CONGRESS OF THE UNITED STATES, JOINT COMMISSION OF AGRICULTURAL INQUIRY, Washington, D. C. The joint commission met, pursuant to recess, in room 70, Capitol Building, Hon. Sydney Anderson (chairman) presiding. The CHAIRMAN. We will now hear Mr. Powell. I should like to say that Mr. Powell did not come here with the expectation of appearing before the committee. He appears now at my suggestion, and without having ample opportunity to get the material which I think he would like to present at this time. I make this statement in justice to him. STATEMENT OF MR. G. HAROLD POWELL, GENERAL MANAGER Mr. POWELL. Mr. Chairman, I take it that I was asked to come before the committee because of the fact that I represent a operative organization of producers, the California Fruit Growers' Exchange, that has had 25 years of experience, which has gone through all the stages of childbirth, learning to creep, and then to walk; also because of the fact that the exchange handles a business which runs into very large figures, probably $100,000,000 in all branches of its business, and that it may have had some experience that may be useful to the committee. The California citrus industry has grown to very large proportions. It now represents an investment of about $250,000,000. Years ago it tried to sell its products just as most agricultural products are sold, either to speculative buyers at the point of production, or it would consign them east on commission, or in other ways common to the sale of agricultural produce generally. That system broke down. The fruit was a semiluxury. The markets were a long distance away. Facilities for transportation were not very well developed, and for several years the industry did not receive the cost of handling the business. It was faced either with giving up the investment or improving its marketing system. Twenty-five years ago the growers in California began to get together and form local units through which they would assemble the products of quite a number of growers in order that they might standardize the product and ship it in carlot quantities. They formed quite a large number of these local units and attempted 3 through them to sell carlot quantities in the same way that the individual had done, but that system broke down also. Following that the local organizations federated into a single agency called the California Fruit Growers' Exchange, which has now developed until its membership represents about 11,500 growers, who are divided into about 200 local associations, each association of growers being largely composed of neighbors who build packing houses at a cost of from $40,000 to $500,000 each, there assemble their fruit, grade it, standardize it, pack it, and put it on the cars for shipment. Representative TEN EYCK. Right there, what is the requirement of membership? Mr. POWELL. Any grower who desires to join can become a member of the association. Each member usually contributes to the capital of the association in amount proportionate to his acreage or shipments. These growers are held to the association by a contract, usùally a long-term contract, which has in it, however, a cancellation clause, through which any member can withdraw at the end of a season if he is dissatisfied. It may be a 10-year contract or it may be a 25-year contract, but he has a cancellation privilege at the end of the year. Representative MILLS. How about the grading of the fruit and picking? Mr. POWELL. The grower forms his local associations. The fruit of the growers is picked by the local association, not by the individual grower, delivered to the packing house, and there packed by them under rules and regulations laid down by the central organization. The function of a local association is to assemble the fruit and prepare it for shipment. Representative MILLS. And grade it? Mr. POWELL. And grade it and prepare it for shipment. Representative FUNK. What proportion of products of this kind. produced in California does your association handle? Mr. POWELL. Seventy-five per cent. Now, these 200 associations for business convenience have formed what they call district exchanges; that is, if there are half a dozen associations in a community they form a nonprofit association, which acts as an agent for them in handling their distributing problems at cost. The associations operate at cost for the members. Some of them are capital stock corporations and some noncapital corporations, but all of them operate at cost, without profit to the capital invested. Representative TEN EYCK. What interest have they in your large working capital? Mr. POWELL We have no capital at all. I will come to that. Mr. POWELL. Then, for still further business convenience the district exchanges have formed a central organization, the California Fruit Growers' Exchange, which has no capital, is a noncapital stock corporation, formed under the laws of California, and acts as the marketing agent for these different associations and district exchanges at cost. Representative MILLS. It does all the selling? Mr. POWELL. It does all the selling; that is the local units sell their product through the central organization. It is not turned over to the central organization. The central organization furnishes facilities in all the markets of the United States, in charge of salaried agents, and the local units determine the conditions under which their product shall be sold through the central agency. About 33 per cent of all the fruit is sold at public auction. It is sold at public auction in practically all the large eastern markets. The rest is sold at private sale. Now, in addition to the purpose I have described, there are other functions which these agencies perform. They include the function of developing markets through their service men; through their agents to cooperate with the trade for the purpose of developing better merchandising and quicker turnovers at lower margins per turnover; national advertising in order to extend the consumption of citrus fruits; furnish the different units a daily news service which will give the members all the information that is necessary for the handling of their business; the collecting of the funds and returning the funds to the local units. Representative MILLS. Well, now, let me ask you this: You maintain a selling agent in a city like New York? Mr. POWELL. Yes. That is an auction market. Representative MILLS. And you sell 70 per cent of your product by private sale? Mr. POWELL. Yes. About 33 per cent of it is sold at public auction. Representative MILLS. On what basis is your price fixed? Mr. POWELL. The law of supply and demand wholly on a perishable product. There is no way in which you can fix any price on a product that is to be sold when it reaches the market except what the buyer is willing to pay for it, and what the seller is willing to sell it for. Representative MILLS. That is what I say-your agent does not attempt to sell your product before it arrives at New York City? Mr. POWELL. No; all the fruit at New York, Boston, and the larger markets is sold at public auction, not at private sale at all. Representative MILLS. So that your agent in New York does not attempt to sell at private sale? Mr. POWELL. No; in all auction markets everything is sold exclusively at auction. In a private-sale market the fruit is sold as promptly as possible after arrival at a price negotiated between the local unit through the central office and the agent with the buyer, and they negotiate back and forth until they arrive at a price that is mutually satisfactory. Representative MILLS. We had another gentleman here from some California association who said that they attempted to sell their product f. o. b. Mr. POWELL. We do not follow that system at all. Representative MILLS. You do not follow that system at all? Mr. POWELL. We follow the delivered system altogether, except in a few pocket markets in the Northwest, where we do sell on an f. o. b. basis. Probably 95 per cent of the commodity is sold on a delivered basis. Representative MILLS. Now, you do not attempt to sell directly to wholesalers or retailers, do you? Mr. POWELL. We sell entirely to wholesalers. At public auction the auction company sells to anyone who comes into the auction |