Our Present Farm Marketing System

OUR PRESENT FARM MARKETING SYSTEM By W. L. Wanless, Dean School of Commerce and Administration, Utah Agricultural College During the one hundred thirty-five years that this nation has existed under the constitution, there have been not less than thirteen periods of business depression, each with its corresponding period of prosperity and the usual intermediate stages. This recurring move- ment from "hard- times" to prosperity and back again is called the "business cycle." On the average, the circle of events is completed in a period of ten years. The particular depression through which we passed last winter though particularly severe on farmers because of the sudden and marked decline in the prices of agricultural pro- ducts, on the whole caused much less suffering than several of the previous "panics" or "crises." In each one of these periods of depression some one part of our economic system has been singled out as being particularly responsible for the trouble. Sometimes it was our land policy, sometimes it was our money or our credit system. This time our marketing or distribu- tive system was indicted as the chief culprit, with taxes and the Federal Reserve System as accomplices in the crime. As a matter of fact, hard-times follow over-prosperity and ex- pansion, because human nature is so constituted that it cannot stand great prosperity. But, like the Israelites of old, we prefer to make something besides ourselves the scape-goat. The result of this criticism is that volumes have been written about our marketing organization — some of it true, most of it false — because those who have written have not taken the trouble to inform themselves. Most of these critics would agree that all middle-men should be shot before sunrise or sooner. Such propaganda, for it is hardly more than that, is much more likely to lead to darkness than to light. If one would really understand our present marketing organiza- tion he must study carefully at least three things. First, he must ap- preciate the amount of work that has to be done in moving goods from the place of primary production to the point of ultimate con- sumption. Second, he must understand the methods that are now being used in performing this enormous task. Third, he must have at least some knowledge of the various marketing agencies that have been established to perform these functions. Many a farmers' organization has gone on the rocks because its sponsors saw only the middle-man that would be displaced by it, but failed utterly to appreciate the func- tion that was being performed. A full page advertisement of a farmers' national organization shows a large crane taking the products of the

OUR PRESENT FARM MARKETING SYSTEM 247 farm right over the heads of a disappointed looking group of middle- men, to the "legitimate" market, but it fails to indicate what forces are moving the crane. When one approaches the study of our "market problem" from the standpoint of the task to be performed, he is almost overwhelmed by the enormity of that task. He is no longer surprised by the fact that it costs as much to market the product of this country as it does to produce them, in the primary sense. He learns that more than half of the people of the United States live in cities, many of them far removed from sources of supply. He finds, too, that of the 42,000,000 people engaged in gainful occupations, nearly 30,000,000 or almost three-fourths must have all their food brought to them, generally from distant points. What is even more surprising, the farmers themselves depend on outside sources for at least fifty per cent of their food supplies, to say nothing of the many other things that they require but do not produce. As he studies the marketing system more closely, he finds that the major task falls into several fairly well-defined sub-divisions or functions. Because most of the supply comes from small producing units, there must be assembling of the products at points of concen- tration: because consumers demand it and economical methods of marketing require it, products must be classified, graded and packed according to accepted standards; because we have a system of territorial division of production, most of our products must be transported long distances before they reach their maximum value; because many farm products are not fit for consumption in their natural or raw state, they must be processed by various means; because most of these goods are produced seasonally, many of them must be stored until they are re- quired for use; because products can be handled and stored most eco- nomically in large volume, there must be a grand breaking up process so that they may reach the ultimate consumer in the very small quan- tities that he requires; and finally, since ninety percent of our marketing is done on a credit basis, there must be an elaborate banking or credit system to meet this need. Besides these regular marketing functions there are many other auxiliary services such as market reporting and the furnishing of com- munication facilities that are contributory to the marketing organiza- tion as a whole. From this brief sketch, even though given only in broadest out- line, it is possible to get some idea of the scope of that which we call marketing. It should be evident, too, that those who perform these important services are just as truly producers as those who work on the farm or in the factory. If some of them are inefficient, they are no more so than farmers who raise a hundred million bushels of potatoes in excess of the nation's needs. When we consider the methods by which the various functions of marketing are performed, less need be said. It is sufficient to point

248 IMPROVEMENT ERA out that many of these methods are the direct result of the demands, the whims, and the fancies of the consumer in the market. This is particularly true of such things as grading, packing and packaging. Throughout the field of marketing, as in all our economic system, there are operating certain fundamental economic laws or prin- ciples which, if recognized and followed will almost certainly bring success. Such is the principle known to economists as the law of diminishing costs. This is just another way of saying that the larger the volume handled in a given enterprise the less, generally speaking, will be the per unit cost of handling. It is the recognition of, and ad- herence to, this principle that has caused so much of our marketing to become highly centralized. Much yet remains to be done in improving marketing methods. In some lines we are just beginning to see the pos- sibilities. But very rapid progress is being made both in the direction of meeting the ever-increasing demands and fancies of the consumer and in taking advantage of the economic forces that underlie the whole structure. Naturally those enterprises, whether private, cooperative or corporate, that have gone farthest in these directions are achieving the greatest business success. If we turn now to a consideration of the various marketing agencies, we find, as might be expected, a close relationship between the agencies and the services they are intended to render. Actuated by the universal desir( for profits, middlemen of many kinds have set up their establishments along the line of the long journey of goods from primary producers to ultimate consumer. Some are very large; some are very sma1l. From the standpoint of efficiency, some would rank high; others exceedingly low. Generally speaking, profits arc actually realized only by those that succeed in reducing costs below those of their least efficient competitors. There are always those who are just on the edge or margin. Many of these swell the list of busi- ness failures. * Undoubtedly, the chief defect of our marketing system is that there are too many middlemen at certain stages in the marketing process. This is particularly true at both ends of the journey of the goods — that is, at the country shipping points and in the retail trade. Here the volume of each unit is so small that there is much loss due to their inability to take advantage of the law of diminishing costs and in the burden of needless over-head. Ordinarily, the retailers' margin of gross profit is larger than those of all other middlemen handling the same commodities combined. While it is easy to point out this defect, it is not so easy to suggest a remedy. In this country we have complete freedom of economic en- terprise. If a person wishes to become a middleman, even though they are already super-abundant, there is no law, except the economic law, that would deny him the privilege. Those that are more efficient are reluctant to sacrifice a part of their margin of profit in order to elimi- nate the less efficient. They calculate, often erroneously, that the in-

OUR PRESENT FARM MARKETING SYSTEM 249 creased volume would not compensate them for the decreased margin. Unfortunately, too many consumers are likely to turn their support and sympathy to the poor, inefficient middleman and condemn his more successful competitor as a profiteer. In this way, society loses much of the potential advantage of increased efficiency in marketing. If we are to improve this marketing system — and certainly it will be improved in many ways — we must cease condemning the system in general and direct our criticisms toward particular services, methods and agencies. The "shot-gun" method must give way to the more precise, better directed rifle shot. In this way, and in this way only, can real progress in this or any other field of human activity be made. Logan, Utah. UNDERSTANDING— FAITH By Dr. George H. Brimhall With all thy getting, get understanding — With all thy findings, find faith When Solomon said: "With all thy getting, get understanding," he included the light of faith. We find our way by feeling as well as by seeing. A philosophv of life that has not faith in it is too untrue to the nature of man to be trusted as a guide. The crowding of God out of the head means the crowding of humanity out of the heart, and with humanity out of the heart, the hand, however skilled, becomes our instrument of destruction. Such is the story that time has told and still is telling of individuals and of groups. I read, "An angel from on high, the long, long silence broke," and I believed that Moroni spoke to Joseph Smith. The inter-com- munication between God and man is a part of the philosophy of life that I fill: The heavens are not darkened, they are full of stars of hope. I read in a work of modern thought, "If you hear a voice, don't answer, run for a doctor." This is a part of another philosophy of life. The heavens are darkened, sunless, moonless, starless. With such a philosophy, man makes it impossible for Divinity to help him. In the darkness of such doubt, man loses faith in his own conscious- ness. For, should an angel appear to a follower in dis-belief in God he would immediately category himself among the hallucinated. Jesus points out this doctrine of spiritual blindness brought on by the enter- tainment of atheistic ideas in the parable of the rich man and Lazarus. "They would not believe though one were sent them from the dead." The state of having lost the power to believe in God is one to be thought of with dread. It is the loss of power to more than partly understand ourselves and the universe. With all our finding, let us find faith.