This supremacy was due to her excellent location, both as a railroad terminal and as a port on the Great Lakes. The development of the Chicago wheat market, then, can be followed in the extension of the railroads into the West and Northwest.

As the means of efficient transportation was increased by the extension of the railroad, the small farmer, who had previously been more or less dependent upon his own abilities for the supplying, not only of the few luxuries he might indulge in, but also for a large amount of his necessities, began to rely on outside sources for most of his supplies and to devote his attention to those activities that would afford him the greatest return. At the same time, with the extension of the railroad the producer and consumer were being separated by an ever widening gap. This gap was filled by the commission men who came gradually to sell farm produce for the farmer, or for the purchaser of that produce from the farmer at country points, to the consumer or shipper in the large central market."

With the introduction of the commission men and purchasers at country points, or middle-men as they are popularly known, there also came many sharp practices, formerly not so apparent in the transactions between the farmer and the buyer in the terminal markets. These abuses centered naturally around the value, weight and grade of the grain. However, as long as the market was a competitive one the farmer was able to secure a fair return for his produce.

Annual Statement of the Trade and Commerce of Chicago, 1858, p. 44; J. E. Boyle, Speculation and the Chicago Board of Trade.

It might be stated that prior to the advent of the railroads farmers hauled their grain for distances as great as 175 miles over plank roads to sell it in the market at Chicago where the price was usually higher than at the inland points.

See Federal Trade Commission, Report on the Grain Trade, vol. ii, p. 59; Report to the Parliament of the Union of South Africa on the Storage and Handling of Grain in Europe, the United States of America and Canada, by Sir Thomas R. Price; Annexure "A," p. 37, Letter of H. P. Merrill, President of the Chicago Board of Trade, March 20, 1911; J. B. Kenkel, The Cooperative Elevator Movement, p. 13.

Together with the introduction of the middle-man, and the physical separation of the producer from his market, there also was introduced a feeling of distrust on the part of the farmer, who gradually came to the conclusion that he was not given a fair share in the returns of his produce. The terminal market seemed too far away and he, seemingly, had no control over his grain after it had left his hands. It was upon these feelings of suspicion that the Grange, a secret agrarian organization, played in the early seventies with the result that for a few years there were a large number of farmers' elevators, whose life varied with the ability and honesty of their managers. Yet at the close of that decade there were few such elevators which had withstood the attacks of their competitors or had survived in spite of the meager abilities of their managers. Thus, we find that in 1880 the whole field was occupied almost entirely by independent buyers or line houses consisting, at most, of ten establishments.

During the period from 1880 to about 1895, these elevators were keen competitors for the purchase of grain at country points, but since they all shipped their grain to the same terminal they were subjected to various sharp practices on the part of the commission men, and also to a great deal of neglect on the part of the railroads, they had a common ground that gradually brought them together to secure by united action better treatment, not only in the matter of grading and weighing but also in the handling of their shipments by the railroads." This led to the formation of state elevator associations in a number of the grain growing States. These associations engaged weighers and inspectors who were to look after the interests of the grain dealers in the terminal market, thus eliminating several elements of risk and permitting the buying of grain to be carried on on a safer basis.

It must also be understood that with the advent of better means of transportation, the means of communication had also been materially improved so that the farmer was usually able to have a fair idea of what his produce would bring at the terminal.

At this time the grading and weighing was done by the different boards of trade (O. N. Refsell, The Farmers' Elevator Movement, p. 875).

Meeting with a great deal of success in this field, the state associations, naturally, attempted to further the interests of their members in other directions. In good crop years or at times when competition seemed to lag in any grain producing locality there usually appeared upon the scene men who were known as "track buyers" or "scoop shovelers "because they bought grain from the farmer at the track and used a scoopshovel to load it into the cars. Since these men had very little money invested in equipment they could afford to purchase grain on a much smaller margin than the regular dealer who had to invest capital in buildings and machinery. It was to destroy this form of competition that the associations next turned their attention. Their object was attained by informing the commission men at terminal points that no member of the association would ship grain to any person who purchased from a "track-buyer" or "scoop-shoveler." The railroads were also induced to refuse cars to any person unless he could show his grain on the right of way at the time he ordered his car.

Having by these means eliminated, almost completely, the most irritating form of competition, the next step was to eliminate competition among themselves so that they might enjoy a reasonable profit on their business. Thus by the elimination of competition and the substitution of a measure of cooperative effort the numerous independent buyers were able to cope successfully with the most trying conditions. Their common peril had brought them together and had enabled them to shape for themselves the conditions under which they would do business.

The producer was now forced to seek a market. He was no longer greeted on the edge of town by a coterie of eager buyers. He must hunt up the elevator man and inquire of him his terms of purchase, and to his astonishment the price and conditions were the same wherever he went.8

Hon. Robert M. La Follette, of Wisconsin, Speech in the United States Senate on the introduction of the Senate resolution to request the Interstate Commerce Commission to investigate the grain trade, June 25, 1906, p. 7.

Consolidation and combination were not, however, confined to the operators of country elevators. The railroads were interested in securing heavy shipments of grain and had, therefore, not only been in the habit of granting rebates to the large terminal shippers but had also encouraged combination and expansion of terminal elevator companies wherever it was to their advantage. With the passage of the interstate commerce law in 1885 the policy of the railroads to give rebates to grain shippers on various lines entering Chicago was changed. Fearing the law, they selected one trusted shipper on each line whose duty it was to see to it that the railroad was protected in the hauling of grain from western points to Chicago. In addition to being granted secret rebates these men were given elevator facilities, owned by the railroads at the terminal market, at a very low charge. These elevators were the public warehouses for the transaction of the public's business at Chicago. Thus the rebater could store his grain practically free of charge. This gave him a wide margin on which to work in order to obtain control of the market, for he could store his grain free while every other person storing grain in that market would be forced to pay him storage.10 Moreover the public elevators thus came into the control of a few men. These men so arranged matters,

'Hearings before the U. S. Senate Committee on Agriculture and Forestry on Bill to Provide for Federal grain inspection, April 2. 1908, p. 80; J. E. Boyle, Speculation and the Chicago Board of Trade, p. 42. The investigation conducted by the Interstate Commerce Commission, Oct. 15-Nov. 23, 1906, the results of which were printed as Senate Document No. 278, 59th Congress, 2nd Session, will give some idea of the territory over which these secret rebaters extended their control and the complete accord with which they worked with the state associations.

10 A public terminal elevator is defined under the law as an elevator for the storage of grain by the general public. Its operators were forbidden to own any grain in them and were expected to get their remuneration from storage alone. These elevators are under the strict supervision of the State which is supposed to see to it that the grain put into the several bins is of the grade corresponding to the wheat already in those bins. The State had no supervision over the private elevators, the owner of which could not store grain for the public. It was in these latter that the mixing and doctoring was done.

that these warehouses, whose purpose it had been to keep the grade of grain stored in it at the highest level of value, were changed to storehouses whose policy was to keep on hand the lowest grade of grain possible and still have that grain graded "contract grade." 11 This forced the purchasers of that grain to sell it at a discount rather than remove it from storage.12 In this way they were able not only to collect storage from the speculator but also, because of the immense quantities of grain on hand, the price could be battered down so as in turn to reduce the insurance charges.

Since the object was to keep the grain in storage as long as possible the system of inspection in and out must be controlled. In this respect the combine was very successful, so much so that no one dared buy grain on a Chicago public warehouse certificate for shipment unless he personally in

11 "Contract grade means any grade of grain suitable for filling the contract entered into in the purchase of grain on the Chicago Board of Trade.

12 Those firms which were parties to this agreement were: The Peavy Grain Co., The Central Elevator Co., The Calumet Elevator Co., The South Chicago Elevator Co., and the J. Rosenbaum Grain Co. (Federal Grain Inspection Hearings before the Committee on Agriculture and Forestry, U. S. Senate, April 2, 1908, on Sen. Bill 382). A large number of the members of these firms were influential officials of the railroads along which they bought grain. Thus J. O. Armour was a director of the C. M. and St. P. R. R. owning in 1908 (a considerably later period) some 30,000 to 40,000 shares of stock. He also controlled the Armour Grain Co. which in turn controlled a large number of other line elevator corporations. The elevators in this combination controlled 13,500,000 bushels of storage space in private elevators, where they mixed grain, and 24,000,000 bushels of public elevator storage space where the mixed grain was stored. They controlled every public elevator at the Chicago Terminal, but one. See The Weekly Northwestern Miller, "Miller vs. Wheat Mixer," vol. xxviii, p. 42, July 12, 1889; Senate Doc. No. 278, 59th Cong., 2nd sess., p. 83; J. E. Boyle, Speculation and the Chicago Board of Trade, pp. 105-106; the Inaugural address of President Baker of the Chicago Board of Trade, 1895. Mr. Samuel Greeley said in testifying before a Senate investigating committee: "There is not a person of standing who is not friendly to or affiliated with this organization in Chicago who will state, either under oath or otherwise, that a public warehouse grain receipt under the management of this elevator trust and the state inspection department is worthy of the respect of any man in the trade n (The Weekly Northwestern Miller, "Not Contract Grade," vol. xxvii, March 15, 1889, p. 328).