THE MOVEMENT OF WHEAT IN THE UNITED STATES.

Otago Witness, Issue 2399, 22 February 1900, Page 4

THE MOVEMENT OF WHEAT IN THE UNITED STATES.

In a recent issue of M'Clure's Magazine, Mr Hay Stannard Baker minutely describes the -audling of and trading in wheat, and the various agencies connected therewith, from its purchase from the growers until its eventual export and distribution. The "Griding, the ■"Elevators-." the "Wheat Traders and Their Methods,*' and " Transportation to the Seaboard " are fully described, and, finally, Mr Baker discusses the important question, What is the result from all the vast production ?nd distribution in profit and prosperity to the United States farmer?? "This is, of course, a most important question,"' Mr Baker says, " for the volume of the wheat business rises and falls in direct proportion to the prosperity of the wheat raiser, and a reduction of his profits means a sluggish movement" in wheat. It is exceedingly difficult to arrive at the exact coht of producing grain ,• there are, indeed, as many estimates ' as there aie investigators.' 1 But the Wisconsin State Bureau ot Labour and Industrial Statistics speaks on the subject in its latest biennial report with much more than ordinary authority. Its calculations arc b:ised on more than 7000 inquiries and schedules, and its investigations have covered a period of three years. The conclusion reached is that it costs the farmer, including every expense, even interest, investment, and deterioration in buildings and machinery, 54 cents a bushel to raise wheat. During the last six years the average price of wheat in the local markets wjis 61 cents a* bus-hel, which would give the farmer a clear profit of seven cents a bushel, "to say nothing of the by-pro-ducts, of the crop, the value of which is estimated at seven cents a bushel."' In other words, quoting the report, " The average profit or surplus as computed from the results of all returns ranged from 5 to 12 per cent, on the capital invested or used." However, the average yield per acre of wheat is gradually creeping up. In 1890 it w;is only 11.1 bushels to the acre, in 3895 it was 13.7 bushels, while in 1898 it had reached 15.3 biu-hels. By the use of machinery, combined with cheaper rates of transportation for supplies, the farmer can produce a large yield more cheaply than ever before, so that, although the farm 1 prices for wheat do not average . higher from year to year, the farmer's profits are larger*. The amount of money which the American farmer receives for his wheat crop reaches the enormous average of nearly 400,000.000 dollars a year. Of' the purchase and sale "of " futures,' 5*5 * a prominent practice in American com ex» changes, Mr Baker says : — " So far, the trading is as simple as the selling of a calico dress by sample — -I have grain to sell, and you buy it. But the most important feature of the wheat exchange is not this buying and selling of cash wheat. Ife is rather the trading in futures, a branch, of the wheat business little understood by the outside public, and often unjustly judged because of its abu-es. It has played of late years an immensely important part in making the movement of wheat swift and certain and in permitting the middleman to do business on a very narrow, but .-till profitable, margin." According to Mr Baker, the selling of futures grew out of actual necessities. Early in the sixties, before the railroads had Teached out to the we&t, the elevator men of Red Wing, Minnesota, then a great wheat market, were compelled to buy the farmers' wheat in quantity in the fall of the year, store it all winter, and iioat it down the Mississippi in the spring. They bought A\ithout the slightest ido_i of what the price would be when they came to sell, and the fluctuations of war times were wide and fiequent. As a consequence, the Red Wing traders were compelled to buy very low from tlie farmers, to avoid any possibility of less -n hen they came to self, and their profits were quite likely io bo enormou-'. This condition of the grain trade, with the resultant dissatisfaction among the farmers, was the direct cause of the practice of selling for the future.

The date of the first transaction is not known, but it was in the winter of 1868-69 that the system was first generally used. .The wheat was sold for delivery in May. It was a simple business transaction, a man selling wheat whicli he had actually in bis possession, to be delivered to the buyer at a future time. From this primitive and perfectly wholesome form the practice, however, finally developed into such refinements of pure speculation that now immense sales for " future " delivery are made by men who don't possess, and don't expect to possess, a grain of actual wheat to men who have no desire or expectation of ever getting any.