MEAT-PACKER LEGISLATION. COMMITTEE ON AGRICULTURE, HOUSE OF REPRESENTATIVES, The committee this day met, Hon. Gilbert N. Haugen (chairman) presiding. The CHAIRMAN. Are you ready to go on, Mr. Rainey? Mr. RAINEY. Yes, sir. The CHAIRMAN. Whom have you this morning? Mr. RAINEY. I think we will hear from Mr. Weld. STATEMENT OF MR. L. D. H. WELD, MANAGER COMMERCIAL Mr. WELD. Mr. Chairman, when I stopped a week ago I was giving some specific examples of the unfairness of the Federal Trade Commission's report, showing that the report could not be relied on as a basis for information about the packing industry and that it could not be relied on as a basis for legislation. I had already discussed the approximately constant percentages which I showed were not the result of agreement. I had taken up the question of part purchases and split shipments and explained what they meant, and showed that what is done under those headings is perfectly legitimate; that is to say, the Federal Trade Commission gives no evidence whatever of collusion, and that especially in the case of split shipments. the Federal Trade Commission quoted parts of telegrams to bear out its contention and omitted other parts of the same telegrams which showed opposite conditions. on. I want to take up briefly this morning, first, the question of wiring Mr. TINCHER. Before you go to that subject, are you going to call attention to the telegrams that they only quoted a part of and put in the hearing the other part? Mr. WELD. Yes, I did that. Mr. WELD. This matter of wiring on is treated in part 2 of the Federal Trade Commission's report, beginning on page 89. It is also discussed in Swift & Co.'s Analysis and Criticisms on page 52. As you will probably understand, this practice of wiring on is where a shipper sends live stock to one market and if he is not satisfied with the bid of the first market, he ships them on to another market, and the allegation is that the packer's buyer in the first market wires on to the second market. It is true that that often occurs, that the packer's buyer in the first market wires on to the packer's buyer in the second market, although, in view of the criticisms that have been made of that practice, Swift & Co. has discontinued it to a considerable extent since 1916. The Federal Trade Commission's report tries to make out that there is collusion among the packers in this practice of wiring on, although it furnishes no evidence whatever that there is collusion. It also says, on page Mr. YOUNG (interposing). Let us see right there. Have all the packers the same system of wiring on? Mr. WELD. Yes, sir; I think so. Mr. YOUNG. It would look a little bit peculiar if there was an understanding or agreement as between the packers to act in concert on this proposition, that is, if they all came to the same conclusion at one and the same time? Mr. WELD. They do not necessarily wire on at the same time. They do not necessarily know, for example, in Kansas City what bids the other packers have made; they may possibly hear from the commission men what bids they have made and possibly wire that on at the same time, but, of course you understand, this matter of wiring on is a perfectly legitimate practice done in every business. For example, if Mr. YOUNG (interposing). I do not agree with you on that proposition. My mind is open to understand why you adopted that policy. I can not understand, if I am a shipper of cattle and ship to Fort Worth from my home and am dissatisfied with the price bid, why I have not a perfect right to take my cattle and ship them to Kansas City without having you purchasers at Fort Worth and also at Kansas City forestall me in the Kansas City market by sending word to that market that "Young is dissatisfied with the price offered and he is coming to your market." There is only one purpose that I can see in doing that and that is to forestall me in the market at Kansas City. Mr. WELD. No, sir; it is not to forestall you at all. This is just a matter of market information. That is just the same as they do here. Your department store here in Washington, Woodward & Lothrop, their buyer in New York bids on a bill of goods in New York and the seller of those goods is not satisfied with the bid that the buyer in New York makes and he says, "I will come over to Washington and come to headquarters and try to sell these goods. The buyer in New York wires to Woodward & Lothrop stating what he has bid on those goods. That is done in every business. We do not do it in any way to forestall the shipper. The goods are sold on the second market for what they are worth, irrespective of what the original bid was. I can show you from the year Mr. YOUNG (interposing). Why the necessity of the packers adopting that custom of wiring ahead if it cuts no figure from the packer's point of view; why make the producer dissatisfied by adopting a custom like that? In other words, do you not know that it does result in the producers feeling like something was being put over on them? Mr. WELD. Yes; I know that is true, and that is why Swift & Co. has largely discontinued it. When he ships from Fort Worth to Kansas City we do not wire to Kansas City; we used to, but the buyer in Fort Worth will wire to our head buyer in Chicago. We have to do our buying very, very carefully; we have to keep in constant touch with all the markets. A nickel means a whole lot to us and a quarter makes a difference between a profit and a loss. So our head buyer in Chicago keeps in the closest touch he can with all the markets, studying them very carefully every minute, and he gets reports of all purchases, bids, etc. Mr. YOUNG. 1 can understand that you probably must do that, but this fact of wiring on that Young, for instance, has shipped to Fort Worth 500 head of cattle and we have offered him so much, and he is going to the market at Kansas City. The very fact that you do that enables you to control the market at Kansas City and to see to it that the bid is in line with the Fort Worth market? Mr. WELD. It does not give us any power whatever to control the market at Kansas City, but it gives to our head buyer in Chicago a good line on the judgment of our buyers in the different markets, and it is one of the best lines we have. Mr. YOUNG. That being true, you know that your Kansas City buyer is not going to bid out of line with the bid that you made at Fort Worth? Mr. WELD. No. He makes the bid on what the conditions are at Kansas City at the time the goods reach Kansas City. Mr. YOUNG. Knowing that the producers are dissatisfied with that kind of custom, feeling that they are forestalled from trying at other markets, by virtue of that kind of a custom, do you not think that it might be a mighty good thing to ease up the feelings of the producers by all the packers stopping that practice? Mr. WELD. I think that it would be poor business to stop that altogether. Swift & Co., as I have said, stopped it to a large extent. Mr. YOUNG. It might be poor business for the packer, but would it not be a good thing for the producers? Mr. WELD. Stop doing a perfectly legitimate thing just because there is a prejudice? Is there not any hope of being able to get the people to see that this thing is done honestly and above board? Mr. YOUNG. I think it would be a very difficult proposition to make me as a producer to ever come to the conclusion that I was getting an honest and square deal and getting the value for my stuff when you are forestalling me by wiring ahead, and that the purpose was not to control the markets. Mr. WELD. We are not forestalling you and we are not controlling the markets. It is done so that we will have information as to just what conditions are in the different markets. It is extremely important that we do that. Mr. YOUNG. Say that I ship 500 cattle from Kaufman, Tex., to Fort Worth, and you make me a bid, representing Swift & Co., of the packers for the cattle. I am dissatisfied because I find on that bid I will not make any profit out of my investment and out of my handling of these cattle. So, I decide that I will try Kansas City and go ahead and ship to Kansas City out of Fort Worth. Why not let that market bid whatever the market will justify Mr. WELD (interposing). They do. Mr. YOUNG. Rather than to wire ahead and say, "Young has been bid this, that, or the other price for 500 head of cattle," could there be any other purpose, SO far as I can see as a producer, than that you have wired ahead to see that I do not get any more at Kansas City than I have been offered at Fort Worth? Mr. WELD. That is just due to suspicion. We do not wire so that you will not get any more in Kansas City than the bid in Fort Worth. Mr. YOUNG. For the life of me I can not see-and it makes me suspicious the object of the packer other than to see that I do not get any more than I had been offered. Mr. WELD. The facts are that is not the result, although the Federal Trade Commission says that it is the result. Mr. YOUNG. I think that I am a fellow of ordinary intelligence, and I think that you are bound to admit that men must look at it from the point of view that I am putting it to you. Mr. WELD. They do look at it with suspicion, and that is the reason we have very largely stopped it. As a matter of fact, when a shipment of cattle is forwarded from Fort Worth to Kansas City, our Kansas City buyer is not informed as to what the bid in Fort Worth was. He used to be. Our head buyer in Chicago is, and if there should be any great difference one way or the other between the bid in Fort Worth upon the goods and the bid in Kansas City, then our head buyer would want to weigh the matter, and if the bid was much lower or much higher in Kansas City, then the head buyer in Chicago would look into the matter and see what was the trouble. Let me tell you another thing. As a matter of fact, if the markets remained the same from day to day, if they should not change at all, the shipper would lose by shipping to another market, because there is the freight rate to pay and there is the shrinkage that he suffers in his cattle. The price varies in different markets as you move toward Chicago and toward the big consuming markets. That is, the price at Fort Worth will be, say, $15 for a particular grade of cattle and in Kansas City at the same time it will be, say $15.50 these are not exact figures, but approximate-in Chicago $15.75, in Buffalo it will be $16.75, and in New York City the market will be $17; that is, the price rises as you get to the big centers o consumption. The price is lower as you get from those centers o consumption, just as the price of wheat in Kansas depends on the price in Liverpool, minus the freight rate, the cost of carrying storing, insurance, etc., in getting it to Liverpool. The difference, between Fort Worth and Kansas City in the price is not sufficient to allow a man to forward cattle from Fort Worth to Kansas City, pay the freight rate, and take the shrinkage on his cattle and make any money. Normally he ought to lose money. If he is bid a higher price in Kansas City than the freight rate and the shrinkage, it is because the market in the meantime has gone up. You see what I mean? Mr. YOUNG. I think I get that point. Mr. WELD. That is important in connection with some of the points which you have made. Mr. YOUNG. I will get to that point. For the life of me I can not see why, when I have a packing establishment within 60 miles of my stock pens, I, as a producer of cattle, should not get at Fort Worth the same price that would prevail at Kansas City, plus the freight rate? Mr. WELD. Minus the freight rate. Mr. YOUNG. Yes; minus the freight on the cattle. Mr. WELD. You do, practically. That is, you get-I have not the exact figures, but the freight rate from Fort Worth to Kansas City would be about 40 cents a hundred and the difference in the price would be somewhere around the same amount, perhaps a little more, perhaps 45 or 50 cents. That is, the price in Fort Worth would be 5 or 50 cents lower for the same cattle on the same day than in Kansas City. If we buy any stuff in Fort Worth we have to pay the reight rate on the finished product to the East. Texas is a surplus cattle-producing State, and we have to ship beef out of Texas. Mr. YOUNG. What is the freight rate on the finished product? Mr. WELD. On the finished product, I do not know. We have some exact figures. Mr. CHAPLIN. We can put them in the record. Mr. WELD. It is something like that, 35 or 50 cents on live cattle from Fort Worth to St. Louis; I think that is the point that I got the figures for. On meat products it is about 50 cents, about one-third; it generally runs a third or a half higner on dressed beef. Mr. YOUNG. The figures on dressed beef. On shipping the cattle on the hoof you have a lot of waste that you pay for that is discarded when you ship the finished product? Mr. WELD. Yes, sir; that is true. And for that reason the difference in price on live animals is not as much as it otherwise would be, because the rate on dressed beef is taken into account in the adjustment of these differentials between the markets and other competition. Mr. YOUNG. That is one of the things that I have never been able to understand, with the oil-meal producers almost neighbors, the highest type of the finished stuff, that the cattlemen who sell feed find it necessary to go to St. Louis or Kansas City instead of going 60 miles to Fort Worth. Mr. WELD. I will tell you. At Fort Worth, or at any plant, we have to get an assortment of all grades of cattle and of all grades of meat, both cattle and hogs-we have to get an assortment of animals, and this assortment of grades of different animals at Fort Worth, the bulk of that stuff is rather poor stuff. Mr. YOUNG. That is exactly the point of my inquiry, why some of that stuff has to go to St. Louis or Kansas City? Mr. WELD. At certain times when good stuff comes in there in large quantities it is difficult for us to take care of it and we have to ship the product a thousand miles. We buy all the fat stuff that comes there that we can afford to buy, considering what it will cost to lay it down in the eastern markets. It is true because there is comparatively little trade for fine meat down there in Fort Worth that the market there is not as good as in a larger market like Kansas City and St. Louis. Whether the shipper really gains anything by shipping to St. Louis or Kansas City I do not know. We buy all that stuff that we can possibly use in our Fort Worth plant. We have the same thing happening in St. Paul. The shippers of fat stuff in Minnesota instead of shipping to St. Paul like to ship to the larger market at Chicago, because they feel that there is at least a larger number of buyers for the fat stuff and a better chance of selling that stuff there to advantage. If we did not have a good-sized plant down in Texas, with a branch-house distributing system in the East, if there were no packer-large packer-with a good distributing system in the East, they could not handle that stuff at all in Texas. Mr. YOUNG. I am sure of that. Mr. WELD. We buy all the fat cattle that we can in connection with the other grades that we buy, but if a large supply of fat stuff comes to Fort Worth, it is almost impossible for us to take care of it, |