is it necessary to make this larger pool? If the cooperative organization paid the member who sold his milk for whole milk consumption a higher price than others, then all dairymen would want to have their milk sold in that way, with the result that there would be more milk offered for whole milk consumption than there would be a demand for, and the price of whole milk would be reduced below the cost of its production. The cooperative pool method of making payment insures to the members equal treatment as no other method will, and enables the organization to distribute its products in different markets or at different times and to employ different manufacturing processes according to the demand.

1

The method of pooling wheat adopted by the State Grain Growers' Association is to make a pool include the area in which a given variety or kind of grain is produced and to have as many pools in that area as there are grades and kinds of grain. If a part of the grain is mixed with wild peas or if any special conditions prevail in any section, it may be necessary to make a separate pool for that grain in order to permit it to be sold and paid for on the basis of the receipts. In Canada there is a wheat pooling association in each of the provinces of Saskatchewan, Alberta and Manitoba which together are federated in one general sales organization and which are reported to have handled 100,000,000 bushels of the 1924 crop. The wheat of each provincial association is pooled according to grade. A differential for different grades or pools may be fixed at the beginning of the season. Then this differential may be later adjusted according to the market receipts for each grade or pool. The Alberta Association, which marketed 37,000,000 bushels of the 1923 crop in the first year of its operations, had that year some thirty odd different grades or pools. In 1924 the number of pools was increased because of the larger number of off grades due to adverse climatic conditions during the period of growing, harvesting and threshing. Undoubtedly this more rapid progress of pooling wheat in Canada than in the United Sttaes was in a measure due to the experience of the Canadian farmers in a one hundred per cent government wheat pool in 1919, when the growers received twenty-five cents a bushel more than the

1 Agricultural Cooperation, Aug. 25, Sept. 8 and Nov. 3, 1924.

farmers in the United States.1 Voluntary pools in Australia handle about fifty per cent of the grain produced and cover each of the provinces of New South Wales, Victoria, South Australia and Western Australia. A government pool distributes one hundred per cent of the wheat produced for the producers of Queensland. The government pool compels all wheat growers to deliver all their wheat to the State Wheat Board, which sells a part of the product to the domestic millers, the inferior grades of wheat in the open market, the selected seed wheat to growers, and the surplus to the export trade. Different premiums and dockages are allowed according to grade and sacking of the wheat in the pool.

The greater the area or volume of products and the longer the period covered by a pool, the greater will be the distribution of risks. The larger costs for marketing particular lots, or the losses from selling products on unfavorable markets, will be more widely spread out and prices will be more nearly equalized to the producer. However, the disadvantage of a small pool is in a measure decreased when all the general expenses are pooled and when the distribution of the product is coordinated and made uniform according to the market demand throughout the year and throughout the possible area of consumption. This has been realized by means of the cooperation developed between the growers, the local associations, the district exchanges and the central exchange which constitute the organization of the California Fruit Growers' Exchange. The larger costs for selling in small markets, for advertising in certain sections and for settling railroad claims on certain lots of fruit, are not charged against the fruit in question but against all the citrous fruit of the California Fruit Growers' Exchange. All expenses for maintaining sixtyseven branch sales offices, for traffic, legal and advertising de

1 Steen, Cooperative Marketing, p. 232.

2 The limitations of the small local pool are also partially avoided by the California Fruit Growers' Exchange by the adoption of an export pool, which may be considered as a form of a general pool in a very restricted sense. A special agreement is made between the local associations which are the shippers and the California Fruit Growers' Exchange, that the Exchange may enter into contracts of sale with foreign buyers at such prices and on such terms as its judgment shall dictate, and the local associations agree to accept such value as the Exchange might set and finally agree to such readjustment as profits, expenses or losses may warrant.

In

partments, are pooled and the total selling cost is averaged so that every grower pays the same selling expense per box. fact one of the chief advantages of organization is this pooling and equalization of expenses. The individual grower cannot undertake the greater costs and risks of selling in distant markets but a general sales agency can afford to bear this expense when sixty million dollars worth of products, embracing seventy per cent of citrous fruit produced in California, bears the expense.

Before growers can realize the advantages of volume pooling, a sufficient number of them must agree to surrender to the management of an organization the property rights of individual grading, of choice of the time and place of sale and the privilege of accepting or rejecting price offers. At the time of formation of the first local association of the California Fruit Growers' Exchange many individual members wanted to avoid the joint action involved in pooling and desired to continue their control of the shipment of their own fruit. Now the individual growers generally find it to their interest to join in the pool of their locals. Aside from a few very large growers, not constituting more than five per cent, all citrous fruit of the California Fruit Growers' Exchange is now pooled according to the grade of the locality covered by each local association. The organization of the American Cranberry Exchange became more centralized after undergoing a somewhat similar development. At first each individual grower branded his fruit according to grade and consigned his own: product to be sold by this local association under his own. brand to his individual account. Later when the growers of Massachusetts, New Jersey and Wisconsin organized a national sales agency it was found advantageous to standardize the grades and brands and to pool the crop in state pools. "In order that centralized selling control might be established, it was necessary to adopt some system that would eliminate the possibility of unfair distribution of high or low priced orders among the members. In addition, it was necessary to equalize transit risks and market fluctuations after the berries were out of the growers' control. The pooling system was adopted as answering these purposes."

"1

1 Hobson, Asher, Sales Methods and Policies of a Growers' National Marketing Agency, U. S. Dept. of Agriculture, Bul. 1109 (1923), p. 13.

While the control of the citrous pools is still reserved by the terms of the contract to the local shipper, that is, to the local association, in practice the control of the distribution of the local pools has largely passed into the hands of the manager of the district exchange of which the local associations are members. These district exchange managers decide where to ship cars after conference with the sales manager of the Central Exchange of which the district exchanges are members. The individual members of the locals have for the most part given up the direction of shipments as well as the maintenance of the identity of their own products. Now grading and pooling is delegated to the local association and all of the larger distributive matters are handed over to the district managers who are hired for the purpose of knowing markets and of adjusting the movement of different qualities and quantities of fruit to different markets according to their varying demand. If each grower were to follow his own inclination the possibility of bringing about agreement among the numerous growers whose fruit is shipped in a car would be difficult, and still more difficult would be the coordination of shipments of different cars between markets. Hence centralization of the direction of the distribution of the products pooled is necessary to prevent glutting or scanting of markets. Whether there shall be local pooling associations rather than large central pools is secondary to this question of achieving sufficient centralization of management to permit coordination of shipments. This procedure may run counter to the bias of those who have been tutored in the economic individualism of classical theory. But the necessity for the coordination of shipments has increased with the territorial specialization in agriculture, with the development of mass production of the factory system, and with the expansion of the productive area from which consuming centers obtain their commodities.

Among most of the larger associations, the determination of price policies, which is a large factor in regulating the rate of movement of products to consumers, is left to the directors. The ten thousand or more growers who make up the membership of the larger organizations cannot hope to secure coordina

1 Cf. Black, John D. and Price, H. Bruce, Cooperative Central Marketing Organizations, Bul. 211, Agricultural Experiment Station, University of Minnesota, April, 1924.

tion of car shipments to effect a uniform distribution or flow to different markets unless the organization, which acts as a unit for the growers, accepts the price offers which come within the standard set by it. Growers individually are inclined to give greater weight to all bullish factors and may even handicap the management by understating their crop in order to influence the management to set a higher opening price. But experience has shown the management in those associations which can determine seasonal prices, as in dried fruits and nuts, that if prices are set too high it may be impossible to move all the products to market during the year and that any carry-over is likely to have a most depressing effect upon the next year's opening price. In associations like those of the cotton and wheat growers, in which the quantity of products outside of the cooperative pools is the larger part of the crop, the management sells according to the market but slackens or accelerates the rate of sale or movement of products to market according as the prices received appear to be favorable or not. In so far as the growers delegate distribution and price determination to the managers of the pools, they eliminate competition among themselves for securing opportunities for sale, and precisely to the extent that the organization covers all markets they are able to put all buyers into competition for their product. This method secures the advantage of the more favorable markets and price offers to growers that are obtained by large-scale distributors generally. The extent to which competition among sellers is decreased and the competition among the buyers of a product is increased depends upon the volume controlled by the seller as well as upon the volume purchased by the buyer. Such marketing advantages may be equalized between sellers and buyers when both cover all markets by their sale or purchase organizations.1 Thus through their worldwide sales offices, the agricultural cotton pools which sell through the American Cotton Growers' Exchange with sales considerably over $100,000,000, might hope to equal the buying power of any manufacturer or middleman who buys from them, provided

1 Devonshire, C. E., The Dennison Manufacturing Company, "The Dependence of Purchasing upon Scientific Knowledge," American Academy of Political and Social Science, Annals, May, 1925.