 

If we turn the pages from 1917 to 1933, we find only 236 plants 
in operation reporting both capacity and production, of which 50 plants 
or 21,2 per cent represented plants of over 40,000 capacity, whereas 
only 46 out of the total of 106 plants opera.ting "ith an annual capa- 
city of less than 5,000 tons in 1917 now represent only 21.2 per cent 
of the total number of plants reporting both capacity and production. 

Turning to the other t-o groups, the 5,000 to 20,000 group end 
the 20,000 to 40,000 group, we find a repetition of the story of the 
la,rge and small producers. In 1917, the former consisted of 129 plants 
or 40.8 per cent of the total. JBy 1933 this number had shruri: to 90, 
or 38.1 per cent of the total number of plants reporting. The second 
of the above groups number 52 plants in 1917, or IS. 8 per cent of the 
total number of plants whereas in 1933, their numbers were almost the 
same, 50 plants, or 21.2 per cent of the total number of plants. 

3. The trend of capacity and production of large and 
small plants 

The study of the number of plants in each' group in the two 
years, 1917 and 1933, tells a rather interesting and' convincing story. 
In 1917 the relatively small producers represented by the two lower 
groups had 74.3 per cent of the number of plants in the industry, and 
the large ones represented by two higher groups had only 25.7 per cent 
of the total. In the years' that elapsed between 1917 and 1933, great 
changes were wrought in the industry, resulting in decreasing the num- 
ber of the small plants from 74.3 per cent to 57.6 per cent, while the 
.number of the larger producers expanded from 25.7 per cent to 42.4 per 
cent. The statistics on the number of plants alone tell the story of 
the gradual expansion of the large plants and the gradual shrinkage of 
the importance of the weaker members of the Industry. The slaughter of 
the weal" is protrayed much more vividly by the percentages of changing 
capacity contained in the above-mentioned tabulation. Here the two 
groups representing the smaller producers had 32.1 per cent of the total 
capacity of all the plants in 1917 and only 18.2 per cent in 1933. In 
other words, a decline of 22.5 per cent in the number of plants had pro- 
duced a decrease of 43.3 per cent in the per cent of capacity of the 
two above-named groups of plants . 

9836 



-43- 



Uhat happened to the capacity of the large plants with capa- 
cities exceeding 20,000 tons per year? How did they increase in 
number and size? In 1917, 25.7 per cent of the number of plants 
rare large concerns with a capacity equal to 67.9 per cent of the 
total capacity, whereas, in 133.", the large plants had increased in 
number so that they represented 42.4 per cent of all lime plants in 
the country and had a capacity representing 81.8 per cent of the en- 
tire productive capacity of the Industry. 

The share of the large plants, those with capacities exceeding 
20,000 tons in actual production or output of lime, increased at 
about the same rate as the increase in capacity. The large plants 
actually produced 68.4 per cent of the total lime output in 1917, 
and 82.4 per cent of the total production in 1933, an increase of 
20.5 per cent in both production and capacitj r . 

The two middle tonnage groups with output of from 5,000 to 
20,000 held their own in numbers better than the small lime plant 
group and yet they lost a great deal more tonnage than the "less 
than 5,000" group. In 1917, the combined group represented 52.9 per 
cent of the total tonnage of all plants reporting both capacity and 
production. In 17 years, 1917-1933, this percentage declined from 
52.9 per cent to 35.9 per cent, a loss of 17 per cent of the total 
tonnage of the plants returns. During the same period of time the 
small producers' tonnage dwindled until it represented only 1.9 per 
cent of the total, a loss of 3.5 per cent, all going to the larger 
producers, making a total diversion of tonnage from the small and 
medium size plants to the large producers amounting to 20.5 per cent 
of the total output of all producers. 

The evolution of the lime industry is shown still more vividly 
if we concentrate on the very large lime plants, those with a capa- 
city of over 40,000 tons a. year. In 1917, these plants represented 
only 9.2 per cent of the total number but had a capacity of 41.6 
per cent of the entire industry with a production equal to 41.7 per 
cent of the entire output of the country. In 1933, their numbers 
had increased so that "they represented 21.2 per cent of the number 
of plants and their combined capacity constituted 59.1 per cent of 
the capacity of all the plants in the Industry. The share of the i 
giant plants in production increased to 62.2 per cent of all the lime 
produced by all the plants in the entire country. 

The relative rate of growth of the four lime producing groups 
is shown ■still more clearly in Table 9 reproduced below which re-_ <_t; 
fleets an astonishing decrease in number, capacity and production 
of the smaller plants and the equally striking increases of the 
groups of plants with large capacities. 



9836 



-44- 



Table 8 



Relative Changes in Percentages of the (a) Total 
dumber of Plants (b) The Capacity and (c) The Total Production 
of Large and Small Plants by Groups 
(1917 - 1933) 



Group 



Fer Cent of Change 



(a) (b) (c) 

Number of Capacity of 
Plants Flants Production 



Under 5, 000. tons 
5,000 to 20,000 tons 
20,000 to 40,000 tons 
40,000 tons and over 



-41.8 

-6.6 

/28.5 

/130.4 



-55.3 

-41.2 

-13.7 

/ 42.1 



-64.8 

-40.1 

-24.3 

,i 49.2 



C. Causes of excessive, expansion of plant capacity 

The great over-expansion of the capacity of the industry is there- 
fore largely due to the increase in size and number of large producers. 
This expansion is still goin^. on, for as late as 1934, one of the plants 
visited by representatives of the NBA was engaged in the construction of 
another huge rotary kiln representing a very large capital investment, 
capable of producing 40C tons a day. This large addition to the plant 
was "begun in spite of the fact that the industry as a whole was operating 
at less than one-third of its capacity and lime producers were complain- 
ing about operating at a loss. 

The conclusion seems to be justified that the large producers, 
through invasion of distant markets, by absorbing freight and often- 
times cutting .prices, have "been able to expand at the expense of the 
weaker and less aggressive lime producers. 

This market s.trangulat ion appears to be the result of the use of 
the precursor of the "basing point system known as "quoting prices to 
meet competition" and absorbing freight in shipping to distant areas. 
The basing point system in the Code improved the efficacy of a practice 
which had "been in operation ever since the large producers began to 
expand their markets at the expense of small producers, for the basing^ 
■point system with the open price filing and the five-day waiting period, 
furnished the cap-stone in the arch which had been gradually constructed 
in the -ore-code period. 



9836 



-45- 



Chart I shows in a striking manner what has happened and what 
is happening to the small producer in spite of the fact that lime 
prices measured in plant net values are nearly twice as high as they 
were "before the war. The reason for the large number of small plants 
in the prewar period has teen described by E. W. Lazell in an article 
in ~och Products (Vol. 13, No. 10, Mar. 22, 1914, as follows): 

"Three factors have operated jointly to keep the Lime 
Industry in a comparatively simple, primitive, and 
underdeveloped state. 

"First, the prevalence and wide distribution of lime 
rock. Limestone occurs in every state and territory 
of the United States .... This general distribution 
or the raw material has resulted in many small plants, 
often poorly and uneconomically constructed, scattered 
throughout the whole country. 

"Second, the ease of burning the stone to lime. The 
comparatively easy and simple process of burning, with 
the resulting small outlay of capital required to erect 
a plant, has caused many persons to enter the business 
without familiarity or previous knowledge of it 

"Third, the perishable character of the burned lime. 
The perishable character of lime has alr.o contributed 
to keep burning in the hands of small producers located 
near some convenient market. 

"These conditions have been materially changed within 
the past few years. Improved methods of quarrying, 
handling the stone, and burning, while requiring more 
capital, have resulted in a decreasing cost per unit 
of output, and larger, more economically operated plants 
have caused the closing down or abandoning of many smaller 
crude plants. A larger factor in bringing about the cen- 
tralization of the Industry into a comparatively few ad- 
vantageous locations has been the railroads. 



"The only improvement in the form of merchantable lime 
known to the writer is that of hydrated lime. ..." 



9836 



-46- 



D. The rise of the large lime .plants 

During the war the prices of lime products advanced to unheard of 
high levels, but lime prices, unlike most competitive products failed 
to decline after the war .was .over. The sharp decline during the panic 
of 1320-21 did not result in a permanently lower level of prices, for 
they rose again to high levels in the post-war "boom days. High prices, 
which served as a stimulus to the large plants, failed to produce the 
sane results for the small producers. This is shown in the following 
table comparing the numbers of plants in each capacity group in 1917 
with the numbers in 1929. 

Table 10 



Changes in Various Capacity Groups 
1917 Compared with 1929 l/ 



Annual Capacity Number of Plants Per Cent Per Cent 
in Short Tons 1917 1929 Increase Decrease 



Less than 5,000 106 28 73.5 

5,000 to 20,000 129 90 30.2 

20,000 to 40,000 52 47 9.6 

40,000 and over 29 47 62.0 

1_/ The year 1929 was selected, instead of the later year, 1933, because 
it is believed that industrial conditions in 1929 are more co: .para- 
ble with the conditions prevailing in 1917 than the depression 
year 1933. 

In the two prosperous years, 1917 and 1929, respectively, the 
larger plants increased 62 per cent, while plants with less than 5,000 
tons annuel capacity decreased 73.5 per cent and plants with a capacity 
of 5,000 to 20,000 tons decreased 30.2 per cent. Those in the 20,000 
to 40,000 tons group declined 9.6 per cent. This marked decline of the 
small plants and- the rapid increase in the percentage of large producers 
seems to show rapidly increasing concentration in the industry due to 
the gradual disappearance of the small and medium-sized plants. 

This analysis represents an attempt to show the inner forces 
operating in the lime industry in the pre-code period. No statistics 
are as yet available for the code or post-code period which will show 
whether or not the lime code tended to intensify and hasten the proces- 
ses operating before the code was adopted. To any one at all familiar 
with the operation of the basing point system, it seems almost self- 
evident that the system with its price filing features, together with 
its elimination of price competition, furnishes still greater oppor- 
tunity for the exploitation of the markets by the large producers at 

9336 



-47- 



the eztpense of the small. Never "before in the history of the Lime 
Industry has it been possible to make use of the so-called "new con- 
petition" as effectively as under the code. 

E. Probable trend in the future 

It is very difficult to predict what will happen to an industry 
in the future, for so much depends on technological changes in pro- 
duction and possible changes in demand. If, however, it is assumed 
that the rate of growth in technical improvements and in demand remain 
the same, it is possible to forecast with considerable accuracy the 
number of years which must elapse before the Lime Industry will be re- 
duced to about 100 plants. 

In 1909 there were a total of 1,232 lime plants reporting to the 
Bureau of Mines. The following chart (Chart II) shows that by the end 
of 1333 this number had been reduced to 332 plants. Should the decline 
in number of lime plants continue at the rate which prevailed from 1S0S 
to 19oS, the total lime production of the country in 1950 will be car- 
ried on by about 100 plants, and this greatly reduced number will be 
owned or controlled by a much smaller number of companies. This means 
a continuation of the process of extermination of the financially weaker 
plants, regardless of how efficiently they may be operated by their 
p re s e nt o w ne r s . 

Instead of showing the probable trend of production by means of 
st.atistics on the number of lime plants in operation from 1S09 to 1954, 
it is possible to secure more accurate results by analyzing the statis- 
tics on actual production of the four leading groups of lime producers 
since 1917. These figures discussed in the foregoing pages show not 
only the percentage of the total lime production of the country, rep- 
resented by the above-mentioned groups, but they reflect more accurately 
the relative shares of the total production represented by each group. 
This method is more accurate because the actual production of the plants 
that fa.iled to report capacity, represents a much smaller proportion of 
the total output of the country, than their relative number would indi- 
cate. This will be evident from the following table; 



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9836 



-49- 



Table 11 



. Number of Plants and Production of (a) Plants 
Heporting Production Only and (b) Plants Reporting Production 

and Capacity 



Number of Plants Reporting Total Tonnage of Plants Reporting 

(a) (b) (a) (b) 

Produc- Produc- Produc- Produc- 

tion tion and tion tion and 



Year 


Only 


Capac i 


ty 


Per Cent 


Only 


Capacity 


Per Cent 


1917 


595 


316 




53.1 


3*493,762 


3,786,364 


92.30 


1921 


520 


306 




58.8 


2,220,772 


2, 532, 153 


87.70 


1925 


450 


2E5 




64.4 


4,261,219 


4,580,823 


93.02 


1929 


381 


212 




55.6 


3,407,563 


4,269,758 


79.80 


1933 


332 


236 




71.1 


2,16^,244 


2,269,280 


95.41 



Kerely a glance at the above table shows that the per cent of pro- 
duction represented by tonnage greatly exceeds the percentage repre- 
sented by the number of plants. For example in 1917 the plants which, 
reported both roduction and capacity represented only 53 per cent of 
all plants reporting, yet they had production ecruul to 93.3 per cent 
of the total out out of ell plants in the line industry. Plant produc- 
tion, is therefore a better index of the trend in the lime industry 
than an analysis based on the decline in the number of plants. 

The trend toward large plants sometimes called the "consolidation 
movement", may be observed from- an analysis of the growth of large 
plants (over 40,000 tons per annum) since 1917, the wa.r period in v.-hich 
the highly mechanized, plant came into prominence. The rate of growth 
of large plants cannot be accurately gauged by the number, for the num- 
ber did not increase very much but by the expansion of their production. 
This cannot be measured by the increase in tonnage for the total ton- 
nage of 'the entire Industry changes from year to year, but by the percent- 
age of the country's entire lime output produced by the large plaints. 
Table 11 cited above shows that in 1917 plants with an output of over 
40,000 tons produced 41,6 per cent of the country's lime. In 1933 
they had increased their output so much that their botal lime tonnage 
represented 62.2 per cent of the total production of all the lime plants 
reporting production to the Bureau of Mines, a total increase of 20.6 
per cent, all of which was diverted from plants with less than 40,000 
tons per annum output. 

This increase of 20.6 per cent took place in the period of 16 
years from 1917 to 1933. If it can be assumed that this tendency will 
continue in the future at the sajne rate of change it is theoretically 
possible to compute the number of years which will elapse before the 
entire lime industry is taken over by the large producers. First, the 

9836 



-50- 



ave-age rate of diversion from smaller to larger plants since 1917 was 
1.3 per cent per annum. Second, the share of the less than 40,000 tons 
per annum group in 1933 was 37.8 per cent of the total production of the 
lime industry. If the large plants continue to divert 1.3 per cent of 
the production from the smaller plants it will take about 30 years un- 
til all the smaller plants will he absorbed or eliminated. 

This is mentioned merely as an illustration of a probable trend 
rather than a forecast of what the trend will he, for anyone who is 
familiar with the multiplicity of forces operating in modern industrial 
society realizes that such forecasts are largely hypothetical. Tech- 
nical changes may revolutionize the production of lime, or cheaper sub- 
stitutes may reduce the demand so that the trend may he greatly changed 
or even reversed. 

Instead of judging the trend .of the industry hy the rate of growth 
of the large plants, the trend may be determined hy the rate of decline 
of the small and medium-size plant.s. From the percentages on Tahle 11 
it is possible to estimate how long it will take until all the plants 
producing less than 20,000 tons per annum will he absorbed or eliminated. 
In 1917 the output of thesj plants represented 31.6 per cent of the pro- 
duction of the entire Lime Industry. Ey 1933 their share had been re- 
duced to 17.6 per cent. A decrease of 14 per cent in 16 years which 
represents an average annual decline of 0.88 per cent. If this group 
continues to lose ground at the same rate for 20 years, the larger pro- 
ducers (over 20,000 tons per annum) will have diverted to themselves 
the entire production of the small plants. Such complete absorption 
is naturally impossible, for no matter how efficient large-scale pro- 
ducers may be they will never completely eliminate a small percentage 
of snail or medium-size plants* 

This trend toward concentration is not always the result of com- 
plete elimination of small plants. It frequently means that small 
plaaits tend to expand and in the end grow into large plants. The 
process, which has been going on, is therefore partially a transfor- 
mation of smaller plants into more efficient large concerns and partly 
the extermination of other plants by means of market strangulation. 

TJith any effective basing point system in operation, it is be- 
lieved that the elimination of weaker plants will be hastened. If 
this elimination of weaker plants involved more economical production 
and lower .prices 'to the consumer, the process might be truly economical 
and therefore justifiable. 

The more powerful lime companies are probably anxious to get rid 
of the competition of the small plants, for many of them do not appear 
to conform to the "rules of the game" and often sell their lime for 
slightly less than the fixed basing point prices. This interferes with 
the smooth working of the basing point system. Cases have been reported 
where owners of small or medium-size lime plants have sold their prod- 
ucts to farmers and nearby consumers, at prices profitable to themselves 
but slightly below the established base prices. Such producers are 

9836 



-51- 

c ailed "chiselers" for the;' make it difficult for the large-scale • 
lime producers to sell their lima in the same area at the established 
base prices. The large pnd more powerful companies may, therefore, 
have a financial interest in securing the removal of the small pro- 
ducer who may cut prices. 

It is not implied, in the above analysis, that the larger lime 
producers are consciously engaged in exterminating the smaller pro- 
ducers; each large producer is merely trying to do as much business 
as possible and make as large profits as he can. In doing so he and 
his fellow producers set in motion forces which in the long run will 
cause many smaller lime plants to lose part of their natural markets 
and ultimately force some of them into, bankruptcy. In like manner, 
the large producers in formulating and administering the code probably 
had no sinister motives. Each member probably regarded the entire 
situation from the standpoint of his own best business interest and 
not with any idea of annihilating rivals or competitirs. The far reach- 
ing effect of the practices legalized by the. code was probably unknown 
to many of the men who put them into effect. 



9836 



-52~ 



Til. THE EXTSKT 01 C30S§HA.ULX|JG ?mIO_1 TO A13) U]©12 THE CODE 

A. The Ixaturc and Signifi cance of crosshauling Crosshauling .nay 
•lie briefly defined as the practice of intershipping identical commodities 
'between two or nore marketing areas, A marketing area ia a territory 
within the geographical limits of which local groups of producers can 
nomally sell identical products at lo^er delivered prices than other 
producers located elsewhere. Their marketing superiority nay be due to 
lower production costs, cheaper freight or other transportation costs, 
or nore economical systems of distribution. A change in any one of 
these factors bap increa.se or decrease the size and shape of a n&rketing 
area, 

„_ In general, all crosshauling, as defined above, is uneconomical 
and' socially wasteful. This is always the case '.here crosshauling is 
used a a means of maintaining higher than competitive prices in two or 
nore marketing areas by uhlsading surplus production at lower mill-net 
returns to the producers, without in any way reducing the cost to the 
consumer. 

Freight absorption is not the only available means of reducing the 
mill- nets to the producer without lowering the delivered price to the 
consumer. Instead of absorbing freight the manufacturer nay absorb 
servicing costs or large-scale advertising, or by grants of special dis- 
counts, premiums or bonuses to distributors, which in the long ran may 
have the same, effect on both producers and! consumers. 

In general, freight absorption has negligi le effects in the case 
of all those commodities in which freight represents a small proportion 
of the delivered prices. There er^: , perhaps, hundreds of thousands of 
conmodities in which 4 ; r ight element is so small that the marketing 
area, of every producer nay be the entire United States. As soon as the 
freight represents an appreciable per cent of the price the tendency is 
to create smaller .larketing areas in which each producer distributes 
his goods. The heavier the product and the higher the freight rate the 
smaller will the marketing area become. 

While it is difficult to determine just -'hen the point is reached 
-here the freight element is so great that cross-shipments are xinecono- 
nical and therefore, from a social point of view, unjustifiable, it is 
safe to assume that if freight represents nearly U3 per cent of the 
mill-net returns, as it does in line products, it furnishes conclusive 
evidence of excessive cross-freights and other wasteful marketing 
practices by the line producers ;.f the country. 

P. Cross-h anll-y; in uneco nonicaP. in r.any industries The most 
flagrant examples of uneconomical crosshauls are found in the so-called 
heavy goods industries. These include groups of commodities s\ich as 
steel, cement, lime, gypsum and other heavy building materials, the 
inter- ship .lent of which places a heavy burden of unnecessary freight 
charges on consumers, although it is at first absorbed by the producers 
and afterwards shifted in higher prices on the consuming public. 

5G36 



-53- 

Cross hrulin': is not always u inoriical. There are many 
industries engaged in the :tio co odities in "hose value or 
price, freight represents c *.'' i] ■ art. 3aeor blades, cots etics, 
scientific instrument, fount in , be, are examples of products 
in which freight absor fcion in tin irocess o; Merchandising, presents 
no very serious iroblems, These commodities may be shipped east and west 
anc 1 north and ^outh across the country ■ ithout appreciably increasing 
final price to the consumer, an<3 furthermore cross shipments nay here 
play a rather useful role by increasing co roetition in price. 

On the other hand, industries that have developed basing point 
systems are, without exception, those ir. which freight absorption is 
practiced, and it is in these industries that most disastrous effects of 
cross freights make themselves felt. Every important investigation of any 
of these industries has revealed m astonishing amount of crosshauls 
resulting invariably in rn increase in consumer prices* 

1. Rep orts of the jc derrl T rade Commiss ion In the Price 
Lares Inquiry of the Federal Trade Co:viission is f ound t he following 
quotation which reveals some of the conclusions it formulated after a 
three year investigation of the basin;; Point System in the Cement 
Industry. 

"Crosshaulin -;, therefore, in its broader sense of an 
uneconomic movement of goods, instead of being neces- 
sarily confined to a cross shipment between two distinct 
market areas, a - , popularly defined., is any shipment of 
such a commodity from one market area to another at a 
total cost ("including production as well as transportation) 
in excess of that of the larginal unit necessary to supply 
the second market area und.er competitive conditions. Then 
this difference is relatively slight on the movement of 
products as a whole, it is of little importance either 
as a matter of unnecessary cost or as an indicator of slug- 
gish competition; but a large difference on a considerable 
proportion of sales has signi: icancc in both regards. "(*) 

The Tederal Trade Commission's repo.rt to the President in the 
Basing Point System in the Iron end Steel Industry contains the following 
on pages 17 and. 15: 

"Artifical transportation charges are inherent 
in a. basing point system because the actual shipping 
point frequently is not the basing point from which 
freight is calculated-. Intermediate consumers who 
purchase raw material, change its form and. pass it on 
in altered form to the ultimate consumer, mast also 
pass on any artificial transportation charges in the 
price of the finished. iprqduct. Thus the entire 
burden falls upon the ultimate consumer. In this 



(*) Federal Trade Commission 1 "Price Bases Inquiry" liarch 1932, 
page 137. 

3236 



-54- 

sense ever" one ako " u"s a can of :?!'■: it or Vegetables 
or "'ho pays rent on a buildin a containing any iron 
or steel products is paying the cost of the ran 
:ietal - m" of. the fabricated product." 

2 , Vicas of ecnionists and "business executives Cr o s s- 
hauling and large-scale nation-aide advertising are both products of 
essentially identical economic forces. Moth are jnade possible "oy the 
relatively large spread between the producers' cost and the price to 
the final consumer. '.Tithout an aide margin betaecii these tao Units 
hoth extensive erosshauling and h.ve advertising campaigns aoulc 1 he 
greatly reduced. '.Lhereas the uneconomical character of nation~"'ide 
advertising is generally recognised only 07 econoaists and ha thinkers 
■'ho have acruired a deeper 3cno\7ledge of the operations of the fundaiien- 
tal economic forces, the 'Tastefulness of crosshaulia-; of heavy products 
has long "oeen hnoan to "business len aid others "ho have given any 
real thought to the real problems of industry, Prof, Frank A. fetter 
in his " i las que race of Monopoly" - (pave J2l) says:- 

"The larger the factory unit of >roduction anc the 
greater the distance that separates it fro.m its 
competitors in rsr direction, the greater the aono- 
plistic margin of profit it en reap from its aearhy 
sales, and (usualljO the ..^re able it ir. financially to 
cut prices dor delivery into it?, coapetitor* s natural 
sales territory." 

The evils of excessive crossaaals -'ere more generally recognised 
hy the Industry before the basing point 3~stea --as definite!"" recogni- 
zed as a profitable nethoc" of Merchandising. "The Concrete Cement 
Age" quoted by the federal Trade Cummission expressed the Cement 
Industry's vieas in the folio- aa~ li iglii ;e in December 1J12: 

"It -'ould seem, aith a commodity of the aeight of 
Portland G:aent, avera ia ■• from dl. ^-KD to 0«?O ^ er barrel 
for tra.iaport&tion chrrges fret: aills to consia.ier that 
the question of cross-shipmants is oae that must be in 
time regulated, as this fact largely accounts dor the 
very loa return' cement Manufacturers have been receiv- 
ing of late years for thei: product. In Germany, by 
cartel agreements restricting cross-ship: '.eats fron 
one territorial group into the territory 0:" another 
territorial group, prices aave been :aintai:iec" by rea- 
sonable figures and mills have realised some returns 
on their capital. In this country the statistics 
shoa that the mnufacta.rer in many sections has re- 
ceived less for his ceaent than in any previous ;rear 
in the history o:c the Industry. It is hoped that sone 
Method aill be arrived at to avoid the conditions that 
have arocucecLthe above situation. " 

The"3ricl: and Clay Products Hecord" in an editorial on June d> 
1322 discussed the effects of the crosshauls on producers but explains 
that this aoulf not be a serious natter if the freight charges could 
be passed on to the consumer: 



-5:5- 

"Undoubtec" ly one of the biggest evils to have follo'red 
in the '7Sl:e noc i ass pro* action ant. hi ;h pressure 
sales nethods is the cros shoaling of cor.i -.odities in an 
jTt to c::-i?-n iarkets to 3 oint -.There the;- --ill 
i >r"o all 0: the ro< action, Thus Ohio Clay products 
are shipped into Illinois; Illinois clay products are 
shipped into Ohio; his 1 ri ships into Pennsylvania 
and Pennsylvania ships it.5 products into Liissouri, 
This 'touIc not "be so serious if all the freight charges 
coiild he pasi of on to the consumer. This can not he 
done, horrever, because local prices ;mst he met by the 
distant ship ers, or at least J :hey effect the .-'let 
considerably, 

"It is this crosshauling, Aevlopeo. non to an errtensive 
scale ra' practiced in a] ;ost every branch of the clay 
products industry, that las cut into - 'ofits to r point 
nhere the:, e is.&.very little profit left. A solution of 
this problem is urgently desired." 

A high official of „a large ceMent company is quoted as saying 

"I have argued "ith the members of this or-anisation 
for years that the cross-freighting of eerient in un- 
sound anc mecononic anc u J t to he stopped. Certainly, 
there ou ght to he sorie lir.it interposed. If the 
cenent companies couL '>■ United to crosshauling 
so that their nill net *70uld he, sa;r, only 15 per 
cent less than theii base price, it -.'oulc affect 
a tremendous saving. The railroads, doubtless, .70uld 
he oprosec to anything of that kind hecause it rould 
nean a heavy loos of revenue. Our o~n organisation 
docs not do so :.uch 0:' this cross-frej '-.no ■ r.s a 
good nany others, This is dus , in considerable port, 
to the location of our plants, hut -:o hare alrrays 
recognised that reachi ' out too far is a questionably pro- 
position. " (*) 



C. The cron es of cros snarling The basing point systen '-'ith its 
fi::ed basing point prices dees not eliminate the most ruthless forn of 
competition be^-reon line producers the is elves, vhich manifests itself, 
not in real price competition hut in freight absorption, advertising 
and errpensive selling canpaigns. This produces nill net returns to 
the producers for belo-; the basing point prices actually paid hy the 
consumers and is the chief cause for excessive cross 'shinnients of" lime 
prodacts. Crosshauls and high* marketing enpenses frequently accompany 
the adoption of the systen. hear-in" in mind the co.yposite forces o/hich 
indirectly _jrodT.ce crosshauls it is necesscry to analyse the nore 
specific direct causes.' 



(*) Federrl Tnade Conra:' ssoon 1 s "Price Bases Inquiry," "arch 1532, 
■ ;e IJ'S. 



-56- 

1. Cross hauling a ~oart of the practice of duroing The art of 
i i - was first introduced an:" generally used in foreign trade. 
Industries ".Those hone markets -..-ere assured "ay means of high protective 
tariffs "ere often able to secure high prices fro:: domestic consuners 
and! then dispose of their surplus production in some foreign market at 
hatever price the;- could pet,, *$h.e barifi histories of the United States 
tee ; "ith e-anpler- of excessively low :.rices to the foreign buyers and 
hi "her prices in the hone markets. As long as only one or tyro nations 
practiced the gentle art of inru", the problem was not considered 
serious, hut as soon as 'all the industrial n tions ":egan to engage in the 
practice, it resulted in legislation m the form of anti-damping lams and 
the prohibition of imports of floods sol.", at less than r^onestic procuction 
costs. 

Dumpily* is essentially a practice which grows out o - " large-scale 
rocuction by numerous plants with great e::cess capacity. The unit pro- 
duction costs in a plant operated at _"/_ oer cent of itr capacity are or- 
dinarily much higher th n n it is operated at full capacity. If only 
oO oer cent of the cutout of rued ; n nt can he marketed at hone it nay 
he profitably to unload the remaining Uo per cent on a foreign market at 
muah; less than the unit costs, • lien produced by plants operated at only 
50 per cent capacity. 

DaiToing is, ho'-ever, no longer •< ctice confined to international 
trade, hat. is found- in nany lines of t'oods in domestic trade and also in 
the merchandising practices, of the distributing trade. This hind of 
dumping lay he continuous, periodic oradic. If periodic, it nay be 
at regular intervals as in the seasonal sales, while sporadic dumping may 
ts :e the form o'' special sales '.held at irregular intervals. The practice 
May he confined to certain restricted areas or markets, or the products 
nap he widely distributed ever ! areas or over the entire countr". 
The practice of dumping is oftemr legitimate practice used ''oy those -ho 
are engaged in the orderly marketing of certain product.;, but it is also 
often a discriminatory device user for the urpose. of putting rivals out 
of business. Ordinarily all the above-naned forms of donping result in 
the lowe> pieces to the final ' ler or lover prices to the distributor. 
The io-rer prices are often temporary and frequently result in a tempora- 
rily disorganized price structure ■ hich renains as long as the practice 
continued. 

At first #he system --as used almost exclusively by large producers, 
who found that it was profitable to unload their surplus output in other 
markets without reducing their prices in their immediate marketing area. 
Gradually the practice spread until producers in all parts of the 
country raided each others markets and sole their ror/luses at any orice 
they were able to secure. 

These raids in distant markets invariably resulted in price 
competition, which in turn produced lower orices to consumers or at least 
to middlemen. This die not always bring about lotfer prices by other 
producers for the sane kinds of ce mddities; neverthelesr, the process 
of dumping by "outsiders had a tendency to prevent price increases -/hich 
might have occurred. 



5S36 



-57- 

Gradually it became evident to .iany producers t:.at the -practice 
lee to. price wars in which prices were not only lowered but p.t times 
slashed below the cost of production. This finally resulted in a form 
of cooperation in which each producer attempted to conform to the price 
structure established in any given market, and instead of reducing the 
prices to the consumer they attempted to accomplish the same result by 
reducing their own mill-net returns and expending the difference oetween 
•their own mill-net and the final selling price in advertising, absorption 
of freight and other forms of so-called "competition in service." 

This is the stage in the evolution oi marketing processes in which 
the basing point system came into existence with its established. Dase 
prices, which ii lived urn to by every producer would greatly decrease 
the possibility of lower consumer prices, 

A small degree of mice competition "'as retained through that 
provision of the basing ooint principle which permitted any one to file 
lower base prices at any basing ooint. The amount of mice competition 
obtained in this wav appears to have been negligible, largely, perhaps, 
because of pressure brought to oear on recalcitrants wno had the courage 
to file lower base ori.ces, 

2. Excess ively hif h base' prices Lne of the fundamental 
direct causes of excessive crosshauling is the existence of excessively 
high base prices or highei -prices in each company's home market than would 
prevail under competitive conditions. If the prices prevailing in two 
markets 100 miles apart represent a mark-up above cost of only $1.00 
per ton tnen a. cross shipment of lime between them would be irapossiole. 
If, however, the base mice in each area is high enough to yield $3.00 per 
ton profit, it will be possible lor producers in Doth sections to ship 
into each other's mark, t areas and. absorb up to $3.00 per ton freight 
without suffering actual loss. It is almost self-evident £hat no lime 
producer will ship his product a distance of 300 miles and absorb freight 
amounting to $3. 00 or $'4.00 per ton unless the lirae prices in the market 
into which he ships are iar above the competitive level. Bat it may be 
argued that the long-distance shipments are made b r - companies with such 
low production costs that the^ r are able to continue .to snip into the 
markets at higher cost moducers. If this were so, one would expect 
snicments to be in one direction from low cost areas to high cost regions, 
art one -would not expect to iind the high cost producers snipping large 
ouantities right back into the markets of the low cost producers. 

It is extre iely difficult to imagine how it is possible to continue 
shipments among the mariv li re producing centers of the country unless 
tnere is some degree of .price control exercised, by the lime industry 
in each market. It mav even be asserted that the extent of the cross 
shipments and the distances between centers of such shipments measures 
the degree of the price control exercised by the industry in question. 
Reduce the high base prices to a competitive level so that selling prices 
represent merely a reasonable profit over cost: and est of the uneconomi- 
cal crosshauls will also disappear. 

5. Excessive ca pacity and hunger for tonnage High base prices 
inevitably lead to excessive capacity i^ an industry and hasten the 
construction of modern highly mechanized plants. Theae great industrial 

9836 



-58- 

establish.ments must find markets for their surplus production. This is 
often called "hunger for tonnage" anj is frequently scoken of fs the 
fundamental underlying cruse of all crosshauls. i.ir. diaries :I. Schwab 
said in his address before the American Iron and Steel Institute, "The 
hunger for tonnage pnd the oesire for greater capacity, which is now, and 
always lias been, one of the fundamental mistakes of our steel industry, 
may probably, have been one of the chief causes of crosshauling of steel 
products • that exists today. '"(*) 

If extensive crosshauling Fere confined to one or two plants only, 
the results vould not be so disastrous, but '-hen many concerns in an 
industry adopt the practice the net result is onlv a shift in purchases 
by consumers subjected to these high-pressure sales methods, \hile the 
total demand remains the same. The outstanding fact is that in their 
ei forts to increase output and reduce costs no one appears to have given 
anv thought to the possibility of passing on th the consumer the economies 
01 large-scale production bv lowering -c:icer. It is onlv ^hen confronted 
with strong sales resistance and stagnant markets that resort is made 
to this fundamental metuod or increasing sales. 

D. Extent of crossnauli^g in the Lime Industry As lime is a rela- 
tively low-oriced and heavy coianipcity, of a some 'nat perishable' character, 
expensive to ship a>->d bulk"", it does rot readily lend, itself to trans- 
portation over long distances. Yet, available evidence poirts to the fact 
that prior to the code, this industry • engaged in considerable crosshauling. 

. Statistics furnished by the Interstate Commerce Commission on tonnage 
and freight revenue obtained by railroads from line products shinned on ' 
Class 1 railroads (see table 12) show that the freight revenue ner ton 
over the Period of 1928 -to 1934 averaged. $3.25 per ton. As this is an 
average yield for all line, a considerable portion 01 it must have been 
hauled long distances at rates ner ton far in excess of the average for 
all lime shipments:. luring the ae'riod mentioned, freight as a percentage 
of tne average MIL -net return amounted to almost 55 ner cent in 1332. 
The freight revenue "as greatest in that year, when it reached $3.45 ner 
ton. The lowest average revenue in the seven-year neriod, 1928-1934, 
$3.06 per ton, was - registered in 1 954, -the- lirst mil vear of oneration 
under the Code, ior the seven-year period the average ireight for more 
than 12, 000,010 tons shinned on. Class 1 railroads amounted to $3.25 ner 
ton. Exnressed as a percentage oi tne average value of lj.me products 
at tne plant, this freight revenue on Class 1 railroads, which included 
approximately 60 per cent of the total production of the industry, 
represented 42,2 per cent of the plant net value per ton. 

E. Crosshauls i r c emen t compare d "ith crosshauls in lime products 

The Interstate Commerce Commission statistics also show that the 
freight revenues per ton of lime for the country as a whole "ere considera- 
bly higher than the per ton 'receipts for cement even though the value of 
a ton of cement "as generally greater than the value of a ton of lime. 



(*) Quoted by Federal Trade Commission 1 s rice Basts Inquiry, pp. 144 
from the New Trade Review , Jiay 31, 1928, pp. 1410-1411; 



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. ae of the increased freight revenue from lime lay be due to the 
slightly ni^her freight rates on some of the railroads of the country. 

ese hither freight rates mav explain s part of the difference in 
freight revenue net ton hut they do not account i or the very large 
difference between the two almost identical products. This is evident 
"hen one considers ~he very wide distribut ion oi lime plants as compared 
with tm more limited distribution 01 cement plants. There were is 1933, 
160 cement plants located in 55 states and 332 lime -olants scattered 
over 37 states. 

There is, therefore, a much more widespread distribution of lime 
than of cement olants since the latter are largely concentrated in a 
belt of states from Ne^ Jersey in the East, and lows and Missouri in the 
Central nest. This means that cement mast necessarily be hauled longer 
distances than lime products "Which should result in materially larger 
per ton freight revenues. 

It appears to he obvious, therefore, that oven after discounting 
the effects of slightly highei freight rates on lime that the extent of 
crosshauling exceeds that of the cement industry. The costs of excessive 
uneconomic shipments of lime ere partly resoonsible for the high prices 
to the consumers ano, in addition, they tena to reduce the net profits 
of the lime industry. 

F. Cross shipments of lime prior to the Code Further evidence of 
crosshauling in the industry prior to the code is shown on Chart III and 
Exhibit A which is composed of 1 6 tables showing interstate shipments of 
lime curing 1929 which have been compiled from figures published by the 
"Bureau of Mines. The Chart is a gracnic representation of shipments of 
all kinds of lime from representative areas curing the yeai 1929. It 
should be noted, however, that shipments from Ohio include finishing 
hydratec lime which enjoys a nation-'-ide market, and under the code was 
given one basing point which was to apply to the country as a whole. 

From the data available at the bureau of Mines, it was impossible to 
arrive at anv approximate amount of the increased cost of trie crosshauls 
to the consumers. 

While the tables and charts mentioned above show interstate ship- 
ments, it ooes not necessarily follow that all the cross-shipments are 
uneconomical crosshauls, for it may happen that the nearest consuming 
area may be located a few miles distant across the state line. Elimina- 
ting all the possible cases of justifiable crosshauls there remains what 
appears to be conclusive evidence of an enormous amount oi uneconomical 
cross- shipments of lime products. ihen Pennsylvania, the leading lime 
producing state ships 87,000 tons into Onio the second largest lime 
producing state, and Ohio, in turn, snips over 50,000 tons into Pennsyl- 
vania, it is safe to assume that much of this trans-shipment represents 
unnecessary and unjustii iable crosshauls. The cistribution of lime 
plants in Pennsylvania and Ohio indicates that the shipments of 30,000 
from Ohio into Pennsylvania and over o7, 3 '0 iron Pennsylvania into Ohio 
included much crosshauling. Turing the year 1S29 shipments from pro- 
ducers in Few York state to consumers m Ohio amounted to slightly 
more than 8,000 tons, and at tne same tine producers in Ohio "'ere ship- 
ping over 80,000 tons to consumers in New York. An unnecessary movement 

9835 



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9836 



-63- 

of lime is most certpir.lv indicated in this cross movement. When clants 
I '■'■' in Pennsylvania shipped over 1,000 tons into Missouri, the 
product. in the course of transportation passed the verv doors of lime 
plants in Ohio, Indiana, and Illinois, and was finally delivered m 
Missouri, a. state which produces far mure lime thpn is consumed within 
its borders. As a -latter of fact there was an excess in production of 
lore than 200, 000, tons ov^ r the amount consumed within Missouri in 1929. 

The crpsshauls just mentioned v-ere not originally oegun as a result 
of the formal adoption of a basing point system, but grew out of the 
marketing principles thpt preceded the re.-ularlv established basing point 
practice with its open price filing procedure. The started and were 
developed in the evolutionpry stage in which the basing point practices 
were originallv iormulated. This is krown as the stage in which pro- 
ducers ouoted delivered prices in each others markets and. was generally 
known m the industry ps "quoting to meet competition. " In this primi- 
tive form there was no open nrice svstem and each producer had to secure 
information through his own salesmen, who obtained their information 
from the actual customers of rival plants. 

Through a regulprlv established system of business espionage every 
large producer ascertained the Alices, quantities sold and the markets 
of his business rivals and wps thus able to quote prices low enough 
to secure spies in the most advantageous markets. Cross-country- 
shipments resulting from efforts of each producer to dump his surplus 
in some other producer's natural, market led. to extensive crosshauling of 
ijvostantially identical Time procucts even oefore the basing point 
svstem was formally adopted. They "svstem" merely simpliiied the prac- 
tice and made the work easier and -lore profitaole. Beiore the "system" 
was accepted no producer could possibly know exactly what delivered prices 
were quoted in every distiict, whereas under the system in operation 
under the code each producer had at nis disoosa! every filed price at 
every bpsing point and could therefore select the markets in which he 
could unload his surplus at the greatest profit to himself. 

Moreover, while it was the customary practice of almost every 
producer to issue price lists prior to .the code, these wei e not strictly 
adhered to, but merely served to indicate the "top" prices at which 
sales would be made. In other words, price lists in those days merely 
served as the starting point from which the bargaining process began. 

£• Crosshauling under the C ode It mav be argued that nearlv all 
the cross shipments. of lime products are necessary and justifiable 
because of the infinite numoer of varieties in the chemical comoosition 
01 products manufactured in the different districts. It may be clai ned 
that chemical lime is shipped into an area which produces out little of 
this grade and composition and tne "builders ' lime is in turn shipped into 
areas producing chieflv chemical lime. In order to ascertain whether or 
not this represents the real reason for crosshauls, an analvsis was made 
of the cross shipments of chemical, agricultural and building lime 
respectively for tnree sample months, February and April 1934 and February 
1935. The results are ^resented in Tables El to E12 in Exhibit E in the 
Appendix and Chart IV on the follo-'ing page. 

9636 



Chart IV shows that Pennsylvama-'nest proc'uced only 13 per cent 
more cnemical lime than was needed, by consumers within that ?rea, and 
yet its shipments to lb other states(*) amounted to 5£ per cent of its 
production. An amount equal to 42 p<.r cent ox" the chemical lime 
■produced within its borders was imported from eight other states., In- 
cluded in the cross shipments of chemical lime were 2,155 tons shipped 
•into Ohio from Pennsylvania ?nd an almost equal amount (2,049 tons) 
was received from that state. The distribution oi lime plants in these 
two states (see Chart IV) '-'ould seem to indicate that the plants located 
in each state could more economically supply most of the consumers 
than the plants in the adjoining state. 

During the sample months for which the figures on cross-hauling 
have been -ore-oared 886 tons were ship -ed to Massachusetts and that state 
in return shipped. 45 tons to Pennsylvania-Vest 60.5 tons shipped to 
Indiana may have passed in transit 43 tons from that state to Fennsylvania- 
West. Producers in Virginia shippee 421 tons of chemical lime to con- 
sumers in the very same area (Pennsylvania-".. est) in which nearby 
producers shipped 364 tons to consumers in Virginia. 

These statistics show absolute cross movements of chemical lime, 
but they do not take into account the uneconomical movements of lime 
from Pennsylvania-West to other states which do not ship to the former, 
out whose needs might be supplied by producers located nearer the con- 
suming markets. For example: 100.5 tons of chemical lime were shipped 
during the three sample months from Pennsylvania- West to consignees in 
Florida which might have been sold .-.more cheaply if supplied by producers 
in the surplus lime producing states of Alabama or Tennessee - ooth of 
which are located several hundred miles nearer to the destination than 
the Pennsylvania-West producers. 

Pennsylvania- East is likewise a large producer of chemical li le. 
Forty- seven and. seven-tenths per cent of its total output of chemical 
lime was exported to 11 other states while an amount equal to 16.8 per 
cent of its procuction was imported from eight other states. Those 
states shipping into Pennsylvania-East included the distant states 
of Vermont and Missouri. 

Ohio, which is another large producer of chemical lime, shipped 
about 53 per cent oi its chemical lime output to 11 other states, and 
received in return a tonnage equal to 89 per cent of the amount produced 
within the state from producers in ten other states. In other words, 
ior every 100 tons of chemical lime sold by producers in this state 53 
tons were sent to other states, and 89 tons were received from producers 
located outside oi the state. Another outstanding example of the cross 
movement of chemical lime is the 665 tons to Few York- East while producers 
in that area were shipping 123 tons to Ohio. Lime buvers in West 
Virginia purchased 1029 tons of Ohio chemical lime and lime plants in the 
former state shipped 2470 tons into the Ohio markets. It is possible 
that producers might in the end. hpve received greater profits and con- 
sumers mi*?ht have obtained lower prices if a more rational system of 
distribution had prevailed. However, the losses resulting to both were 

transferred to partial gains for the railro a ds. 

(*) The ™ord "states" as used in the discussion on crossheuls during the 
Code includes state sub-divisions. For example: Pennsylvania-East and 
Pennsylvania-West '"Quid be rei erred to as two states. 
9836 



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9S3R 



-66- 

Massachusetts, a state whose lime plants produced 19 percent more 
chemical lime than its consumers could use, exported almost as many tons 
as it imported. For every 100 tons produced within the state 75.8 tons 
were shipped into other states and 5fi.8 tons were imported from other lime 
producing states. The state of Maine supplied 186 tons of chemical lime 
to Massachusetts, and 180 tons were shipped into Maine by producers in 
Mas sachus e 1 1 s . 

Crosshauling is by no means restriced to chemical lime products, for 
during the sample months for which the crosshauls were computed, there is 
sufficient evidence to indicate that there were considerable cross movements 
of agricultural and building lime. 

Inasmuch as the exact destination of the lime shipments cannot be 
obtained from the monthly reports, it is impossible to make exact estimates 
of cross shipments especially since transfers of lime between contiguous 
states did not always represent crosshauls. However, knowing the location 
of the lime plants in Massachusetts and Connecticut it is very evident that 
a shipment of 453 tons of building lime from Massachusetts to Connecticut 
and of 122 tons from the latter state into the former, involved uneconomical 
movement of this type of lime, furthermore, the shipment of 22 tons of 
building lime from Massachusetts to Rhode Island, while producers in the 
latter state, shipped only one ton less to consumers in Massachusetts must 
be regarded as cross freighting of building lime. 

While the total output of agricultural lime in Massachusetts exceeded 
by more than 200 tons the amount- consumed within the state, yet this type 
of lime was imported from three states and in turn exported to consumers 
located in four other states. 

Shipments of building lime from Ohio to 25 states probably represent 
large quantities of finishing hydrate and smaller amounts of quicklime and 
other kinds of building lime. Although the shipments of Ohio hydrate may 
not be regarded as an uneconomical movement of building lime, there can be 
no doubt about the character of 123 tons of imports from seven states. The 
imports are examples of uneconomical practices of lime producers which truly 
represent "carrying coals to Hew Castle." 

Pennsylvania-West exported approximately 39 percent of its production 
of agricultural lime to 11 other states, and at the same time imported an 
amount coual to about 9 percent of its production. 

Other examples of the cross movement of agricultural lime and chemical 
lime are shown in the tables on "Interstate Shipments of Lime Products" in 
the Appendix under Exhibit B. 

H« Produc tion and consumption ._._area_s_ — For the ourpose of determining 
the relationship between production and consumption of lime the country was 
divided in four large areas, which have been designated as regions. The 
states included in the four regions and the distribution of plants and 
basing points are shown on Chart V. Both production and consumption data 
for each state were furnished by the Bureau of Mines and allocated to the 
proper region. Table 14 shown below indicates production and consumption 
for each region from 1929 to 1933. 

983(5 



-67- 

Of the totrl lime produced in the r Jr. ited States in 193?, the Western 
Legion produced about 4 per cent and consumed slightly .nore than 5 
per cent; the Southern Region produced 14.7 per cent and consumed 
slightly more than IT per cent; the Central Region produced about 14 
per cent and consumed almost 11 per cent; the Northeastern and Lake 
Region produced £7.3 oer cent and consuinea 71.5 pei cent. During 1929, 
proouction and consumption figures more nearly balanced each other then 
i.r 1933 in the four regions. 

The wide distribution of lime plants throughout the country together 
with the close relationships between production and consumption just 
described would seen to indicate that lime slants Lave been located 
favorably with respect to the general markets which the'/ supply. 

Chart VI has been prepared to show the extent of cross shipments 
of chemical lime in three sample months. Since it was i rpossible to 
secure the interstate shipment or all the -producers in each state, an 
effort ^as mace to secure a rough picture of the actual situation by 
selecting one large orocucer in each sample state rnd indicating the 
shipments by lines crn^n from lis plant to the center of the state 
representing the destination. rhe center of each state was assumed to 
be the destination since the monthly reports to the code authority- 
do nut furnish the exact destination of the lime shipment . The chart 
shows the shipments across state line:: and also the location of other 
lime plants from whence the lime supplies might have been secured 
without paving for long rail shipments. 

The chart is merely an illustration of a very small part of the 
interstate shipments. If similar lines could have been drawn from all 
the plants in each state, the number of lines drawn in every direction 
would have been so great that the picture would ha?e Deen almost 
meaningless. By using onlv one plant in each state it is possible 
to show more clearlv the number of plants near each destination from 
whom the product could nave been procured. 

The monthly production reports submitted to tne Lime Code Authority 
by members of the industry served as the source material for the above 
statistics on crosshauling. These reports merely supply a combined 
statement on tonnage and plant returns or tne combined shipments to each 
of the various state destinations. There arc no data showing the actual 
distances the several lime products have been shipped by each producer. 
A part of the total shipment into a state may have merely passed the 
state line, and another part of the combined shipment mav have traveled 
hundreds of miles into the interior of the state. An exact measure as 
to the extent that lime products are crosshauled can only be secured 
from an examination of tne individual invoices of each producer. Further- 
more, crosshauling is not confined to absolute transfers of lime between 
any two producing states. There mav be a great deal of wasteful cross- 
hauling between lime producers located in different sections of the 
same state. Crosshauling of this nature may be equally as wasteful 
as that on long distance interstate shipments. 



9b36 




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3^36 



-70- 

I. Crosshauls reflected by the per ton freight revenue from lime ship- 
ments or American railroads - Crosshauling represents a sort of an an- 
araoly in the economic behavior of prices and shipments during a depress- 
ion. Whereas the shipments of most commodities decrease in amount, 
goods which are subject to crosshauling tend to increase in the extent of 
the crosshauls with the progress of tne depression, and the return of 
prosperity tends to decrease the actual ton uileage of crosshauls and 
to decrease the percentage which freight represents in the mill-net 
returns to the producers. Lime producers are forced, in a period of 
depression when their home market dwindles, to snip their products 
into more distant markets, absorbing larger amounts of freight in so 
doing. This results not onlv in an increase in the average per ton 
freight paid on lime products but. increases greatly the percent which 
freight represents of the average per ton v^lue of the product. This 
is indicated very clearly on Table XV on the following page which il- 
lustrates the above-mentioned trend. The average per ton revenue of American 
railroads on lime shipments averaged about $3.2^ in the four years 
preceding 193? when the average freight suddenly increased to $3.48 
per ton. In the same way the carriers per ton revenue on cement 
averaged $2.68 in the earlier vears and increased to $2.84 in the 
-lowest depression year, 1932. Tne return of prosperity registered a de- 
cline in the per ton freight on line fro.:i.$3.27 to $3.09 and on cement 
from $2.74 to " $2. 68. 



9836 



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9S36 



-72- 



The actual per ton freight revenue is not as significant as the 
percentage of average value of the product represented by freight -pay- 
ments. The Table reveals very clearly the effects of crosshauls on the 
consumers burden. In the years preceding the depression the per cent of 
increase over tne average per ton value of lime represented by freight 
amounted to 41.1 per cent and in 1952 the freight represented 5^.9 per 
cent of the plant net per ton value. The percentage declined to 52. 1 
per cent in 1933 and 43,8 per cent in 1934. 

The very same tendency is reflected in the cement statistics. 
Here tne freight represented an increase of 33.4 per cent of 
the per ton value up to 1931, when it gradually mounted until 
it equalled 52.9 per cent in 1932, from which time it declined to 
33,1 per cent in 1933. 

A part of the increase in the per cent of average value represented 
by freight is no doubt due to the decline in plant price or plant net 
value. The greate r the decline in plant net values of cement the larger 
•"ill oe the -percentage represented by freight even though the average 
freight per ton has not increased in the year 1932, but the actual in- 
creases in per ton freight revenue when -prices were declining can only 
be explained by more extensive crosshauls and shipments into more dis- 
tant markets. 

It must not be forgotten tnat the -price to the consumer must ne- 
cessarily include the plant net to the -producer -plus the freight and 
while the freight is usually at first absorved, at least in part, by 
the, producer, it is finally saddled on the consumer in higher -prices. 
The total freight revenue' -per ton rep-resents both the necessary and eco- 
nomical freight Hiich the consumer ^ould • normally pay when he buys any r 
products, but it includes also the wasteful ano unnecessary crosshauls, 
which represent a burden on the industry as a "'hole nit more directly 
a burden on the final consumer. The Table and the Analysis explains the 
real reason why the average freight revenue per ton decreased slightlv 
under the code and in the post-code period but it does not explain why 
it decreased more in the lime industry tnan in the cement industry. A 
reasonable explanation of the discrepancy between the two industries is 
the following: The cement industry has had a well organized basing 
point system in operation for many years. The system worked so well un- 
der the established control bodies that it was not deemed necessary to 
incorporate a basing point system in its Code of Pair Competition. While 
the Lime Industry had been operating under a system of "quoting prices 
to meet competition" which involved the use of round-about methods of 
securing Quotations made by rival producers, with the advent of the code and 
a well organized basing point syste.i (coupled with open price filing) it 
became possible for each producer to ascertain with greater accuracy "'hat 
markets offered the best opportunities for sale. 

Instead of shipping long distances, it was now possible to select 

exactly those markets which offered the 1 greate" profits and involved the 

smaller amounts of freight absorption. In this way the open -price filing 

mechanism prooably tended to decrease slightly the actual amount of 

freight paid to the railroads by the lime industry. This also helps 

to explain the greater decline in the per ton freight revenue from lime 

compared with cement, 
9fi3 6 



-73- 

Another provision in the lime code which may have helped to re- 
duce the average per ton revenue of the railroads is the trucking dif- 
ferential. Prior to the code there was no generally accepted penalty 
applied to consumers who use trucks for shipping lime products. Price 
lists filed with the Federal Trade Commission in 1928 make no mention 
of trucking differentials. However, since the District Committees for- 
mulated their terms and conditions of sale this differential became very 
important in most of the lime industries. The surcharge of $1.00 or more 
per ton on lime carried "by trucks may very probably have transferred 
back to the railroads man^ of the short haul shipments formerly carried 
by the road carriers. Furthermore, it has been alleged that after the 
Code became effective, many of the small producers were forced to engage 
in cross hauls if they wished to continue in business. This may also 
have tended to create still more short hauls for the railroads, since 
the small manufacturers were not financially capable of shipping long 
distances and absorbing large amounts of freight in so doing. 

It is highly probable, therefore, that the decrease in the per 
ton revenue of the rail carriers is not due to a real reduction in cross- 
hauling, but to the fact that they obtained more short hauls instead of 
the long hauls prevailing prior to the code. 

The importance attributed to the code in bringing about a slight 
decline in the average per ton rail revenue from lime products should 
not be exaggerated. As a matter of fact, a greater decline occurred 
from 1928 to 1929 than for the period in question, 1933 to 1934. In the 
latter period the decline was only 18 cents per ton, whereas a decrease 
of 22 cents per ton was registered in 1929; for in the preceding year 
the average freight. paid on lime shipped by rail was $3.38 per ton and 
in 1929 it had decreased to $3.16 per ton. This decline occurred in the 
period of prosperity in which there was no code to whose beneficent in- 
fluence, the decrease could possibly be attributed. 

J. Pie Effect of Cross-hauls and other Basing Point Practices on 
Consumers 

In the brief period allowed for the completion of the lime investi- 
gation it was impossible to gather data bearing on the increased costs 
due to the excessive cross-hauls of lime products. Fortunately the very 
exhaustive investigation of the basing point system in the cement indus- 
try undertaken by the Federal Trade Commission shows in very great de- 
tail what the; effect was in the one industry that most closely resembles 
the lime industry. 

4 The Commission computed the excessive all rail freight on cement 
shipments to 25 cities and found that it amounted to $7,190,000 from 
July 1, 1928 to June 30, 1929. Computations were also made of the esti- 
mated burden of unnecessary production and distribution costs arising 
under the imperfect competition in the cement industry on all sales by 
manufacturers. 

The combined result showed an unnecessary burden of $.243 per barrel, 
on 141,000,000 barrels or a total of $34,000,000. If this rate were 
applied to the entire production in 1927 it would amount to about $42,000,000. 



9836 



-74- 



This would mean -an average of 20 per cent of the production and selling 
cost which : might vary widely in individual cases. The Federal Trade Com- 
mission does not contend that this entire cost burden would be entirely 
eliminated under a system of competitive mill prices, hut it believes 
that a substantial portion of the amount represents a loss to consumers 
and to society generally, since it constitutes unnecessary costs. 

If it is possible to apply the results of the Federal Trade Com- 
mission's investigation of the cement industry in computing the pos- 
sible losses to the public from cross freight and other unnecessary 
cost in the lime industry it appears that a very large amount of use- 
less expense aggregating possibly $6,000,000 is the price paid by 
the consumers for the crosshauls and otner basing point practices in 
the latter industry. This estimate is based on the following compu- 
tations: The total freic-ht revenue of the Class 1 railroads from Ce- 
ment shipments- was $26,0 O.X'O in 1935.. During the same year the 
freight revenue from lime oroducts carried by the same railroads was 
$3,800,000 or about one-seventh of the revenue from cement. If the ag- 
gregate increased costs of cement arising out of excessive crosshauls 
and other unnecessary costs was $4?, 000, 000 the proportionate losses to 
the public on its lime consumption would amount to $6,000,000. 

Conclusions concerning the lime industry bpsed on the experience 
of the cement industry may at first, apnear to be far-fetched, but a 
closer examination of the two Industries sho^s that they actually have 
more features in common that almost any two industries one may select. 
They bothbave the same system of production using almost identical ro- 
tary and formerly vertical kilns. Both have nearly the same sources of raw 
materials 5nd use the same kinds of laoor. Their marketing problems are 
alike and it is almost self-evident that the lime industry derived the 
bpsing point system from the cement industry. 

There seems to be no reason to believe that the 'effects of 
the ssme marketing system in the t^o industries should be different 
in the lime industry from those of the cement industry. 

It may, however, be asserted t. ; :at the effects, in tne lime in- 
dustrv should be less pronounced and that the. estimate $6,000,000 is 
excessive. A more tnorough examination seems to show that such is not 
the case. In the first place, tne cement industry has less than . 
half of the number of plants operated by the lime industry, .152 in cem- 
ent and 332 in lime in 1933 and furthermore, the large number of lime 
plants is more widely scattered over the entire country than are the 
cement slants. Lime plants are therefore much nearer their natural 
markets and need to use rail transportation over shorter distances 
if operpted competitively. Moreover, and ntrhaps, more important still, 
is the higher freight rates on lime than on cement. From 1926 to 1935 
lime shipments average $.55 p> r ton, or 20 per cent higher freight charges 
than freight or cement. If these higher freight rates are taken into 
considerption, one might reasonably conclude that the estimated los;; of 
$6,000,000 based on -the experience of t.^e cement industry should be in- 
creased materially instead of being considered excessive. 

The entire estimate is of course brsed on the accuracy of the 
findings of the Federal Trade Commission in its cement investigation. 
9836 



-75- 



If their conclusions arc -unsubstantiated, the extimate based on their 
findings becomes largely hypothetical. However, sufficient evidence has 
beer, submitted in this report to warrant a conclusion that a very heavy 
burdan has been saddled on the consumer and en society by the b.- sing 
point system. Whether this burden amounts to $7,000,000, $5,000,000 
or even $10,000,000 remains an unsolved problem on «?hich more evidence 
should be secured. 

It is necessary to enrohasize here that the Commissions findings 
vere not confined to crosshauls, since the very nature of the problem 
is such that the effect of crosshauls cannot oe separated from the 
other extra costs due to an uneconomical marketing arrangement. The 
Commission's estimate includes all kinds of unnecessary costs brought 
about bv the elimination oi marketing competition, most of which ^ould 
be avoided if real price competition were restored. The brief and 
somewhat fragmentary investigation of this problem in the lime industry 
would lead an impartial investigator to the conclusion that the unneces- 
sary cost in the lime industry, relative to the size of the two in- 
dustries, exceed in laany instance!- those discovered by the Federal Trade 
Commission in the cement industry. 



9836 



-76- 

iii. varying mill-net prices a3 a result of freight absorption 
and gthbr basing point practices 

A. The nature of ba sing point prices .. 

. Prices to consigners in industries using the Basing point 
system-are leliverel prices male up of a price or prices at a Basing 
point -plus freight to lestination. In practically all instances, 
this Bc.se price is ficticious an 1 , loes not represent the price re- 
ceive! by t.e producer or the amount pail By tie consumer, even though 
the latter may haul the commolity By truck from a. plant locate! at a 
Basing joint. It may be asked, "What is the purpose of nuc ting Basing 
prices when they are never the actual prices involve! in a Business 
transaction?" Base prices an! the Basing point system with its uniform 
terms an! conations of sale to which most members of In his try adhere, 
seem to Be merely a vehicle for eliminating orice competition, By plac- 
ing all consumers on the same price Basis in each listrict. This is 
in accor 1 with, a new theory of competition in which quality an! service 
an! tie allege! integrity of the manufacturer predominate. If Indus- 
try if: to pursue this policy of completely li scar ding price competition, 
which after all is the Basis upon which- the great majority of tie 
commoU ties pro luce! in the country are soil, it will Be necessary to 
interlace so .:e system of control through a regulatory Bo ly create! By 
the state or some similar -lev ice in orler to prevent uneconomically 
high prices and discriminatory pi-actices. 

B. Varying mill-net prices . 

Accor ling to acceptel economic principles, one of the tests 
of free an! unrestricted competition in an in lustry may be base! on 
the legree of the uniformity of mill-net returns. In any inlustry in 
which price competitions is effective no one buyer will Be willing to 
pay more for an identical commolity than the price his competitors 
nave to pay at the same time an! place. Conversely, in a market where 
competitive conlitions prevail a seller will Be willing to accept no 
less from one buyer than from another for the same commolity at the 
same time. This measure of competition which has been teste! by time 
an! in many branches of trade is strictly oppose! to the "new competi- 
tive theory" which was put into practice by a few industries prior to 
the depression and initiate! by many others since that time. 

The anomalous character of tie easing point prices in the 
lime inlustry is illustrate! "ay the wile lifferences in mill-net returns 
on sale- to various classes of buyers in lifferent marketing areas. 
Mill-net returns above the home or nearest base price-, may result 
from any one or a combination of tie following factors, all of which 
have been discussed in other -arts of the report. 

1. Truck lif f erential s 

2. L.C.L. differentials 

3. Phantom freight 

4. Sales lirect to consumers 



9836 



-77- 



I.Iill-net returns below the home or nearest casing point prices 
may be cause", by one or more of the following which have also been 
liscussed elsewhere in the report: 

1. Freight absorption 

2. Quoting lower prices in competitors 
territory 

3. Switching charges 

4. Contracts male prior to N.R.A. and still 
in effect. 

In order to illustrate the true character of basing point prices 
and tc letermine the extent to which sales of lime products are male 
above and below these prices, Charts VII, VIII anl IX have been pre- 
pared. (*) The figures upon which they are base", were taken from 
the monthly production reports submitted to the Lime code authority 
by members of the industry. Furthermore, the figures for each of the 
eight companies selected were compute! from shipments male luring one 
sample month, an', therefore, are not intended to give a measure of 
the total amount of freight absorption, however, they are illustra- 
tive of t" e wide variations in mill net returns from the basing point 
filed prices. These charts have been designed to present the follow- 
ing information: first, the location of tne plant; second, the filed 
price of the company at the plant or at the nearest basing point; 
third, the type of lime; and fourth, the mill-net return per ton on 
all shipments toeacli of the various state destinations. It siioo.ll be 
noted that the figures for tie mill-net returns realized in any state 
may he made up of several individual shipments, upon which eacu pro- 
ducer may have applied one or more of tie lif f erential s mentioned a- 
bove. If the mill-net returns based on individual invoices were 
available, the deviations from the basing point prices would be much 
greater than is indicated on the charts. Tl:e mill-net returns, as shown 
on the charts, are occasionally above the base prices, but, as a 
rule, only when the lime is sold in the home market. When a producer 
ships lime into a competitor's territory the mill net return is al- 
most always considerably below the base price. 

C. h ill— net vs. consumer oric es 

An attempt has been made to show by means of a series of 
charts and tables what has happened to prices - mill-net and basing 
point prices - under the basing point practices in the lime industry. 
It must not be assumed that consumers are benefited when many pro- 
ducers obtain mill-net returns materially below their own base 
prices, for every consumer to whom shipments are made secures no benefit 
from the low mill-net returns to producers. The consumer must not 
only pay the full base price but in many cases, also the artificial 
freight from the basing point to the point of delivery. It the 
actual invoices were available, it would be possible to prepare 
charts showing the exact excess above the base price- paid by each 



(*) The data on which these charts are based will be found under 
Exhibit "C" in the Appendix. 

9836 



78 
CHART m 

LIME INDUSTRY 

VARYING MILL NET PRICES PER TON 



DOLLARS 

e 



COMPANY "A* 

LOCATED )N VIRGINIA 
CHEMICAL QUICKLIME IN SULK DOLLARS 





s 






i 


BASE 




i 

z 










i 






6 
o 
i 


PRICE 







CHEMICAL HYDRATE 





BASE 


1" 


1- 

< 

hi 

i 




> 
id 

a 

y 

-j 

? 

Ul 

z 




Q 

z 
< 

_l 
> 

< 
5 




< 

> 

U 

? 






5 

tt 

o 
u. 

Li 


PRICE 







COMPANY "B" 

LOCATED IN WESTERN PENNSYLVANIA 



dollars CHEMICAL QUICKLIME IN BULK 



z 

| | BASE 


* 5 S \ 

i i 3 





z 


in 

2 


i 
u 


PRICE 


a 









DOLLARS 
10 



CHEMICAL HYDRATE 





m 

>- 
z 




o 

X 

o 


1 PENN. WEST 




BASE 










b 




z 
z 



o 




< 

J 
li. 


- 


si 

< 

5 


PRICE 




T 2 ^ i 

z "J 









COMPANY "C" 

LOCATED IN TENNESSEE 
dollars CHEMICAL QUICKLIME IN BULK dollars CHEMICAL HYDRATED 



u BASE 


z V 1-1 


< 

> 




* ■ 


o 
r 




PRICE. 


z L=J 

u 

h 













z 








2 


V 


< 




1- 


£ 


> 


BASE 






u 




PRICE 






_l 


o 








h. 


i 










SOURCE i CODE AUTHORITY MONTHLY PRODUCTION REPORTS 

9836 



N.R.A. 

DIVISION OF REVIEW 
SPECIAL STUDIES SECTION 
No £33 



7» 

chart inn 
LIME INDUSTRY 

VARYING MILL NET PRICES PER TON 



COMPANY "D* 

LOCATED IN TENNESSEE 
dollars CHEMICAL QUICKLIME IN BULK dollars CHEMICAL HYDRATE 



LLUUm 



o 5 



Baa 



o -x. 



TO C 



COMPANY "E" 

LOCATED IN CALIFORNIA 
dollars CHEMICAL QUICKLIME IN BULK dollars CHEMICAL HYDRATE 

le 



flfilf 



-J 
< 
o 

| 1 SASE 




I 

I 


PRICE 















COMPANY "F* 

LOCATED IN ILLINOIS 
dollars CHEMICAL QUICKLIME IN BULK dollars CHEMICAL HYDRATE 



JZL 






-«£■ 











BASE 




u 
















PRICE 




a 


-J 
-J 




X 

5 




4 




n 






2 












X 

o 













SOURCE' CODE AUTHORITY MONTHLY PRODUCTION REPORTS 

9836 



NRA 

DIVISION OF REVIEW 
SPECIAL STUDIES SECTION 
NO. 834- 



7Q~A 
CHART E 

LIME INDUSTRY 

VARYING MILL NET PRICES PER TON 



DOLLARS 

7 



COMPANY "G" 

LOCATED IN MISSOURI 
CHEMICAL QUICKLIME IN BULK 



a 

i 
~1 o 



CHEMICAL HYDRATE 



A * 



raise 



u 



DOLLARS 

12 



COMPANY "H" 
LOCATED IN MASSACHUSETTS 
CHEMICAL HYDRATE 











i 

3 




5 










m 




BA^| 


















PRICE 




5 




a 

uJ 

2 

Z 

UJ 

Q. 




UJ 

S 

z 

z 

Ul 

a 




u 
«n 

(T 
UJ 

"5 

Li 

Z 

















SOURCE- COOE AUTHORITY MONTHLY PRODUCTION REPORTS 



9836 



NRA 

DIVISION OF REVIEW 
SPECIAL STUDIES SECTION 

No.135 



-80- 

group of consumers. The main difference between the charts made in 
tais manner and those submitted with this report would he that none of 
the consumer prices would "be below the br se prices in his home area 
and man,'"' consumers would actually pay prices jrently in excess of the 
base prices on some of their shi'oments. The consumers' price chart 
would never show any price below the b-sing point filed price quota- 
tions, unless the sale was made to a consumer in an area with lower 
base prices than those in the producers home area. The difference be- 
tween the mill-net returns and the invoiced price to the consumer would 
show to so~ie e::tent the real burden imposed on the public by the market- 
in practices of the Lime Industry. 

D . Kill-net returns of efvht representative lar.-:e 'plan ts 

Company "A" which is locate.:" in Virginia, with its nearest base 
price within that state of 37.00 per ton on chemical quicklime, in bulk, 
realized a maximum mill-net on sales in the hor.e state, ar.d only slight- 
ly less on sales to nearby West Virginia. However, on sales in Pennsyl- 
vani; an-' Ohio the two largest lime producing states, each having a 
surplus production of chemical lime, mill-ne^s of $5.70 and $5.45 per 
ton, respectively, were received. On chemical hydrate the company re- 
ceived a mill-net below the base price on all shipments, however, the 
net return below the base price was less than $.50 per ton on lime sold 
within the state. On all shipments to other states the sales netted 
over $1.00 per ton below the base price. 

Company "3" located in the western part of Pennsylvania is one of 
the largest lime producers in the country. Its shipments of chemical 
quicklime in bulk and chemical hydrate during the sample month amounted 
to almost 6,000 tons. With a $7.00 per ton base price for the bulk 
quicklime ales in western Hew York, its natural marketing area yielded 
net r turns er ton slightly above the base price. Mill-nets below the 
base pric were realized on shipments in its own district and to eight 
other st-tes. The lowest mill-net, $4.31 per ton, was obtained on ship- 
ments to destinations in Michigan, several hundred miles away and a 
state with a large surplus of chemical lime. Mill-net returns on chem- 
ical nydrate were apj^roximately the same as the nearest basing point 
price of $8.50 per ton, the wei dated average on about 1,000 tons of this 
type of lime being only $.14 per ton below the base price. The greatest 
deviation from the base price occurred on a small shipment to Massachu- 
setts . 

Company "C" present-; an excellent illustration of the pricing 
policy of a large plant located in a state having surplus produc- 
tion. This plant in Tennessee with its nearest filed basing point 
price of $6.25 per ton on chemical quicklime in bulk, realised 
only $3.75 per ton on more than 1,000 tons shiprped into Ohio. 
The mill-net was only $.02 higher per ton on more than 1,700 
tons shipped into Kentucky. Almost 1,200 tons were shipped by this 
plant into Virginia, which is also a surplus lime producing state, 



983c 



-Sl- 



at a .net tc 'plant of only $4.55 )er ton. During the sample month from 
which t ese figures have bee., taken, this plant, which charged con- 
sumers wit '-n the state |J6.25 per ten, plus freight, had an average 
mill-net return on all tit f t.iis type of lime of only ,£4.05 

per ton. Tl e company did succeed in aarketing approximately 160 tens 
of c ernica? hydrate at an av ra :e net tc plants of J - 13 per ton - 
or mly }.Z5 below the base Tice. 

C ipany "D" located also in Tennessee, seems to have fared some- 
what better an its shipments into distant markets during the same montl: 
in which Company "C" received su.cn low net-returns. 7ith a $6.25 per 
ten be.se price for chemical bulk quicklime, the plant netted 55.88 per 
ton en about 770 tons. This same company netted only $.21 per ton be- 
low the $8.50 base price on its chemical hydrate. 

Company "E" located in California, a state having a deficit of 
lime production in 1933, received a mill-net return per ton of $11.23 
on sales ma.de to consumers within the state and only $8.96 on ship- 
ments into Dregon, the border of which is ap proximately 300 miles 
distant from the California ilant. The base price for this type of 
lime was $12.25 per ton at the nearest basing point, or more than 100 
percent higher than base prices in the large lime producing state of 
Indiana. Pet returns of $14.96 per ton were received 'by the plant on 
sales of chemical hydrate in California and only $8.00 per ten when 
shipping into the surplus lime producing state of . : 'as ington, the 
nearest border of which is about 600 miles from tn.e plant. It would 
seem that if the sale in the state of Washington was not made below 
the cost cf production tie plant must nave been r \<P . i harvest on 
sale? made tc consumers witiin tie home state. 

Company "?" with a large plant near Chicago and four others in 
the large producing states of Okie and Missouri, shipped its products 
to at lea,st four other states during the sample month. With a base 
price in Chicago of $7.25 per ton on bulk chemical quicklime, mill- 
net returns averaged $.22 per ten below base on sales in Illinois, al- 
most exactly the base price in Indiana, $.94 and $.33 below tie base 
price on sales in Michiganand .Visconsin, respectively. 



Tlie ba.se price quoted on chemical hydrate, $9.50 per ton was not 
realised by the plant on any of its sale: and tne lowest net to plant 
being \2.4J per ton below the base price on sales to Ohio. 

C .upany "G" located in Missouri, is an additional example of a 
large plant in a state with a hughe surplus production. During the 
sample month this plant sold about 7,700 tons of bulk chemical quick- 
lime on which it received mill-net? per ton of $3.30 on over 2,000 
tons shipped to Virginia and )7.10 per ton on 413 tons snipped to 
Louisiana,. _4n average net per ton on all shipments for this type of 
lime amounted to $4.69 per ton or slightly over 28 percent lower than 
the home base price of $6.00 per ton. 

This company shipped chemical hydrate as far West as Wyoming, as 



9336 



-62- 

far South as Texa.s, as far East as New York, and as far North as Wisconsin- 
in fact almost to the four corners of the country. While the base price 
on che heal hydrate was $8.00 per ton, deviations from it ranged from 
$510 in Western Pennsylvania to $7.70 on shipments into Oklahoma. The 
plant received an average mill-net on its total shipments of $7.01 per 
ton or 14.1 percent below the base price. 

3cr.rr.any "h" one of the largest producers in Massachusetts, a 
deficit lime producing state, snipped chemical quicklime in bulk to 
New York and Pennsylvania-West. The latter state produces a large excess 
of this type of lime. While the plant sells to consumers in Massachu- 
setts a.t the base price of -3.00 per ton plus freight, it sold this 
same lime to consumers in Western Pennsylvania at a plant net of 
$5.40 per ton - or about 22 percent oelow the Massachusetts basing 
point price. 

On chemical hydrate the practice of accepting a low return on 
sales in the marketing areas of competitors and much higher returns on 
sales tc consumers within its own marketing area seems to have been 
generally followed. 

While the above discussion of the deviations in mill-net prices 
from basing point filed prices includes only chemical quicklime in 
bulk and chemical, hydrate, it is believed that similar deviations from 
base prices would be found on chemical lime in containers, on building 
and on agricultural lime products. This conclusion is based on the 
fact that the other types of lime are snipped just as widely as those 
used in the analysis. 

Building and agricultural lime products were not included in the 
tables because they are marketed in various size barrels and bags, and 
a different base price is quoted for each size. The shipments as re- 
ported to the code authority do not give the tonnage of each type of 
lime sold in various size containers. As the bagging and barreling 
costs are net uniform for all producers, any base price computed to 
be representative of these products would, at best, be only an approxi- 
mate figure. 

The general practice of accepting low^r mill-net returns by 
absorbing freight to distant areas tends to promote combination of 
any scattered plants located in different parts of the country. 
If a lime company has its main plant ij Pennsylvania but owns other 
plants in New York State, Maine, Texas, Missouri and Wisconsin, it 
is in a position tc secure higher mill-net returns on its total ship- 
ments than a company with only one plant... The one plant concern 
must absorb larger and larger amounts of freight the farther afield 
it goes in its sales campaigns, whereas the multiple plant company 
can fill orders from its nearest plant and thus avoid a part of the 
long distajice hauls on which its rivals must absorb freight. ■ 
The basing point system with its freight absorption element contains 
the germ of horizontal combinations in industry. There are already 
unmistakable signs of this tendency in the lime industry, and with 



9836 



-83- 



the ccntinuance of the basing point system the movement towards con- 
solidation Will probably be hastened. 

2 . Probable rates of jross profit on sales in .vx e market . 

It may be maintained that the freight burdens resulting from 
cross." ruling are borne wholly b " producers since the absorption of 
freight lowers their mill-net returns by the amount of freight absorbed. 
There are, however, business leaders in industries where crosshauling 
is prevalent who believe that the losses caused b; wasteful distribu- 
tion costs are paid for by prodacers and consumers jointly. 
C arles Li. Schwab says in this connection, ".But tiiere is another 
possibility of increasing earnings without either reducing costs 
further t id with ut increasing prices further which I want to suggest 
to you for your consideration, and that is the elimination of waste 
in our own industry dae t: its aethods of distribution. One of t.ie 
principal instances of sue be is the crosshauling of steel pro- 

ducts." (*) 

A casual inspection of t.ie charts on varying mill-net prices 
is sufficient to show the wide deviations in mill-net returns on sales 
by t'.'.e same company to various state destinations. In the absence of 
available cost data it is impossible to ascertain whether or not the 
lowest of these mill-net returns represented sales below cost. How- 
ever, it seems fairly certain that Company "A", for example, could not 
afford tc sell about 36 percent of its chemical cuicklime in bulk at 
cost, and almost 34 percent of its chemical hydrate at a profit of 
only $.06 per ton; nor could Company "C" sell about 26 percent of its 
Chemical cuicklime in bulk at cost, and 43 percent of the remainder at 
a profit of only $.C2 per ton. (**) 

hence it may reasonably be assumed that the lowest mill-net 
returns of the eight companies do not represent sales below cost. 
If this is trae, the lowest mill-net returns may be used as an 
approximation of cost - .although it is conceivable that even these 
low returns brought profit to some of the producers. Tables 16 and 
17 given below show for two types of lime; first, the companies 
referred tc on Charts VI, VII and VIII; second, the lowest mill-net 
returns of each company; third, the mill-net returns in sales made 
to consumers in the home state.; and fourth, the percentage of profit 
on sales made to consumers within the state, assuming that sales 
yielding the lowest mill-net returns were made exactly at cost. 
Comparability of these computations cannot be questioned because the 
mill-net returns in both distant and home markets represent the 
identical merchandising expenditures with the one exception of freight 
absorption. This item is nil in t.j.e home area and may amount to 



(*) ?ro .. ~rmi Trade Review , hay 31, 1928, ?g. 1410-1411 

(**) The tonnage sold at the different mill nets will be found in 
tie tables on Varying Mill Net Price s in the Appendix. 

9836 



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several dollars per ton on sales in distant markets. These tables 
are based on material contained in the monthly production reports of 
eight companies for one month. They show the trend of mark-ups hut 
do not contain any conclusive evidence that the same rates of return 
prevail in all plants in the industry. Without asserting that the 
results shown in these tables can be applied to the operations of 
all lime producers, the extraordinary spreads between the lowest 
mill-net returns and mill-net yield of lime products sold at home, 
©re startling in their implications. In the sale of chemical quick- 
lime in bulk, two plants representing 25 percent of the total sample 
obtained 60 percent profit on their sales at home and two other plants 
received 50 percent profit. The remaining four line producers netted 
from 14.2 percent to 25 percent on their local sales. 

Chemical hydrate yielded even greater rates of gross profits from 
the sales at home. The two highest rates of return were 87 percent 
and 71 percent respectively, and the rates for the remaining six plants 
tsnhrf gtom 15.6 percent to 42.8 percent. 

Even if the above percentages do not, as has been assumed - repre- 
sent the rates of gross profits obtained by lime producers, neverthe- 
less, they furnish rather conclusive evidence of the extent of the bur- 
den imposed through the basing point system on the consumers of lime 
products located near the lime producing centers. 

Perhaps the word "profits" as used in Tables 16 and 17 is mislead- 
ing and "markups" or "gross profit" is a better designation for tie 
concept discussed. A plant may sell a part of its output in tie home 
area wit a 75 percent markup and yet be operating at a loss, for tie 
amount of freight absorbed and the selling expenses involved may be 
so groat that the producer is operating at a loss. The degree of the 
marlcop does not necessarily imply excessive net profits to the plants 
engaged in freight absorption. 

Prom the standpoint of producer, the markup or gross profit is 
meaningless unless it is transformed to net profits, which can be dis- 
tributed as dividends to stockholders. Tne importance to this aspect 
of the question deserves special consideration and further investiga- 
tion. Lack of source material and incapability to do extensive field 
work prevented a discussion of this vital Question in the Preliminary 
Report. 

IV. OPPOSITION OP PRODUCERS IN DISTRICT 5B TO TEE BASING POINT 
SYSTEi.I 

The attitude of the lime industry to the basing point system is 
by no means uniform as is illustrated by the replies to Question No. 11 
of the Questionnaire sent out by the Research and Planning Division of 
the IT. R. A. Twenty-seven companies out of a total of 5Z sending in 
replies, stated that tie system had given certain advantages to their 



9836 



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TA3LE 16 

PERCENT OF PROFIT MADE ON SALES IN TIE HOME MAHKET I? 
LC.7EST MILL NET RETURNS. IN DISTANT AREAS REPRESENT 
COST (in a sample month) 



CHEMICAL QUICK LIME 

m iulk 









Percent Profit 




Lowest Mill 


Mill Net on 


on Sales in 


Company 


Net Return 


Sales in State 


3ome State 


Company "A" 


5.45 


3.33 


53.3 


Company "3" 


4.31 


6.90 


60.0 


Company "C" 


3.75 


6.15 


64.0 


Company "C" 


5.48 


6." ' 


14.2 


Company "E" 


3.96 


11.22 


35.2 


Company "?" 


6.31 


7.47 


13.4 


Company "C-" 


3.30 


5.04 


53.7 


Company "' '" 


1. 







Source':- Computed from monthly production reports submitted to 
Lime Code Authority. 

1/ No sales in home State in sample month. 



9336 



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TABLE 17 

PERCENT OF PBOFIT MADE OH SALES IN THE HOME MARKET 
IF LOWEST MILL NET RETURNS IE DISTANT AREAS REPRE- 
SENT COST (in a sample month.) 

CHEMICAL HYDRATE 













Percent Profit 






Lowest Hill 


Mill Net on 


on Sales in 


Comp; 


•ny 


Net 


Return 


Sales in State 


Home State 


Company 


ii i^ii 




7.36 


8.51 


15.6 


Company 


"3" 




6.71 


8.60 


23.2 


Company 


11,311 




6.75 


8.57 


27.0 


Company 


npii 




6.60 


8.30 


25.8 


Co npany 


11311 




8.00 


14.96 


87.0 


Company 


11 jiii 




7.35 


8.74 


18.9 


Company 


ti Q.11 




5.10 


7.28 


42.3 


Company 


",;" 




6.80 


11.63 


71.0 



Source: Computed from monthly production reports submitted to 
Lime Code Authority. 



9836 



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competi'i: r which they did not have prior to t _e Code. Twenty-seven 
companies replied tiat t e system had not given such advantages and 
four fims failed to reply. 

Ukereas opposition to tie basing point system is scattered all 
over tie country, there is one group of producers, the so-called 
Ohio 33 Group, which has voiced very vigorous objections to the en- 
tire system. 

A . Formal charges of Dist ri ct 53 "Producer s ag ainst the basing 
Tint system . 

This group has not only expressed its disapproval to the 
code authority but through its District Control Committee, it has 
entered its formal protest to the National Industrial Recovery Board 
against the continuance of the system in the lime industry. In con- 
nection with this protest it filed a formal brief containing several 
indictments. The chief charges against the system are the following: 

1. The lime industry generally is a local industry 
and the basing point system is not applicable, 
and never was intended to be applied, to local 
industries. 

2. Tiie use of the basing point system is not a long 
established custom of the industry as a whole. 

3. The difference in grade and quality, kind and 
characteristics of the lime produced by t e in- 
dustry makes it impossible to use the basing 
point system on a. fair and equi table basis and 
effectuate the purpose of the Code of Pair Com- 
petition . 

4. The basing point system fosters and is respon- 
sible for over-expansion in plant capacity. 

5. The basing point system permits and fosters 
the juggling of price structures through' 
reciprocal arrangements between plants of the 
same company and between marketing centers 
and producing centers to the ultimate destruc- 
tion of tie small producer. 

6. The basing point system is a cumbersome, corn- 
plicated and unnatural marketing arrangement 
which the small producer is unable to grasp, or 
have the resources to successfully use. 

7. The basing point system permits sales to be 
made at a loss when it would be possible to 
make such a sale at a profit. 



9836 



c 



-88- 



The basing point principle or system, as provided 
in the present code, has proven a failure. 

The products of t e lime industry are so numerous 
and tie uses so diversified, that marketing througn 
the basing point system only results in chaos and 
unfair competition. 

10. The basing point principle as provided in the 
amended code will also fail, as its success is 
based on moral suasion and artificial and un- 
natural competitive conditions. 

11. The basing point principle in the present code 
and in the amended code encourages and contem- 
plates crosshauling and expensive 'non-productive 
sales efforts beyond natural trading areas. 

12. The basing point system is based on a net to mill 
price below that which a producer files as his 
price, and filed prices are in many instances 

.paper prices. 

13. It fosters a method of determining average net 
to mill prices below tie manufacturers' filed 
prices, the difference between the net to mill 
and the filed price Ices not benefit t_e con- 
sumer, but instead goes for transportation, in 
many cases consumers i->aying transportation charges 
not actually incurred. 

14. It eliminates individual initiative in the estab- 
lishment of prices. 

15. Basing point systems are primarily designed for 
industries which have a standard product, markets 
national in scope, where costs and prices are 
approximately the sane at all the basing points. 

16. The basing point system breeds retaliatory action 
which is the point at wnich destructive competi- 
tion starts. 

17. The basing point principle encourages and fosters 
the vicious practice of producers located in the 
South through cheap labor and better working 
conditions of maintaining a comparatively high 
price in their locality and selling a large per- 
centage of their output in tie North at the es- 
tablished basing point prices at northern basing 
points through a freight absorption and- result- 
ing net to mill which is prohibitive for northern 



9836 



-89- 

producers. This is an unsound and unfair 
method of competition. 

The D strict Committee builds up a v try str,on ; argument based 
on h I tical cases. Graphs are submitted showin low a large 
producer can Invade the markets of a group of small, producers and 
gradu Livert the sales from local plants to distant lime plants. 

Tni s is by means of freight absorption in suca a way that a 

single lime plant may market a part of its output in the local 
mark t t )9.00 per ton, .another part may be sold in another area at 
a mill net cf S6.90 per ton and some sold at $3.30 in a distant 
marhet. 

T.ese d~ stant. producers, whose competition was never felt 
before the code, now becaie :ct ; -ve rivals for business and tma force 
the local lime oroiucers to ship t.eir surplus product into distant 
mar:ct? and absorb L:eavy ireipit c .arges in so doing. Theoretically, 
the argument seems sound but no concrete cases are furnished to sub- 
stantiate thoir conclusions. 



9836 



-9*%- 

B. The economic background of the opposition of the pr oducers 
in District 5B . The 5E Ohio Group appears to he in a peculiar situation. 
They produce a grade of lime whose calcium content is slightly lower 
than tnat of competing lime producers with plants in Pennsylvania or 
Indiana. The latter, hy sending salesmen into the Ohio territory are 
able to stress the fact that their lime contains a larger -er cent of 
calcium and therefore is a superior product even though the Ohio lime 
is said to he entirely satisfactory for most uses. In this way nearly 
one-half of the home market is said to have heen taken away from the 
producers in District SB.. TTuen the Ohio producers tried to meet the 
price of the outsiders by filing lower basing point urices, the com- 
petitors immediately reduced their own filed prices, "to meet com- 
petition" a-.id the struggle was on just the same as it was before the 
price cut. 

It is asserted that this practice is going on at T.n increasing 
rate and that "it will ultimately result in gradual degeneration of 
the lime industry and the elimination of the weaker producers. « A 
lowering of the basing point price by the local producers does not 
tend to increase their sales, for the distant competitors will im- 
mediately meet the lowered price and continue their aggressive sales 
campaign. 

The 53 producers also charge that basing point prices result in 
tne use of moral suasion and agreements between producers in any given 
district, "Tie fact that uniform prices must be in effect or filed to 
make the basing point principle successful and that agreements must be 
reached by members in a district and between districts regarding terms 
and conditions of sale as well as grades and quality, with further 
agreements as to policy regar - larketing areas anc! methods of sell- 
ing, shows that fundamentally tne basing point principle is the result 
of moral suasion and artificial and unnatural competitive conditions." 

V. THE ATTITUDE 0? LIME PRODUCERS TO THE ] ASI1 T POINT SYSTEM, PRIOR ^0 

Al'D EURI1TG THE CODS PERIOD 

A. Basing point prices; The social -point of view versus the 
business man's point of view . Prices and business profits nay 
be discussed from two different points of view. From the r.oint of" 
view of the business nan who has embarked on a business enter rise and 
has invested his capital in it, the policy of "laissez faire" is gener- 
ally advocated. He naturally feels that he has the right to sell to 
any one, anywhere at any -price that he pleases, and that any inter- 
ference with his efforts by the government or by any other administrative 
body is offensive meddling and an unwarranted interference with his 
legitimate business. If the business man chooses to unload his lime in 
a market a thousand miles away at a mill-net return of $2.00 per ton and 
chooses to make up the differences by sales at home at $12.00 per ton, 
he feels that tnat is his privilege and that no governmental agency has 
any right to interfere. What if S2.00 per ton is less than his actual 
cost of production, when overhead and a reasonable return for the lime- 
stone used in the lime production have been included? The lime producer 
will admit very frankly that $2.00 per ton is much less than his' total 
costs, but he says that $2.00 is not less than his "*ut of pocket costs." 
The limestone exists in such large quantities that the producer does not 

9856 



-91- 

count it as costs, all that he includes is the cost of the labor and 
coal, for ae considers that the overhead is there anyway;, and that it 
is not increased V'. th< long distance shipments. All that he ^ets on 
his surplus lime, which he cannot sell at home or in nearby markets 
anyway is the lowest "out of pocket cos-ts." He contends that by ab- 
sorbing; freight and disposing of his surplus in this way he keeps his plant 
goitt" S &is laborers employed. So way stress the low mill net sales 
and vmy regulate the industry? Instead of being penalized for selling 
at excessively low mill-ret returns he ought to be given a nodal for 
continuing the operation of his plant at as full capacity as possible 
and giving employment ,c labor, 

Much can be said in favor of such an argument when it is -stated in 
this wa; . Ev r me who knows anything about business problems and busi- 
ness practice will i lize with the efforts of every conscientious 
lime producer who, having invested his capital in an enterprise, attempts 
to keep out of bankruptcy by selling all lie can at the highest prices 
he can get, and by unloading the remainder at prices that barely cover 
his "out of pocket" expenses, Bearing in mind all the complicated 
problems which ever, large— scale business enterprise has tjO lauc, it- 
is easy to understand way most business -icn favor a "hands off" attitude 
on the part of the government. 

!Fnere is, however, another side to this problem which the average 
business executive finds difficult to comprehend: The social side of 
business. The social side of business involves the real difference be- 
tween competitive business anc 1 monopolistic or quasi-monopolistic enter- 
prises. 

The business man is the hired risk-taker in socief". _His pay con- 
sists of potential high profits during periods of prosperity, and oc- 
casionally during dopYEt-aloasi If the enterprise is monopolistic in 
character as in the case of the railroads and public utilities, society 
steps in through commissions ■ i othor regulatory bodies and limits the 
profits by fixin; the rates. These enterprises, therefore, may not make 
100 or 1,000 per cent in profits] Thar profits are restricted but in 
return their risks are decreased. For if the rates established do not 
yield a reasonable return on the investment, society authorizes an in- 
crease in rates. 

The business executive engaged in a competitive business enterprise 
frequently fails to grasp the fundamental difference between the two 
types of business and often assumes that he should be guaranteed a mini- 
mum net return on his investment as well as his monopolist companion, 
and that any practice, not expressly illegal, which is devised to aid 
him in securing a reasonable return is legitimate and should not be 
interfered with. The larger the plant and the greater the investment 
in an enterprise, the more strenuous becomes the demand that the enter- 
prise must be saved from bankruptcy, if for no other reason than that it 
gives c. ployment to labor. 

A demand for guaranteed returns on investment has not ueen made in 

behalf of the hundreds of thousands of farmers who have invested all 

their savings in farms and have been forced to the wall by declines in 

farm prices. It has not been advanced to save the thousands of small 

9836 



■-.,- ' -92- 

producers whose very existence depended on enterprises in which they 
had invested every dollar they owned in the world «• enterprises which 
were not in a position to secure large returns from sales at home and 
to resort to an unloading of the "balance on far-away markets at returns 
that just covered a part of their costs. 

The million dollar plant and the small thousand dollar enterprise 
are all alike from the social point of view. Loth have agreed to as-, 
sume all risksl Ho one ever asked them to invest a million or a thou- 
sand dollars in the enterprise they selected. They invested the money 
knowingly, with their eyes open and they did it because of the chance 
of high profits. They knew that they took the risk of heavy losses 
as well as high profits. As long as they played the game fairly and 
engaged in a real competitive struggle - real price competition - no 
one complained. But, just as soon as price competition disappears and 
is replaced by competition in \iseless services, such as excessive 
freight transportation or advertising or high pressure selling, society 
has a right to step in and call a halt, no matter whether the practices 
result in excessive profits or not. 

'Here is where the business man's point of view parts company with 
the social point of view. The business man sees no reason why a basing 
point system which results in uniform prices in each district is not 
legitimate and, therefore, justifiable. From the social point of view 
the basing point system becomes unjustifiable the moment it results in 
partial or complete price control in any market and prevents the consumer 
from obtaining the benefits of real price competition. 



9836 



-93- 

CHAPTER IV 
TI^ EFFEC TS OF TIIE BASI/Q POINT SYSTEM ON PRICES 
I. The Nature of Comnetitive Price 

There is seldom, if ever, in existence a competitive -orice which 
is based on the law just described, for competitive ^ r ices are much 
like a pendulum which swings continuously above or below this theoretical 
level. The law of conroetitive prices which is supposed to affect the 
greatest number of exchanges in a given market is at best a statement of 
a tendency of prices to a lower level as economies of production occur 
within an industry, or in the case of scarcity goods or commodities, 
of which the available supply is decreasing, the tendency is to gradually 
cause a rise in prices as the supply decreases. 

The real test of competition is found in the effect of economies 
of production on c.onr.:_-ners? prices*. If they are passed on to the consumer, 
it is presumptive evidence that competition exists. If, on the other 
hand, prices remain the same or rise where economies have been introduced, 
there is presumptive evidence that monopolistic forces are at work. 

A. The nature of the "m w competition- . " 

According to this theory "competition in the quality of the product, 
dependability and character of service and the integrity of the manu- 
facturer" (*) is the only kind of competition that is not of a vicious 
and "cutthroat" nature. This means merely that competition should be 
restricted to service and salesmanship. It entirely excludes price 
competition which is the vpry essence of economic competition. For, the 
real test of true competition is whether or not the economies of produc- 
tion are actually passed on to the consumer in lower prices or whether 
these economies are diverted into the pockets of producers, distributors, 
or the railroads. 

In striking contrast with real competition is -the "New Competition" 
which is said to be beneficial to the producer, the laborer, and the 
consumer. Price competition is asserted by the Lime Code Authority to 
be "cutthroat competition," always resulting in uneconomic price declines, 
which, in turn, result in "sales below cost and wastage of the capital 
of manufacturers" .... "The destruction of capital resulting from the 
decline of prices from 1929 to 1933 "prevented the maintenance of a 
living wage to labor." (*) 

3. The nature of "cutthroat" competition 

The term "cutthroat" competition has assumed a different meaning 
since the beginning of the last depression. At present it is used by 
business men to designate the actions of any competitor who cuts prices 



(*) Quotation from the Report of the Code Authority of the Lime Industry, 
as to "The Effects of the Lime Code upon conditions within the 
Industry," February 7, 1934, p. 7. 

9836 



' • -94- 

below the level tacitly agreed to' "by members of an industry. Today the 
price cutter violates the unwritten code of ethics established by the 
dominant members of an industry and his actions are called "unethical." 
Ofttimes he is called a "chiseler" and is considered an outsider by 
the eetablished business fraternity. 

Yet there is really but one type of cutthroat 'competition, and 
that is the kind which is directed toward partial or complete elimina- 
tion of competitors. 

C . Real competiti on vs. discriminatory competitive practices 

It is frequently asserted that all competitors attempt to drive 
their -rivals out of business. This statement is partially true, but 
all competitors do not make- use of discriminatory practices in their 
efforts to maintain themselves in business. Then a producer or group 
of producers charge high prices in certain regions and use the profits 
thus , obtained to reduce prices in the markets' of the rival for the 
purpose of eliminating competition, the practice is discriminatory and 
contrary. to law. 

II. COMPETITION TJNDER THE LI'S CODE BASING POINT SYSTEM 

A. Price competition eliminated under the "new competition." 

In defense of this new thoory of competition, its adherents lay 
much stress on the fact that any producer may, if he so desires, file 
a lower base price at any time. This privilege, uoon further inspection, 
appears rather meaningless, for it is usually reauired that the reduced 
price must be filed a sufficient length of time before it may become 
effective, so .that all other members of the industry will have been 
notified before the new price may be used. Moreover, the system is so 
devised that, other members may file, to meet this lower price, on the 
day it becomes effective. This places every cut in price, 'filed by a 
member, under the scrutiny of every producer and makes is possible for 
the., latter to use pressure on the price-cutter to dissuxade him from 
the price cut, or, this failing, to engage in retaliatory measures. 

It has been repeatedly stated by lime producers, and producers 
iri District 5-B have openly asserted in their brief to the National 
Recovery Administration that "agreements must be reached -by members in 
a district and between districts regarding terras and conditions of 
sale as well as grades and quality." This group further alleges that 
the system is used to "maintain a base price high enough to permit free 
and unrestricted dumping with the necessary absorption of freight, ' 
resulting in a realized price that is far below the published price." 

B. Basing point prices .are., generally non-competitive 

In order to illustrate the nature and extent of the uniform price 
quotations in the various lime districts a sample price list is submitted 
in Exhibit H in the appendix to this report. 



9836 



-95- 

The original -price list is submitted as evidence to show how 
extremely ■ improbable -it is that 20 producers in these, two districts 
could have filed so many -identical -prices at eight basing -points 
without some sort of e:;-oress or- imnli-ed price agreements or some well 
established -price fixing system. Out of approximately 2500 separate 
■price quotations there are only 29 deviations from the identical trices 
filed by the majority of the producers. Hone of the deviations repre- 
sent -prices which are lower than those of the majority of the -producers. 
If real -price competition existed in the establishment of basing-ooint 
prices, one would normally exnect to find some of the deviating quota- 
tions lower than those filed by the majority of the -producers. Such, 
however, is not the case for every one of the deviating qiiotations are 
higher than identical nrices of the remaining producers. 

Eight out of the 29 deviations are all accounted for by one 
company, the Ash Grove- Lime- and Portland Cement Company which quoted 
$2.00 per ten on -pulverized lime above the identical prices filed by 
the remaining producers and the same grade of lime in barrels at 
$.10 per barrel -above the- established price. 

Eight of the deviations re-present higher -prices for agricultural 
lime filed by five -nroclucers at different basing points, whereas, c-nly 
three deviations are found in the quotations of chemical lime. The - 
remainder represent slight deviations from the regular prices of 
building lime. Since this price list represents the first quotations 
filed under the Code it would normally reflect a larger number of 
deviations than did those- filed after the Code had been firmly es- 
tablished. , , ... 

Page 2 of the above-mentioned -price list covers terms and con- 
ditions of sale and marketing conditions. Here, even greater uniformity 
appears to have been achieved for no less than ten "terms and conditions 
of sale" are enumerated and f ive , soecif ic marketing- practices are 
designated as "standard and uniform for all manufacturers on all price 
lists filed." 

It appears to be almost self-evident that fixed uniform prices 
at each basing point indicate absence of -price comnetition, or at least 
furnish a powerful brake rn price changes at such -ooints. It is gen- 
erally claimed that basing point -prices are the result of corn-petition 
but this competition in some districts amears to be largely -pseudo- 
competition, for moral suasion and group pressure exert a -powerful 
influence against downward revisions in the price structure. 

1 . Evidence of group -pressure — confidential 
. oral evidence- from: limel-pgoducer s 

Verbal evidence was secured .from lime producers on a field trip by 
representatives of the N.R.A.- The manager of a large company claimed 
that if any -producer filed a lower Price at a basing -point, the other 
members of the industry .would wait on him and attempt to -persuade him 
to restore his original schedule of trices. Such visits were "sometimes 
followed by the withdrawal of the lower prices before the ond of the 
five day waiting period. If the -producer refused, there wn.s always the 



983C 



-96- 

imnlied threat of retaliatory measures which might prove disastrous. 
In one instance a producer was permitted to sell a type of lime, 
which was a by-product under his method »f operation, at a lower price, 
provided that he confined his sales to a limited market. 

2. Evidence fr om P r _ L ^uc;^rs in D istric t 5-B 

"The fact that uniform prices must be in effect or 
filed to make the basing point principle successful shows 
that fundamentally the principle is the result pf moral 
suasion and artificial and unnatural competitive conditions." 

3. Evidence from reto rts of the Federal Trade Commission , 

On Page 6 of the Report to the President on the basing point 
system in the Iron and Steel Industry is found the fallowing: 

"The same groups and committees which then (9 months ago) ' 
existed, are still active and through them a medium is afforded 
for understanding:-, and agreements as to what base price shall 

be filed or allowed to become effective" 1 Hrw freely 

ene of these groups still continues to discuss prices is shown 
be a letter written in September 19, 1934 by the Chairman of 
tubular goods committee to the Secretary of the Institute. 
He discussed the advisability of reducing prices to jobbers 
en the Pacific Coast, etc. f A letter writter hy a member to 
the Chairman of the group stated 'It would seem the general 
situation might reciuire some discussion in connection with 
price filing." 

The Federal Trade Commission report to the Senate en the cement 
industry contains the fallowing on Page 36. 

"Once the multiple mill basing point policy had been 
generally adopted and firmly entrenched by the cement industry, 
manufacturers turned their attention toward efforts to boost • 
to a higher level, the mill basing point prices." 

The power of dominant companies to raise base prices is illustrated 
in Pagp 40 of the report as follows: - - "- '■ »■" 

"The basing point prices at the Lehigh Valley and the 
Hudson River prices were increased 30 cents per barrel on 

November 23, 1929 An advance of 30 cents per 

barrel was also made at the mills at Glen Falls, Howes Cove, 
Janesville and Portland Point and Union Bridge, Maryland. 
The same advances were made at York, Pennsylvania on 

November 25 The increases were made in the base 

prices at the mills on the North Central Section, generally, 
without changing the base prico at the State owned mill at 
Rapid City, South Dakota. M 



9836 



r-97- 

III. ANALYSIS OF FRICE3 OF LIME PRODUCTS. 

An analysis of prices, if it is to "be significant, must take into 
consideration the evolution of prices in any given industry. Actual price 
statistics are meaningless unless they are considered with a background 
of the earlier prices obtained when industry was core primitive and less 
highly mechanized. It is a well known fact that all prices are relative 
and can be judged only by a comparison with prices previously in effect, 
or with cost of production, or with prices of similar commodities. Prices 
in any single year or at any given time must be judged in their relation 
to the business cycle or the general tendency or price-swing in the group 
of commodities to which the one in question belongs. A general statement 
that prices have declined since 1929 means little or nothing unless the 
preceding price trend is considered. The drop in prices may be merely a 
part of the downward swing due to technical improvements, introduction of 
mass production methods, or movement in sympathy with the general price 
level. 

A. Lime prices a:s reflected by mill net returns, 1907 - 1935. 

While wholesale and retail prices of the products of an industry may 
give a rough indication as to the financial well-being of that industry, 
the mill net returns per unit of production reflect far more accurately 
the relative amount of prosperity in an industry. The following analysis 
of lime prices is based upon the average mill net returns per ton of all 
lime producers reporting their annual statistics to the Bureau of Mines. 
In this discussion "plant prices" is understood to have the same meaning 
as "average mill net returns". 

One of the startling aspects of the plant prices of lime products 
is the fact that at no time since the beginning of the depression have 
they reached their pre-war level, whereas many similar products, cement, ■ 
for example, fell to within a few per cent of the level which prevailed 
before the war. In the darkest years of the depression, 1932 and 1933, 
lime plant prices were still about fifty-seven per cent higher than in 
the years immediately preceding the war, when plant prices averaged only 
a few cents more than four dollars per ton. Under the impetus of the 
war boom, but with only a slight increase in demand, plant prices of 
lime products soared rapidly until they reached an all-time high in 1920 
of $10.52 per ton. From this peak plant prices declined slowly to $8.18 
per ton in 1928, and then, dropped a little more rapidly to $6. 28. in 
1932. In other words, the apparent effect of the depression on plant 
lime prices was merely to increase slightly the downward trend which 
had existed for over ten years. (See Chart X) 

B . ■ Plant net values an d methods of •p r oduction of lime compared 
with cement . The production of lime and cement represents a 
very similar industrial process. The production of cement does not re- 
quire more highly .skilled labor than does that of lime. She quarrying 
methods are the same and both industries use large 'rotary kilns. The 
barreling is the same for both products, for cement, like lime, may be 
shipped in bulk or containers. One apparent difference is that of fuel 
costs, for the production of a ton of cement, according to reports from 
the Bureau of Standards, requires much more fuel than is required in 

9836 



the "burning of a ton of lime. It has been asserted that recent increases 
of lime prices are due to increased fuel and labor costs. If this is 
true, one would expect cement prices to have increased more rapidly than 
the prices of lime products. A casual inspection of Ghart XI seems to 
show that since the depression there has been a greater increase in 
cement prices than in lime. Some of this increase is apparent rather 
than real, for the sharp upturn of cement prices must be considered with 
their almost equally sharp decline during the depression years. The 
chart takes on added significance when a comparison is made with the 
number of plants engaged in the production of the two similar commodities. 
The number of lime plants decreased from 1232 in 1909 to 284 in 1932, 
whereas the number of cement plants increased steadily from 94 in 1907 
to 163 in 1929, and then declined to 150 in 1934. 

Table 17 shows that in 5 out of the 19 years which have elapsed 
since 1920, per ton cement prices, have actually been lower than lime 
prices, and during the remaining nine years they have averaged only a 
little more than the prices of some lime products. In view of the fact 
that the manufacture of cement requires much more fuel than does the 
burning of lime one would expect the line prices to be materially lower 
than those of cement. 

Perhaps the abnormally high lime prices are, in part at least, the 
cause of the diversion of a large part of the market for building lime 
to the cement and gypsum industries. Th e industry as a whole seems to 
have suffered because cement and gypsum have been substituted for lime 
in the building industry, due i:artly perhaps to a pricing policy which 
may seem to be profitable from the standpoint of an individual plant 
and yet may be suicidal for the industry as a whole. It is impossible 
to determine, without more exhaustive research, whether this is the 
situation in the lime industry. The lime producers seem to attribute 
the decline in the demand for lime in the building industry primarily to 
aggressive advertising by the cement and gypsum manufacturers rather 
than to the marketing system pursued by the larger lime manufacturers. 

Prior to the war, plant prices of lime were appreciably lower than 
those of cement. However, from 1918 to 1930, the plant prices of lime 
and cement were so nearly equal t:a t tney almost coincide when plotted 
on the same chart. Prom 1930 to 1933 cement prices broke from the trend, 
which they had been following for 12 years, and dropped considerably 
below it. Lime prices, on the other hand, appear to have withstood the 
forces of the depression far better than cement prices, for they fell 
only slightly below the trend that had prevailed for more than ten years. 

Tlae cement industry, according to the reports of the Federal Trade 
Commission, is one in which there have frequently been attempted under- 
standings among producers as to prices and production control. As early 
as 1905 the minutes of the association, which then represented the in- 
dustry, were replete with discussions on these subjects. The Pederal 
Trade Commission, in its investigation of that industry, found the 
following in the minutes of the Association of American Fortland Cement 
Manufacturers : 



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TABLS 18. 

A.V3BAGE FLANT NET VALUE OF LIME AND CEMENT PER 3K0RT TON AND NUMBER 
OF LIKE jUT> CEMENT PLANTS, 1007 - 1934. l/ 



No. of Active Plants . §/ Average value rer short ton 
YEAR LIME CEMENT LIME 2/ CEMENT 3/ 



Average per 
short ton , 
COAL (4/ 



1907 


899 


1908 


942 


1909 


1232 


1910 


1125 


1911 


1159 


1912 


1017 


1913 


1023 


1914 


954 


1915 


906 


1916 


778 


1917 


595 


1918 


496 


1919 


539 


1920 


515 


1921 


520 


1922 


530 


1923 


467 


1924 


450 


1925 


450 


1926 


435 


1927 


417 


1928 


411 


1929 


381 


1930 


375 


1931 


345 


1932 


343 


1933 


332 


1934 


264 



94 
98 
108 
111 
115 
109 
113 
110 
106 
113 
117 
114 
111 
117 
115 
118 
126 
132 
138 
140 
153 
156 
163 
163 
160 
160 
152 
150 



$4.09 


$ 5.91 


1 . 14 


4.01 


4.52 


1.12 


3.97 


4.31 


1.07 


4.02 


4.73 


1.12 


4.03 


4.47 


1.11 


3.96 


4.31 


1.15 


4.07 


5.37 


1.18 


O. J6 


4.95 


1.17 


3.98 


4.58 


1.13 


4.54 


5.85 


1.32 


6.29 


7.18 


2.26 


8.36 


8.51 


2.58 


8.84 


9.10 


2.49 


10.52 


10.75 


3.75 


9.83 


10.05 


2.89 


9.14 


9.36 


3.02 


9.81 


10.11 


2.68 


9.72 


9.63 


2.20 


*/ • oU 


9.42 


2.04 


S.ll 


9.10 


2.06 


8.75 


8.62 


1.99 


8.18 


£.35 


1.86 


7.34 


7.87 


1.78 


7.56 


7.66 ' 


1.70 


6.90 


5.91 


1.54 


6.28 


5.37 


1.31 


6.28 


7.08 


1.34 


7.06 


8.09 


1.84 



l/ Source: From data published "by the Bureau of Mines 

2/ Average value per short ton f.o.o. plant 

3/ Average factor,*; price per ton in "bulk Portland Cement 

4/ Average value per short ton "bituminous coal. 



9836 



-102- 

" I Relieve that something can be done, 

and sgould he done, to improve trices on cement, 
or if this is out of the question', to at least 
curtail the production " 

11 The main grievance which the association 

has here today is the grievance for a uniform price 
for cement. I feel that I can safely state that two- 
thirds of those present are ready to adopt any pro- 
ceedings which vrill advance and keep the price of 
cement ^-here it should be, and if there is any member 
here who has the ability to present to the Executive 
Committee something that rill accomplish this, I 
assure them that the Executive Committee will do all 
in their pover to -out it in lorce. Now, it is in 
your hands — not in the hands of the Executive Com- 
mittee — and I agree i^ith y~u, ' and Trill sustain any 
motion that will advance the price of Portland Cement 
for the year. " 

The Commission quotes other price and production control discuss- 
ions by representatives of more than twenty large cement producers. 
TThether or not these discussions let to any actual concerted action 
cannot be answered. However, a phenomenal rise in cement prices oc- 
curred during the war and continued up to 1920. These prices were very 
slow in returning to approximately the level which existed prior to 
the war. In fact it required more than twelve years for cement prices 
to recede from the all-time high of 1920 to a level only a little high- 
er than the pre-war prices in 1932. 

Moreover, neither cement nor lime plant prices have declined from 
the high levels of 1920 as did those of bituminous coal and coke. V/hile 
bituminous coal prices declined at a rate of 6.7 per cent per year from 
1920 to 1933, that of line declined at a rate of 4.2 per cent over the 
same years. Coal declined more nearly to the pre-war level, as is in- 
dicated on Chart XII, which shors the price trends of lime, cement and 
bituminous coal from 1920 to 1933. 

The introduction of rotary type kilns in the cement industry about 
1910 and in the Lime Industry about seven years later brought about 
greater fuel efficiency, ^hich combined with lower fuel prices materially 
reduced production costs in both industries. More up-to-date methods 
of mining and quarrying and the utilization of more efficient mechanical 
devises in the plants have no doubt greatly reduced the labor costs and 
have probably also reduced the production costs. This conclusion is 
almost obvious, unless the increased overhead caused by the heavy cap- 
ital investments equals or exceeds the savings obtained through plant 
mechanization. This presupposes unsound business judgment by the pro- 
ducers in installing the ne'- devices and the situation described above 
could not normally prevail except in severe depression years. 

All the available evidence seems to show that lime plant prices have 
been remarkable well maintained for an industry in which competition is 
claimed to regulate prices. Table 19 shows concTusively that, as far as 
prices are concerned, the lime industry has been less hard hit by the 

9836 




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9836 



-104- 

depression than any other industry, with the possible exception of g few 
price-controlled industries, quasi-monopolistic in character, for there 
are only three other industries shown in the Table in which prices de- 
clined less than they did in lime products. In its control of production 
represented by curtailment of output, it ranks among the six most power- 
ful industries included in the table. 

The chart takes on an added significance when a comparison is made 
with a number of plants engaged in the production of the two allied pro- 
ducts. The number of lime plants decreased steadily frorri 1,233 in 1909 
to 234 in 1934, whereas the number of cement plants increased steadily 
from 94 in 1907 to 163 in 1929, and then declined slightly to 150 in 
1934. 

Cement prices flucti;ated between -$.80 and $1.00 per barrel up to 
1913 when they increased rapidly due to the war demand up to $2.02 in 
1920 and then declined gradually to $1.44 in 1930 and finally almost 
reached the pre-war level by dropping to $1.01 in 1933. These figures 
would not be so significant if cement had been a highly competitive 
industry for the tendency would then have been for competition to force 
prices to very low levels. But cement is general^ recognized as one 
of the few industries in which prices have been successfully maintained 
over a long period of years, furthermore , cement is an industry in which 
the demand has been gradually expanding whereas the lime industry has 
suffered somewhat from contraction of consumption. The total tonnage 
of lime products declined from four and a half millions in 1925 to less 
than two million tons in 1932, and yet the capacity of the lime plants 
increased steadily even though over 100 plants were forced out of business 
or absorbed by the larger ones. This seems to connote price and pro- 
duction control even more effective than that of the Cement Industry. 

C . Wheat production and lime production compared . 

1. Geographical distribution of wheat and lime areas . A com- 
parison of the production and price control in the lime industry with 
the forces operating in a highly competitive industry like wheat farming 
tends to bring into relief the abnormal conditions existing in the former 
industry. The following two maps show the production and consumption of 
wheat and lime respectively by means of surpluses and deficits when com- 
pared with consumption in each state. 

In 1933 there were sixteen states with a surplus production of 
lime products. In other words, the production of lime products within 
sixteen states exceeded the consumption within those states. Twenty-one 
states with lime plants had deficits, that is, produced less than enough 
lime to satisfy their own needs, and eleven states reported no lime por- 
duction at all- A similar situation prevailed in wheat production. The 
wheat surplus and deficit states as computed by the Department of Agri- 
culture on the basis of an average from 1910 - 1914 show sixteen surplus 
producing states and twenty-three deficit states. The five largest wheat 
surplus states are concentrated in the Central Northwest and the five 
largest lime producing states are in the region East of the Mississippi 
in the vicinity of Lake Erie and Lake Michigan. With reference to the 
chief markets, the lime industry is more favorably located than are the 



9836 



-105- 



Table 19. 



PER CENT OF DRCF IN FPJCE3 COMPARED WITH PER CENT OF 
DROP 111 PRODUCTION IN SELECTED INDUSTRIES. 



1929 



1933 (*) 









Per Cent Drop 


Per 


Cent Drop 






m 




in 






Frices 


Production 


Agricultural implornc 


■nts 


5 




80 


Motor vehicles 




15 




80 


Cement 




18 




65 


Lime 




19. 9(**) 




46.8 (***) 


Iron and steel 




20 




83 


Auto tires 




33 




70 


Textile products 




45 




30 


Food products 




49 




14 


Leather 




50 




20 


Petroleum 




56 




20 


Agricultural comnodi 


ties 


63 




6 



Source: Senate Document No. 13 - 74th Congress, 1st 

Session. Industrial Prices and Their Relative 
Inflexibility. 

(*) If the above statistics had been complied for 1932 
instead of 1933, the relative positions of lime and 
cement in the price scale would have "been reversed, 
"because cement prices as reflected "by 3.L.S. figures 
declined two per cent more than lime prices from 1929 
to 1932. 



(**) Inserted "by N.E.A. 
(***) Inserted by N.R.A. 



computed from 3.L.S. figures 

computed from Bureau of Mines figures, 



9836 



-105- 

wheat producing areas. This is graphically illustrated in charts XIII 
and XIV with Exhibits D-,. and D in the Appendix. Several of the largest 
lime producing states like Pennsylvania, Indiana and Ohio are at the 
same time the chief consumers of chemical and "building lime. 

2. The effects of our depression on wheat and lim e. With 
virtually similar distribution of lime and wheat production throughout 
the country wholesale lime prices declined only 11.3 per cent from 1919 
to 1929, and 19.9 per cent from 1929 to 1935. Wheat prices on the other 
hand, declined nearly 45 per cent from 1919 to 1929 and a further decline 
of 41 per cent from 1929 to 1933. Combined with the relatively small 
decline in lime prices the total production of lime fell 45.8 per cent 
from 1929 to 1933, whereas the output of wheat declined only six per 
cent during the same period. 

3 . Wheat nri ces under a b asing ,'oint system similar to that 
used in the Lire Ind ustry. An interesting study could be 

made of the increased burden which would be saddled on the American 
public if the vheat producers had adopted, a basing point system with 
basing point prices proportionate to those prevailing in the lime 
industry under the code. Some of the effects can be noted without 
making any further compilations. 

(a) The price of wheat to consumers in the surplus 
producing states would have to be jacked up high enough to enable the 
producers to snip into distant areas and absorb the freight. 

(b) Consumers in surplus areas would lost the natural 
advantages of location because when the farmer receives only $.65 a 
bushel these consumers would not be able to buy at that price but would 
have to pay a basing point rice of Sl.no or $1.25 plus freight from 
the basing point to the consumers mill even though the wheat itself 
might be grown in the fields around the mill. 

(c) Wheat producers would net as now receive a uniform 
price from all buyers regardless of destination, but instead would have 
different di?cri minatory prices between buyers in different areas. The 
producer might realize $1.25 per bushel from nearby buyers and only 
$.60 a bushel from buyers located at a distance. 

(d) Cross shipments of wheat would increase rapidly 
and producers in Kansas, a state with a huge surplus would ship into 
North Dakota another surplus state, while North Dakota in turn shipped 
wheat to consumers in Kansas. 

(e) Wheat, instead of moving as at present to places 
where prices are higher by at least the cost of the freight, would move 
in all directions across the country and the cost of the cross shipments 
plus the higher basing point prices would all be borne by the American 
people. 

(f) If Kansas City, Minneapolis, Duluth and Chicago were 
made wheat basing points it would force a radical change in the desti- 
nation of wheat shipments. Furthermore, the system could never be 



9836 



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-10g~ 

successfully carried out without some sort of combination or tacit con- 
spiracy on the part of wheat producers. If the same number of "basing -_ 
points were used as in the lime industry it would still "be necessary to 
have some sort of secret understandings in order to operate the system 
successfully. The large number of wheat producers would of course make 
the enforcement of any such agreements impracticable. It is not assumed 
in the above analogy that even the major portion of the forces affecting 
wheat prices are identical with those found in the lime situation. The 
market for wheat is a world market and the market for lime products is 
very definitely national in its scope. 

Furthermore, the demand side of wheat prices differs widely 
from the demand for lime products sine's the foreign demand for wheat 
and the production of wheat in other parts of the world all affect the 
Chicago or New York quotations. All that is attempted in the above 
comparison is to show what affect a basing point marketing system would 
have on consumer prices after world forces have established the Chicago 
wheat prices. The entire comparison involves merely the effects of a 
certain type of marketing on the final prices to the consumer. 

IV. EFFECT OF THE teABKEEIKG PHOVISIONS CF THE LIKE CODE 0L T FHICES 

A. Increased rigidity of prices ■ 

Many economists have in recent years regarded the frequency of 
price changes as one of the best- single tests of the competitive character 
of prices. Jacob Viner in "Objective Tests of Competitive Price applied 
to the Cement Industry", says: "If there is keen price competition 
there must necessarily be an almost continuous fluctuation in prices in 
response to the buying and selling activities of competing operators, 
as their judgments' of the relation of supply to demand change in accord- 
ance v/ith the constant stream of new information" . 



9836 



-110- 



1 . Frecmency of mrice changes before an:", during the Code fron 
B.L.S. Quotations. Prior to the adoption of a Code of Prir Competition 
"by the Lino Industry, the frequency of price changes, as recorded by price 
quotations made to the Bureau of La"bor Statistics, seers to indicate that 
a relatively flexible price structure existed in the industry. The 
monthly index numbers on hydrated line prices for the period January 
1323 to December 1J33 published "by the Bureau show 109 changes out 
of a possible total of 131» and 113 changes on hasor.'s lump line out 
of the possible 131. (*) Expressed in averages this means that in the 
eleven year period immediately preceding the line code, too representative 
line products had an an average 10. U monthly price changes per year. 

The lime code, as approved lay the President on October 3» 1S33 
became effective ten days later, provided for. price filing of all 
industry products within ten days after the effective date of the code. 
During the first two months under the code, lime prices continued to 
show the same degree of flexibility which prevailed prior to the code. 
As soon as the- code became firmly established the price structure became 
almost completely rigid for the period from January lS^ to June 1335» 
inclusive. The above mentioned index numbers did not register a single 
price change for either commodity. This indicates a rigidity in the 
price structure never before experienced in the history of the line 
industry. Had the index numbers used in the analysis been based on 
quotations of only one or two companies, the absolute freezing of 
prices for a period of eighteen months might not be so significant. 
However, as the index numbers used in this analysis are based upon the 
quotations received 'oy the Bureau of Labor from fifteen companies 
producing Llason's lump lime and eight companies producing hydrated 
finishing lime, this evidence is Tuch more convincing. Further ore, 
the prices reported to the Bureau of Labor Statistics are given in 
dollars per ton at the kilns or plants and are carried to four decimal 
places. Consequently, hae there been the slightest change in price b;^ 
any one of the 15 companies, it -oulc n have been reflected in the composite 
price, which has not changed es much as l/lOO of a cent per ton in a 
year and a half. It follows that the rigidity of lime prices Curing 
the Code iT as even greater than the price rigidity of some commodities 
controlled by effective monopolies based on trade-narks, patents 
or coo-rights. 



(*) The frequency of each item is the number of times the monthly 
price of an item changes. If the period covered is five years, 
the greatest possible number of changes would be 55* 

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SC36 



-113- 



2. Price chrr., ;e s under the Code from Pricer filed vith the Code 
Authority . A more e::tensive analysis of price .rigidity uas made by 
including a large number of line products quoted by a greater number 
of producers than is - vailable in the 3.L. S.Tnolesale Price Bulletins. 
In making this analysis five types of lime vrere selected on -'hich 
comparable price nio tat ions "'ere filed in Districts 1, 2~3» ^> ^~A end 
5-B. The prices and price changes filed ~oy all producers in these 
districts v/ere traced fron the original price filings under the Code 
up to March 1, l c ;35» 

Table 22 \7hicb presents a summary of the findings slicrs for the 
various districts: 

(a) The number of finis reporting, 

(b) The average number of months since the first 
price list -.'as filed (not all firms started 
to report immediately after the approval of 
the code.) 

(c)' The number of price changes in basing point 
prices. 

(d) The average number of price changes per year 
reporting firm. 



3236 



-114- 
TA3LE 22 

Number of Price Changes for Five Hinds of Lino During the Code Period, 

in Rc"oi-cse:itr-tiv: Districts . 





(1) 


(2) 


(3) 




(4) 




Number 


Av. Ho. months 


Number 


Av. 


Ho. price 




firms 


since 1st price 


price 


changes per 




reporting 


list 


change s 


yea 


r "oer firm 


Finish Hydrate 




■ 


Diet. Ho. 5A 


11 


17.6 


10. ■ 




,624 


11 53 


7 


lU.l 


2 




.243 


Total 


IS 


16.2S 


12 




.492 


Agricultural Hydrate 












Dist. Wo. 1 


12 


l4.2 


1 




.071 


ii -i± 


26 


16.0 


3 




,0S4 


" 5A 


12 


16.3 


10 




,6 


" 53 


19 


li+.U 


15 




.659 


Total 


6Q 


i5o 


29 




.330 


Chemical Lump (hulk) 












Dist. No. 4 


?-5 


16.0 


1 




• 03 


11 5A 


o 


17.0 


7 




.5H0 


Total 


3'4 


1 . 2 


S 




.274 


Chemical Quicklime 












Dist. Ho. 1 


10 


15.2 


2 




.156 


" 5A 


1 


1S.0 


1 




.67 


Total 


11 


15.^5 


3 




.204 


Chemical Hydrate 












Dist. Ho. 1 


i4 


Q. 14 







;is 


11 2 and 3 


12 


15.5 


1 




,064 


n li 


25 


16.0 


2 




.06 


" 5A 


o 


15,2 


3 




,252 


" 5B 


o 


15.4 


T 




.096 


Total 


6s 


15.6 . 


10 




.103 



Basing Points: 

Dist. Ho. 1 - Farnams, Massachusetts 

Dist. Ho, 2 and 3 - (h'artinsburg, IT. Virginia, Cedar Hollo':, Pa. 

(York, Pennsylvania, Bellefonte, Pennsylvania 
Dist, Ho, 4 - Riverton, Virginia 
Dist. Ho. 5A - Gibonsburg, Ohio 
Dist. Ho. 5B ~ iiarble Cliff, Ohio 

The totals for columns Ho, 2 and Ho. 4 are rirthnetic averages; 
number of reporting firms 'vera used as weighting factors. 

Source: Price lists furnished "by the Lime Indastry C ode Authority. 
9336 



-115- 

The most striking feature of the above Table is found in Column U 
which shows that of the five types of lime analyzed, not one had an 
average rate 07" one price change in two years. The very, highest average 
rate of change, that of finish. hydrate had a percentage of O.U5 - or less 
than one half a price change per year per reporting firm. The fotir other 
line products averaged 0.33> O.27, 0.20, and 0.10 price changes per year 
per firn reporting. 

Tnile the two types of line shov'n on chart - registered" not a single 
price change in eighteen months, the results are not in conflict with 
tnose obtained in the above analysis of the filed prices. This is because, 
in the latter analysis the period covered included a part of the first 
two months under the code, "hereas the 100 percent inflexibility did not 
include that early period. 

"Jhile the time limitations, did not permit a study of all prices 
for all districts, it is believed that "o~j using five common type ; of 
lime and following their price changes in the large lime producing 
districts the results are adequately representative of the price 
movements throughout the industry. 

3 . Absence of mrice changes in bids on go ve rrr :ent co nt ract s . 
An opportunity was offered to the members of the lime industry, as well 
as others with open price codes, to engage in a slight degree of price 
competition on government bids, when the President issued Executive 
Order ITo. 6767 authorizing s rice concession of not to exceed 15 
percent on bids for governmental agency contracts. This order exempted 
all producers from the code limitations and permitted any producer, no 
matter what 'his filed prices -'ere, to quote the government a reduction 
not to exceed 13 percent of the filed prices. 

That none of the members of the lime industry have availed them- 
selves of this opportunity is evidenced by following: 

Executive Order 6767 provided that any bidder quoting less than 
his filed basing point prices on governmental. contracts was required to 
notify the code authority, or other appropriate agency, of the fact, 
stating the quantity and the prices so quoted. Since the code authority 
of the line industry has had no notification of any such action on the 
part of any firm it proves conclusively. that the line producers have 
failed to avail themselves of the opportunity to secure government 
contracts by shading their filed prices. It appears to be highly probable 
that either pressure had been brought to bear on lime producers to 
refrain from quoting lower prices to governmental agencies, or else 
unwritten agreement:: have been made to refrain from such action. 

V. Code vs. Pre— code Prices 

A. The report of the Lime Code Authority . In the report submitted 
by the lime code authority to the Administration of the IIPA. on the 
Effects of the lime code upon conditions in the industry, it is maintained 
that lime prices are controlled by competition of prices of alternate or - 
substitute materials in three major fields of consumption. In agricul- 
ture there is said to be competition from limestone, oyster shells and 

9S36 



-116- 



land plaster; in construction from gypsum and cenent, and in the industrial 
field, limestone, caustic soda and returned line sludge. 

whereas the so-called "competing materials" do sometimes take the 
place of lime, there appears to oe "but very little real price competition 
because the supply of each is either --.ore expensive than lime or else 
e;:ists in only limited quantities. All the oyster shells on the Atlantic 
Coast would not suffice to supply the needs of the farms in the country. 
As for gypsum and cement competing with lime, it is a well known fact 
that they are loth more costl;- to produce than lime — • for according to 
estimates by the Bureau of Standards cement requires nearly twice as much 
fuel per ton as lime. The sane is true of the alleged competition with 
chemical lime products. Limestone and caustic soda are at present used 
in certain industrial processes out only where they are especially adapted 
to definite industrial needs. 

On the other hand, potential competition arising out of the possibility 
that some industrial users may establish their own lime plants does 
exercise a very real restraining influence on prices of chemical lime 
and helps to account for the relatively lower prices obtained by 
chemical users. Industrial users appear to secure lower prices, for all 
of them are ouoted dealer prices on relatively more specialized grades 
of lime than the product sold to builders and farmers. T he general 
statement that competing materials keep down lime prices, is like 
saying that the prices of motor cars cannot go very high because horse 
drawn vehicles compete with motor vehicles in highway transportation. 

In order to show that line prices are low as compared with groups 
of similar commodities a curious table is presented by the code authority 
made up of index numbers which are supposed to represent the prices 
of lime products, building materials, cement, brick, structure! steel 
and of all commodities. - The weakness of the table lies in the fact, 
that index numbers of wholesale prices published by the Bureau of 
Labor Statistics are usee, for all com ipdities except lime -products . 
The so-called "composite prices" of line products are not wholesale 
price index numbers, but represent the mill net returns per ton as 
published, by the Bureau of ' ines. This table nrk.es it appear that lime 
prices have declined more than have the prices of most other building 
materials. 

This table of the code authority is reproduced on Table 24 with 
the addition of a column of lime index numbers of wholesale prices taken 
from the B.L.S. wholesale price bulletin. This places all commodities 
on a comparable basis. A fairer comparative estimate of the plant net 
values of lime products could be secured if the mill net returns of all. 
of the other products used in the table were available. They have been 
corrouted for cement and the results are included in the following table: 



SS36 



-117- 



TABLE 23 

Inde:; Eunbers Shoeing Trend of Plant-Net Values of Line ( dead-burned 

Dolemite exluded) and Cenent 





(1926 = 100) 


Year 


Plant wet Value of Line 


1926 


100.0 


1S27 


95,7 


192S 


88,1 


1929 


8U,9 


1930 


si.G 


1931 


7^.9 


1932 


67.3 


1933 


66.7 



Plant l?et Value of Cenent 

100.0 
9 ! I.S 

91, S 

86.6 
SU.3 
Gh'.k 
59.0 
77.8 



Source: Pron Data Furnished 3y The Bureau of Mines* 



9S36 



-118- 
TABLE 2k 

ppjcb theses :c liiib aid oqep coihiobities 
i;.?o to 1933' 



Composite 

Line Price 
Index * 

1526 = 100 

* *** 



All 
Commodities 



1920 llU.2 



1926 100.0 



IS'27 
1923 

IS 29 

1930 
1931 
1932 



S5,7 



SS.l 

8^,9 
SI, 6 

7^, 3 

67.8 



1250 
100.0 

37.S 



35, ^ 



SO, 7 
S9»S 



78.; 



15U.U 
100.0 

55.^ 
37-7 
96,5 

: ..< 
71,1 

su.s 



Cement 
Building (Conpos- 
Haterials ite) 



*** 



150.1 

100.0 

_3.3 

3*7 

7,1 

SO. 3 

77. 6 

71.^ 



*** 



Structural 
Brick Lumber Steel 

* * * ** * * * * 



100.0 

SS.7 

S5.S 
91, s 
91.8 



7-7 o 



118. H 

100,0 

S3, 2 

52.7 

91,1 

SM 
so. 6 

77.3 



165.2 

100,0 

S2,5 

90,1 

9^ , 5 



S5,7 



5S.5 



lUU.U 

100.0 

9^,5 



35,2 



98,1 
57,3 
83,1 

H0.9 



1SJ2 



Oct. 


7Fj O** 


S3,S 


71,2 


• 


Si. 2 


SH.b 


SH.2 


S6.S 


ITov. 


7HJ4 


-.7 


71.1 


S'4.9 


31.2 


6U.7 


SS.5 


S6.S 


Dec. 


76.2 


,?. 


70.3 


.'5.3 


91.2 


S5. 7 


ss.o 


SS.S 



* From Bureau of LIir.es Statistics. Figures do not include dead-burned dolomite. 

** From data collected by the Code Authority of the Line Industry. Figures for 
October, Sovenber, and Decenber do not include dead-burned dolomite nor 
finishing hydrate d line. 

*** Fron Bureau of Labor St.atistics. 



9S36 



-119- 

Table 23 sho^s that the plant net returns on cement declined almost 
10 per cent more than did those for lime products from 1926 to 1933. From 
an index of 100 in 1926 "olant net returns on cement declined to 59 in 
1933, a decline of 41 per cent, whereas the -olant net returns on lime in 
1933 had declined only 33.3 per cent from the 1926 "base. 

The entire statistical presentation of the Code Authority on nrices 
annears to "be faultv because it attempts to compare units which are not 
alike. The so-called "urice" is really the ■olant net returns per ton, a 
concent radically different from wholesale prices, for the latter cannot 
possibly include discounts, differentials and other special charges or 
concessions involved in determining olant net values. Comparing these 
two entirely different types of units is like judging -orice naid by the 
consumer by the net profits of the manufacturer. The two units are funda- 
mentally different since wholesale orices may be high while plant net 
values are low and vice versa. 

It is not maintained that -olant net values are meaningless for sta- 
tistical nurnoses. On the contrary, in a study of -orices as they affect 
the manufacturer, slant net returns reflect far more accurately than do 
wholesale orices the amount that the manufacturer receives for his nro- 
duct. The former do not, however, show the burden on consumers resulting 
from higher basing ooint -orices. It is possible to levy tribute from the 
consumer in the form of greatly increased basing ooint orices and at the 
same time to fritter away the oroceeds in exoensive crosshauls, uneconomi- 
cal salesmanship and advertising. It is even possible to boost consumer 
-prices so high that the plant net value per ton actually declines. 

3. Have Lim e Prices Increased under the Co de-? 

1« Li me Pr ices in the 3.L.S . Bul letins. The ordinary sources 
of price statistics are not very satisfactory in securing lime nrices, 
partly because a single sample does not reflect the condition of a large 
group of products, but more es-oeciallv because wholesale orices do not 
reflect the extras or differentials which represent an aooreciable per- 
centage of the quoted orice. Truck and L.C.L. differentials, snecial 
nrices for containers and numerous other items affecting consumer nrices 
are not included in the ordinary nrice statistics. However, while it is 
doubtful if the 3.L.S. wholesale orices are entirely accurate in measur- 
ing the exact degrees of price changes, they renresent the only reliable 
price statistics available for a long neriod of time. The following 
analysis based on the index numbers of two tyoes of lime as reported by 
the Bureau of Labor Statistics, using 1926 as a basis illustrated by means 
of a Chart (XVII ) showing the snread between lime orices and all indus- 
trial nrices. 

The index numbers of mason's lump lime declined 26.1 oer cent from 
1926 to April 1933, the lowest ooint reached during the neriod from 1923 
to 1955. Between Aoril and Sentember 1933, the latter being the last ure- 
code month, the index number for this tyoe of lime rose to 



9836 



( 



( 



120 




-121- 



81,3 ~ or an increase of 10.0 percent during the five months i rnedir tely 
preceding the adoption of the code. The first two months under the 
code witnessed a slight increase which was followed lay a slightly 
greater recession in January 153' ■• Since the lest named date the index 
number has remained unchanged. 

The Bureau's index number for hydrated lime also reached a lo - ' 
point in April 1933i '"'hen it showed a maximum decline of 24.5 percent 
from the I52S "iase, By the beginning of the' first month under the code 
hydrated line prices had increased lp.7 percent from April 1933* Between 
October 1933 an d January 133^ the price of this type of line increased 
about h percent, where it has remained up to June 1935* 

The index number for mason's lump line is nor; 19.^- percent below 
the 1526 base and that for hydrated line but 11.0 percent b elo-; r the 
19 2o average. 

As was the case in several other industries, prices did not 
increase rapidly under the codes, but seen to have increased in antici- 
pation of the codes. In fact several industries had codes of fair 
competition prepared before the national Industrial decovery Act was 
passed ~oy Congress. 

2 . Price lists submitted to the Federal Tra/e Con '.ission in 
192& compared with those filed with the Code Authority in 193^' » A 
clearer idea of the price changes wrought ^oy the code can be gained from 
a comparison of the price list submitted to the Federal -trade Commission 
in 192S with the prices filed with the Line code authority by the sane 
identical company in 1935* Table 25 found on the following pare contains 
the prices nuoted in two such price lists, placed in parallel columns. 
This shows very clearly that while carload lot prices on chemical lime 
have not changed, the differentials provided under the code for L.C.L. 
and trucl: shipments have been nateriall increased. The consumers' differ- 
ential on L.C.L. chemical line has increased the price by $2.00 per ton. 
Outside of the chemical product group, even the carload lot ealer 
prices have been increased and a trucl: differential of 75 cents per ton 
has ^oeen added to the regular dealer prices; furthermore, the consumer 
prices on L.C.L. shipments have been increased by 52.00 per ton. 
Copies of the price lists from which these prices have been talc en, are 
found in the confidential Piles of the Division of Review. This table 
merely shows what has happened in the operation of a single company and 
of itself is not conclusive evidence but the results are substantiated 
>-j the other price lists filed with the Federal Trade Commission in 
192S. 



9S36 



-122- 







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-123- 

The effect of the Code on the f 'ver 



?e olant net r.er ton value 



and on shipments, 



1 . High prices n fleeted by the incre ased al^nt net 
value oer ton reported in replies to N.R,A. questionnaire. Higher 
prices were published by the lime producers immediately orior to and 
aft^r the adoption of tne lime rode. The effect of these trices is 
snown by the increased plant net per ton value of lime products for the 
first six months of 1954 over the corresponding ore-code six months of 
1933. Thpse values are based on data furnished by 47 lime pro- 
ducers in the questionnaire sent out by the Division of Research and 
Planning. The following table, Table 26, shows that tha average in- 
crease in 1934 oer ton value was 20,2 per cent over that of 1933. The 
smallest lime produc ers (less than 5 r 000 tons per year) increased 
their average per ten value by 2.6 per cent., whereas the ne^t largest 
group (30,000 to 40 : OO0 tons) increased its average per ton value by 
28.87 per cent. The average plant value per ton of all lime products 
was $6*35 in 1933 and inerpased to $7,65 in 1934, an increase of $1.30 
per ton. All sizes of plants obtained higher ->veragc olant net values 
in 1934 than in 1933. The lowest increase is registered by the smaller 
plants (less than 5.,or)0 tons) •~ T hose increase in average value " r as only 
34 cents per ton, ••'here^s the groups (10 to 15,000 tons) obtained an 
average of $1.60 per ton more in 1934 than in 1933. 

TABLE 26 ■ 

AVER AM VALUE PEE SHORT TON SHIPPED DURING 
FIRST SIX MONTHS OF 1933 AND 1934. 



Size of Plant Number 
(Based on Shipment s of 

in 1950) Plants 



Aver age Value p er Short Ton Shipppd l/ 
First Six First six Per Cent 
Months 1933 i onths 1934 Change 



Total 



Data for tne 47 identical plants 2/ 
47 $ 6.35 $ 7.63 



Less than 5,000 short 

tons 9 

5,000 and under 10,000 

short tons 10 

10,000 and under 15,000 

short tons 5 

15,000 and under 20,000 

short tons 10 

20,000 and under 30,000 

short tons 3 

30,000 and under 40,000 

short tons 4 

40,000 shorts tons and 

ove r 6 



6.14 
5.99 
6.24 
6.64 
5.55 
6.82 



9.63 
7.27 
7.27 
7.40 
7.53 
7.. 15 
8.16 



20.2 

2.6 
18.4 
21.4 
18.6 
13.4 
28.8 
19.6 



Source: NRA Research and Planning Division- Special Confidential Reports 



9836 



on the Lime Industry. 

1/ Average value ner short tens shipped are based on valte s P.O.B. 
Plant and amounts hilled to buyer before discounts and in- 
cluding selling expejz.ee.. 

2.1 No data are available on the shipments in 1930 for the ten 

additional olants, consequently the above frequency ennot 
be presented for the larger number of slants . 

The following chart, Chart XV, and supporting table (Table 27) 
shows what actually took place within the industry after the code went 
into effect. It is net r-sserled that all the changes are due to or 
caused by tae code. The increased oroduction is partly due to the 
larger demand for lime products which must be attributed largely to 
the recovery - but the increased prices and conseuuent incr°ased 
earnings c»nnot easily be attributed to anything but the code and the 
marketing practice provisions contained therein. 

The foregoing chart, (Chart XV) showing the percentage of in- 
crease in earnings of lime producers by different size grouos for the 
first six months of 1934 over the s^.me period in 1933, offers .con- 
clusive proof that lime producers h-ive greatly increased their earn- 
ings under the Code. The only group that did not show a decided in- 
crease in yield is the group of small producers (less than 5,000 
tons per year) where tne output was increased by. 21.7 oer cent, but 
wnose v lues per ton increased only 5.2 per cent., .-"hile the yield 
per ton increased only slightly over the first six months of 1933, the 
increase in volume, or gross output was so large that they were very 
much better off. 

In all of the other grouos, the percenta e of increase in value 

was far in excess of the increase in volume. It follows that the 

greatly enhanced nrices, applied to the increased output should 

normally yield extremely handsome returns to the large producers. A 

66,9 per cent increase in. price applied' to an increased volume of 

47.2 per cent should result in greatly increased profit to loroducers 

selling from twenty to thirty thousand tons of lime per year. The 

average increase in shipments of all olants reporting '"as 13.2 per 

cent, and the average oercent increase in nlant net values amounted to 
35.9. These statistics "-hich '-ere compiled from records suo^olied by 

lime producers in their replies to the MR i questionnaire, Drove con- 
clusively that the plant net yield of lime products has been materially 
increased through the code, but as has been said before, they do not reflect 
the extent of excessively high prices finally p~id by the consumer. In 
many cases the plant net return to the producers is less than half the 
price charged the consumer. 

The aggregate increase in value during the six-month period ob- 
tai ned by the 47 lime producers replying to the questionnaire was 
nearly $775,000 and the increase in volume only 41,000 tons. The major 
Dortion of the increased returns received by the lime producers must, 
therefore, be largely ascribed to increased prices rather than to in- 
creased production. 



9836 



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e£64 JO J-IVH W H3AO *£6I JO j"lVH +«l '3SV380NI J.N33 H3d 



-127- 

D« Price Statis tics on Lim e Produ ct s do not 'Reflect Consumers' 
Prices . 

It was pointed out in the o~sing point study in th= st^el 
industry that the pric<= quotations on standard steel products do not 
reveal the true price situation in the steel ousmess. This holds 
true to an even greater extent in the line industry. After the co-"e 
went into effect many special charges or differentials have been 
agreed upon and applied to the entire industry through the instrumentality 
of thp code authority and its district control committees. The truck 
differential alone amounting to from 75 cents per ton to $1.00 per ton, 
and in one district to $2.60 per ton, means a. heavy additional ourden 
ujon the consumer, for among the small producers (less than 5,000 tons 
per annum) 31.8 per cent of all lime sold is shi aped by truck. This 
means an increase of about $1.00 oer ton on nearly one-third of the 
lime sold by this group, In another group (20,000 to 30,0^0 tons out- 
put) the truck shipments represent 14 per cent of all the lime sold. 
Altogether 41,653 tons shipped by 55 lime oroducers reporting to 
the fflUA questionnaire -'ere delivered by trucks during the 10 months 
I period frpm January 1 to September 30, 1933. This amo anted to 9.17 
per cent of the total output of these concerns. 

Similar statistic on L. C. L. shipments were not secured, but it 
is evident that the ex* ra charges en L. C. L. shipments must result in 
an appreciable increase in consumer prices on lime shipped in this way. 
Attention is called to the discussion on this subject in Part V-B-2. 

£. The Effect of the Code in Pl-^nt l-'et Value, Plant Net Per 
Ton Values - and on Gross Receipts Reflected by the P.eolies to the 
MA w?aestionnaire .. The questionnaire sent out by the NRA to all lime 
producers reporting to the Bureau of Mines elicited replies from 
nearly 100 lime companies. The information contained in these re-olies 
was confidential in nature, and it "<>s, therefore, impossible to se- 
cure anything but general summaries in which the identity of the in- 
dividual producers '^ould not be disclosed. 'Vhile nearly a hundred 
k replies were received, a number of those reporting stated that they 
had discontinued operations and others replied that they ^ere unable 
to furnish answers to all the questions asked. Altogether, 59 manu- 
facturers furnished usable replies to some or all of the questions con- 
tained in the questionnaire. Forty-seven replies contained the in- 
formation necessary for a complete tabulation of the data requested in 
the 12 questions on which information was needed. This number may 
appear to represent an inadequate sample, whereas as a matter of fact 
the returns must be regarded as hignly satisfactory as a means of re- 
flecting the operations of the industry prior to and during the code. 
.Then one bears in mind the fact that the National Lime Association 
representing the leading producers of the industry had only 67 mem- 
bers in 1934, it is evident that the samole consisting of from 47 to 
59 usable replies represents a satisfactory cross section of the entire 
industry. 

1. Basing point practices as shown in the replies by 47 
producers snow very clearly that 50 percent of the + otal number did 
not use the basing point system during the nine months immediately ore- 
ceding the adoption of the code. Table 31 on page 225 reveals the 
actual tonna.ge shipped by different pricing methods by the members of 
the Industry submitting reports. This shows that 39.9 percent of total 
9836 snipments of all the producers reporting sold their products f.o.b. 



— lib- 
plant with no allowance for freight, and 42-/0 was sold at delivered' 
orices. Since only 90.9 oercent of the total shipments re-oorted were 
snip-oed "by rail, it is evident that approximately one half of the rail 
shipments consisted of f.o.b. plant trices with no allowance for freight 
whatever. If the shipments "f.o.D.. plant freight allowed" representing 
5.6 percent of the total are added, it a _ ooears that over one half of the 
rail shipments were made "by -oroducers who did not use the "basing -ooint 
system in its entirety or used it onlv in exceptional cases. 

2. The large 'oroducers obtained much greater advantage from 
the code than the small -oroducers secured. The chart on page 218 and 
the table on page 219 show very clearly that the large lime producers 
"benefited far more from the code than the smaller lime slants. If the 
value of lime shipments had increassd at the sane rate as the increase 
in the volume of shipments, it would have indicated that -orices had not 
"been materially iraoroved'as a result of the code. In fact, the financial 
advantages which may in any way "be attributed to the code may "be roughly 
measured by the amount which the percentage of increase in value exceeds 
the oercentage in increase of volume of shipments. Using this criterion 
as an index, table Mo. 30 sho'"s that the small olants (5000 tons or less) 
increased their values only 3.2 percent over and' above their increase in 
volume of shi-oment ; whereas the average for all companies producing in 
excess of 5000 tons oer annum increased their total net values 22.3 per- 
cent more than the increase in volume of shipments , while all olants 
producing in excess of 30,000 tons increased their plant net values 27.6 
oercent in excess of their increase in volume of shipments. From these 
statistics it is reasonable to conclude that the large producers obtain- 
ed far greater plant net returns uncer the Code than the small producers. 
Table 26 also shows that the -olant net oer ton values of all the larger 
oroducers increased ov;r 20 percent, whereas the smaller producers (less 
than 5000 tons oer annum outout) increased their oer ton values only 
2.6 percent. These statistics seem to show rather conclusively who were 
the beneficiaries of 'the basing '-ooint -oractices contained in the lime code. 



9836 





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-131- 



IABLE 29 

OPIITIOITS AS TO TZ-IE DZTITZCT Or THE 3ASIITG POIITT SYSTEI.I Oh GO' PhTITOTtS. (ll) 
(irjIIH?. 0? PLAIJTS STATIITG THAT USE HiSIITC- POIITT SYSTEU, SII7CE 0CT03£H, 1933, 
TAG GIV3IT CERTAIJJ ADYAI7TAGES TO THEIR COIPHTITORS TIIAT THEY DID HOT 

HAVE PILIOF. TO 'THE CODE). 



Size of plant 

(Tiased on Shi merits 

in 1930)" 



uabcr of Plants 



Total 



Advantages 

to 
Cor. ^eti tors 



!To Advantage ITo 

to Con aetitors Ansver 



Data for the 47 identical plants 



Total 



47 



30 



33 



Less than 5,000 short 

tons 
5,000 and under 10,000 

short tons 
10,00C and under 15,000 

short tons 
15,000 and under 20,000 

short tons 
2G,0'j0 and under 30, CO' J 

short tons 
30, J' nd under 40,' 

short tons 
40,000 short tons and 

over 



Grand Total 



9 
10 
5 
10 
3 
4 
6 



2 
2 



4 
5 
2 
6 

2 
4 



Data for all plants answering question 1/ 
5o <zt 27 



Source: HRA He search :.'.nd plannin, 1 Division -, Specip,! Confidential Reports 
on Line Industry. 

1/ ITo data are available on the shipments in 1930 for the 11 additional 
plants consequently the above frequency cannot be presented for the 
larger number of plants. 



9836 



-132- 

TA3LE 30 

OPINKNS as to the effect of marketing provisions 

OF THE LIME CoPE ON INDIVIDUAL BUSINESS. (9b) 
(MARKETING PROVISIONS - EASING POINT AND OPEN PRICE FILING) 



Size of Plant 

(Based on Shipments 

in 1930) 



Number of plants 



Tot-^1 



Favorable 
Affect 



Unfavorable 
Affect 



No 
Answer 



Data for 47 identic! nlants 



Total 



Less than 5,000 short tons 
5,000 and under 10,000 

short tons 
10,000 and under 15,000 

short tons 
15,000 and under 20,ono 

short tons 
20,000 and under 30,000 

short tons 
30,000 and under 40,Oon 

short tons 
40.000 short tons and 

over 



47 


28 


9 


4 


10 


5 


5 


3 


10 


7 


3 


1 


4 


3 


6 


5 



14 
4 
4 
1 
2 
1 

• 1 
1 



Data for all plants answering question!/ 
Grand Total 59 34 . 20 



5 
1 
1 
1 
1 
1 



Source: ERA Research and Planning Division - Special Confidential Reports 
on Lime industry, 

1/ No data are available on the shipments in 1930 for the 12 addi- 

tional plants consequently the above frequency cannot be 
presented for the larger number of plants. 



3836 



-133- 

3. Nearly 50 percent of the producers believed that the 
basing point system aid riven pdviit^ys to their competitors which the 
letter did not have before . The attitude of the line producers as re- 
flected, by the replies to the questionnaire (see taole 32) shows that 

27 oat of the 58 lime manufacturers answering the question believed that the 
basing point system had given advantages to many competitors which 
the latter did not have prior to the Code., The trend is also shown in 
table 30 giving the opinions of lime producers as to whether the basing 
ooint system had produced favorable cr unfavorable effects on their 
business. Twenty-eight replies indicated favorable results and only 
14 claimed that the effect had been unfavorable, while 5 producers 
failed to answer the question. Among the 14 claiming unfavorable effects 
8 v 'ere small producers - less than 10,0^0 tons jft y=ar out-out, and nine 
of the 28 who admitted favorable effects were also small producers. 

Many of these small -producers realizing that the value of 
their shipments had increased slightly, (actually only .?.?£) stated 
that they had been benefited by trie code. Had they known that the large 
producers increased their total v=lue of shipments by 27.6^ their re- 
plies might have been some- hit Qualified, 

4. Producers •■-'ho were opposed to the Code, increased their 
plant net values, volume of shi -vents and plant net per ton values, more 
than the proppnents pf the Code . Table 32 contains some v ry startling 
information of the effects of the cpde practices and business recover"" 
on the prosperity of lime producers. It is, of course, not implied that 
the entire incre se in output and value cf lime products was caused by cr 
due entirely te the code. Apart of the increase must be attributed to 
the general upturn in business in 1934 rather than to any specific 
features of the code, but the effects of the recovery would normally be 
the s me for the lime producers who approved the code -,s for those who 
opposed it. Any change in the value and volume of shipments of these t'"0 
groups must, therefore, oe attributed to some other cause than the 

genei -1 recovery of ousiness. 

Lne would naturally expect that the producers who sponsored the 
code would, be the first to feel the beneficial effects of the code 
practices, wherea.s the reoli- s to the ERA questionnaire seem to show 
that the opponents of the system benefited to a greater extent both in 
velume pf business and i- n value of shipments. The table in Question 
(table 32) sho^s that while the opponents of the code increased the 
value of their shipments 55.9 percent during the six months under the 
code over that of the corresponding six rarn'th period prior to th a code, 
the sponsors of the code registered only 53.8 percent increase. In 
the volume of shipments the difference is net so pronounced, for the 
opponents increased their shipments 17.8 percent while the proponents 
had an increase of 13.1 percent during the sme period. 

It is difficult and perhaps impossible to explain exactly what 
cases were responsible for + he rather startling differences in yield and 
volume. However," it is possible to formulate some plausible ex- 
planations without attempting to draw any definite final conclusions. 
In the first place, it is evident that the lime producers who were 
opppsed to the cod^ obtained much smaller plant net returns per ton in 



9836 



-134- 

1933 than did those who favored the "basing ooint sys+'-m. The 
average per ton value of the first group was only $5.15 in 1933, 
whereas the proponents of the system received an average of *6.50 for 
their lime shipments. This value is exceptionally high; for the 
average pr-r ton value of all nroducers for the same ypar "as $6.38 
per ton. This ™ould seem to indicate that those ooposed to the code 
had been engaged in genuine orice competition d uring the denrpssion, 
v/hile the proponents had maintained their price structure pven 
better than the avprage for all lime producers. A. differpnce of 
$1.35 per ton in the olant net v-^lue can, therefore, reasonably be 
accounted for by the lower price lists quoted by sucn oroducers, or 
it may possibly have been caused by much greater absorption of freight 
by this group, an assumption which seems highly improbable. 

The lo^ ifr ton price pr c v^iling for the prononents in 1933 would 
help to expl tin the greater increase in per ton value in 1934. Even 
though this price was increased 35. 2, the average per ton value was 
still 88f£ less than the value secured by those '"ho favored this 
system. The very pronounced increase in the total vilue of shipments 
under the code may not, therefore, be significant, since it merely 
shows that these plants had reduced their prices more and, therefore, 
received an account much smaller proportionately in the six months 
prior to the code than did the producers who sponsored the code. It 
is a "-ell known statistical principle that percentages are not com- 
parable where one of the items represents a very small base and the 
otner a very large one. In the second place, a possible explanation 
of the discrepancy may be found in th Q - fact that tnose ^ho opposed 
the code did not live up to the basing point prices as strictly as 
the proponents did. By shading tneir lime prices slightly below the 
prices filed at the basing point, they may have be^n able to sell a 
larger portion of tneir output in the most profitable nearby s->les 
territory at a pricp averaging nearly $1.00 opt ton less than the 
average price obtained by the proponents without oeing forced to ab- 
sorb large amounts of freig.it on s les in more distant markets. 

These hypotheses do not exhaust the possible causes which may 
be construed as explanations of the stvange anomaly that the lime 
producers "ho protested against the code should have increased their 
volume of shipments, value of shiDmen+'S and value per ton more than 
the sponsors of thp code did. 

The effect of the code on the proponents and opponents of the 
basing point principle must not be confused with its effect on large 
and small producers, for som Q of the most outspoken ooponents of the 
code operated large plants and- felt that their operations would be 
best served by the absence of code restrictions on the marketing of 
lime products. 

The above analysis represents merely tentative conclusions b^sed 

on hypothetical assumptions of fact, since statistical data on which 
they are b=>sed are too limited and fragmentary to warrant any 

definite explanations. It mav, for example, be suggested that the 



9836 



-135- 



increpsed outout and value of shipments is due to superior merchandis- 
ing ability of all of the group oooosed to the basing point system, 
but it is highly improbable that this c^n be true. It may also be 
asserted that it was a m^re matter of chance that the producers 
who oooosed the code haooened to sho- better results than did the 
other lime producers. 



9836 



-136- 

LIME INDUSTRY 

TABLE 31 

HiPOgTANCE OF VARIOUS PRICING METHODS 
(BASED OH SHIPMENTS MADE FOE TEE 10. MONTH PERIOD, 
JANUARY 1 to SEPTEMBER 30, 1933) 



Pricing 
Method 



Total 

Rail Shipments: 

F.O.B. Plant, 
freight allowed 
F.O.B. plant, N_o 

allowance for 

freight 
F.O.B. Plant, Fart 

allowance for 

freight 
Delivered Prices 
Shipments by Truck 

or Water 



Number of 
Plants 



Shipments 

in 
..Short . Tons 



Data for 47 identical plants 
47 461,462 



10 



27 



If 

19 

26 



26,017 



184,086 



10,798 
194,469 

38,092 



Per Cent of 

Total 
Shipments 



100.0 



5.6 



39.9 



4.1 
42.1 

8.3 



Total 

Rail Shipments: 

F.O.B. Plant, 
freight allowed 
F.O.B. Plant, No 

allowances for 

freight 
F.O.B. Plant, Part 

allowance for 

freight 
Delivered Prices 
Shipments "by Truck 

or TTater 



Data for all plants answering question 
55 510,765 100.0 



13 



11 
23 

29 



27,682 
188,439 



19,098 
228,893 

46,653 



5.4 



36.9 



3.8 
44.8 

9.1 



Source: TTRA Research and planning Division Special Confidential 
Reports on the Lime Industry. 



983,6 



-137- 



TABIu: . 



VALUZ AiD VOLUME OF RHIPLIITTS CLASSIFIED BY ATTITUDE 
TOWAlD LULTIPLE LASII.G POINT SYSTEM OF MARKETING 







1933 




1934 








Number 


First 6 Hi 
v alue rnd 


3 nths 
'Average 


First 6 M 


onths 


>er Cent 




Value and 


■Average 


Change 


Item 


Plants 


Shipments 


« Value 


Shipments 


Value 






. Reporting 


at the 


•and ship— 


• at the 


and Ship- 








plant 


'nents Per 
'Plant 


plant 


ments Per 
Plant 




Value of 












Shipment 














For ' 


32 1 


,468,320 


45,385 


1,964,992 


61,405 


£33. -8 


Against 


8 


335,888 


41,936 


523,563 


65,445 


/55.9 


No Reply- 


7 


180,417 


25,774 


208,718 


29,817 


/15.7 


Volume of 






' 








Shipment .. 














For 


32 


225,884 


7,059 


255,491 


7,984 


/13.1 


Against 


8 


65,273 


8,159 


76,871 


9,609 


/17.8 


I T o Reply 


7 


21,150 


3,021 


21 , 036 


3,005 


/ -5 


Ave rase Value 














Per Ton Shinned 














For 


32 


35C 




769 




/18.3 


Against 


8 


515 




681 




/32.2 


'Jo Reply 


7 


853 




992 




-/16.3 



Source: NBA Research and Planning Division - Special Confidential Reports 
on the Lime Industry. 



9836 



I 



-138« 

CHAPTER V 

rpPB f??ECT 0? TH E BASING- POINT SYSTEM OH THE CONSUMER 

. DISAP VANTAGES TO CONSUMERS RESULTING PROIvi THE PRICING AND uARKETING 
POLICIES OP THE INDUSTRY 



A, Agriculture as a consumer of lime -products . Since the American 
farmer needs large quantities of line to regulate the acidity of huge areas 
of agricultural land, the agricultural demand for lime represents a wide 
and attractive market which lime producers should cultivate. According to 
the Bureau of Mines, agricultural consumption amounted to 10.8 per cent of 
the total lime produced in the United States during 1933, This amounted to 
246,110 short tons. 

During the period from 1909 to 1915 when the average plant price of 
agricultural lime was $3.01 per ton, the American fanners used approximately 
621,000 tons per year on their farms. Prom 1915 the price of agricultural 
lime increased until it reached $8.80 in 1920. nth each increase in price 
the volume .of consumption of agricultural line declined steadily, until it 
reached a low point of 240,000 tons in 1923. Prom 1923 on, the price de- 
clined each year and the volume increased until it reached 343,000 tons 
in 1930, when the average price was $6,92, A part of this increase was 
probably due to the fact that the American farmers enjoyed a period of great 
prosperity, which enabled them to buy line products even though the market 
price of lime was considerably higher than it had been in the years preced- 
ing the war, 

1 . Demand for agricultural lime is relatively elastic . 

While the demand for certain types of lime may be fairly inelastic 
the demand for agricultural lime appears to respond rather quickly to lime 
prices. The demand for line for water softening purposes does not increase 
even though the -orice declines. On the other hand, the dunand for agricul- 
tural lime seems to be sensitive to price changes. When one considers the 
activities of the Department of Agriculture and of the National Lime As- 
sociation, in their educational campaigns to teach the farmer better methods 
of treating the soil, and showing the various uses of lime in improving the 
fertility, it would seem reasonably certain that there should result an in- 
creasing volume of lime consumption for agricultural purposes, unless other 
forces intervened which tended to change this trend. Because lime represents 
such a small part of the cost of constructing a building, the demand for 
building lime is highly inelastic. " In the paper industry and the glass in- 
dustry, the same quantity of line will be bought, regardless of whether the 
price is $6.00 or $8.00 a ton. In all these industries the quantity of 
other goods produced regulates very largely the quantity of lime bought. 
In agriculture on the other hand, the price determines to a large degree 
the quantity bought and if prices go too high the farmer is forced to cur- 
tail purchases, 

2, Agricultural consumption of line since 1907 and its relation, 
to line nrices . 

The following Chart (Chart XVI ) shows in a very striking manner the 
fact that agricultural demand is highly responsive to price changes. The 

9836 



-139- 

large volume of consumption of line in agriculture between 1907 and 1916 
reveals the effects of low lime pricss. During the war and poet-war boom 
from 1916 to 1926 the rapid vise in lime m-ices was followed by a gradual 
decline in the consumption of agricultural line. The price increases which 
amounted in some years to over IOC per cent were reflected in a drastic 
decline in this tyoe of consumption from 1916 to 1921. 

The collapse of agriculture in the depression years, 1929 to 1933, 
left the farmer without money with which, to buy lime or other fertilizers. 
The decline in lime prices did not therefore produce the normal increase 
in consumption, and when recovery began,:.in ?.933 the sud-en increase in the 
price of agricultural lime tended to retard the normal expansion for the 
product and to stiffle the latent demand which resulted from lands unlimed 
during the depression years. 

3 . The demand for building and chemical lime relatively in- 
elastic . 

Chart XVI \a,lso shows how the industrial boom during the war and post- 
war era. of prosperity in the building and chemical industries brought about 
an enormous increase in consumption of these two types of lime. This" in- 
dustrial boom, with its high line prices, was probably responsible for the 
rapid expansion of many highly mechanized line plants involving large capi- 
tal investments. In spite of the decreased demand by agriculture, the con- 
tinued and increasing demand for industrial lime made lime production ap- 
pea.r to be extremely profitable in large plants. This probably resulted in 
the elimination of many small plants and finally in over-expanded line 
plants with capacities far in excess of the needs of the entire country. 

3. Does the Pricing Folic?/ "f the Industry Constitute Discrimination 
Against Consumers of Agricultural Limes 

The relatively high prices of agricultural lime compared with the 
prices of chemical lime may be due in part to the fact that industries 
using chemical lime are able to buy lime in large quantities and to insist 
on the lowest possible prices, whereas consumers of agricultural lime are 
in no position to secure price concessions. The grade and quality require- 
ments of consumers of chemical lime appear to be far more rigid than are 
the requirements of agriculture. 

In the early days of the industry the country was dotted with small 
lime producers who utilized relatively inexpensive lime kilns in the r>ro- 
duction of lime. Today the bulk of the lime is produced in highly mech- 
anized plants, using rotary and vertical kilns and other relatively ex- 
pensive appliances, which enable a single plant to turn out a larger vol- 
ume of lime in a single week than the smaller plants were able to produce 
in an entire year. These plants are in a position to produce special grades 
of lime which are suited to the needs of certain specific types of indus- 
try. Many special grades are probably more expensive to produce and should 
command very much higher prices, whereas agricultural lime may be, in a 
large measure, a by-product of some of the large lime plants. 



9836 



PRODUCTION 



140 

CHART X2T 

LIME INDUSTRY 

AND AVERAGE VALUE PER TON AT PLANT 



10 







AGRICULTURAL LIME 








„**""■""•» 


.^^^ 


1 
AVERAGE VALUE 








% * — 


"-l£"^ 

PRODUCTioFT 
1 






<n 

o 

I 25 



20 



BUILDING UME 



15 



10 











\ PRODUCTION 


N 

% 


*\ i 




/ 

i 

# 
• 


\ 
\ 
\ 
\ 
\ 
1 








% ^** * 




l 

\ 
\ 
\ 
\ 
\ 
\ 










/ERAQE VAL 


5e — s\ 

















25 



20 



15 



IO 



CHEMIC AL LIME 




1907 



1911 



1916 



1921 



1926 



1931 



»9e 



983P 



SOURCE.'- U. 3. BUREAU OF MINES 



NRA 

DIVISION- -OF REVIEW 
SPECIM- STODCtS 5€CTIBH 
N»229 



-141- 

1 . Indus trial consumers require a higher grade of lime. 

The small pot kilns did not produce lime sufficiently pure or uni- 
form in size and quality to meet the needs of consumers of chemical 
lime. Their product was, however, entirely satisfactory for agriculture, 
for it often contained as much or even more active calcium oxide per ton 
than is found in the relatively pure hydrated product of up-to-date 
plants. The leading' industries using lime in their processes of pro- 
duction usually require a specialized grade of chemical lime. Glass 
works require a grade of lime free from metallic impurities which tend 
to discolor the -lass. Metallurgy needs a lime containing specific 
chemical constituents and free from others. Paper mills also need a 
highly specialized grade of chemical lime which involves in its produc- 
tion more careful selection and grading of the limestone in the quarries 
and more careful treatment in the process of burning and shipping. 

2 . Agricultural lime prices are higher than the nrices of 
chemical lime . Chemical lime sold for special industrial uses is there- 
fore a higher grade and more expensive to produce than ordinary agri- 
cultural lime and the prices charged for it should therefore be mater- 
ially higher than those quoted to agriculturists. 

Perhaps the most obvious example of price discrimination 
against consumers of agricultural lime occurs in charging them higher 
prices for run of kiln lime, which, as the name indicates, is lime that 
receives no further treatment after it leaves the kilns, than is charged 
for chemical lump lime which must be screened in order to remove the 
fines produced during the burning. 

Tlie following quotations in effect November 10, 1933 and list- 
ed below show that the American farmer actually pays more for a cheaper 
grade of product than does the industrial buyer. 

Carload Prices 

P. 0. 3. Belief onte l/ 

Nov. 29, 1933 

Chemical Lime 

Lump' $7.00 

Ground 6.00 

Hydrate 8.50 

Agricultural Lime 

Run of Kiln S.00 
Hydrate 9.50 

3. "Jo dealer's discoun* to farmers . The agricultural inter- 
ests are also handicapped because they are not in a position to buy lime 

l/ Prom prices filed with the Code Author tiy - consumer differential 
included. 

9336 



- 142 - 

in large quantities and thus secure the dealers discount. Buyers of chem- 
ical lime usually "buy directly from the plant and are given the dealers dis- 
count of approximately $1.00 per ton. This alone represents an increase in 
the farmers price from 10 to 15 per cent of the quoted price. Furthermore, 
it is alleged and there appears to he reason to "believe, that some indus- 
trial users secure cut rates in the forms of special discounts on some ship- 
ments. This practice was contrary to the code provisions hut was probahly 
engaged in "by only a few of the members of the industry. 

4. Do higher marketing e:roenses on agricultural lime .justify higher 
prices to farmers? In defence of the relatively high prices of agricultural 
lime, producers claim that the expenses of marketing agricultural lime are 
higher than for "building or chemical lime. It is alleged that these extra ex- 
penses may run as high as $2.00 per ton. If this is true it is an indication 
of more or less effective price control by lime producers; for it is usually 
where prices are established at high levels that producers can afford to ex- 
pend such a large percentage of the selling price on marketing expenses. Oc- 
casionally some individual producer might expend $2.00 or even more -oer ton in 
expanding his market, thereby disposing of a part of his output at cost or at 
a loss, fhereas if all producers spend this amount in either developing new 
demand or in diverting customers from each other, it appears to be circumstan- 
tial evidence of the existence of price control. Furthermore, it seems highly 
probable that a -part , perhaps a large part of this marketing expense, is de- 
voted to the sale of hydrated lime, a product much less economical to the 
farmer than pulverized quicklime. 

Perhaps lime producers may profit from the recent experience of 
electric -power companies and other enterprises, which vrhen forced to reduce 
prices, discovered that their sales had increased to such an extent that their 
profits wore higher than ever. The potential capacity of agriculture as a mar- 
ket for lime is indicated by the fact that prior to the war, when plant net 
prices of agricultural lime ^ere less than four dollars per ton, farmers 
bought twice as much lim Q a.s they did in the era of prosperity and high lime 
prices after the war. If, instead of exoending on an average of two dollars 
per ton on marketing and one dollar per ton on dealer discounts and large sums 
on freight absorption, -prices could be materially reduced to the farmer, it is 
possible that farm consumption might be greatly increased. While there ore 
regions where pulverized limestone has largely displaced lime in agriculture, 
there appears to be ample room for incresed sales in regions beyond the reach 
of the limestone deposits and stone crushers. The average farmer operates at 
present on such a narrow margin of profit, that he is unable to buy lime for 
his fields unless the price is very reasonable. 

5. Trucking differential re-presents a discrimination against 
farmers . l.Iany farmers are also located near lime plants and are in a position 
to haul the lime to their farms on their own trucks. The truck differential 
places an especialljr heavy burden on this class of lime consumers. 

6. Farmers as a class are not organized and therefore cannot 
secure reductions by mass buying . With the exception of few cooperative far- 
mers organizations, the American farmers are not in a position to secure price 
concessions from the lime producers. Industrial users on the other hand, are 
able to play one lime producer against his rival and threaten to build their 
own lime plants, should the price quotations be too high. Some industries 
have already built plants to sup-ply their regularly recurring ne>eds and 
others are r^c&i- to do the same. This, perhaps, helps to explain why the 
highest grade of lime is sold at the lowest prices and the lowest grade 
(agricultural lime) is often sold at higher prices, 

9836 



-143- 

C . Hydra tec 1 lime as a _rae ans of increasing prices and its use 
i mder the basing point s ystem 

1 . Advanta ges and disadvantages of hydrated lime . 

Hydrate d lime, as the n-me indicates, is lime to which water has 
been added in sufficient quantity to change calcium oxide (ouicklime) 
to calcium hydroxide (hydrated lime) , the latter being a fine white 
powder. The process of manufacture, which is rel tively simple and re- 
quires no elaborate mechanical devices, is essentially as follows: 

(a) Crushing the quicklime if it is much larger than one inch 
in diameter. 

(b) Feeding the crushed lime into an hydrator, which mixes 
the lime with water* 

(c) Removing some impurities from the hydrate by means of 
shaking screens or air separators. (*) 

(d) Storage of the hydrate in bins or lor to bagging. 

Hydrated lime is said to enjoy certain advantages over ouicklime, 
the chief of which are: first, because of the oowdered form it can be 
handled more easily; second, because of its fineness it will keep better; 
third, it does not require slaking, thus saves time and labor on the job; 
and fourth, it may contain less impurities because of the opportunity 
for their removal during the screening or separating process. 

The chief disadvantage of the hydrated product is that it contains 
from 17 to 2 :: oer cent water, on which the consumer must pay freight. 
Notwithstanding this last objection, the production of hydrate increased 
from 140,135 tons in 1907 to 1,612,818 tons in 1328, while the number of 
plants producing hydrate increased from 33 in 1907 to 157 in 1928. 

If prices were based on the relative costs involve:", in the pro- 
duction of quicklime and hydrate, one would expect hydrated lime to be 
sold at a substantial reduction. However, examination orices quoted for 
both types seems to indicate that the hydrated lime, instead of being 
cheaper than quicklime, is frequently sold at higher prices. The reason 
why the hydrate might be profitably sold at a lower price is that the 
mining or quarrying cost plus the fuel cost, which account for the 
greater part of the total cost of production, are about 21 per cent less 
on hydrated lime, than on ouicklime. 7or example, in the production of 
100 tons of hydrate, mining or quarrying and fuel costs apply to only 
79 tons of the original ouicklime to which 21 tons of water are added to 
produce the 100 tons of hydrate. Moreover, the cost of hydrating the 
ouicklime is relatively inexpensive, probably cannot exceed $.50 per ton, 
end it is doubtful if this cost is much more than that of grinding or 
pulverizing quicklime. In addition, in the production of lump or pebble 



(*) Many of the smaller hydrating plants do not screen or separate the 
impurities from the hydrated product. 



9836 



-144- 

lime, many fines are produced which often cannot "be sold as quicklime 
and yet are amenable to hydration and this lime, that otherwise, might 
glut the market and have to he sold at any 'orice, can he profitably 
hydrated. 

2. Excessive prices of hydrated l ine. With the exception of 
relatively few instances, a price comparison "between quicklime and the 
hydrate is of questionable accuracy due to the fact that the two types 
of lime are seldom sold in the same kind and size of containers "by the 
same producer* Quicklime is custouerily sold in hulk and in 180 .and 280 
pound barrels, and when ground it is usually sold in 80 -oound paper bags. 
Hydrated lime is marketed, in 50, 40,10 and 5 pound bags, and occasionally 
in bulk. 

The price list of the Herzog Lime and Stone Company, effective 
May 10, 1954 quotes industrial ground ouicklime and industrial hydrate 
prices, both in bulk. Table 33 which has been prepared from this price 
list shows the prices of the two types of lime, and, in addition the 
computed price at which the hydrate might be sold if its prices were 
based on the calcium oxide content. Obviously, the economies involved 
in the production of hydrated lime enumerated above have not been passed 
on to consumers. 

a. The Chemical Industry . 

Because lime is the cheapest known acid neutralizing agent avail- 
able in large quantities, it is used extensively in the chemical industry. 
The majority of consumers of chemical lime are primarily interested in 
its basic property, which depends on the available calcium oxide. It 
is then not surprising to find that of the total lime consumed in this 
industry only 22 per cent was the hydrated product. This percentage 
would probably be considerably lower if it were not for the fact that 
heat liberated during the hydration process is sometimes detrimental in 
several reactions where chemical lime is used. 

b. Agriculture . 

The value of lime as a fertilizer depends also le rgely on the amount 
of available calcium oxide. On a ton for ton basis, it would seem far 
more economical for the farmer to use quicklime. This is because the 
purchase price to the farmer for 10 tons of hydrated lime, which contains 
only 7.9 tons of calcium oxide is much more than he would have to pay 
for the same amount of calcium oxide in the form of quicklime. Further- 
more, the reduced cost of hauling 7.9 tons of quicklime from the railroad 
station to his farm plus the reduced cost of applying it to his land re- 
presnets a considerable saving, estimated at about 20 per cent of the 
identical costs in hauling and applying the 10 tons of hydrated product 
to his field. Prom the best, information available it appears that the 
effects on the soil are the same whether he spreads 10 tons of hydrate 
or 7.9 tons of quicklime to the same field. 

Notwithstanding the obvious advantages of quicklime for agricultural 
purposes, approximately 80 per cent of the lime sold to farmers in 1934 
was the hydrated product. In. 1910 with the average plant value of lime 

9836 



-145- 



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-146- 

at less than $3.00 per ton, E. 0. Flippin in his article on the "Relation 
of Lime to Soil Improvenents, " Cornell University Agricultural Experiment 
Station Bulletin said, "....at the present prices, and taking into 
account the freight and hauling, quicklime will he found to he more 
economical." In view of the increased prices and freight rates since 
that tine, it would seem that the above facts warrant the conclusion 
that the farmers have been induced to buy hydrpted lime because of the 
propaganda of the Lima Association and the selling efforts of line 
salesmen. The increased cost of hydrate over quicklime in 1910 when the 
average r>rice was less than $4.00 per ton, was $.82, in 1954, when the 
average price was $7.50 per ton, the increased cost to the farmer in 
buying the hydrated was $1.58 ner ton. 

This represents the increased cash outlays without counting the 
other extra costs enumerated above. In its copyrighted booklet entitled 
"Lime in Agriculture" the national Lime Association st-tes "lump lime" 
must be slacked before being applied to the soil. It would seem, however, 
to be far more economical if the American farmer would use ground or 
pulverized quicklime wnicn can be applied to the soil with the same 
mechanical devices employed for the application of hydrated lime. 

c . The Building I n dustry 

The advantages of hydrated lime seem at first blush to be far 
greater in the building industry than in agriculture or in the uses of 
chemical lime. The chief disadvantage of ruicklime in the building 
industry is the fact that it must be properly slacked before it can be 
mixed with sand to produce lime put'ty. The prober slacking of quicklime 
involves considerable stirring, and after it has been thoroughly hydrated 
it must stand for two or three days before it is ready for use. In 
building operations where speed is essential, hydrated lime may at times 
be more convenient and may perhaps even aopear to be more economical 
where very high priced labor is used, but with the advent of pulverized 
quicklime, a comparatively recent innovation, even this alleged economy 
of hydrate over quicklime seems to be questionable. 

Pulverized quicklime is more easily slacked and does not require 
the services of skilled plasterers or masons to do the slacking. In some 
building operations it was customary to have the slacking of lump quick- 
lime done by inexperienced common labor and as a result some of the lime 
was improperly hydrated and other parts were overburned during the 
slacking process. This resulted in decreasing the amount of mortar that 
could be made from the •same quantity of lime and often produced what is 
known as "popping" and "pitting" in plastered walls. These were caused 
by small particles of improperly hydrated lime mixed in the plaster 
which upon absorbing moisture would expand and explode or push out little 
patches of the plaster from the finished wall. 

It was probably for the reason that <iuicklirae was often improperly 
slacked that the United States Government specified in its building con- 
tracts that lump quicklime shall not be used on government buildings. 
The production of pulverized ouicklime has changed the relative ad- 
vantages of hydrate over ouicklime, for many government specifications 
now contain the clause that "either pulverized ouicklime or hydrate shall 

9836 



-147- 



"be used. " 

In spite of effective sales campaigns to push the use of 
hydrate, the monthly reports to the code authorities show that 
43 per cent of all the "building lime sold "by producers consisted of 
quicklime. 

The "building industry in Europe uses very little hydrated 
lime, partly "because the cost of materials represents a much larger 
per cent of the cost of construction there than in the United States, 
partly also "because the wages of construction workers have never 
reached the high levels prevailing in this country. Economies in the 
use of "building materials are therefore of far greater importance 
over there than in this country. 

Failure to use hydrate in Zurpoe is not due to economic 

backwardness or failure to appreciate new products, "but is mainly 

due to the very real economies in costs resulting from the use of 
quicklime. 

3. The effect s of excessive hy drated lirne price s on the 
consuming industries . 

While the above table represents the quotation of but 
one company, it is inserted in the report because it represents 
fairly well the status of hydrated dime prices "quoted by most of 
the companies producing this product. (See Table 35) 

In view of the high prices and the greatly reduced lirne 
content of hydrated lirne, one would expect this product to be used 
only in those industries in which it was economically superior to 
quicklime. Such, however, is not' the case for it is used in vary- 
ing degrees by each of the three groups of lime consumers. It is 
interesting to note the degree of purchasing efficiency displayed by 
the three groups roughly reflected by relative amounts of hydrated 
lime consumed by each. The per cent of the total lirne consumption 
represented by hydrate increases from 22 per cent in the chemical 
industry to 57 per cent in the building industry and finally mounts 
to SO per cent in agriculture. These percentages are based on the 
reports made by all the lime producers reporting to the code authority 
for the period October 1933 to March 1934. 

4. The relation of hydrated lime to the basing point system . 

The lime industry is not- to be blamed for pushing the sale 
of those kinds of lime on which it secures the greatest v>rofits. 
Every business attempts tc do that and as long as the public accepts 
the sales talk at its full value, sales of such procudts tend to in - 
crease. But hydrated lirne appears to play a rather important role 
in the operation of the basing point systems. 



9836 



-148- 



Thc Ohio 5A producers of finishing hydrate have established 
v/hat appears to be a partial monopoly on this grade of lime, and 
to bolster up the partial monopoly they have established but one 
basing point for the entire country and prices everywhere are at 
the C-ibsonburg base price plus freight to the point of delivery. 
Other producers of hydrated lime also use trade names and trade- 
marks on their bags or other containers and it becomes easier for 
salesmen to push specific brands than to stress the alleged superi- 
ority of lime sold in bulk. In this way the larger concerns acquire 
a sales momentum which enables them to invade distant markets and 
unload their surplus without cutting the local basing point prices. 
It is probably that the selling of hydrate and other lime products 
in containers has tended to strengthen the power of the larger 
companies over the markets of the country. Since the competition 
inprice, which once existed in the industry, has disappeared, it 
has been displaced by sales competition which has resulted in 
greatly extending the geographical area into which the large pro- 
ducers can ship their branded goods. 

II. FH3IGHT-HA.IL A1TL THUCZ - AS A MEMS OF IHCH3AJ5IHG D3LIV3H3D 
LIKE PHIC3S 

A. The effect on consumers of the all-rail freight element 
in deliver ed prices.^ 

An essential clement of the basing point system in the lime 
industry is the requirement that, with few exceptions, all deliver- 
ed prices shall include the cost of all-rail shipment from basing 
point to destination. The amended lime code, article VIII, sec- 
tion 5(d) provides that: 

"The delivered price terms of each such Industry 
Product for rail deliver;/ within such low rate 
area and to designate destination or areas beyond 
such low- rate area shall be the sum of the price 
or prices filed f.o.b. basing point plus the rail 
freight-rate from basing points to destination." 

While the code also provides in article VIII, section 3(e): 

"Price terms shall also be filed for any ship- 
ments from manufacturing plants by truck or 
water, and/or any "mill pickups" such price terms 
to specify (l) the area in which track or water 
shipments will be made; (2) the trucking or water 
transportation charge or rate; and (3) the mini- 
mum quantity to be shipped by truck of water." 

The district committees have generally deprived the consumer 
of the advantages of truck, or water shipments by imposing arbi- 
trary differentials which make such deliveries cost as much or 
more than all- rail shipments. 



9836 



-149- 



This means that if cheaper forms of transportation are 
used the "buyer pays the all-rail price regardless of what the 
actual transportation costs. This results in many cases in 
larger plant-net returns to the industry, and incidentally - 
out perhaps most important of all - is the effect on prices, 
since it prevents the possibility of having prices which were 
not identical at any destination. 

1. All increases in lime freight rates are shifted 
to the consumer . 

In industries in which active price competition pre- 
vails, increases in freight rates, cost of fuel or taxes must 
frequently he absorbed in part by the producer or shipper. This 
is especially true in the manufacture of goods for which there 
is an elastic demand. If a moderate increase in price drives 
many consumers out of the market or induces them to use alterna- 
tive goods, the freight increase would he largely absorbed by the 
producer, since a sharp decline in consumption would tend to in- 
crease the producer's unit costs and reduce his net profits more 
than the amount of possible freight absorption. 

Under the basing -ooint. system all freight increases 
will be saddled directly on the consumer for every lime price 
quoted by a limo producer is a delivered price and is composed 
of two elements, the basing point plant price plus freight from 
the basing point to the consumer. 3very increase in freight 
rates is, therefore, reflected in higher prices because every 
price will be increased by the exact amount of the freight in- 
crease. 

Higher freight rates do increase somewhat the burden 
of the lime producer's because the cost of freight absorption 
is increased by the amount of the increased freight rate. Higher 
freight rates also tend to decrease the size of the area within 
which it is profitable to ship lime and absorb freight. 

2. Phantom freight paid by the cor-sumer. 

The freight absorption by the producer does not tend in 
any way to reduce the freight burden on the lime consumer. On 
the contrary, the consumer's burden is greatly increased by the 
higher charges for phantom freight, for a some of the freight 
from basing point to destination is undoubtedly phantom freight. 
If a producer is located near the consumer, so that the actual 
freight paid is negligible, the consumer may be charged -ohantom 
from the nearest basing point many miles away. 

The actual freight receipts of the Class 1 railroads 
from lime shipments do, not, therefore, express the total freight 
charges imposed on the consumer for in addition to the actual freight 
charges there is frequently fictitious freight charges which are add- 
ed to the profits of the producers without contributing to the freight 
revenue of the railroad. 

9836 



-150- 

3. Reduced fre ight burdens on the consumer if the 

bajfing^ point practices are abandoned. Without the basing 
point system each plant would be its own 'basing point and small plants 
located near consuming areas would be cble to quote lower prices because 
the freight from the plant to the consumer is low. Furthermore, there 
would be less danger of raids by large producers into their natural 
marketing areas because of the lower consumer prices. If all consumers 
had the same freight from the basing point to destination in a certain 
region, the abolition of the basing point practice would not produce 
any material change in prices quoted to consumers. But if the basing 
point is located 100 miles farther away from the consumer than the 
nearby plants, the price increase saddled on the consumer would equal 
the freight on ICO miles which in some instances amounts to over $2.00 
per ton. Without the basing point system, producers would often find it 
to their advantage to lower prices in order to dispose of surplus output 
and in so doing they usually increase the number of consumers as well as 
the volume of goods sold. With the basing point system price cutting is 
eliminated unless the producer is ready to accept the lower prices for 
all goods marketed in the home area as well as at a distance. 

If the basing point system is eliminated, the freight rate becomes 
a much less important element in the price structure for a large part of 
the cross freights would tend to disappear. This feature is further con 
sidered in Chapter III. 

B. Arbitrary c harge s for truck and L.C.L. shipments 

1. The o rigi n of the truck differential in the Lime Jndustry;. 
The practice of placing a surcharge on truck shipments is apparently an 
attempt to imitate the policy of the cement industry which found it im- 
possible to maintain uniform delivered prices because of the unequal 
costs of truck and railway transportation. 

prior to the World War, shipments of cement by truck represented a 
very small percentage of the total volume. However, with the shortage 
of railroad cars during this period, several cement companies turned to 
trucking their product on short hauls. With the vastly improved high- 
ways and high truck efficiency, it was possible to affect a considerable 
saving by using truck transportation instead of rails for making deliver- 
ies. This tended to place dealers supplied by mills located at a con- 
siderable distance from their plants md. dependent on rail shipments at 
a natural price disadvantage. Consequently, pressure was soon brought 
to bear on those producers delivering by trucks. In order to preserve 
the formula uniform delivered price system it oecame necessary to abolish 
the trucking of cement altogether or by penalizing this method of trans- 
portation an amount sufficient to eliminate a part or all of its natural 
advantages. This was accomplished by placing a surcharge of $.15 per 
barrel on all truck deliveries where it was found that they interfered 
with the formula delivered price. 

So successful was this method in eliminating price competition in 
the cement industry that it was only natural that other industries adopt- 
ing the basing point system would employ a similar device for the main- 
tenance of uniform delivered prices. 

9836 



-151- 

Further investigation will "be necessary to determine when the 
system of placing a surcharge on truck shipments was inaugurated in 
the lime industry. However, as late as the year 1928 no reference was 
made to truck differentials in the price lists submitted to the Federal 
Trade Commission, nor wan there any reference to truck differential in 
the first price lists filed with the Control Committees in come districts 
Copies of these price lists are found, in the confidential files. 

2. Truck differentials vary in the different lime districts. 

Whereas the differential or. truck shipments of cement was almost uni- 
form at $.15 cents per barrel, that on lime products, under the code, 
presents wide variation among the various districts, and even in differ- 
ent localities in the same district. In Tahle 1, Exhibit F, which shows 
conditions and terms ox sale by districts, so great is the variation in 
this type of penalty that it seems difficult to justify these added 
costs which are pe.ss.ed on to the customer. For example, in Massachusetts 
at the first filing of prices after the Code was a proved, the truck 
differential on bagged goods was $2.60 per ton. This represented al- 
most 29 per cent of the basing price at Farnams on chemical hydrate. 

A further illustration of the penalties placed upon truck trans- 
portation is presented in the following price list ho. 18 of Districts 
2 and 3, datsd.April 24, 1934, which reads as. follows: 

"When delivery is made by pur trucks or hired 
trucks the delivery price will not be less than 
the well established price for comparable grades 
f.o.b., cars at "casing point covering the destina- 
tion involved, plus basing point rail freight." 

"The above regulations would apply to either 
dealers or consumers when delivery is made by 
their own trucks or by means of hired trucks. 
Our previously published discounts and terms of 
sale and consumers' differentials would also apply," 

3 . A bsolute p ro hibi tion of _t ruc k and L.C.L. shipm ents. 

In District 13, which includes the state of Texas, no truck ship- 
ments were permitted at all. In still other basing point areas a differ- 
ential is made on some points and not on others. Arbitrary surcharges 
are imposed in many lime districts on L.C.L. shipments, and it appears 
to be doubtful whether such charges bear any proper relation to the 
additional costs involved in filling such orders. Here, also, the 
amount of such surchages varies greatly in different sections of the 
country. . The District Committees in ea.ch lime district appear to have 
assumed the power to regulate truck and L.C.L. shipments. 

4 . Federal Trade Commission evidence that truck differentials 
and L.C.L. shipments are of recent origin an d were in- 
creased under the Code. A comparison of price— lists sub- 
mitted to the Federal Trade Commission in 1929 with the filed prices 

of the same identical firms on Hay 1, 1935 reveals what changes have 
been made in the price policies during the intervening period. Most 
of these changes may be traced largely to the time when the lime code 
was in process of formulation and adoption* The changes in the attitude 
9836 



-152- 



of lime producers toward truck and L. C. L. shipments is clearly shown 
in the parallel price lists submitted to the Commission. The 1928 
lists of a p ennsylvania company specifies no additional charges for 
truck shipment, whereas in 1S35 a surcharge of $.75 per ton is added 
to tiie regular prices by this company. In 1928 the extra charge on 
.L.C.L. shipments was $.50 per ton while in 1935 it was quoted at *1.00 
per ton, or an increase of ion per cent. 

Producers in "i.'e stern Massachusetts at the first filing of price 
lists with their control committee placed no additional surcharge on 
L.C.L. shipments. However, the producers in District 13, which com- 
prises the state of Texas, quote as follows: 

"Truck oick-ups at plant of manufacture or truck 
shipments by manufacturers are not permitted. No 
L->'.'-,L. shipments from plants will be permitted to 
points within District No. 13." 

Variations in tne two types of differentials described above are 
a further indication that the oasing point system as practiced onder 
the Code was a recent innovation. Had this system Deen in ooeration 
over a long period of time, tne variations on track and L.C.L. ship- 
ments would have become more uniform throughout the country, and the 
determination of the conditions of sale would not nave be^n left to 
the District Committees as they appear to have been. 

C» Effec t of truck differentials on consumers and small producers . 

It has been mentioned elsewhere in this report that there is not suffi- 
cient evidence as to the exact date when the practice of niacins a sur- 
charge on truck shipments was inaugurated by the lime industry. However, 
the available evidence points to the fact that it was not used widely, 
if at all, prior co the code. 

In order to arrive at ^ ao proximate figure of the amount that 
the truck differentials cost t e limp consumers o^ the country in 1934, 
an average t aofe i .fferential of $1,00 per ton was taken to be repre- 
sentative of the average extra charges in all line districts. 

Exhibit F. compiled from price lists filed with the District Com- 
mittees of all the lime districts defined oy the code authority con- 
tains the more important terms and conditions of sales in the entire 
lime industry. This snows a wide vriety in the amount of the truck 
diff erential c The extra charges levied on consumers for using trucks 
for transporting lime vary from nothing in a few districts to $2.60 per 
ton in others. 

It appears, therefore, tnat an average differential of $1.00 per 
ton for the country as a whole is a very conservative estimate. 

Table 37, on tne tonnages of truck, rail ana water shipments, com- 
piled from figures submitted by 47 olants replying to tne N.R.A. 
questionnaire, snows that truck shipments from these olants amounted 
to approximately 85,000 tons out of a total of 666,594 tons shipped 
by all methods daring 1934. 

9836 



-153- 

Usin L : the same proportion of truck to rail shipments for all 
companies reporting to the United States Bureau of Mines, and apply- 
ing a differential of $1.00 per ton, the computed penalty on consumers 
amounts to over $300,000 per year. This is the price paid by consumers 
to buttress the basing point system for the lime industry. A comparison 
of size for the 58 plants in the National Recovery Administration re- 
turns, with the total plants reporting to the Bureau of Minos, shows 
that the companies replying to the NRA questionnaire are preponderantly 
the larger plants, whose percentage of truck to total shipments was 
considerably smaller than ' that for the industry as a whole. Therefore, 
the figure of $300,000 for the year 1934 as a measiare of the increased 
cost to consumers, appears to be a conservative estimate. 

From 1930 to 1934 truck shipments of lime increased for all classes 
of producers, except those reporting 133 shipments of less than 5,000 
tons. Even hero the- decline was slight. During both years the small 
producers relied far more on truck transportation than did the large 
producers. Table 55 gives the percentage for the several groups of 
producers classed according to the size of shipments in 1930. Statis- 
tics on shipments outside the home area according to size of plant may 
be found in Chapter I, However, it is relevant to again mention here 
the fact that, generally speaking, it is enly the large procurers that 
engage in shipping great distances, and the small producers, for the 
most part, confine their sales to the immediate areas which may often 
be more economically served by truck transportation. The small pro- 
ducers are not usually in a position to pay salaries and expenses of 
salesmen on the road to push their sales in ; distant markets. Any re- 
strictions or penalties on 32 per cent of the sales of plants which 
produced less than 5,000 tons in 1930 must in the long run result in 
decreased sales by this group of lime producers. Since agricultural 
consumption represents a large proportion of the sales of the small 
producer, any restrictions on the sale of agricultural lime will tend 
to retard materially the sales of small producers. Lime producers claim 
that truck differentials are justified by the increased cost of handling 
lime shipped by truck. 

Their explanation for it is somewhat as follows! 

(a) Interrupting men engaged in other duties. A 
large plant will have on the average a certain 
number of railroad cars to fill, and the plant 
routine is governed accordingly. 

(b) Truckers arrive at almost any hour of the day 
or night. 

(c) The railroad facilities for loading are superior. 

(d) Truck shipments necessitate making out more 
invoices, and thus the bookkeeping costs are 
increased. 

Other producers object to the differential and one interviewed on 
the field trip asserted that he coiild not honestly make this additional 
charge, and therefore, refused to do so. His reasons for maintaining 

9836 



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-155- 
that it was an unjust "burden were as follows: 

(a) Trucks arrive prepared to receive the lime, whereas 
it is first necessary to remove nails from the cars 
that would tear the bagged lime in transit. It is 
also necessary to clean and line the cars. 

(b) There are no switching charges from the plant to 
the yards, which in many cases the lime producer 
must absorb. 

(c) Truckers may assist in loading the cars, and thus 
save the time of a loader. 

The real reason why lime manufacturers desired to eliminate or at 
least control motor truck transportation was because it interferred with 
the smooth operation of tlie basing point principle and prevented the 
quotation of uniform and identical delivered prices. 

The Federal Trade Commission report to the Senate on the cement 
industry traced in considerable detail the evolution of the truck differ- 
ential in cement wnicn resulted in a uniform charge of $.15 per barrel. 
It traced the conferences with trunk line railroads and the agreements 
finally entered into by cement manufacturers which in the end estab- 
lished the uniform charge on all truck: ..deliveries. This charge was 
due, in part, to the activities of Builders' Supply Associations who 
wished to prevent large contractors from buying cement directly from 
the plant instead of paying the dealers differential. It was early 
recognized that the failure to insure the surcharge of $.15 per barrel 
by all cement companies, endangered the effective control of the price 
of cement and created what manufacturers referred to as the "trucking 
evil". This "trucking evil" really meant that some cement buyers would 
be enabled to buy some of their supplies at prices a little lower than 
the f.o.b. basing point delivered prices. 

The lime manufacturers, tnerefore, took over the practices evolved 
by the cement industry and proceeded by means of the codes to establish 
arbitrary trucking differentials in most of the lime districts of the 
country. 

Attempts on the part of the producers througout the country to 
descriminate against the truck transportation seems to be a backward 
step, since it is a well known fact that transportation by truck is 
more economical on distances up to 100 miles. Furthermore, since rail- 
toads often have to follow circuitous paths to reach a particular destin- 
ation, these efforts on the part of producers to eliminate truck trans- 
portation will cause the Industry to revert to a less economical method 
of shipment and the cmsumer will foot the bill, not only for the truck 
shipments but also for the excessive rail freight made effective through 
the truck differential. 

III. DISCRIMINATION IK THE PRICE STRUCTURE 

Instances of price discrimination may be fonnd in almost every 
industry and trade, however, the amount of d is crimination involved, in 

9836 



-156- 



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9S36 



-157- 

many instances is practically negligible. Price discrimination is 
practiced to a certain degree whenever there is an absorption of service 
or transportation costs. The small grocer may be said to engage in dis- 
criminatory practices when he charges the same- price for sales made over 
the counter as -n those delivered to the customer's dcor-step. further- 
more, the United States Government may be said to be guilty of the prac- 
tice when its Post Office Department collects a letter in Washington and 
delivers it in California for the same amount of postage as for delivery 
in nearby Virginia. The question of price discrimination then obviously 
resolves itself into one of degree ana purpose, with all the factors 
including value of the product, selling price and the amount of service 
and transportation costs absorbed, properly weighted. 

A different situation obtains when a producer sells at a lower 
price in his competitor's territory than in his own, for in addition to 
the absorption of freight required to place his product there, he incurs 
heavy selling expenses in sending salesmen into distant markets. This 
questionable practice of apparently charging the homo consumers "all 
the traffic will bear" and dumping surplus production on other markets 
at whatever it would bring had grown up in the lime industry prior to 
the code.. Under the basing point system as practiced by the industry 
under the, lime code,, each producer knov/ing erectly the market price 
outside of his home area and the exact amount of freight thereto, the 
practice of dumping at .almost any price was eliminated because he was 
required to respect the base prices outside his low rate area. However, 
the practice of quoting high prices in the home aroa continued but dump- 
ing was restricted to meeting the prices in 'effect at distant basing 
points. The dumping that is resorted to under the basing point system 
is not the kind that benefits any group, of consumers, for the prices 
charged are always the base prices on file with the district control 
committees, or the lawcst base price plus freight from a more distant 
basing point. The consumer suffers through the relatively high prices 



charged in the low ra.te area 
prices from other producers w' 
lime. 



without being able to. secure any lower 

ho may be engaged in dumping their surplus 



Under the normal competitive conditions, distant buyers of a com- 
modity on which the freight rate represents an "ppreciable element of 
cost would expect to pay a higher price than other buyers located nearer 
to the point of production. The price which a buyer pays for an auto- 
mobile manufactured in Detroit is a combination of the f.o.b. Detroit 
price plus the freight from that point to destination. This method of 
computing delivered prices on lime products is found in relatively few 
instances. 

A. T he Gibsonburg plus system of quoting Ohio fin is hing lime. 
Becaii.se many buyers believe that finishing hydrate produced in the 
northern part of Ohio is superior to that produced in other sbctions 
of the country they are willing to ;oay a premium for the Ohio Hydrate. 
Buyers of this lime pay the prices quoted at Gibsonburg, plus freight 
to destination. In other words, these northern Ohio producers have 
but one basing point for the finishing hydrate, from which freight 
is added to compute the delivered price throughoiit the country. In 
the first filing of prices by producers in District 1, those quoting- 
prices on finishing hydrate also used the Ohio ba„sing point. In 
computing the delivered price to buyers in District 1, 
9836 



-158- 

Tablc 36 

HEW EI'GLAED LIME COHPAEY, ADAMS, MASS. 
(As of October 23, 1933) 



JTotes: 
Cash Discounts - 
Bag Goods 25^ ton 



Bull: 



25(* 



G - Plus rate from Genoa, Ohio 
M - Hill Base 



1_/ Underscoring by F 



A. 



h.Y. 

State 

East of 

77 th 

Meridian 

Maine, 

N.H., 

Vt., 

Mass. , 

a. I., 

Conn. 



Finish Quicklime 

Masons Quicklime 

Finish Quicklime 

Masons Quicklime 

Chemical Quicklime 
n ii 

Finish Quicklime 
Masons Quicklime 
Masons Hydrate 
Agricultural Ii" r d.) 

) 
Finish Hydrate l/ 

Hydrated Lime 
ii ii 

n ii 

Chemical Lump Lime Bulk 
Chem. Pulverized Lime 80# 
Chem. Hydrated Lime 50# 
Spray Lime 50# 



180# barrels 

1G0# 

280# 

280=* 

180# 

280# 

G0# p"or. bs 5s 

80# * » 

50# " 



DUf 

50# 



6Qtt 

10# 
5# 



1.95 F 
1.65 F 
2.75 F 
2.25 F 
1.55 F 
2.25 F 
15.00 F 
13.00 F 
8.50 F 

8.50 ;.: 
9.00 G 



7.50 F 
10.00 F 

9.00 F 
10.25 F 



Manhattan 

3ronx 
Brooklyn 
Queens 
Hi chmond 
& West- 
chester 



i a s sa\i 
County 



Counties, Long 
17. Y. Island 



Suffolk 
Countir 
Long 
I sland 



2.20 D 
1.90 D 
5.15 D 
2.65 D 



17.60 D 
15.50 D 
11.10 D 

11.10 D 
9.00 G 



2.35 D 

2.05 D 
3.25 D 

',,53) 



18.35 D 
15.55 D 
11. G5 D 

11.85.D 
9. CO G 



7.50 F 
10.00 F 

9.00 F 
10.25 F 



7.50 F 
10.00 F 

9.00 F 
10.25 F 



2.40 D 
2.10 D 
3.35 D 
2.85 D 



19.10 D 
17.10 D 
12.60 D 

12.60 D 
9.00 G 



11.00 


G 


11.00 G 


11.00 G 


11.00 


Cr 


16.50 


G 


16.50 G 


15.50 C- 


16 . 50 


G 


20.00 


G 


20.00 G 


20.00 G 


20.00 


G 



7.50 F 
10.00 F 

9.00 F 
10.25 F 



Waste Lime sludge loaded in bulk by purchaser $1.00 per ton Ii. 

In Manhattan, Bronx, Kings, Queens, Richmond, llassau and Westchester 
Counties, IT. Y. , discount will be allowed for payment on 10th of month following 
date of invoice. 

Kote 1: Price on lime other than Agricultural, picked up at the plant by trucks 
not owned or employed by the Hew England Lime Company, will be $2.60 per ton 
on bagged goods, $.25 per barrel on small barrels, or $.40 per barrel on large 
barrels over the mill base price, 

Note 2; Price raa^ be equalized with other rew England producing woints lowest 
combination of mill base price plus freight rote to govern delivered price. 



Cash Discounts ~ 

180# bbls. 5<i bbl 
280# " 10J* " 



F - Plus rate from Farnams, Mass. 



9836 



-159- 

Table 37 

UNITED STATES GYPSUM CO. 
(As of October 23, 1933) 

Jobber's Discount 10 ! ^; this applies to lime jobbers, lime manu- 
facturers, and Gypsum manufacturers 



I T . Y. State 
East of 77th 
Meridian 
Maine, I 7 . P., 
Vt. , Mass. , 
R. I . , Conn. 



Manhattan 

Broru: 

Brooklyn 

Queens 

Richmond 

ci 'Test- Nassau 

Chester County 

Counties Long 

". Y. Island 



Suffolk 
County 
Long 
I si and 



Finish Quicklime 

Masons Quicklime 

Fi ni sh Qui ckl ime 

Iiasons Quicklime 

Chemical Quicklime 
ii ii 

Finish Quicklime 

Masons 'Quicklime 

Ma sons Hydrate 

Agricultural Hydrate) 

Note 2 ) 

Finish Hydrate if 

Hydrated Lime 
n ii 

ii ii 

Spray Lime 
Chemical Lump Lime 
Chemical Pulverised Lime 
Chem. Hydrated Lime 



180# 

180# 

280# 

280# 

1E0# 

28Q# 

80# 

80-;? 

50# 



bbls. 

ii 

ii 
n 
ii 
n 



50# » 
50# " 
25# » 
10# " 



50# » 
Bulk 
80# " 

50# " 



bags 
it 

ii 



See Mote 1 

. 1.95 F 

1.65 F 

2.75 F 

2.25 F 

1.C0 F 

2.80 F 

15.00 F 

13.00 F 

3.50 F 

3.50 F 

9.00 G 



10.25 F 
7.50 F 

10.00 F 
9.00 F' 



2.20 Bel. 
1.90 Del. 
3.15 Del. 
2.65 Del. 



2.35 Del. 
2.05 Del. 
3.25 D e l. 
2.75 Del. 



17.60 Del. 13.35 Del. 
15.50 Del. 15.35 Del. 
11.10 Del. 11.35 Del. 



11.10 Del. 11.35 Del. 
C '.0C G 9.00 G 



10.25 F 
7.50 F 

10.00 F 
9.00 F 



lo.; 



F 



7.50 F 

10.00 F 

9.00 F 



2.40 De 
2.10 De 
3.35 De 
2.85 De 



19.10 De 
17.10 De 
12.60 De 

12.60 De 
9.00 G 



11.00 c- 


11.00 G 


11.00 G 


11.00 G 


15.50 G 


16.50 G . 


16.50 G 


: 16.50 G 


20.00 G 


20.00 G 


20.00 G 


20.00 G 



10.25 F 
7.50 F 

10.00 F 
9.00'F 



Exception to Te rms: In Manhattan, Bronx, Kings, Queens, Richmond, Passau and 
TJestchester Counties, N. Y. Discount will be allowed for payment on 10th of 
month following date of invoice. 



Uote I . Price on pick-ups at plant will 

be $2.60 ton on Bag Goods; $.25 on small 

barrels and $.40 on large barrels over 

mill Base price e;;cept in State of Ver- 
mont where price will be $1.00 ton on 

Bag Goods: $.10 on small barrels and $.15 

on 1e rge barrels over Mill Base price. 

Extra, for pick-up does not apply on Agri- 

cul tural Hydrat e . 

Cash Discount , Except Hydra ted 
Finishing Lime • 

ISO-- bbls. 5$ bbl. 
280# ■ 10 $5 " 
Bag Goods 25<p per ton 
Bulk 25^ " " " 

Hydrated Finishing Lime terms - 

9835 2\i> cash in 10 days - net 30 da-s. 



Mote 2 . Price may be equalized 



with other New England producing 
plaints lowest combination of 
Mill Base - ' price plus freight to 
govern delivered -orice. 

F - Plus Hate from Farnams, Mass. 
G - Plus Hate from Genoa, Ohio l/ 



l] Underscoring 
by ITHA 



- 160 - 

the price was nade up of the Ohio base price plus freight from that point. Con- 
sumers would pay freight from Ohio even though the lime was shipped from the 
western part of Massachusetts. 

The pricing methods applicable to finishing hydrate tear a striking re- 
semblance to the old "Pittsburgh Plus" pricing methods of the steel industry, 
which was declared illegal by the Federal Trade Commission. 

The following price lists show the use of the one basing point for 
finishing dydrate. 

3. price quotations on Ohio finishing hydrate -prices quoted on 
other lime -products . 

These very same Ohio finishing hydrate -producers when selling the more 
common grades of lime depart widely from the single basing point system just 
described, and absorb large amounts of freight in shipping into distant markets. 
For example: the Herzog Lime and Stone Company, located at Forrest, Ohio, us- 
ing Gibsohburg as the home basing -point, quotes finishing hydrate in 50 pound, 
bags at $10.50 per ton, f .o.b. Gibsohburg. The prices quoted at other basing 
points (See Table 41) are higher than the Gibsoncurg price. At Anneville, 
Pennsylvania the price is -$16.35 per ton. Presumably, the difference between 
these two basing point prices, which amounts to $5.85 per ton 1_/ , is repre- 
sented by the freight from Gibsohburg to Anneville. The Hersog base price at 
Gibsoriburg on agricultural hydrate was quoted at $8.50 per ton. Assuming the 
freight rates to be the same on agricultural and. finishing lime, one might ex- 
pect the Anneville price on the agricultural lime to be $8.50 (the G-ibsonburg 
base price) plus $5.85 (the freight from G-ibsonburg to Anneville) or $14.35 
per ton. That, however, is not the case for the Anneville price quoted on 
the agricultural lime is exactly the seme as the Gibsonburg or home ba.se price. 
If the amount of freight which the Herzog company must absorb to compete with 
producers located, at Anneville is deducted from the quoted price at that point, 
the mill-net per ton, if not a sale below cost, indicates that huge profits are 
made on sales at the home basing point at the expanse of the local consumers. 

Perhaps the most conspicuous examples of discriminatory practices are 
found in the filed prices 'of the 1-Torthem Lime and Stone Company, located a.t 
Petosky, Michigan (See Table 38). Effective December 4, 1933 this company 
quoted a price on chemical lump lime, f.o.b. Petosky, at $7.50 per ton, and at 
the same time quoted a price on the same type of lime at both Marble Cliff, 
Ohio and Mitchell, Indiana of $5.00 per ton. TTere the company to absorb rail- 
freight to the last two named basing points, the price would have been at least 
50 per cent of the home basing price. Another example is that of the Universal 
Gypsum Company with plants at Lime City, Texas; York, Pennsylvania; and Orando, 
Virginia, which quoted lump quicklime, in bulk at Dallas, Texas $8.50 per ton, 
at El Paso, Texas $7.50 per ton, $7.00 per ton at Limedale, Arkansas, and 
$6.00 per ton at Hannibal, Missouri. Of the basing points just listed, Dallas, 
Texas is the nearest to the Lime City plant and prices at that basing point 
were almost 42 per cent higher than at Hannibal, Missouri - several hundred 
miles from the nearest plant owned by the company. 

If there were only a few isolated instances like the above it might not 
be considered, a very serious matter, for any large plant may at times be 
forced to soil a part of its surplus lime outside the home market. But the 
above examples are not sporadic cases. .On the contrary, the very same plants 
cited above, which ship lime into the markets of other producers, have their 
home markets invaded by the numerous producers located in the same 
territories into which the Texas and Michigan plants make their freight 
absorbed shipments. 



9836 



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9836 



-163- 



APPEITDIX 



9836 



-164- 
APPEEDIX 

CHAPTER I 

U1TS0LVED LIME IEDU3TRY PROBLEMS TEAT DESERVE FCffiTEER COiTSIDERATIOI 



The summary of findings enumerated at the beginning of this re- 
port reveals the nature of the tentative conclusions which may be 
drawn from an investigation which necessarily was incomplete in some 
of its aspects. Before final conclusions can be drawn, it will be 
necessary to carry on further investigations of several factors which 
have bee:": excluded from the report because there was no adequate 
source material available. Some of the more promising fields of re- 
search that should be covered are enumerated below. 

I. Fields of Research 

1. Labor costs, wares ~n i c ond itions of l abor . - The 
absence of satisfactory statistics on wages and labor costs made it 
inadvisable to eve: ; attempt to make an analysis of this phase of the 
lime industry problem. The replies to the ERA questionnaire 'did net 
differentiate labor costs of lime manufacturing and the labor costs of 
crushed stone or other allied products mac in the same plant. The 
required material can be secured through a questionnaire and some field 
work, 

2. Production cos t s and marlrups on lime -products - Without 
undertaking any elaborate cost-accounting investigation, it is necessary 
to secure source material on the labor, fuel and material costs of lime 
manufacturing and to ascertain the effect of the code provisions on the 
operations of the lime producers. These data are needed in order to 
provide a basis for a more accurate estimate of the markups on lime 
products and to ascertain whether or not a more economical system of 
distribution would neutralize or obviate the bad effects of the market- 
ing practices under the code. 

3. The finances and the co r porate structure of the Lime 
I ndustry - Financial statistics should be secured by means of a question- 
naire which would reveal the financial structure of the large lime com- 
panies - their funded debts, capitalization, dividends, interest rates, 
and especially the financial control - if any - exercised "oy producers 

of allied products, such as cement, gypsum and steel companies. 

4. .Meth ods of el i minating excessive crosshau ling - More 
accurate statistics are needed on the extent of crosshauling in order 
to ascertain the actual effects of the code. Some of this material car- 
be secured from a more deta.iled analysis of the records of the Bureau 
of dines. A still more accurate survey can be made, if access can be 
secured to the invoices of some of the larger lime producers. An 
examination of the invoices would show the exact amounts of freight 
absorptions in their relations to mill net returns, the changes in the 
extent of crosshailing wrought by the code together with the changes 

in the final consumer prices resulting from code enforcement. 



9836 



-165- 

r . T he -probable effects of enforcing Article VIII . 

Secti on gb of t he Lime Code - Lime freight rates have 
■been passed upon in several of the rate decisions of the Interstate 
Commerce Commission. The hearings on these cases together with the 
decisions themselves' contain valuable source material for a more 
thorough investigation of freight rates or. lime. 

Llore factual evidence is needed before it is possible to appraise 
possible effects of enforcing article VIII section 2b of the lime code 
which was stayed by the Board at the time the code was adopted. A part 
of the necessary data car. probably be secured from the invoices of a 
selected number of lime companies. 

It will be necessary to compute the aggregate shipment of plants 
located at basing points, plants located less than 50 miles from basing 
points and plants located over 50 miles from basin..; points. These 
statistics will be needed in order to estimate the probable effect of 
the limited fright absorption provision in the code. 

6. The above named five problems do not exhause the 
possibilities of issues that need to be further explored. 

(a) In order to properly appraise all the effects 
of the code upon the lime industry it is 
necessary to secure information on the be- 
havior of the industry in the post-code 
period. The nominal abandonment of some of 
the marketing practices embodied in the code 
may possibly have had little or no effect 
upon the operations of the lime producers, fol- 
ic is conceivable that in some districts the 
larger producers may have continued the code 
practices without any formal agreements and 
without any enforcement machinery, 

(b) The investigations thus far completed have 
not thrown much light on the real role of 
the lime districts in the marketing prac- 
tices of the industry. It is known that 
they were organized before the World War, 
were recognized by the War Industries Board, 
and finally were iTia.de an immediate part of 
the marketing machinery provided under the 
code. Llore information is needed on their 
functions, methods of operation, and the 
underlying rea.sons for their retention by 
the lime producers of the country. Authentic 
material on this subject can only be obtained 
through field work. 

II. Additional Materials Needed to Continue the Investigation: 

Suggested Sources and Methods of Securing the Necessary Data 

A satisfactory final re'oort cannot be made Without securing 



9036 



-166- 

additional data, a part of which can only be obtained by means of field 
work. Some of the necessary information can, however, be obtained by 
means of a questionnaire, provided, of course, a sufficient number of 
replies are received. 

1. Data that can only be. obtained through field work 



(a) Compiling data from invoices of a selected number f 
of sample companies for the first six months of the years 1S33 and 1934 
in order to show: 

1. The actual effects of the code on crosshauling. 

2. The actual amount of intra-sta.te crosshauling. 

3. The actual consumer prices including differ- 
entials, discounts and other extra charges pro- 
vided under the code. 

(b) Where field v;orh is undertaken it will be well to 
also collect material on conditions of labor, collective bargaining, 
etc. and to secure more a.uthoritative information on the increases in 
labor costs attributable to the code. 

(c) First-hand information of the financial records, 
profits and losses, dividends and overhead in the code and pre-code 
periods. It is also dcsira.ble to secure date on the extent of financial 
*r stock control exercised by allied concerns. 

(d) Authentic information should be secured from the 
Ohio 53 Group, whose members objected to the basing point system and 
asserted that nearly 50 percent of their market had been diverted by 
their competitors through its use. 

(c) Information should also be secured from a selected 
number of former lime producers who have been forced to the wall in 
recent years. 

2 . A dditional data which may be secured by means of a 
brief q uestionnaire 

(a) Labor and fuel costs for the code and pre-code 
periods. 

(b) Gross operating profits and net profits for 
the code and pre-code periods. 

(c) Changes in extent and character of overhead 
during the code period. 

3. A vailable materia ,! in Washington which may be •profitably- 
used in further analysis 

(a) Confidential records of the Bureau of Mines. 



9836 



-167- 
(Id) Records filed with the code authority 

(c) Possibly records of the District Committees 
if they can he made available. 

4. Production costs on the Pacific Coast should he in- 
vestigated to ascertain the causes of the high lime prices under the 
code in that region. Lime prices in some sections of the West appear 
to bo high enough to represent some eastern brse prices plus freight 
across the continent, even though the coast lime plants arc capable 
of producing enough to meet all the local needs. 



9836 



( 



-168- 

OHAPTER II 
I. CEGAHIZATIOls A1;D DEVELOPMENT OP THE LI1IE IIIDUSTRY 

(Chapter II has been prepared and submitted by the Trade 
Relations Committee of the National Lime Association) 

1. History of the Line Industry and the Significan t 
Stages of Its Development 

Lime is derived 'from high grade limestone through dissociation 
of the calcium carbonate by heat which produces calcium oxide or quick- 
lime and carbon dioxide in the form of gas. The reaction is similar 
with dolomite. Quicklime may be sold and used as such, or first slaked 
by the addition of water forming hydrated lime. Line products are 
widely used as reagents in r multitude of chemical and industrial pro- 
cesses, as a cementitious material in building construction, and as a. 
soil conditioner in agriculture. 

The art of burning lime antedates recorded history. The Egyptians 
were familiar with its use, and the ancient Greeks and Romans recognized 
lime as one of the important products essential to the civilizations of 
those days. 

Lime manufacture was one of the early enterprises engaged in by 
the settlers after the Colonies r ~ere well consolidated along the Atlantic 
Seaboard. Although records of these early line kilns are not available, 
it is known that lime was burned more than two hundred years ago. The 
first use of this product probably w.-s in mortar and plaster, and later 
lime was used also as a soil conditioner and as a reagent in the chemical 
industries. 

Prior to the development of the vertical kilns and the more modern 
rotary kilns lime was manufactured crudely, and in fact, primitive methods 
are today used to a limited extent in a number of localities. Where an 
outcrop of limestone was easily available lumps of stone were quarried l 
and oiled in alternate layers with cord rrood which was then ignited. 
The heat drove off the carbon dioxide, leaving an impure calcium oxide 
quite unlike the refined product of the present dag'', but one which was 
both useful and essential to the needs of the pioneer. Later masonry 
walls nere constructed around such piles of limestone and wood, and even- 
tually there were developed pot kilns and vertical kilns which permitted 
lime manufacture to be carried on as a continuous process. 

Because outcrops of limestone ere relatively abundant, and because 
limeburning was essentially a simile operation prior to the twentieth 
century ^ the Lime Industry consisted of a large number of small, widely 
scattered units during the early stages of its development. As technical 
developments progressed both in quarry practice and line plant technique, 
production tended to become centralized because of the many advantages 
inherent to a well established and well organized operation. Rotary kilns 
were developed first in the cement industry and were perfected during the 
period of about 1909 to 1915. The use of rotary kilns in the manufacture 
of lime was retarded somewhat because of the long familiarity with and 
the demand for lump lime rather than the pebble size material resulting 
from the use of rotary kilns. After 1915, however, rotary kilns gained ^ider 
favor among lime manufacturers, and today there are about seventy rotary 
9836 



-169- 

kilns recorded in the lime industry. 

The growth of the chemical lime markets during the war and subsequent 
thereto augmented this trend toward greater mechanism and larger size 
units which in turn caused a great decrease in the number of companies 
or enterprises en ■■ ;ed generally in the manufacture of lime. 

Salient features of production, number of units, and average value 
per ton, are indicated "by Figure 1. Particularly is to he noted the 
sharp decline in the number of units from 1909 to 1918 and the gradual 
trend downward since 1922. Other significant frets to be noted are: 

First, the general dedline in total annual tonnage since 
1925, which resulted mainly from a loss in building lime, 
and was due both to the general decline in the construc- 
tion industry beginning prior to the depression, and also 
to some extent by the development of competing building 
materials* 

Second, the relative increase in the amount of chemical 
lime sold annually and the sensitivity of this branch of 
the industry to industrial depressions. 

Third, the relative stability of the agricultural lime 
marks t . 

Fourth, the ganeral decline in the average value per ton 
since 1923. 

Fifth, the grea.t increase in capacity which occurred be- 
tween 1917 and 1929. 

By 1952 the Industry had reached a point where wage scales and prices 
in parts of the country had collapsed, bankruptcies were numerous and 
chaotic conditions generally were the rule. The industry, like many 
others, had been unable to withstand the terrific economic pressure re- 
sulting from five years of diminishing markets, ten years of declining 
prices and, withal, an increa.se in productive capacity. Cutthroat compe- 
tition and exploitation of labor were concomitant results. 

For several years prior to the enactment of the national Recovery 
Act, the lime industry, led by the national Lime Association, had de- 
voted consider-ble attention to unfair trade practices and their elimina- 
tion. A conference of the industry, in fact, was held in 1929 under the 
auspices of the Federal Tra.de Commission, out of which ^ere developed 
certain trade practice rules, many of which subsequently were incorporated 
in the original Code of Fair Competition for the Lime Industry approved 
October 3, 1933. 

The lime industry was one of the very first non-metallic mineral in- 
dustries to apply for and secure a code under the IIIRA. The orocess of 
code making began, in fact, even before the President.'.had signed the bill* 



9836 



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9836 



-171- 



Late in June, 1923, a conference of the lime industry : as held in 
Atlantic City at which time a code was evolved after thorough considera- 
tion of. the many points of view advanced and the multitude of nroblems 
tnroughout the Industry. It should be clearly kept in mind that the orig- 
inal, lime code waf not dra'- r n arbitrarily as an artificial devise inap- 
plicable or contrary to the wishes of the industry as a whole, but was a 
most carefully considered document embodying past customs and oast oractices 
which were aeceptable and fair, and outlawing those oractices deemed harm- 
ful to the Industry generally. 

However, despite the tremendous amount of work and thought given 
to the development of the limp code inroerf ections were brought to light 
in practice making it desir ble to am c nd certain of its marketing oro- 
visions and these amendments were aooroved by a majority of the industry 
at r conference held at Washington, Fay 24, 1924. lifter ten months the 
National Industrial Recovery Board finally approved the amended Lime 
Code on A iril 1, 1935. 

2„ Present Organisation of the Industry 

Lime is produced at ures^nt by more than 300 enterprises located in 
39 states. The si~e of the individual 'units varies all the way from plants 
capable of producing over a twenty-four hour period net more than five 
or ten tons to those with a capacity of upwards of five hundred tons a day. 
Naturally, there is a tremendous contrast in the ^orm and characteristics 
of plants of these varying capacities. 

The larger olants have well organized quarries or underground lime- 
stone mines and are well equipped with modern devices for burning, crush- 
ing and. grinding, hydrating, packing, and shipping lime oroducts. Serving 
these plants are adequate sales and traffic departments. On the other hand, 
the very small units in the industry may be one man affairs employing 
five or ten men with nc technical staff, and a . limited sales or- 
ganization if any, but which, nevertheless, occupy an appreciable oart of the 
lime industry. There is still another type of line oroducer who in a 
sense is not properly a member of the industry. In some states, notably 
Pennsylvania, ti.ere are a large number of farmer.: who , because of the 
availability of coal and limestone, burn a few hundred tons a year, usually 
in field, kilns, for their own use or for sale to the adjoinin~ farms. 
Farm labor is used -lmost exlusively in these operations, but seldom 
are more than three or four men employed at any One time. The lime indus- 
try as a whole is uneffected by this type of producer and while in number 
tney are large, their total annual production is not more than one-half 
of one per cent of the total of the industry. Table 2 shows in detail 
the general situation in regard to' the number of olants and their annual 
production in various si^e groups. 

Figure 2 is a map of the United St rtes upon which has been indicated 
the relative distribution of the lime olants. No attemot has been made 
to include thereon a hundred or more extremely small producers who are 
not in reality a part of the lime industry. 



9836 



-173- 

Uecaxi.se limestone is a raw mcterial both for the production of segre- 
gates for construction purposes and for Portland cement, it is natural that 
a number of operating units in the lime industry are also producers of both 
crushed, limestone and other stone products, and Portland cement. Further-* 
more, Mil ding lime competes with gypsum products and, therefore, some com- 
panies manufacturing lime are also producers of sypsum. There is, there- 
fore, an appreciable degree of interlocking with other similar non-metallic 
mining or quarrying industries. 

Inasmuch as lime is extensively used by large consumers in the chemi- 
cal and other manufacturing industries, there has developed a minor trend 
for consumers to enter the lime business and to produce lime principally 
for their own use. This so-called captive tonnage, however, is not a 
significant part of the total lime production, comprising probably not 
more than 2-V per cent of the total lime produced. 

3 . Pact ors Ck > yarni ng Lo cation of Plants and C-eoloffical 
Distribution of Plants in tl ;e Industry 

Limestone as recognized by the geologist is both relatively abundant, 
and fairly widely distributed over the United States. There is, however, 
a vast distinction betv.'een limestone as a rock and limestone as a raw material 
suitable for the manufacture of lime under the exacting conditions prevailing 
in the industry today. Limestone for the manufacture of lime generally must 
be of the purest kind, containing as high a percentage of calcium carbonate 
or dolomite as may be abailable from a practical standpoint. It is often 
necessary to prospect strata of limestone until a particular horizon or bed 
is found of sufficient purity to make 'high grade quicklime. It should be 
pointed out that modern methods of lime burning permit no selection of the 
chemical constituents of the stone in the burning process. Uhile higher 
grades of ' stone may be selected from the quarry, the characteristics of 
the finished products are directly dependent upon the quality of the stone 
entering the kilns. The location of lime plants, therefore, is directly 
dependent upon geological formations, and lime plants tend to be grouped 
or clustered around a particular district '.here favorable outcrops are 
numerous or along well defined and distinct geological formations. 

Inasmuch as lime burning is essentially a process of employing heat 
to dissociate the calcium carbonate and drive off the carbon dioxide pres- 
ent, lavailibilityof sources of fuel is an important consideration in the 
location of a lime plant. Furthermore, lime is a relatively bulky, perish- 
able, and low priced commodity, and means of transportation must be given 
careful consideration, hot only mast the deposit of limestone be relative- 
ly pure and near the surface to minimize charges for the removal of over- 
burden, but it must be favorably located in regard to existing transporta- 
tion facilities such as rail, water or highways. 

Figure 2, showing basing points as well as the location of lime 
plants, illustrates clearly the concentration of units resulting from these 
factors governiag the location of lime plants. Out of this natural 
grouping of producing units the' i -e was developed over a. long period the 
essential principle of the multiple basing point system of marketing. 
Many freight rates, as is well known, nave been set lip not on a mileage 
basis but upon a competitive basis from points or origin to common mar- 
kets. Freight tariffs, therefore, have tended to become more or less 

9835 



-173- 



9836 




-174- 



equalized fron points within a given producing area or district to the 
important markets served by such prouuction centers. As an example, 
line plants are scattered all along the Shenandoah Valley in Virginia, 
but the rail freight rates fron all Virginia producing -joints to any 
destination south of the Virginia Line are the same for any plant. 
Thus, it becomes custonary for manufacturers in quoting delivered 
orices at such southern destinations to b se their delivered prices 
from one shipping point, in this case hiverton. 

4. Methods of Production .-n d the Hovel opnent 
of Large nnd Small Plants 

Lime manufacturing is essentially a : lining or quarrying operation 
to which is added the process of line burning. Limestone is won either 
from open quarries or undergrouund limestone mines with no great modifi- 
cation, if any, from the standard mining, and quarrying methods used 'oj 
other industries. In open quarries the overburden is removed e-ither by 
hand, by teams with scrapers, or with steam shovels, depending upon the 
bizc of the plant and ,tho extent of the quarry. The lineston is drilled 
and blasted and the broken rock is loaded into cars which are then 
trained to the charging platform of the lime kilns. Where excessive 
stripping becomes necessary as a particular bed or formation of limestone 
dips into the ground, underground milling nay be and often is resorted to. 
In this case, blocks of linestone are developed by drifts, or shafts, or 
both and lineston:.- is removed by excavating large rooms or stopes, leav- 
ing adequate pillars for support to the roof. 

In small oper tions comparatively small amounts of stone are shot 
down with a single blast, loading is generally by hand, and tramming may 
either be done by hand or by mule. In the larger quarries thousands of 
tons of limestone nay be broken with a single huge blast, loading is 
done by steam shovels and locomotives are used for transportation of 
the raw material* Under sone conditions where the beds of limestones 
are not uniform in quality considerable selection of high grade stone 
may be done within the quarry. This process, of course, involves rejec- 
tion of considerable quantities of unfit material with a correspondingly 
higher cost per ton of stone to the kilns. Such selection generally is 
possible only in quarries where loading is done ~oy hand, where steam 
shovels are used selection of stone generally is impracticable. 

The raw limestone is generally calcined either in vertical kilns or 
rotary kilns. Vertical kilns consist essentially of a shaft fed from 
the top with raw limestone end fired from the bottom with coal, wood, or 
gas. Lime is drawn every few hours and fresh limestone is added at the 
top, and the kiln is cooled only at such times as repairs must be made to 
the lining, or when the market is such as to force curtailment in produc- 
tion. Vertical kilns produce a product known as lump or bulk quicklime 
together with a considerable quantity of fines. The product fron the 
rotary kiln generally approximates the size of a hen's eg r -- t or a little 
larger, and the stone fed to a. rotary kiln is careful 1 crushed and graded... 
to insure proper uniformity in the pebble line so manufactured. Quick-' 
line reacts chemically with water, producing a calcium or dolomite hydrate, 
and much line sold today is in the hydrates form. 

9836 



-175- 



As in many other industries, some lime manufr cturin™ companies, 
becuase of greater available capital, better natural resources, or 
more favorable marketing conditions have expanded productive capacity 
at a greater rate than others. Lime from certain producing districts 
has been more favored for certain uses than line produced elsewhere,, and 
plants enjoying such characteristics in their product have naturally 
terfded to nationalize their markets as far as possible. 

5. Characteristics and Uses of Lino Products" 

Probably no other mining or quarrying non-metallic industry enjoys 
such a wide variety of uses as line. More than a thousand chemical or 
industrial uses have been noted, but in general, the markets for lime 
products fall into three principal classifications; namely, agricultural, 
building, and chemical. In agriculture, line is used as a soil condi- 
tioner to correct soil acidity. In the field of building constriction, 
lime is used as an ingredient in mortars for masonry construction, in 
plaster work, and as an admixture in concrete. In the chemical or in- 
dustrial field large -quantities of line are used as refractory material 
in the steel and other metallurgical industries, and also as a flu:: prim- 
arily in the open hearth -process of steel manufacture. Other important 
chemical markets are the paper industries, glass manufacture, water puri- 
fication, tanning, and a host of other chemical processes. Table 3 con- 
taining data compiled by the United States Bureau of Mines indicates the 
present relative importance of these several uses for line products. 

6. Consumption. Consuming Areas and Ikrkets 
for Lime Products 

Markets for -lime products can be analyzed more easily by consider- 
ing individually the major classifications of agricultural, building and 
chemical lime and further considering the various uses in the light of 
the economic characteristics of the consuming industries themselves. 
There must also be considered such other factors as competing materials, 
distribution of population, industry concentration, and customer habit 
of the many classes of consumer. 

Sales of agricultural lime are greatest in the northeastern states. 
Agricultural markets for lime products for use a.s a soil conditioner r.ro 
related to some extent to rainfall for calcium carbonate is leached out 
of the soil by rain water, and regions with heavy rainfall generally ha.ve 
a definiency in Hie calcium carbonate content of the soils. Therefore 
the important line markets lie generally .east of about the 96th meridian, 
although scattered arease on the west coast and in the rocky mountain 
district require liming materials. In much of the western part of this 
area east of the 96 meridian, the demand for liming material is met by 
the use of pulverized limestone or limestone screenings resulting from 
crushed stone operations. The principal argicultural lime markets, 
therefore, as existing today lie in the eastern portion of the United 
States. 



9836 



-176- 



Buil&ing lime is a minor construction material from the viewpoint of 
the total cost of construction, although in periods of building activity, 
the building lime market is one of the most important from the viewpoint 
of the lime industry. The index of consumption and demand for building 
lime is directly dependent uoon the quantity of building construction, 
and therefore, markets for building lime are where there is building in 
progress. It may be pointed out that heavy engineering projects such 
as dams, highways, and the like offer little or no market to the lime 
manufacturer. 

The chief markets for chemical and industrial lime obviously are 
in the large industrial centers of the Eastern United States, tending to 
be concentrated to some extent around such steel producing centers as 
Pittsburgh, Youngstown, Chicago, St. Louis, Birmingham, as well as to 
the minor steel producing centers. Paper mills tend to be located either 
in the most northerly states or the southern states, and therefore, the 
demand for lime for paper pulp manufacture is greater in these territories. 
Inasmuch as many cities use lime for water purification purposes, this . 
important market is directly dependent uoon density of population as 
well as upon the local need for water softening or for water purification. 

, As a whole, lime consuming industries may be grouped under the two 
classifications of durable goods and non-durable goods. With the depress- 
ion since 1929, part of the mrrkets for lime suffered much more acutely 
than others. With the slump in the heavy goods industries, such as 
building construction and steel manufacture, markets for building and 
refractory lime suffered accordingly. On the other hand with lime sold 
in sucxi consumer' s goods industries as paper, agriculture, tanning, and 
the like, the decline has been less acute and production more sustained. 
Lime for water purification comes under this latter classification. 



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f\j? j* if invo ud r— bo CT\ <r\ 0-\ cr» O 



O-* I— -in 

I— \£> r"~lC\l 



ki m-i f-v r-v 



en 



5^ 



8 

60 



_l SL 



J- 
r— 


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o 


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in.3- eo 60 r^ irvrf r— 60 v^> h r— cu vo 

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H H H H H HH tJw <M (VI N WW 



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ifocua>cr>inc\jo~ii' I \cijinc\i ■-< 



CJ ITl 60 rH 



r— o m rn to ^ ru ^* vc o vr> in ro to r— 
eo Cncncvir— crirtrHmfMn in-* h h 

rH H Si HH WH WH 



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h h cy r*vJ in>x> o 



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kvo o u> o i*\w> o invo cu <r> o "* o 

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H h h h cu f\x-> invo <r>.3- t— o Q 



riNi^m cn^t in in h vo r— Q to'-o 



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ino in cm h 



ino ino ino ino ino mo ino mo ino ino ino ino ino ino 
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9836 



-179- 

Table 3. Lime Solo, by Producers In the United States 
in 1933, by Uses 
(Bureau of Wines Statistics) 







Quantity 


Va 


lue 


Use 


Per Cent 










of Tot 


al 


Short Tons 


Total 


Average 


Agricultural 


10.8 




246,110 


$1,313,247 


j>D. 3o 


Building 


23.5 




533,083 


3,823,594 


7.18 


Chemical 












Glass uorks 


3.7 




82,634 


331,565 


4.74 


Metallurgy- 


11.7 




265,963 


1,406,480 


5.29 


Paper Hills 


13.4 




304,729 


1,587,869 


5.54 


Refractory lime 












(dead-burned dolomite) 


11.5 




261,812 


2,064,369 


7.89 


Sugar refineries 


.8 




17,372 


191,579 


11.03 


Tanneries 


3.1 




70,662 


438,545 


5. SI 


Uater purification 


7.7 




174,694 


1,001,474 


5.73 


Other uses 


13.8 




312,216 


1,924,237 


6.16 


Total Chemical 


55.7 




1,490,082 


9,106,818 


6.11 




100.0 




2,269,280 


14,253,559 


5.23 


Hydrated lime (included in 












above totals) 


37.0 




840,007 


5,822,026 


5.69 



9836 



-180- 

Table 3. (Cont'd) 
Minor Chemical Uses (IS -33) 



Short 
Use Tons Value 



Acid neutralization 

Alkali works (ammonia, soda, potash) 

Bleach, liquid 

Calcium acetate 

Calcium carbide 

Coke and gas manufacture (gas purification 
and plant "byproducts) 

Food products 

Gelatin (edible) 

Clue 

Insecticides (spraying materials) 

Magnesia works 

Oil and fat manufacture 

Paint (calcimine, whitewash, varnish, etc.) 

Polishing and buffing 

Rubber 



Salt refining 



Sand-lime brick 

Silica brick 

Soap 

Tobacco curing 

Wood distillation 

Undistributed 1_/ 

Unspecified 



5,914 


$47,605 


9,701 


60,215 


15,566 


94,395 


6,253 


34, 382 


23, 247 


89 , 485 


22,766 


133,964 


9.190 


45,518 


2,115 


15,117 


3,487 


22, 100 


22, 428 


161,931 


4,592 


29,198 


21,163 


158,028 


6,800 


43,772 


1,140 


21 , 283 


2,061 


13,978 


5,138 


23,570 


4, 349 


27,283 


8,745 


56,518 


7,835 


27,193 


3,076 


12,560 


1,559 


10,325 


19,398 


129,706 


105.192 


665,910 


312, 216 


1.924,237 



1/ Lime used in alcohol manufacture, asphalt filler, bichromates, bleaching^ptra'&ej?; 

calcium phosphate, corn products, cosmetics, creameries and dairies, depilatories, 
disinfectants (chloride of lime, etc.), dyes, explosives, flour mills, fruit juices, • 
gasoline, lubricants, mold wash, oxygen purification, retarder, roads, sanitation, 
slag cements, textiles, wire drawing, and wool cleaning. 
9836 



-181- 

3XHIBIT C 

TRAD3 RZLATIOiTS COMMITTEE 

of the 

ITxiTIOHAL LI 1-3 ASSOCIATION 
927 15th St. "J. ".;. Washington, D. C. 



February 7, 1934 

Cvcnoral Hugh S. Johnson 
lational Recovery Administration 

Washington, D. C. 

My dear General Johnson: 

It is a pleasure to submit on behalf of the Code Authority 
of the Lime Industry a report concerning the effect of the Lime 
Code upon conditions within the industry. 

The Code has been in force since October 13, 1933. We arc 
happy to tell you that it lias proved highly successful, and we 
are grateful to the President and to the Administrator for 
their having made it possible for the lime industry to be so 
strengthened in its time of trouble. 

This report deals with the effect of the marketing previ- 
sions of the Code upon prices. V7e feel that the Code is excel- 
lent as now written, and pray for its continuance as a permanent 
institution in the industry. 

Very sincerely yours, 

Cede Authority 



Norman G-. Hough 
Executive Officer 



9836 



-182- 



RSPORT TO TIE ADMIHISTPATOH 
as to 
TIE EFFECT OF THE LIME CODE UP01I COMDITIOITS WITHIN 
THE IICUSTRY 
Submitted by the Code Authority of the' 
Lime Industry 

February 7, 1934 

IITTHODUCTIOII 

The Code of Fair Competition for the Line Industry provides 
that within four months after date of approval, a report shall 
be made to the President as to the effect of the basing point 
and average cost provisions upon prices in the industry, togeth- 
er with any recommendations that nay seem desirable. The four 
month period having been passed on February 3, this report is sub- 
mitted in accordance with the terms of the Code. 

The average cost provisions are not yet operative and therefore 
this report deals particularly '.vith the basing point provisions con- 
tained in Article III, - Marketing, of the Lime Code. 

The practice of determining delivered prices for lime in given 
markets by the utilization of a basing point or basing points plus 
the prevailing freight rates has been a long-standing custom in the 
industry; furthermore, the lime industry has been operating united- 
ly under the multiple basing point provisions of the Code since 
October 13, 1333. Although it is too early as yet to report in 
detail the effects of such universal application of the basing point 
provisions upon the industry, the following observations are indica- 
tive of results to date. 



COHCSPTIOi: OF THE MULTIPLE 3ASING 
POIHT PRINCIPLE 

Lime manufacturers regard the multiple basing point method of 
marketing together with the system of price publication as a scientific 
and orderly plan of distributing their products. Such a merchandis- 
ing structure is considered to be as logical and as necessary to the 
industry as the application of sound engineering practice in the 
development of the quar/y, the proper design of the kilns, or the 
intelligent organization of personnel to operate the plant. It is 
submitted that problems of distribution are equal in importance to 



9836 



-133- 

problems of production, and are to "bo approached in the same 
spirit as those purely technical in nature. 

The multiple basin:-: point system of marketing as long 
applied to the lime industry has evolved a well devloped plan 
of distribution after years of trial and error, much as modern 
engineering practice has emerged as a science from a vast histori- 
cal background of human experience. The present marketing plan 
is not yet perfect and certain defects offer opportunities for 
abuse which are recognized, and which will require patience and 
thoughtful effort to avoid. 

Two objections commonly are voiced to the multiple basing 
point theory, first, that a consumer located near a plant but 
relatively far from a basing point is charged a transportation 
cost, -part of which actually does not exist, and, second, that 
a basically uneconomic -plant may be given und^ocrved -protection. 
Both of these possibilities are recognized, but it is sincerely 
believed that where an injustice is done to a consumer, or where a 
plant is supported artificially, it is usually because cf abuse rath- 
er than proper use of the multiple basing point system of marketing. 
Basing point practice based up n one or but few basing points 
might exact from the consumer the payment of non-existent trans- 
portation costs in a considerable amount. The multiple basing 
point system of marketing as applied under the Code for the 
Lime Industry breaks up the country into a large number of com- 
paratively small marketing areas. These marketing areas are de- 
termined as nearly as practicable by the low freight rate from 
the chief producing centers serving a given market. No consumer 
of lime therefore is asked to pay unreasonable transportation charges 
on his requirements. 

The multiple basing point plan cf marketing is particularly 
well adapted to the lime industry because of the natural conditions 
controlling the proximity of lime plants. The location of a lime 
quarry is dependent primarily upon the physical and chemical qual- 
ities of the limestone from which the lime is to be made. Haw 
limestone suitable for the manufacture of marketable grades of 
lime products is relatively not abundant, available deposits of 
high grade stone being limited to definite geological areas. Where 
such limestone is found occuring in economic relationship to fuel 
supplies and markets, lime plants tend to bo clustered or to be 
concentrated on or along such geological formations. Basing points, 
as established in the lime manufacturing districts, arc primarily 
selected because of the generally central -ocsition of each baaing 
point to a particular group of plants. It should be recognized 
that the basing point plan, as applied to an industry, the units 
of which are concentrated in definite producing localities, pre- 
sents different economic conditions than where an industry is not 
thus restricted as to the location of the producing units. The 
use of basing points, tending to be centered in groups of plants, 
goes far toward approximating conditions where all plants are 
used independently as points of origin for delivered prices. 

9836 



-164- 



Again let it be stated that the multiple "basing point plan 
of marketing is essential to prevent great confusion in marketing. 
There is no mox'e logic in countenancing conditions thereby dis- 
tribution of a finsihed product is necessarily attended by con- 
fusion, subterfuge, and unfair practices, than to say that a 
lime plant should be located blindly, that machinery should be 
ordered without specifying its use, and that there need be no 
supervision of labor, no budgeting of expenditures, and no con- 
sistent policy of operation. 

EFFECT OH PTOHDCTIOH 

All lime products essentially are raw materials which may 
be used by three principal consuming industries, roughly classi- 
fied as agriculture, building, and chemical or industrial. In 
1929 all lime produced and sold in the United States (other than 
dead-burned dolomite) was distributed 8.9 per cent to agriculture, 
43.4 per cent to building, and 47.7 per cent to chemical or in- 
dustrial. In 1932, the total tonnage was distributed 13.4 per 
cent to agriculture, 32.7 percent to building, and 53.9 per cent 
to chemical or industrial uses. 

Production of lime products is geared closely to actual de- 
mand from the consuming industries because quicklime is perish- 
able, ^nd hydra ted lime deteriorates over any appreciable period 
of time. Stocks never are a serious economic factor. 

Production of lime, therefore, is sensitive to activity in 
the consuming industries, anc! is dependent primarily upon con- 
sumer requirements. A given merchandising plan has no effect 
in itself upon this demand unless the price structure is so dis- 
turbed as to alter the competitive position of lime products with 
other commodities. 



2PF3CT OH PHICBS 

Because the weighted average cost provisions of the Lime Code 
have not yet become in force throughout the industry, pending 
approval of a cost formula by the Administrator, this provision 
has had no effect upon prices of lime products. There is, then, 
to be considered the effect upon prices thus far of the multiple bas- 
ing point provisions and price features of the Code. 

Table 1 shows the approximate price levels of lime and other 
commodities for 1920, from 1926 to 1932, and by months for the last 
quarter of 1933. Only an approximate statistical correlation of 
composite lime prices for October, November, and December, with pre- 
ceding yearly figures is possible. The index numbers for October, Ho- 
vember, and December are known to be somewhat too high because of the 
difference in statistical data gathered by the 3ureau of Mines and 
by the Code Authority of the Lime Industry. However, even a rough 



9836 



-185- 



correlation does indicate that the price of lime as shown by 
statistics covering two months and a half of operating under the 
marketing provisions of the Cole is about at the 1931 level and 
lias continued in nearly the sane relative position to the All 
Commodity Index of the Department of Labor. The composite lime 
index is considerably below the level of certain other commodities. 

Lime prices are very definitely controlled by competition from 
alternate or substitute materials in all three major fields of dis- 
tribution. In construction, such competitive materials are '. ypsum, 
masonry cement, and Portland cement; in agriculture, limestone, oyster 
shells, and land plaster; in the chemical or industrial field, the 
many competitive materials include limestone, caustic soda, and rc- 
burned lime sludge, in addition to which there is also the great 
possibility of large lime consumers installing lime producing units 
of their own. 

It is well to point cut that the lime indexes for October to 
December are heavily weighted with chemical or industrial lime, 
some of which was under contracts for extended periods. Increased 
labor and supply costs are not yet entirely reflected in this index 
and therefore further rises are likely to occur in the first few months 
of 1934. Table 2 shows in detail the quantity of lime shipped and the 
average value per ton during October, November, and December. 

In commenting upon present and future effects of marketing provi- 
sions upon- lime prices, it should be noted further that the lime indus- 
try is operating at less than 30 per cent of theoretical capacity. (28.8 
per cent in D cembcr for companies reporting production); consequently, 
costs are high because of curtailed production schedules and because 
of rises in labor and supply costs. Price levels for probably a year 
or more will be subject to such variables as changing rates of produc- 
tion schedules, cost cf labor and supplies, and financial reserves of 
the manufacturers (for a large percentage of manufacturers today re- 
port that they are operating under a lose at the present .price levels). 
It will be quite unsafe therefore to draw any general ccnclusiions as 
to the specific effect of the multiple basing point and price publica- 
tion provisions of the Code upon prices cf lime until most of these 
other items have ceased to be such highly variable factors. By the end 
of 1934, the true effect upon price levels cf an orderly marketing plan 
should be more plainly discernible 



9836 



-186- 

Chapter III C 1 



Table 1 
PRICE TEEEDS OF LIME AND OTHER COMMODITIES 

1920 to 1933 



Composite 

Lime Price All Building Cement 

Index * commodities. Materials (Compos- Brick Lumber Strut- 
1926 = 100 *** *** ite)*** *** *** rual 

Sted 



1920 


114.2 


154.4 


150.1 


117.2 


118.4 


165.2 


144.4 


1926 


100 


100 


100 


100 


100 


100 


100 


1927 


95.7 


95.4 


93.3 


96.7 


93.2 


92.5 


94.5 


1923 


88.1 


97.7 


93.7 


95.9 


92.7 


90.1 


95.2 


1929 


8^.9 


96.5 


97.1 


91.3 


91.1 


94.5 


98.1 


1930 


81.6 


8^.3 


90.3 


91.8 


84.7 


85.7 


87.3 


1931 


74.9 


71.1 


77 . 6 


79.4 


80.6 


68,6 


83.1 


1932 


67.8 


S4.8 


71.4 


77.2 


- 77.3 


58.5 


80.9 


1933 
















Oct. 


75. 2** 


71.2 


83.9 


91.2 


84.6 


8-:-. 2 


86.8 


Nov. 


74.-. 


71.1 


84.9 


91.2 


' ■ .7 


86.5 


86.8 


Dec. 


76.2 


70.8 


85.6 


91.2 


85.7 


88.0 


86.8 



* From Bureau of Mines Statistics. Figures do not include dead-burned 
dolomite. 

** From data collected by the Code Authority of the Lime Industry. 
Figures for October, iTovember, and December do not include dead- 
burned dolomite nor finishing hydrated lime. 

*** From Bureau of Labor Statistics. 



9 836 



-187- 

Cha.pt er III C 2 

Table 2 

PRICE TRENDS OP LIME PRODUCTS FOE OCTOBER, NOVEMBER , AND DECEMBER, 1933 * 
(Does not include finishing hydra ted lime) 



October 



November 



December 



AGRICULTURE 








• 








Quicklime 






- 










Bulk - 


Tons 


888 




-.25 




148 






Per Ton 




S5.26 




S6.ll 




00« j<j 


Bbls.- 


Tons 


65 




53 




22 






Per Ton 




1ft. 83 




16.00 




14.88 


3:., s - 


Ton 


792 




449 




98 






Per Ton 




7.96' 




8.7^ 




8.79 


Total Quicklime- 


Tons 


1745 




927 




2^8 






Per Ton 




6.92 




8.99 




8.97 


Total Hydrate - 


Tons 


553° 




2264 




2828 






Per Ton 





8.22 




7 . 8; : ; 




8.42 


BUILDING 












Quicklime, Bulk - 


Tons 


35 ; P 




2531 




1558 






Per Ton 




7.37 




7.89 




8.08 


Bbls.- 


Tons 


3098 




2485 




1889 






Per Ton 




15.05 




15.91 




15.94 


Bags - 


Tons 


2239 




2213 




1708 






Per -Lon 




11.91 




12.02 




11.57 


To tal Qui ckl ime- 


Tons 


8955 




7209 




5135 






Per Ton 




11.50 




11 . 83 




12.10 


Total Hydrate - 


Tons 


10 : .74 




9088 




7251 






Per Ton 




8. 56 




8.24 




8.27 



CHEMICAL 

Ouicklime 



Bulk - 


Tons 
Per Ton 


80548 




5.42 


54858 




5.48 


62233 


5.59 


Bbls.- 


Tons 
Per Ton 


583 




13.63 


838 




13.89 


1062 


14.04 


Bags - 


Tons 
Per Ton 


2713 




9.00 


3070 




<J • oo 


2831 


3.65 


Total Quicklime- 


Tons 
Per Ton 


83647 




5.85 


58768 




5.78 


88176 


5.86 


^otal Hydrate - 


Tons 


19552 






19599 






19362 






Per Ton 






7.27 






7.10 




7.37 


TOTAL LIME 


- Tons 109,811 






97,833 






100,816 






Per Ton 


L 


the 


6.84 






h. ( ( 




6.93 


* Prom statistic 

none 


s collect 


ed by 


Code Authority 


of 


the Lime Indus 


try. 



-IBS- 
COMPETITION UNDER THE PRESENT SYSTEM 

Cutthroat csmpetiticn under the old chaotic manner of distribution 
was destructive particularly in two ways. Eirst, price wars resulted in 
price declines, which were unrelated to natural price recessions contin- 
gent with curtailment in market demand. Such uneconomic price declines 
frequently went below the cost of production of the manufacturer initiat- 
ing such price warfare and the repercussions and consequent wastage of 
capital spread to other manufacturers. It should be borne in mind in 
making any comparison of prices with the period from 1930 to 1933 that 
in many areas through the operation of the above conditions these prices 
have fallen to levels which have destroyed capital and prevented the 
maintenance of even a living wage to labor. 

The present marketing plan tends to minimize such uneconomic price 
declines and therefore directly benefits labor as well as affording some 
protection to capital that is wisely and economically invested. 

Competition under the present marketing plan is not eliminated; it 
merely is out in the open and is' conducted according to fair rules known 
by all. To some, it is a new form of competition in.which quality of 
product, dependability and character of service, and integrity of the 
manufacturer predominate. 



OPEN PRICE POLICY ' 

In addition to the basing point and average 'cost provisions of the 
Code, Section 3 (c), Article III, also provides for an open price policy 
The price publication features of the Coae are closely linked with the 
proper and intelligent use of the basing plan. The period of five days 
before a filed price became effective, except as provided for, is necessary 
to enable all manufacturers to ruote intelligently and upon a common com- 
petitive basis. 3y this means only can the basing noint plan sf marketing 
be effective. The elimination of the open price provisions of the Code can 
lead only to disastrous price wars and demoralization of markets, with con- 
sequent reductions if wage scales to a starvation basis such as formerly pre- 
vailed in many sections of the Quntry where wage rates in the lime in- 
dustry havo been as low as ton cents and in some extreme cases as low as 
five cents an hour. Adeouate purchasing power of labor as provided for by 
the minimum wago scales of the Code can be maintained only by the main- 
tenance of reasonable price levels for lime products, and to assure such 
maintenance the open price policy is an essential provision of the Code. 



9836 



-189- 

EECOMffiNDATIONS 



In view of tn° results thus far achieved, the Code Authority 
earnestly recommends that the "casing point provisions be extended as 
a part of the Lime Code for the remainder of 1934. By the cxoiration 
of that time, additional data will have become available upon which 
further recommendations can be predicated. 

Hecessary marketing provisions, namely, basing point, weighted 
average district cost, and the open price policy constitute the heart 
of the Code, and are essential to maintenance of labor schedules. 
Without these factors the lime industry would be helpless and utterly 
unable to operate under the National Industrial Recovery Act. 

Respectfully submitted, 

CODE AUTHORITY 



Norman G. Hough 
Executive Officer 



Washington, D. C. 
February ?, 1934 



J83fi 



-190- 

Exhibit D-l 



•I able 1 

INTERSTATE SHIPMENTS OF LIKE I¥, SEOBT TONS 
(During 1929) 

ARKANSAS 



Destination 
and/or 
Origin E:-rports Imports 



Alabama 31 

Iowa 

Kansas 

Louisiana 

Missouri 2,508 

Nebraska 

Ohio 

Oklahoma 3,870 R54 

Tennessee 75 150 

T exas 



Production consumed within the state: 10,890 tons 





195 


1 


,n?F, 


o . 


,834 




949 




709 


3 


,870 




75 


1 


,449 



Source: From data furnished \>y the Bureau of Mines. 



983^ 



-191- 



Exhibit D-2 



TABLE 2 

IHTERSTATZ SHI^MEITTS OP LIME II SHORT TOI T S 
(Daring l c 29) 

ILLINOIS 



Destination 
rnd/or 
Orx; ;in 



Idaho 

Indiana 

Io^a 

Kansas 

Michigan 

Minnesota 

Mississippi 

Missouri 

Nebraska 

Ne v > York 

North Dakota 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 

South Dakota 

Tennessee 

Utah 

Virginia 

West Virginia 

Wisconsin 



Er.jorts 



1,603 

11,755 

13,236 

256 

3,114 

2,913 

1,292 

804 

302 

1,652 

656 

25 

18 

508 



12,025 



Production consumed within the state: 69,223 



Irraorts 



12,163 

230 

73,304 

308 

56,611 

1,822 



3;i72 

78,151 



Source: Prom data furnished by the Bureau of Mines. 



9836 



-192- Exhibit D~3 

.TABLE 3 

INTERSTATE SHIPHEITS OF LlivIE III SHORT TONS 
(During 1929) 

CONNECTICUT 



Destination 
and/ or 
Origin Exports Imports 

I.iaine 231 

Lias s achus etts 9,372 9, 48 7 

Missouri 1 

Nebraska 5 

Ile^ Ken-? shire 501 

Nev? Jersey 1,323 

lie-' York 5,435 391 

North Carolina 10 

Ohio 5,689 

Penny"! vania 5,945 

Rhode Island 6,066 

Vermont 1 121 

Virginia 360 

Vfest Virginia 76 

T7i scons in 1 

Production consumed uithin the state: 12,536 



Source: Prom data furnished by the Bureau of i lines. 



9836 



19 3 ~ Exhibit D-4 



TABLE 4 



INTERSTATE SHIPMENTS OF LIII3 I" SHORT TONS 
(During 1929) 

INDIANA 



Destination 
and/ or 



Origin Exports Imports 

Ala/ba 2 

District of Columbia 18 

Florida 1 

Illinois 12,162 11,755 

Iopa 342 

Kansas 440 

Kentucky 5,080 

Loui si cy.c. 3 

Michigan 18,999 

Minnesota. 37 

Mississippi 3 

Missouri . 8,516 

Ner Jersey 9 

New York 193 32 

Ohio 14,753 28,411 

Oklahoma . 60 

Pennsylvania 1,103 

South Dakota 1 

Tennessee 115 

Utah 3 

Virginia 1 2d 

West Virginia 101 1,921 

Wisconsin 1,804 3,253 

Production consumed within the state: 35,581 



Source: From data furnished by the Bureau of Mines. 



9836 



-194- 

TABLE 5 



Exhibit 



INTERSTATE SHIPMENTS OF LI1IE IN SHORT TONS 
(During 1929) 

MAINE 



Destination 
and/ or 
Origin 



Exoorts 



Inroorts 



Connecticut 

Liassacliusetts 

New Hampshire 

New Yorl: 

Ohio 

Rhode Island 

Pennsylvania 

Vermont 



2,130 

545 



146 
75 



231 
2,215 

60 
944 

3,859 
1,270 



Production consumed within the state: 12,212 



Source: >oa data furnished by the Dure: u of Lines. 



9836 



~ 195 Exhibit B-6 



T^JBLE 6 



INTERSTATE SEIPIJIITS OF LliZ IN SHORT TONS 
(Boring 1929) 

ili RYLAKD 



Destination 
and/or 

Origin Exports Imports 



Delaware 3,097 

District of Columbia 110 

New Jersey 8,44-9 

New York 3,144 140 

North Carolina 125 

North Dakota 165 

Ohio 10,548 

Pennsylvania 2,640 16,064 

Vermont 

Virginia' 58 2,995 

West Virginia 550 39,578 

Wisconsin 5 

Production consumed within the state: 15,256 



Source: From date furnished by the Bureau of Mines. 



9836 



-196- 
TABLE 7 



Exhibit D-7 



inTEB.STi.TE SHIF .31SJJTS OF LIME II" SEOET TOITS 
(During 1929) 

MASSACHUSETTS 



Destination 
and/ or 
Origin 



E:qports 



Inroarts 



Connecticut 

District of Columbia 

Maine 

Missouri 

He r ' Earn shire 

Hew Jersey 

New York 

Ohio 

Penns" lvania 

Puerto 31 co 

Rhode Island 

Vermont 

Virginia 

Uest Virginia 

Wisconsin 



9,437 

40 

2,215 

44C 

3,918 

42,182 

67 

2,432 

240 

693 

231 



9,372 

2,130 
125 



16,868 

11 , 553 

6,035 

306 

6,773 

379 

100 
41 



Production consumed within the state: 20,965 



Source: From data furnished by the Bureau of Mines, 



9836 



-197- 
TABLE 8 



Exhibit D-8 



IKTEHS?CkTE SHIPLIEITTS OP LILLE IN SKOHT TOWS 
(During 1929) 

MICHIGAN 



Destination 

and/or 
Origin 



Exports 



Imoorts 



Illinois 

Indiana 

Iowa 

Minnesota 

Missouri 

New York 

North Dakota 

Ohio 

Pennsylvania 

South Dakota 

Vermont 

West Virginia 

Wisconsin 

Canada 



230 

600 
4,524 



75 



205 



39,644 
1,081 



Production consumed within the state: 59,562 



3,114 
18,999 

230 

12,591 

461 

80,901 
200 



124 
1,470 



Source: Pron data furnished by the Bureau of hir.es. 



9336 



-193- 



Exhibit D-9 



TABLE 9 

INTERSTATE SHIPMENTS OP LIME I IT SHORT TOITS 
(Daring 1929) 

Missouri 



Destination 
and/ or 
Origin 



Exports 



Inroorts 



Alabama 

Arizona. 

Arkansas 

Colorado 

Connecticut 

Florida. 

I daho 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Nebraska 

New Jerse" 

Ne 1 "' Mexico 

Ne^ York 

North Dakota 

Ohio 

Oklahcna 

Pennsylvania 

Rhode Island 

South Carolina 

South Dakota 

Tennessee 

Texas 

Utah 

Virginia 

West Virginia 

Wisconsin 

Wyoming 

Canada 



150 

50 

2,508 

12,579 

1 

20 

577 

73,304 

8,516 

30,374 

30,158 

2,053 

2,061 

125 

12,5 r 'l 

6S6 

1,025 

7,505 

151 

574 

727 

555 

2,514 

16,909 

22 

1,500 

1,285 

5 r '9 

1 , 991 

1 , 783 

20 

18 

233 

14,203 

1,408 

189 



949 



804 



6 
7,483 
1,018 



173 



Production consumed within the state: 70,220 



Source: Fron data furnished by the Bureau of Mines. 



9856 



-199- 



Exhibit D-10 



TABLE 10 

IUTERSTATS SHIPMENTS 0? LIKE II SHORT T01TS 
(During 1?29) 

KEJ YORK 



Destination 

and/ or 
Origin 



Exports 



Irmorts 



Connecticut 

Illinois 

Indiana 

Maine 

Maryland 

Mas s a chus e 1 1 s 

Michigan 

Missouri 

Hew Jersey 

North Carolina 

Ohio 

Pennsylvania 

Rhode Island 

Vermont 

Virginia 

West Virginia 

Wisconsin 

Canada 



391 

S83 

32 

60 

140 

16,368 

461 

6 

1,170 

15 

15,299 

8,048 

105 

39 

23 

47 
2,224 



5,435 

193 

3,144 
42,182 

787 



94,462 
86,039 



16,279 
226 



Production consumed within the state: 60,664 



Source: Eron data furnished by the Bureau of Mines. 



3836 



-200- 
TA3LE 11 



Exhibit D-ll 



INTERSTATE SHIPMENTS OF LIME III SHORT TOMS 
(Daring 1929) 

OHIO 



Destination 
and/ or 
Origin 



Alabama 

Arizona 

Arkansas 

California 

Colorado 

Connecticut 

Delaware 

District of Columbia 

Florida 

Georgia 

Idaho 

Illinois 

Indiana 

Iowa 

Kansas 

Kentucky 

Louisiana 

Maine 

Maryland 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 

Nebraska 

Hew Hampshire 

New Jersejr 

Net? Me;:ico 

Ne-7 York 

North Carolina 

North Dakota 

Oklahoma 

Oregon 



Exoorts 



2,010 

11 

654 

90 

676 

5,689 

1,082 

7 , 298 

5,878 

4,794 

62 

56,611 

28,411 

4,342 

1,315 

13,066 

5,160 

944 

10,548 

11,553 

30,091 

.4,377 

1,482 

7,483 

110 

2,364 

11,029 

23,461 

614 

94,462 

7,945 

373 

2,355 

91 



Imuorts 



,656 
14, 753 



353 



67 



2,614 



13,299 



9836 



( Continued) 



-201- 

0"I0 
(Co itinued) 



Destination 
and/or 

Origin Sxports Imports 

Pennsylv. nia 87,123 30,129 

Rhode Island 3,416 

South Carolina 2,967 

South Dakota 1,125 

Tennessee 6,169 14,514 

Texas 1 f 314 

Utah 60 

Vermont . 747 

Virginia 11,335 1,036 

Washington 122 

West Virginia 22,019 32,194 

Wisconsin 5,252 85 

Wyoming 263 

Canada 6 , 331 

©ther Countries 118 

Unspecified 541 

Production consumed within the state: 268,295 



Source: ?rom data furnished by the Bureau of Mines, 



TABLE 12 



Exhibit D-12 



INTERSTATE SHIPMENTS OP EH 31 III SHORT TONS 
(During 192?) 

PENNSYLVANIA 



Destination 
and/ or 
' Origin 



Exports 



Irroorts 



Connecticut 

Delaware 

District of Columbia 

Plorida 

Illinois 

Indiana 

Kentucky 

Maine 

Maryland 

Has sacnus et t s 

Michigan 

Minnesota 

Missouri 

lie'? Haqoshire 

Ne-7 Jersey 

New York 

Ohio 

Rhode Island 

Vermont 

Virginia 

West Virginia 

Uisconsin 

Canada 

Other Conrtries 



5,945 

33,751 

1,810 

235 

1,822 

500 

3,859 

16,064 

6,033 

200 

2 

1,018 

2,383 

57,188 

86,039 

30,129 

866 

891 

4,931 

1 

1,071 

137 



Production consumed within the state: 429,057 



1,103 



2,640 
2,432 



22 



8,048 
87,128 

199 

6,600 

180,250 

10 



Source: Prom data furnished "by the Bureau of Mines. 



9836 



-203- E:diibit D-13 

T..3LS 13 

iktesst^te shie hikes op liits ii: short tons 

(During 1929) 

esettessse 



Destination 

and/or 

Origin Exports Imports 

Alabama 2,195 868 

Arkansas 150 7d 

Florida 7,325 

Georgia 7,245 

Indiana 115 

Kentucky 26,911 

Louisiana 3,249 

Maine 15 

Mississippi 2,380 

Missouri 1,991 

North Carolina 26,206 

Ohio 14,514 6,169 

South Carolina 3,433 

Virginia 15,797 

Wisconsin 29 

Production consumed within the state: 34,587 



Source: Prom data furnished by the Bureau of nines. 



9"'36 



-204- 
TABLE 14 



Exhibit D-14 



INTERSTATE SHIPMENTS OF LILIE IE SHORT TOES 
(During 1929) 

TEXAS 



Destination 
and/or 
Origin 



Arizona 

Arkansas 

Colorado 

Louisiana 

Missouri 

New Mexico 

Oklahoma 

Ohio 

Utah 

Other Countries 



Exports 



20 
11,876 

13,529 
2,855 

12 
24 



Imports 



260 
1,449 



1,783 
480 

1,314 



Production consumed within the state: 69,016 



Source: From data furnishec' o Tr the Eureau of Mines. 



9836 



-205- 
TaHLL 15 



Exhibit D-15 



irTEasTAT^ s'i^.^ts or li::e i:t shout tons 

(During 1929) 
TEST VTBGIFIa 



Destination 
and/ or 

Origin 



Shorts 



Imorts 



Connecticut 

Dela t.:. e 

District of Colvjnbia 

Illinois 

Indiana 

Kentviclr' 

Maryland 

Mas s achus et t s 

Michigan 

Missouri 

IT e 1 ■ Jersey 

New York 

North Carolina 

Ohio 

Pennsylvania 

Puerto Rico 

Rhode I oland 

South Carolina 

Virginia 

Wisconsin 

Canada. 



76 

2, l52o 

5,936 

3,172 

1,921 

16,383 

59,578' 

100 

124 

14,197 

16,279 

647 

32,194 

130,250 

1,595 

421 

17 

9,393 

237 

1 



Production consumed within the state: 36,845 



101 
550 

233 



22,019 
4,931 



6,047 



Source: From data furnished "by the Bureau of Mines. 



9836 



-206- 
TaBLE 16 



Exhibit D-16 



INTERSTATE SHIPMENTS OF LINE II" SH'.PT TOES 
(During 1929) 

FISCOFSlV 



Destination 
and/ or 
Origin 



Colorado 

Connecticut 

Illinois 

Indiana 

Iowa 

Kansas 

Maryland 

Mas sachus et t s 

Michigan 

Minnesota 

Missouri 

Nebraska. 

New Jerse3 r 

New York 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 

South Dakota 

Tennessee 

Utah 

Virginia 

Y/ashington 



Exports 



37 

1 

78,151 

3, 253 

317 

• 45 

5 

41 

1,470 

1,640 

173 

49 

351 

2b 

65 
45 
19 
10 
34 
29 
20 
1 
18 



Inroorts 



12,025 
1,804 



39,644 

3,000 

14,203 



47 
5,252 



Production consumed within the state: 44,306 



Source: From data furnished by the 3urecu of Fines. 



9836 



-207- 

TA3L3 1 

INTERSTATE SHIPMENTS 0? LILS I" SHORT TONS 
(During Feb. 1934, April 1934 and Feb. 1935) 

ALABAMA 

Sixth Largest Producing State During 1933 



Exhibit 



Destination 
and/ or 
Origin 



Agriculture Building Lime Chemical 
Exports Imports Exports Imports Exports Imports 



Alabama 

District of Columbis 

Florida 514.18 

Georgia 9.5H 

Illinois 

Louisiana 

Mississippi 

Missouri (E) 

Missouri (U) 

! T orth Carolina 

Ohio 

South Carolina 

Tennessee 

Alabama production consumed rithin state: 



232.95 
1,386.25 



1,100.90 








787, 


.80 




25.0 














174.59 






2, 


,166, 


.10 




989.04 








932, 


.15 




14.85 












240.0 


33.80 


30. 


40 










505.50 














147.45 


8. 


25 








1,152.40 


.te: 


Agri 


.culture 




2.0 




Building 








1,501.09 




Chemical 








8,292.98 



SOURCE: Compiled from monthly production reports submitted to the Lime 
Code Authority. 



9836 



-208- 



TABLS 2 



Exhibit E-2 



INTERSTATE SHIPMENTS OF LIME IN SHORT TONS 
(During Feb. 1334, April 1934 & Feb. 1935) 

Illinois, 8th Largest Producing State During 1933. 



Destination 
and /or 
Origin 



Indiana. 
Iowa 

Michigan 
Minnesota 
Missouri (E) 
Missouri (f) 
New Jersey 
New York ("") 
North Dakota 
Ohio 

South Dakota 
Wisconsin 



■Agriculture 



Exports I'-yjorts 



Building Lime C hemi cal _ 
Expor ts Import s Exports Imports 



33.0 



41.0 



4.0 



1.0 



48.0 
318.0 
110.0 
142.0 
441.25 
205.25 



11.0 

15.0 

30.0 

107.0 



25.0 3,128.15 1,158.10 
636.0 
874.0 
19.0 
229.35 
15.0 250.63 
20.0 
1.0 



383.0 254.0 
525.80 1,012.0 



554.0 

55.83 
140.58 



Illinois production consumed within state Agricultural 3.50 

Building 2,018,17 
Chemical 6,706.03 



Source: Compiled from monthly reports of production submitted to the Lime 
Code Authority. 



3836 



-20$- 

E::hioit 3-3 

Table 3 

I3IPSTAII SEIPIZliJTS 0" LI1.Z3 II: SIIOBT TOHS 
(Duri i Feb. 193H, April 1?3 Il & ?eo. 1935) 
Indiana, 3th Largest Producing State Daring 1953- 



Destination 


















anc./ d r 


A'-ricul 


.ture 


Build-in 


"; Line 


Chenica 


1 


Origin 


Erports 


Ir 


XOV'CS 


Export 


I: 


rrports Exports 1 


aports 


Illinois 


U.00 






25.00 




.Us. 00 


1,15S.10 


3,132.15 


IoTa 








22.50 






70.00 




Kentiiclr- 


li-1.30 






229*1+6 






761.00 




Michigan 


15 J. 00 






1+6S.56 






1.21U.93 




Minnesota 














1.00 




Iv T e- Yorh (7) 














•75 




Ohio 


9.00 




£2.00 


25.00 




127.25 


2,732.40 


1,226.09 


Pennsylvania ("J) 














43.00 




Tennessee 












75.00 






Virginia 
















3.06 


TTest Virginia 














2,721.45 




Uisconsin 














1^3,00 


90.46 



Indiana production consumed r ;ithin state Agricultural 23O07U 

Building 764.02 

Chenical. 4, 513.33 



Source: Compiled fro:: monthly production reports s^^'b:litted to the Line 
Code Authorit". 



9.S36 



-210- 

Exhibit E-4 

TABLE 4 

INTERSTATE SHIPMENTS OF LIME IN SHORT TOMS 
(During Feb. 1934, April 1934 & Feb. 1935^ 

Massachusetts, l^th Largest producing State During 1933 























Destination 




















and/ or 




Agriei 
Exports 


ilture 
Imports 




Buildin 


g Lime 


Chemical 


Origin 


Exports 


Imports 


Exports 


Imports 


Connecticut 




272.0 






453.45 


121.68 


28.90 






Delaware 














75.0 






Maine 






435.50 




15.0 


520.35 


179.90 




186.42 


New Hampshire 










.70 










New Jersey- 




40.0 






148 . 14 




100.0 






New York (E) 




381.12 




1 


,572.62 


1, 


,791.55 




0.75 


New York (■;■) 




20.0 






49.15 


1 


,033.0 






Ohio. 










0.84 


45.0 








Pennsylvania ( 


E) 




50.0 




41.58 




43.0 




65.18 


Pennsylvania ( 


■*; 








19.0 




45.0 




866.25 


Rhode Island 




40.0 






21.90 


21.0 


72.0 






Virginia 


















72.95 


Vermont 






30.0 






286.03 




1,301.28 


Tifest Virginia 


















31.0 


Massachusetts 


production consumed wi 


th 


in stats 


Agricultural 




251.55 














Build 


ing 


1, 


'174.59 














Chemi 


cal 


1, 


,072.99 



Source: Compiled from monthly production reports submitted to the Lime Code 
Authority. 



9836 



-211- 



Sxhlbit E-5 



Table 5 



INTERSTATE SHIPM3MTS OF LIME IK SHORT TONS 
(During Feb. Lo4, April 1934 and Feb. 1935*) 



MISSOURI - '..EST 
Third Largest Producing State During 1933 



Destination 


Agriculture 


Building Lime 


Chemical Lime 


and/ or 


Exports Imports 


Exports 


Imports 


Exo or t s 


Imports 


Origin 














Alabama 










240. 




Arkansas 




122 . 10 






735. 




Colorado 




492.10 






53. 




Idaho 




214. 










Illinois 




15. 


205 


.25 


554. 


250.63 


Iowa 




701.80 






677. 




Kansas 




1,161.20 






796 . 50 




Louisiana 




89.30 






213. in 




Michigan 










50. 




Minnesota 




91. 






30. 




Missouri (e) 


30. v> 


300.60 


57, 


32 


198. 1, 


164.72 


Nebraska 




590. 50 






732.30 




New Mexico 




15. 






100. 




Oklahoma 




573. 






478. 




North Dakota 










30. 




South Dakota 




4. 






112. 




Texas 




138.70 






162. 




Wisconsin 










25. 


5.63 


Wyoming 




19. 











Missouri (W) Production consumed within Missouri (\l) 



Agriculture 0. 
Building 798.0 
Chemical 723.3 



Source: Compiled from monthly reports of production submitted to the 
Lime Code Authority. 



9836 



-212- 



Table 6 



Exhibit E-6 



INTERSTATE SHIPMENTS OF LIME IN SHOUT TONS 
(During Feb. 1934, ipril 1934 & Eeb. 1935> 

MISSOURI - EAST 



Destination 












and/ or 




Agriculture 


Euildin 


g Lime 


Chemical 


Origin 


Exports Imports 


■Exports 


Innoorts 


Exports Imports 


Alabama 






14.85 


776.10 


Arkansas 




60.00 


66.0^ 




124.06 


Colorado 






2 f,| 8 . 54 






Florida 










30.01 


Illinois 




25.60 41.00 


488 . 06 


441 . 25 


13,247.72 229.35 


Indiana 




25. 10 


1.^0 




6,958.59 


Iowa 






142.13 




9,58 1.77 


Kansas 




75. -10 


48.00 




2,313.00 


Kentucky 






15. On 




43.01 


Louisiana 






30.00 




1,541.10 


Michigan 










5,953.88 


Minnesota 






15.00 




216.52 


Nebraska 










475.20 


Maine 










33.00 


New Jersey 










31.00 


New York (S) 










736.51 


New York ( . > 










679.01 


North Dakota 










491.00 


Ohio 






28.00 


35.0-1 


2,808.70 


Oklahoma 






46.60 




547.50 


Pennsylvania 


(E) 








73.00 


Pennsylvania 


(vrt 








181.01 


Rhode Island 










20.00 


South Carolina 








76.14 


South Dakota 






11. on 




143.17 


Tennessee 




• 


61.00 




438.89 


Texas 






3.00 




26.00 


Virginia 










2,081.00 


'Jisconsin 










2,042.62 


'Washington 










30.01 


Wyoming 










61.10 


Missouri (H) 




30.00 


57.32 


30O. 61 


1,164.72 198.00 


Export 










26.73 



Missouri - East production consumed within Missouri - East Agriculture 119.34 

Building 801.59 
Chemical 5,530.88 



Source : 



9836 



Compiled from monthly production reports submitted to the Lime 
Code authority. 



-213- 



Table 7 



Exhibit E-7 



INTERSTATE SHI.- FNTS OF LI. 3 IN SHORT TONS 
(During Feb. 1934, April 1934 & Feb. 1935) 

Ohio, Largest Producing State During 1933. 



Destination 
and/or 


Agriculture 


Building Line 


Chemical 


Origin 


Exoorts Imports 


Exoorts Invoorts 


Exoorts Imoorts 



Alabama 




Arkansas 




Connecticut 




Delaware 




District of Cclumlj 


ia 


Florida 




Illinois 


1. 


Indiana 


82. 


Kentucky 




Louisiana 




Maryland 


5. 


Massachusetts 




Michigan 


13 '. 


Minnesota- 




Missouri (e) 




North Carolina 




Hew Hampshire 




New Jersey 




New York (e'* 


32. 


New York (V7) 


50. 


Pennsylvania (E^ 


112. 


Pennsylvania (7/0. 


226. 


Ehode Island 




Tennessee 




Virginia 


19. 


v/est Virginia 


67. 


'Ji scons in 





4-\13 



3"). 40 

15. 
120. 

91. 
12'\ 

80. 
383. 
187.25 

30. 

272. 

45. 
654. 05 

15. 

35. 
105. 

80. 

62. 
396. 
494. 

58. 
328. 

15. 

60. 
139. 

54. 



15. 
29. 



,84 



28. 



14.40 

15. 
21.50 



55.83 254.0 
1,286."»9 2,738.40 
3,717.28 
260. 



559.35 
2,818.71 



856. 
665. 



2,149 
55. 



1,129. 
15. 



123.44 

664. 
1,590.95 
1, 112.07 

5,889.62 
1,112.07 
2,470. 



Ohio production consumed within the states: 



Agriculture 

Building 

Chemical 



1, '48.11 
1,810.10 
9,489.28 



Source: Cora-oiled from monthly renorts 
Code Authority. 



nroduction submitted by the Lime 



9836 



•214- 



Table 8 



Exhibit 3-3 



INTERSTATE SHIPMENTS C. LI E IiT SHO.IT TOSS 
(During Feb. 1934, April 1934 & "eb. 1935 "^ 

PEILiSYLVANIA - EAST 



Destination 


















and/ or 




Agri 


cul tur e 


Buildin 


g Lime 


Chem: 


.cal 


Origin 


Exports 




Imports 


Exports 


Imports 


Exp o r t s 


Imports 


Delaware 




638. '9 






338 . 42 




518.24 




Maryland 


1, 


,196.77 




127 . 00 


74.18 




385.05 




Massachusetts 




5'>.'X"> 








41.58 


65.18 


43 . 00 


Maine 














175.00 


1. 10 


Missouri (E*! 
















73.00 


New Jersey 


4, 


2 '9,35 






773.60 




1,024.55 




Hew York (e) 


2, 


161.25 




15 k '0 


345.45 




591.17 


149.98 


Hew York (',»") 










30.00 


4. '10 


483.50 




New Ha .to shire 














161.00 




Ohio 








1'2.00 


14.40 


58 . 00 


1,59''. 95 




Pennsylvania (\ 


J) 


122.95 


1 


,054.97 


42.70 


34.31 


4, 434.S5 1,6 '4.53 


Virginia 




464.20 




114.96 




49.50 




927.55 


Vermont 








48.00 








40.00 


West Virginia 




45. 0" 




46 i 


12.65 




314.00 


549.75 



Pennsylvania (e) production consunea within state Agricultural 3,679.79 

Building 1,874.50 

Chemical 10,643.45 



Source: Compiled froia monthly production reports submitted to the Lime 
Code Authority. 



9836 



Exhibit E-9 



Table 9 



INTERSTATE SHIPM23TS 0? LI. E III SH0 7 .T TONS 
(During Eeb. 1934, Aoril 1934 and Pe'o. 1935) 

PENNSYLVANIA - ..EST 



Destination 


















and/ or 


Agriculture 




Buildin 


.g Lime 


Chemical 


Origin 


Exports 


Imports 


Exports 


Imports 


Exports 


Imports 


Connecticut 


2.06 












54.84 




Delaware 


213.43 






175.05 






126 . 00 




Florida 


102. 












l v \51 




Illinois 














5.83 




Indiana 


0.23 












60.50 


43. 


Kentucky- 














15.71 




Massachusetts 










19. 





866.25 


45.0 


Maryland 


S4.79 






15.59 






254.05 




Maine 














3,075.75 




Michigan 














129.65 




Missouri (E") 
















181.01 


North Carolina 














2.09 




New Hampshire 














25.0 




New Jersey 


74.68 






15.0 






1,764.06 




New York (e) 


133.0 






33.0 






2,256.74 




New York ( '.:) 


441.51 






32.45 






1,878.40 




Ohio 


40. 13 


226. 







328, 





2,154.73 


2, H9.0 


Pennsylvania (E) 


1,034.97 


122. 


95 


34.31 


42, 


,70 


1,604.53 


4,434.65 


Virginia 


0.29 


68. 







84, 


,10 


363.77 


421.20 


Uest Virginia 




135. 







74. 


,0 


155 . 47 


4, ">80.97 


Wisconsin 
















4.0 



Pennsylvania (\l) Froduction consumed within state: Argriculture 4,170.71 

Building 644.89 
Chemical 12,630.56 



Source: Compiled from monthly production reports submitted to the Lime 
Code Authority. 



9836 



-216- 



Table 10 



Exhibit 3-10 



INTERSTATE SHIPMENTS ■OF-. Lli.E II SE0.1T TOES 
(Luring Feb. 1934, April 1934 and Feo. 1935) 

TENNESSEE 
Fifth Largest Producing State During 1933 



Destination Agriculture Building Lime' Chemical 
and/or Exports Imports Exports Imports Exports Irroorts 
Origin 



Alabama 
Florida 

Georgia 1.0 
Indiana 
Kentucky- 
Louisiana 
Mississippi 
MiS'SOuri (e) 
North Carolina 
Ohio 

South Carolina 
Virginia 
West Virginia 



8.35 


147.45 


1,152.40 




201.75 




698.30 




533.78 




799 . 30 




75.0 








411.46 




4,377.45 




40O.0 




721.6 5 




319.97 










61.0 




438.8' 


713.13 




4,584.90 




15. 


60.0" 


5,889.62 




968.45 




55.65 




27 . 60 




4, 369 . 65 
15.0 




hin state: 


Agriculture 


7.14 




Build 


.ing 1, 


725.75 




Chemi 


cal 3, 


306 . 45 



Source: Compiled from monthly production reoorts submitted to the Lime 
Code Authority. 



9836 



-217- 



Table 11 



Exhibit E-ll 



i [ttshstate shipments o. ll,.e in shout tons 

(During Feb. 1934, Aoril 1934 and Feb. 1935^ 
VIRGINIA 

Seventh Largest Producing State During 1933 



Destin: 'ion 


A~ri 


culture 


Build: 


ins, Lime 




Chemic 


al Lime 


and/ or 


Exports 


Imports 


Exports 


Import 


s 


Exoorts 


Imports 


Origin 


















California 






1 > ' . 












Connecticut 














22.95 




District of 


















Columbia 


18.0 




684.62 












Indiana 














■ 3. '6 




Maine 














425.0 




Massachusetts 














72.95 




Maryland 


124. 


611.0 


394.12 








569.75 




Missouri (E^ 
















2,081.0 


North Carolina 


. 654.0 




1,556.15 








769.50 




New Jersey 


87; 




59.75 






2, 


197.41 




New York (E' 


70.50 




13.40 








493.13 




New York ('/) 














247.90 




Ohio 




19 . n 




139. 





i; 


,112.07 




Pennsylvania ( 


















<E) 


114.96 


46^.20 


49.50 








927.55 




Pennsylvania 


















(nn 


68.0 


0.29 


84.10 








421.20 


363.77 


Rhode Island 






327.50 












Tennessee 








27. 


60 






4,369.65 


'Vest Virginia 


212.25 


111.56 


359.84 


129, 


90 


3, 


,002.85 


2,137.40 


Wisconsin 
















0.13 


Virginia production cc 


'nsumed with 


in state: 


Agriculture 


609.70 










Bu: 


tiding 




2,505.11 










Chemical 




1,672.80 



Source: Compiled from monthly reports of production submitted to the Lime 
Code Authority. 



9836 



-218- 



Exhibit S-12 



Table 12 

INTERSTATE SHIPMENTS OF LIME III SHCRT TONS 
[■During Feb. 1934, April 1934 and Feb. 1935 N 

WEST VIRGINIA 

Fourth Largest Producing State During 1933 



Destination Agriculture Building Lime Chemical 

and/or Exports Inports Exports Iimoorts Exports Imports 
Origin 



Delaware 




31.0 




30.0 




6-\r> 




District of 
















Columbia 








341.0 








Kentucky 








87.95 




0.50 




Massachusetts 












31.0 




Maryland 




305.28 


1.0 


463.0 




2,286.09 




Maine 












60.0 




Michigan 












75. 




Indiana 














2,781.45 


North Carolina 






41.0 




244. 1 




Hew Jersey 




30.0 








435.0 




New York (eT 




45.0 




42.0 




769.0 




New York (W N 








20.0 




803. 1 




Ohio 






67.0 


21.50 


54. 


,0 2,470.0 


1,029.0 


Pennsylvania 


(tf 


46.0 


45.0 




12. 


65 549.75 


314.0 


Pennsylvania 


W 


135.0 




74.0 




4,080, 97 


155.47 


Tennessee 














15.0 


Virginia 




111.56 


212.25 


129.90 


359, 


,84 2,137.40 


3,002.85 


West Virginia Pr 


Dduction 


c on suued 


within 


state: 


Agriculture 


655.86 














Building 


279.87 














Chemical 


1,389.52 



Source: Compiled from monthlv production reoorts submitted to the Lime 
Code Authority. 



9836 



-219- 

Table 1 

VAllYi; G "ILL 17ET PRICES 
(in a sample month) 

COMPANY "A" LOCATED III VIRC-II7IA 



Destination 
of Shroments 



Chemical Quick in Bulk Chemical Hydrate 

Base Price-$7.00 per ton Base Price- $9.00 per ton 
Tonnage Mill Net Tonnage Mill Net 

Shipoed Per Ton Shipped per Ton 



Maryland 






Her Jersey 






New York- West 


137.9 


6.10 


Ohio 


127.7 


5.45 


Pennsylvania-Eo.st 






Pennsylvania- West 


27.2 


5.70 


Virginia 


7.0 


8.38 


West Virginia 


1.0 


8.00 



115.3 
95.0 



60.0 

48.0 
25.5 



7.36 
7.60 



7.90 

8.51 
7.30 



Total Shipments 



360.8 



343.8 



Average Mill Net 



o.i 



7.67 



Source: Computed from monthly production reports submitted to the 
Line Code Authority. 



9836 



-220- 



Ta"ble 2 



VARYING LULL NET PRICES 
(In a sample month) : 

CClvlPANY "B" LOCATED IN WESTERN PENNSYLVANIA 



Destination 
of Shi-oments 



Chemical Quick in Bulk 
Base Price 

Tonnage Hill Net 

Shinped Per Ton 



Cheriical liydrate 



$7.00 Per ton Base Price- $8.50 Per Ton 



Tonnage 
Shitroed 



Hill Net 

Per Ton 



Connecticut 






33.0 


7.47 


Florida 






50.0 


7.00 


Maryland 


32.2 


6.30 


15.5 


7.84 


Massachusetts 


186.8 


5.77 


26.0 


6.71 


Michigan 


51.6 


4.31 






Ner: Jersey 


655.7 


5.95 


285.0 


8.24 


New York-East 


393.5 


6.87 


100.0 


8.46 


Ner York-West 


599.5 


7.27 


190.0 


9.51 


Ohio 


163.9 


6.72 


1.0 


9.50 


Pennsylvania-East 


169. 


6.73 


241.0 


8.00 


Pennsylvania-West 


3,318.3 


6.90 


158.3 


8.60 


West Virginia 


156.0 


6.99 






Total Shipments 


5,727.3 




1,099.8 




Average Mill Net 




6.75 




8.36 



Source: Computed from monthly production reports submitted to the 
Lime Code Authority. 



9836 



-221- 



Table 3 



VARYING LIL1 LIST PRICES 
(in a sample month) 

ccMpaliy "c" located n: telkessee 



Destination 
of Shroments 



Chemical Quick in Bulk 
Base Price - $6.25 Per Ton 
Tonnage Mill Net 

Shi-Q-oed Per Ton 



Chemical Hydrate 
Bas-3 Price -$8.50 Per Ton 
Tonnage Till ITet 

Shi-oped Per Ton 



PI or i da 






Kentucky 


1,784.8 


- 3.77 


Louisiana 


76.6 


.5.77 


Ilorth Carolina 


27.8 


- 6.25 


Ohio 


1,078.4 


3.75 


Tennessee 


23.5 


6.15 


Virginia 


1,139.6 


4.55 


Total Shipments 


4,180.8 




Average hill ITet 




4.05 



30.0 
17.5 



8.26 
8.50 



30.0 


6.75 


57.0 


8.57 


25.0 


8.50 


159 . 5 





8.15 



Source: Confuted from monthly production reports submitted to 
Lime Code Authority. 



9836 



-222- 

Table 4 

VARYING HILL NET PRICES 
(in a sample nontli) 

COhPAiTY »D" LOCATH). 117 TENNESSEE 





Chemical 


Quick In Bulk 








Base Price- $6.25 Per Ton 


Base price- 


$8.50 Per Ton 


Destination 


Tonnage 


hill Net 


Tonnage 


Mill Net 


of Shipments 


Shipped 


Per Ton 


Shipped 


Per Ton 


Alabama 


130.0 


5.48 


0.5 


10.50 


Florida 


345.4 


5.89 


25.0 


8.27 


Georgia 


. 19.0 


6.00 . 


40.0 


8.39 


Kentucky 






30.0 


8.30 


Louisiana 




• 


25.0 


7.75 


North Carolina 


25.2 


5.85 . 






Ohio 


196.1 


6.03 . 


15.0 


6.60 


South Carolina 


• 




15.0 


10.60 


Tennessee 


.54.0 


6.26 


95.0 


8.30 


Total Shi -orients 


769.7 


• 


245.5 




Average Hill Net 




5.88 




8.29 



Source: Computed from monthly production reports submitted to the 
Line Code Authority. 



9836 



-223- 



Exhibit F5 



Table 5 

VARYING- KILL NET PRICES 
(in a sample month) 

COMPANY "E" LOCATED IN CALIFORNIA 





Chemical 


Ouick in Bui 1 : 




Chemical 


Hydra 


te 




Base Price 


s $12.25 Per Ton 


B, 


rise Price 


= $14 


.75 Per Ton 


Destination 


Tonnage 


Mill Net 




Tonnage 




Mill Net 


of Shipments 


Shipped 


Per Ton 




Shipped 




Per Ton 


California 


185.0 


11.22 




41.0 




14.9R 


Oregon 


140.0 


8.96 










Washington 








20.0 




8.00 



Total Shipments 



275.0 



fil 



Average Mill Net 



10. OR 



12.93 



Source: Computed from monthly production reports submitted to the Lime 
Code Authority. 



9836 



"•'--224- 



Exhibit Eft 



Table ft 

VARYING MILL NET PRICES 
(in a sample month) 

COMPANY "F" LOCATED IK ILLINOIS 



Destination 
o f Shipment e 



1 1 1 i no i s 

Indiana 

Michigan 

Ohio 
Wisconsin 



Chemical Quick in Bulk 
Base Price = "7.25 Per Ton 
Tonnage Mill Net 
Ship-oed Per Ton 



346.0. 

972.0. 
72.0. 

238.0. 



Chemical Hydrate 
Base Price - $9.50 Per Ton 
Tonnage Mill Wet 
Shipped' '"Per Ton 



7.47 
7.25 
6.31 

ft. 87 



ft58.0 


G.74 


185.0 


9.25 


140.0 


8.14 


51.0 


7.35 


277.0 


8.41 



Total Shipments 2,128.0 
Average Mill Net 



7.27 



1,329.0 



8.ft2 



Source: Computed from monthly production reports submitted to the Lime 
Code Authority. 



983 ft 



-224-A- 



Table 7 

VABYINO MILL NET PRICES 
(in a sample month) 

COMPANY IV G-" LOCATED IN MISSOURI 



Exhibit F7 



Chemical Quick in Bulk 

Base Price = $6.00 Per Ton 
Destination Tonnage Mill Net 
of Shipments Shipped Per Ton 



Alabama 


386.0 


4.91 


Arkansas 






Florida 






Illinois 


1580.0 


5.09 


Indiana 


469.0 


4.30 


Iowa 


1471.0 


5.49 


Kansas 






Louisiana 


413.0 


7.1C 


Michigan 


233.0 


5.05 


Missouri - 


East 159.0 


5.04 



Missouri - TCest 

Nebraska 

New York - East fil.O 

Ohio 789.0 

Oklahoma 65.0 

Pennsylvania - "Vest 

Texas 

Virginia 2031.0 



4.72 
4.55 
6.12 



Chemical Hydrate 
Base Price = 38.00 Per Ton 
Tonnage Mill Net 
Shipped Per Ton 



90.0 


^.00 


40.0 


8.00 


15.0 


£.£7 


£40.0 


7.44 


18.0 


7.11 


45.0 


7.93 


59.0 


6.83 



3.30 



140.0 


6.97 


300,0 


£.52 


35.0 


7.28 


25.0 


7.32 


375.0 


7.00 


116.0 


6.57 


30.0 


7.70 


50.0 


5.10 


15.0 


6.67 


25.0 


7.00 



9836 



-225- 



VARYING MILI NET PHI CSS 
(in a sample month) 

company "g" lcc-t::d in Missouri 

(Contin led) 



Cheinical Quick in Bulk 
Base Price ■> §6.00 Per Ton 

Destination lonnage Mill Net 
of Shipments Shipped Per Ton 



Wisconsin 
Wyoming 



34.0 



5.58 



Chemical Hydrate 
3asc Price = 38.00 Per Ton 



Tonnage 
Shipped 



30.0 



Mill Net 
Per Ton 



fi.40 



Total Shipments 7,^81.0 
Average Mill Net 



4.R9 



2,028.0 



7.01 



Source: Computed from monthly production reports submitted to the Lime 
Code Authority. 



9836 



( 



■< 



-226- 



Table 8 



Exhibit F8 



VARYING- MILL NET PRICES 
(in a s amp 1 3 mo n th ) 

COMPANY "H" LOCATED IK MASSACHUSETTS 



Chemical Quick in Bulk 
Base Price - $8.00 Per Ton 



Chemical Hydrate 
Base Price » S9.00 Fer Ton 



Destination 


Tonnage 


Mill Net 


Tonnage 


M 


ill Net 


of Shipments 


Shipped 


Per Ton 


Shipped 


Pi 


or Ton 


Massachusetts 






11.0 




11.63 


New Jersey 






15.0 




6.66 


New York - East 


165.0 


7.50 


99.0 




8.29 


New York - West 


14.0 


9.08 


15.0 




9.34 


Pennsylvania - East 






40.0 




6.90 


Pennsylvania - West 


15.0 


5.40 


15.0 




6.80 



Total Shipments 
Average Mill Net 



194.0 



7.45 



19.5 



8.04 



Source: Computed from monthly production reports submitted to the Lime 
Code Authority. 



9836 



. . -227- 



TA3LE I 



Exhibit G-l 



SUPPLUS AHD. DEPICIT LIME STATES, 1929 AhD 1933 

















1929 Tons 




1933 


Tons' 


State 


Sunlus 


Deficit 


Sur :dus 




Deficit 


Alabama 


50,391 




32,117 






Arizona 


13,947 




6 , 35.9 






Arkansas 


19,269 






(1) 




California 




38,909 






11,023 


Colorado 




15,212 






3, 32G 


Connecticut 


(1) 










Florida 


(1) 










Georgia 




24,264 






17,157 


Idaho 


(1) 










Illinois 




304,014 






44,661 


Indiana 


12,443 








13 , 655 


lows. 


(1) 










Kentucky 


(1) 






(1) 




Maine 


(1) 










Maryl and 




47,486 






22,746 


Massachusstts 


32,080 




9,944 






Michigan 




87,189 






45,399 


Minnesota 


(1) 






(1) 




Missouri 


219,169 




167,781 






Montana 


(1) 








1,303 


Nevada 


(1) 






(1) 




Now Jersey 


(1) 






(1) 




New Mexico 


(1) 






(1) 




Nev; York 




325,166 






143,512 


North Carolina 


(1) 






(1) 




Ohio 


564,392 




280,313 






Oklaho-ia 


(1) 










Oregon 




6,385 




(1) 




Pennsylvania 




16,617 


52,518 






Hhoclc Island 




17,338 






8,890 


South Dakota 


(1) 






(1) 




Tonnes sou 


125,175 




83,531 






Texas 


23,384 




3,215 






Utah.' 


2,485 




191 






Vermont 


48,009 




25,070 






Virginia 


63,622 




26,561 






Washington 


2,983 




1,660 






West Virginia 


238,563 




39,424 






Wisconsin 


6,760 








35,455 



9836 



-227-A- 



TABLS I (Continued) 



Exhibit (P'l 
(Cont.) 



192 
State Surplus 


'9 


Tc 


ns 
Dei 


1 c ?. t 


19 
Surplus 


S3 Tons 


Deficit 


Number of States 15 
Number in Undistri- 
buted 3 








10 
11 


13 
3 




11 
10 



Total 



13 



21 



Nino States Reported No Production 1929 
Eleven " " » " 1933 



16 



21 



(1) Undistributed. 

Sourc„: Data furnished oy U. 3. Bureau of Mines. 



983fi 



_■■■' r 



Exhibit G~2 
(Cont.) 



r. . 





SURPLUS a"' 


TTTTTi " 
, ...... 


P ST. .15 3 










co:?S"*o 


1528 - 


1932 










In "4111 


<: f 5>u ;hels 










Pi 


3r Cr -4t-\ Consu 


1 44 on - 4.1/ 5 


bushc 1 s 








Production 


Po;oluation 


Cons. 


Surplus 


1/ Deficit 


2/ 




Hiousands 


rhousands 


Thousmds 


i [illions 


' iillions 




Alp. 


34,000 


2,645,2 


11,054,3 




11.0 




Ariz. 


502, 


4 35,6 


1 ,315,5 




1.2 




Ark. 


247 , 


1,354,5 


' 7,775,2 




7.5 




Cal. 


11,047, 


5,677,3 


23,674,1 




12.6 




Col. 


17,111, 


1,035,8 


' 4,519,5 


12.3 






Conn. 




1,506,9 


5,700,8 




6.7 




Dol. 


1,3( 0, 


238,4 


J ,o 


.8 






D. C. 




,, 










Fla. 




1,468,2 


6,122,4 




6.1 




Ga. 


511, 


2,908,5 


15,153,5 




11.6 




Idaho 


27,028, 


>,0 


1,855,8 


25.3 






111. 


32,532, 


7,550,7 


31 ,819 , 8 


.7 






Ind. 


25,522, 


3 , 233 , 5 


] ; , _4 , 5 


15.0 






I OT 


7,445, 


2,470,9 


10 , ; -03 , 8 




2.9 




Kan. 


177,431, 


1,831,0 


7,3-3,8 


159.6 






Ky. 


5,002, 


2,614,6 


10,902,3 




7.9 




La. 




2,101,5 


8,7 4,6 




8.3 




;;e. 


51, 


797,4 


3,525,3 




3. 8 




I Id. 


8,648 , 


1,631,5 


5 9 80o 9 b 


1.8 






;;?sd. 




4, 249, 5 


17,750,9 




17.7 




•iich. 


15,523, 


3,842,3 


20,192,5 




4.7 




I finn. 


20,946, 


2 , 3 54 , 


10,3 1,7 


10.3 






i'iss. 


3, 


1,009, ] 


8,331,0 




8.4 




; o. 


20,363 


3,629,4 


15,134,5 


5.2 






' iont. 


45,167, 


r >7,6 


,2 "' ,8 


42.9 






l?e"b. 


53,538, 


1,370,0 


5,7 .- 5 , 1 


50,8 






I'fev. 


O 1 o , 


91,1 


372 , : 


.01 






• . 




435,3 


2,053,7 




2.0 




I ■ J . 


1,155, 


4,041,3 


15,352, - 




15.7 




11. .. 


4,140, 


■ 33,3 


1,735,2 


2.4 






r# Yi 


4,411, 


12,538,1 


52,492,2 




48.1 




i i ■ c • 


3 ,5 - , 


3,170,3 


1 5,3:5:i,l 




9.6 




11. D. 


102,905, 


630,8 


2,859,1 


100.1 






Ohio 


30,430 


5, S46 , 7 


27,715,7 


2. 






Okla . 


55,145, 


2,596,0 


9,991,5 


-' s 9 






Ore. 


21,205, 


'3,3 


r-> -\ryri 


17.2 






Pa, 


17,337, 


5,631,4 


40,1-32,7 




25.8 




R. I. 




637,5 


2,355, 9 




2.9 




S • C . 


575 , 


1,730,3 


7 , 350 , I 




5.7 




S. 7' . 


a < , o.j. , 


592 , 8 


3,3 i9, ; 


54.7 






Tenn. 


2,913, 


2, 313,6 


10,511,0 




8.0 




Te::. 


41,083, 


5,824,7 




16.8 







9836 



~228~A~ 
(continr 1) 



Exhibit S~2 

(Cont.) 





a- 


fOC 


luction 


Povjlp.tion 


Sons. 


Suralus 


1/ 


. (3 LlGit 2/ 




t: 


10 as f . l. s 


Thous? at s 


I Uf3Pa< -3 


] 'ill ion 


3 


; "illi ms 


Utah 






5,554, 


507 , 3 


2,117,7 


3.4 






Vt. 






15, 


3o9 , 5 


1,499,5 






1.5 


Va. 






3,220, 


, 21,9 


10,099,1 






.09 


'..'"Sli. 






42 , 882 , 


1,553,4 


5,519,4 


oS.4 






".". Va. 






l',643, 


1,729,2 


7,210,3 






5. 5 


Wis. 






l',859, 


2 , 939 , 


12,255,7 






. 10.4 


!7yo. 






3', 753, 


225,5 


340,5 


2.3 







Source: Co;.r dl d fro.: Statistics \rr th.3 De rrt::c\: 
1/ Surplus -'Production in Excess of Con ti ;. 

2/ Deficit - Donsurration in Excess of Pr action 



;ri culture. 



9336 



as 



Ah 



221$ 



is 
a: 

iff] 

Hi 

2211 



ii 



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It 



ii tsi ti 5 s . sa ja 

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! 

Si 



s .- 

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I 



215 p 



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9838 



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it 

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9836 



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230 



TSHT JOSTI SIHI II IB01IH1 JOH SHB5Q. OUT SHOIJICIHOO 



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if 



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N 


Ii 


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i 

9 


•Soi 

Si.8 


s 





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a p. g £ 



H OK 



ft & 

82 






ft ft 

Q O 



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211 



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s i: 



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Is.* 



111 



a> • N 

a) -h p. 

o M ft 

Q ft ff 



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si • 



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si ' 



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ft ft ft ft 

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r-l O c-t 
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-251- 

TAELE I 
VOLUME AND VAI#E OF SHIPMENTS, FIRST SIX MONTHS 1933 - 1934 



Volume of Shipments (snort tons) Value of Shipments l/ 
Size of Plant First First First Eirst 
(Based on Number Six Six Six Six 

Shipments of Months Months Per Cent Months Months Per Cent 
in 1930^ Plant s 1933 1954 Change 1933 1934 Change 

Data for the 47 identical plants 

Total 47 312,307 353,398 +13.2 1,984,625 2,697,273 +35.0 

Less than 5,000 short 

. tons 9 7,557 8,903 +21.1 69,051 85,309 4.24.3 
5,000 and under 
10,000 short 

tons 10 41,562 43,490 +4.6 ' 255,272 316,0.24 4-23.8 
10,000 and under 
15,000 short 

tons 5 17,302' 16,818 +8.7 103,716 136,825+31.0 
15,000 and under 
. 20,000 short 

tons 10 52,083 61,952 +18.9 324,849 458,437 441.1 
20,000 and under 
3^,000 short 

tons 3 20,512 30,117 +47.2 136,233 227,384 +66.9 
30,000 and under 
40,000 short 

tons 4 69,308 76,963 +11.0 384,654 556,546 +43.1 
40,000 short tons 

and over 6 104,183 113,080 + 8.5 710,870 922,254 J-29.7 

Data for all plants answering question 2/ 

Grand Total 55 335,726 381,005 2,114,514 2,173,621 



Source: NRA Research and Planning Division - Special Confidential Report on 
Lime Indust ry. 

1_/ Values are F.O.B. plant and are the amounts billed to the huyer he- 
fore discounts and including selling expense. 

2/ Totals for trie first six months 1953 and 1934 respectively. 



9856 



-232- 



TABLE 2 



AVERAGE VALUE PER SHORT TON SHIPPED DURING 
FIRST SIX MONTHS OP 1933 AND 1934 



Size of Plant Number 
(Based o n Shipments of 
in 1930) Plants 



Total 



Average Value per Short Ton Snippe d l/ 

First Six First Six Per Cent 
Months 1933 Months 1934 Change 



Data for the 47 identical plants 2/ 



47 



i>6.35 



37.63 



20.2 



Less than 5,000 

short tons 
5,000 and under 10,000 

short tons 
10,000 and' lander 15,000 

short tons 
15,000 and under 20.GC3 

short tons 
20,000 and under 30,000 

short tens 
30,000 and under 40,000 

short tens 
4 0,000 short tons 

and over 



9 


9.39 ■ 


■ 9 .-63 


2.6 


10 


5.14 


7 . 27 


18.4 


5 


5.99 


. 7.27 


21.4 


ic 


6.24 ■ 


7,40 


18.6 


3 


6.64 


7.53 


13.4 


4 


5.55 


7.15 


■28.8 


6 


6.82 . 


• e.ier 


19.6 



Source: N.R.A Research and Planning Division - Speeial Confidential 
Reports on the Lime Industry. 

1/ Average value per short- t^ns shipped are based on values 
f.o.b. plant and amounts billed to buyer before discounts 
and including 'Selling expense. 

2/ No data are available on the shipments in 193^ for the ten 
additional slants, consequently the above frequency cannat 
be presented for the larger number of plants. 



9836 



-233- 



TABLE 3 



PER CE17T OF ANNUAL CAPACITY OPERATIONS, 
GROUPED BY SIZE OF PLANT, 193C - 1934 
(BASED ON THE RELATION OF SHIPMENTS TO CAPACITY). 



Annual Shipments 
Size of Plants as a Per Cent 

(Based on Shipments Number of of Annual Capacity 
for 1930) Plants 1930 1934 



Data for 47 identical plants l/ 
Total 47 39.6 31.0 

Less than 5,000 snort 

tons 
5,000 and under 10,000 

short tons 
10,000 and und-r 15,000 

short tons 
15,000 and under 2") ,000 

short tons 
20,000 and under 30.00C 

short tons 
30,000 and under 4f ,000 

short tons 
40,000 shflrt ten? and 

over 



9 


19.7 


15.2 


10 


25.9 


28.3 


5 


38.2 


21.3 


10 


34.3 


28.0 


3 


39.5 


34.3 


4 


45. 1 


48.4 


6 


42.7 


29.7 



Source: NRA Research and Planning Division. Special Confi- 
dential Reports on Lime Industry. 

\J Due to lack of data on shipments, the group of plant: 

reporting partial data could not be shown on this 
table. 



983S 



-234- 
TABLE 4 

ATTITUDE TOv/ARD MULTIPLE .BASING- POINT SYSTEM WITH 
LIMITED FREIGHT ABSORPTION. (lO) 
(ARTICLE VIII, SECTION 3. OF AMENDED COLE). 



Size of Plant 
(Based on Shipments 
in 1930)' ■ 



Number of Plants in Favor of Above Code Provision 

No 
Total ;: ' for .- .-. Against . . Answer 



Lata for the 47 identical plants 



Total 47 

Less than 5,000 short ' 

tons 9 

5,000 and tinder 10,000.' 

short tons 10 

10,000 and under 15,000 

short- tons • 5 
15,000 and under 20,000 

short- tons 10 

20,000 and under 30,000 

short- tons . 3 
30,000 and under 40,000 

short tons . : 4 
40,000 short tons and 

over • ... 6 



25 

4 
7 
2 
5 
1 
3 
3 



18 

4 
1 
' 2 
5. 
2 
1 
3 



Grand Total 



Data for all plants answering quest 



ion-' 



59 



29 



26 



Source: NRA Research -and planning Division - Special Confidential Re- 
ports on Lime Industry. ,-. •* ■ 

1_/ No data available on the shipments -in 1930 for the 12 addition- 
al plants consequently the above 'frequency cannot be presented 
for the larger number of plants. 



9836 



-235- 

EXHI3IT K 

Original Price List on Limp Products for District 7 and District 12 

Note: Exhibit H contains th^ original price List filed 
with the Code Authority for Districts 7 and 12. 
As only one cony of th= r>ric" list was available, 
it seemed inadvisable to duplicate such a volumi- 
nous list (15 large typed cages of figures 16^ 
inches by 21g inch-s) so it was decided that this • 
exhibit snould accompany only the original copy 
of the report. 

This ;rice list is submitted as a sample to illustrate the de- 
gree of uniformity that has been acnieved by lime producers in Districts 
7 and l"' 1 -- District 12 includes the following states: Nebraska, Kansas, 
Oklahoma, Arkansas, Louisiana - -ast of the Mississippi River - and 
Missouri, west of the 93rd Meridian, district 7 includes Illinois, In- 
diana, and that part of Missouri east of the 9.',rd Meridian. 

The total area represented by the two districts is five times 
as great as all of England, Scotland and .ales combined and nearly three 
times as large as all of Germany. This on^ price list issued by the 
District Committee not only governs all prices of lime products sold by 
producers, out regulates in great detail the terras and conditions of sale. 
For example, if a' oroducer quotas carload lot -prices to a contractor he 
must first find out at what rice ch n Guilders' Supply dealer quotes lime 
and then quote th & same orice. 

The filed nrice list of this District Control Committee con- 
tains almost identical nric-s on six basing points fcr all the producers 
in ths district. Most of these prices are identical for all of the 
twenty widely separated lime producers , for in the entire list aggregating 
nearly 2,o00 distinct quotations there were only 29 deviations from the 
uniformly identical nrices filed by the other lime producers. This seems 
to represent the normal expectation of error which would result if all 
the producers attempted to live up to an agreement designed to secure 
comolete uniformity of all lime •■Trices without having before them an ex- 
act list to duplicate. 

Closer scrutiny of the various basing noint prices will retfeal 
more clearly the true nature of the deviations from established identical 
prices contained in this list. 

(a) On pages 4 and 5 are found the quotations of twenty lime pro- 
ducers using Chicago, Illinois, as a Casing point. Nearly 400 district 
price quotations pre listed and yet only two deviate in the slightest 
degree from the prices filed by the remaining 19 producers. 

(b) On pages 5 and 7, 19 producers using Hannibal, Missouri, as a 
basing point file "irices on 37 varieties and quantities of lime and yet 
there are only seven deviations from what appear to b° established prices. 

(c) The next list, found on pages 8 and 9 uses Limedale, Arkansas, 



9836 



-236- 

as a basing point, contains only two quotations to mar the perfect har- 
mony which chatacterizes the identical irices quoted by every producer 
in the two districts. 

(d) With Mitchell, Indiana, as a basing point, the producers seem 
to have acnieved a little less uniformity, for here (on pages 10 and ll) 
are found no less than ten deviations from the identical prices of the 
majority of the -producers. Four of these represent higher orices on ag- 
ricultural lime. Four others quote aigher nrices on building lime and 
two represent quotations on chemical lime. 

(e) On pages 12 and 13 are found quotations using Soringfield, 
Missouri, as a basing point containing eight deviations from identical 
prices. Four of these prices, higher than those filed by the remaining 
18 producers were quoted by a single company, the Indiana Lime and Stone 
Comoany, which filed prices one dollar oer ton higher than the remaining 
companies. On four items the deviating quotations are filed by the Ash 
Grove Lime and Portland Cement Company, $1.00 per ton higher on -pulverized 
lime and $.10 per bbl. higher on the same grade rf lime in 180 pound barrels. 
The other two deviations' represent' $3.00 per ton higher price's on ag- 
ricultural lime than the identical prices quoted by the remaining pro- 
ducers. 

(f) Page 14 contains quotation? on Easton, Louisiana, as a basing 
point by only one lime oroducer and there could therefore be no deviations 
registered by other orrducers at this basing point. 



9836 



• .' -237- 
SXHiriT L 
Form R-P-83 Confidential Sovemment Report File No 

THE NAIIOiAL RECOVERY ADMINISTRATION 
Research and Planning Division 

Washington, D. C. 

********* 

Soecial Confidential Report on the Line Industry 

Report on a separate for:. 1 , for ef:eh -plant . You may, however, make 
a consolidated report for all plants located in the sane city or town. 

PLEASE FILE REI T .RY 01" Oh 31SF0RE LjLT 10, 1935 

I HEREBY CERTIFY that this is a true and complete report to the best 
of my knowledge and belief. 

(Name of firm) (Street address) 

(City) (State) (signature of responsible 

official) 

INQUIRY I - L ILE INDUSTRY C AP ACITY AYE SHIPMENTS 

State the maximum number of tons of lime and lime products your plant 
was capable of producing (assuming 24-hour day and 31 days per month) 
during the following months: 

Hay 1930 short tons May 1934 short tons 

2 . Stat e the n um ber of tons of lime and lime -products shi-Q'oed during 

. ■ 1950 and 19 34 

hind of lime Shi pments (in short ton s -2,000 lbs) 

during 1 930 1954 

.'Building . . 

Chemical 

Agricultural . 

All other hinc s 

dotal shipments 

3. Estimate the amount of lime and lime -oroducts shipped during 1930 
and 1954 by the three following methods: 

Method of shipment Estim ated s hipments (in snort tons) 
___' during 1330 1934 

Railroad 



Truck T 27 ^ 

Water 

Total (sane as quest. 2). 

4. Estimate the amount of lime and line products shipped fron January 1 

to September 30, 1933, according to each of the five following 
"oricinr; method s: 

Pricing method Estimated shipments (short tons) 

(Jan uary 1 to September 50, 1935) 

(P.O. 3. Plant - freight allowed... 

(P. 0.3. Plant - n_ allowance for 

Rail freight 

Ship-(F. 0.33. Plant - part allowance 

ments for freight 

(Delivered prices 

Shipments by truck or water 

• Total shipments for period 

IITQjJIRY II - S-LLI1'?- kPT'IOPS 

5. luring the period from January to September 1955, were "delivered 

prices" made up of price or prices at one or more basing points 
plus freight from basing point to destination, regardless of 
location of shipping noint? ______ If so, name the basing ooint 

or points used (yes or no) 

6. Prior to the code (October 1955). did you use the multiple basing 

moint system as a method of quoting -orices? If so, 

state the year of origin and location of (yes or ho) 
each basing point. 

Kind of lime Year basing point system Location (cit" r and state) 
was adopted (estimate) used for each kind of 

lime at time system was 
. adonted 



Building. . . . 
Chemi cal .... 
Agricultural 



7. Did you ever adopt the basing point system as a means for quoting 

prices on lime and lime products ano. later discontinue it? 

If so, indicate approximate dates: (yes or no) 

(a) Easing point system adopted 

(month and year) 

(b) Basing point system later discontinued 

(month and year) 

8. State the location of basing points used during major part of 1954 

and the estimated shipments of lime and lime products quoted from 

.. each basin* ~ooint: - 

Railway distance Estimated shipments (short 
Location arid basing points from plant to tons) during 1934 priced 
used during major part of each basing point from indicated basing ;ooint 

1954 used used 

(city and state) (in miles) Building Chemical Agricultural 
lime lime lime 



-238- 



Shioments \>r true'', rater, etc. x xxx 

Total tons shipued xxxx 



S. (a) Are you in favor of the multiple basing point system of market- 
ing for the lime industry? 

(yes or no) 
(t>) Has your business been favorably effected b- r the marketing pro- 
visions (basing point system and open price filing) of the 
Lime Code? 



(yes or no) 

(Explain fully 



10. Are you in favor of the multiple basing point s"stem for the lime 
industry with limited freight absorption (as defined below and 
which is described in Amended Code, Article VIII, Section 3)? 

Explain i 

(yes or no) 



(Limited freight absorption plan: - the limitation of net realized 
plant price for any lime product sold for delivery in any destination 
or area outside the low rate area where the manufacturing plant is 
located to not less than eighty percent (80$) of the filed price for 
that product F.0.3. basing point.) 

11. Has the basing point system (since October 1923) given certain ad- 
vantages to your competitors that they did not have prior to the 
code? 



(yes or no ) 

E:nlain fully 



12. State the total shipments of lime and lime products and payrolls for 
the following months: 

Shipments of lime and lime -products Amount of payro ll** 
Month 1933 1924 



Short tons Value* Short tons Value* 1923 1924 



January $ $_ _ _ $ $_ 

February 

March 

April 

May 

June 



* Values are FOB plant and are to be reported as the amoiint billed to the 
buyer before discounts and including selling exeense. 



-23G-A 
(Cont'd) 

< 

* Include in the payroll- all-persons employed during the month except 
(a) sales and sales -service emplo.ye.es ,_,(d.) persons engaged in a 
managerial, executive, supervisor"/;. .or technical capacity and 
their immediate' assistants, who. are. paid $35.00 -oer week or 
more. Include, hovever, foreman r.eguiarly engaged in manual 
lahor irrespective of amount of compensation, and skilled 
production workers. 



(USE aEVZHSS SIDE OH SEPARATE SHEETS FOR AiIY FURTHER COMMEIITS 
YOU WISH TO IjASE.) 



-239- 

sxhihit :. 
PAVo-ihBLE 3o::h;i."ts 

on 
Til.; Basing Point Systei 
by the Line Producers 
in 
IT.R.A. Qroes tio in? i re 



I [early all the favorable connents ar< lade by "relatively large 

producers. The onl"' snail ilant n lziii : such consents wrs located in 

Pennsylvania - ad a capacity r: ~" 5600 tons per annun. Al 1 the re- 

iri:iing -^roducerr, had r capacity of over 10,000 tons and several re- 

nresented lants with r capacity of ov 40,000 tons. The following 

t,"t.i - are sanples of th : tyocs of renlies received: 

1. A 50,000 ton capacity plant in Illinois 

"It has given us a, better knowledge of iiarkets by 
stabilization, to quote intelligently on business 
that is profitable within ron%s of le gitinate 
trr di i ■ area." 

2. A large ,-lr.ut in "...- ryland 

"In favor of basing point systen being continued. Ue 
iiust absorb freight dif ferentials in majority of in- 
stances.. It is i iterative no continue to use it." 

3. A large jlant in Tennessee 

"Stabilized market, in inst' no ; lowered net selling 
prices - additions] i: sing joints not foimerly con- 
sidered." 

4. A nediun size plant in Hew York 

"Competitive narkets are more stabilized and price- 
cutting "by conoetitors has been nininized." 

5. A nediun size plant in Maryland 

"This systen is fundaner.tally sound and we think 
has reacted favorable." 



!336 



-240 - 

6. A medium size plant in California 

"Served to stabilize the industry in California 
which was demoralized prior to signing of Code. 
T7e will again have demoralization if present 
market provisions are cancelled." 

7. A large plant in California 

"To some extent O.K. if commercial bribery could 
be stopped." 

3. A very large plant in Fennsylvalia 

""~e kno r ' definitely the competitive conditions which 
must be met in any market which ve might care to reach." 

9. A large plant in Pennsylvania over 50,000 tons capacity 
"Each manufacturer knows filed prices, and nay not be 
changed without notice, thus price-cutting wars are 
ended." 

10. A medium size plsnt in Florida (over 10,000 tons capacity) 
"Gave us an opportunity to know our cor.roetitors 

prices and therefore could meet them or not." 

11. A medium size plant in Alabama 

"Tr.en a competitor knows my price he is not at mercy 
of buyer, who might mistake price conditions." 

12. A large plant in Massachusetts 

"Basing point system exemplifies quoting delivered 
market price to areas in r, hich oth c r lime producing 
have lower freight rates than ours. Open price 
filing eliminates constant changing of prices, different 
prices to buyers of lime, of like grade axic\ quality;" 

13. A large plant in ».is?ouri 

•"Prior to the Code there '"as cut-throat competition 
and prices were belo^ cost of production in many 
instances. 

B. UNFAVORABLE COM/IEIITS BY LILE PRODUCERS 01" THE BASII'G POINT SYSTEi: 

FRQj'.i THE IVRA ■«,,U E5 TI0MAIKE 

Small producer in Penna. rbout QO miles from nearest basing point 
says : 

1. The basing point system makes the cost of our product excessive 
to the farmer-consumer in our local en? nearby territory. The basing 
point system has given our competitors a chance to slip inferior 
products into our territory in competition "ith our product. All of 
our product is agricultural lime and has always been sold direct to 
the farmer- consumer at a low price f.o.b. railroad cars, trucks, or 
•■agons at our plant. In most. cases the basing point freight rates 
to points in our recognized local territory is so much higher than 
the actual freight to destination that "e are not able to justify 

9836 



- 241- 
this discrepancy in any explanation that "e can make to our customer:." 

2. 1'y a smallL producer in Calif orni? ; "There has "been a persis- 
tent sentiment among our competitors to den;- us the right of a basing 
point at our plant. ... We rant to place ourselves on record here 
that ' e are opposed to any system of basing points that tends to de- 
prive any individual manufacturer from filing prices based on his 
oral plant if he desire, to do so," Note: the nearest competing 
plant is located more than 200 miles from this plant. 

3, jj; a large producer in Ohio : "....The basing point system, 

ho'-ever, is so easily and successfully abused that those producers 
vlio elect to use the basing point system properly, are placed at a 
disadvantage. .... .Since the industry generally is not producing a 

net profit of 20$, it follors that the absorption of a 20$ differ- 
ential - ould result in either selling belo-- cost to reach the remote 
market^ or rould. indicate that he is collecting a premium from his 
short haul market in order to permit him to absorb substantial anounts 
to reach remote markets." 

4-o Another large producer in Ohio says : "Large firms broadcast 
same prices and pick up business ,v hereas formerly they made their 
om prices and re could profit from our natural advantage." 

5. A small company in Tennessee (10,000 capacity per year) says: 
"There should be some limit to protect the smaller mills in one lor 
rate area from the larger mills located in either lo<-" rate areas." 

5, Qne of the largest producers in the industry says : "Prior to 
the adoption of the Code basing points '"ere unknown as such in the 
industry, although in some markets re believe line prices ' ere gen- 
erally limited by the delivered prices made by producers grouped in 
some freight groups plus "the freight from those groups. The products 
.... re re sold at prices made by us f.o.b. plant and ordinarily no 
other prices "ere considered in quoting or selling." 

7 . A snail plant in Oregon favors ever r -plant a basin;;' point . 

8. A snail plant in Virginia says ? "^<e have never priced ry lime 
except F.O.B. plant and our total lime sales in 1934 '-as $2700.; 
mostly agricultural and local stuff by track..,.. " 

9. A snail producer in Pennsylvania says : "At present re are 
selling f.o.b, plant, no freight allowed, and. "e are not in favor 
oi the multiple basing point system, neither are re in favor of 
price fixing nor open price filing as this is a form of price fixing." 

10. A Penna. plant rith slightly less than 20,000 tons annual capa- 
city says : "There 'ere no established basing points regardless 
rhat the National Lime Association says. .... The Code Authority 
■Till hamper the small plants but the larger and. more powerful plants 

ill not be disturbed." 

11. A small plant in Colorado says : "Basing points in our opinion 
9836 



-24a- 

has done more to eliminate price competition than any other phase 
of Code." 

12. A small producer in Indiana says : "The total abandonment of 
business on a compatitive basis has been injurious to our business 
and benefits our competitors in the low rate area." 

13. A i'Tew York plant which miffht be called medium sized says : 
"Prices are more stabilized ;nd are "better but the large companies 
take the business. Smaller business has always survived on r slight 
price differential. r ithin our front door territory, so to speak, 
prices are all alike and large companies have advantage. This has 
been reflected in sales. Price filing and price fixing works to 
the advantage of the large manufacturer because of his highly or- 
ganised advertising end sales set up, and to the disadvantage of 
the small manufacturer." 

14. A small plant in Arizona says : "Owing to our competitors' 
publishing one price we held to same until they had taken mc t of 
our business by selling below their published price." 

10. "Prior to the establishing of basing points each manu- 
facturer more rr less confined himself to his O'-n natural territory 
during the five busy agricultural lime marketing months. During 
slow periods they '-ould go to other markets and meet, or in some 
places cut, prices to move their tonnage. However, they did not 
canvas this territory for reader business. However, at present, 
the 'hole area is their canvassing territory." 

N, B. Each plant referred to above a.s "small" has an annual capa- 
city of at least 5,000 tons. 

12. A small plant in Tennessee (over 10,000 per year capacity ) 
says ; "Have been damaged by open price filing - sealed bids are 
useless." 



9836# 



OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 

THE DIVISION OF REVIEW 

THE WORK OF THE DIVISION OF REVIEW 

Executive Order No. 7075, dated June 15, 1935, established the Division of Review of the 
National Recovery Administration. The pertinent part of the Executive Order reads thus: 

The Division of Review shall assemble, analyze, and report upon the statistical 
information and records of experience of the operations of the various trades and 
industries heretofore subject to codes of fair competition, shall study the ef- 
fects of such codes upon trade, industrial and labor conditions in general, and 
other related matters, shall make available for the protection and promotion of 
the public interest an adequate review of the effects of the Administration of 
Title I of the National Industrial Recovery Act, and the principles and policies 
put into effect thereunder, and shall otherwise aid the President in carrying out 
his functions under the said Title. I hereby appoint Leon C. Marshall, Director of 
the Division of Review. 

The study sections set up in the Division of Review covered these areas: industry 
studies, foreign trade studies, labor studies, trade practice studies, statistical studies, 
legal studies, administration studies, miscellaneous studies, and the writing of code his- 
tories. The materials which were produced by these sections are indicated below. 

Except for the Code Histories, all items mentioned below are scheduled to be in mimeo- 
graphed form by April 1, 1936. 

THE CODE HISTORIES 

The Code Histories are documented accounts of the formation and administration of the 
codes. They contain the definition of the industry and the principal products thereof; the 
classes of members in the industry; the history of cede formation including an account of the 
sponsoring organizations, the conferences, negotiations and hearings which 'were held, and 
the activities in connection with obtaining approval of the code; the history of the ad- 
ministration of the code, covering the organization and operation of the code authority, 
the difficulties encountered in administration, the extent of compliance or non-compliance, 
z.nd the general success or lack of success of the code; and an analysis of the operation of 
code provisions dealing with wages, hours, trade practices, and other provisions. These 
and other matters are canvassed not only in terms of the materials to be found in the files, 
but also in terms of the experiences of the deputies and others concerned with code formation 
and administration. 

The Code Histories, (including histories of certain NRA units or agencies) are not 
mimeographed. They are to be turned over to the Department of Commerce in typewritten form. 
All told, approximately eight hundred and fifty (850) histories will be completed. This 
number includes all of the approved codes and some of the unapproved codes. (In Work Mate- 
rials No^ ,18, Contents of Code Histories, will be found the outline which governed the 
preparation of Code Histories.) 



(In the case of all approved codes and also in the case of some codes not carried to 
final approval, there are in NRA files further materials on industries. Particularly worthy 
of mention are the Volumes I, II and III which constitute the material officially submitted 
to the President in support of the recommendation for approval of each code. These volumes 
9768—1. 



-11 - 

set forth the origination of the codes, the sponsoring group, the evidence advanced to sup- 
port the proposal, the report of the Division of Research and Planning on the industry, the 
recommendations of the various Advisory Boards, certain types of official correspondence, 
the transcript of the formal hearing, and other pertinent matter. There is also much offi- 
cial information relating to amendments, interpretations, exemptions, and other rulings. The 
materials mentioned in this paragraph were of course not a part of the work of the Division 
of Review. ) 

THE WORK MATERIALS SERIES 

In the work of the Division of Review a considerable number of studies and compilations 
of data (other than those noted below in the Evidence Studies Series and the Statistical 
Material Series) have been made. These are listed below, grouped according to the char- 
acter of the material. (In Work Materials No . 17 , Tentative Ou tli nes and Summaries of 
Studies in Process , the materials are fully described) . 

I ndustry Studies 

Automobile Industry, An Economic Survey of 

Bitaminous Coal Industry under Free Competition and Code Regulation, Ecnomic Survey cf 

Electrical Manufacturing Industry, The 

Fertilizer Industry, The 

Fishery Industry and the Fishery Codes 

Fishermen and Fishing Craft, Earnings of 

Foreign Trade under the National Industrial Recovery Act 

Part A - Competitive Position of the United States in International Trade 1927-29 through 

1934. 
Part B - Section 3 (e) of NIRA and its administration. 
Part C - Imports and Importing under NRA Codes. 
Part D - Exports and Exporting under NRA Codes. 

Forest Products Industries, Foreign Trade Study of the 

Iron and Steel Industry, The 

Knitting Industries, The 

Leather and Shoe Industries, The 

Lumber and Timber Products Industry, Economic Problems of the 

Men's Clothing Industry, The 

Millinery Industry, The 

Motion Picture Industry, The 

Migration of Industry, The: The Shift of Twenty-Five Needle Trades From New York State, 
1926 to 1934 

National Labor Income by Months, 1929-35 

Paper Industry, The 

Production, Prices, Employment and Payrolls in Industry, Agriculture and Railway Trans- 
portation, January 1923, to date 

Retail Trades Study, The 

Rubber Industry Study, The 

Textile Industry in the United Kingdom, France, Germany, Italy, and Japan 

Textile Yarns and Fabrics 

Tobacco Industry, The 

Wholesale Trades Study, The 

Women's Neckwear and Scarf Industry, Financial and Labor Data on 

9768—2 



- Ill - 

Women's Apparel Industry, Some Aspects of the 

Trade P ractic e Studies 

Commodities, Information Concerning: A Study of NRA and Related Experiences in Control 

Distribution, Manufacturers' Control of: Trade Practice Provisions in Selected NRA Codes 

Distributive Relations in the Asbestos Industry 

Design Piracy: The Problem and Its Treatment Under NRA Codes 

Electrical Mfg. Industry: Price Filing Study 

Fertilizer Industry: Price Filing Study 

Geographical Price Relations Under Codes of Fair Competition, Control of 

Minimum Price Regulation Under Codes of Fair Competition 

Multiple Basing Point System in the Lime Industry: Operation of the 

Price Control in the Coffee Industry 

Price Filing Under NRA Codes 

Production Control in the Ice Industry 

Production Control, Case Studies in 

Resale Price Maintenance Legislation in the United States 

Retail Price Cutting, Restriction of, with special Emphasis on The Drug Industry. 

Trade Practice Rules of The Federal Trade Commission (1914-1936): A classification for 

comparision with Trade Practice Provisions of NRA Codes. 

Labor Studies 

Cap and Cloth Hat Industry, Commission Report on Wage Differentials in 

Earnings in Selected Manufacturing Industries, by States, 1933-35 

Employment, Payrolls, Hours, and Wages in 115 Selected Code Industries 1933-35 

Fur Manufacturing, Commission Report on Wages and Hours in 

Hours and Wages in American Industry 

Labor Program Under the National Industrial Recovery Act, The 

Part A. Introduction 

Part B. Control of Hours and Reemployment 

Part C. Control of Wages 

Part D. Control of Other Conditions of Employment 

Part E. Section 7(a) of the Recovery Act 
Materials in the Field of Industrial Relations 
PRA Census of Employment, June, October, 1933 
Puerto Rico Needlework, Homeworkers Survey 

A dminist rative Studies 

Administrative and Legal Aspects of Stays, Exemptions and Exceptions, Code Amendments, Con- 
ditional Orders of Approval 

Administrative Interpretations of NRA Codes 

Administrative Law and Procedure under the NIRA 

Agreements Under Sections 4(a) and 7(b) of the NIRA 

Approved Codes in Industry Groups, Classification of 

Basic Code, the — (Administrative Order X-61) 

Code Authorities and Their part in the Administration of the NIRA 
Part A. Introduction 
Part B. Nature, Composition and Organization of Code Authorities 

9768—3 . 



- IV - 

Part C. Activities of the Code Authorities 

Part D. Code Authority Finances 

Part E. Summary and Evaluation 
C^de Compliance Activities of the NRA 

Code Making Program of the NRA in the Territories, The 
Code Provisions and Related Subjects, Policy Statements Concerning 
Content of NIRA Administrative Legislation 

Part A. Executive and Administrative Orders 

Part B. Labor Provisions in the Codes 

Part C. Trade Practice Provisions in the Codes 

Part D. Administrative Provisions in the Codes 

Part E. Agreements under Sections 4(a) and 7(b) 

Part F. A Type Case: The Cotton Textile Code 
Labels Under NRA, A Study of 

Model Code and Model Provisions for Codes, Development of 

National Recovery Administration, The: A Review of its Organization and Activities 
NRA Insignia 

President's Reemployment Agreement, The 

President's Reemployment Agreement, Substitutions in Connection with the 
Prison Labor Problem under NRA and the Prison Compact, The 
Problems of Administration in the Overlapping of Code Definitions of Industries and Trades, 

Multiple Code Coverage, Classifying Individual Members of Industries and Trades 
Relationship of NRA to Government Contracts and Contracts Involving the Use of Government 

Funds 
Relationship of NRA with States and Municipalities 
Sheltered Workshops Under NRA 
Uncodified Industries: A Study of Factors Limiting the Code Making Program 

Legal Studies 

Anti-Trust Laws and Unfair Competition 

Collective Bargaining Agreements, the Right of Individual Employees to Enforce 

Commerce Clause, Federal Regulation of the Employer-Employee Relationship Under the 

Delegation of Power, Certain Phases of the Principle of, with Reference to Federal Industrial 
Regulatory Legislation 

Enforcement, Extra-Judicial Methods of 

Federal Regulation through the Joint Employment of the Power of Taxation and the Spending 
Power 

Government Contract Provisions as a Means of Establishing Proper Economic Standards, Legal 
Memorandum on Possibility of 

Industrial Relations in Australia, Regulation of 

Intrastate Activities Which so Affect Interstate Commerce as to Bring them Under the Com- 
merce Clause, Cases on 

Legislative Possibilities of the State Constitutions 

Post Office and Post Road Power — Can it be Used as a Means of Federal Industrial Regula- 
tion? 

State Recovery Legislation in Aid of Federal Recovery Legislation History and Analysis 

Tariff Rates to Secure Proper Standards of Wages and Hours, the Possibility of Variation in 

Trade Practices and the Anti-Trust Laws 

Treaty Making Power of the United States 

War Power, Can it be Used as a Means of Federal Regulation of Child Labor? 

9768—4. 



THE EVIDENCE STUDIES SERIES 

The Evidence Studies were originally undertaken to gather material for pending court 
cases. After the Schechter decision the project was continued in order to assemble data for 
use in connection with the studies of the Division of Review. The data are particularly 
concerned with the nature, size and operations of the industry; and with the relation of the 
industry to interstate commerce. The industries covered by the Evidence Studies account for 
more than one-half of the total number of workers under codes. The list of those studies 
follows: 



Automobile Manufacturing Industry 
Automotive Parts and Equipment Industry 
Baking Industry 

Boot and Shoe Manufacturing Industry 
Bottled Soft Drink Industry 
Builders' Supplies Industry 
Canning Industry 
Chemical Manufacturing Industry 
Cigar Manufacturing Industry 
Coat and Suit Industry 
Construction Industry 
Cotton Garment Industry 
Dress Manufacturing Industry 
Electrical Contracting Industry 
Electrical Manufacturing Industry 
Fabricated Metal Products Mfg. and Metal Fin- 
ishing and Metal Coating Industry 
Fishery Industry 
Furniture Manufacturing Industry 
General Contractors Industry 
Graphic Arts Industry 
Gray Iron Foundry Industry 
Hosiery Industry 

Infant's and Children's Wear Industry 
Iron and Steel Industry 



Leather Industry 

Lumber and Timber Products Industry 
Mason Contractors Industry 
Men's Clothing Industry 
Motion Picture Industry 
Motor Vehicle Retailing Trade 
Needlework Industry of Puerto Rico 
Painting and Paperhanging Industry 
Photo Engraving Industry 
Plumbing Contracting Industry 
Retail Lumber Industry 
Retail Trade Industry 
Retail Tire and Battery Trade Industry 
Rubber Manufacturing Industry 
Rubber Tire Manufacturing Industry 
Shipbuilding Industry 
Silk Textile Industry 
Structural Clay Products Industry 
Throwing Industry 
Trucking Industry 
Waste Materials Industry 
Wholesale and Retail Food Industry 
Wholesale Fresh Fruit and Vegetable Indus- 
try 
Wool Textile Industry 



THE STATISTICAL MATERIALS SERIES 



This series is supplementary to the Evidence Studies Series. The reports include data 
on establishments, firms, employment, payrolls, wages, hours, production capacities, ship- 
ments, sales, consumption, stocks, prices, material costs, failures, exports and imports. 
They also include notes on the principal qualifications that should be observed in using the 
data, the technical methods employed, and the applicability of the material to the study of 
the industries concerned. The following numbers appear in the series: 
9768—5. 



- vi - 

Asphalt Shingle and Roofing Industry Fertilizer Industry 

Business Furniture Funeral Supply Industry 

Candy Manufacturing Industry Glass Container Industry 

Carpet and Rug Industry Ice Manufacturing Industry 

Cement Industry Knitted Outerwear Industry 

Cleaning and Dyeing Trade Paint, Varnish, ana Lacquer, Mfg. Industry 

Coffee Industry Plumbing Fixtures Industry 

Copper and Brass Mill Products Industry Rayon and Synthetic Yarn Producing Industry 

Cotton Textile Industry Salt Producing Industry 

Electrical Manufacturing Industry 

THE COVERAGE 

The original, and approved, plan of the Division of Review contemplated resources suf- 
ficient (a) to prepare some 1200 histories of codes and NRA units or agencies, (b) to con- 
soHdate and index the NRA files containing some 40,000,000 pieces, (c) to engage in ex- 
tensive field work, (d) to secure much aid from established statistical agencies of govern- 
ment, (e) to assemble a considerable number of experts in various fields, (f) to conduct 
approximately 25% more studies than are listed above, and (g) to prepare a comprehens.ve 
summary report. 

Because of reductions made in personnel and in use of outside experts, limitation of 
access to field work and research agencies, and lack of jurisdiction over files, the pro- 
jected plan was necessarily curtailed. The most serious curtailments were the omission of 
the comprehensive summary report; the dropping of certain studies and the reduction in the 
coverage of other studies; and the abandonment of the consolidation and indexing of the 
files. Fortunately, there is reason to hope that the files may yet be carec for under other 
auspices. 

Notwithstanding these limitations, if the files are ultimately consolidated and in- 
dexed the exploration of the NRA materials will have been sufficient to make them accessible 
and highly useful. They constitute the largest and richest single body of information 
concerning the problems and operations of industry ever assembled in any nation. 

L. C. Marshall, 
Director, Division of Review. 
9768—6.