of the increasing stocks of wheat in Australia and the Argentine and the very large prospective crop in this country in 1918. This implied a continuing limitation upon competition in the manufacture and sale of flour. The large and fairly evenly distributed wheat crop, taken in conjunction with the fact that the functions of the Grain Corporation became somewhat different under the price guaranty arrangement, made it practicable to relax somewhat the restrictions upon the grain trade and to allow a wider range of competition there than had been possible with the short crop of 1917. It is beyond the scope of this paper to enter upon a detailed exposition of the new arrangements which became effective in July, 1918. Suffice it to say that the Grain Corporation announced a schedule of wheat prices which it was prepared to pay at the principal terminal markets, based upon the minimum government guaranty of $2.00 to the farmer, so arranged that the producers in the least advantageously situated districts could realize approximately $2.00 per bushel for their wheat at country shipping points. The control by the Grain Corporation of country elevators, as to retention and diversion of shipments,2 was relinquished and shippers were permitted to sell to whom they would. The mills were also allowed to buy from whom they pleased and to pay any price they pleased; of course, the lower range of competitive bidding was established by the offer of the Grain Corporation to pay at least the government guaranteed minimum. As a matter of fact, removing the fetters from the free play of commercial initiative led to a premium of several cents per bushel over the government minimum being paid for wheat during the early weeks of the new crop movement, in 1 The government guarantee then was $2.00; the President by proclamation subsequently made the figure $2.20. * See page 18. spite of a movement the size and rapidity of which broke all records. The principal limitations placed upon the mills affected the prices which they might charge for their products, the quantity of wheat which might be used in making a given quantity of flour, and the kind of flour which might be made. The Food Administration had got over its scruples concerning its own powers as to price-fixing and imposed upon the mills a fixed operating differential or margin -a figure by which the combined prices of flour and feed might not exceed the price (reckoned on the government purchasing basis) of an equivalent amount of wheat. The ratio of extraction was continued at 74 per cent (i. e., 4.4 bushels of wheat per barrel of flour), and the differential for the combined prices of a barrel of flour and the corresponding amount of offal (about 68 pounds) above the price of 4.4 bushels of wheat was set at $1.10. In other words the differential of $1.10 per barrel of flour included costs and profits. Thus, if the government price for No. 1 Northern wheat at Minneapolis were set at $2.20 per bushel, the price of 4.4 bushels would be $9.68, and the combined prices of flour and feed at the mill door might not exceed $10.78; further, if the government named price for mill feed (at say 41 per cent of the price of wheat) averaged $30.00 per ton, or one and one-half cents per pound, at that point, the maximum price for flour at the mill door would be $9.76. These regulations were easy to police since prices could be readily checked by the reports required from flour jobbers and buyers. Furthermore, they were compulsory; there was no element of voluntary agreement in them, as with the arrangements of 1917-18. Hence it became possible to dispense with the elaborate and expensive machinery of of the increasing stocks of wheat in Australia and the Argentine and the very large prospective crop in this country in 1918. This implied a continuing limitation upon competition in the manufacture and sale of flour. The large and fairly evenly distributed wheat crop, taken in conjunction with the fact that the functions of the Grain Corporation became somewhat different under the price guaranty arrangement, made it practicable to relax somewhat the restrictions upon the grain trade and to allow a wider range of competition there than had been possible with the short crop of 1917. It is beyond the scope of this paper to enter upon a detailed exposition of the new arrangements which became effective in July, 1918. Suffice it to say that the Grain Corporation announced a schedule of wheat prices which it was prepared to pay at the principal terminal markets, based upon the minimum government guaranty of $2.00 to the farmer, so arranged that the producers in the least advantageously situated districts could realize approximately $2.00 per bushel for their wheat at country shipping points. The control by the Grain Corporation of country elevators, as to retention and diversion of shipments,2 was relinquished and shippers were permitted to sell to whom they would. The mills were also allowed to buy from whom they pleased and to pay any price they pleased; of course, the lower range of competitive bidding was established by the offer of the Grain Corporation to pay at least the government guaranteed minimum. As a matter of fact, removing the fetters from the free play of commercial initiative led to a premium of several cents per bushel over the government minimum being paid for wheat during the early weeks of the new crop movement, in 1 The government guarantee then was $2.00; the President by proclamation subsequently made the figure $2.20. 2 See page 18. spite of a movement the size and rapidity of which broke all records. The principal limitations placed upon the mills affected the prices which they might charge for their products, the quantity of wheat which might be used in making a given quantity of flour, and the kind of flour which might be made. The Food Administration had got over its scruples concerning its own powers as to price-fixing and imposed upon the mills a fixed operating differential or margin — a figure by which the combined prices of flour and feed might not exceed the price (reckoned on the government purchasing basis) of an equivalent amount of wheat. The ratio of extraction was continued at 74 per cent (i. e., 4.4 bushels of wheat per barrel of flour), and the differential for the combined prices of a barrel of flour and the corresponding amount of offal (about 68 pounds) above the price of 4.4 bushels of wheat was set at $1.10. In other words the differential of $1.10 per barrel of flour included costs and profits. Thus, if the government price for No. 1 Northern wheat at Minneapolis were set at $2.20 per bushel, the price of 4.4 bushels would be $9.68, and the combined prices of flour and feed at the mill door might not exceed $10.78; further, if the government named price for mill feed (at say 41 per cent of the price of wheat) averaged $30.00 per ton, or one and one-half cents per pound, at that point, the maximum price for flour at the mill door would be $9.76. These regulations were easy to police since prices could be readily checked by the reports required from flour jobbers and buyers. Furthermore, they were compulsory; there was no element of voluntary agreement in them, as with the arrangements of 1917-18. Hence it became possible to dispense with the elaborate and expensive machinery of the Milling Division, which accordingly went out of existence. In its stead a milling section, with a representative miller at its head, was established in the new Cereal Division, of which the Grain Corporation also became a part. It is too early yet to form any conclusion as to the efficacy of the new plan of regulation, but at this writing (August, 1918) it seems to be working well. There has been very little, if any, complaint as to inability of farmers to secure the full guaranteed minimum price which the Grain Corporation stands ready to maintain at all times and in almost all places. If, through lack of competitive bidding at local points, farmers fail to secure the full government price, the Grain Corporation will accept direct consignments, paying the shipper at least $2.00 per bushel f. o. b. shipping point, less commission. The fixed differential mode of controlling the price of flour has the advantage of simplicity; it is easily understood in general principle; it definitely establishes maximum prices. Its application was possible only with the fixed base price of wheat to the producer and the requirement of a uniform grade of 100 per cent straight flour; the fixed wheat price became the datum point from which the prices of flour and feed could be reckoned; under the "100 per cent straight "rule" flour is flour," while before this requirement there were as many different grades as there were mills.2 SUMMARY AND CRITICAL ESTIMATE OF RESULTS Broadly speaking, the problems of the Food Administration at the outset of its career in the regulation of the wheat and flour trade were: (1) to attain price stability, for the protection of both producer and consumer; (2) |