THE CHICAGO PACKERS.

Taranaki Daily News, 10 January 1920, Page 10

THE CHICAGO PACKERS.

MANAGING DIRECTOR'S STATE MENT ON PROFITS.

(To the Editor of The Observer). Sir, —In his original article of September '7 Mr. Ignatius Phayre made three gros3 misstatements in regard to Armour and Company and the Chicago packing industry. He said that Armour and Company are members of a Meat Trust. I assured him, on the sworn and emphatic testimony of Mr. J. Ogden Armour, that they are not. He said that the Chicago packers were the prime source of profiteering. I showed that Armour and Company earned last year 18 per fnt. on their turnover, and that the Chicago packing industry for a long series of years has been conducted on the basis of a 3 per cent, return on the volume of business and an 8 per cent, return on the capital invested. (There are scores of American packing firma outside Chicago that earn a considerably higher percentage both on sales and on capital). Finally, Mr. Phayre asserted that the CMcago packers were four times the profits to-day as before the war. I not only denied that, but remind e.I Mr. Phayre that the profits of the industry for the past two years have been limited by law to 2.5 per cent, on the turnover and to 9 per cent, on the paid-up capital, and that under neither heads did Armour and Company in 1918 succeed in earning more than a fraction over half of the prescribed maximum. I should have thought Mr. Phayre would have seep 4 he necessity of either attempting f r his statements or of c.MmiiiW admitting that he was mistaken, nut'in his reply to my letter he does neither. He does not dare to reaffirm them, but he has not the grace to withdraw them and to own he was wrong. With a few airy sarcasms he skates off into another part of the field—only to come another series of croppers. I have helped him on to his feet once, and been very scurvily treated for my pains- But I will piake another attempt, first because I hate to seo «. fellow-mortal (and a possible consumer of Armour and Co.'s products) floundering in error, and, secondly, because the things about the packing industry which Mr. Phayre does not understand are equally misunderstood by the sensation' al journalist and the average ignoramus on both sides of the Atlantic.

The Chicago packers do not themselves raise the cattle, hogs, and sheep that they slaughter and prepare for market. They are not producers, but merchants, manufacturers, and distributors. They buv and sell against one another, just as the great cotton firms in Manchester buy and sell against one another. They can no more control the price of the raw material they handle than Manchester can control the price of Southern cotton. In the past four years the price of live hogs on the Chicago market ftas increased 250 per cent. The same number of pounds of live stock cost Armour and Co. £20.000.000 more in 1918 than in 1917. Is not that all the proof that is needed to show the absurdity of the fiction that the packers determine the prices at which thp farmers r.nd the stock-raisers shall sell to them? The packers, then, buy their live stock in the open market, just like any other business house. But in every liead of live stock there is a large proportion that has no food value whatever. A steer wi>i[rhin<r a thousand pounds has approximately 440 pounds of inedible waste. The meat produced from a steer would not pay for what the steer cost. If the 440 pounds of inedible matter were thrown away, either the producer would have to take less for his animal or the consumer would have to pav more for his food. But they are not thrown awav. The Chicago packers may fairly claim to have led the world in converting these waste portions of cattle, hogs, and sheep into marketable commodities Thev have succeeded in manufacturing from them perhaps a thousand different and saleable by-products. Broadly speakins. it is on these by-nroducts that they make their profit. They do not make it on the meat they dress and cure. Very often there is an actual loss on the edible' narts of each animal that enters the Chicago saleyards; and in the best of years the packers' profit on each noiiid of meat that is bought by the nublic is somewhere between a farthinsr and a half-nennv. Tn other words, from the consumer's standpoint, it is negligible. You might wipe it out altogether, and the price of beef and bacon would be totally unaffected.

May I venture to compare the packing industry with The Observer? The Observer sells because of the excellence of its news columns, its editorials, its snroial Articles, and its array of regular features. I take it that it is to the business of procuring and disrdavinsr these attractions that the organisation of the Observer is mainlv directed. But these are not what make the paper pay. The Observer, I hope and presume, draw 0 its profits partly, but to a very small extent, from its sales; but mainly from its advertisements, which are in the nature ■of a by-product. In the same way the packing indnstry makes either no profit at all or an infinitesimal one on the meat that is consumed by the public, and relies almost wholly on its by-products to show a balance" on the right side.

Foodstuffs are of all commodities the most perishable. To ensure their delivery and their rapid disposal thousands of miles away from their source of production the packers have had to huild up a vast transportation, marketing, storage, and distributing system. They went into the refrigerator car business, for instance, in order to link the producing West with the consuming East and because the railroad companies refused to run the risks of the new venture on their own account, and I may add, first, that without those cars it would have bee.i impossible for the packers to have met Great Britain's demands during the war; and, secondly, that the packers derive no advantages in the matter of rates which are not equally shared bv other shipners. Possessing these nation-wide facilities, the packers are constantly naked by other manufacturers of food product to handle their goods for them. In some cases they have agreed to. That is why they are now marketing such commodities as canned fruits and veeetables and fish and rice. They engage very little in the production of these articles of food. Their chief interest in them is as distributing agents who command unequalled marketing facilities, who have a reputation to keep up for the quality of the goods they supply, and who desire to lessen the expenses of their selling organisation by keeping it fully employed all the year round.

In the case of Armour and Co. these side lines do not amount to 5 per cent, of our general business. But it is altogether to the interest of the public and of the provision trades that we should enrage in them. We place our whole merchandising service at their disposal; we op«n up new markets and stimulate demand; ,we raise the standards of the products: we simplify and therefore cheapen the b»«io.ess of storing,

transporting and selling them. Is it or is it not to the advantage of the public that foodstuffs should be distributed as widely, as quickly and at as low a price as possible? We maintain that it is, that only huge organisations can tackle the job efficiently, and that the Chicago packers succeed as no other firm have ever succeeded in bringing producer and consumer in touch with a minimum of waste, expense, and delay.

For these services we charged last year less than 2 per cent, on our turnover. For the past eighteen years, including the war period, the profits of Armour and Company on the actual investment and, appraised value of the business have averaged under 9 per cent.' On every steer, including all the by-pro-ducts, we make a profit of about a dollar. On the meat portions of the animal we make, as I have said, a profit in the best years of from one farthing to one half-penny a pound. These, sir, are the fundamental and unassailable facts of the packing industry. I am, Sir, '

Yours very truly, R. H. CABELL,

Managing Director, Amour and Company, Ltd.

Queen's House, Kingsway, W.C.2, October 2, 1919.

P.S.—ln the above statement I have dealt generally with most of the points on which Mr. Phayre seems to need enlightenment. But there is one of his assertions that must he met more specifically. Mr. Phayre declares that, when cross-examined by the Senate uommittee on his South American holdings, "Mr. Ogden Armour admitted that he had suppressed an unconsidered trifle of 10,000,000 dol. in his profit showing." Mr. Armour admitted nothing of the kind; and Mr- Phayre's insinuation that Mr. Armour had at any time made any effort to conceal the profits of his South American interests is purely malicious. Mr. Armour explained quite fully to the Committee that the South American business is a separate company, organised and operating under South American kws, and that the profits derived from it are invested in South America. Had Mr. Armour received the profits in the United States they would, of course, have come within the scope of the United States revenue authorities, and in-come-tax would have been paid on them. As it is, they are reinvested in South America, and no 1 report upon tneiu is required by the law= of the United States. An Englishman who reinvests in Canada the profits of his Canadian undertakings is in a similar position. He dees not have to pay British in-come-lax upon them or make any disclosure of them to the British Commissioners. But to say that he is therefore "suppressing" is to distort the facts into conveving a totally false impression. Mr. Phayre not only does this but he j bases his entire case against the packing industry on the report of the Federal | Trade Commission—a report compounded, as ho knows, from hearsay evidence which the packers were given no opportunity to refute. And yet he disclaim*animus and writes from the Inner Temple!