This dissertation has been 65-3833 microfilmed exactly as received

CHAUHAN, Krishna Kumar Singh, 1934- EFFECT OF THE GENERAL ECONOMIC DEVELOPMENT ON THE EVOLUTION OF AGRICULTURAL MARKETING IN THE UNITED STATES.

The Ohio State University, Ph.D., 1964 Economics, agricultural

University Microfilms, Inc., Ann Arbor, Michigan EFFECT OF THE GESTURAL ECONOMIC DEVELOPMENT OH THE

EVOLUTION OF AGRICULTURAL MARKETING IN THE

UNITED STATES

DISSERTATION

Presented In Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy In the Graduate School o f The Ohio S ta te U n iv e rsity

By

Krishna Kumar Singh Chauhan, B.Sc., M.Sc.

The Ohio State University

ig6h

Approved hy

F . 7 - A dviser Department of Agricultural Economics and Rural Sociology ACKBOW IdEDGMMSS

Sincere appreciation is extended to my adviser, Dr. Elmer E.

Baumer, Professor of Agricultural Economics and Bural Sociology for his encouragement, guidance and inestimable help dxuring the course of this study.

Special thanks are to Dr. D. I. Padherg to whom I am highly in­ debted for his valuable advice and constructive criticism. I owe my thanks to Dr. M. Q-. Smith, Chairman of the Department of Agricultural

Economics and Rural Sociology for his helpful advice and assistance in this study. My sincere thanks ore to Dr. R. H. Bohn lug, Assistant Dean and

Coordinator OSU/lndia Agricultural Program for enabling me to stay at this University for an additional four months in order to complete my

Ph.D. program. I express my gratitude to the United States and Indian

Governments for financing my v i s i t to th is country.

I am personally indebted beyond any. repayment to my friend Robert

Welsh, Instructor in the Department of Agricultural Economics and

Sural Sociology, for his all kinds of help throughout my graduate work at this University.

Finally, I should thank my wife Patna, who through her letters has been a constant source of encouragement and inspiration throughout my stay in this country.

i i VITA

January 3 , 193 k Bom - Moradahad (U.P.), India

1 9 5 ^ ...... B.Sc. Ag., Agra University, Agra, India 1 9 5 6 ...... M.Sc. Ag., Agra University, Agra, India

1956-1957 • • • Assistant Professor, Agricultural Economics, B. R. College, Agra, In d ia 1958-1962 . . . Lecturer in Agricultural Economics, Rajasthan College of Agriculture, Udaipur, Rajasthan, India

I 962 - 196 I+ . . . Worked for Ph.D. at She Ohio State University, Columbus, Ohio, as an A.I.D. participant

PUBLICATIONS

"Agricultural Investments , 11 Agra University Journal of Research (Letters), Vol. II, January, 1957

FIELDS OP STUDY

Major Field: Agricultural Marketing

Studies in Economic Theory

Studies in History of Economic Thought

Studies in Statistical Analysis

Studies in Foreign Agriculture Development

Studies in Market Structure

Studies in Agricultural Production Economics

i l l CONTENTS

PAGE

ACKNOWLEDGMENTS ...... i i

VITA, PUBLICATIONS AND PIELDS OP STUDY ...... i l l fAPTVS ...... ix

CHAPTER

I INTRODUCTION...... 1

Method o f A pproach...... 6

Importance of the Study ...... 7

II DEVELOPMENT OP TRANSPORTATION...... 8

Development of Transportation Before 1776 •••• 8

Development of Transportation, 1776-1860 ...... 10

Development of Transportation, 1860-1910 ...... 11

Development of Transportation, I 9 IO-I93 O 12

Development of Transportation, 19 30-1990 ...... 12

Development of Transportation Since 195° ...... 13

Road Transportation...... lH

Railroad Transportation ...... 23

Water T ran sp ortation...... 31

II I DEVELOPMENT OP STORAGE OP PARM PRODUCTS ...... 36

Storage Before 1 7 7 6 ...... 37

Storage,177 ^”I860 ...... 3®

iv CONTENTS (contd.)

CHAPTER PAGE

III (contd.)

S torage, 1860-1910 ...... 40

Storage, I9 IO-I93 O ...... k3

Storage, I93 O-I95 O ...... 4-7

Storage Since 1950...... 51 IV DEVELOPMENT OP STANDAEDIZATION, GRADING, AND INSPECTION OP AGRICULTURAL PRODUCTS ...... 56

Standardization, Grading and Inspection Before 1776...... 58 Standardization, Grading and Inspection, 1776-1860 60

Standardization, Grading and Inspection, 1860-1910 ...... 62

Standardization, Grading and Inspection, 1910-1930 ...... 67

Standardization, Grading and Inspection, 1930-1950 ...... - ...... 70 Standardization, Grading and Inspection, Since I 95 O ...... 73

V ' DEVELOPMENT OP POOD—PROCESSING AND PACKAGING . . . 75

Pood Processing, Before1 7 7 6 ...... 76

Pood Processing, I776-I 8 6 0 ...... 79

Pood Processing, 1860-1910 ...... 83

▼ CONTENTS (contd.)

CHAPTER ~ PAGE

V (contd.)

Pood Processing, 1910-1930 ...... 87

Pood Processing, 93 I O-I95 O ...... 96

Pood Processing, Since 1930...... • ...... 103 71 DEVELOPMENT OP MARKET INFORMATION...... 108

Market Information, Before 177& • • * *»...... 109

Market Information, 177&-1860 ...... 109

Market Information, 1860-1910 ...... I l l

Market Information, I9 IO-193 O ...... 112

Market Information, I93 O-I95 O ...... 115

Market Information, Since 1950 ...... Il6 711 DEVELOPMENT OP SELLING BY FARMERS ...... 119

Selling toy Farmers, Before 177& ...... H9

S ellin g toy Farmers, 1776-1860...... 120

Selling toy Farmers, 1860-1910 ...... 121

S ellin g toy Farmers, 1910-1930 ...... 122

Selling toy Farmers, 19 30-195® ...... 12^

Selling toy Farmers, Since 1950 ...... 125

▼i CONTESTS (contd.)

CHAPTER PACE

VIII DEVELOPMENT OF COOPERATIVE MARKETING- ASSOCIATION 127

Cooperatives, Before 177^ ...... 127

Cooperatives, lJjS-1^60 ...... 128

Cooperatives, 1860-1910 ...... 129

Cooperatives, I 9 IO-193 O ...... 131*

Cooperatives, 1930-1950 ...... 137

Cooperatives, Since 195® ...... I*t0

IX DEVELOPMENT OP WHOLESALERS AND OTHER MIDDLEMEN OP WHOLESALE TRADE...... 1^3

Middlemen of Wholesale Trade, Before 177& — • 1^4-

Middlemen o f Wholesale Trade, 1776-IS 60 . lUU

Middlemen of Wholesale Trade, 1860-1910 . IU5

Middlemen o f Wholesale Trade, I 9 IO-193 O . lU8

Middlemen of Wholesale Trade, I 93 O-I95 O . 150

Middlemen of Wholesale Trade, Since 1 9 5 0 . 153 / X DEVELOPMENT OP RETAILING INSTITUTIONS ...... 158

Retailing Institutions, Before 1776 ...... 159

Retailing Institutions, 1776-I860 ...... l60

Retailing Institutions, 1860-1910 ...... 163 Retailing Institutions, I9 IO-193 O ...... 166

v ii CONTENTS (contd.)

CHAPTEH PACE

X (co n td .)

Retailing Institutions, 1930-1950 ...... 170

Retail Institutions, Since 1$50 ...... 176

XI SUMMARY AND CONCLUSIONS ...... 1S2

Summary ...... 182

C o n c lu sio n ...... 195

APPENDIX...... 199 BIBLIOGRAPHY...... 210

v i i i TABLES

table page

1 VOLUME OF DOMESTIC INTER-CITY FREIGHT TRAFFIC, BY TYPE OF TRANSPORTATION, lgllO-1960 ...... 13

2 RURAL ROAD MILEAGE IE THE UNITED STATES, 1800-1960 17

3 MOTOR VEHICLE REGISTRATIONS IE THE UNITED STATES, 1900-1960 ...... 19

k RAILROAD MILEAGE IN THE UNITED STATES, 1830-1960 . 3°

3 REFRIGERATED WAREHOUSES: TOTAL GROSS SPACE, BY TYPE OF PLANT, UNITED STATES, 1921-19^9 ...... U 6

6 HUMBER OF FROZEN FOOD LOCKER PLANTS IN OPERATION, UNITED STATES, I 938 -I 95 O ...... 50

7 REFRIGERATED WAREHOUSES: TOTAL GROSS SPACE, BY TYPE OF PLANT, UNITED STATES, 195 I-I 96 I '...... 53

8 NUMBER OF FROZEN FOOD LOCKER PLANTS IN OPERATION, UNITED STATES, I 95 I-I 96 O ......

9 OPERATING MANUFACTURING ESTABLISHMENTS IN THE UNITED STATES, FOOD AND KINDRED PRODUCTS, 1909-1929 88

10 NUMBER OF MEAT PACKING AND SLAUGHTERING ESTABLISHMENTS, NUMBER OF MPL0YEE3 AND VALUE ADDED, UNITED STATES, 1689-1958 ...... 89

11 NUMBER OF FLOUR MILL ESTABLISHMENTS, NUMBER OF EMPLOYEES AND VALUE ADDED, UNITED STATES, 1899- 195 s ...... 92 12 NUMBER OF CANNED AND FROZEN FOOD ESTABLISHMENTS, NUMBER OF EMPLOYEES AND VALUE ADDED, UNITED STATES, 1889-1958 ...... 9^

lx TABLES (contd.)

TABLE PAGE

13' OPERATING MANUFACTURING ESTABLISHMENTS IN THE UNITED STATES, FOOD AND KINDRED PRODUCTS, 1 3 3 1 -1 9 5 0 ...... 97

lM- OPERATING MANUFACTURING ESTABLISHMENTS IN THE UNITED STATES, FOOD AND KINDRED PRODUCTS, 1 9 5 0 -1 9 6 0 ...... 10U

15 PERCENTAGE OP HOMES WITH RADIO, UNITED STATES, 1930-1950 ...... 115

16 PERCENTAGE OP HOUSEHOLDS WITH TELEVISION SETS, UNITED STATES, I 95 O-I96 I ...... 118 » 17 NUMBER, MEMBERSHIP, AND BUSINESS OP FARMERS• MARKETING COOPERATIVES, UNITED STATES, I913 -I93 O 135

IS NUMBER, MEMBERSHIP, AND BUSINESS OP FARMERS' MARKETING COOPERATIVES, UNITED STATES, I 93 O-I95 O 138

19 NUMBER, MEMBERSHIP, AND BUSINESS OP FARMERS' MARKETING COOPERATIVES, UNITED STATES, I 99 O-I96 O 140

20 WHOLESALE AGENCIES IN THE UNITED STATES, 1929 and 19^8 ...... 152

21 WHOLESALE AGENCIES IN THE UNITED STATIS, 195 U and 1958 ...... 155 22 NUMBER OP GROCERY CHAINS, UNITED STATIS, 1872-1929 ...... I 65

23 : RETAIL POOD STORES AND GENERAL STORES, BY TYPE OP STORES, UNITED STATES, I 929 -I 96 O ...... - ...... I 7I+

21+ NUMBER OP PERSONS PER STORE, UNITED STATES, 1929-1960 175

x TABLES (contd.)

TABLE PAGE

25 GROCERY STORE SALES, BY SIZE OF STORE...... 178 26 HUMBER OE CHAIN STORES AND A7ERAGE SALES PER STORE, UNITED STATES, 194-8-1960 ...... 180

2? GROWTH OE AFFILIATED ( VOLUNTARY AND COOPERATIVE GROUPS) INDEPENDENT RETAILERS, UNITED STATES, 1947-1962 ...... ISO

23 GROSS NATIONAL PRODUCT, UNITED STATES, I 869 -I 96 O 200

29 DISPOSABLE PERSONAL INCOME, UNITED STATES, 1897-1960 201

30 RAILROAD MILEAGE IN THE UNITED STATES, I 83 O-I960 202

31 SURFACED RURAL ROAD MILEAGE IN THE UNITED STATES, I 8 OO-I96 O ...... 203

32 AUTOMOBILES IN THE UNITED STATIS, I 9 OO-I960 ...... 204

33 USE OF ELECTRIC ENERGY IN THE UNITED STATES, 1902-1955 ...... 205

34 TELEPHONES IN THE UNITED STATUS, I 876 -I 96 O ...... 206

35 URBAN AND RURAL POPULATION OF THE UNITED STATES, 1790-1960 207

36 GROWTH OF CITIES IN THE UNITED STATES, I 79 O-I960 208

37 POPULATION OF FARMS IN THE UNITED STATES, 1790-1960 ...... 209

2d CHATTER I

IHTROmJCTIOH

Marketing plays an important role in the national economy of the country* In the economically developed countries of the world, mar­ keting system has become very specialised *nd a complex process. Thor© aro, however, oasy underdeveloped countries ©f Asia, Africa and

Latin America where the marketing system is s till very simple and has not become so complex. Most of the services are performed by the farmer himself or by the consumers and not many specialized agencies have developed as in the case of the modern system of agricultural marketing in the United States.

today, the Marketing system in the United States is highly spe­ cialized and very complex. But this has not always been so. In the early history of lia©riea 9 the great bulk of people lived in what may be termed a ©tat© o f s e lf -s u f fic ie n t economy. The pioneer fam ilies produced almost everything they consumed. Their methods o f production were highly primitive and production very low. As only a small per­ centage of people lived In cities, there was little market for surplus farm products. Under such an economy, there was l i t t l e trad© in farm products. Whatever little surplus was left was exchanged for other goods ©r ©ash, mostly with th© neighbor© within the eoasoalty.

1 Th© farmers did suit concentrate their entire time and energy on production alone hat divided between production end marketing* fh^fr performed almost a ll the marketing functions themselves. They trans­ ported their own goods, sorted out the product® into various lots of different quality and acted as their own salesmen. Whatever service

they did not perform was taken care of by consumers th®m selves.

However, the situation changed with time as a result of various economic, social, and p olitical &@v©l©pa©nto» 5?k© o@l£-sufficient

character of tbs farmers was tolcoa away by tho forces @£ urbanisation and the industrial development. As the cities grew, the farmers had to produce to meet the growing demands of the industrial population.

AX©@, the increased foreign demand for American farm products gave additional initiative for increasing production. At the same time, their own demands grew and they wanted more of the convenience© In­ dustry produced. Shcy had to produce soro salable products t© bay

these thing® mad© in factories. Th© farmer® tended to become more and more specialised, concentrating moot of their efforts on producing

few products for which th eir farms were meat adapted. They found theae©lv©@ such acre dependent up@a market place and beeaae aero deeply Involved in the ecsaerelal aad specialised eseacay. 2ho farming cam© to b© considered as a ©CEamereial enterprise rather than a way ©f l i f e .

The transition from th© subsistence to th© eoMaerelallsod aad opocialiaed economy has rooulted la the treaoatoao change® la the system of agricultural marketing as well. The old method® of mar­ keting have been displaced. The farmer® no longer act a® their own salesmen directly to the consumers, nor do they haul their own produce

/fay heree and wagon to the nearfay market for sal®. Instead they leave most of the marketing to the specialised marketing institutions which have developed to perform th® Sanctions of transportation, processing, storage, end distribution. On th® ©th@r hand, th® consumers delegate most of the preparation and storage of food to the marketing system. She farmer now devotes most of his time in production of farm products and has faeeom© increasingly specialised. Gr©at technological d©v©l-

©paoato tew© hoea introduced in th© porforaanco ©f marketing fuaetioao.

She marketing services have become more numerous and more elaborate.

On th® whole, the marketing system has become very complex. The de­ velopment© in assembling, processing, transporting, sorting, whole­ saling and retailing end the changes in the methods of selling for most commercial farmers and th® changing shopping M bits of housewives kwo boon dooeribGd ao a revolution in agricultural Earkoting.

Shis ^revolution® in the development of th® present system of agricultural marketing, tew over, roots upon naay dovolopaonto in the general ©conosgr. Ale®, this process of coordinated development ©f agricultural fmrk©ting and th© gossral ©eonoiay has involved aovoral doeados. It say b© more appropriate to consider this process ©f change a result of ©volution.

It is recognised, however, that this ©volution of th© agricul­ tural marketing system in th® United States has depended to a consid­ erable ©stoat ©a th© poeial factors ao udL Bh© Eaaaor in uhieh tho marketing system evolves in a country is also a function of th© social organization an& Institutions of tbat country. General attitude of

the society toward trade and the attitude of the businessmen toward

social good hare considerable impact upon the marketing practices and marketing institutions in a country. Moreover, certain social insti­

tutions like east® system and family structure put certain lim its on

the mobility of the resources within the economy, thereby leading to unfavorable effects on the economy and marketing practices. She ef­

fect of th© social factors, although recognised, has not b©ea stu d ied

in this dissertation.

She present study has been undertaken to analyze the historical

evolution of this complex system of agricultural marketing in th e

United States and to study the corresponding development of the gen­

eral economy. Agricultural marketing system in a country should fit in the de­

velopment stag© of the general economy. ®h© general economic devol-

opment, however,, is the outcome of a number of factors. It is not possible to consider all thes© factors in our study. Wo hav©, there­

for®, taken into consideration some of th© most important factors which indicate th© general economic development, the extent of capital

form ation, and th© le v e l o f technology in an economy. 3?hss© in d ic a ­

tors also show th© well being and th© standard of living of th© people

in th® country, fhe following indicators of th© development of gen­

e r a l economy have been taken in to accounts

1 . ©r@oo national product per capita

2. Disposable personal income per capita 3. Percentage of population in urban and rural areas

1}. Growth, o f th e c i t i e s

3 . Percentage of population on farms

6 . Automobiles per 1,000 population

7 . Railroad mileage per 1,000 population and per 1,000 square

miles of land area

8 . Surfaced road mileage per 1,000 population and per 1,000

square miles of land area

9 . Use o f electricity

10. Telephones per 1,000 population.

The development of these indicators in the United States since

Colonial times has been presented in the Appendix.

The objectives of th© study ares

1. To study the historical evolution of agricultural marketing

systm in the United States.

2. To study the relationship between the development of the

general economy and the ©volution of agricultural marketing.

Our hypothesis to be tested, therefore, is as followss ”Th© evolution of agricultural marketing system depends on the development of th© general ©conooy and has a positive relationship with general economic development of the country . 0 6

Method of Approach

She study has heen divided into eleven chapters. In Chapters II tc X, the development of various marketing functions and institutions in th® United States since Colonial times has been discussed in de­ t a i l . The historical evolution of agricultural marketing has been di­ vided into the following period.

Before 177S°*=Bko Colonial period eovoriag th© ycaro from tho

settlement at Jamestown to the Declaration of American Independence.

1776-1860—Transitional period extending from the official be­ ginning of the Republic to th© Civil War.

1860-1910—The period of use of scientific inventions in agri­ culture and the revolutionary development in railroad transportation.

1910-19^O'”’X&trodnetion tractor ©a farms end th© first agri­ cultural revolution during World War I.

I 93 O-195 ©—Depression o f th© 1930*0 and th© period of economic develops eat during and immediately a fte r the World War II.

Sine© 199 O--Modern period w ith a l l round development in th© general economy.

Th© development o f various maa&eting function© vis: transpor­

tation, storage, grading and standardisation, processing and packaging, market information and selling during these ©ix periods ha© been di@-

©uogqgL in Chapter©12 to FIX. Th© dovolopooat o f marketing ia o tita -

tlo n s —cooperative mark©ting associations, wholesaler© and other 7 middlemen of wholesale trade, and retailing institution®—has been dealt with in Chapters VIII to X. In Chapter XI, the study has been summarized and conclusions drawn.

Importance o f th© Study

Th© process of the evolution of agricultural marketing system and its relationship with the general economic development of a country has not dvm n much atten tion from th© pecpl© working in th© mask ©ting field and others interested in th© economic development of th© under­ developed countries.

It is hoped that the present study would enable us to indicate the trend in the development of agricultural marketing with a corre­ sponding development in the general economy. It is also hoped that this study will he useful for the students who are interested to see th© past tr©nd ©f th© development of agricultural marketing system in the United States.

For th® last on® decade, considerable interest 1ms been developed in the economic development of th© underdeveloped countries of the world. Th© role which agricultural marketing has to play in such an effort is very significant. It is hoped that this work may prove u sefu l to those who w ill b@ concerned with the development o f agri­ cultural marketing in th® underdeveloped countries. CHAPTER I I

DEVELOPMENT OE TRANSPORTATION

Transportation is the physical movement of the products from the point of their production to the processing and consuming centers.

Transportation is one of the physical functions of marketing. It is a productive activity ao it eroatoa !Spl&e ©‘3 u t i l i t y by making th© goods available at the proper place. It becomes a major factor im- mediately after the produce is ready for market and continues to be important, throughout almost a ll phases o f marketing. The development of efficient means of transportation that would carry farm goods from the centers of production to the centers of consumption at moderate cost is very essential to th© development ©f agricultural marketing.

The development of transportation system in th© United States since Colonial times has been discussed here in this chapter.

Development of Transportation Before IJfS

Th© first pioneers who cam® to th® United States settled along th© Atlantic Seaboard. They depended entirely upon ocean transpor­ tation to Europe for marketing theirrm materials and bringingmanu­ factured goods in exchange. The population grew and moved to the

Interior. Water s till remained th© chief a©ana of eaiffinmleatI©nD bat

Indian trails gradually evolved into routes for travelers on foot or

8 o " . : o . Ci a

9 horseback. These crude trails effectively curtailed land transport and internal trade. The journeys involved excessive charges and very fee could afford these. The farm family produced almost all the food required. Some families 'began growing cash crops like tobacco for market. They “eith er ro lled i t in hog heads to tid e water market, or attached it to thills to the cart and an ox-hitched theretpi or they „1 worked their littl© crop down the stream in little b o a ts. * Some d ir t roads w©r ©0 however* b u ilt into the interior upland. Th© pioneer a in

©©vsral eoicaunitios mads a train ones a year to go t© city markets which were developed in Philadelphia and Baltimore for Pennsylvania,

Maryland, and Virginia frontier; and Charleston or Savannah for the up country of the Carolinas and Georgia. All travel was on hors®-’ back. They carried goods like Sirs, the bacon, linen, or whisky and

©xchang© thee® with goods they purchased in the towns. Sometimes, when th® prices uoro vory high, wheat flour could also b© wagoned t© tide water. Generally, however, “grain would not bear the cost of transportation for whieh reason th© whisky distilled from it often bo- cam© th© solo, resource of th© westerners ao a means o f exchange'for necessaries to be bought in th© seaports. Th© livestock was driven al@ng thss© d i r t roads to the c ity m arkets. W©ar th© e@aSte however, the situation a lte r e d . = Around c i t i e s like Boston and Philadelphia, there grew up a considerable land transportation, particularly in th©

^Joseph Sehafor, Social History of Anar lean Agriculture (Ssw York; Th© Macmillan Company, 1936 ) , p . 6l . 2Ibld.. p. 6l. viator when the oaov remedied and concealed the deficiencies of dirt roads. She Conestoga wagon 'became a popular means o f tra n s p o rta tio n on these roads. They vers rounded at the hot too to prevent the eon- te n to from s p i l l lag and were covered w ith a lin e n top and crammed w ith a diverse cargo.

Development of Transportation, 1776-I860

Th© improvement© ia th© transportation f a c i l it i e s -after th© Rev­ o lu tio n until th© Civil War fall roughly into three groups. 1. Turnpikes and improved roads

2. Canals and improved rivers

3 . Railroads

In the 1790*8 an intense interest was developed in the construc­ tio n o f improved roa&s and turnpikes. This was caused prim arily by th© rapid postward a©v@a©at and by th© increased prosperity and grow­ ing foreign commerce resulting from European War. The War of 1812 gav© an added impetus to road building for moving troop© and ©applies.

However, th® mania in road building died down in th© 1820* s partly &u@ to competition from canals and partly du© to their fi­ nancial failure. ®h© private corporations which had invested their capital so enthusiastically to make money from to ll charges realised that the eost of maintenance and collection of toll© exceeded income.

The fici?0l©p-3©at of steamboat ia 1820 greatly revolutionised th© water transportation. Canal building project© w©r© pushed with feverish haste. Although water transportation was slower than by 11 road, It was much, cheaper. The success of canals very much discour­ aged road "building. However, canal building also faced the same fate with the introduction of railroads and financial difficulties faced during th® p anic o f 1837 * With th© Introduction of railroads in th© 1630's th© 8am© enthu­ siasm was shown in railroad "building wag the case with canal "build­ ing a few years ago. By i860, railroads had reached the youthful stage and had taken over much of the freight from the canals and turn- pilsoD.

Development of Transportation, 1860-1910

This period can he called as a railroad "era" in the history of the development of transportation in th© United States. Bailroad de­ velopment took place on an unprecedented scale during this period. The railroads promoted the settlement of large sections of the west, participated ia the grain trade, and "built many elevators besides their main function of providing means of transportation throughout the nation. They held the v ir tu a l monopoly in transportation o f passengers and the freight. The railroad was faster and could de­ liver freight directly to its destination. One of th© most revolutionary transportation developments was th© introduction of refrigerated cars in th© I8608 s. Although the first experiments in the us© of ic© during transit were made during th©

1850 *s, the first successful shipment of dressed beef from Chicago to the east did not occur until I869 . It was, however, Gustav F. Swift, a Chicago packer, who after a few saporimQnts was building Ms own re­ frigerator cars in 1881, and successfully shipping dressed beef from Chicago to the east. It was not until the 1880's that successful care o • ■-'('I,- '

12 for shipping fruits vere developed. The development of the refriger­ ated freight ear opened new opportunities for commercial faming in all parte of the United States.

Bevelepamt of Transportation, 1930-1930

The railroads were the undisputed leaders in the transport ’busi­ ness so far hut another revolutionary development took place during this period wMch began threatening railroad business. Th© intro­ duction ©f mtesaoMloo and motor trucks and its subsequent popularity after World War 1 forced the railroads to abandon its unprofitable lines. The use of motor trucks in the initial stages of their de­ velopment was, however, confined primarily to move the fara products to the shipping points. The lack of surfaced and all-weather improved roads was th® main deterent in the extensive use of motor trucks as leag-diot-oaco carriers. However, th© voMelo registrations and th© miles of surfaced roads had increased to such a point by 1930 th a t they formed a considerable challenge to railroad supremacy.

Development of Transportation, 193®“ 195®

On© ©f th© most significant changes ia transportation during this period was th© rapid rise ia highway transportation. Inter-city high­ way freight traffic increased at an enormous rat©! it also gained an increasingly larger share of th® total freight hauled.

Sfco ote.ro @f th© freight carried by n©t©r traeko iacroaood from

9.33 P®3®1 ®®at in I 9 U0 to l^.SO per seat in I 95 O. During th® ©am© period, th© share of freight by railroads had dropped from 63. 2b per

o 13 cant to 57. per coat. She change in their relative importance was much more violent between 19*4-5 and 1990 * th® y e ars im m ediately a f t e r

World War II. Bailroad traffic freight had decreased by about 11 per cent daring these five years, of which about 10 per cent was taken away by motor tracks. She improvement® in highways and flexibility @f track transport doubtless brought this change about.

Development of Transportation Since 19 90

®©bh ra ilro a d s oad caotos1 tr&e&o hav© saado s ig n ific a n t iE p ro v o ments In their equipment and facilities sine® 195*5. However, the motor tracks have continued to increase their share of inter-city freight at the aspens© of the railroads. The increasing proportion of inter-city freight carried by trucks and the decreasing proportion carried by railroads are shown in Table 1.

M L S 1 TOXiUHE Of DOMESTIC II®IE-CITY JEEXGHT TROTIC, BY TYPE Of TMJTSPOmTXOH, I9 HO-I96 O

Total Traffic Hail Motor Inland Oil ¥@1ws20 loads VoMeloo Water Ways Pip©lin@s Airway® (million (p©r (per (p©r (per (p©r Year ton-all©®) coat) cent) cent) cent) cent) 19 *8® 651, 2©*!- 63.2*8 9 .5 3 . IS . 13 9 . 1© „ .@@2 19^5 1,072.1490 6s.6h 6.2¥ 13.31 .11.00 .00s 1950 1,09*1,160 57. Uh 19. so ih.93 11.81 0.029 1955 1,298,060 50.H3 17.20 16.68 15.66 0.037 i960 1,3*86,650 hh.17 22.23 16.56 16. 9 s 0.058

Seureo? Separtessat of Ommoseot, Baroan ©f th© Oonouo, SfioffiO" t i c a l Abstract o f th© Waited Statoo, 1962 (Washington, D. G.s E . S. Government Printing Office), p. 570* Ik

She share of the railroads has decreased by more than 13 p e r c a t during this ten-year period whereas the tracks here increased their

share by about 7 per cent. The share of inland waterways has also

shown an inercao© of about 2 per cent during this period. The fact

m ains, however, that the railroads still carry teiid© m many te a - all es of inter-city freight a s trucks.

The improvements made in the operation of railroad and motor

tru ck t r m 0p©rtatlon hav© enabled tho movement o f fre s h Yam p rodu cts

t© far distances without much loss, low York City, for ©sample, re­

ceived H4 per cent of its fresh produce in 1959 i?*om California and

F lo rid a , 3,000 m iles and 1,500 m iles away, respectively.3 A© to the proportion o f agricultural products hauled by trucks, 99 P©ff cent o f

hogs, 97 P0r cent of cattle, 100 p e r cent of fresh fruits and vegeta­

bles arrived in Chicago by trucks in 1959•^

Hoad Transportation

B efore I 860 Mi l II II ^ At the ©psning of th© national period the main towns along th@

ooacoast woro coaneetod by r®ado o f a most rudimentary type. Thes©

roads.were eh@k©d with sad in the winter. The pack brain© @f her 000

encountered great hardships on the overland routes. There was always

3 Carl ton S. Wright, food Buying, Marketing Information for iBgQgfl (IfcJ York? She E-Jaosillan' Ooc^aay,1962 ) , p. JX.

^Automobile Manufacturer© Association, Motor Tracks fa cte (D etroit, Michigan! How Center Building, 19^3^ # PP* 15 a danger of attack from Indians. Until long after the Revolution there were no bridges over the principal rivers.

However, in the last decade of the eighteenth century an intense interest developed in improved road transportation, particularly in th® building o f turnpikes; that is, reads upon which tolls were charged. The first important turnpike was built from 1792 to 179 ^ by the Philadelphia and Lancaster Turnpike Company. This turnpike ran from th© part of Philadelphia to th© town of Lancaster. Lancaster wao a f a i r oised town lying 60 silos uost along th© Conestoga Hivor in a prosperous agricultural region. This turnpike was a great success be­ cause it opened the opportunities for trad® between a commercial and in d u stria l town and an a gricu ltu ral region. The success o f t h is turn­ pike encouraged road building and during the next30 years thousands of miles of roads were built. Both state and private interest© fi-

* saaeed tho construction of tho road oystoa. Private corporations uoro given charter rights by th© states. Th® states, however, had adequate control through limiting tolls and rates ©f return.

fh© Cumberland load or National Pik© was th© first improved eom- saaieatioa completed from th© East Coast t® th© new west. It was th© f i r s t Etederal road and cost th© government some $7,©000Q09o This road connected Cumberland on th© Potomac River and Wheeling, •West Virginia, in ISIS. It was later continued from Wheeling almost due west through

Zanesville, Columbus, and Springfield, CM©? Richmond, Indianapolis, and S erro Ham to , Indiana; to V aadalla, I l l i n o i s . I t reached Columbus in 1033 afcd Vandalia in IS52. The Cumberland Road not only fhraishsd 1 6 a great highway for immigration but reduced transportation costs ho* tween Baltimore and the Ohio. This road very much encouraged internal commerce within the region and brought great prosperity to the region through which it ran.

Other improved roads were constructed by many states and private corporations. By I860, there were 68,000 miles of surfaced road in the United States as compared to but only 1,000 miles in 1800 (Table 2).

1860*1910

After the Civil War, there was much more interest in the expan­ sion of railroad© and not much attention was given to th® construction of highways either by the local or the state governments. However, the highways in the north were better than those in much of the south,

There were a nusbor of wagon trail© across the wost, ouch as Oregon

Trail and Santa F© Trail. On th® whole, most of th® roads in th® eountsy were of d irt, sometimes graded up and dragged, sometimes not.

Some road construction, however, took place although very slowly.

Even with railroad and river transportation available most farmers had to travel over roads to get their products to th© depot or th® dock.

Sy 1900, there wore 129,080 miles of surfaced road in th© United

States. The bicycle eras© began in th© United States in th® 1890ss and continued in th© first decade of th® present century.

Th© ouscooofal Gssperimonto with automobiles after 1900 , increased th© interest in road building. In 1920 , the number ©f automobile registrations in the United States had gone to 458,377 us compared to TABLE 2

BUBAL BQAL MILEAGE IB THE UHITED STATES, 1800-1960

Total Surfaced Total Mileage* Mileage® Percentage Teas* (1,000 miles) (1,000 miles) Surfaced

1800 H.A. 1 1820 H.A. 10 18**0 H.A. 6** I 860 H.A, 88

1880 H.A. 96 Mill

19©0 H .A 0 129 1901 * 2,151 154 7.25 1909 2,200 190 8 .3 6 1910 H.A. 20** 191 ** 2.21*5 257 10.51

1921 2.925 387 13.23 1925 3.006 521 17.33 1930 3.009 69** 23.06 1935 3.032 1,080 19 W 2.990 l.3**0

19*15 3,012 1.H95 1*9063 1950 2,99© l,6 ? 9 56.15 1955 3,01*5 1 . 9*12 i 960 3.116 2,165 §:S

a£nclud®s extensions of coentry, town, and township roads hut excludes rural mileage not under local control.

^Includes a ll surfaced mileage whether under state or local c o n tro l.

Sources U. S. Department o f Commerce, Bureau o f th® Census, Historical Statistics of the United States, Colonial Times to 1957. ■p. ^58: Statistical Aha t r a c t . 1963 (P. S. Government Printing Office Washing ton, D. G.J). 16 only 8,000 In 1900 (Table 3 ). The member of motor tracks registered was 10,123 in 1910. Total rural road mileage was estimated to be

2,131*000 miles of which only 15*1,000 (7-2 per cent) was surfaced

(Table 2). In 1909, it had increased to 2,200,000 mil©© of which

190,00 0 m iles (8.6 per cent) was surfaced.

1910-1930

With the introduction of automobiles and the motor trucks, the eonotraetion of hard-aurfeeed roado boeas© tho aoeGOoary roqmirQSQiato

It was not until 1913 . haw ev er, that the number o f motor vehicles registered in the United States crossed the million marie, and 1916 that the national government began the planning and financing of a n ational highway system. The number of automobiles registrations in­ creased from h58,377 da 1910 to 23,03*l-,753 da 193®, an increase o f about 50 time® within this 20-ysar period. Sh© rural road mileage increased from 2,200,000 in 1909 to 3»°09»°00 in 19J0, of which 23.06 per eont (69*^,000 mil©©) was surfaced. Motor truck® operating a® eoraiaom carrier® or a® private or contract carriers took over as in- creasing amount of inter-city freight. Only10,123 truck® were reg­ istered until 1910, bat th© number swelled to 3»6?*H593 dn 1930°

Several factors contributed to this rise ©f inter-city tracking.

Motor tracks possessed great flexibility in service, height in l@©0-than-©arload lots moved very slowly by rail, but trucks could givo faot and frequent oosvi ©o ©a small oMpDont, usually ©a a door- to-door basis. Also, they captured business where speed was more

Important, ©specially perishables. TABLE 3

MOTOE VEHICLE BSGISTBA.TIOHS IE THE UEITED STATES, I 9 OO-I96 O

Automobiles Trucks Tear (number) (number)

1900 8,000 —

1909 77.MOO l.Uoo

1910 458.377 10,123

1915 2,332,426 1 5 8 ,5 0 6

1920 8 , 131,522 1 . 107.639 1925 17,481,001 2,569.734

1930 23.034,753 3.674.593

1935 22, 567.827 3.919.305 1940 27,465,826 4 , 886,262

1945 25.793.493 5,079,802

1950 40,333.591 8,604.448

1955 52,135.583 10, 302,987 i 960 61, 558,847 11,699,318 1962 65.644,000 12, 321,282

Source: United States Department of Commerce, Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957? A Statistical Abstract Supplement (Washington, D. C.s U. S. Government P rinting O ffice, 19&>), p . 462; Automobiles Manu­ facturers Associations, Automobiles—lacts and. Eigures, 1963 (Detroit, Michigan, 1963 ). 20

1 9 3 0 - 1 9 9 0

The most significant development in the transportation of food

since 1930 has been the rise of the motor trade as a long distance

ca rrier. Between I 93 O end 1950, both th® number o f trades and miles

of earfaced road were more than doubled; and a national system of highway track transport cam® into existence. Although the total mileage of rural roads remained almost constant during this period,

th® surfaced roads increased about two and a half times; i.e ., from

69^,000 miles in 1930 bo 1,679,000 miles in I 95 O. The Federal Gov­

ernment's participation in highway construction increased consider­

ably. The Federal-Aid Highways increased from 193d0^9 m iles in 1930

to 6*40,753 m iles in 1950* The total cost o f 3T©d©ral-Aid Highway

System Increased from $237 million in 193° to $753 million in 1950.^

Fart o f th© co st of construction of this system was borne by th®

Federal fands and tho rest by the state fhsds.

Simultaneously, significant changes were made in the size and

construction of food-truck bodies. Improvements in brakes and tires

increased th© efficiency and th© safety in truck transportation.

Diesel engines e©me into much more general us®. More ragged and powerftol ©agin© designs were developed for the purpose of achieving

higher speeds upgrade under loads. Th® introduction o f tank trucks

S. Department of Sommer©©, Bureau of the Census, S tatistical A b stract &t tho Waited States, 1963 ( Washington, D. G.s W. §. Government Printing Office, 1963 ) , p- 55®* 21

for hauling milk, liquid sugar, vegetable oils and vines, greatly

facilitated the movement of the liquid forme of food to long distances.

Insulated and refrigerated trucks widely transported dairy and poultry pro d u cts, meats, fruits and vegetables and frozen foods. However, on® o f th® most revolutionary developments in truck transportation cam® in the 19*10' s when the mechanically refrigerated trucks were devel­ oped. Th© bigger and improved motor trucks necessitated improvements in road construction. A trend toward extra-lane super-highways began in tho 19*t0! o. In 1939s ther© uor© only J00 alios of roads ©f *85 foot or more in width; in 19*49* there were more than 2,000 miles.^

The improved roads and trucks resulted in fa ster and more con­ v en ien t movement of farm p ro d u cts. By 1950» th© motor tru ck s became

the most important means o f transportation o f farm products.

Sine© 19g0

Th® us© o f motor tru c k s a s th© main tra n s p o rt c a rrie r s has been increasing rapidly sine© 1950 * as a result of modem highway devel­ opment and improved facilities. Eh® mob or @£ vehicle registrations has increased by about Jp per cent between 1950 and i 960 . Eh© number of motor truck registrations increased from S, 60*S-,HH8 in X95 O to

11, 669,318 i a i 960 (Eabl© 3)* Ehore w©r© 3 , 116,000 miles of rural roads in i 960 o f which 6 9 .^8 p e r c a t (2 ,1 6 5 thousand miles) were

Waited States Department ©f Agriculture, g< Marketing (Agriculture Monograph 1*4, Washington, S. G.s TL S. Government Printing Office, October, 1952 ). 22 surfaced, as coraparsd to only 1,679*000 miles of aurfaced roads in

I95O; i.e., only 96.16 per cent of the total rural road mileage (Table

2 ). The In ter-S tate Highway program was in itia te d in 1956. She Federal-Aid Highway Act of 1956 provided a plan to complete a Hi,000 m iles of la tlo n a l System o f In ter-S tate and Defense Highways by 1969.

The project is to cost $29 billion. The Congress raised the Federal Government* e share of building costs and granted wide authority m er construction standard©, highway access and vehicle weight lim it. Th© modern highway system is designed with access control throughout! i . e . , the roadway may be reached only through planned, access from connected routes. There are no vehicular crossings at grades, and, therefor®, no traffic lights. In addition to the rural mileage, urban expressways serve the central business areas of the large urban centers. Th© Inter-State System has facilitated rapid and safe move­ ment for passengers vehicles and trucks. As a result, the trucks havo increased their size and speed. In 1999, 22.9 ?er c®1* of all new truck registrations were in th© heavy class with a gross vehicle weight of over 16,000 pounds, compared to only 10 per cent in

Consequently, the average length of haul and freight carried per truck have increased. These improvements in th© highway system and th© motor trucks have enabled th© movement of the farm products to th© markets quickly and economically.

bright, ©p. cit., p. 75* 23 Eailroad Transportation

Before I860

The first railroads designed for passenger service in America were those built to supplement th® canal system such m th® road from

Philadelphia to Columbia and from Hollidaysburg to Johnstown. Th®

Baltimore and Ohio, running from Bllicot m ills, 13 miles out, was the first to go into operation as a common carrier in 1330. Its cars were, tow©v©r, tors© dram .

She first to be built with steampowered locomotion was tho

C harleston and Hamburg in I 83 O, running from Charleston, South Caro­ lin a , to Hamburg, 125 miles away, at the fall line point on th®

Savannah Siver, across from Augusta, Georgia. Bsgular service began in Jexsusry, 1831, with a locomotive HThe Best BWend of Charleston , 0 built in lew York State. When this line was completed in 1033a it covered 136 miles and was th© longest railroad at that tira© in th© world. Impressed with the success of these experiments, great inter­ est developed in railroad construction. By 1850, seven trunk lines w®r© built and about 9,000 miles of railroad was into operation.

Within th© next ten years, th© railroad building took place very rapidly and by 1360 th© s^ailroa&s operated 3 0 ,626 miles of road link­ ing almost a ll important market centers throughout th© country.

Pennsylvania railroad from Harrisburg to Pittsburgh wae completed in

1S52s Baltimore end Ohio from Baltin®ro t@ Wheeling, Woot V irginia, in

January, 1353* and th© Hew York Central from Albany to Buffalo in Elay,

1853* Th@ f i r s t r a il service from Hew York to Chicago was reached in 2 4

1853 cm& t0 3^®* S t. Louis in 1855* There was very little railroad construction west of th® Miseieeippi E lver before th e C iv il War. la the south, the Western and Atlantic Ballroad of Georgia reached the f ©na®0 s©® liv e r la ISgO. She opening of la sh v ill® aid Chataaooga in

1854, connected Atlanta w ith th© river and r a il eysfeea @f th© north­ west. This system became the distributing agency fbr western grain and neat in the eastern corabelt. By 18 58 , the Central Virginia, running west from liehmond, and th© Southsid© Railroad, running west fe@Q Potorobarg, had nado eoaaoetioao w ith th© southwest, and by 1S59 with the Mississippi liver. She Mobile and Ohio was organized which reached Cairo, Illinois, in 1859* In th© sane year lew Orleans opened connections with Jackson, Tennessee, by building the lew Orleans,

Jackson and Great Northern. The Illinois Central Ballroad connected

Cairo and Chicago.

Tho railroodo t©@& from rivor end lak© otoomboat sack of th© traffic and by i 860 unquestionably became th© leading form o f trans­ portation. Consequently, tho whole eonploidoa of the eoEssore© between th® oast, the woot and th© south changed. The commercial t ie s between east and west definitely strengthened as now th® west could send most of its produce directly east by rail. Financing th© railroad construction. Some o f th© first railroad construction was carried ©a directly by state governments, notably in eaoo of Pennsylvania and Michigan. However, th© p rivate business corporations wore tho primary Institutions financing tho railroad construction. Som® of it was provided by American investors but the large easts were to r rowed from abroad. She sta te , o f coarse, retained

some control over rates, profit and other matters as seemed necessary.

The state and local governments also made substantial contributions In

the form of specific grants of cash or land or purchase of stocks or tends, Th® railroads obtained assistance from Federal government as well in form of public land grants. It is estimated that by lg60,

Congress had allotted over 30 million acres to 11 states.®

Igfo-igilO

Th© Civil War had an immediate effect upon transportation, par­

tic u la r ly in th® south, tu t the d ecisio n o f the Federal Government to

encourage th© building of western railroads by land grants had far- reaching effects. In 1862, Congress passed an act to aid the con­

struction of the first transcontinental road. Th® major portion of

this construction was ©atrusted to two largo companies—th© Contra!

Pacific and tho Union Pacific. Eventually on May 10, 1369, tho to© roads w©r© brought together at Promontory Point, Utah.

She railroad construction continued at a vigorous paeo throughout th© country and ©steaded rapidly into th© western region. la th©

©arly eighties, Hew Orleans got her first railroad. Meanwhile th©

AeMaoi, T©poka ©ad Santa X?o moved westward along th© route ©f ©Id wagon trad© to Santa P© and then crowling across th© d eserts o f lew

Mexico and Arizona, reached th© ports of Southern California.

% . S. Woytiasky and E. S. Woytinoky, World Cegsaeree and Gov- ernmente—Trends and Outlook (lew Yorks The Twentieth Century Fund,, I 9 5 5 i . P - 3 *uf. 2 6

In th© south, too, th e railroad transportation developed at a ra p id r a te . In 1870» the south had 13,422 miles of railroad; in i860, the total was 21,176. Thereafter, construction proceeded more rapidly, th® total mileage reaching 54,926 in MOO and 79,841 in 1910.

faking the country as a whole, the growth of railroad® far ex­ ceeded that of the population during this period. Since th® Civil

War, th® population increased about threefold, whereas railroad mile­ age gn§3 eightfold. In 1910, th© railroad a il sago had grown to .

240,293 silo o ao compared to 3 0 ,6 2 6 in I860. In other words, thoro was 2 .6 miles of railroad per 1 ,0 0 0 people in 1910 while it was only

O.9 7 miles in I 860 .

Th© railroad© introduced various improvements in their equipment and facilities as well. Steel rails, labor saving devices for han­ dling bulky commodities and other improvements in railroad technology enabled th© railroad© to inercaoQ thoir speed and redaeo ff'oigkt rates. Th© farmers could ship their products to th© market in smeh less time thaa by waterway©. Thao, th© railroad© wore able t© divert almost eooplotoly th© agricultural trad© from th© river and canal ro u te s .

financing the.. eonotmotion. Although th© private busi­ ness corporations wor© th© main aoure© of railroad capital, th© Fed­ eral government greatly helped the railroad construction of th© country during this period. Government subsidy in the form of land grants asd tho loan of Fedoral credit contributed significantly t© railroad expansion. For th® construction of transcontinental railroad., for example, the Congress donated the right of way across the public domain and 20 square miles of land in alternate sections along the right of way for each mile of track built. It also pro­ vided fo r 30-ycar lo an s o f $16,000, $32,000, o r $U8,0Q0 for each mile o f track depending on whether th® construction was in plains, foot* h ill, or mountain country. On the whole, the Union Pacific and the

Central Pacific received approximately 20 million acres of land and

$60 million in loans.9

‘She stat© and local governments also contributed greatly for railroad construction during this period. State governments put up an estimated $228 million and donated 30 million acres of land. Mu­ nicipalities and counties provided $300 million.*®

1910-1930

She railroad network continued t© increase after igiO and reached i t s maximum p h y sic al s iz e in 1915* However, a f t e r 1916 a reverse trend started and th© railroads began to abandon their unprofitable lin e s . By 1930 , about 5,000 miles of the first.trade was abandoned.

Put they ted increased their capacity to handle freight as a result of improved facilities and equipment.

% . Harry Williams, B. ET. Current, and Frank Frlsdel, A H isto ry of th® United States (Since I 865 ) (How York; A lfred A. Knopf,. 19^1)7 P. 52.

1Qim a ., p. 5 5 - 28

1 9 3 0 - 1 9 5 0

Sh@ trend toward redaction in total railroad mileage continued daring th is period. Between 193° end 1950* more than 15*000 m iles o f

first track was abandoned, fhe railroads faced sever© competition

from motor tracks during this period. They* therefor©* concentrated

their efforts to improve their facilities and equipment. She most

spectacular advance daring that period was the introduction of the

Dioool Electric IocoeoMvg. Shoo© aro mvo poworfhl and economical

than th© eoal and ©11-burning steam locomotives. In 1929o thor© w@r® only 25 diesel locomotives in the country; in I9U0, less than 1,000 of th© hh.ooo locomotives then in us© were d ie se ls; bat by 1950 ap­ proximately half th® freight was pulled by diesels.^ Improvements in the design of refrigerator cars using ice and the introduction of mechanically refrigerated railw ay cars w©r© mad© during this period. She reverse-flow fans can circulate e@©l air for

fresh perishables and also warm air for products that mast be guarded against cold. A method of h alf-stag e icing saved th© espouse o f fe lly loaded ic© bunkers to shippers ©f parlohabloo that require only mildly cool tcsagsQratnroo. Many other technological improvements were made during this period to redue© the dsmago la shipment and t© oak©

th© railroads safer and faster. Some railroads also began to us© motor trucks with the permission of the Inter-State Comaere©

•^Halted States Department o f AgrleuXta.ro, Technology in Food Marketing, op. c it., p. 52* 29

Commieaion to d e liv e r less-th an -ca rload l o t s on lin e s where greater

speed of delivery could be obtained at lower cost.

Since 1990

Since 195^* th© rail©© of railroad operated in th© United States have continued to decrease, primarily as a result of rapid rise of highway transportation. Ballroad® still move a large quantity of perishable foods, however. "About HO per cent of the fruit and veg@- tablo ©MpBoato n©70 % r a il. n Sailroo&o havo, hsmavor, esaeoa*

tratsd on improving the efficiency of their operation to regain their lost business. Bail schedules have been shortened as much as a day in

shipment from th© Pacific Coast to Chicago and Hew York. Improvements are mad® in refrigerator cars through installation of air*circulating

fans and tb s us a of such cars has greatly increased. In 1939* about

J2 thousand fan-©quipped refrigerator ears tioro availabla out @f a

fleet of about 122 thousand refrigerator cars of all typos.^ fh©

cobMmcuo operation and therm ostat!e control w©r© other improvement®

in th© fan ears. She us© ©f mechanical refrigerator ears hao boon

increasing for th© transportation ©f fro sen foods and other [email protected] products such as meat, fresh fruit® and vegetable®, and dairy products.

^%ait©& State® Department o f Agriculture), Shod, She Yearbook of Agriculture, 1959 (Washington, D. C.i U. S. Government P rinting Gffie®, 1939) ■ P. HlU.

. p . MU. 3 0

TABLE *

BAILRQAD MILEAGE IN THE UNITED STATES, I 83 O-I96 O

Miles of Ballroad Operated Miles of Ballroad Operated Tear (December 31/ T ear (December 31)

1830 23 1900 193.3*6

1835 1,098 1905 218,101 is*o 2,818 1910 21*0,293

18*5 M33 1915 253*789 1850 9.021 1920 252,81*5 i«55 18.37* 1925 2*9.398 i 860 30,626 1930 2*9,052

1865 35.085 1935 2*1,822 1ST© 52,922 19IK) 233,670

1875 7*.096 19*5 226,696

1880 93.262 1950 223,779

1885 128,320 1955 220,670 1890 166,703 i 960 217.552

1895 180,657

Source: U. S. Department of Commerce, Bureau of the Census, Historical Statist I c q of the United States. Colonial Times to 1957 (Washington, D. C,: U. S> Coyernment Printing Office, i 960 ). Statistical Abstract of th© United States. 1963 . Combination Mghgay-rallwey movements hav© gained in popularity.

In 1955* there were 169,150 flat-car loadings under the ^piggy-back^

service enables the movement of large numbers of trailers on one

train. This permits th© delivery ©f food stuff© directly to retail

stores, instead of having to unload them at a warehouse and transfer

th® food to delivery trucks.

Water fransportation

Bofero 1869

Waterways were the c h ie f means o f transportation in Colonial

America. However, no organized efforts were made to improve the water

transportation until th® early part of the nineteenth century.

Steamboat. With th© introduction and the development of steam­ boats in th® early 18005 s th® importance of river traffic increased

tremendously. Ekltoa, in lS©y Trailt tho nSl<3rm©at, n tho first ©©&> aoreially practical steamboat. ®h® steamboat greatly increased th© speed of mat or transportation. She time, from How Orleans to Pitts­ burgh mo reduced from ICO to 3© days. By the IS5O0 0 the fa st ©at

steamboats wore making the upstream journey from lew Orleans to

Louisville in loss than five day©? freight and passenger rates were

cut to a fraction of their former costs. She perfection ©f steamboat mo greatly helpfhl in specialisation. Southerners were inclined to

specialize in cotton production, thus having need for meat, wheat, and implements, ot©., produced in tho uoot. In tar-a, tho uootomoro

found th® cotton plantations an excellent market for their produce.

She western meat and wheat were seat to th® southern market over th© 32 Ohio and Mississippi Rivero. It wa®, of eosrss, necessary to cor© th® moat lest it spoil on tho still slow journoy down the river. 3&k®~ wise, the wheat was most frequently shipped in the form of flonr.

Therefor®, many tom s on those rivers became important processing aM manufacturing e@nt@rs. By 1S28, Cincinnati became so important a© a pork-processing center that it was given a aick-naa® of ^porkpoli®.0

St. Lewis and Lewisville also became thriving river cities.

Canal dovolQ^aonto ' Uith tho development @f th© otesaboat and tho consequent oueeooo ©f rivor transport* aa increased emphasis mo gives, on artificial waterways. Shi© led to the building of canals where it was feasible as in Ohio* low York* and Pennsylvania. Small canals were constructed in Virginia* Hsrth Carolina* and Massachwsetto. Th©

Brie Canal project got underway in 1S17 and was completed in IS25 by lew York state government. Th© total ©xpen&itmr© ran to something

©vor 07*009*000.^ fh@ ©access of th© Erie Canal m e immediate. Whereas before the eoaal mo M ilt it cost $ 1 0 0 t© m@v© a ton @£ freight partly by wages* from Buffalo to Bow York and took 2 0 days time* now i t cost ©sly $ 1 © aad took only ©ight days time. However* th© transportation was still vary slew ao tho camel beats and bargee uoro towed by horse ©r rsaloo at a speed ©f two to thro© miles an hear. Th© canal* of coarse* in­ creased th© trado and som© villages and toms along th© rente like

■^Harold U. Faulkner* Agaric©n Economic Hi story (L7ow Yorks Harper & Brothers, 195H), p. 268. 33 U tic a 9 Rom®, Syracuse, and Rochester g rm vexy rapidly la the next 20 years, 2h© lake cities of Buffalo, Cleveland, Detroit, and Chicago grew into M g trade centers.

Th® Erie Canal was such a success that other sim ila r p ro jects . w©r@ s ta r te d in other eastern s ta te s and m iddle west, Eh© Pennsyl­ vania Canal constructed in 1826-lf>3^ with its connected railways was

39 U miles long. A canal running along the Potomac was hullt to e@n- no©t tho EsGtora G©o0t and tho ©hi® Biv©r. amorous other canals won© ta ilt to earnest tho-upecuatry with tho t i d elator. Eho ©M® and tho

Erie Canal (1833) in tb® eastern part of the state connected Cleveland on tho Brio Canal with Portsmouth on th® Ohio River. She Miami and

E rie Canalopened ten years later, ran from E©l©do in th® n o rth to

Cincinnati on th® Ohio River. Eh© Wabash and Erie Canal connected

Toledo, Ohio, in th© north to Evansville on th© Ohio River in th©

o©uth„ Eko Illiaoia-Midaigan Canal, completed la 1£&8, e@smostsd

CMcago on Lake Michiganw ith th© headwaters on th® Illinois River a t

LaSalle. 0n the whole, tho parted h©tween IS30 to IS50 was a great eanal-huildiag ora. fh© canal ssileag© in th© United States increased

from 127© la 1830 to 3 ,3 2 0 ia 18 M0 and to 3 ,7 0 0 in iSgO.1^

She construction of this network of eaaal building was financed both by th© stab© government© and tho private corporations. It io ■or ©stisated that ooaothing like$100 million were spent on the easel

^s^saiimor, gg. cit. B p. 272.

l^H arold E. Williamson (ed„), fh® growth o f th© American Economy (He® Yorks Pr®atic©-Hsll Inc., I 9 M&), p . 178. 3 * construction. between 1800 and 1850. Most of this expenditure was tone by the states, The vehicles were privately owned. Th© opera­ tors paid tolls for the use of various sections of canals. They charged freight for the movement of passengers and the shipment of goods in order to make profits for themselves.

1860-1910

After the Civil War not much attention was given to the con-

Btnaetioa of ©ssslo ao railroads ted aascooofally replaced ttetoruayo as th® main means of transportation.

1910-1930

If was, however, realised daring World War I that railroads were inadequate and again the attempts were made to revive the waterways.

Th® national government sought to build and improve an inland water­ way along th© A tla n tic ©ad C alf Coast. A namber o f dans ©ad lock s were built. However, except during war years, the waterways did not play a significant part in th© transportation of farm products.

With the development of diesel tow heats, th© b&rg© transport on the Mississippi system increased ©gain. It Jumped from 5-5 billion ton-miles in 1931 to 36 billion ton-miles in 1 9 5 1 = S in c e 1 9 5 0

On the whole, waterways carry a very small volume of agricul­ tural products. However, in case of hulky and heavy products and where speed is not important, it is very cheap to transport hy water.

G-raln is the principal farm product transported hy water. One out of every five harges haul grain.*7

^Hichard L. Kohls, Marketing of Agricultural Products (Hew York: The Macmillan Company, I96 I), p. 239- CHAPTER I I I

DEVELOPMENT OP STORAGE OF FARM PRODUCTS

Agricultural production ie characterized "by its seasonal nature

and the variation in the supply of goods produced frost time to time.

Most of the farm products like grains, cotton, tobacco, and fruits and vegotatloD have a rolativoly ohort harvest period. Othcro, such ao butter, eggs, and pork, although produced throughout the year, have a wide variation in their level of production. The agricultural prod­ u c ts are, however, demanded for consumption throughout the year. They must, therefore, be stored from the time of their initial production until they are wanted hy the consumers. Storage performs the function of asking those products available throughout tho year. Storage, therefor©, is a productive marketing function as it creates Him© utility" by making the goods available at th© desired time.

Storage may b© ©ith©r common storage or cold storage. Th© t©ra

^common storage” r@£@rs to those H storage facilities which do not re­ quire th© maint©nance of low or constant temperature. ”*■ Commodities which need common storage are grains, cotton, tobacco, etc. On th© other hand, cold storage which requires th© maintenance of low or

%©ary S. Erdaaa, jkaerleaa Produeo Markoto (Boston and low Yorks D. G. Heath and Company","lS^TT' pT"32S-

3 6 constant temperataros and controlled humidity is needed for storing perishable products like moat, eggs, dairy products, etc* Gold storage is very important in the marketing of perishable products be- cause it not only prolongs marketing season for them, hut also reduces th© wastage and loss in quality* Cold storage enables frozen foods to be stored almost indefinitely and thereby eliminates seasonal limitations upon th e available supply.

Storage of fsssa products is o o a e a tia l throughout th© channel of trad© as tho goods pass feom th© producer to th© consumer. Storage function may be undertaken by the famer himself, by elevators and warehouses, processors, wholesalers, retailers. Some storage function is also performed by th© consumers who purchase their supply for con­ sumption over time, mostly a week or so.

Improved storage of farm product© has played a very significant role in th© development ©f agricultural marketing oyGtcsa ia th© United

S ta te s . Th© development of storage function since Colonial times ha© been discussed in this chapter.

Storage Before 1776

During th© Colonial period, most ©f th© etorag©o f farm products was done by th© farm family on th® farm. Th® grains if ©re stored in th® bins of wood or metal and other containers which were crudely built. Cotton was stacked in th© fields, and potatoes, apples and

©aieao wore kept froa foil to spring ia family collars. 3 « Moot o f the perishable protects wore consumed fresh and very

little proportion could b© stored. Pork was smoked, salted and stored

for consumption during the winter months. Fruitsand vegetables were

© atm fresh; some were dried and stored. Th© consumers did their own

storage and preservation. 0Th© thrifty housewife bought strawberries

or poaches in season and made preserves or jam for winter us®.R

The country merchant and the butcher also performed storage to

somo © stm t. Th©y„ however,, stored th© farm products for a very small

period. Storage mo not taken ao a specialised ftaetiea daring this

period because of very little trad© in farm products.

Storage B17?6-1860

There were not many changes in th® storage function for the first

few decades after the Revolution. Storage was still undertaken pri­

m arily ©a the farso. Few iEjprsvcnasata wore nado in tho ot@rag© Macs

on th© farms.

However, with an increase in the population and trad© in fare

products,,. ©specially wheat, and wheat flour, the country merchants and

millers began t© tak© increasing interest ia parfonaing th© storag©

function. With th© advent ©£ th© railroads,, lino ©levator companies were established which used to collects stores and ship th© grains.

These eoepaai©© had headquarters in such c i t i e s as Chicago. They

owned a number ©f country ©levators along tha railroad lines.

^W®!!© A. Sherman, Merchandising Fruits and Vegetables (Hew York; McGraw-Hill Company, In c ., 1930 )* p . 10. In texminal markets, the grain was stored either in hag® or in bulk in ordinary warehouses where it was elevated by manpower or horsepower. In 18U8, the first hrick warehouse was huilt in Chicago, using th© first steam ©levator in th© world.^ The establishment of th© Chicago Board of 2rad© in 18^8 and consequently, th® development of the Chicago market as th® greatest futures market in th® world, greatly ©neonraged th® business of warehousing. The grain elevator system developed a lot? cost and speedy system of physical handling ®f grain, Those !5tall structures, each tolding from five hundred thou­ sand to five million bushels, were mad® up of long, slender, pexpen- dicular bins that were filled by buckets or cups lifted from the bottom to th© top of th© structures by aidless, pow©s>-drlv@n b elts.”

These elevators could carry out unloading and loading functions at a fast speed. In 1855, th® Galena elevator, for example, could unload

100 ears por day. 0 Me ago ©lovator system in traduced for tho first time th® practice of uniform warehouse receipts based on definite quantity and grado.

Sy I 8 6 0 , public warehouses for storage of grain were in operation in Indiana, Illinois and other midwest states. Indiana was probably tho first state to enact a legislation in IS57 providing for grain warehousing eontrol.

3 p. E. Goldstein, Marketing - A Eanaor 9 0 Problem (Hew Yorks The Macmillan ۩., 192 g)0 p. 12.

%ayae B. Baosaosen, Marketing Earn Pro due to, 1 8 7 3 - 1 9 1 ^ (Mia©©.), p . 10. Ho

Cold storage. ETatuml Ice was being used "for cooling and to

help preserve meat and milk in the process of marketing. Country

butchers and dairy farmers built ice houses and dammed small streams

or caught surface water in shallow ponds as far south as ice three

inches in thickness was to form.®'* However, th© supply was uncertain

and the use was very much lim ited.

Storage,, 1860-1910

Chicago and other towns on th© M ississippi and th© Ohio had al­

ready become important terminal grain markets before the Civil War.

By 1SJ0, the farmer was 3©1 ling his grain to the local dealer who, in

turn, consigned it to the commission merchant in the terminal market

for resale, who, in turn, sold it to the shipper. Fending such re­

sale, th® grain was stored in terminal public warehousesa

Storage of farm products became a specialised ftoetioa ao a re­

sult of increasing urbanisation, westward movement of th© population,

and increasing a g ricu ltu ra lproduction duo to tech n o logica l develop­

ments. ®he elevator movement mad© a rapid progress during this

period. By 187®, warehousing of grain emerged from Bb©inga p riv a te

and unimportant business and became established ao a most important c u tility function.® ^Facilitated by established standard grad© and

Ssheraaa, ©g„ e it., p. 26. 6 Goldstein, ©p. e it., p. 12. t o regular inspection ©yates, trading in warehouse receipts instead of grain itself was mad® possible, She warehouse receipts were con­ sidered good legal trader.

Shore w@r@9 however, complaints by th® farmers and farm orgeat® cations against many unfair practices by local ©levators and Ware­ houses. As a result of growing public concern, attempts were sad® to regulate th® local warehousing facilities. Illinois took th© lead

©ad, ia MSjo th© Illinois Assembly provided for inspection of grains and required tho publication of rates by all public warehousemen.

Illinois Constitution of 1870 mode it mandatory for legislation to pass laws for th® inspection of grain and for th® regulation of ware­ house receipt®. In 1871* the legislature established maximum charges for the storage of grain. Other states followed and legislations regulating public warehouses were enacted by South Dakota in 1S900 lorth Dakota ia 1891, and Minnesota ia XS9 3 .

Sh© country elevators were either leased to or w©r© operated by larg© skipping or grain men chanM slag coapaaig o, ffko lo c a l doaloro built their own ©levators. With tho ©rang© movement, farmers entered in th is f ie ld in ©rdor to stimulate competition in country grain buying. As a result,, a number ©f cooperative warohouooo were built at

Qoverel points providing separate Mao fo r th© farmer members. Sh© f i r s t farmer ©levator was built at Brooklyn, Poweshiek County, Iowa,

Ju ly , 10690 But these cooperative attempts lacked experience and baoiaooo ability. Ehcy olo© not vosr-y strong opposition from tho established ©levator companies, Sb© result was that these earlier coapaai©0 were short-lived. Haay cooperative companies were reorgani­ sed daring the faraaer’s Alliance Movement. nevertheless, cooperative elevator movement could not make any significant progress until 1895*

Sold storage. Th© most revolutionary development In storage of perishable products, "brought about during this period, was th e me­ chanical refrigeration. Ammonia absorption process was invented in

I860. She first cold storage room in the United States was construct­ ed In lew York In I 865 for the purpose o f storing fieh.^ She proces®, kDuovor, did not e©no lat@ gaaorcsl uoo and cold atorago did not reaok a commercial state of development until the early nineties. Cold storage houses were constructed in the large cities. Seme of then® wen© private houses where th© owners stored their own products. L ater, public cold storage houses were built where outsiders stored their products on payment.

In tho early 1900°oD tho Introduction of Xockor plants which pro­ vide refrigerated storage for perishable farm product® was th© most outstanding dovolopaent. It io a ,Joafoty deposit bos kept In a rsoia with a temperature aoar s©r@ whoro families may store fro sen food supplies that have bocn grown at homo or purchased at wholesale.15® CMe® leo and Cold Storage Company, Chico, California was th© first

E. Hibbard and Asher Hobson, Th© Marketing of Wisconsin But ter. University of'Wisconsin, Agriculture Ispeniment Station, Bulletin Io, S?©, 1916 , p . 3 7 .

1. EJsan, EofTlgoratcd Hood took or o - A lew Cooperative Service. Farm Credit Administration,. Cooperative Division, Circular ! o . C-IO7 (Washingtons U. S. Government Printing Office, 1936), p* 1. * 3 plant to undertake this service at about 1903*^ Shift lee plant first

rented an upstairs eold storage apace to local merchants for storing

eggs, apples, and other produce. In 1908, it extended this service

to farmers for storin g o f n e a t in box©®. Each farm er famished his

om box and . the boxes w©r© stacked in a ?e® . However, lock or move-

ment did not make any progress before 1910, although another l©ek®r

p la n t is reported to be in operation at Crete, Nebraska, in 1910.

Ster©gG019M“ 3>950

As the marketing system became more complex as a result of grow­

ing distance between th® production and consumption areas, there waft

g re a te r need for quantities of products to be stored at various points

in the marketing channel. Agricultural production increased tremendously during and after

World War I . She farmers f o lt th© aeuto shortage of atorago facil­

i t i e s on their fame. Shis, together with other problems, caused th©

producer to hau l th© traXk o f h is grain to th© ©levator ia a feu wackoB

instead ©f spreading it over th© oatir© y©ar. Shis forced the surplus

of each crop iat© th© terminal warehouses. ®h©s© warehouses gr©u ia

s i so and becoB© mar© aoehamisGd. Most ©f these ©levators b©eam©

equipped, w ith special device© for loading and unloading o f grain s.

9Ib id.

2%,. A. Bouell ©t a l . , Minnesota Oold Storage lacker Plants0 University of Minnesota, Agricultural Experiment Station Bulletin 3^5* January, 19h0, p. 1. t* fhas® device® like car dumper® tilt the care and discharge their con­

tent 0 at faster rat©.

Host of the terminal elevators were operated by the private deal­

er© la grain and the railroad©. A ©urv©y ia th® operation of ©le­ vator© in terminal maskoto in 1920 ©hewed th a t o f th© t o t a l ot@g©g©

capacity, excluding that of miller© and converters, about SO per cent was operated by such dealers, 12 per cent by railroads, 2 per cent by mnieipalitiGS and 6 per cen t by public warehousemen not dealing in grain. Parsers, however, were complaining that th© local elevator com­ panies would mix grain to the disadvantage of th® shipper, would mis- grad© it, and would deduct too much for dirt and weed seeds. Sh©y

also wanted the state regulation of elevator© and warehousemen to se­

cure th® validity and negotiability of warehouse receipts. She

Gongrooo paoocd tho United Statoo Uarohoaoo Act of91 IS. Slao Aot

authorised th© Secretary of Agriculture to issu e lic e n s e s to war©- kmaooaesa. She Act ©^plioo only to staple and unprocessed agricultural

e©BS0diti©s. It is aot mandatory ©a tho part of ©vosy warehouse t©

\ ©porato under th© provision ©£ this Act. However, thos© who ehoooo to

s© ©pornto aro oubjoct t® fedoral cuporvioioa usdor th© Act. The

roeoipto issued by th©g© lie eased warehouses an© accepted by basks a®'

c o lla te r a l for loams ranging fromJO to 90 per eesat of th© receipt valuo. Staao, th© legislation provided not only th© protection ©gainst

tho looo from storage bat also facilitated financing tho carkotisg process. *5 Cold storage. In the 'beginning, the people were prejudiced against the goods stored in the cold storage houses, but by World War

I, the economic benefits of cold storage were recognised by the farm-

©r®, dealers and other marketing agencies. Within time, the eon-

@un@r@ ale® became convinced that the cold storage does not necessar­ ily deteriorate the quality of the product. Cold storage capacity increased rapidly. Gross refrigerated warehouse capacity increased from 5*5-3.6 m illio n cubic f©©t in 1921 to 728.6 million cubic foot in

1929 (Sable 5).

Th© us© o f lock er p la n ts was on increase and some improvements were a lso mad® in them. In 1913 , Chico le e and Cold Storage Company installed covered bone© which could be locked. As the demand for such accommodation increased Ba special room was built in 1917* and wooden lockers in a variety of sizes were provided.In 1917» an ic® p lan t manager ia Contrails, Washington, furnished opaeo ia Mo cold storage Ip room for th® freezing and storing of wild gam®. The method was very craeeeosfel aad ho ©stondod this oorvlc© to farmers as well wh© wished to stor© thsir homo-killed meats. About 1927, Walla Walla, Washing­ ton , th© lo c a l dairymen® 0 association allowed farmers to frees© rab­ bits and other gasa© in th© but tor-storage room of the creamery plant.

Lator many er©am©ri®s, ic® plants, and milk plants installed a number

^%3amB ©p» e i t . , p. 1. 46

TABLE 5 RB5KI&EBATED VABEHGDSES: TOTAL ©BOSS SPACE, BY TIPI Of FLAHT, UHITED STATES, 1921-1949

P rivate and Public Cold Seai-primt© Meat Packing T o ta l Storage Only Cold Storage Bo tabli ehments A ll Types Year ( 1 , 0 0 0 en. f t . ) ( 1 , 0 0 0 on. f t . ) (1,000 cu. f t . ) (1,000 ccl. ft.)

1921 194,166 55,684 293.722 543.572 1923 205,936 70,329 309.079 5S5 ,404 1925 242,564 81,101 303,004 626,669 1927 273,297 82,081 311,068 667,046 1929 3 1 6 , 8 1 0 29.455 322,330 728,595 1931 325,703 94,075 321,065 740,843

1933 317,211 97.457 297.274 711,942 1935 322,450 84,914 303,206 710,570 1937 333,233 86,847 309,642 730,322

1939 351,362 82,510 312,562 746,440 1941 371.771 92, 38O 302,232 766,383 19*3 329.991 91.625 169, 650s 651,266 1945 403,832 107,545 134,014s 6 4 6 ,m 1947 408,232 135.216 130,993® 675,041 19U9 413,256 171,192 116, 324® 700,778

deduction from earlier years 1® due chiefly to th© elimination from reports of meat-packing establishments of th© “working space” In such, establishm ents.

Sour e ox U. S. D. A ., Capacity o f Bo fr ig orated I'JaffoheuoGQ la the Baited States. Statistical Bulletin So. 193. October 1, 1955 (Waeh- in g to n , D. C.t 0 . S. ©©veriment Printing Office, October, 1956), p. 9 and 0. S. S. A., Agsloaltnral Statistics 1954 (Washington, D. C.r 0. S. ©everaseat Printing' Office), p. 5S5 . I*7 of freezer lockers throughout the west. However, these plants pro­ vided only locker-storage ©pace, The patrons prepared and prepackaged their own product® and placed them directly into the locker.

Storage,1930-1950

The active contribution that good storage can make to the mar­ keting of foods was widely recognized after 1930 . Technological pro­ gress stirred up far-reaching changes in methods of storing farm products. Tho fasaoro, market agents, and wardhouacsiQa realised tho importance of proper storage in maintaining th© quality of the prod­ uct. Increased mechanization was Introduced in storage and handling.

Much was learned in the us© o f insecticides and fungicides on farm products to protect Insect injury and reduce losses in storage without affecting the consumer's health. The use of mechanical harvesting of grain ted resulted ia product ©f Mghor moisture content. The dxying methods w©r© improved to minimi 2© deterioration in storage.

Hoa©arch conducted in use of 00g for retarding decay of fruits and vegetables, undertaken by U.S.D.A. in 1932 , led to th© practical use o f th is method o f protecting fsu its and vegetables. In 1935c procedures wore developed for fumigating food, feed, and stored to­ bacco ia vaceum and atmosphere vaults to prevent insect contamination and damage.

Although no enact data is available on th© ©stent of storage at different points, bulls of tho storage uao still tendlod by tho com­ mercial firm© (including cooperatives), such as lo c a l and term in al elevators and warehouses, processor®, and dealers. In 1933, however, the Federal government was drawn into the storage business in a large way as a result of the national farm program designed to stabilize th® market supplies and prices of a number of durable products - cotton, tobacco, r ic e and peanuts. The Commodity Credit Corporation, estab­ lished on September 22, 1933 e. purchases and stores grain and makes loans. It usee the facilities of privately owned elevators in ad­ dition to th® storage structures it owns. Although, a relatively small part of th® total storage space la th© United States is fta- aiofeod by th© GovoraaGnt, th© e ffe c ts o f th© loan programs have boon far-reaching* Government programs of lending money at a low rate of interest guaranteed occupancy programs and rapid depreciation privi­ leges for income tax purposes encouraged both farm and commercial firms to build new storage facilities. Many farmers were greatly en­ couraged. to construct i up roved storage facilities on the farms.

Gold storage. Bath th© public cold ©torag©, and p riv a te and sesal-privat© cold storage warehouses increased significantly between

1921 and I 9 H9 (Sabi© 5) . However, th© refrigerated space o f meat­ packing establishments showed a declining troad. This reduction was due chiefly to the elimination from reports of meat packing establish- % meats o f th© nworkiag space” in such establishments sine© 19^3-

Broa 1925 to 19 ^5 » sharp-freezer capacity had practically doubled. ^ S’roesor spac© Increased from 171 million cubic feet la

S. B. A ., T©efaaoIogy In Feed Marketing, op. e i t . , p. 5° 1929 to 269 million cuMe fn et in 19*49 i in contrast cooler space de­ clined from 998 million cable feet to U36 million cable feet during ik the same period. Many besohaologieal advances w©r© made in th© control of tempora- tar® and humidity for foods in storage, Thee© changes have greatly reduced the deterioration of products in storage. Multieommodity storage, which “allows fuller use of space by scheduling storage of coamoiiti©© to conform to e@mpl®a©nt©ry seasonal in-and-out movement patioraa13*^ iaereaood rapidly. Warehouses with e©nvort£blo opaeo uoro built. Those are suitable either for general storage with controlled temperature for refrigerated cooler storage, or for refrigerated freezer space, and thereby permit warehousemen to store almost any commodity.

Shod lookers. Gold storage houses equipped with individual

Icehoro eojao into prominence ia tho lat© 1930*D. Those sodom plants provided not only frozen space but also expanded their facilities to include provisions for slaughtering, curing, wrapping of meat aad manufacture of ©diblo and inedible byproducts.

Tho somber of loekor plants Increased about aine-fold between

193S and 1930. There were only 1,269 locker plants ia 193$ cad the number increase^ to 11,969 195 ®- These locker plants wore owned by

8. D. A., Statiatlje^JB^l^M h l®<■ l^S (tfooMagt@a, D.G.s U . S . &. P rintlag ©f fico,'' Bq c c Sk s ?, ' 193^5"d ^ P o^ s T

S. D. A., Technology in ibod Marketing, op. e it. , p. 98 . 90 private individuals, partnerships* retail meat dealers, lee plants, le e cream fa c to r ie s, creameries, m ilk p la n ts, cheese fa c to r ie s, and corporations. Some of these were also owned by cooperative associa­ tions particularly in Wisconsin and Minnesota. The looker plants were located mainly in rural areas where home-free zing facilities were al­ most negligible. During this period, the food locker plant had de­ veloped as a specialized storage, processing, and a selling agency.

TABLE 6

BOMBER 07 PBOZM JOOD LOOSER PLANTS IB OPERATION, OHITED STATES, 1938-1950

Locker Plants Tear (number)

193 S 1,269 19UO 2 , 87 ©

19)42 14,323

19)4)4 5,282

19)46 8,025 19148 10,617

1950 U ,569

Source: a1959 Almanac of the frozen food Industry," Quick frozen foods, Vol. m , Bo. S, March, 1959, p. 1?1. 51 Introdtaetion of horn® freez«r. The hose freezer was introduced

about 19 ^0 . Very f m were so ld b efo re 19^5. By 195®, Bo®® f*®©®®*1 1 fi sales approached one million malts per year. 0 The u se o f home elec­

tric freezer increased simultaneously. Th® first home freezers were

small in size. The average home freezer sold in 1$HS was S .2 cubic

feet and held approximately 2k5 pomnds of frozen food. Zn 195®0 the

average size Increased to 12.1 cable feet with a capacity of h22

pomado ©f frozen f o o d .^

Storage Sine© I95 O

Sine® 1950, many improvements have been made in the storage of

farm products. Storage is undertaken on a scientific basis. It is now possible to store many farm products for a very long time without

deterioration in the quality. Hew method of storing apples through tho moo of neontr©Hod atmoophoro, n for ©sample, enables to maintain

apples at th© peak of their quality for many months. Thus, the mar­ keting season for apples is lengthened.

Th© total capacity of off-farm commercial grain storage estab­

lishments in the United States i?as estimated by th© Crop Reporting

Board of the U. S. D. A., to be 1.65 b illio n bash@lo on A p ril, 19^3“

According to the same source, the total capacity increased to about

■^‘•Eloetrie Merchandising tJ©dk0n Vol. 9 3 ® ^ forks Me&raw-HiXl Publishing Company, January 23, 1961 ) , p°

^Tffrozen Ibod Paetbook and Directory. 1959 - 60, national Frozen Food Distributors Association, Hew fork, Hew Tork, p. 65. 3*5 Million "bushels In 1957 &&& to 5*0 "billion on January 1, 1961 .

Capacity data excluded CCC bins, mothball ships under government control need to store grain, warehouses used to etore only rice or peanuts, oil seed crusher© processing only cotton seed or peanuts, tobacco warehouses, seed warehouses and storages that handle only dry beans or dry peas.

There are no official estimates of grain storage capacity on farms. Warm, capacity is very flexible and for practical purposes is not lim ited . However, a considerable amount i s stored on the farms.

Temporary storage on farms frequently is found in machine sheds, barns, vacant houses and other buildings. Ear corn is often stored in outdoor bins constructed from woven wire or slatted fencing. Xn th® great plains and some other regions, in dry seasons, small grain is sometimes stored for short periods in piles directly on the ground, either with or without protective covering.

Cold storage. There has been about h-5 per cent increase in the total cold storage capacity in the United States since 1950° Total gross spac© of refrigerated warehouses increased from about 73-3- mil­ lion cubic feet ia 1951 to more than @n© billion cubic feet ia 1961 in spite ©f considerable decline in th© refrigerated ®ga®o @£ meat­ packing establishments. She capacity of meat-packing establishments was reduced to almost h a lf from 9 ^ m illio n cubic foot in 1953- to 52 million cubic feet ia 1961 . There was, however, a rapid increase in the capacity of public cold storage, and private and seai-private cold 53 storage warehouses. The public cold storage showed an increase of Ho per cent and private and semi-private cold storage of about 100 per cent during this period.

TABLE 7

EEEEIGEHATED WAREHOUSES: TOTAL OBOSS SPACE, BT TIPE OF PLAHT, TJHITED STATES, I95I-I96I

Private and Public Cold Smi-private Meat Packing Total® Storage Only 0@M Storage Establishments A ll Tear ( 1,000 cu. f t . ) ( 1,000 cu. ft.) (l ,000 eu. f t . ) ( 1,000 cu. f t . )

1951 1*25,114 187,673 98,229 711,016

1953 466,470 202, 1*91 79.089 748,050

1955 498,599 245,350 68,568 813,017

1957 545,061 294,174 62,162 901.397

1959 569.199 325.313 50,872 945,384

1961 595,463 379.355 51,985 1,026,803

^o tal grose refrigerated spac© does not include refrigerators and fro©sere in the home or store, display eases, refrigerated trans­ portation equipment and other refrigerated space.

Source: TJ. S. D. A., Capacity of Refrigerated Warehouses in the United States. October 1, 1961 , Bulletin Co. St. 2 (£2), SES, Crop Beporting Board (Washington, D. C.s U. S. G. Printing Office, August, 1962 ) , p . 16.

food lockers. The number of food locker plants reached its peak of 11,60S in 1991 but has shown a steady decline since then. This reduction was mainly due to increased us© of home freesers. Horn© freezers have been more convenient to the consumers than the food 5* lockers. Moreover, Increasing family Incomes since 1950 , the accom­

panying era of prosperity, and the interest in "good life" have in­

duced the consumers to replace the food locker "by home freezer.

TABLE 8

BOMBER OP PRO ZEN POOD LOCKER PLANTS IB OPERATION, UNITED STATES, I95I-I960

Locker Plants Year (number) 1951 11,608 1952 11,1+27 195 ^ 10,85U 1956 10,344 1958 9,611 1959 9,271 i960 9,21+9

Source: "1959 Almanac of Frozen Pood Industry,11 op. c lt. , p. 171 and Agricultural Statistics, i 960 (U. S. D. A., Washington, D. C., 1961); p. 613-

The use of home freezers has been on the increase since 1950*

Almost every home has a refrigerator. On January 1, 1961 , some 50.7 m illion American homes, SB per cent of all the electrically wired homes, had electric refrigerators.^-® The size of freezers sold has also increased considerably since 1950 * average size increased

*®Wright, Pood Buying (New Yorks The Macmillan Company, 1962), p . 292. 55 froa 12.1 e a U e fe e t In 1950 to 15.35 cuMc fe e t In 1959 and th e av­ erage capacity from U22 pounds of frozen fbod in 195® to U6l in

1 9 5 9 . 19

zen Food Facfrbook and D irectory, 1959 "60 * °P* c i t . , p. (S5. CHAPTER IV

DEVELOPMENT 07 SIAHDARDIZATIOE, GRADING, ADD

IKSPECTIOD 07 AGRICULTURAL PRODUCTS

Farm commodities are raised tinder varying environmental condi­ tions and cultural practices and, therefore, show a considerable var­ iation in th© quality. Unless these quality differences ar© reflected in prices, the lncmtive for the production of quality produce suffers to the detriment of industrial need and consumer preference. The prime importance of grading is to differentiate among various qual­ ities of one and the same product so as to provide a "yardstick” to measure these differences and ultimately to establish a common "lan­ guage." Moreover, there is a need for some sort of inspection of the farm products at various points in th© marketing channel, in order to assure the public wholesome food, free from adulteration.

The development of efficient grading, standardization and In­ spection of the farm products in th© United States Ms greatly facil­ itated the agricultural marketing system. The consumer is assured of obtaining food free from adulteration and, to a great extent, a product of a quality in line with the price paid. Grades and stand­ ards are also useful to all those persons who engage in trade, as they facilitate th© transactions by producers, wholesalers, dealers, com­ mission merchants, and retailers.

56 57 Grades and standards of faro products have "been developed by various agencies, namely, Federal and State governments, municipali­ ties and local governments and various trade organizations. However, the development of official Federal grades have established national uniformity and r,have been used quite generally by state governments and trade as the basis for eta%® and private grading systems.8*

Originally, the official grades were developed for use by pro­ ducers in-preparing their product for markets and by distributors for trading in wholesale quantities and terminal market transactions, but they have become increasingly useful to retailers in baying and sell­ ing and to consumers in buying.

Most of the official grade standards are optional while others are mandatory. In case of the former, the manufacturer or the distri­ b u to r can decide whether or not he wishes to label his products ac­ cording to thes© ataadards. When th© standards ar© mandatory, no other standard can be used lawfully. Federal grad® standards now

©sdst for more than 100 foods.

Most quality grading systems fall into on© of th© following group© s2

H tabers, a© U. S. Mo. 1, U. S. Ho. 2, U. S. Ho. 3, or a® ©cor©a

(87-93)

*Mas E. Bruak, and B. Darrah, Marketing of Agricultural Prod- met n (Hew Yorks Eh© Bsaald Pros© Co®paay0 1955) o P» 279®

^Carlton E. Wright, Food Buying (Hew York: The Macmillan Company, 1962 ) , p . 189. 5*

L etters, as Grade A, B, C

Adjectives, as Prime, Choice, Good

Mixed numbers, letters, and adjectives, as Extra Fancy, Fancy,

Ho. 1, U t ilit y .

She development of grading and standardization of fara products has come about gradually with other developments In food production and processing. This development has been discussed In this chapter.

Standard!satloa, Grading and Inspection Before IfjS

The pioneer families in Colonial America were mainly self-suf­ f ic ie n t . People m ostly consumed what they grew. There was very little trade in agricultural commodities. In such a primitive society marketing was largely a local function. The buyers, and sellers were located very elos© to each other. Th© number of products traded was very small. Th© aurp I u b which the family had were either bartered with neighbors or sold to th© merchants in exchange for other goods.

Th© buyers could appraise th© goods by seeing with their own ©yes and make th© transactions on the b asis o f th eir Judgement o f th© q u ality.

Under such primitive and self-sufficleat society, no attempt was mad® by th© farmer® or by country merchants to distinguish between differ­ ent qualities of produce, and nno description other than this or that was needed.13 ^

^G. S. Shephard, Marketing Farm Products—Economic A nalysis (Ames, Iowa: The Iowa State U n iversity Press, 1962 ) , p . 200. m Development of standard weights and measures

t The Colonial s e ttle r s had brought w ith them a system o f weights and measures from their mother countries. These weights and measures, of course* varied greatly from one part of the country to another.

However, as a resu lt o f Colonial trade certain commodities moved in the commercial channels. As the trade increased, the need for stand­ ard weights and measures was felt.

She British Crown prescribed standards ©f weights and measures from time to time, She attempts were mad® to regulate the sis© of barrels for liquor, beef, pork, pitch tar, and turpentine. NIn the legislation of the Province and State of Maryland, in reference to to­ bacco, the dimensions or gage of tobacco, hog heads were fixed by lh acts between 175® and 1789 Similar other acts were enacted throughout most of th© colonies to control short weighing of important staples. According to a

Massachusetts Act of l 6U6 , the standard for bread was fixed upon the basis of a penny loaf. ”Th© weight of the penny loaf of three dif­ ferent types of bread - white, wheat en, and household - was set ac­ cording to variations in th© price of wheat. Supplementary enactments ar© recorded in l 6Sl„ l6S5o 1696 , and 1720- 21.

^Edward E. Oallsha©, nPrie© is a Hexas and a Symbol,” Marketing, Yearbook of Agriculture, 195*1, TJ. S. D. A. (Washington, D. C.: U. S. ©©voraiaent Printing O ffice, 195*0» p. 152.

5Ibld.. p. 1 5 2 . So Standardisation, Grading, and Inspection, 1JJ6-1860

She nation entered into an important phase of development after the Eevolution. As a result of increasing density of population and improved transportation system, well defined local markets had de­ veloped. However, for three or four decades after the Eevolution, need for grading the fara products was not recognized greatly. She buyers and sellers wore still in el©so contact and mad© transactions by oooiag th© satire product or by sample. Within time, however, o@a© producers established their personal reputation for excellence of products or honesty of pack.

As trad© increased, some attempts for classifying the product© were mad® for important commodities like cotton, tobacco and hogs.

These attempts were mad® primarily by the merchants at th® wholesale level who sought to benefit by dividing tho entire lot into different quality groups.

In cotton trade, the term ‘’middling81 was apparently adopted from its us© in England. Such terms as agood, ” 81 f a i r , 0 and “ordinary55 were in general uo® by 1S25- livestock were classified on th© basis of th© girth ©f th© belly. During the 16508a “hags wore sometimes classified a© 8 fat distillery-fed5, hogs and 0 fa t corn-fed5 h o g s.0^

In tho 18509©e the grain ©levator system began to encourage grading ®f wheat. It forced into grain trad© huge quantities of

^Eichard L„ Kohls, Marketing of Agricultural Products (E m York: Th© Macmillan Company, 1961 V, p. 203- uniform warehouse receipt? based on a definite quality and grade rather than on individual lots in stores. Grades were first indi­ cated on the receipts at Chicago in 1357-^

Th® government interest in protecting th® consumer from impure and harmfhl foods began to develop. Th® first general food laws w©r© enacted by the states. Massachusetts enacted a pure food and drink law in 178U, and California in I 85 O.

Bovolopacat of standard uolghto and measures

The Federal Government fully recognized the need for uniform weights and measures. The Articles of Confederation provided that the

Congress shall f!hav© the sole and exclusive right and power of. . . fixing the standard of weights and measures throughout the United

S t a t e s ."

As a first stop the Congress passed an act ia 1828.. According to this act, brass weight obtained by the minister of the United States at London in 182| bseame th© standard troy pound of the mint of th©

United States. This troy pound became th© standard of coinage and avoirdupois pound was derived from th is .

The Treasury Departments during 1830 - 32, took action to unify th© weights and measures of th© custom service. It fixed th® specifica­ tions for gallon and bushel. The Congress, through a resolution of

^Wayae D. laomusoon, Marketing Farm Products, 1873-191^ (Mimes.), p. 11. 62

Office of Weights and Measures was created to serve as a custodian for fundamental unite.

Standardization, Grading and Inspection, 1860-1910

After the Civil War, there was a rapid growth in the rail trans­ portation. Araorieaa agricultures mo undergoing a transformation from the self-sufficient occupation into a modern 'business organization on scientific and commercial basis. As a result, agriculture entered into th© phase of specialization immediately after the Civil War.

The consumers and the producers of farm products could no more come in the direct contact of each other. The buyers had no way to inspect th© goods ia person. Thus, th© n©@& for standards and specifications for farm products was strongly realized. Attempts were made by indi­ vidu als and certain organizations engaged in trad© o f farm products to establish the grades of quality. The elevators had already undertaken grading of grains just before th© Civil War. Th© practice spread to other markets and many trade organizations, Chambers o f Commerce, and boards o f trad© follow ed s u it. They !iemployed grain inspectors for grading carload lots upon arrival in th© principal markets. 15 ^ Several

se. W. Kitchen, ‘’Standardization and Inspection of lam Products,15 Yearbook of Agriculture, 19^0, U. S. D. A. (Washington, D. C.s U. S. Government Printing Office, 19^0), p. 669 . 63 state government b also undertook grading and Inspection of farm prod­ ucts. The State of Illinois was the first to establish the govern­ mental grading and inspection. However, there existed wide differ­ ences in the standards fixed by different state governments and by various trade organizations. C. W. Kitchen, the chief of th® Agri­ cultural Marketing Service, described the situation as follows:

Each market had its own grade and methods of interpreting grades. Sometimes the certificates of grad© issued in ©a© market was not recognised ia an­ o th er. Soeq standards, for ©sample, required that Ho. 2 corn be dry, others reasonably dry; one would re­ quire not more than l6 per cent of moisture, another perhaps not more than 13*3 p e r cent; some one weight p e r bushel, some an o th er. Ho. 3 oats were described under more than 30 different sets of specifications, and the test-weight requirements for this grade ranged from 22 to 29 pounds per bushel. A study of the phraseology of the grain trade in 1906 d isclo sed 338 names or grade titles; 133 for wheat, 63 fo r corn, 77 for oats, 53 f°r barley, ten for rye, and one each for •no grad©' and 'no established grade. Th© situation was not much bettor in case of other commodities.

Groat confusion prevailed due to lack of uniform standards in grading of cotton, meat, dairy products and fruits and vegetables. The middlemen o f the trade followed many unfair practices to theirown advantage. Yarious organizations and th© groups protested against the existing conditions and attempts to systematise grading and standard­ iza tio n were made. In 187^, a convention of cotton exchanges adopted fixed standards. These standards were put into effect in most of the exchanges, but the Hew York ©xehaag© was th© only one to adhere to them over a period of yearo.

9 Ib id . . p. 669 . 6H

However, in spite of the existence of pare food laws in most of the states, adulteration was widespread. Ibr example, "Hew York

Inspectors in 1875 found 52 per cent of the butter, 56 per cent of the olive oil, and 6h per cent of the brandy they examined to be adul­ terated.®10 Moreover, "little uniformity existed under the state laws; food legal in one state might be banned by its neighbors.®"^

Share was great public resentment and various public organizer* ties® and state chemists were advocating the Federal action to remedy the situation. As a result o f their attempts, ©specially of Dr.

Harvey W. Wiley, the Chief Chemist of the United States Department of

Agriculture, the attention of the government was drawn and the Con­ gress passed a number of legislations.

The first Federal laws regulating the marketing of farm products were concerned with livestock and meat. Bureau of Animal Husbandry was ostabliohed in ISSh, to prevent the exportation of diseaood eattlo and to provide means for the ©upression and extirpation of pleuro­ pneumonia and other contagious diseases among domestic animals. The 12 first federal meat inspection act was passed on August JO, IS9 0 .

The law provided for the inspection of meat products processed for exportation and also for the inspection of all live animals offered

^C harles W. Crawford, "Long Fight for Pur© Foods,® Marketing, Yearbook of Agriculture, 195^, op. clt.„ p. 21J.

11Ib id . . p. 213.

^Basmussen, op. clt., p. l6. for export. She law was modified In 1891, to require inspection of animals 'before they were slaughtered, and to permit the post-mortem examinations of carcasses destined for human consumption. It also provided for an examination before and after slaughter by veterinary surgeon© of all animals slaughtered for export or interstate trade by the important slaughterhouses and the condemnation of a ll animals found to be diseased. The Meat Inspection Act, passed on June 30»

1906 , required th e inspection of meat after slaughter and the regu­ lation of sanitary conditions in packing plants. The law als© os- tended inspection authority to meats in all stages and processes of preparation, curing, canning, etc. The use of harmful chemicals and preservations and of misleading labels was prohibited under this act.

The institution of these livestock and meat regulations encouraged farmers to improve their methods of raising livestock and forced the procossoro to improve the sanitary conditions in the meat packing p la n ts .

Simultaneously, the Congress also passed the Eood and Drug© Act in 1906 . This was an act for ^preventing the manufacture, sale, or transportation of adulterated or misbranded or poisonous or delete­ rious foods, drugs, medicines, and liquors and for regulating traffic therein, and for other purposes. 61 laboratories were established and food inspectors were sent throughout the country. However, the definitions and standards set up under the act were purely adminis­ trative or advisory standards. It mo also hampered by the different interpretations of the standards and by the weak penalties provided 66 in the law. In spite of these weaknesses, however, great success was achieved in the elimination of a wide variety of harmful foods from the market.

In 1907* Congress appropriated finds to the United States Depart­ ment of Agriculture for a study of standardization, and as a r e su lt a set of standards were developed.

By 1910, the role of the Federal Government in the standardiza­ tion of farm products and the protection of consumers from insanitary and hamfhl foods was recognized "by the public and various marketing ag encies.

Standardization of weights and measures

On July 28 , 18 ,66, an act legalizing the use of metric units was passed ty the Congress. Consequently, several states recognized the le g a lity o f using m etric u n its. However, fJthere was id.de d iv ersity o f practice—in sizes of packages or containers, other customs of mar­ ket, and the enforcement, or lack of enforcement, of regulations designed to assure the us© of correct weights and measures in trad©.53^ In 1901, the O ffice o f Weights and Measures was superceded

T>y the Hational Bureau of Standards, which initiated the HationaX

Conferences on Weights and Measures in 1905 . These conferences pro­ mote voluntary cooperative actions of states, city, and county of­ ficials in encouraging the uniformity of practice in methods of sal©

C. Crittenden, “Units and Standards of Measurement,11 Marketing, Yearbook of Agriculture, 195*K op. c lt., p. lhS. 67 of products. In 1909 , the Bureau investigated the measuring instru­ ments in use In the retail markets in the country. It found an enormous number of defective instruments and short-weighing, largely due to an inefficient and corrupt inspection service. The Bureau then drafted a model law to provide for a standard manual for us® by in­ spection officials. Most of its provisions have been adopted by most s ta te s .

S tan d ard isatio n , Q-radlng and Inspection, 19 IO-193 O

Various legislative actions taken by the Federal and state gov­ ernments so far had, to a large extent, created a consciousness on the part of market agencies and the consumer organizations about the need for uniformity in grading and standardization. The conditions during World War I provided an added impetus for more Federal regu­ lation of standardization and inspection of farm products. Standards for grades of beef for military procurement were developed. As a re­ sult of improved motor transportation, paved roads, and radios during and immediately after the war, the need for the development of an accurate and intelligible trad® language greatly increased.

An Office of Markets, U. S. D. A. 8s first marketing agency, was established in the Department of Agriculture on May 16, 1913* Sine© then th® Department of Agriculture has been the major agency promoting the development and use ©f grades in business transactions involving food products. 6b

In 1916, the Cotton Futures Act was passed. She act required the use of Federal standards In trading in cotton futures. Official standards for grades of American upland cotton were established to re­ place earlier permissive standards. The act was declared unconstitu­

tional hut was re-enacted August H, 1916. Th© Grain Standard Act and

the United States Warehouse Act were passed in 1916. The Grain Stand­ ard Act required the use o f Federal standards when grain was sold by grad© in inter© tat© ©r foreign commerce. (Eh© United States War ©bans©

Act required th© licensing of public warehouses storing agricultural products and the use of official grades on the warehouse receipts, if

such grade© existed, unless their omission was requested by the

storers of product.

The Food Products Act of 1917 authorized for the establishment of

standards and for permissive inspection services on fruits and vege­

tables as well as other products. The paosag© of this act helped t© abate the confusion caused by conflicting trade terms and practices and a broad national policy began to take shape. U. S. Inspect ion

Service for fresh fruits and vegetables was established by th© Bureau of Markets with inspection 0 ffices in tea of th© larger markets.

The first U. S. standards for grades of butter wore issued in

1919 and for Cheddar chess© in I923. Cooperative Federal-Stat©

Inspection Service was organized in 1922, for conducting shipping point inspection work on fresh fruits and vegetables. Attempts were made in 1§22 to develop and to encourage th© use of a federal grading

system for eggs. The United States Cotton Standard Act of 1923, required the use of official cotton standards in all interstate and escort trade. These standards were made universal standards by the

Universal Cotton Standards Agreement between U. S. D. A. and cotton associations and exchanges in major cotton importing and consuming countries. In 1927? the Federal grading of beef was initiated in response to a request from Better Beef Association and the first

U. S. grade standards for processed fruits and vegetables were issued for canned eorn, canned p©as„ and canned potatoes in 1928.

On th© whole* during this period legislations were enacted for

Federal grading, standardization and inspection of almost all the major agricultural products. There still existed the main problem of having them generally accepted in merchandising practices. However, the Federal regulation established the principle of uniformity in grading and standardization of the farm products.

Standardization of weights and measures

Th© Congress recognized the danger of deception and th© resulting losses to purchasers through a lade of standardizations and Multipli­ city of sizes of containers in which fruits and vegetables were sold.

Three aeto were passed during this period to regulate the sizes and

In some cases th© shapes of thase containers. In 1915 ® the Standard

Barrel Act was passed, standardising the sis© of the barrel and its sub-division. Th© Standard Containers Act passed in 1916 standardized

Cliraax grape baskets, berry boxes and set up dry pint basket, dry quart, and multiples thereof as th© standard basket for small fruits and vegetables. The Standard Containers Act of 1928 applied to 70 hampers, rotund stave and splint baskets. This act requires that manu­

facturers submit specifications for their containers to the Secretary of Agriculture for approval thus guarding against deceptive appear-

6LX&C ©*

These legislative actions regulating the forms and sizes of cer­

tain containers have established a large degree of uni form! ty in the marketing of farm products.

Standardizations, Grading and Inspection, 1930“ 195^

By I 93 O, the grade and grading came to be generally accepted as devices for describing quality of goods. Usefulness of grades Has recognized by the growers, processors and the market agencies.

Attempts were now made for compulsory - or mandatory - grade labeling. ”The compulsory labeling of milk with th© grade was one of the first ventures in compulsory grad© labeling of consumer* s ill goods. 13 Th© canners sponsored in I 93 O the McRary-Mapes amendment to the Pood and Drug a Act. Th© amendment provided for the compulsory labeling of canned foods falling below th© standard quality, condi­

tions and fill of container.

The Consumers Advisory Board of the Rational Recovery Administra­ tion proposed that compulsory grad© labeling be written into the codes o f fa ir competition o f ST. R. A. Many other consumer agencies lik e the

^ J e s s ie 7. Coles, {JGompulsory Grade L abeling,” Marketing, Year­ book of Agriculture, 195^i °P» c lt., p. 101-. Consumers* Counsel o f th e A gricu.ltu.ral Adjustment A dm inistration advo­ cated compulsory grade labeling of certain agricultural products.

These attempts met with strong opposition and controversy over grade labeling developed. Th© canning industry strongly opposed the can- ners* code. The opposition was so strong that the attempts of th© proponents of compulsory labeling were wholly unsuccessful.

However, Canned Fruit and Vegetable Inspection Service was es­ tablished in th® Bureau of Agricultural Economics in 1931® 0114

Agricultural Adjustment Act of 1933 authorised system of licences for milk distributors which was later amended in 1933 to provide for mar­ keting agreements and orders. Finally, the Food, Drag and Cosmetic

Act was passed in 193®, aB a result of strong fight by consumers groups, particularly large women's organizations. The law immediately

"granted authority to begin the formulation of necessary regulations, including definitions and standard© for foods, and continued in forcing the provisions of the Act of 1906 until new law became fhlly effective0^ ©a July 1, 19^0. It broadly defines adulteration and misbranding. Under th© provisions of this law the adulterated foods may not be "introduced or delivered for introduction Into Inter©tats commerce." The use of containers that might make contents injurious to health is also forbidden. The power to administer the law was transferred to th© Federal Security Administrator. The law provided for the prosecution under criminal court proceedings, for persona and

^Report of the Chief of the Food and Drug Administration, 1939» p. 1. 72 firs® responsible for violations. The enforcement of the lav was made more practical and more strict. The penalties imposed were raised to

a maxi mum o f $10,000 and three years imprisonment. It was thought

that these penalties w©r® severe enough so that manufacturers and processors w ill find them a real deterrent and w ill not, as they some­

times did under the 1906 Lav, merely pay the penalty and continue to violate the lav. This act "expanded the definition of adulteration to

include production or storage under insanitary conditions that may r©- iS suit in contamination with filth . 0 Thao, this act gav© a new

stimulus to sanitation in food marketing. It also gave protection to

consumers against "economic cheats" as it provided that labels should give the whole truth about the ingredients, and the composition of the product.

The beef standards were modified in 1 9 3 9 to provide for the grading ©f all steer, heifer, and cow beef on a single standard. In

1950 0 Prime and Choice were combined as a single grade, Prime, th© good grad® became Choice, and upper part of commercial grade was

designated Coed.

Th© Agricultural Marketing Act of 9IU6 directed th© Secretary of

Agricultures

To develop and improve standards of quality- • • • To inspect, certify, and id e n tify th© class, quality, quantity, and condition of agricultural products when shipped or received in interstate commerce, under such

^Crawford, op. c it., p. 218. 73

♦ rales and regulations as the Secretary of Agriculture may prescribe. . .to the end that agricultural products may he marketed to the best advantage, that trading may be facilitated, and that consumers may be able to ob­ tain the quality product which they desire. . . .^7

Standardisation, Grading and Inspection, Since 1950

The use of Federal grades has widely increased since 1950. The

state and Federal grading system has come in wide use. The Federal

government had enacted additional legislations with a view to remedy

the shortcomings of th e earlier laws. On th® other hand, the state

governments and the marketing agencies have based their grading system

on th© basis of existing Federal laws.

In 1956 , the TJ. S. Grain Standards Act was amended to "make i t unlawful to sample grain improperly and to cause the issuance of a

false or incorrect certificate of grade by deceptive loading, handling

o r sampling or by submitting grain for inspection knowing that i t had

been so loaded or sampled."*® Sh© Poultry Products Inspection Aet, was approved on August 2S,

1957* but became effective January 1, 1959* ®h© act requires all

poultry and poultry products to be inspected for wholesomeness by th©

^Tuoy ¥ . Lennartoon, "What Grades Mean," Food. Yearbook o f Agri­ culture, 1959 , U. S. D. A. (Washington, D. C.: U. S. Government Printing Office, 1959). P- 3^5-

1%. S. D. A„, Agricultural Marketing Service, Milestone In Mar­ k e tin g in the U. S. Department o f A griculture, AMS-5OO (Washington, D. C.s TJ. S. Government P rin tin g O ffice, May, 1963 ) , p . 15. 7* Poultry Inspection Division of Agricultural Marketing Service, if

sold, shipped, or hauled in interstate or foreign commerce. She act

also requires the official mark of inspection to appear on the im­ mediate container.

Most of the Federal standards are put into effect through Co­ operative Federal-State agreements. In 1959, 296 cooperative Federal-

State agreements were in effect.*9 Approximately 50 per cent of heef,

16 per cent of veal and calf, and 36 per cent of lamb and mutton pro­ duced by commercial slaughters were federally graded in 95 I S. 20 About

85 per cent of fruits and vegetables crops were packed in 1958, in PT accordance with Federal standards.

In i 960 , state and Federal grading systems existed for foods which represented "more than half the nation's food b ill8^ - milk, butter, cheese, eggs, meat, chicken, turkey, and fresh, canned, and

frozen fruits and vegetables.

^Lennartson, oj>. clt., p. 3^ 5.

20Ib ld . . p . 3U8 .

21IM d., p. 3U7 .

2%. S. D. A., Checklist of U. S. Standards for Eton Products, AMS-210 (Revised January, 1961), Agriculture Marketing Service, Mar- keting Information Division, Washington, D. C., 1961. CHAPTER 7

DE7EL0FMEKTT OP POOD—PROCESS HT& AND PACKAGING-

Processing means "subjecting materials to a process of manu- facture, development or preparation for the market; converting some­ thing into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurisation, fruits and vegetables by sorting and packing.Most o f the farm products have to undergo some kind of processing before they can be consumed. Pro­ cessin g involves changing the form of the products and therefore

"form" utility is created. It is sometimes argued that processing is not, in the true sense o f the term, a marketing function. However, th© study of the development of the processing and packagingi s very essential in tracing the evolution of the agricultural marketing system.

In this chapter, the development of processing and packaging of farm products during different periods has been discussed. Although it is not possible to study the development of all food-processing industries, some of th© most important ones are discussed in detail.

^Charles B. Kuhlemann, "The Processing of Agricultural Products in Pre-Ballway Age" In H. 3?. Williamson (®d), Th© Growth of American Economy (Mm Yorks Prontlee-Halls Inc., 19^), p. 1^9•

75 76

Feed Precessing, Before 1776

On the pioneer farm, most of the processing was done In the home by the members of the family. The farmer provided his own raw ma­ terial, performed the processing activities and owned the finished product. As settlements grew, some people became skilled in these jobs. They became specialists and devoted all their time to pro­ cessing activities. These specialists traveled from one farm to an­ other to grind farmer* g grain or slaughter his meat supply.

With the growth of population, the villages grew into towns.

Many of these itinerant processors settled In towns and built small shops. They began to purchase raw materials and sell the finished product. The methods of processing were very simple and crude. They worked with hand tools and little consideration was given to sanita­ tio n .

Meat packing industry

During the Colonial period, at first each farmer was his own butcher0 After the harvest was over and cold weather had set in, several hogs and steers were killed to provide the winter* s supply of meat. The meat that was not eaten fresh was smoked or cured with s a lt .

However, some people began to specialize as butchers as th© popu­ lation increased and villages grew into toms. Itinerant butchers traveled from farm to farm to slaughter for farmers. After a time many itinerant butchers settled in the growing towns. They built 77 small slaughterhouses at the edge of the town and he came meat dealers

as well. They "bought animals from the farmers and sold fresh meat to

the community. Some of then "began to peddle it from house to house

as w e ll.

Much of the meat could not he sold fresh and had to he cured in

some way. The slaughtering was confined to the winter months. The

supply was preserved hy smoking the meat or salting it.

As a resu lt o f population growth,, the demand for meat increased.

Moreover, the meat ©sports also developed. The total demand could not

he met hy the farmers of the neighborhood. Bow, the drovers origi­

nated who traveled from farm to farm, collecting cattle and hogs.

When they had obtained a sufficient number, the animals were driven to

the market where they were sold to the "butchers and meat packers.

New York, Philadelphia, and Baltimore had become important packing p centers hy th© Revolutionary War period.

Hour milling

Th© pioneer settlers in America ground their grain in their

homes. They used to crush grain between two stones "by means of a

revolving motion o f the upper one. However, the labor was scarce and

as th© population grew, power mills became a necessity. By the end

o f the 17th century, mills utilizing the power of small streams had

become common where wheat grown in the neighborhood was bought for

grinding. Horse-power was used in many eases although windmills were

2Ibld. . p. 1 9 1 . 78 also popular. At Cambridge, Massachusetts, a windmill ground grain as early as 1632. In Pennsylvania and Maryland, water power mills were Irailt before I 65O.

These early mills were small and crudely constructed. Many of them had no machinery other than the mill stones. Later the m ills installed cylindrical bolting machines to do the sifting. The farm­ ers were charged a toll in the form of flour as the cost of grinding.

The t o l l -flo u r was either consumed by th© miller or sold to others.

She millers then began to buy wheat from farmers and manufacturing flour for sale. Thus, the grist-m ill became a merchant-mill. Many of these merchant-mills supplied flour for export trade to Europe and

West Indies.

Pood canning

. During th© Colonial period, no canning industry was developed.

Th© farmers did not try to preserve the food and even if they wanted, they did not know the method of canning. Some of them wore, however, malting constant efforts to find ways of food preservation. According to Peter Halm, a Swedish traveler who visited American Colonies about

1750, the people in Hew York, in order to preserve lobsters and oysters, used to wash, boil, and put up in glass or ©arthen jars.

These jar© were well stoppered to keqp out th© air.

Liquor manufacturing was also an important industry in Colonial

America. Many a pioneer family made its own supply. In th© larger towns, however, breweries were soon established. These were small- scale plants brewing beer and ale for local consumption. JFbod Processing* IJJ6-I86O

Most of the processing of food products was still done hy farm

families and the consumers themselves. But during this period, there was an increasing trend toward delegating the processing activities to

the specialized agencies. Certain technological developments and the

continued progress in the transportation facilities resulted in the

development of some important food processing centers.

Meat packing industry

As trade developed, many merchants originated. These merchants purchased livestock from the farmers in exchange of goods. They did not slaughter themselves hut turned over the animals to the butchers operating slaughterhouses on the outskirts of the city. Thus, a

division of labor in manufacturing and merchandising developed in meat

industry. From the slaughterhouses the carcasses were hauled aeroso

the city to the packing houses on the river banks. Th© meat was

smoked and cured here. For escorting th e meat to long distances, hmzever, it was necessary to pickle it in brine and pack i t in b ar­ rels. Some packers performed a number o f activities. A description o f one is given as follows?

BHobert Hewea, of Boston, in 178 ^ conducted a slaughterhouse, a

salting house, and a factory for glue, soap, candles, and starch;

these were in separate but neighboring buildings. Theowner also had a ashop8 some distance from his aworks,” where he sold hard and soft

soap, glue, meats, food oil, and watch lights, together with starch 80 and hair powder. He purchased and killed livestock for city merchants and killed and sold for country clients. The capacity of his slaugh­

terho use was 50 cattle and 200 hogs a day, and the fee for killing was

th© offals."^ The slaughterhouses had developed a considerable division of la b o r by I 8 U0 . Another important development in meat-packing industry during this period was the profitable utilization of its by-products.

She lard oil was mad© out of cheap fats. Factories were established

to male© brushes out o f hog b r is t le s . Soap and glue manufacture became

an important by-product industry.

Some Important slaughtering and meat-packing centers arose in the

cities west of the Alleghenies during this period as river navigation was developed and later supplemented by canals and railroads. Cincin- * nati had become an important center before ’1820. This development was

stimulated by the extension of corn planting in the Ohio Yalley and

cotton planting in the southwest. Hogs were raised to utilize grain

that otherwise had no market except for distilling. Pork-packing ad­

vanced rapidly in Chicago, especially after the opening of th©

I llin o is and Michigan Canal in 184-S and the growth o f railroad net­ works. Louisville and St. Louis also became th© prominent packing

centers before the Civil War.

5?. S. Clark, History of Manufactures in th© United States— Yolume I (I 607-IS 60) (Hew York: Peter Smith, I9 H9 ) , p. H82. 81

Flour milling

By the time of the adoption of the Constitution, power mills were common in all the Colonies. Just after the Revolution, a period of rapid technical improvements in flour milling was induced hy the in­ ventions of Oliver Evans. He developed a series of Improvements: a conveyor that moved the meal horizontally from one machine to another, an elevator that moved it vertically from one floor of the mill to an©the2% and a "hopper hoy0 that spread the flour cooling. Thee© improvements saved labor. But the new machinery required larger amounts of power and coat more to construct. More capital was, there­ fore, needed and the industry was transferred to a capitalistic basis.

The larger merchant mills using the Evans equipment could operate at a lower cost per barrel, and thus the large mills flourished and the smaller mills failed. This led to th e localization of the industry in favorably situated milling centers lik e Baltimore, Richmond and

R ochester.

Food eaanlng

Hicholao Appert, a Frenchman, was the first person to perfect the art of preserving food by sterlizing it with heat and enclosing it in airtight containers in I 8 O9 . Appert8s treatise, "The Book for A ll

Households or the Art of Preserving Animal and Vegetable Substances for Many Years,iJ was published in 1810. Some years later an English translation was circulated in English-speaking countries. This spread the knowledge of the new method to this country. 82

William Underwood is said to have been th© first American canner.

Bnglishr-bom, he came to America and settled in Boston in 18ig. By

1821 he was shipping fruits and terries in glass jars to South America and the Orient. In the nest few years canners were 'beginning to use tin cans in­ stead of glass jars and canning as it is now known came into "being.

Canning Became an established industry at various points on the

Atlantic Coast. Baltimore and its neighborhood Became the most im­ portant canning centers of America. Shis area had superior supplies of shellfish together with easily available labor for canning season and the facilities for the distribution of the canned products. About

ISUO, canning of corn began inMaine.

The market for canned goods was, however, very lim ited in the be­ ginning. Th© prices of canned goods were high! a small can of to­ matoes, peas or com might sell for 50 cents at retail. Th© cans used for canning were crudely mad© by hand. Tinsmiths sealed th© cans after they were filled by hand. Boiling water was used to sterilize the product. The process was slow and costly. This method of food preservation was confined chiefly to fish and oysters before I 860 .

Fruit canning, however, began in California and the Pacific Coast be­ tween IS50 and I860. During the 18509s following Gail Borden's de­ velopment of vacuum evaporation process, the canning of milk also

*%uhlemann, op. c i t . , p. 203. began. It was estimated that by I860 the total output of the canning industry was about 5* 000,000 cans a y e a r . 5

Food Processing, 1860-1910

A fte r i 860 , the agricultural processing industries generally passed into the factory stage. She preparation of food was trans­ ferred to an increasing extent from the kitchen to the factory. At th® same time, they ©xpanded in number and importance,, in variety of products and in volume of output. ITevJ Industries emerged and others experienced radical changes in the technique of production and in business organization and management. $y 1910 , meat packing, flour milling, sugar refining, canning and dairy processing became very important industries.

As a result of improved railroad transportation during this period, Chicago became the great packing center, followed by Kansas

City, STea York, Indianapolis and St. Louis. Many farmers in th© western part of the new Corn Belt found it profitable to buy rang© cattle and fatten them for the market. Increasing corn production caused a phenomenal growth, in the number of hogs raised in th© Corn

Belt states. The development of the Union Stock Yards was also an important cause for the growth of the packing industry in Chicago.

5 ib id ., p . 2 0 3 . Enterprising ‘businessmen like Gustavus E. Swift and Philip Armour ap­ peared in the packing industry and established large firms. She meat packing industry bad become more integrated and the same establishment did both slaughtering and packing.

It was the development of refrigeration, however, that brought a revolution in the meat packing industry. After i 860 , the packers found it possible to slaughter successfully in warm weather by placing crates of ieo and salt about th© slaughterhouses. By 1B~[Q a ll th© larger plants had eooling rooms chilled with natural ice.

In 1870, one of Swift's engineers discovered the principle of air circulation, as applied to refrigeration and designed a practical refrigerator car. Th© mechanical refrigeration enabled th© packing house to disperse with its enormous ice house in favor of more compact and efficient power plants. The packers could now set up an all-year industry and soil to a national market. As a result of extension of railways into the western range country, the west became the country's greatest reservoir of livestock. Beef began to replac© pork and soon became the dominant product.

The bacteriological and chemical control for the standardisation of quality of meat and th© introduction of th© principles of sanita­ tion and hygiene ware the other developments in the packing industry before igiO .

All these developments encouraged th© further centralisation of the slaughtering and packing industry, both geographically and in th© hands of large firms. S5 Flour milling

Introduction of two new processes in the flour milling industry

in the 1870's was the most significant development which revolution­

ized this industry. The first one was the method for separating flour

from bran hy means o f an air current rather than hy sieves. The sec­

ond innovation was the use of rolling process for grinding. Both

these innovations were first introduced in Minneapolis. These inno­

vations resulted in multiple grinding with reduced speed and pressure

so as to prevent heating and discoloring of flour. Th® production of

'’middlings11 was increased. The middlings when purified and reground

produced the hast flour.

Minneapolis, which was in the center of spring wheat territory,

became the leading flour milling center of the United States. The

Minneapolis m ills dominated the domestic market and were also making

rapid progress in conquering th© markets of northern and eastern

Europe. By 1882, Minneapolis manufactured over 3*000,000 barrels of

flour a year and hy 1890 , over 7, 000,000 to th© valu© of nearly

$31, 000, 000. As early as IS 78 a solid train of cars carrying 2,500

barrels of flour reached E m York after an unbroken trip from Min­

neapolis to make connection with a steamer which would deliver th®

consignment in London16 days from the time it left the Falls of St. g Anthony. Th© production of wheat flour increased from 39.8 m illion

barrels to 83*3 i n 1§90 and to 107.2 in 1910 =

^Clark, op. clt., Vol. II, p. 506. 86

With these technological changes, the m illers now realized tha

advantages of large-scale organization. The industry moved west to he nearer the source of wheat supply. After 1890, there was a new movement toward co n cen tratio n o f ownership and c o n tro l. The m ille rs

also organized the subsidiary companies which built up lines of ele­

vators along the railroads throughout the wheat area.

The baking industry

Seizing of broad and related products was s till confined mostly within the house during this period. However, the baking industry made its modest beginning after the Civil War and attained large im­ portance in the IS 9 0 5 b. Many biscuit and cracker manufacturing com­ panies were formed. In 1898, the National Biscuit Company was formed by the merger of four large companies. The industry also engaged in

the production of bread, cake, piss and pastry during this period.

Shod canning

Canning industry made a major headway during this period. In

1861, the first factory to manufacture condensed milk was established by Gail Borden in Wassaic, New York. This industry got an unexpected support and popularity as its whole output was t air on over by the

National Government for Army use. The soldiers acquired a taste for the condensed milk. This gave it great popularity. Army demands also stimulated the canning ©f fruito and vegetables.

The autoclave was introduced, which made possible cooking tem­ peratures as high as 500°. Machine-made cans were Introduced about 87 1885* Many other innovations revolutionized the canning industry during this period. The machinery for preparing fruits, vegetal)lee and fish for canning, and sealing cans was introduced. More emphasis was now placed on the chmical and bacteriological control of the produ ct.

During this period, canneries were built all over the country, but Maryland and California were the leading states. Pineapple can* ning industry was established in the first decade of the 20th Century.

Condensed soup industry a lso made i t s beginning.

Food Processing, 1910-1930

The demand for processed food increased greatly during this peri­ od as a result of World War I and the post-war economic boom. The growing urbanization of population and improved means of transpor­ tation tremendously increased the demand for processed foods. Hew techniques and new processes were perfected. There was an increasing trend on the part of the processing firms to increase the size of th® business units through consolidation daring this period.

The number of the establishments increased at first but through consolidation and mergers, it went down to almost at the 9 IO9 le v e l.

However, the number of employees and the value added by food manu­ facturing increased greatly during this period. 88

TABLE 9

OPERATING MANUFACTURING ESTABLISHMENTS IN THE UNITED STATES, EOOD AND KINDRED PRODUCTS, 1909-1929

Value Added Number o f Number of (Adjusted) T ear Establishments All Employees $1,000

1909 5 5 .3& 1+11,575 - 1.323.677

1916 S T .to j 536,1+36 1.070,571+

1919 69 ,h 23 733.661+ 2,1+95.716

1921 51.502 759,931 2,119.557

1925 1+8,151 792,772 2 , 718,202

1929 55.325 871.910 3.339.81+8

Source: U. S. Department of Commerce, Bureau of the Census, Abstract of the Fifteenth Census of the United States, 1930 , P» T^Og and Census of Manufactures,1958, Vol. H , Part I, p. 20-1 (Washington, D. C.s U. S. Government Printing Office).

Meat padklng industry

Ao a result primarily of rapid growth of motor trucks as a means of transportation, th© packers moved close to the source of livestock a fter World War I . The number of slaughtering and meat packing plants had Increased from 1,221 in I909 to 1,39? lu 3-923 to 1,?62 In 1929 .

On th© other hand, th© value added by this industry increased from about $l6k million in 1909 to $1+11 million in 1923 and to $1+83.82 million In 1929. (So© Table 10). Usually those interior packing plan ts were started by sm all, newly formed companies. As a r e su lt of the competition from these interior packers, the percentage of 89

total slaughter of Mg packers was reduced substantially. In 1916

the HMg four” slaughtered J1 per cent of the animals killed under

Federal inspection, but by 1929 this percentage had fallen to 59 p e r cent.T

TABLE 10

NUMBER OF MEAT PACE ISO AND SLAUGHTERING ESTABLISHMENTS, NUMBER OF EMPLOYEES AND VALUE ADDED, UNITED STATES, 1889-1958

Number of Number of Value Added Year Establishments A ll Employe es ($1 ,000)

1899 882 68 , 3*6 101,682

1909 1,221 S7.S13 i 6h, 106

191 k 1.279 98,833 210,303

1919 i , 30h 160,996 ^63,361

1921 1,1SU 117, 0h2 3 3 2 ,7 ^

1923 1,397 132,792 h n ,U os

1929 1,762 122,505 483,821

1939 3.387 1^7,263 1192,125

19 U7 3.971 27h,U93 1, 279,742

195 b ^.992 311.366 1 . 938,307

195 s 5. 52s 311,758 2,499,233

Source: U. S. Department of Commerce, Bureau of the Census, Census of Manufactures. 1958, Vol. II, Part 1 (Washington, D. C.: U. S. Government P rin tin g O ffic e ), p . 20A-H.

^Frederik L. Thomsen, Agricultural Marketing (New York: McGraw- H ill Book Company, I n c ., 195^5• P* 128. The meat packers also engaged in the handling of many other prod­ ucts like hides, fertilizers, cotton oil, butter, eggs, cheese, canned fruits and vegetables, and general groceries. A few of them operated r e ta il meat markets and grocery sto res. At the time o f World War I, th eir business enterprises had become very large and ram ified. The packers began to buy more and more of their livestock direct from farmers, by-passing the sp ec ia lize d middlemen performing the lo c a l assembly function. Thus, a trend toward 'Vertical integration15 began in the meat packing industry after World War I. They also engaged in pooling, dividing markets and livestock purchases and other kinds of monopolistic practices. Moreover, their diversified operations such as canning and wholesaling of unrelated food products were threatening to disrupt the entire distributive system of food products. As a result, in 1919» the Federal Government proceeded against the big packers to indict them for violation of the anti-trust lavjo. In an effort to avoid possible indictment, the f,blg five 15 packers voluntar­ ily agreed in 1920 to a set of propositions known as the Packers*

Consent Decree. As a result of this decree the companies had to dis­ continue their retail meat stores and quit the wholesale distribution of products unrelated to meats, notably groceries. They also agreed to dispose of their holdings in public stockyards, railroad terminals, market newspapers, and public cold-storage warehouses for products other than meats. 91

Hour milling

She World War I brought many changes to the flour Industry as well. The demand for flour for export to Europe Increased as the

European population became largely dependent on American flour and wheat exports. In I91 U only 10 per cent of the annual flour produc­ tion was exported, while 2U per cent was exported in 1920 .

The flour industry was largely centralized in ten or 20 cities in or near the areas of specialized wheat production. During the decade of the 1920 8s there was a growing trend toward plant consoli­ dation and application of mass production methods. The number of flour m ills decreased from 11,691 in 1909 to U.022 in 1929 whereas

the average number of employees decreased from 51»^2& in 1909 to

35*792 in 1929 (Table 11). The value added by milling industry in­ creased from $ ll6 million to $191 .* 1- million during the same period.

In the same period, Buffalo emerged as the leading milling center of the country as a result of change in the freight rate structure and growing opportunity to mill Canadian wheat. The physical output of wheat flour increased from 110.S million barrels in 1911 to 123.6 million barrels in 1929 .

Th© flour milling companies also began to enter in the breakfast

food area as w e ll. Washburn-Crosby b u ilt a cereal m ill in Chicago in

1923 . The millers also diversified the products of their flour mills, making corn meal and rye flou r. 92

•CABLE 11

HUMBER OR ELOUR. MILL ESTAELISMEHTS, HUMBER 07 EMPLOYEES ASD VALUE ADDED, UHITED STATES, 1899-195®

Value Added Humber o f Humber o f (Adjusted) Year Establishments A ll Employees $1,000

1899 9.476 37.748 73.280 1909 11,691 51,484 116,008

191 H 10,788 52,966 125,410

1919 10,708 63.832 253.253 1921 6,485 48,137 185,620

1929 4,022 35.792 191.397

1939 2,143 35.97® 143,883

19^7 1,243 39.597 410.774 1954 803 28,969 330,634

195® 814 28,215 393.053

Sources U. S. Department o f Commerce, Bureau o f the Census, Census o f M anufactures., 195®. Vol. I I , P a rt I (W ashington, D. C.s U. S. Government Printing Office), p. 20-D-4.

Baking industry

After World War I, the "baking industry began to develop rapidly.

The co n d itio n s during the War had turned many people from home baking.

Many improvements xsere introduced in the industry as a result of in­

creasing mechanization and adoption of scientific processes. The

baking industry began to pass into the era of commercial manufacture.

The improved quality and cheaper cost of breakfast foods helped to 93 promote their popularity. The growing urbanization of population and the improvements in roads and trucks made it possible for a single bakery to supply a large area. A series of mergers and consolidations developed. At first, most of these were local in character and were mainly for the purpose of eliminating cut throat competition. Later there was a growing trend toward bringing together the scattered plants under one ownership and control.

four largest companies, Ward Baking Corporation, General Baking

Corporation, Continental Baking Corporation and Purity Bakeries were formed in the 1920's. An attempt to consolidate the first three of these was abandoned as a result of federal action in 1926 . food canning

As a result of growing urbanization of population during this period, the canning industry grow rapidly after World War I. Th© eity people purchased more of canned food. These foods were more con­ venient and saved time to the housewives. The consumers had not to make purchases in large quantities and there was no problem of storage. All these factors gave increased popularity of canned foods during this period. By 1929, canning factories were operating in all but three of th© US s t a t e s . 9 The number of canning establishments in the country was 3,3^5 1Q 1929 slightly less than it was in 1909 * B it the average number of employees increased from 59 , 96 s in 1909 to

9&uhl©mann, ©p. c i t . , p . k^9» 9*

112,1*78 la 1929 and th® value added by canning industry had increased from $55.3 million to $315.9 million during the same period (Table

12).

TABLE 12

HUMBER 0 7 GAMED AND 7R0ZEN TOOD ESTABLISHMENTS, NUMBER 07 EMPLOYEES AND VALUE ADDED, UNITED STATES, I 889 -I 958

Value Add©!, Number o f Number o f (Adjusted) Year Estahli shments All Employees $1,000

IS89 1,328 61,812 19,092

1899 2,570 57,012 35.667

1909 3.767 59,968 55.278

19 lH 1*, 220 7 M 7 1 83,782

1919 1*, 2S0 89,923 215,628

1921 2,225 59,675 11*2,127

1929 3,3^5 112, 1*78 315.889

1939 3.053 13M 71 317,^96

19^7 3.825 201,109 911 *, 181*

195^ 3.513 199,230 1 , 371*,088

1958 3,693 223,323 1,895.705

Source: U. S. Department o f Commerce, Bureau o f th e Census, Census of Manufactures. 1958, Vol. I1, Part I (Washington, D. C.: U. S. Government Printing Office), p. 20A-1*. 95 The quality of canned fruits also Improved as a result of Im­ proved processes. Machinery was invented to shell peas without taking the pods from the vine, to husk corn, to peal tomatoes and to perform other preparatory cannery operations that previously required manual la b o r.

Frozen food industry

Clarence Birdseye discovered in 19 If that fish and gam® when fro son rapidly at a very low temperature maintained their original flavor ever long periods of time. As a result of this discovery, th© attempts were made to preserve foods by freezing. Pish was the first food product to "be quick-frozen for wide distribution.*^

At first, the public was prejudiced against the frozen foods.

They thought, although wrongly, that frozen foods were inferior in quality. Later, the idea was conceived of freezing and packing con­ centrated orange slush. This required only to add water to make a fin© product. V/ithin a short time, the freezing was extended to vegetables like peas and green beans and to fruits like strawberries.

Packaging of frozen foods

The processing firms were faced with the problem of wrapping frozen food economically so as to protect the quality of the product.

*®Ceorge L„ Mentley, ‘’Frozen Foods, H in Paul Sayers ( ed.) Pood Haricoting (Hew Yorks M c&rau-Hill Book Company, I n c ., 1950 )» p . 289. 96

The early attempts were not so such on the design of the packages as on the neatness. R0n the labels the nature of the contents, number of servings, and the directions of preparation were set forth. Most of the packaging operations were done entirely by hand.

Th© fro sen food Industry was, however, in the experimental stage b efo re 1930 and was not very popular in public.

lood P rocessin g, 1930“ 195^

Th© trend toward more processing and a greater variety of pro­ cessing continued during this period. New and improved techniques were introduced and faster, more improved methods were used for pro­ cessing many foods. The growing trend in urbanization, improved transportation and -igher consumer incomes facilitated transfer of many services to modern commercial processing plants.

During this period, the total number of establishments engaged in manufacture of food decreased by 32 per cent from h8 , j 29 in 1931 to 3§»^66 in 1950* The value added by food manufacture increased from

$2.75 billion in 1931 to $10.1 billion. This indicates that despite the depression, there was a growing trend toward large-scale organi­ zation with use of modern technology in th© food processing industry.

This was mad© possible by increasing urbanization of population and tremendous developments in the transportation, especially motor trucks. During World War II and immediately after, there was a rapid

1 1 Ib id. . p. 2 8 9 . adoption of new equipment and new techniques In food processing.

Sanitation in food processing plants became more end more a matter of public interest. Enactment of the Federal Food, Drug and Cosmetic

Act o f 1938 , did much to encourage sanitary practices in food pro­ c e s s in g .1^

TABLE 13

OPERATING MANUFACTURING ESTABLISHMENTS IN THE UNIT® STATES, FOOD AND KINDRED PRODUCTS, 1931-1950

Value Added Number 0 f Number o f (Adjusted) Tear Establishments A ll Employees $1,000

1931 U s,729 N.A. 2 , 7U5,357

1935 US,982 932, U29 2, SOU,162

1939 U3,667 N.A. 3.USU.696 I9U7 U2 ,802 i,U6l,36U 9,115,975

1950 38,U66 i ,U92,96 o 10.10U.316

Source: U.' S. Department of Commerce, Bureau of th© Census, Census of Manufactures. 195®, Vol. I I , Part I (Washington, D. C.s U. S. Government Printing O ffic e), p. 20-1.

Within the 20 year period a considerable progress was also mad© in the perfection of equipment to purify water used for plant clean­ ing, sanitation and for the preparation of the food itself. Inplant chlorination—th© application of chlorine to the water in regulated

12U. S. D. A., Technology in Food Marketing, op. clt. , p. 28. and closely controlled quantities—was introduced and in 1950 * a^out

200 food processing plants were using inplant chlorination.1^ ‘’In-

plant chlorination reduces bacterial population, reduces time spent in

cleaning up, and makes i t p o ssib le to carry on continuous processing

operations for longer periods.”1^

Packaging,

Packaging of food products became more essential to economical

marketing during this period. It affords many economic advantages,,

It facilitates handling of the product and also reduces the shrinkage

and deterioration. Packaging also reduces labor, freight, and the

storing cost. Packaging had become an integral part of processing

during this period.

During this period, many developments were made in the material

.used for packaging, packaging equipment and th© packaging designs for

consumers8 convenience. The development of new plastic and trans­

parent flexible materials like cellophane, and polyethylene greatly

improved the packaging of many processed foods, especially of frozen

foods. The multi-wall paper bags, whichbegan during World War XI,

were extensively used by 195®* These were mad© of stronger and much

lighter paper. The quality of tin cans and glass containers greatly

improved during this period. Sulfur-resisting and acid-resisting

1 3 lb id . . p. 3 0 .

% . S. D. A., Marketing. Yearbook of Agriculture, 95 I H (Wash­ ington, D. C.: U. S. Government P rinting O ffic e ), p. 131. 99 enamel for tin cane was developed and glass containers of less weight and more strength were widely used in packaging processed foods.

All these technological changes in the packaging had a great impact on food processing, and increased the popularity and use of processed foods. There was, however, an increasing trend toward smaller sizes of packages.

Prepackaging of foods also came in wide use during this period.

In th e I 93 O8 s the prepackaging of fruits and vegetables, and eggs was introduced. By 195 °» prepackaging of certain food products like meat,

fruits, vegetables and eggs had become an essential feature of mer­ chandising.

Another important development in food processing industry during this period was the phenomenal growth of the dehydration industry, especially during World War II. During the War, great interest de­ veloped in dehydrated products, as these required fewer transportation and storage facilities and did not have to be packaged in containers requiring scare© tin. ®h© most important products for dehydration wer© eggs, milk and vegetables. The production of dehydrated ©ggs increased from ^89,000 pounds in 193 O to a peak of 320-7 m illio n pounds in I 9 HU and then decreased steadily to 9 3 million pounds in

1950.^ Similarily, th© production of dehydrated milk showed an

1^n. s . d . A„, Technology in Ibod Marketing, op. c it. , p. ^2. 1 0 0 increasing trend from 2j 6 million ponnde in 1930 to 1.06 'b illio n pounds in 1949 and. decreased to 93»4 million pounds in 1950 .*^

Meat packing Industry

Th© number of meat packing plants increased during this period.

By I 95 O, meat packing plants were distributed throughout the country.

An Important cause was the movement of plants closer to the centers of livestock production as a result of greatly Improved transportation

systems and improved refrigeration. Moreover,, the opportunities created by war-time control program for meat also encouraged new

entrants into the industry.

Th© scomber of plants in meat packing and slaughtering industry increased from 1,762 in I 929 to 3 , 38 ? in I 939 and 3,971 in 1947 .

While the average number of all employees Increased from 122,303 in

1929 to 274,493 in 19^7, th© value added showed an increase from

$483.8 million in 1929 to $ 1.28 billion in 194 ? (Table 10).

However, th e re uas a trend toward reduction of concentration in meat packing induo try during thio period as a result of the growth, of small interior packers. In 1939» the four leading packing firms ac­

counted for th© industry slaughter of 49.9 P©^ cent of cattle, 46.9 per cent of calves, 70°? P©s? cent of sheep and lambs and 40.2 per cent hogs. These percentages decreased to 3® *3* 39*6, 67. 8 , and 40.4 respectively in 1947•^

l 6Xbid., p. 42.

S. Shephard, Marketing larm Products, Economic Analysis (Ames, Iowa: The Iowa State University P ress, 19&?), p. 364* 101

There have also been many technological changes In the meat packing and slaughtering Industry during this period. The production of .table-ready meats increased significantly as a result of consumer demands for these products. Containers and wrappers for prepackaged fresh meats„ ready-to-serve products and cured meats were developed.

Flour milling

There was a reduction in th® number of flour milling plants during this period. She number of flour mills decreased fromk 002S ia

1929 to 2,11*3 in 1939 and to l,2k 3 in 19^7» However, the value added hy flou r industry increased from $191 .H million in I929 to $1*10.8 million in 19^7 (Tahle 21). The demand for flour, pancake flour, cak© and biscuit mixtures increased during World War II. The millers responded to these demands by increasing the size of the plants and also diversifying th© mill products.

Decentralization of mill production was another trend during th©

1930 * 0. The larger companies tended to seize strategic locations in every region and cover th© country with a network of rasan factoring plants and distributing warehouses. Th© forces that encouraged this tendency were the desire to develop new products, to secure better market distribution of all products, and mek© deliveries quickly and at lowest costs.

Many technological developments took place in flour-milling in­ dustry during M o 20 year period. A successful method, for ©sample, was developed for "protecting flour mill products against Insect 102

Infestation by use of a machine which utilizes centrifugal force to k ill all forms of Insect life "by high-velocity impact against the «18 casing of the machine."

Baking industry

There was a greater trend toward concentration in this industry.

According to 19^7 Census o f Manufactures, the number o f establishm ents

decreased from 18,399 in 1939 to 7*122 in I 9 U7 . This was due to the

rapid reduction in the number of the firms manufacturing crackers and

biscuits products. The significant advances in design and manufacture

of machinery and equipment made it uneconomic for the small producers

to compete in the market.

In the early 19^0*s, the standards were specified for the addi­

tion of nutrients in bread which are lost in processing. "Enriched" breads w ith added thiamine, rib o flav in , n iacin and iron, became popular with consumers and cam© in wide use by 1950* Improvements which wero mad© in the packaging of bread to keep it fresher and at­

tractive are among th© other developments during this period.

Eood canning and frozen food industry

She use o f canned and frozen foods showed an increasing trend

during this period. The number of establishments engaged in the pro­

duction o f such foods increased from 3*3^5 i n 1929 to 3,325 in I9 U7

(Table 12). However, the value added increased about th reefold , from

1SU. S. D. A., Technology in Food Marketing, op. c it., p. 31* 103

$316 million to $9lU million, The production of frozen foods was undertaken on scientific basis in the early 1930 's and by 1950 they became increasingly important in American l i f e . Total production o f all frozen foods in th© United States increased from jUO m illion pounds during 1931-35 to 3 = 31? m illion pounds in l g ^ . 1^ The fresh flavor, eye appeal, low cost, and simple convenience of frozen foods made deep impression on the housewives and the institutional users alike. Many new frozen products, like frozen whipped potatoes and frozen Prench fried potatoes gained housewife's acceptance.

In case of canned foods, the improved technology resulted in more efficient production. The low cost and improved colors, flavors and textures of canned foods increased the consumer demand for these prod­ u cts.

Pood Processing, Since 1950

Pood processing and packaging has undergone significant changes sine© I95 O. The post-war economic boom has continued and the incomes v of the people have been increasing. Moreover, the housewives have little time to devote for processing of the food products. More and more processing and packaging services are being demanded by the con­ sumers .

The number of establishments has increased from 38 , 1+66 in I95 O to

1+2,373 in 195^ but again decreased to 1+1,619 in 1958. While th©

^ frozen Pood Paetbook and D irectory. 1959~6o (Uew York; Hational Prozen Pood Distributors Association), p. 1+3. average number of a ll employees has shown some Increase, the value

added "by the industry has increased almost 100 per cent; i. e., from

$10.10 billion in 1950 to $19.66 billion in i 960 .

CABLE lU

OPERATING- MAHUEACTURING ESTABLISHMENTS IN THE UNITED STATES, POOD AND KINDRED PRODUCTS, 1950-1960

Value Added Humber o f lumber o f (A

1950 38,1*66 1,1*92,960 10,101*, 316

1952 36,829 l . *79.583 11,3110,11*0

195* *2.373 1,6*6,591 13. 397.781

1955 1*2,205 1,67*,255 l h ,790,062

1957 N.A. 1,687,615 16, 3*6,999 195S *1,619 1,698,811* 17,532,55s

i960 N.A. 1, 713,000 19,661,000

Source: U. S. Department of Commerce, Bureau of th© Census, Census of Manufactures. 1958 , Vol. I, p. 20-1; and Statistical Abstract, o f th® United S ta te s. 1962 , pp. 77*~75 (Washington, S. C.s U. S. Government Printing O ffic e).

As a result of improved highway systema, the food processing firms can now cover a much wider geographical area than ever before.

Improved refrigeration and the home freezing facilities accompanied w ith higher consumer incomes have tremendously increased the use o f processed foods. Consumers with rising incomes have been [email protected] 105 more highly processed food. The food processing industry has re­ sponded well to these changing consumer demands, by introducing ef­ ficiency in the production of such foods. There have been consider­ able improvements in machinery and equipment, methods of handling goods in hulk lots and continuous operations.

In the "baking industry, for example, there has "been an expanded use of pneumatic conveyors for hulk handling of ingredients. By 195^. an estimated 75 to 90 per cent medium and large scale hread plants adopted this devieo.^ Continuous mix machines introduced in baking industry in 1953 enabled the bread plants to replace six stages and reduced the Mdough processing time from several hours to a matter of minutes.”2* Automatic conveyor systems introduced in 19 H9 cam® in wide use. Use of the modem technology in food processing has neces­ sitated the increased size of the firms for economic production, ffiheso largo firms have been able to reduce cost of many food pro­ cessing operations due to greater specialization and efficient pro­ duction. A greater variety of processed foods is available to th© consumers.

However, there has been a decline in the relative importance of th© food processing industries as a result of phenomenal development of large scale retail units. It is estimated that in 195&

2°B. ft. Walsh and B. M. Evans, Economics o f Change In Market Structure, Conduct aad Performance, the Baking IndustrvP 19^7°19gg Hew Serioo Ho. 2 8 ,-U n iversity ofTf^raska Studies, ib^omhor71§637 p . kB.

21Ibld. . p. 5 0 . io 6 approximately 2.5 per cent of the national Income originated in in­ dustries manufacturing food and kindred products compared with 2 .9 p e r cen t i n I 9 U7 3 .1 per cent in 1939 * ^

let ailing, wholesaling, and food processing have become more integrated. She processors are now not in a position to dominate th® food market as they did in the 19 3°'8* They have had to change opera­ tions and policies in order to conform retail trade requirements. The retailers no longer accept whatever supplied by th© processors. They can specify th© product and require offers. 13Consumer eontrol by processors has generally diminished. ,,23

These changes have forced many processors to alter enterprise structure. 11 They have developed direct sales merchandising, ©spe­ cially for bulk or specification items. High speed and full capacity operations are being built. The crucial importance of effective dif­ ferentiation and promotion Is being recognized. Product planning,new product development, and engineering have become major functions 21, closely coordinated within manufacturing, procurement and sales. 13

%. S. D. A., Agricultural Marketing Service, Marketing Research Division, The Bbod Marketing Industries—Recent Changes and Prospects (Washington, D. C.s U. S. Government P rinting O ffice, November, 1957). P- 18.

23(j„ l» Mehren, "The Changing Structure o f th© Pood M arket, 33 Jo u rn a l o f Farm Economics, Vol. XXXIX, Ho. 2, May, 1957» P* 352.

2^IMd. o p. 352. 107 However, they seek new products and hew methods of preservation in order to improve their competitive position.

The developments in packaging of foods have "been equally signif­ icant since 1950. Few commodities are offered for sale In hulk today.

Prepackaging has drawn much more attention than ever before. It has been very important for fruits and vegetables. Prepackaged carrots, for instance, increased from 1 per cent of retail carrot sales in 1951 to 85 per cent in 19 5^ and to practically 100 per cent by 1959

Improved packaging materials, containers and methods have been devel­ oped. Packages are now much more handy, attractive and strong. The modern packaging has helped to contain and protect the form and qual­ i t y o f th e product and i t s tim ely and e f f ic ie n t movement through tra d e channels. This has also improved sanitation, reduced waste and fa­ cilitated the use of trade-marked brands.

T. Pentzer, "Marketing, Quality and Cost, "Food, Yearbook o f A g ric u ltu re , 1959* ££■ c l t . , p . Ul2 . CHAPTER. 71

DEVELOPMENT OF MARKET INFORMATION

The function of market information involves collection, interpre­ tation, and dissemination of data dealing with quantities moving in

trade, market price quotations and other such Information.

Collection and diGseailnation of market news hag important hearing on the present or prospective market value of commodities. Producers, traders, processors and consumers a ll need accurate information on quantities and prices if marketing mechanisms are to work efficiently.

Accurate and timely market information enables the farmers to plan their crop and livestock production programs to the best advan­ tage and to market their output efficiently. It is equally important

to the wholesalers, retailers, and other agencies engaged in market­ ing. With better market information wholesalers may develop potential

consumer demands and producer supplies. The processors can make better decisions as to proper outlet, the proper package and many other qu estion s. Knowing both th© p rices and su p p lies, the r e ta ile r can plan his advertising programs in advance and get his floor dis­ play ready.

In the absence of current news, products from the distant points may be loaded to an already glutted market, to be sold at vexy low

108 109 prices or moved elsewhere with considerable cost and loss. On the other hand, in another market, an unnecessary shortage of supplies may

result in unduly high prices. Transportation and storage agencies also depend greatly on advance information in planning their schedules

to meet seasonal marketing requirements.

She processors and the dealers have usually been able to obtain market info m at ion on their own, even in the most underdeveloped so­

cieties. It is, usually, th© producers who need more than anyone

else, some public organisation for th© collection and the diosomiaa-

tion of the market information for him. In cases, where one group has

information and the other does not the competitive conditions are dif­

fe r e n t. Th© group having access to information may benefit at th©

expense of the others which do not have.

Market Information, Before IJfS

In the s e lf - s u f f ic ie n t economy during th is period no sp ecia lized

agency for providing market information existed. As there ms little

trad© in agricultural goods, and the markets were local, the farmers,

dealers, and buyers were in close contact with each other. Th© prod­ ucts did not move long distances and there was no need for collecting

and disseminating information about th® supplies and prices.

Market Information, 1776-1860

Ac the population grow and trade in farm products increased, easy markets developed in the towns and cities. The prices at different 110 markets varied considerably. However, no media developed for the col­ lection and dissemination of market information, The local dealers and country merchants who made frequent trips to these markets were th© main seurc© of information. They did not usually giv© th© c o rre ct information to th© fanners a© to the prices prevailing in th© d is ta n t markets. Travelers were also important sources of the information.

Occasionally farmers also made trips to town for some other business and thereby got th© information about prevailing prices.

Eh© eonditionQ in big cities wav©, however, different. Eho dealers in these cities were collecting information for their own use.

In the middle of the 18th century in Hew York City, for example, it became customary for each dealer to notify his customers of th© p rices that obtained the Hew York market. They sent out printed sheets or circulars showing prices of different commodities. Much of th© print­ ing o f thscG Ohsqto was done by on© Mr. Benjamin Urnor.^

In 185® Urner began to publish a p rice l i s t o r "price current®1 on h is &\m account. H© co llected h is own market news and was se llin g this service to various dealers. His sheets were cheaper and superior to the individual sheets published by the various dealers. Many dealers readily subscribed for Urner's publication to send to th eir customers in place of their own quotations.

Such information was not, however, widely disseminated. Only few commercial enterprises v;ere able to talc© advantage of such a provision.

^L. D. H. Weld, Th© Marketing o f Earn Products (Hew York! Th© Macmillan Company, 1920), p . 301- I l l

The farmers were still in the dark about the prices and supplies in distant markets.

Market Information, 1860-1900

A fter th© C iv il War, th e production had increased, and th e pro­ duction areas spread out. There was greater need for reliable infor­ mation regarding the production and prices of the farm products. The institution of crop and livestock reporting service was one of th®

first activities of thG United States Bepartaont of Agriculture when it was established in 1862. The reporting service provided the in­ formation about total production of different crops. The main agency for providing the market information as to the price quotations, was

still the private and commercial source.

The "price current" publish®! by Benjamin Urner, became very popular after I860 . Xt was f ir s t published weekly, but in 1S82 i t was changed to daily service, "The Producers' Price Current."

In 1S73, k. P. Barry, started a similar competing service, but in 1895# fche two companies consolidated into the Umer-Barry Company.

At the same time they began to publish the "Hew York Produce Review and American Creamery." This marketing journal was devoted mainly to butter, egg, cheese, and poultry interests, later such agencies were established in other big cities like Chicago, Boston, St. Louis,

Cincinnati mid others.

She development o f various means o f conmranication in th is period helped to disseminate the market Information to a certain extent. 112

The miles of electric telegraph wire operated by Western Union in­

creased greatly during this period. From a toy in 1876, the telephone

had come to he a very important means of communication hy 1910. There were 82 telephones per 1,000 of population in 1910 as compared to only

$bout 1 .1 in 1876 .

As the population grew, and the settlement spread across th®

country, the postal service increased as well. Even in the remote

areas of the country, the mail served th© people "by boat and hy rail.

Moreover, during the five decades following the close of th© Civil

War, the number of newspapers and periodicals continued to grow. The

business newspapers multiplied also.

However, in spite of the existence of some kind of market infor­

mation and news media, most of the producers could not get market in­

formation they needed. Even if they did, the information was received

not in tie© to he of practical value. Generally, the private agencies who supplied such information colored this for the disadvantage of

th© producers.

Market Information, I9 IO-I93 O

By 1910, the agricultural production in the country had increased

substantially. Many other changes were taking place in industrial de­

velopment, the growth of cities, and the expansion of railroad and

comHmnication f a c i l i t i e s . Ae a re o u lt of greater specialization, the

farmers were producing more and more for th© market. Growing need for

some unbiased and reliable source of market infomatlen was increas­ ingly felt. 113

Although the production estimates and reports of crop conditions had been refined, there was lack o f accurate information on supplies and prices. This led to simultaneous gluts and scarcities in markets throughout th® country. The commercial news service was of little use and limited only to few people in trade. In general, the farmers, dealers, handlers, and processors were trying to operate in the dark.

As a result of public demand for such an agency the Office of

Markets, which was the predecessor of the Bureau of Agricultural Eco­ nomies, was estab lish ed in 1913 . The Eederal Marketing Hews Service came into being in 1915- first report was issued March 27, 19^5» on the movement and prices of strawberries at Hammond, Louisiana. A market news service for fruits and vegetables was established in th®

Office of the Markets and Bural Organization. Six year-round report­ ing offices to cover the terminal markets, and seven seasonal shipping point reporting stations were opened.

The service was expanded and market reporters were placed at important country shipping points and at consuming eenters. Daily reports were issued for important agricultural commodities. This service was received with much enthusiasm by farmers and dealers everywhere. Many branch offices'were opened throughout th© country.

The service got an added impetus during World War I . The Bureau of Agricultural Economics was set up in 1922, which soon became th© greatest organization for the gathering and distribution of market news in the world. She need for accurate Information was f e l t much more during the depression of the 1920’s. Accordingly, the U.S.D.A. llU

began to publish the "outlook" information and other related infor­

mation as well.

A leased telegraph wire circuit that connects the various branch

offices with one another and with central headquarters at Washington

was operated for rapid dispatch of information over the country,

later, radio was also used to flash the news over the country more

quickly. The first market news radio report was broadcast May 21,

1921 over station KDKA, Pittsburgh.

Simultaneously, the private agencies also improved and widened

the scope of their news service. From several terminal markets one or more daily market journals or "price currents" were issued. Important

ones were: Daily Trade Bulletin of Chicago, the Daily Market Record

of Minneapolis, the St. Louis Market Reporter, and the Kansas City

Daily Price Current.

Along with th© development of the agencies for collection, in™

terprstation and dissemination of market news, there was also a rapid

development of the news media. Telephone industry greatly expanded

a fte r World War I . Even fo r the iso la te d farm homes, the telephone

had come to be all but indisponsible. There were 163 telephones per

1,000 of population in 1930 * as compared to only S 3 in 1910 . The long

distance facilities for telephoning became popular. By 193®d the

whole country, with exceptions here and there, had facilities for

carrying on conversation with places far away.

The electric telegraph Increased and improved its facilities in

keeping with the growth in population and expansion of business. In 115

the early 1920’8 the radio was little more than a play thing. In

1930 . more than hO per cent of a ll U. S. homes and about 21 per cent

o f rural farm homes had radio (Table 15).

TABLE 15

PERCEHTAGE OF HOMES WITH RADIO, TOUTED STATES, 1930-1950

Tear A ll Homes Urban Rural Hon-farm Rural Farm

1930 U0 .3 50.0 33-7 2 0 .8

I 9 U0 82.8 91.9 79.0 60.2

1950 95.7 97.2 93.1 9 2 .0

Source: U. S. Department of Commerce, Statistical Abstract of the United States. 1950 (Washington, D. C„: TJ. S. Government Printing OfficeTT

Market Information, 1930-195°

The Federal market news service expanded rapidly during this

period. By 1950 , it had grown to more than 100 year-round and hh

seasonal offices throughout the country. These offices were operated

on a commodity basis as a result of insistent demands from those in­

terested in specific commodities in certain market areas. The serv­

ices were run in cooperation with various state agencies. It made possible a wider dissemination of information than could be don®

solely by the Federal government. Th® Mors© telegraph system was replaced "by leased teletype cir­

cuits which provided fast, accurate exchange of Information between

offices. The use of radio for dissemination of market information greatly increased. In 1950* over 1„100 radio stations throughout the

country served the public by broadcasting market reports. A sample

survey made in Iowa in 19^9 revealed that 90 per cent of the farmers p interviewed used their radio daily for market reports.

Hcwopaporo provided another Important channel for market dlsocsa-

in a tlo n . In 1950, IT. S. Department of Agriculture reports wore car­

ried in nearly 1,100 daily papers with a circulation of more than 37 m illio n .

Beporte are mailed free upon request. In I 9 U9 , th e U. S. D. A. distributed more than 28 million copies of these reports.

The means o f communication, developed equally rapidly during th is period. About 96 per coat of all homes In the United States had radio

In 1950 as compared to only 4-0 per cent in 1930* The increase in th e

rural farm homes with radio was phenomenal as it increased from 21 per cent in 1930 to 92 per cent in 1950 (Table 15)»

Market Information,, Since 195^

The development and improvements In the coverage and reporting of market news have continued sines I 95 O. Sh@ Federal Market f a s

Service now covers almost all th® important farm commodities. Hearly

% . S. D. A., Technology la Food Marketing, Agriculture Monograph llf (Washington, D. C.s U. S. Government Printing Office, 1952), P* S3- 117 1,500 radio stations and l6o television stations throughout th®

country regularly broadcast market news information. Most of the

daily newspapers carry market news either completely or in part as

collected by th© Federal and state agencies. She U. S. D. A. supplies

free o f charge th© mimeographed reports and summaries.

Although a ll businesses us© the market information published by

U. S. D. A. some o f them c o lle c t some inform ation on th e ir own as

well. Various trade organisations like American Meat Institute,

American Dairy Association and many others collect information, for th© particular use of their members. Many trade newspapers like the '¥all

Street Journal" and some magazines like "Progressive Grocer" and "Feed

Stuffs" collect and disseminate statistical and survey information of

p articu lar in te r e st o f th e ir members.

There has been a rapid progress in the means of communication a®

U G l l o

Nearly every household in the United States has a radio. Th© us©

of television sets has increased tremendously since 1950° Only 12 per

cent of all households in the country had television sets in 1950 » whereas $9 P©r e©at o f a ll homes had te le v is io n in 196 l (Table iS).

In ease of rural farm families, less than 3 Pss? cent had a television

set in 1950, but SO per cent of the rural farm homes were with tele­

vision sets in 1961 .

Tremendous progress mad© in the c o lle c tio n , in terp reta tio n and

dissemination of market information accompanied uith the phenomenal growth in the means of communication has enabled th© farmers, traders. 116 manufacturers, and the consumers to he well Informed about the pre­ vailing conditions of the market. They can plan their programs of production and marketing well in advance. This has enabled the mar­ keting system to function smoothly and efficiently.

TABLE 16

PERCENTAGE OF HOUSEHOLDS WITH TELEVISION SETS, UNITED STATES, I 95 O-I96 I

Year A ll Homes Urban Rural Non-farm Rural Farm

1950 12 15.7 5-9 2 .7

1955 67 7^ 6l k2 i 960 88 89 88 76

1961 89 90 90 80

Score®: U. S. Department of Commerce, Bureau o f th© Census, Statistical Abstract of the United States. 1955 sad 1962 (Washington, D. C.: Tj"“S‘ Government Printing Office). CHAPTER 711

DEVELOPMENT OF SELLING BI FARMERS

Th® first step in the marketing of farm products is the sale of these products off the farm. The farmer has to make decisions ah out the time, place, and the terms of sale. Many alternatives are open to him for soiling Mo goods. However, feho evolution. ©f various moth- ods has heen the outcome of various conditions in the economy.

Selling hy Farmers, Before 177^

The farmers in Colonial America were consuming most of the prod­ ucts they grew on their farms. There wets very little trade in farm products. Whatever little surplus was left after meeting th© family needs was "bartered with the neighbors.

Most o f th© sa le s tier© d ir ec t to the consumers. However, when various local middlemen like the peddler and the country stores emerged, the farmer sold M s product to them or "bartered in exchange for goods of the household requirement. He brought Ms products lik© eggs, butter, cheese, smoked meat to th© country merchant or th©

"butcher for exchange. Th© country merchant used to extend long-term credit to the farmer awaiting the return of Ms fall crop.

By the middle of the 10th eeatusy the population in seme cities lik© PhlladelpMa and New York increased. Fairs and weekly public

1 1 9 120

mark©ta tier© held in these cities where the farmers from th® neighbor­

hood country brought their products for sale. Peter Ealm, a Swedish

traveler gives the following account of each markets existing at

Philadelphia in th® middle o f the 18th century?

She town has two great fairs every year; on® in May and th® other in November, both on the l6th day of those two months. Sat besides these fairs, there are every week, two market days, vis. Wednesday and Saturday. On these days the country people of Pennsylvania and iTew Jersey bring to town a quantity of victuals and other productions of th© country, and this Is a groat advantage b© tko boraa.^

By and large, most of th© sales during this period were direct to

the consumers. The product was taken to the buyer or the buyer came

to the producer and inspected th© goods personally. Th© price and th®

term s o f sal® were agreed upon between the two.

Selling by Farmers, 1776-1360

Th© population increased and settlement spread after th© Hevolu-

tlon. The tendency toward specialisation developed and the farmers

began producing surpluses for trade. After 1800, radical changes took place in the marketing system of th© country. Th© producer could no

longer meet face to face the consumer of his goods. All thee©fa c to rs

necessitated the emergence of various sorts of middlemen. The farmer

then sold hio goods to these middlemen and concentrated himself on th® production of the farm products. Various lo c a l middlemen were th©

*P©ter Kalm, Travels Into lorth America (London, 1771) ♦ la Pinkerton, Voyages and Travels, XIII, p. 39^* 121

elevator companies, warehousemen, hucksters, batchers, assemblers, and

others, who assembled the produce of many producers and, in turn, dis­ posed of these products to other middlemen or sold directly to the

consumers.

The farmer had little or no idea concerning the state of other markets. Moreover, he had comparatively few pounds or bushels to sell

and the cost of transportation would have been greater than any excess he might hav© received ever and above what he could get at horn©.

These factors forced him to sell almost entirely to th© local middle­ men.

Selling by Farmers, i860-1910

When the production increased after the Civil War as a result of increased inventions in agriculture, the farmers had time to make ef­

fo rts for th© improvement in marketing f a c i l i t i e s . Th© improvements in water and railway transportation also enabled the farmers to sell

their products where the prices were higher.

The central markets developed m a result of improved railroad

transportation. These markets were large in size and few in number, located at large cities and strategic transportation points. Th© farmers were selling their products primarily to the local middlemen who, in turn, sold th© products in the terminal markets. Besides elevators and warehouses, other middlianen were th© in te rio r brokers, trade buyers, scoop shovelers, solicitors for terminal dealers, re­ tailers, country merchants and their agents. 122

With the efforts of the Grange and other farm organizations many cooperative marketing associations were organized where the member farmers sold their products. Most of the farmers were dissatisfied with th© middlemen at that time and felt that they were being cheated by these ^unscrupulous” middlemen. Those farmers who had large quan­ tities to sell carried their products directly to the terminal markets in order to fetch better prices.

Late ia 1S90 many producers sold directly to consumers at car door, ©specially such products as apples, potatoes, and some other fruits and vegetables. A producer, for example, would load a car of apples and ship it to a small town. He would then proceed by train to the same market, @0 as to arrive a few days ahead of his car of apples.

Upon arrival, he would announce and advertise the arrival of his car.

When the car arrived, he would sell right from the car door. The

D railroad cospanleo found this method troublesome and the practice was forbidden in 191? by the Interstate Commerce Commission.

Selling by Farmers, I9 IO-I93 O

During thio period, a trend toward direct selling of products by farmers began. This was primarily due to improved transportation facilities. Many fanners acquired motor trucks which enabled them to haul their goods to th© central markets or to the adjoining city for oal© directly to th© consumers.

She farmers in the neighborhood of big cities loaded their trucko and drove to the retail public markets in the cities. Such markets 123 had become very popular after World War 1. Some farmers began to sell their fresh produce on roadside stands along some of the most impor­ tant highways. With development in road building such roadside selling by farmers became very popular. Many farmer© built permanent stand© which had ample buildings for shelter, rest rooms, free table benches and facilities for water.

Another method o f d ir ec t sa le which was experimented by farmers during this period was parcel post shipment. Th© method began in

1913. Th© post office authorities as well as express companies pub- l l 8 h@d the lis t of producers who had goods to sell at stated prices and also the list of consumers who wanted to purchase different com­ m odities. Th© method was lim ited to shipment© o f poultry, bu tter, and eggs. The Parcel Post shipments, however, did not come in general us© because it was very difficult to make satisfactory contacts. More­ over, it wao very troublesome and costly to pack goods in small dura­ ble packages for shipment. The direct ©ale by farmers to the conr

Qumors got added impetus during th© depression period. The tendency to bypass th© local middlemen increased among the farmers although greater per cent of products still passed through the hands of these agencies. The extension of such facilities as the telephone, rural free delivery mail and provision of market information placed th© farmer on a more nearly equal footing with the local middlemen.

Sal© through cooperative s o c ie tie s became very important method of marketing many farm products. 2n 1920 , for esafiplQ, approximately, one-fourth of Iowa9 e livestock was marketed cooperatively. Selling by Farmers, 1930-1950

With great improvements in the means of transportation and com-

monleation and the provision of market Information there was an in­

creased tendency to bypass th® terminal markets and the local middle­

men. lack of time on the part of the farmers and development of more

efficient retail organization discouraged direct sale by producers to

the consumers. Th® farmers, however, were selling increasingly to the

processors and th.® largo retailors directly. Such oaloo uoro ma&o

either individually or through cooperative organizations.

As a result of increase in the volume of processing of the farm products, th© processors were able to offer the farmers very profit­

able outlets. Improvements in motor trucks made it possible for the

processors to assemble the farmer's product direct from the field.

Horoover# there was an increasing trend toward decentralisation

by food processing industries. Bine© 1920, th© meat packing industry,

for ©sample, moved to th© e©ntero o f liv esto ck production in th©

interior. This enabled th© processors to bypass the terminal markets

and purchase livestock directly from th© producers. Th© farmer found

i t more convenient to sell directly to processors nearer home and

avoided talcing risks to ship his products at long diotancoo to th©

terminal markets.

Another tread in th© sale of certain farm products during this period m o th© increasing uo© of auction markets. This m o more

evident in ease o f liv esto ck and fr u its and v ego tables and tobacco.

In 1930* about 200 livestock auctions were estimated to b® in 125 operation in the United States. The number increased rapidly to 1,3^5

i n 1937 and to 2,k72 in 19^9*^ Such auctions usually operated at

country points and were privately owned. The farmers brought their

livestock for sal© to thes© auction markets where it was sold to the

highest bidder. Country auction markets for fruits and vegetables and

tobaceo also became Quite popular during this period.

Selling by Efermers, Since I 95 O

Thor© havo boon significant developments in the transportation

and communication, storage, grading, and processing of farm products.

These developments have affected the farmer's methods of selling his p ro d u c ts. Th© d ir e c t sa le s to consumers in retail public markets have

been reduced to almost zero. Most of the farmers have very little

time to devote in selling their goods directly to the consumers. In

eaes of small producoro of fruits and vegetables,, however, selling on

roaSnid© markets has been rather on the increase. Phenomenal highway

construction and increasing traveling by people insures a profitable market for fresh fruits and vegetables for the small farmers who ean

devote their time for such an activity. The most important method of

Gelling perishable farm goods has, however, been the direct sals to

th© processors and big retailers. The producers eater into some sort

of agreement with processors or the retailers who operate their own processing plants. Such agreements maynot be necessarily a written

^Shephard, oj>. c lt., p. 89* 1 2 6 contract. Many processor!? advise the farmers on production problems through their field agents, plant managers, or some other represen­ tatives. The farmers, therefore, adjust their production plans In accordance with the needs of the processors and the retailers. The processors assemble the farmer*s products direct from the farm. Tank trucks, for example, go from farm to farm picking up milk by pumping i t d ir ec t from the cooler.

Sales through commission merchants in the terminal markets have su b stan tially d eclin ed . The sa le s through lo c a l middlemen are s t i l l important. Most of the grain is sold to local elevators and ware­ houses although some farmers sell directly to flour mills as well.

The changes in selling methods have enabled the farmers to spe­ cialize and give more attention to farming operations. In order to take advantage of the economies of large scale production and to u tili se their resources most efficiently the farmers have delegated almost all the marketing tasks to the marketing system. CHAPTER T i ll

DEVELOPMENT OP COOPERATIVE MARKETING ASSOCIATIONS

Cooperative associations have played a significant role in the marketing of farm products in the United States. Cooperative mar­ keting association is defined as *a voluntary business organization established by I to member patrons to market fam products collectively for their direct benefit.The ownership and control of the coop­ erative is in the hands of those who use its services. The main ob­ jective of the marketing cooperative is to serve for its members in the sale of their products at the highest possible price with minimum of costs. Cooperatives enable the individual farmers to secure the advantages of large-scale operation. Cooperative organizations may have access to managerial skills and also sufficient capital for re­ search and development. Thus the fanners can meet power with power without losing their status as individual operators.

Cooperatives t Before 1776

Some sort of cooperation among th® farmer© esisted even during the Colonial period. Earners helped each other in heavy task© lik©

1So H. Baklcen and M. A. Schaarse The Economies of Cooperative Market lag (le w Yorks McGraw-Hill Book Company, In c ., 193?)» ?° 3»

127 128 clearing land, erecting buildings, constructing roads, log-rolling bees and com husking. They also united together voluntarily for mutual protection against Indians and fire. The first and the oldest cooperative in the United S tates m s formed i n 1752 when Benjamin jfranklln organised th© Philadelphia Contributor ship fer th© Insurance of Houses from Loss by Hr®. However, no cooperative for marketing the farm products existed daring this period. Th® farmers were self- s u ffic ie n t and had l i t t l e surplus to s e l l . They had not y®t recog­ nised th© importance of cooperative technique in the sale of their p ro d u cts.

Cooperatives, 1776-I 86 Q

After Independence, with the increase in the productive capacity of farmers they felt the need to market their surplus products on favorable torao. At first, th© neighbors joined together informally to market their products in order to secure a better price and also to

Improve their production techniques. -They organized societies in th®

1JS011 s to import purebred cattle and later had comsmnity drives of livestock to th© eastern coastal cities. 2 As they realised the ad­ vantages of these informal cooperative efforts, more and more farmers participated in such marketing, buying and service activities. At­ tempts w©r© now made to put cooperation on formal basis and such

%. S. B. A. Earmor Goopsratlv© Service, Barmer Gooporativoo in th© United States. E.G.S. Bulletin 1 (Washington, D. C.t U. S. Government Printing Office, Deember, 1955)* P- 10* 129

1*118111688 organizations To eg an here and there. Early efforts at "as­ sociated or cooperative dairying” were attempted at Goshen, Con­ necticut, about 1810.3 The first cheese factory constructed and operated on a cooperative plan was initiated in 1 8 5 1 by Jesse Williams on h is farm n ear Bom©, Hew York.** In I 856 the first associated dairy

for the manufacture of batter was formed in Campbell Hall, Orange

County, Nea York. Wisconsin fanners organized the Dane County Earn­

er0 o Protective Union and erected a grain ©levator at Madison in 1857®

A cooperative association for hog auctionwas developed in I 860 by

farmers of Bureau County, Illinois.

This period was one of experimentation. The fanners were

searching for self-help methods and techniques to solve some o f th eir

economic problem s. The co o p erativ e movement had not y e t taken any « definite shape. Although, a few hundred local associations were

formed by I 860 , thooo wore usually incorporated.

Cooperatives, 1860-1910

After th© Civil War, th© American farmers had a long period ©f hard times as a result of a combination of circumstances. There was a decline in t h © general price 1 © v q 1 da© to monetary adjustments.

The railroad ©spans!on in th© west had opened up new farming lands and

3lbid.„ p. 11.

^Andrew W. McKay, '’Beginning with Ben Franklin,,s inU. S. D. A., Marketing, Yearbook of Agriculture, 195^» ££• c lt.. p. 2^3* 1 3 0 had resulted In a rapid expansion in agricultural production. She farmers were experiencing a depression period and they felt that the railroad charged undue freight rates on their goods. On the other hand, they were also unhappy with th® middlemen realizing that they were being cheated "by thes© ^parasitic middlemen.0

She associated dairies, initiated in the lSj^O's in New York, had spread to other states by 186*>. Shes® cooperative dairies resulted in th® improved and mor© uniform q u a lity and m . improved prie© for th© product. Shoo® benefits and also the savings in the c o s t.o f supplies encouraged the dairy farmers to organize themselves more and more in such associations. An organization, which later became th® American

Dairyman9® Association, was formed at a convention of representatives of the associated dairies in 1866.5 There were mor© than HOO cooper­ atives processing dairy products by 1867.

She f i r s t association to market fr u its and vegetables was formed a t Hammonton, Hew Jersey in ISGj, which in 18SU expanded to include cooperative purchasing ©f supplies as w e ll. The f ir s t law recognising the cooperative method o f buying and se llin g was passedin I 865 by the state of Michigan.

Sole of teango in the dovolopaQnt of cooperatives

It was in 1867 that th© first great rural organization, namely, th® Order ©f the Patrons o f Husbandry, more commonly known ao c}Grang©0

5lbid., p. 21*3 . 131 w&e formed. It engaged in th® cooperative marketing of grain, live­

stock, wool, tobacco, eotton and other commodities through its local units. A number of cooperative grain elevator companies were also

organised.

She various se llin g agencies o f th© ©rang© were a l l based ©a th© g en eral id e a th a t th e r e la tio n "between th® farm©re and the consumer o f

his products tad become too indirect by th® introduction of an un~

BGCQaQoEils? largo number o f middlemen. I t wasw ith this purpose ©f

"bringing producers and eonouoiGFo into th© most direct and friendly

relation to dispense with a surplus of middlemen that several coopera­

tive enterprises were organized through th© activities of Grange*

Moreover, there was a widespread dissatisfaction among farmers a©

a result of very high freight rates charged by the railroads. Cries

of monopoly and exploitation were heard throughout. She farmer®

ca lled for ©qua! ju s tic e to a l l and ©pposod th© g ran tin g o f pu blic

roads to railroads.

Sh© Granges locals w©r© organized throughout at a very rapid rat©.

In th© years mor© than 20,000 local Granges as w e ll a© 00a© 6 2$ state agency systems wer© established. In th© south, th© Granges

concentrated ©a marketing of cotton. Warehouses for receiving,

grading and financing cotton were leased In Alabama and M ississip p i.

Agencies for handling members1 cotton in large lots were established

la Georgia, Arkansas and Louisiana. By 1873-d ^0 cooperative elevator

^U. S. D. A. Farmer Cooperative Service, op. c it., p. 11. 1 3 2 companies were operating in Iowa. An ©sporting company for wheat was organized by California Grange in the 1870's. The moat important contribution of the Grange wae, however, the formulation of a set of roles f o r th e organization of cooperative store© in 1875° These rule© were based on loohdal© Principles. The

Boehdale system of cooperation requires distribution of net savings in proportion to patronage. The Grange demonstrated that this system was most promising on©. Th© praetie© o f making th© e&l©s at th© p rev a il­ ing retail prieoo in th© eom m xnlty oas olas introduced. This helped to avoid the intense opposition of local middlemen.

However, many cooperative enterprises started by Grange, sus­ tained heavy lo s s e s , and had to b© liq u id ated . The movement had based its programs on largely fallacious ideas about marketing and the factors responsible for unsatisfactory prices. The Grange had grown too fa c t and attem pted too such. Thuo0 th© ©rang© activities© de­ clined by 1876.

Parmer Alliance. This farm organization originated in Texas in

1875 ° ^to activities included marketing, purchasing supplies and price control. It started a number of cooperative stores and grain elevators. One of its most significant efforts was th© formation of the Florida Fruit Exchange. It attacked monopoly by railroads in the establishment of railroad rates or tariffs. Th© Interstate.Commere©

Act (1887) for regulating railroads was passed mainly as a result of th o ir vigorous eajspaiga. This organizationalso cam© to an ond ia the 1890 *s. 133 After I8600 th.® cooperative movement again started making steady

progress and by 1910 it had firmly established itself as a part of

economic system for serving farmers. By 1890, there were about 1,000

active cooperatives* Seventy-five per cent of thee© handled dairy

products? 10 per cent grain and over 10 per cent fruits and vege­

ta b le s .?

She coo perative e le v a to r movement made co nsiderable pro g ress

during th© n in e tie s, © specially from 1895 1900 . Sh© f i r s t 'farm­

e r s0 otato grain dealers association was organised in Illinois ©a

February 19, 1903- ^he cooperative elevator movement enjoyed a steady

growth since 1905 .

A number of organizations were formed to handle soft or decid­ uous fruits between 1870 and 1900 , but the first important cooperative

for such fruits was the California Fruit Exchange, established in

1901. 2k© Southern California Fruit Exchange? uao organised ia 1899 which became the California F ruit Growers' Exchange in I905 .

®ha Farmers' Union formed in Sesas in 1902 also emphasised co­

operative marketing and purchasing through its locals and also its

federated and centralised regional associations. It engaged in

storing and marketing of cotton in th© South and in th© organisation

of ©levators, creameries and livestock cooperatives in th© mid-west.

Although th© cooperative movement committed many m istakes during

this period, th© farmers learned much about business methods. They

?U. S. D. A., Farmer Cooperative Service, ©j>. c it., p. 13. 13^

"began to realize as never "before that combination could be met suc­

cessfully only by combination.

Cooperatives, I 9 IQ-193 O

As a result of experiences gained by th© farmers in cooperation

so far there was a rapid increase in the organization of business co­ operatives during this period. Uearly 7 .0 0 0 cooperatives for mar­ keting faro products and about 1 , 3®® a ssociation s for purchasing sup­ p lies w©r© formed between 1910 and 1920 .^

During the first decade of this period, stirring changes took place in U. S. agriculture. She gasoline tractors and other improved farm implements were being used extensively on farms. This along with

tremendous demand for farm products during World War I led to an

eventual increase in agricultural production. After th© war was over,

the demand for farm product a declined. She prices of farm products began falling rapidly in 1920 which led many cooperatives to b® o rg an !zed.

As a result of th© activities of th© Ehrmor©0 Union and bhs Asa©3p-

Icaa Society of Squity, many cooperatives were organized throughout

the country for marketing grain, dairy products, livestock and f r u i ts and vegetab les. She creation o f a Commission on Country L ife in l$06

encouraged cooperatives. !Kig establishment of the Office of Markets ia 1913 with a project ia cooperative marketing and purchasing also

®U. S. D. A ., M arketing, op. e l t . , p . 2^5* 135 contributed greatly to th® rapid progress of cooperatives during this period. The organisation of American farm Bureau federation in 1919

influenced and stimulated business cooperatives. It set up special

committees to prepare plans for establishing national marketing co­

operatives in the f ie ld s of livestock, g ra in , fruits and vegetables

and eggs. The National Livestock Producer's Association was organised

in 1 9 2 1 .

m r a 17

NUMBER, MMBEBSHIP, AND BUSINESS OP FARMERS' MARKETING COOPERATIVES, UNITED STATES, 1913-1930

Estimated E stim ated Cooperatives Membership Business Tear L iste d ( 1 ,000) ($1 ,0 0 0 ,000)

1913 2,9gg N.A. 30U

1915 5*1^ 592 621* 1921 6 .U76 N.A. 1,19S

1925-26 9,586 2, 1*53 2 ,2 6 5

1929-30 1 0 , 51*6 2 ,6 3 0 2 ,3 1 0

Sources U. S. D. A., Parmer Cooperative Service, General Report 112, Statistics of farmers Cooperatives,, M 6O-6 1 (Washington, D. C.s TJ. S. Government P rinting O ffice, July, 1963 ) •

The number of the marketing cooperatives increased from 2,988 in

1913 to 10,5^6 in I 929 - 3O® During the same period th© business done

by these cooperatives Increased from $30** million la 1913 to $2 .3

billion in 1929 - 3 0 . 1 3 6

Commodity m arketing. E arly in 1920 farm ers wore given a n m slogan — Bordarly commodity marketing." Up to this time the local associations had usually received primary attention in building farm­ er cooperatives. In April 1920, Aarron Sapiro, a California lawyer, proposed that regional associations he createdto handle the entire output of various crops in important producing areas, This implied that through cooperative control of a large percentage of a crop, the farmers would get monopoly prices. Many otabo ami regional associ­ ations for marketing cotton, tobacco, wheat, milk, melons, alfalfa, potatoes, peanuts, rice and poultry were formed. Earners signed long­ term ^ironclad11 contracts providing fo r delivery of th e ir crops.

There wer© l 6 large, centrally controlled cooperatives with approxi­ m ately 50*000 members, at th® end o f 1920. By 1926 , th® number in-, creased to with mor© than 879,000 members.

Moot o f th© commodity marketing a sso cia tio n s, however, soon realised that it was not possible to obtain control of a percentage of any crop sufficient to male© an attempt to f i x prices. It was ale© evident that cooperation was not the eur© for all th© ills of th© general economic conditions. Moreover, th© ^heory o f ^monopoly and prosper!ty,J did not lead to carefu l and economical management.

Legislative action. Th© American Institute o f Cooperation was organised in 1925 at Washington, D. 0., as an educational body. The

Gapper-Folstoad Act, passed ia 1922, specifically sanctioned farmers cooperatives that met certain requirements. In 1926 , th© Cooperative 137 Marketing Act was passed "by Congress. Shis provided for a division of cooperative marketing in the U. S. Department of Agriculture.

She Agricultural Marketing Act established the federal farm Board in 1929 . She Board assisted in the organisation of several large national associations. I t also financed the cooperatives and m s able to save many cooperatives from failure during the great business de­ pression of 1929 - 3 9 * 3?his gave tesporary stimulus to cooperative organisation and new local0 regional and national organisations ap­ peared very rapidly.

Cooperatives, 193 O-I95 O

Shis period may be characterized as the one emphasizing sound business principles and the modernization of cooperatives.

5he growth of marketing cooperatives and their volume of business is show ia Table IS.

Sh© number o f marketing associations declined steadily from

10D362 In I93 O-3I to 6,922 in 19^3“5®- However, there was a rapid growth in the volume o f business and the membership o f these coopera­ tives. Shis period ms marked by consolidation, integration, diver­ sification and a shift from simple to complex associations and to broader service. There was a rapid increase in the number of feder­ ations and centralized organizations as well as bargaining associ­ ations. Mor© attention than ever before was devoted to sound business p rin cip les and membership p a rticip a tio n . 133

TABLE 18

HUMBEE, MEMBERSHIP, AND BUSINESS OP PAHMEBS* MABK3DIIHO COOPERATIVES, UNITES) STATES, 1930-1950

Estimated Estimated Cooperatives Membership Busin© so Year______Lie ted ______(1,000)______($1,000,000)

1930-31 10,362 2,608 2,185

193^35 8, 79** 2,1*90 1 , 31*3 1935-36 8,388 2,710 1,586

1939- 1*0 8,051 2,300 1,729 191*1-1*2 7, 821* 2, 1*30 - 2.360

1944-45 7.1*00 2,895 M 35 191*6-1*7 7.268 3.378 6,005

1949-50 6,922 l*.075 7.083

Source: U. S. D. A ., Parmer Cooperative Service, Statistics of Earners Cooperatives, 1 9 6 0 -6 1 (Washington, D. C.: U. S. Gov­ ernment Printing Office, Ju ly , 1963 ) .

The farm Credit Administration established a system of banks for cooperatives to make facility, • operating, and commodity loanso Theo© banks provided dependable and economic lending services and assisted many cooperative© to get on a sounder financial basis. They did much to promote the use o f complete and accurate records and advised many cooperatives on business and financial practices.

Th© 0 QG& for research, sorvieo, and educational assistance to farmer cooperatives «as also recognized. The Cooperative Besearch 1 3 9 and Service Division of Farm Credit Administration and later the

Farmer Cooperative Service placed emphasis on problems o f management, organization, policies, financing, merchandising, costs, efficiency and membership r e la tio n s.

Farmer cooperatives also diversified into more marketing opera­ tions during this period. Cold storage and locker plant services were added. The fruit and vegetable, dairy, and poultry cooperatives en­ gaged much more in pros easing activities. Sis meat packing organisa­ tio n s x?©ro launched from 1930 to 193®. She World War I I , however, greatly stimulated the trend toward more cooperative processing of farm products. She processing of dried milk, dehydration of fruits and vegetables increased significantly. Many rice cooperatives in­ creased their artificial drying and storage facilities and also acquiring m illin g f a c i l i t i e s . Canning o f fr u its and vegetables by cooperatives continued to grow. Ereesing of such products was also done by cooperatives. Market progress In prepackaging and merchandis­ ing was made.

During this period much more emphasis was placed on the adoption of modern methods. Associations shipping livestock by rail almost disappeared as roads improved and trucks became common. Much progress was also mad© in the modernisation of the facilities and equipment ©f the cooperatives. Th© cooperatives built new warehouses and offices to better handle an Increasing volume of business. They installed the latest design in grain storage ©levators. Old transportation equip­ ment was replaced by modem types. In e ffic ie n t small cooperatives IbO

consolidated or merged to get the advantages of larger volume, modern

equipment and more capable management.

Cooperatives, Since 1950

The trend among farmers to work together in larger areas has

continued since 1950• However, there has been a decline in the number of the cooperatives and their membership. The volume of business has

Increased significantly. There has been increased financial stability

and much la rg e r farmer investment.

The development of marketing cooperatives, their membership and a the volume of business are shown in Table 1 9 .

TABLE 19

HUMBER, MEMBERSHIP, AND BUSEHISS OF FARMERS® MARKETING OOOPEHATITES, UNITED STATES, I95 O-I96 O

Estimated Estimated Cooperatives Membership Business Year Listed (1,000)______($1,000,*000)

1951-52 6,59b 4,229 7,377 1954-55 6,330 ‘ b,2ib 7,425

1955-56 6,28b b,223 7,b95 1959-60 5,82s 3.622 9,330

Source: U. S. D. A., Farmer Cooperative Service, Statistics of Earmers Cooperatives, 1960-61 (Washington, D. C.s U. S. Gov­ ernment Printing Office, July, 1963) • l l j - l

Large modern plants have been built by many locals to serve a

county, Instead o f a sin g le community and to achieve m aterial eco­

nomies and greater efficiency of operation.

Many broad services have been added by these large-seal© coopera-

, tives that are national or almost national in scope. They have added

up-to-date machinery and equipment for processing and packaging. They

maintain extensive sales organizations, conduct nationwide advertising

and oaloo promotion campaigns. Sho fruit ©ad vegetable associations

hav© added many marketing services for their members including grading,

packing, canning, freezing, drying fruits and vegetables and concen­

trating frozen juices. The fruit and vegetable associations united to

set up American National Stoods, Inc., in January, 195 ^» The coopera­

tiv e s have also p articip ated in the research programs for the develop­

ment o f new products and to discover the new u ses for them. Th©

bargaining associations have increased in number since 1950 aad i t

is believed that growing emphasis w ill be placed on bargaining co­

operatives in the future. This w ill, however, depend upon th© extent

to which farmers generally and clearly appreciate the nature of th©

marketing problems confronting them.

Sh© experience with cooperative marketing in th© United States

shows that cooperative marketing should be looked upon as a business,

not a religion. Cooperation for the sal© of cooperation is not

likely to succeed. "She cooperatives which wore organised in a

highly emotional way, with high-powered propaganda, spectacular mem­

bership ’drives,0 appeals to farmers8 prejudice against middlemen or 11*2 other features of marketing, and windy promisee of great benefits, have almost always come to grief. "9 Where the cooperatives were ef­ ficiently managed on sound business principles, the cooperatives were successful.

Many large-scale farmer cooperatives are among the leading mer­ chandising organisations of the country with widely known brand names.

SunKiet, Land O'Lakes, Diamond, Eatmor, Sonmaid, Dairygold, and Blue

Goose are some o f the examples.

9fhomsen, op. c it., p. 1*1(0. CHAPTER IX

BBVEL0H4MT 07 WHOLESALERS AHD OTHER MIDDLE® 07 WHOLESALE SHADE

With the development of the trade In farm products, a number of middlemen have evolve! from time to time. These middlemen - whole­ salers , eosEiisBion noreM.antOj. brokers and ©there - form th© eoanoeting link between country shippers and retailers or between country shippers and food processors. They have played a very significant role in the development of agricultural marketing. They facilitate the smooth movement of goods through the marketing channel and perform many marketing functions. Their major functions are assembling, ware­ housing, and grading of farm products. They take orders and make de­ liveries and faralok their customers with such services as merchan­ dising aids, credit and others.

She middlemen ©f w holesale trad© „may b© o f two kindss th© mer­ chant middlemen such as wholesalers and jobbers receiv e th© goods and buy them outright. They take t i t l e to, own th© goods, and assume th® risk @f profit or loss. The @©eond group consists of agent middlemen such a s commission merchants and broker©. They merely act as, th® agent of the seller and do now own the goods.

Eh© development ©f th© wholesalers and other major middlemen of th© w holesale trad© is discussed in this chapter.

Ik 3 Middlemen of Wholesale Trade, Before 177&

The first wholesalers in the Colonial America were the importers

located in the port towns like Boston and Hew York. They dealt in

manufactured goods which they imported from Europe, China and India.

The country merchants who assembled farm products and other country goods, made pack trains two or three times a year to the seaboard

towns. They delivered these goods to th ese importers in exchange of oasmfaetered goodo.

Middlemen of Wholesale Trade, 1776-12>6o

As th© population pushed westward to the open plains and com- mere© followed, the consumers and the producers were no longer located near each other. Local markets had developed in the small country

towns tther© th© farmers ®r local shipp©rs brought their goods for

sale. This necessitated th© existence of some agency who could buy

th© products in large quantities. Thus, originated th© wholesalers who had enough funds to assemble th© products from lo c a l shippers and

the producers, store them for some time and grant credit to their

elients. It is reported that th© first wholesale house for domestic merchandise, distinct from an importing house, was established in

ISOS. 1 Ihrther wholesale activity was notsd after th© War of 1S12,

% athas Ousaiaga, ^Wholesalers Modernise and Merchandise, w Paul Sayors ( ©d.) , in Shod Marketing (lew Yorks McGraw-Hill Book Co. „ 1950), p. 11^. 1*»5 b u t t h is movement d id not become marked u n t i l a f t e r the C iv il War.

However, V I 85 O, as the railroad building made some progress, it was evident that wholesale tirade in farm products was going to he an im­ portant activity. The ship chandlers, pro vision era of wagon trains and railroads were th® first to turn to wholesale grocery operations.

She Beid Murdoch Division of Consolidated Grocers Corporation began in

1853 at Dubuque, Iowa,2 as provision©? of wagon trains westward bound frem th© M ississippi. (The firm rawed to Chicago in ISSgo)

Simultaneously, in the South, cotton economy was developing fa st after the invention of the cotton gin in 1793 *7 Eli Whitney, a young graduate of Tale University. Cotton planting spread rapidly. She cotton wholesalers at th© seaboard towns developed, who assembled and bought cotton from th® planters. As the production increased and co tto n plantations spread more and more, there was need for som© go- between the local dealers or planters and the wholesalers. Thes© conditions favored th® development of th e factor. Th® factors as­ sembled aid concentrated cotton and infomed the planters as to th© nature of the market. They acted as commission agents for thoir c lie n ts .

Middlemen o f Wholesale Trade, IS6O-I9 IO

After th® Civil War, rapid railroad development and increasing urbanisation ©f people led to the development of th© central markets

2 Ibid.. p . 1 1 ^. 146 in th© large cities along the railroad routes. She railroad made it possible for the fanners and local dealers to haul large loads to long distances, cheaper and faster. Wholesale activity was now neces­ sary and many wholesalers were established in interior towns like

Cincinnati, St. Louis and Chicago. Then many country general stores and other merchants turned to the more profitable field of grocery wholesaling and wholesalers spread in the smaller interior towns as w e ll.

At fir at, th© wholesalers used to send traveling salesmen to collect accounts, gather credit information, and later to solicit orders for goods. These traveling agents went into thecountry towns fo r the purpose of buying certain products including ©ggs, poultry, and butter for city shipment. They also received orders for certain goods such a s fr u its to b© ©hipped to th© lo c a lity from th© primary market. Traveling salesmen gained in importance and became numerous with th© development of railroad network during th© ISJO8 s and th©

1SSOB0.

Simultaneously, another c la ss o f middlemen - the commission man - developed immediately after th® Civil War. Th© central markets w©r© often located at far distances from th© local markets. It wao not always possible for th© producer or the lo c a l dealer to accompany hie goods to the central markets. This gave rise to the need of a class of dealers ©Isswhore who could receive shipments ©f farm products from th© local shippers and sell these goods ©a his behalf, leeognislag the opportunity afforded by this need, certain men established 14-7 themselves at the more important centers of trade for the purpose of handling farm products. Thus originated the commission man. These middleman rendered the ueefhl service of facilitating the transfer of farm products. He did th® physical handling of the goods, arranged for the terns of sale* collected, deducted hie fee, and remitted the balance to hie principal. They did not, however, take the risk of buying the products outright.

Although some brokers e x iste d for cotton marketing, th© f ir s t food broker cam© into existence “shortly after th© Civil War, when the new canning Industry then began to expand to an ever increasing market in th® United States.He functioned as a salesman for canners and specialized in selling the products of these canneries in widely scattered markets throughout the country. He did not own or physi­ cally hancO.© th© products. Th© first brokers war© located in k©y markets. They sold the goods on a eofiiaission basis. Th© brokerage charges were either a modest percentage of th© selling price or a fixed remuneration per Gao©. Th® broker system proved advantageous to food processors as it saved their time and reduced selling costs to a definite percentage of ©ales. Shortly after, th© broker began handling other products a® well and by th© end of th© 19 th century, he became an important middleman in th© marketing o f farm products.

Urban Shirk, “Evolution of the Shod Broker, 13 Sb©& Marketing, ©p. eit., p. 131. XUS

Middlemen of Wholesale Trade, 1910-1930

She wholesalers and Jobbers had,become the most important middle­ men in the marketing of farm products by 1910. They exercised great control on the market and had considerable market power. They per­ formed almost all the marketing functions. They financed the local dealers, graded the farm products and stored them for speculative purposes.

However, after World War 1, with.the rioo of national adver­ tising system, th® food manufacturers began bypassing the wholesalers and selling directly to retailers. Discovering the value of publi­ cised brands and packages, the manufacturers were promoting goods under their own brands in competition with wholesalers who had their own brands. The companies marketing cereals, crackers and canned goods began to reach all housewives.

At th® same time, the rapid growth of retail chains after 1910 contributed to the bypassing of the wholesalers. The big chains bought directly from th© manufacturers and did their own wholesaling.

Thus, a trend toward mor© close integration of wholesaling and re­ tailing begana f te r World War I. furthermore, several grocery re­ tailers cooperated to operate their own wholesale houses, in order to meet the competition from coxporate chains. Th© development of corporate and cooperative chains threatened th® existence'©£ th© in ­ dependent wholesalers. Several wholesalers, therefore, organised voluntary chains. They sponsored groups of retailers who agreed to buy from them. Th® wholesalers did advertising and other merchandising activities for the member retailers. There were several voluntary and cooperative chains by the late 1920s s. Some of the voluntary groups operated many warehouses and often had their own brands on some goods, particularly on canned fruits and vegetables, and oof foe.

Another development which took place in wholesaling during th©

1 920 's was the rapid growth of cash-and-carry wholesalers and cash-

and-carry department of wholesalers. These x-jct© strongest in that

line where they operated as specialty distributors. The cash-and-

carry operations resulted in lowering the costs as they did not need any salesmen, any advertising costs and any other service costs.

The development o f th© motor trucks and improved roads encouraged

direct method of marketing. It was now possible for the local agen­

cies including farmer, private companies, country merchants, o r co-

©psrativo associations to mak© direct shipments to th© food manu­

facturers or the retail chain stores. They could bypass th e com­ mission merchant as they could non mak© outright sa le s. The develop­ ment and use of standard grades and the improvements in communication

and dissemination of market information had also reduced the need for

commission agents. Shis forced the commission man to enter tho

jobbing business and do his buying outright in order to get th© business ©ad remain in trade. As jobbers they had themselves to ac­

count to rather than serve as agents of distant sellers. They bought

la less-than-carlot quantities and, in turn, sold to th© retailors. 1 5 0

nevertheless, commission men were s till important middlemen in the

marketing of.certain farm products, like livestock, although their

relative importance was declining. However, the services of food "broker expanded into the* selling of

many farm products as the trend toward more processing of food in­

creased after World War I. He begqn to serve in a marketing center as

a local and independent salesman for the packers, processors, and

manufacturers. By 1930 ® the "brokers were operating in ©very m arketing

center, Thsy broadened their field and acted as agents for both th©

buyer and the seller. They worked as agents for producers and country

shippers of farm products and also agents of central market whole­

salers and th® food mauufheturers. ' a

Middlemen of Wholesale Trade, 1930-195^

Ther© was a continued trend toward more direct marketing ©ad th© » bypassing of the traditional cen tral markets. There was a rap id im­

provement in truck^ transportation, grading and standardization of th©

farm products and th© dissemination of th® market information, large

seal© retail chains and supermarkets t?@r© buying goods directly. Shoy

* did their own wholesaling function. This caused th© increasing inte­

gration of production, wholesaling and retailing functions.

To meet the challenge from big retailers, the wholesalers adopted

a number of practices to reduce their costs of operation and thereby

stay in business. 151 She number of cash-and-carry wholesalers Increased significantly during this period. In 19*18, there were U0 5 cash-and-carry wholesale

depots. These were usually operated in conjunction with other whole­

sale establishments. They usually catered to the small retailers.

Many wholesalers specialized in the sale of foods and other related products to hotels, restaurants, public institutions, etc.

Many wholesalers concentrated their efforts in modernizing their

facilities and thereby reducing their operating costs. Th©y ala©

broadened the lines carried so that thsy could fill most o f th© needs

of their retail customers.

The number of merchant wholesale establishments increased from

i& 1 9 to 33*6?S in I 9 U8 (Table 20). Th© number of merchant

wholesalers handling grocery and related products increased from

2h , 196 in 1929 to 3 0 * 88 U in 19^8 - an increase of more than 25 p er

cent during this period. low over, th© msbor of the assemblors of

the farm products declined to almost half. With improved highways

and increasing us© of motor trades, farmers no longer needed an as­

sembling establishment within a few miles of their farms. Moreover,

it was now possible for the assemblers of fam products to operate

over a wide area. Thss© factors resulted in the redu ction o f th©

number of assembling establishments.

Table 20 also shows that the sales per establishment did increase

for a ll th© classes of wholesale establishments. The sal©s p©r

establishment for merchant wholesalers increased from about SABLE 20 WHOLESALE AGEHCIIS IH SHE UHITED STATES, I 929 AED I 9US

1929 1948 Type o f ^ o r a tio n Sales p er S ales p e r end Humber o f Sales Establishment Humber o f Sales Establishment Kind of Easiness Establishments $1,000 $1,000 Establishments $1,000 $1,000 Assemblers of fans Products 31,810 4,083,744 128.4 16,7^7 9 ,920,288 591.0

Merchant Ohoiesslers 27,596 12, 127,557 . ^39.5 33,478 25, 761,672 769.5 Grocery and Belated Product Wholesalers 24,196 8,448,101 3lt9.2 30,884 18,857,679 610.6 Farm Products {vm material) merchants 3,1400 3.679 ^ 5 6 1,082.2 2,594 6,903.993 2661.5 Manufacturers5 Sales Branch O ffices H.A. H.A. H.A. 4,327 7,682,210 1775.4 Merchandising Agents and Brokers 6,535 H.A. H.A. 8,070 19.005,375 2355.0 Groceries and Belated Products 4,017 H.A. H.A. 4,326 7,265,473 1679.5 Farm Products (rat? m aterials) 2,518 H.A. H.A. 3 J 4 4 11,369,545 3135.7

T otal — — 62,662 62,369,545 995.3

Sours©; Compiled from Census of Business. 1948 (Departmmt of C©Ea@rce, Bureau of the Census, Washington, D. C. 1 U. S. Government Printing Office). 153 thousand in 1J29 to about $770 thousand in 1948 - an increase of mor®

than 60 per cent*

She commission merchants also declined rapidly in their impor­

tance daring this period* They if or© being bypassed by the local

dealers and the producers who new engaged more in direct sales than

ever before.

She food broker, however, occupied a very important place in the marketing ©f ta m products during this ported* Sh© growing popularity

o f processed and paekagod food, and th© increase in th©number o f grocery products from several hundreds into thousand items, gave in­

creasing impetus to the growth of brokers. As a result of his per­

sonal contacts with local buyers he was able to know what the market

wanted. He became a highly specialized local salesman and maintained

a number of highly trained salesmen and a clerical staff to take car©

o f bo©kks©piag and correspondence.

Middlemen o f W holesale ®rad©p Since I95O

lia e o 195^0 wholesaling io becoming more closely integrated with

food retailing. Wholesalers ^hav© been adapting to th© changing con­

ditions vosy well, She wholesale' establishments have attained large

sis© to serve the larger r e t a il o u tle ts. They have ©spanded in to non­

food items as well to meet the needs of th© retailers who now handle

increasing numbers o f non-food itc a o .

Casifr-aad-carry, oQlf-oerviee wholesaling hao increased rapidly

sine© 195^* Almost all affiliated warehouses now operate on cash-and- 15^ carry basis. Host of the general-line grocery wholesalers hare tcoded to add fresh produce departments, along with other Hoes In order to meet the complete needs of the retail grocery trade.

Retailer-owned wholesalers and th® voluntary wholesalers have gained in importance and now dominate the wholesaling field. She voluntary wholesalers render a number of services to their members in addition to supplying the goods. They supervise and render advice in otoro layout, ©poratioao and oorehaa&ioiEg . Both classeso f whole­ s a le r s Khav© mad© largo independent retailors fully eompotitiv© with chains through highly efficient plants.”1*

Food wholesalers no longer operate as agencies with independent merchandising policies. Th© affiliated wholesale groups ar© moving from their own label© and long-margin items toward those yielding h igh est profit to retailers. In a cense, wholesaling is becoming an integrated department of retailers rather than a sdSLf-contained sot of independent, profit-seeking units.5 o S t i s not to bo concluded,, bow over, that th© wholesale trade is disappearing. What io true, of eours©0 is th© fact that wholesalers ar© now adapting mar© and more to th© changing conditions. Th© total number wholesalers of a ll kinds in th© United States according t© the

Census o f Business data was 6l„02y in 195^® a s compared to 59*013 i s

^BGergo L. EJohrcta, t3She Changing E\aod Market S tru ctu re,i! Jo u rn al o f Bam E>6em©f3ieon V ol. r a s , T$o. 2 (Elay, 195?) * P° 351-

5r ij id .. p . 351- EABLB 21 wbdussaus agencies nr she otism) states, 1954 asid 1958

1954 ' 1958 Type of Operation Sales per Sales per and lumber of Sales Establishment limbo? of Sales Establishment Kind of Easiness Establishments $1,000 $1,000 Establishments $1,000 $1,000 Assemblers of Farm Pro duets 13>Z55 9 ,050,816 6S2.g 14,036 8,998,640 638.4 Merchant Wholesalers 33.648 31, 289,765 930.0 34,417 34.794,717 1019.7 Grocery and Belated Product Wholesalers 29,795 22,057,824 740.3 30,222 25, 200,909 833.9 Farm Produets (raa materials) merchants 3.653 9,231,941 2396.O 4,195 9,593,808 2287.0 Manufacturers8 Sales Branch Offices 4,488 11,746,914 2617.4 4,190 12, 593,431 3005.6 Merchandising Agents andBrokers 7,622 21, 224,259 2784.6 8,324 23. 616,309 2837.7 Groceries and Belated Product Wholesalers 4,056 9.728,538 2398.6 4,559 10,800,646 2369.0 Farm Products (m ? materials) 3,566 11,495,721 3223.7 3J 65 12, 815,663 3403.9 T otal 59,013 73.311,754 1242.3 61,027 80,003,097 1310.9

Sources Compiled from Census of Business, 1958. Wholesale Trade (U. S. Department of Commerce, Bureau ©f the Census, BaoMngtea, D. G. % 0. S. Government Printing Office). 156

1951* and 62,662 In I 9 I&. The average sales per establishment have,

however, shown a s ig n ific a n t in cre ase to $ 1 ,3 1 1 thousand in 195 ® a®

compared to $993 thousand in 19*18 and $1,2*12 thousand i n 195*1* This

proves the contention that wholesale establishments in th© United

, States are growing larger.

Merchant wholesalers increased both in number and in size. The

average sales Increased from $770 thousand in 19*18 to $930 thousand in

195^ ©n& $10019 thousand in 1958= 2ho moot significant ehango ia

wholesale establishments has been a rapid decline in th© number of

establishments operated by the assaabiers. Their sales, however, have

shown an increase during this period. The decrease in the number of

assembling establishments has been the result of changing marketing

practices and efforts to reduce costs by economies of scale and tech­

nological improvements. There has been a growing trend toward direct

hauling from farms to processing plants and retailers, thereby

minimising the importance of assemblers.

Th© commission merchants are being bypassed aor© and more. They

have, however, increasingly engaged ia Jobbing activity. They now

buy on their own account as well. They are still very important ia

marketing of certain products as livestock and also ia certain big

c i t i e s lik e Hew York.

Th© modem food broker has become an in teg ra l part ©f th© g i­

gantic fm& ea& gr@<8ory industry in the United StatGa. Ho confines

his ©ales activities to a definite territory, the trading area 157 surrounding the key d ty vhere he maintains hie of flee. Vlthln hie territory, he le the sole sales agency of his principal who uses his sales sendee. Besides facilitating sale of the products, he now renders many other services as well for his clients.

r CHAPTER X

BBTOOPMMT 07 RETAILIHG IESTITUTIOHS

Retailing denotes selling directly to consumers. A retail es­ tablishment is defined as Na single or separate place of business, principally engaged in the performance of marketing functions, wherein or out of which sales are mado primarily to ultimate consumers.0^ Retailers are th® merchant middlemen engaged primarily in selling directly to ultimate consumers.

Retailing institutions occupy a very important and strategic position in the present marketing system in the United States, Shod retailing is one of the biggest businesses in the United States.

Retail food ©tor© sales, according t© th© classification of th© Bu­ reau of th© Census ©xesedod ^0 billion dollars in I95S0 It exceeded th© sales of any other category of retail stores.

Th© development o f th© p re s e n t day retailing institutions has been a result of the process of ©volution. Many factors inside and outside of th© economic system seem to have caused these changes. We discuss in this chapter, th© development of various retailing insti­ tutions sine® Colonial times.

1®. Wo Beckman ©ad If. R. Davidson, Marketing (3fc Yorks The Ronald Press Company, 1962), p. 13^.

158 159

H®tailing InstitutIons, Before 177^

The pioneer s e t t l e r ® were mainly self-sufficient. Most of the population lived on fauna growing almost a ll the products they needed

for ©oaOTsptlon. Whatever surplus they had was "bartered with neigh­ bors for other goods. However, as the population Increased as a re­

sult of immigration and "births, certain retailing institutions began

to emerge.

Sgad&ag posts. Probably the first retelling institutions. do velcped in the Colonial America were the trading posts. Thee© were

originally established to exchange furs for manufactured goods and were patronised by pioneer trappers. A trading post was operated in

Albany as early as l621.2 Farmers brought their products for sale at

these posts. Products came from farms five to ten miles away as the

roado wore v©ry poor.

Peddlers. Eh© t3Yaak©et3 peddler or th© itinerant trader appeared

quits ©arly In lew England. Eh© pioneer settlers moved westward and

th© early settlers established their homesteads. Eh© population wo©

extremely scattered and th© transportation was very difficult. Many pioneer families wore q u its c u t-o ff from th® towns.

"EJa&or those eireumstaaeGQ,, E3th© peddler by going from house to

house cad by covering a relatively large territory wao abl© to operate

%a. A. Sovaae nParaero Ao Ehelr Own SalGomoa,,0 Marketing,, Year- book o f Agriculture, 195^ (Washingtea, D. C.s U. S. Governmoat Printing Office, 195*0» P- 28. 3.60 choreas more settled types of mercantile activity woulA have failed,

Th.® early peddlers traveled on foot with packs on their ’backs. Grad­ u a lly they acquired the horses and moved on'horseback. The Tanka® peddler carried cutlery and tin ware from New England and other pro- ducing e@nb©re to th© Ohio falley, t© th© west. H© had Imagination and knew what his easterners wanted. He performed valuable service of making products available to people who had something to sell or trade.

Sotaillng Institutions, 17?S“1S€0

As th® population spread westward, th© peddler became a more important retailer. When th© roads were improved, he acquired wagons as th© means of Ms transportation. Many small producer® took up peddling jobs to sell their products directly to consumers. However, with increased population and improved transportation other retailing institutions caorgGd by th© end of th© ISbh century.

Public market®. As ©mall towns developed, the farmers from th© surrounding ©euabry brought their products like fruits, vegetables, poultry and dairy products for sale to the town people, These towns soon assigned some public places for the assembly of the country producer® and th© buyers. These public market© became popular and were held two or three days a week. "By th© opening of th© 19th e©atusy, ©very tom of any importance had on© or mor© public markets aad a.set ©f ordinances which provided for bhoir administration and

^hgais S. Atherton, The Southern Country Store, Ig00-is60 (Baton Bouget Louisiana Stat© University Prose, 19%). regulations.”^ These markets were administered by Ha clerk or maxk@t master appointed by the mayor, city council or both. ”5 However, with the development of country general stores and the increase in the size of cities, the importance of public markets had begun to decline in some of th© larger cities. Passing of certain ordinances by city councils also injured th© business of those who remained in public m arkets.

Sha ggaoral store. Th© development of th© general otore was th© moat important advance in retailing during this period. She general store replaced the peddler and the public market as the chief re­

tailing institution. '’In the opening years of th© 19 th century, th© general store was th© typical retail store in th© United States.

Many of these stores were owned by the former peddlers. Some of these were owned by farmers who first started a grist mill and soon entered in general trade bringing in goods the neighbors wanted.

The general store performed many functions which th© trade posts, peddlers, and public markets could not render. As th© name implies, it was the soure© of supply for all the wants of its customers. It carried cloth, hardware, liquor, patent medicines, and dry groceries

such as tea, coffee, sugar, and spices. Sh© farmers oaefcaaged th©Is?. products for such goods. In turn, the merchant used to soil those

^Irod M. Jones, of th© Unitefi. EtatQfL\_lS{lCHlSSo (Urhe&ao ®ho W aivers! ty ©f I l li n o i s P roas, 1§)3 ?K p . 5 9 . 5 ib id . o „ till 1 6 2 farm products to the dealers in cities. He made tedious and often dangerous journeys to visit big city wholesalers about twice a year to replenish Ms stock. She general store sold for cash, barter, or credit, often time long term - up to a year5 0 duration. ■ 3 She general store mad© available the year around supply of good© which the people in the community wanted. However, the sales volume of general store was small and the margins were Mgh - JO to 40 p er cent ®r«mor@. As a result, there was not any specialisation. Sho general store mad© its purchases in email quantities resulting ia Mgh costs for Mmself and consequently high prices for consumers.

The general merchant had personal contact with Ms customers and £ the village storekeeping carried a prestige almost like that of a profession. The general store was not only a business place but also served as a meeting place and a center of social life for the members of tho community. The people used to assemble there in the evenings and discussed their "social and political problems.

Th© specialty store. The economic development of th© country, ra p id ly ©Jipanding p opu lation, g re a tly in creased th© demand fo r v a rie ty in each line of merchandise. Th© general store could not meet M o growing demand. As a result, the specialty store which handled an extremely limited variety of goods, eg®© into ©Mstance. They became popular with public and by 1S60, many specialty stores had established a reputation. Retailing Institutions, 1860-1910

The general store and public markets continued to serve the con­ sumers. However, their relative importance was declining as a result of the increasing popularity of specially stores. Because th© spe­ cialty stores specialised in a limited variety of goods, they were able to offer a greater variety than the general stores. The number and sal© of specialty stores increased rapidly. Grocery stores, for osEffi^lo, t©@k over Each of th© trad© in dry groceries. Stores dealing only in meat, dry goods, tobacco, baked goods, dairy products, and others were established. These stores involved personal clerk service and customer credit. They operated at lower costs than the general stores. These stores could make purchases in larger quantities and sell more advantageously as there were not many lines to give at­

tention to.

Department stores. The success of specialty stores encouraged them to expand, further. Many of them added other merchandise lines to enlarge th© scale of their business. They began to operate a number of separate shops under the same ownership in the same estab­ lishment. Thus, originated the department stores.

Th© growth of urban population and improved urban transportation after the Civil War contributed greatly to the development of such stores. Th© consumers could v isit the downtown areas with conven­ iens© and sake moot of their purchases. Thaao stores handled mostly non-agricultural products like women9® and children 90 ready-to-wear, dry goods* homo furnishings, etc. Some of them, however* also main­

tained grocery departments. These stores were well situated for

handling poultry, cheese, hutter, citrus, apples, potatoes, and other

vegetables of staple demand and not too perishable a character, Th©s©

stores could buy large quantities and sell on a narrow margin. But,

they were not much success in the field of marketing farm products,

and slowly gave way to other retailing institutions.

PGvelcpaeat ©f chain stores. She origin of chain stores in the

United States dates back to IS 58 when Georg© S1. Gilman and Georg©

Huntington Hartford opened a small store on Yessey Street, Hew York.

®h©y began to import tea direct from China and Japan and to sell it

at much lower prices than that charged by cont@nporary merchant©.

She venture proved so successful that they opened another store a

year later. By 1S650 they w©r© operating 25 stores and had assumed

the name, of Great American Tea Company. t'Joll csotaMiohoa in business,

: they decided to add a line of groceries as well. In 16&9, th e name « Great Atlantic and Pacific Tea Company tjas adopted.

I t was not until 1SJ2, however, that another chain was organised.

Jones B rothers Sea Company, l a t e r to beeom© Grand Union Company, was

- opened in Brooklyn. In 1SS2, Bernard H. Kroger, a Cincinnati grocery

clerk opened the Great Western Sea Company, ©ad In 1902, it became the

K roger Grocery and Baking Company. She company had 36 stores la 1902.

Several other feed chains wore established before the end of the

19th century. It Is estimated that by I 9OO, 21 chains tier© operating 165

in the grocery business. The number increased to kk in 1905 mid to

62 in 1910 (Table 22).

TABLE 22

HUMBER OF GROCERY CHAUS , USX TED STATS®, 1272-1910

Tear Humber o f Chains Year Humber o f Chains

1@?2 1 1915 112 1080 1 1920 180 1890 6 1925 301

1900 21 1928 315

1905 kk 1929 693 1910 62

Source? U. S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1957 (Washington, D. C.: U. S. Government P rinting O ffice, i960) , p . 523.

The A & P experimented with a new merchandising idea on the sug­ gestion of John A. Hartford. They opened new types of stores called th e 11 economy s t o r e s ,” the forerunners o f cash-and-carry. The©© stores were small, low rent, and on® man affaire with modest fixtures. These were !S designed to sell groceries as cheap as possible by the simple device of selling on a cash-and-carry basis instead of making 1 6 6 deliveries and extending credit."7 The economy stores proved very successful and the decision was made to open them at rapid rate.

Other retailing institutions. Some other types of food retailing institutions which operated in Mg cities, were the wagon route sellers and push-cart operators. Wagon route sellers cam® into existence sometime in the last decade of the 19 th century. She products were delivered to the consumers' home by a man with a horse and wagon.

The products were m ostly eoffo©, te a , "baking powder, sp ic es and few packaged staple groceries. The push cart peddlers served the 1 m income areas of the Mg cities like Wew York and Chicago. They op­

erated at low cost and carried the products to consumers' homes.

Retailing Institutions, I 9 IO-I93 O

Chain stores. Chain stores had a phenomenal growth after I 91 H.

A & P opened its five hundredth store in 19X3 snd. "by 1919 b th e re w©r© over h,200. The peak was reached in I 93 O when the company had 15,737 0 s to re s . Other chains also showed a rapid growth in the number and sis® of

their stores. By 1929s the number of chains had increased to 693» operating 52b51^ stores ©11 over bh© country. The growth was phe­ nomenal in the decade of the 1 9 2 0 's . By 1929 b however, from the

Godfrey M. Lebhar, Chain Stores in America, 1859°1959 (Sew Yorks Chain Store Publishing Corporation, 1959 )9 28.

gIM d . . p . 2 9 . 1 6 ? standpoint of the number of stores, chains had reached an apparent

Saturation point. Share was also a tendency of vertical integration hy these chains. All of the large chains and many of the smaller ones now carried on their own wholesaling operations arl few of them want for processing food products for their own stores. According to th©

Census of Betail Distribution for 19«9» there were hSl.ggi total re* tail food stores in the United States. In that year 13 per cent of all retail food stores wear® chains and they sad© a third of th© total s a le s . Various factors had contributed toward the phenomenal development of chain organizations during the 1920 ’s. She urbanisation of popu­ lation was increasing at a rapid rat®. The number of people living in cities was about twice that at the beginning of the century. The consumers had become extremely price-conscious as a result of rapid increase in retail prices, which had doubled botwoen IJJlh and 1920 .

The retail chains war© usually able to sell at th© lower prices than independent stores, because their operating expenses were Xowor and they were purchasing supplies at favorable prices.

Development of self-service. Clarence Saunders of Memphis„

SeaaoaoGQj, was probably th© first person whs invented the revolution­ ary idea of self-s©rvic© in food retailing. He opened his first

Piggly^Wiggly store in19 1 6 . I t was 00 designed th a t th© customer was compelled t© pass through all th© display shelves on her way from the eatraae© to th© checkout. The customer made her own selections i6 g asd took them to check out at the completion of her shopping. Shis was a radical and highly important change in the method of operation of retail stores.

Shis new method was so successful that many other food stores converted their stores to self-service. Ehey realized that self-serv­ ice not only reduced the costs hut also provided novelty pulling power which attracted new customers. With the simultaneous Improvements in packaging,, self-service increased rapidly. By 1930® celf-servico had become established ao an improved means of food retailing.

General stores. General stores were still very important re­ tailing institutions especially in th© rural area©. According to the

Census of Business, there were 10h,039 general stores in 1929 handling food products all over th© United States.

Revival of retail public markets. Other important food retailing development during this period was the revival of retail public Ears­ hots and their increasing importance. She development of retail public markets during this period was th© result of the conditions which then prevailed in the country. The farmers were dissatisfied with the existing middlsaan system. Shey thought that th© middleman received undue large share of the consumer0@ dollar. Moreover,, there was an increasing desire ©n th© part of th© city people for cheaper and more efficient method of distribution of fresh farm products.

ShesG factors stimulated the growth of retail public markets whore farmers generally received higher prices for their produce than that obtained by selling to th© middlemen. 169

During World War 1, organized moves were made to establish public

market places in different towns and cities. In Massachusetts, for

example, The State Board of Agriculture introduced a b ill in the

legislature authorizing all cities and towns of over 10,000 to main­

tain public markets with buildings, and requiring cities and town© which did not do this to set aside squares or streets for us® a© public markets.^ Most of those markets were owned bp municipalities.

S©sq of ttea wore started under the auspices of Chambers ©f 6©aaoreo0

others of local safety or food production committees. Usually th©

s it e s consisted merely of an uncovered tract set aside for this pur­ pose. In some cases indoor markets were established where sheds were

erected or special market houses constructed. Th® farmers, who brought their products to sell, were required to get a permit from market authorities and had to pay foes. The fees varied according to

the vehicles entering th© market. The farmers sold their products

from wagon. Some of them displayed their produce on boxes or tables.

gush cart peddlers and hucksters. In cities, another kind of

retailing institutions which were quit© popular with some classes ef

consumers wore th® push cart peddlers and hucksters. Many nearby growers spent a substantial portion of their time peddling ©r huck­

stering fruits and vegetables from house to house. Many hucksters

Eduardo Asia, Jr., Public Markots in Maopachaootto (Bootoas The Commonwealth o f M assachusetts, S ta te Board o f A g ricu ltu re, Circular STo. Sh, March, 191g), p 0 h. 170

■began using hors e-and-w agon end later motor tracks and dealt in more complete line of fruits and vegetables. Fash, cart was a poor man's market. These were located on crowded str e e ts in the poorer section s o f th© c i t i e s . In 1$Z% French reported approximately f aB6o push cart peddlers plying their trad© in greater Sew York.*®

&©tailing Institutions, 1930-1950

Chain a to re a. In 1930, two &£A7elops0nto in grocery retail trade greatly affected th© chain stores. The first was th© rapid develop­ ment of combination stores - a grocery store handling fresh meats and fruits and vegetables as well. These combination stores were much bigger in size than the straight grocery stores. The second and more revolutionary development was the introduction of supermarkets in the

1930's. As a result of competition from these new types of retailing institutions many chains closed th eir'small and marginal store©.

Moreover, the imposition of special chain store taxes in some states undoubtedly accelerated this tread. Thus, the number of chain stores showed a constant decline sine© 1930. A & P had only h„500 stores in

1950 as compared to 15,737 in 1930 number of total food chain

©tores in th© United States was only 27,700 in 19^6 as compared t©

52, 51^ in 1930* However, the average sales per store were rising.

*®Barl H. French, Push Part Market 0 in lew York City, U. S. D. A. and P o rt &■£ Hew York Authority Cooperating, Mimeo. Beport, March, 1925. **Lebhar, op. c l t . , p . 29. 171

Supermarket. She most important innovation, of the early 1930'© was the introduction of ® elf- service sup ©market. She term super­ market is defined as na large, departmental retail establishment of­ fering a relatively broad ©ad couplet© stock of dry groceries, fresh meat, perishable produc© and dairy products, supplemented by a variety of convenience, non-food merchandise and operated primarily on a self-service basis.

Although large self-service markets existed in California in

1918, their growth was localised. It me ling Sullen, a brash young man, who opened his first successful "cheapy" supermarket in August,

1 9 3 0 “ it was much smaller than those that followed, but it made merchandising history. Shortly, other much larger units were opened.

The first "Big Bear" market was opened in Elizabeth, New Jersey, in

December, 1932» in the first year, th© actual sales totaled about ■

$3 .9 million of which 5 6 ° 5 P^r sent was contributed by th© grocery department. William Albers opened his first Albers supermarket in a new, sodom building in Cincinnati in November, 1933-

She early supermarkets wore not, however, without opposition.

Other retailors wore not happy with th© coming up of this new kind of rotail organisation. All sorts of roadblocks wore thrown in th© way of the early growth of supermarkets. Setailere boycotted wholesalers and manufacturers who sold to th© supermarkets. Newspapers under pressure from other retailors refused their advertisements.

^Backman and Davidson, op. c it., p. 22J. 172 nevertheless , supermarket growth, continued at a rapid rat®. By 195 ®» the number of supermarkets, with a minimum volume of $ 250,000 had gone up to lh,217 as compared to only 300 in 1935.^ Supermarket sales as per cent of food store sale© increased from 1.7-per cent in 1935

31.3 P®r cent in 1950-^ She success of the early supermarkets was attributed to th® eco­ nomic conditions which then existed within the country. Curing the midst of the depression of the early thirties hug© structures, garages, and factories became available at lev? rates. She consumer® s purchasing power were highly depleted, unemployment was on increase and many of the workers were on a part-time basis. They were badly in need of seme lew-cost institutions. The "cheapy” supermarkets offered them the appeal for low prices. The supermarkets with self-service and other low-cost features of operation were able to operate at much lower costs than the existing food stores. They considerably reduced th© margins prevailing in th© food industry and as a consequence brought great revolution in the food retailing.

Th© first supermarkets were opened by independent merchant®.

Some of the chains soon recognised th© advantages of supermarket mer­ chandising. They were eager to become a part of supermarket industry.

Chains thus altered into active competition with pioneer independent© and opened their own supermarkets.

■^IFrank J . Gh&rvat, Supomaarketlng (Hew Yorks She Macmillan Company, 1 9 6 1 ) , p . 3* ll*Ihid. 173

After World War II, great changes took place in th® supermarket

industry. Self-service was expanded into the meat and produce in­

dustry. Expansion was made possible by technological developments in

transparent wrapping materials making i t possible to prepackage a number of products that had. previously only been sold with th® as­

sistance of a produce clerk or butcher.

•Eh® supermarkets carried a wide assortment of foods and other merchandise. They added a number ©f non-foed Item® a® well. By 195®?

It was apparent that supermarkets were rapidly approaching th® eoat

dominant position in food retailing.

Total retail food stores in the United States have shown a de­

crease between 1929 and I 9 U8 . Th© greatest reduction was in th® number of general stores, where th® number decreased from 10M-,089

1929 to only 20,55® in 19^-S® Th© general stores were replaced by th©

largG-Qlscd grocery stereo, whose number increased from 307 0^-25

1929, to 387,337 in 1939 and again decreased to 350, 75U In 19^8

(S able 23).

Despite the Increase of about 25 million in the population In the

United States between 1923 and I 9 U8 , there was a drop la the number of

total retail stores. Shio resulted in an increase in the population -

store ratio during this period. Taking total food and general stores

together, thar© were 3^5 persons per store in 19^8 as compared to only

20S peroono per otore in 1 9 2 9 . Ear the grocery stores alono there was ©no grocery ctore for every 396 persons in 1 923 , wkorcao in I 9 U8 ,

on© grocery store for ©very hlS persons (Table 2h). 17*

TABLE 2 3

EMAIL POOD ST0EI3 AHD GENEEAL STOEES, BY TYPE 03? STOEES, U1XTED STATES, I929-I96O

Grocery Other T otal Pood General Tear Stores Stores* Stores Stores Total

1929s 307**25 1?*, *66 * 81,891 10*,089 585,980

1935s 35*.971 177.039 532,010 66,701 59 S.711

1939s 387.337 173,212 5 6 0 ,5 ^ 39.688 600,237

19 * 8 * 350,75* 110,159 * 60,913 20,588 * 81,501 195 V* 279 , * 1*0 105,176 3S*, 6l 6 17,701 * 02,317

195 a1* 261,000 96,000 357.000 16,000 373.000

1960 ® 237,100 99,000 336,100 15,000 351,100

*Includes meat markets, fish (seafood) markets, fruit stores, vegetable markets, candy, nut, and confectionary stores, delicates­ sens and other©.

Seure©: ®0 . S. Department of Commerce, Bureau of the Census, Census o f Business (Washington: U. S. Government Printing O ffice),

Progressive Grocer, Pacts in Grocery Distribution (1959 E dition), ET©w York, Bear York, pp. E*~E 5. ’

Progressive Grocer, Vol. *0, Wo. * (April, 1961), p . SH-X3, P-2*. 175

TABLE 2k

HUMBER 07 PERSOHS PER STORE, UHITED STATES, 1929-1960

Population® Persons per* Persons Total* Year ( 1, 000) Grocery Store Food and General Stores

1929 121,875 396 208

1939 131,02s 338 218 19*18 1*1-6,631 klS 305

1956 162 M l 581 UoU

195S 17^ ,06** 667 U67 i 960 17 s,46U 753 508

Source: ®U. S. Census and. Federal Trade Commission.

* Calculated by dividing the population data by number of.stores in Column 2 and 6 in Table 23.

There was also a reduction in the number of specialty stores and delicatessens. The large sized supermarkets replaced these stores at a rapid rate, so that in 19 *5-8 , there were only 110,159 such stores as compared to 17*4-,U66 in 1929. Th© large sized retail grocery stores have also handled an in­ creasing number of items. Th© average retail grocery store handled a® many as 3,750 items in 1950, whereas it bandied only 867 items in 192 S.15

^•^Progressive Grocer, Vol. *10, Ho. 4 (A p ril, 1961 ), Hew York, p . 7-3- 1 7 6

Retail -public markets. She depression and 1cm faxa prlees after

1329 had contributed greatly to Increase the number and patronage of public markets. Farmers became more eager to obtain a large share of consumer’s food dollar and the city residents with declining incomes found it more profitable to make their purchases on such markets in­ stead of buying from other retail institutions. However, during World

War II and after, with increasing specialisation in agriculture the farmer a fmmd little time to go to the city and sell their own prod­ ucts directly to the consumers. Th©s© factors, along with the de­ velopment of other more efficient retailing institutions like chain stores and supermarkets, caused th® decline of the retail public mar­ k e ts . «► Retail Institutions, Since 1950

Sine© 1950 b food retail stores have been getting larger ©0 their number has declined rapidly. There was a decline from 481,501 retail stores of all kinds in 1948 to 402,317 in 1954 and to 353-tlOO in i960 (Table 23) . There was on© food store of one kind or another serving 508 persons in i960 (Table 24). Thus, each store In i960 served almost tele© as many persons a© it did twenty years ©arlior.

Taking grocery stores alone, each stor© served 753 persons in i 960 as compared to 418 in 1948 and 338 in 1939- Th© general stores and the specialty stores bavo declined la importance. 177 Although the number of food stores has gone down, the dollar sales per store have Increased greatly. Average sales per food retail store increased from $22, 688 in 1929 to $103, 3®* 1b 195 ^« to $130,202 in 195®° grocery stores, the increase was from $23*9^ in X9«^ to $123, 1?S ia 195 ^ to $1S2,SU6 in I 95 S. 16 Both th© increase In dol­ lars of sal® per store and the number of persons which each store serves indicate the continuing trend toward larger retail food stores.

drouth of supermarkets. Most of th® retail food "business is concentrated in th© hands of supermarkets operated both "by independ­ ents and chains. The number of supermarkets has constantly Increased.

There were 15,3^3 supermarkets (with a minimum volume of $375*000) in 1951® ?he definition of supermarket was changed in 195^ to include only those stores which have a minimum volume of $300,000. According to this definition,, there were 20,hl3 supermarkets in 195^* ffiho percentage of grocery store oalos handled by supermarkets in i 960 had increased to 69 per cent of the total sales from 4-3 per cent in 1952 (Tahl© 25). As th© proportion of the "business handled "by large stores has increased, that carried "by small stores has declined. The large food retailers (independent or chain) have acquired great market power. They s e ll enough volume to estab lish th e ir own procurement, whole­ saling and merchandising policies and often own manufacturing

AWS1©d©raljLlS Trade ComniiDOlen, Economic Enquiry Into Stood Marketing, Part I (Washington, D. C.i U. S. Government Printing Office, i 960 ), P. *3® 178 facilities. Stood retailers dominate the market as a result of large scale haying and can bargain on terns favorable to them with pro­ c e sso rs.

TABLE 25

GROCERY STORE SALES, B7 SIZE OS' STORE

(Percentage of Total Sales) . S to re 1952 1956 i 960

Supermarkets ($375*000 more/year) h3 62 69 S u p e rettes ($75,000 - $375,000) 35 28 23

Small stores (under $ 75* 000) 22 10 8 100 100 100

Soureos Progressive Grocer, Vol. to , Ho. h (A pril, 1961 ) , p. P-7.

Wholesaling function has become effectively integrated with the retailing function. Pood retailers have acquired their own whole­ saling facilities. They have also joined cooperative wholesaling groups, and entered into contracts tfith private wholesaling groups. By these devices, they have complete control over time and conditions o f delivery and physical standard and delivery terns.

Th© average retail grocery in i 960 handled 6,000 items as com­ pared to h ,|1 3 In 1955»3'^ is not uncommon t© find 15 ©r even

^Progressive Grocer, Vol. to, Wo. h, op. cit., p. F-3* 179 20,000 items in giant supermarkets. She nnmber and variety of items carried is not limited to food. Household supplies, soaps, detergents, baby food, pet foods and many other non-food items are sold in in­ creasing quantities.

They widely engage in sales promotion and advertising activities.

She percentage of supermarkets giving trading stamps was doubled from

IS per cent in 1952 to 36 p e r cent in 1959* Many superm arkets u se thoir own label ®a items bought in balk, fheir stocking, parking, and total store areas are increasing.

Chains and affiliated retail stores. The number of stores oper­ ated by retail food chains has gone down slightly since 195 ® whereas th® s a le s per store have more than doubled during this period. Chains operated only IS, 600 stores in 1960 as compared to 22,000 in 1992.

However, th© average sales per store was $1,100,000 in i960 to $ 5 3 0 ,^ in 1952 (Sabi© 26).

Another trend in food retailing has been the organisation o f co­ operative and voluntary chains by independent retailers. These af­ filiated groups have been able to compete with corporate chains very successfully. Table 27 shows that the share of total U. S. grocery sales in chains and affiliated independents has been increasing. She affiliated independent retailers have gained at the expense of the unaffiliated independents. ISO

TABLE 26

HUMBER 07 CHAIN STOEES AND AVERAGE SALTS PTE STORE, UNITED STATES, 191*8-1960

Average Sales Year Number o f Chela Stores (d o lla rs )

19*42 27,700 3*43.321

1952 22,000 530,145*4

195*4 1 9 ,0U0 702,993

1956 IS ,000 861,111

1958 17,1100 1,070,1400 i 960 i s , 600 1 , 100,000

Source: Progressive grocer, Vol. *42, No. *4 (April, 1963 ).

TABLE 27

GROWTH 07 A77I1IATED (VOLUNTARY AND COOPERATIVE GROUPS) INDEPENDENT RETAILERS, 'UNITED STATES, 19 ^7-1962

Percentage of Total U, S. Grocery Sales Chain Unafflliated Affiliated 19*47 37 3*4 29 195 3 36 25 39 1956 37 19 I4I4 1 9 5 s 39 16 *45 1962 141 10 1*9

Source: Progressive Grocer, Vol. *42, No. 4 (April, 19 63), p . 55. ‘ 181

Many factors bars contributed toward the success and popularity of large-slued one-stop supermarkets. There has been growing con­ centration of population in the urban areas. Improved highway systems and widespread use of automobiles have enabled the consumers to shop on these large-sized stores. Moreover, increasing use of home freezer has made it possible to make purchases in large quantities. However, another recent development has been the increasing popularity of smaller self-service stores called "superettes” o r "bantams." They serve more specifically the densely populated urban areas and

"pockets" between supermarkets.

Betall public markets, peddlers, hucksters and others, although still found in big cities, have almost disappeared as the modern re­ tailing institutions. CHAPTER XI

SUMHAET A&D COHCKJSIOHS

Summary

We have discussed the evolution of various marketing functions and th© institutions in detail in Chapter© XI to X. These develop­ ments during different periods are summarised below.

Before 1776

The agricultural marketing system in the Colonial America was very simple because of the subsistence economy which then existed.

More than 95 per cent of the population lived in the rural areas and moot o f them %?©r© farmers. The means of transportation and communi­ cation were highly underdeveloped which made the movement of goods from on© plac© to another very d if f ic u lt . Under such an economy littl© trad® in farm products developed. Whatever surplus was left after meeting the family needs was either bartered with neighbors or sold for cash. Th© farmers performed almost a ll th© functions them­ selves. They acted as their own salesmen, transported their own products, stored their surplus themselves and took all the risks in the process o f exchange. The need for performing suchfu n ctio n s as g radin g and standardisation and mark ©ting Information waa not f o lt

182 183 because of the localized nature of marketing where buyers and sellers were in constant close contact with each other. Ho specialised in­ stitutions, in the modern sense of the word, dereloped under these circumstances. Within time, however, some farmers "began to realize that they could do some jobs more efficiently than others, Thus, few people began to specialize as batchers and peddlers to perform certain marketing functions for others.

She period after the Bevolution saw many changes within th® eco­ nomy of the country. The population of the Waited States increased more than ten times between the Revolution and th© Civil War. This, along with increasing urbanization, provided a growing market for farm p ro d u cts. On the whole, however, the eeonomy was s t i l l p rim a rily agrarian with more than 80 por cent of th© people living ia rural areas and 58 per cent gainfully engaged in agriculture in I860. Th© marketing system was s till very simple but many development® within th© economy initiated changes in the marketing practices and th© mar­ keting institutions which later had the far-reaching effects.

She developments in water transportation, especially th© con­ struction of many canals and the introduction of the steam boat greatly facilitated th© movement of agricultural goods, thereby in­ creasing the trade in farm products. Th® introduction of railroads in 1830 uao feho ftoob important development which revolution!sod the agricultural marketing system in th© United States. The growth of 18^

railroad "building was so rapid that la I860 there were about one mile

of railroad per 1,000 persons or 10*3 m iles per 1,000 square m iles o f

land area, a s compared to .001 and .01 mile, respectively, in 1830 .

She changes which took plaee as a result of railroads and other

improvements in water and land transportation were very striking.

Grain elevators were huilt along the railroad lines which purchased

the grains from the farmers and performed the most important function

©f storage as well. Specialisation in the performance of somebss ^

keting functions had "begun to emerge. Many lo c a l middlemen developed

who assembled the farm produets from numerous producers who had l i t t l e

surplus to sell. This was an economic necessity caused by the widen­

ing distance between th® producers and the consumers of th© farm prod­ u c ts.

Many persons also specialized to perform certain processing

operations Xik© livestock s 1 aught©ring, meat packing and flour mill­

ing. The famer began to devote more of his time to production of

crops and livestock in order to meet the growing demand of urban population.

The role of th© government in th© development of marketing during

this period was not vesy significant. It cannot be d©nied0 however,

that government's attempts in the standardisation of weights and

measures in the 1830 's ©&d the enactment of laws "by some states to

p rotect the consumer from impure and adulterated food were the in it ia l

a tops in th© increasing role of government regulation in th© later periods. Some local and state governments had also helped the 1 8 5 development of agricultural marketing indirectly by financing the construction of canals and railroads.

1 8 6 0 -1 9 1 0

She development in the general economy of th e country after the

Civil War greatly affected the agricultural marketing system. Th® population was rapidly increasing as a result of immigration and b ir th s, Th© density of population had increased from 10.6 persons per oquar© sail© o f land aroa in 1S60 to 31”® in 1910 . Ska percentage ©f population living in urban areas was more than doubled from 20 per c en t in I860 to about kS per cent in 1910. In 1910, there were 2,262 places with 2,500 persons or above, as compared to only 663 in 18J0.

Three of these places had a population of one million or more in 1910.

The percentage of population on farms declined from 58 per cent in

I 860 to about 35 P©y ©eat la 1910 ,

This period was characterized by a number of scientific inven­ tions in agriculture and increasing farm production. The general economy o f the country was increasing rapidly as can be gauged from the fact that th© gross national product per capita (in 1929 constant dollars) was estimated to be only $223 in 1869 - 18730 whereas it in­ creased to $632 in 1907 - 1911 . She disposable personal income per eapita had mere than doubled during this period.

Other indicators of the development of th© general economy also suggest th© increasing prospority sad technological advance during this period. Telephones were introduced in 1S7& sud by 1910 there 186 •1 82 telephones per l a000 of population. She electric energy, intro­ duced in 1902 , was, however, limited to only 16 per cent of all dwellings hy 1910 with no farm houses with electric service.

Ther© was rapid development of railroad transportation during this period. Shore were 81 miles of railroad per 1,000 square miles of land area and 2.6 miles for every 1,000 persons in 1910. On the other hand, not much interest was taken in the construction of roads during this period. Surfaced rural roads in the country, however, in­ creased from 30 m iles per 1,000 square miles of land area in i 860 to

68 m iles in 1910 .

The rising economic prosperity in the country and improved means of transportation and communication caused far-reaching changes in th© marketing of farm products. Specialization became more prominent.

The storage function became a sp ecialized job performed by elevator companies and private dealers. Th© introduction of mechanical re­ frigeration in i860 and its commercialization after I 89 O was one o f th© most revolutionary developments of this period. Many private dealers constructed cold storage houses and rented them to others for storing their products. This development greatly facilitated food processing and th© marketing of perishable products. The preparation of food was transferred to an increasing extent from the kitchen to the factory. ISTew in d u stries emerged and others experienced radical changes in techniques of production and in business organisation and management. Terminal markets bad developed in important cities along the railroad routes where the products assembled at the local markets were concentrated. It was here that various marketing functions were per­ formed. This had necessitated the emergence of specialized middlemen such as wholesalers, commission men and brokers.

Another development of importance in this period was th© in­ creasing organization of cooperative marketing associations initiated by various farmer organisations such as Grange and Farmer Alliance.

These efforts were the result of the dissatisfaction of farmers with middlemen system which then existed. These efforts could not, how­ ever, elim inate the middlemen system although they gave the hop© to th© farmers that power could be met with power. They also drew th© attention of the government to regulate marketing system to a certain extent and forced the middlemen to change some of their undesirable p ra ctices.

The development of grading system by various private organiza­ tions, Chambers of Commerce and boards of trade had not been able to create uniformity of. language in th© marketing of farm products. Th©

Federal Government had, however, stepped in to safeguard the consumers from unsanitary and harmful foods. Th© Congress passed a number ©f legislative acts. The most important was the Fowl and Drugs Act of

1906 to prevent th© manufacture, sal©, or transportation of adulter­ ated or misbranded food. Th© standardisation of weights and measures was another government activity which promoted th© ordorly marketing system during this period. Moreover, government financing of great 188 railroad network in the country had an indirect effect on the develop­ ment of the agricultural marketing system.

1910-1930

fh ie was the period o f rapid economic growth as a result of in­ creasing merchantzation of agriculture and the favorable conditions created "by World War I . The development o f g en eral economy during this period is evident from the growth of gross national product and other Indicators ©f the general economic development. She grooo national product per capita (in 1929 constant dollars) increased from « $608 in 1907-1911 to $688 in 1920 and $772 in 1930 . The disposable personal income per capita in current dollars increased from $335 in

1912 - 1916 to $676 in 1920 hut again decreased to $6oM- in 1930 -

Transportation development was phenomenal during this period as a result of increasing railroad building and th© introduction ©ad us© of motor vehicles. There was one automobile for ©very 53 persons in

1930 as compared to one for every 200 persons in 1910. Th© us© o f motor tracks increased and highway systems improved as a result of increasing emphasis on road transportation. The use of electric energy also showed an increasing trend. S ixty-eigh t per cent o f a l l 0 dwellings and 10.^ per cent of farm dwellings had electric service in

1930* Other developments were th© rapid increase in the us© of telephones and th© introduction of radio as an important means o f eoEamaaie ation.

These developments in th© general economy along with the in­ creasing population and growing urbanization during th is p erio d 189 revolutIonized the agricultural marketing system. By 1930 more than

96 per cent of the population was living in 3*1^5 cities with a popu­ lation of 2,500 or over. Five of these places had a population of one million or more. On the other hand, the population on farms had de­ clined from 35 per cent in 1910 to 25 per cent in 1930 -

There was ah increasing government participation in the regu­ lation of marketing system to protect the producers and the consumers from some unscrupulous middlemen and facilitating the orderly mar­ keting. The Office of the Markets was established in 1913 Federal government enacted a number of regulations for grading, standardiza­ tion and inspection of farm products. These regulations and their strict enforcement greatly encouraged th© uniformity of language in the marketing process. The provision of market information since 1915 increased the competitive position of the farmers and benefited the marketing system as a whole. A number of legislative actions were also taken by th© government to help th© cooperative marketing as­ sociations to grow during this period.

All these factors resulted in increasing specialization in th© performance of th© marketing functions. The farmer began to grow primarily for the market. Various marketing institutions increased their size to derive th© benefits of th© technological developments.

Increased flow of capital in the country and increasing pur­ chasing power of people along with growing urbanisationo f population increased th© demand for processed foods. The food processors tended to grow through vortical integration. They by-passed wholesalers and 1 9 0 made direct contracts with farmers or local dealers to be assured of reliable supply. The motor trade transportation and improved mechan­ ical refrigeration resulted in the decline of the importance of ter­ minal markets. The retail chain organizations increased in size and number;, reaching a peak in 1929 . The im portance o f g en eral s to re s and other retailing institutions declined.

1930-1950

Ther© wore too important developments in the general eeonosy during this period. First, the depression in the early 1930s® ad­ versely affected the economic growth. Second, and the more Important development, was the outbreak of World War II in 1939 which lasted for more than five years. There was phenomenal economic growth during and after the War.

Th© gross national product per capita (in I 929 constant dollars) declined during the depression period from $772 in 1930 to $718 in

1935 but showed a rapid growth thereafter to $916 In 19**0 and $1,223 in 1950* Th© disposable personal income declined at first in I9*i0 but was more than doubled In 1950 ®

Urbanization of population continually increased during this period to per cent of the total population in 1950. The farm population, on the other hand, declined rapidly from 25 per cent in

1930 to about 15 per eent in 1950 . Increasing urban and non-farm population afforded a widening market for farm products. Moreover, th e in c re a sin g flow o f c a p ita l in th© economy and ris in g p ro sp e rity 1 9 i of the population since the 19 MO1 s caused significant changes in peoples' wants and consequently the marketing practices.

Tremendous growth in motor truck transportation and improved railroad and water transportation had enabled the movement of farm products from far distances. Highway construction had increased rapidly between 1930 and 1950 . There were 56U.U miles of surfaced rural roads for 1,000 square miles of land area in 1950 whereas it was only 223 railoo p©r 1,000 square s ilo s of land, area in 1930 “ ®k© number of telephones decreased during the depression period but in­ creased rapidly in the igUO's. There were only 136 telephones for every 1,000 population in 1935 * whereas in 1950 ther© were 281 for

©very 1,000 population. Hinety-siz: per cent of all dwellings and about "J2 per cent of farm dwellings had electric service in 1950 *

Th® self-service, large-sized supermarkets which cam© into ©m- iotoneo to oorvo the consumers with depleted incomes during the do pression of the 193 O's became th© most dominant retailing institution by 1950* Their ©sponsion was mad© possible as a result of several factors. Wide us© and ownership o f automobiles had greatly affected th© shopping habits of th© people. The supermarkets provided them a place whore they could shop at one step and s a tis fy almost a ll thoir needs. These institutions .operated at ©elf-oervice and thereby re­ duced th e ir operating costs.

Th© tread toward more processing and packaging had increased as a result of tremendous improvement0 la transportation, storage and t grading and standardization. T$m technologies wore adopted in 192 processing food products. Food processors continued to enlarge their else, They moved close to the source of rasa material as a result of changing transportation facilities. Food, lockers came into prominence in the late 1930s s as the specialized agencies for th© storage of perishable products. Later, th^y expanded their activities to include slaughtering, curing and trapping of meat.

The provision of market information by the Federal government egoaeioo and private organisations accompanied by tremendous develop­ ment in th© means of commnnication affected th© marketing practices of the farmers and greatly helped the orderly marketing.

There was an increasing tendency to bypass the terminal markets and the wholesalers. Th© wholesalers, however, adapted themselves very well to the changing conditions by sponsoring voluntary retail chains. Th© cooperative marketing associations realized that in order to compete with other marketing Institutions they have to operate ©a sound business principles. They enlarged their size and diversified their marketing operations and adopted modem technology increasing their operating efficiency.

Sine© 1950

There has been an all-round development in th© general economy since 195^° Tha post-war boom has resulted in the growth of gross national products per capita ( i n 1929 constant dollars) to $1,39& in

1955 and to $10>&2 In i 9 6 0 . Th© disposable personal income per capita increased by approximately 50 PQ2“ e®nt between 1950 and i 960 . This 193 has meant increasing flow of capital in the economy and rising par- chasing power of the people, providing for the favorable conditions for the development of agricultural marketing system.

There has been growing urbanization of population since1950 .

About 70 per cent of th© people live in 5^65 urban places with popu­ la tio n o f 2,500 or above. Increasing number of the people are living in the suburban areas. The percentage of population living on fame haOp however„ declined constantly. In i 960 ,, only 0.7 VQV cent of the to ta l population liv e d on farms as compared to 11.6 in 1955 15.3 in 1950.

Tremendous development has taken place in highway transportation sine© 1950 . There were 728.5 »il®s of surfaced rural roads per 1,000 square miles of land area, or more than 12 miles per 1,000 persons in i960, as compared to and 11.2 miles respectively in 195®* The motor trades are widely used ©o long distance carriers of farm prod­ ucts and have taken away much of th© railroad business. The rail­ roads, however,, have mad© great Improvements in th eir f a c i l i t i e s and equipment. Th© products ar© now moved from far distances rapidly and cheaply.

Increasing percentage of dwellings with electric energy sine©

1950 have mad© th© wide use of electric refrigerators, radios and television® possible. Wide use of telephones, radios and televisions has made the market intelligence available to the farmers, processors, wholesalers, retailers, consumers and others alike. Those factors have greatly affected the shopping habits of the consumer. The wide igU use of automobiles makes it possible and even necessary to shop once a week. In 1960, ther® was one automobile for every three persons in the United States.

Increasing us© of home freezers and electric refrigerators ®n- ables the housewife to purchase her week1© food supply and store with­ out the fear of it being spoiled. The supermarkets and superettes have added a great variety of products, packages and services. They have engaged in greater sales promotion activities in order to at­ tract the customers.

Increasing prosperity and rising purchasing power of consumers has resulted in growing demand for processed foods and increased number of services. Th© marketing system has to meat these growing demands by greater specialization, technological developments and ef­ ficient operation.

Shooo changes hav© very much altered th© eozapotltivo positions of various marketing institutions. The large-si sod retailers hav© tended t© integrate wholesaling and processing fractions to a greater ©stoat.

Th© wholesalers are being bypassed as a result of growing trend of direct marketing. They are, however, modifying their operations in order to adapt to the changing conditions. Th© processors do not hav© as much market power now as they had in the 1930*0. Th© cooperative marketing associations hav© grown in sis© in order to compete with other institutions. Their number has constantly declined but th© avorago EffiEtbor ©£ sacsaboro and the buoiaooo p©r association has boon rapidly rising. Th© inefficient association© hav® been forced to close their operation. 195 Conclusion

This study shows that there exists a positive relationship be­ tween the development of the general economy and the evolution of agricultural marketing system. Zn an economy with low gross national product, low disposable personal income per capita and predominantly rural and agricu ltu ral economy, the marketing system has been simple with little or no specialization at all. When the economy of th®

Halted Staton was aolf-oufficlont and undordovolopod with little flew of capital and limited technological advance, th© marketing functions were simple and no specialized and large-scale institutions developed to perform these functions. However, as the general economy has de­ veloped, there has been corresponding development in the marketing functions, and growth of more specialized and large-sized marketing institutions.

The study reveals that with the development in th© general eco­ nomy of th© United States, ther© has been a corresponding development in the marketing functions and th© institutions. 33a© farmers hav© tended to specialize and th© consumers with increasing purchasing power hav© tended to demand th© increased services from the marketing system. The marketing institutions hav© tended to become largo in size to derive th© benefits of seal© economies and to bring their co sts down. It Is, howovor, very difficult to define the cause and effect re­ lationship between th© environmental development and th© marketing de­ velopment. W© cannot conclude definitely, for example, that th® 1 9 6 development of roads censed the changes in the transportation function.

The need for transportation could have "caused" the development of roads and improved highways. It can also he argued that instead of th® process of mechanical refrigeration causing the changes in stor­ ages the need for storage of perishable products could hav© resulted in the development o f mechanical refrigeration.

Whereas we are not able to empirically prove that agricultural marketing development is dependent on general economic developments w© think it is and that associations are more than coincidence.

We believe this dependence of the agricultural marketing develop­ ment on the general economic development is important enough that where, in underdeveloped countries, the general economy is at a prim­ i ti v e sta te o f development, th® agricultural marketing activity i s lim ited and sim ple. Th© lack o f cap ital flow, low purchasing power o f th© people, and less technological development ia an underdeveloped economy places rather direct lim its on the development of elaborate and specialised marketing system. Under sueh a stag© of economic de­ velopment the lack of capital and technological advance necessarily results in insufficient and undeveloped means of transportation, com­ munication, and storage. Inadequate and inefficient means of trans­ portation - roads, railways, waterways, and airways - do not enable the ©conomie movement o f farm products from the point of th eir pro­ duction to d istan t consuming cantors, and thereby the sp ecia lisa tio n

In production and marketing, lack ©f storage facilities do not permit the growth o f food processing industries and the year-around supply 197 of farm products. Even if, a government agency may exist to collect

and disseminata market information, it is of little use for people in

an underdeveloped economy where the means of communication, like radio

and television, are not within the reach of masses. Moreover, the

lack of electric power does not permit the wide use of radio, tele­ vision, electric refrigerator, etc. The growth of food processing

industries is not possible in an economy where purchasing power of the people i s low. Shopping habits o f the consumers in an economy with very limited ownership and use of automobiles place a lim it on th®

development of large-sized retailing institutions such as supermar­ k e ts.

It seems that the development in the general economy of a country

removes the lim its placed on the development of specialized and elab­

orate agricultural marketing activity. Increasing flow of capital,

technological advance and high purchasing power induce and rather

necessitate the changes in the marketing practices and the institu­

tio n s. This study also revealed that the role of the government in

promoting the development of agricultural marketing system in th®

United States has been very significant. Ho orderly marketing could

have been possible without the uniformity in grading of farm products,

laws for the protection of consumers from unsanitary and adulterated

foods and th© provision of ad©qu&*©t timely and unbiased market in­

formation. The government has also helped the evolution of agricultural marketing system by financing and regulating the trans­ portation aystam and through its other regulatory activities.

It is, therefore, evident that the process of the marketing de­ velopment is a complex phenomena requiring the simultaneous develop­ ment of the conditions within and outside the marketing system. How­ ever, we b eliev e that the development o f the general economy i s the necessary requirement for the evolution of agricultural marketing system in a country. APPEHDIX 2 0 0

SABLE 28

OBOSS HATI0HA1 PBODtJCT, UHITED STATES, I869-I96O

1929 D ollars Current Dollars Total Per Capita .Total Per Capita Tear (billion dollars) (dollars)

Department of Commerce Concept I960* 260.6 1,442 503.9 2.786 1955 230.8 18 396 397.5 2,405 1950 I87.1 1.233 284.6 1,876 19^5 180.9 1.293 213.6 1,526 19*10 121.0 916 100.6 761 91 . 1* 1935 7 1 8 72.5 569 1930 95.1 772 91.1 740 1925 90.5 781 91-3 788 1920 73.3 688 -88.9 835 1912-1916 62.5 632 40.3 408 1907-1911 55.0 608 24.2 294 1897-1901 37.1 *196 17.3 231

1889-1893 27.3 . U2h 13.6 199 Euznet's Concept 1889-1893 26.1 405 13.1 204

I8S7-I691 24.0 386 — — 1882-1886 20.7 374 11.1 204 1817-1881 16.1 327 —— 1872-1876 11.2 254 7.53 171 1869-1873 9.1 223 6.71 165

Source: Department o f Commerce, Bureau o f th® Ce n s u e , H istorical Statistics of the Dnlted States — Colonial Time? to 1957 and Statiatical Abstract of the United States. 1463 (Washington, D. C.: TJ. S. Government Printing Office). 2 0 1

TABLE 2 9 DISPOSABLE PEHS0KA1 INCOME, DOTTED STATES, 1897-1960

Disposable Personal Income Per Capita Year _ (billion dollars)______( do lia r a) a i 960 3U9 .U 1, 93 ^

1950 207.7 1.369 19 UO 76.1 576

1930 7b ,k 60U

1920 71.5 676

1917-1921 61.0 580

1912-1916 33.0 335

1907-1911 26. 14- 292

1902-1906 20.0 2143

1397-1901 lH.1 188

aPer capita disposable personal income prior to 1920 was obtained "by dividing the total disposable personal income "by average population daring corresponding periods.

Source: U. S. Department o f Commerce, Bureau o f the Census, Historical Statistics of the United States — Colonial Times to 1957 and Statistical Abstract, 1963 (Washington, D. C.: U. S. Government" Printing Office). 2 0 2

frAyne 3 0

BAILBOAD MILEA.OE IN IBS UKITSiD SIATES, 1830-1960

lotal Miles of Bailroad per 1,000 Square Bailroad per 1,000 Tear Hoad O perated^ Miles of Land Area^ P ersons 0

i960 217.552 73.2 1.22 1950 223.799 75.2 l.»*S I9M0 233,670 76.5 1.77 1930 21*9,822 83-9 2.03 1920 252,8^5 85.1 2.39 1910 21*0,293 8O.9 2.61 1900 193 . 3^6 6 5 .I 2.5!* 1890 166,707 56.1 2.68 1880 93,262 31. ^ 1.86 1870 52,922 17.8 1.33 I860 30,626 10.3 0.97 1850 9.021 3.7 O.39 161*0 2,818 1 .6 0.16 1830 23 0.01 0.001

Source: SU. S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States — Colonial limes to 1957

U. S. Governmenti P rin tin g O ffice.

Calculated by dividing total miles of road operated "by th® total land area of the United States in corresponding years.

Calculated by dividing total miles of road operated by th e United States in corresponding years. 203

TABLE 31

SURFACED RURAL ROAD MILEAGE IN THE UNITED STATES, ISOO-I960

Total Surfaced Mileage per 1,000 Square Mileage per 1,000 Mileage Milee of Land Area Persons Tear (1,000 miles)a (miles)® (m ile s)0

i960 2,165 728.5 12.13 1950 1.679 564.4 11.19 1940 1,340 447.0 10.18

1930 694 233.I 5.65 1920 369 124.3 3.49 1910 204 68.0 2.22

1900 129 47.8 1.70

1880 96 32.3 1.91

IS60 88 29.6 2.80

1840 64 36.6 3.75 1820 10 5.7 1.04 1800 1 1.1 0.19

Source: ®U. S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States — Colonial Times to 1957 and Statistical Abstract of the United States, 19&3 (Washington, B.C.s U. S. Government P rinting O ffice) and Automobile Manufacturers Asso­ ciation, Inc., Automobile — Facts and Figures (Detroit: 1963).

^Calculated by dividing total mileage by the total land area in the United States for corresponding years.

^Calculated by dividing total mileage by total population of the United State© for the corresponding years. SABLE 3 2

AUTOMOBILES IN THE UNITED STATES, 1900-1960

Total Number o f Automobiles per 1,000 Number o f Persons Tear Automobiles Begistored Persons® per Automobile® i 960 61,558,81*7 3HH.9 2.9

1950 HO,333.591 267.6 3-7 19lM> 27, 1*65,826 208.6 1*.8

1930 23.03H.753 187.6 5.3

1920 8 , 131.522 76.9 13.O

1910 H58.377 H.98 200.0 1900 8,000 0.10 10,000.0

aCalculat®d by dividing total number of automobiles registered by total population of the United States for the corresponding years.

Source: U. S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States — Colonial Times to 1957 (Washington. D. C.: U. S. Government Printing Office, 960 I ) and Automobile Manufacturers Association, Inc., Automobile— Shots and Figures (Detroit: 1963)• 205

ZABLE 3 3

USB OF ELECTRIC ENERGY Hr THE UNITED STATES, 1902-1955

Percentage of Dwelling Unite with Electric Total in Million Annual Use per Service Year KW-hre. Customer KW-hr. All Dwellings Farm

1955 637.321 2.751 98.1+ 9 I+.I+ 1950 3 9 6 ,3 ^ 1,830 9 U.0 77.7

1945 275.02S 1.229 S5.O 148.0

19 UQ 181,706 952 78.7 32.6

1935 120, 121+ 677 6s.o 12.6

1930 115,783 5^7 68.2 10. lr

1925 85,513 396 53.2 3-9

1920 57,125 339 3^.7 1 .6

1912 25,000 261+ 15.9 - 1902 6,029 —- 8.0 —

Source: U-. S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States — Colonial Times to 1957 (Washington, D. C.: U. 3. Government Printing Office, lgbO). 2 0 6

TABLE 3*

TELEPHONES 15 THE U5ITED STATES, 1876-1960

Tear Utam'ber in 1,000 Per 1,000 Population i 960 7*.3^2 * 0 7 .8

1955 56, 2*3 337-2 1950 * 3, 00* 280.9

19*5 27,867 198.1 19 UO 21,928 165 .I

1935 17, * 2* 136.* 1930 20,202 163.*

1925 16,936 1* 5.2

1920 13,329 123.9

1915 10, 52* IO3.9

1910 7,635 82.0

1905 M 2 7 * 8 .8 1900 1,356 17.6 1895 3*0 * .8 I 89 O 23* 3-7 I 885 156 2.7 1880 & 1.1

1876 3 0 .1

Source: U. S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States ■— Colonial Times to 1957

D. cTi U. S. Government Printing Office, i 960 ). 207

CABLE 33

UKBAH AOT HJBAL P0HJLA.TI0H OP CHE UHITED STATES, 1790-1960

Census Total Urban Sural Per eeht o f Total Yeas1 Population Population Population Urban Rural Hevr Urban D efin ition i 960 178 ,^ 66,236 124,699,022 53.765.214 69.9 30.1 1950 150.697,361 96.467,686 54,229,675 64.0 36.0 Old Urban D efin ition i 960 178,464,236 112,531.941 65.932.295 63.1 36.9 1950 I50.697.36l 29,749.063 60. 948 . 29 5 59-6 40.4 19 W 131. 669,275 74,423,702 57.245.573 56.5 43.5 1930 122,775.045 68,954,823 53.820,223 56.2 43.8 1920 105, 710,620 54,157,973 51, 552,647 51.2 48.8 1910 91 , 972,266 41.992,932 49 , 973.334 45.7 54.3

1900 75.994,575 30.159.921 45. 834,654 39.7 60.3 1890 62,947,714 22, 106,265 40,841,4% 35.1 64.9 1880 50,l55.78i3 14,129,735 36, 026,048 28.2 71.8

1870 38 , 552.371 9.902,361 28 , 656,010 25.7 79-3 I 860 31,443,321 6, 216,518 25, 226,803 19.8 80.2 1850 23, 191,876 3.543.716 19,648,160 15.3 84.7 is4o 17. 069.453 1,245,055 15, 224, 39 s 10.8 89.2 1830 12, 866,020 1,127,247 11,738,723 8.8 91.2 1820 9 . 635.453 693.255 2.945.198 7.2 92.8

1810 7.239.281 525,459 6,714,442 7-3 32.7 1800 5.308,483 322,371 4,986,112 6 .1 93.9 1790 3, 929,214 201,655 3.727,559 5.1 94.9

Source: U. S. Department of Commerce, Bureau of the Census, Population Census, i 960 , Vol. I (Washington, D. C.: TJ. S. Government Printing Office, i 960 ). 208

TABLE 36

GROWTH OF CITIES IN THE UNITED STATES, I 79 O-I96 O

Incorporated Places Incorporated Places Incorporated Places

Number Per cent of Number Per cent of Number Per cent oi of Total of Tctal o f Total Year Places Population Places Population Places Population New Urban D efin ition i 960 5.^+5 61+.0 132 28.5 5 9 .8 1950 l+,28l+ 5S.7 106 29.1+ 5 11.5 Old Urban D efin ition i 960 5.022 63.O 131 28.1+ 5 9.8 1950 59-6 108 29.6 5 11.5 1930 3.165 56.2 93 29.6 5 12.3 1910 2,262 1+5.7 50 22.1 3 9 .2 1S90 1.3US 35.1 28 15. 1+ 3 5.8

1S70 663 25.7 11+ 10.8 - -

1S50 236 15.3 6 5.0 - -

1830 90 8.8 1 1.6 - -

1810 1+6 7.3 - - - -

1790 2*+ 5.1 - —--

Source: U. S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States, 1962 (Washington, D. C.: U. S. Government Printing Office, 1962 ) and Stuart A. Queen and David B. Carpenter, The American City (New York: McGraw-Hill Book Company, In c ., 1963 ) , p . 59 . TABLE 37

POPULATION ON 7ABMS IN THE UNITED STATES, I 79 O-I960

Tear Percentage of Population on Farms

i 960 S.7 1955 11.6 1990 15.3 1945 17.5 19 MO 23.2

1935 25.3 1930 24.9 1925 27.O 1920 30.1 1915 32.4- 1910 34.9 1900 38.0 I 890 1+3.0 1880 U9 .0 1870 53-0 I 860 58.0 18 50 64.0 1840 69.0 1820 72.0 1790 over 90.0

Source: Lata for 19 IO-I96 O ie taken from U. S. D. A., Agricultural Statistics, i960 (Washington, D. C.: U. S. Government Printing Office, 1961 ). Data for I 79 O-I9 OO is for the per cent of persons gainfully engaged in agriculture and has Been taken from U. S. D. A., Agricultural Marketing Service, A Chronology of American Agriculture. 1790-1956 (Washington, D.C.: U. S. Government Printing Office, 195®)• BIBLIOGRAPHY

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