Mr. VOIGT. Then it follows from what you say that a packer can maintain his precise ratio of purchases whether he is prosperous or close to bankruptcy?

Mr. WELD. Unless he goes too far toward bankruptcy and has to quit. Even if the concern is kept going, when it has not been making money, it would undoubtedly insist on getting as much business as it had been getting. If it began to slip behind at all it would soon go to smash undoubtedly.

Mr. CHAPLIN. They are compelled to do that.

Mr. VOIGT. So that whether a packer is making money or losing money for all time to come, so far as you can see, he is going to maintain this ratio of purchases?

Mr. CHAPLIN. We are going to maintain ours; we are not going to fall behind 1 per cent, if we can help it.

Mr. MARSH. You have an average turnover of six times a year? Mr. WELD. Reckoned on either investment or our inventory; yes. Mr. MARSH. And what is your average profit on the turnover? Mr. WELD. On sales last year it was 1.15 cents. For the last 20 years it has been about 2 cents.

Mr. MARSH. That is equivalent to 15 per cent a year, is it not? Mr. CHAPLIN. No; because that is the only stock of goods that we

carry.

Mr. MARSH. I want to get your own statement; that would be three and a half times two and a half?

Mr. CHAPLIN. Yes.

Mr. MARSH. Which would be about

Mr. CHAPLIN. Eight and three-fourths.

Mr. MARSH. Eight and three-fourths per cent. Now, if it takes a live-stock producer three years to get an animal ready for the market, is he not entitled to three times that profit, or over 26 per cent?

Mr. WELD. He has got to get a much larger profit on each sale than the packer does; the same with the retail dealer, too.

Mr. MARSH. Well, I do not concede that as to the retail dealer; but we do not need to go into that argument here.

Mr. WELD. He has got to get more than a quarter-around a half a cent a pound to give him a profit on his investment.

Mr. MARSH. Well, it depends on his turnover there, of course. Now, the live-stock producer, to be on a parity with you, has got to get about 24 to 26 per cent, has he not?

Mr. CHAPLIN. Is that on the cost of the calf or the finished steer? Mr. MARSH. On the cost of production, all the investment that has gone in.

Mr. WELD. I do not exactly see your figuring. You will have to get at it something in this way: Suppose you have 11 per cent on your investment, as we have in the last 20 years; what profit would the cattleman have to get per head on his annual sale to yield a similar profit on his investment? I do not know as I could answer that; it would have to be a much larger percentage on his sale than we can operate on. That is one reason we can operate on such a very slender margin of profit. The margin of profit has practically no effect on prices, because we do get practically six turnovers a year on our inventory.

Mr. MARSH. Live-stock producers are not getting that now, and have not been for several years, have they?

Mr. WELD. I do not know.

Mr. MARSH. Well, I will make that statement, then, that they have been running behind on hundreds and thousands and millions of head of cattle. That information is in the record here. Do you think that there is any future for the packing-plant business unless the livestock producers can get the cost of production plus a reasonable profit?

Mr. WELD. No, sir. On his total farm operation he has got to make a profit to stay in the live-stock business.

Mr. MARSH. In your judgment, are the packers able to pay the cost of production of live stock and to sell meat products at the price they are selling them to-day, or lower?

Mr. WELD. In the long run, we can afford to pay enough to cover the cost of production and a profit to the farmer and sell the stuff at a price which will move the resulting yields into consumption. Of course, any arbitrary lifting of the price of live stock would mean if the price of meats, for example, were raised arbitrarily, there would be meat that would not be consumed; the price becomes adjusted at such a point. Competition works that

out.

Mr. MARSH. Now, coming to butter, cheese, eggs, and poultry, I understood you to say this morning, Mr. Weld-and if not, please correct me that there is absolute competition right down the line in the packing-plant business?

Mr. WELD. Concerning the products, in all the products that we have.

Mr. MARSH. All right, then, you have got the full, finest development of competition, you say, which is possible in any industry?

Mr. WELD. The finest what?

Mr. MARSH. The finest form of competition which is possible? Mr. WELD. I do not know as I have said that. I do not know what better form of competition you would want.

Mr. MARSH. Still, both the producers' and consumers' ends of the industry are in a chaotic condition, admittedly; that is proven very fully by the testimony at these hearings.

Mr. WELD. And the spread between the raw materials and the finished product is as low as possible to make it.

Mr. MARSH. Now, you say there is absolutely free competition, but the system is not working. Would not that seem to suggest to you, as an economist, that we ought to have some supervision by a Government agency to see what is the trouble?

Mr. WELD. No; because we know that the thing is done as efficiently as you could ask to have it done, and that, as I have said, the price becomes adjusted so as to just clear the supply in consumptive channels, and the highest possible price is paid to producers with respect to that price that will clear that supply in consumptive channels. Until you can prove otherwise, which you can not, why, you have not got a case on that.

Mr. MARSH. Pardon me, I might say very frankly, I am concerned with getting this business on a stable basis, and not pri

166762-20-PT 27———7

marily in seeing any packer go to jail. I am trying to analyze it on that point. But you have not got it on a stable basis as long as the live-stock producers are quitting production because they can not get the cost of production and a reasonable profit from you, and you say you can not pay any more, and consumers are dissatisfied with prices.

Mr. WELD. We can not pay any more than we do. Competition forces us to pay the highest possible price, as compared with the price it is possible to get for those goods in selling them at the retail stores.

Mr. RAINEY. What would be the result of putting into operation a plan of cost of production plus profit, on the consumer?

Mr. WELD. Well, if the price were arbitrarily held up, the consumer would pay more, and there would be a supply that would not be consumed. It would, of course, have the effect of raising the price to the consumer, if any arbitrary step were taken to raise the price.

Mr. RAINEY. Would it be possible to arrange a system where cost of production plus a profit could be paid?

Mr. WELD. I do not think it would be possible at all.

Mr. MARSH. Let me say right now that the farmers of America are going to get their basic industry on that basis, or else the American people and a part of the rest of the world is going to go hungry.

Mr. WELD. I hope they do, and I think we are furnishing them the very best facilities possible to bring that about; but you must realize consider the beef situation in the last few months. You remember that before the war there was only the domestic demand for beef; there were no exports. During the war there was a tremendous demand from abroad that resulted in much greater production in this country. The production of cattle increased tremendously from 1914 to 1918. Now, suddenly, with the signing of the armistice, that foreign demand fell off, and Europe began to go to South America. It means that a very important demand that has been in existence for the last three or four years has disappeared, and that if production had been maintained where it was in 1917 and 1918 there would be an overproduction; that is, such a large supply that the public could not have consumed it, except at a lower price than has been prevailing. The price had to come down. means that the price of live cattle had to be cut down, and that the cattle industry is now in the process of readjustment to prewar

conditions.

That

We had abnormal conditions during the war on account of that foreign demand, and such a readjustment had to come about. It is extremely unfortunate for the producer, and it has also affected us in our business, resulting in a loss in our cattle operations this last year.

Mr. MARSH. Well, I can not agree with that; but I want to make this suggestion-if the price of the finished products of the packers can be reduced, the consumption would materially increase. You live in Chicago, and I have lived there sometimes, and in several other big cities, and we know that there are several millions of people to-day who are not eating enough; they can not buy more; if the product was cheaper they would buy it.

Mr. RAINEY. How could that be accomplished? Your line of reasoning is that by paying cost plus the consumer would get the meat cheaper. Would not that affect the producer?

Mr. MARSH. I am just coming to that now. Has there been any careful study by the packers, individually or jointly, of the unit of efficiency production in the meat-packing industry?

Mr. WELD. We are studying it all the time, and developing the highest degree we know how.

Mr. MARSH. That is internal efficiency, but I am referring to the actual distribution of packing plants in relation to the sources of supply.

Mr. WELD. Oh, yes; we are studying that all the time; we have men studying that.

Mr. MARSH. Well, a witness said here the other-I did not get his name, but I understood him to say that it was seven days' travel from the place where he raises his live stock to the nearest packing plant. Now, is that correct, do you know?

Mr. WELD. You mean seven days' travel for a stock train?

Mr. MARSH. Yes; he was speaking of transportation of live stock. Mr. WELD. I do not know whether there could be such a case or not. There might be some places out in Wyoming

Mr. MARSH (interposing). I think he was from Wyoming or Arizona. Well, that is not efficiency.

Mr. CHAPLIN. Yes; that is efficiency. You can not go and build little packing houses all over the West without rhyme or reason. You have got to have reasons for these things. You have got to compete with the central markets. You can not support a packing house in a locality that produces only one kind of live stock, you have got to have a balanced plant, with so many cattle, so many hogs, so many sheep, and so many calves, and you have got to have an assortment of quality; and you have got to have railroad lines running in all directions, so you can ship the meat. You can not locate a plant just any place and operate it economically.

Mr. MARSH. Now, let us see; of course you can not, in just any place. What I want to get at is whether there is any need for such long hauls and such waste in shipping. Now, do you know anything about the cooperative packing plant out at Fargo, N. Dak.?

Mr. WELD. No; I do not.

Mr. MARSH. They are handling only cattle and hogs; they started a year or two ago and are doing very nicely, and I am going to raise the question again; if these cooperative plants are ready to start their business as soon as they can get their stock cars and refrigerator cars, is not that an indictment of your Big Five-is not that an indictment of your failure to start a plant there? I mean of the Big Five, not of Swift.

Mr. WELD. No; we will have to find out what results they are paying. It is rather questionable whether a relatively small plant can be operated at Fargo. I am not sure but what the time will come when one can; but until North Dakota gets more need

Mr. MARSH (interposing). It has.

Mr. WELD. I mean to do a long-distance distribution. You see, St. Paul has much; a much greater supply of hogs. You can get plenty of cattle up at Fargo, but they would be seasonal shipment.❤

You would get almost no hogs; the days would come when you would get them, possibly.

Mr. MARSH. Well, they have a capacity of a thousand hogs a day, and several hundred cattle, I believe, and they are getting along; and you must admit that the establishing of such a packing plant tends to develop the production of live stock of all sorts in the vicinity. Of course, it is not feasible everywhere.

Mr. WELD. Well, I think that until the live-stock industry is developed more in that part of the country and you can get a better assortment-but probably there is less waste in shipping the stuff through to St. Paul and then killing it up in North Dakota and finding an outlet at a greater distance. I am not sure now but what it might possibly pay a large packer to put a plant in Fargo. I do not know whether we have considered that or not. We are in St. Paul and Omaha, and now in Sioux City; but we are studying that proposition all the time and have in two plants within the last two or three years where there were just such considerations as that involved.

Mr. MARSH. In point of fact, it would be a very bad thing, from a public viewpoint, if there were no small competing plants, would it not?

Mr. WELD. I think the small plant is most useful and necessary, and bound to continue in existence. It can handle the local supply of live stock more cheaply than the large packer can. The large packer is made necessary in order to distribute over long distances, and he has to have distributing facilities to do that.

Mr. MARSII. Well, of these 1,279 selling and meat packing plants, which were reported in the census of manufacturers for 1914; how many of them approximately are doing local and how many long distance business?

Mr. WELD. Well, I do not know, except that you can get some line on that from the number of inspected houses. There are about 235 or 237, outside of the large packers, who are doing interstate business. The large packers, with their different plants, are in that number, so that it would probably leave-it would probably mean that 400 of those are doing interstate business and the rest more or less local business. That is just a pure guess.

Mr. MARSH. I want to come now to this article by Mr. Henry Krumery, president of the Wisconsin Cheese Producers' Federation, and ask you whether his statements in The Non-Partisan Leader of March 22, are correct that Wisconsin now produces about 70 per cent of the cheese produced in the United States and the Big Five packers control the marketing of 75 per cent of this cheese?

Mr. WELD. It is not true; no; that is, not in the usual use of the word "control," the way the word "control" is probably meant to be used there. I know that Wisconsin produces a large percentage of the cheese, but I do not know what part of the total production of the United States. I did not know it was as large as 75 per cent, because I know New York is a large producer. And the Big Five buy a large proportion of the Wisconsin output.

Mr. MARSH (reading):

The packers do not compete with each other in buying cheese.

Mr. WELD. That is a false statement.