I have but one lamp by which my feet are guided; and that is the lamp of experience. I know no way of judging the future but by the past.—Patrick Henry.
With the establishment of co-operative elevators for the storing of grain at interior points the farmers of Western Canada launched out upon the greatest experiment in co-operation this continent has seen. The success of these elevators, owned and controlled by the farmers themselves, in all probability would evolve the final phase of internal storage in connection with the Canadian grain fields.
Co-incident with their agitation for government ownership of elevators at country points, the farmers were urging upon the federal authorities the desirability of government control and operation of terminal storage facilities. It was not enough that the Provincial Governments of the Prairie Provinces should protect the farmers within their boundaries; for the terminal storage of grain was a part of the system and the farmers contended that corporation control of the terminals by grain dealers was leading to abuses and manipulations of the grain that were not in the best interests of the country.
Grateful as they were, therefore, for the efforts to improve early conditions by legislation, it was the opinion of the Grain Growers that these contraventions of the Grain Act would be prevented only by acquisition of the terminals by the Dominion Government. Mere legislation and supervision by the Government would not provide an effective remedy.
At the head of the lakes the grain passed out of the control of the transportation companies into the hands of the grain dealers; it was the only point in transit where it became subject to manipulation. With the exception of those owned by the C. P. R., the terminal elevators were operated by dealers, largely controlled by United States concerns and managed by experts from across the line. It was frequently charged that terminal operators forgot that they ought to be warehousemen solely and sought profits outside those of legitimate elevation and storage charges, although these authorized charges paid ample return on capital investment. The farmers wanted this temptation of handling and mixing grain at the terminals removed so that terminal operators could not tamper with the grain while it was in their custody. The claims of the Grain Growers that mixing was going on at Fort William and Port Arthur were based upon the report of the Royal Grain Commission which had investigated the grain trade in 1906-7.
The first definite step taken to lay these matters before the Dominion Government was in the winter of 1908 after the formation of the Inter-Provincial Council of Grain Growers' and Farmers' Associations. At a meeting of these representatives of all the organized farmers it was decided to send delegates to Ottawa. When these gentlemen reached their destination in May, 1909, they found themselves face to face with a large and active group of grain men, railway officials and bankers who had gathered to take a hand in the interview with Sir Richard Cartwright, then Minister of Trade and Commerce. Beyond some concessions regarding special binning of grain, nothing came of this trip apparently, although the Western farmers were supported strongly by the Dominion Millers' Association.
A second memorandum was presented early in 1910 and the Grain Growers were granted a very respectful hearing by the Government; for, while the organized farmers represented but part of the farming constituency in the West, they had the sympathy of the entire farming community behind them in these requests. They went home, however, feeling the need of concentrating their energies on organization if they were to get actual action from politicians.
They had not much more than got home safely before something happened which proved their assertions that all was not as it should be down on the lake-front. Mr. C. C. Castle, Warehouse Commissioner, one day held in his hand some official reports from the Inspection Department concerning certain elevator concerns and compared the figures with the returns made to the authorities by these concerns themselves. He shook his head at the discrepancies and started an investigation. There were three companies involved and after full evidence was taken legally these three companies were prosecuted for returning untrue statements and in the Police Court at Winnipeg they were fined a total of $5,550 by the Magistrate.
The next thing was the drafting of a Grain Bill which aimed to improve certain matters. It was considered by the Senate and passed. It reached the House of Commons and Hon. Frank Oliver took it by the halter and led it about. Before anything could happen to it, however, and the judges get a chance to study its good and bad points, July (1911) came along and Parliament dissolved like a lump of sugar dropped into a cup of tea and in the hub-bubbles of a general election everything wasin statu quo, as they say. And when the race was over and the Party Nags back in their stalls, lo! new tenants were taking their turn at sliding around on the polished Treasury Benches and having a sun bath!
The new Minister of Trade and Commerce was Hon. George E. Foster. He looked over the Grain Bill, passed his hand along its withers and patted it on the rump. Then he sat down and made a copy of it, idealizing it by injecting a few "betterments," then trotted it out for inspection with tail and mane plaited and bells on its patent-leather surcingle. He did not claim to be its real father—only its foster-father. He introduced it to the House with a very lucid review of the whole agitation for improvement in the Grain and Inspection Acts since "Johnny" Millar, of Indian Head, Saskatchewan, handed in the Royal Grain Commission report in 1907.
The new Government proposed to grant government control of terminal elevators only on a limited and experimental scale. They wanted to test out the principle by lease or construction of two or three terminals at the head of the lakes before undertaking the financial responsibility of handling the entire terminal system. Heretofore there had been government supervision merely; but now for an experiment there would be government operation as well while the management of the remaining terminals would have to be satisfactory to the Government.
"The demand of the West is that the grain should not be manipulated at the terminals," declared Mr. Foster. "It does not matter a pin as to how that is brought about so that the thing itself is accomplished."
The new bill provided for sample markets and the farmers did not like this unless the Government acquired the terminals as had been requested. Owing to the grain blockade, due to car shortage, feeling was running high in the West and the farmers eyed the new legislation closely. They came upon a clause which startled them and in the row that followed it looked at one time as if the new Bill would be led to the boneyard and killed.
One of the proposals of the Government was the formation of a Board of Grain Commissioners with wide discretionary powers. They would be made responsible for the proper conduct of the entire grain trade and deal with all matters pertaining thereto. They were to have the absolute say-so in regard to car distribution and there was one clause that threatened this protection for which the Western farmers had fought so hard in earlier days.
At once consternation spread among the Grain Growers, their apprehensions based upon bitter experience. They protested vehemently. Letters, petitions and resolutions slid all over the official Government desks and delegations followed to Ottawa. Not the organized grain growers alone, but the whole Western farming element was up in arms.
Nevertheless, the new Grain Bill passed the House of Commons and browsed over to the Senate.
It was the farmers' last chance to stop it. R. McKenzie and J. S. Wood, of the Manitoba Grain Growers; J. A. Maharg and F. W. Green, of the Saskatchewan Grain Growers, and E. J. Fream, of the United Farmers of Alberta—these practical men figuratively took off their coats and waded in when they got in conference with Senate members. They preferred to see the whole bill killed unless the objectionable clause regarding car distribution were struck out; they saw the old-time elevator abuses again becoming possible and quite nullifying the many good features which the new legislation possessed.
The final upshot was that somewhat unexpectedly Hon. Senator Lougheed, leader in the Upper House, withdrew the offending clause on behalf of the Government, although the Government felt that the farmers were unduly excited.
The new Board of Grain Commissioners was appointed without delay and consisted of three men who understood Western conditions—W. D. Staples, of Treherne, Manitoba; Frank E. Gibbs, of Fort William, and Dr. Robert Magill, now Secretary of the Winnipeg Grain Exchange. Dr. Magill was made Chief Grain Commissioner, for he had rendered excellent services in the past and commanded the respect of the entire West.
The Board was not long in reaching the conclusion that if grain dealing companies were to be eliminated from the business of owning and operating terminal elevators, outright purchase and breaking of leases would be necessary. The companies refused to lease to the Government voluntarily on any terms which the Board could recommend. Some would not lease on any terms whatever, claiming that to lease their terminals would dislocate their whole system of interior elevators, involving a loss of capital which had been invested legitimately. Apart from this, the Board had its hands so full with other important things that expropriation and all that it involved would claim their whole time and energy to the neglect of other urgent matters.
Accordingly, the Grain Commissioners recommended that the Government meet the immediate need of increased terminal facilities at the head of the lakes by building a three-million-bushel elevator, thoroughly equipped for storing, cleaning, drying and handling grain and with provision for future extensions to a capacity of thirty million bushels. They also approved of the Grain Growers' Grain Company leasing one of the C. P. R. elevators. In this way both the Board and the Grain Growers would gain first-hand knowledge of terminal elevator conditions.
While formulating a policy for terminal elevators the Grain Commissioners considered the need for terminal storage in the interior as well as at the lakefront. The increase in the area of the grain fields, particularly in Alberta, was straining the transportation facilities to the limit and the construction of the Grand Trunk Pacific promised to open up still more acreage. Railway rolling stock, railway yard accommodations at Winnipeg and Fort William and elevator storage were not keeping pace with the annual volume of new grain. The Government Inspection Department was up to its eyes in grain, working night and day during the rush season, while lake and ocean tonnage likewise were inadequate. Even the eleven million bushels of extra storage capacity being built at the lake at the time the Board was considering the situation would soon fill and overflow. Congestion at eastern transfer houses or terminal points was threatening, water freight rates were up and the export market disturbed and there was no reserve of storage capacity in Western Canada to meet emergencies. In a wet season the drying plants at Fort William and Port Arthur were far from adequate. Delayed inspection returns and terminal outturns, due to the recurring car shortage, prevented the farmers from financing and widened the spread between street and track prices as the close of navigation approached.
Reviewing all this, the Grain Commissioners came to the conclusion that it was time to consider seriously the erection of Government terminal facilities nearer the grain fields. Especially in Alberta was the need great for inspection and terminal storage to be nearer the producer. It would relieve congestion, benefit the whole grain trade and provide for the future possibility of alternate shipping routes via Hudson Bay or the Panama Canal.
It was true that the Royal Grain Commission of 1906-7 had raised objections to interior terminals and inspection, such as the extra expense of handling, the extra loss to the grain in handling and re-handling, the possibility of the railways solving the car shortage problem, the difficulty of getting shippers to send their grain to such elevators and so forth. But the Board considered that, in view of other possible routes than the Eastern, these objections were not strong enough to balance the benefits. Accordingly they recommended the Government to take action, the elevators to be regarded as public terminals in which mixing of grades would be forbidden.
While the farmers in all three Prairie Provinces were busy with these vital matters, the Grain Growers' Grain Company meanwhile was wading along through all the difficult seasons of car shortage, expanding its usefulness and trying its best to give the maximum of service the while it was reaching out into the export field in an experimental way.
Then, in 1911, a situation arose unexpectedly that caused turmoil among the officers of the pioneer company and led to considerable anxiety among the Grain Growers all over the West. For, through an excess of zeal upon the part of an employee, the Grain Growers' Grain Company suddenly found itself dragged into the maelstrom of "The Pit." It was accused of trying to corner the oat market and was forced to fight for very life.
So that at last it looked indeed as if Chance had delivered the farmers into the hands of those who preferred to see them eliminated altogether from the market.
Now, infidel, I have thee on the hip! —Merchant of Venice.
The visitors' gallery is an excellent vantage point from which to view the trading floor of the Exchange. It runs the full width of the south wall. The chairs entrenched behind the rail have acquired a slippery polish from the shiftings of countless occupants just as the wall behind has known the restless backs of onlookers who have stood for hours at a stretch.
It is here that the curious foregather—good people from every walk of life except the grain business. The tourist who is "just passing through your beautiful city" and has heard that Winnipeg has the largest primary wheat market in the world—the tourist drops in to see the sights. Friend Husband is there, pretending to be very bored by these things while fulfilling his promise to take Friend Wife "some day when there's something doing." Young girls who only know that bulls hate anything red and that bears hug people to death—they are there, thrilled by the prospect of what they are about to witness with but a very vague idea of what it will be. A dear old lady from the quiet eddies of some sheltered spot has been brought in by the rest of her party to see "goin's on" of which she does not approve because gambling is a well-known sin. She is somewhat reassured by noting a few seats away a man who wears the garb of a clergyman; presently he will take notes for his forthcoming sermon on "The Propinquity of Temptation and Its Relation to the Christian Life." The two young women who whisper together in the corner have been reading stockmarket stories in the magazines and they are wondering which of the traders, assembling on the floor below, will have his coat and collar torn off and which will break down and give vent to those "big, dry man-sobs" when his fortune is wrecked!
Not the least of the sights at the Grain Exchange is the Visitors'Gallery!
Two tanned farmers are discussing quotations and general conditions in a matter-of-fact way. War demands, the unfavorable United States Government report and rumors of black rust are making for a bullish condition. Cables are up and the market promises to be wild this morning. The gong will go in five minutes.
"The Pit" is out in the middle of the floor. There is an octagonal platform, raised a couple of feet from the floor level. In the centre of this platform three wide steps descend to floor level again; so that the traders standing on the different steps are able to see over one another's heads and note each other's bids. On the west side of the Pit is an elevated, built-in desk like those seen in court-rooms, somewhat resembling an old-fashioned pulpit; here three men sit throughout the session. One keeps his fingers on the switch-box which operates the big clock on the north wall where the fluctuations of the trading are flashed on a frosted dial in red-light figures. At his left sits a second man whose duty it is to record the bidding on an official form for the purpose. At the right is a telegraph operator who sends the record of the trading as it occurs to other big Exchanges—Minneapolis, Chicago, New York, etc.
The telegraphic report registers in several instruments attached to the big blackboard that occupies the entire north wall. Operators with chalk and chalk-brush in hand move about the platform at the base of this blackboard, catching the quotations from the clicking instruments and altering the figures on the board to keep pace with the changing information. A glance at this great blackboard will furnish the latest quotations on wheat, oats, barley, flax, corn, etc., the world over.
Ranged along the entire east wall are the clacking instruments of the various telegraph companies for the use of the brokers and firms trading on the Winnipeg Exchange. Telephone booths at the north, seats for friends of members on the west side, weather maps, etc., beneath the gallery—these complete the equipment of the big chamber.
The group about the Pit, waiting for the market to open, grows rapidly as 9.30 approaches. Members of the Exchange saunter in from the smoking-room, swap good-natured banter or confer earnestly with their representatives on the floor. In response to the megaphoned bellow of a call boy, individuals hurry to the telephone booths. Messengers shove about, looking for certain brokers. The market is very unsteady; it may go up or down. The men are clustering about the Pit now; most of them are in their shirt-sleeves and they are on tip-toe like sprinters who wait for the starter's pistol. Some of them have instructions to dump wheat on the market; some have been told to buy. Hundreds of thousands of bushels will change hands in the first few minutes. The market may go up or it may go—
Bang goes the gong! They're off! Above the red abbreviation, OCT., at the bottom of the big clock the blood-red figure 5 indicates the opening of the market at $1.45 even. With a mad swirl the trading begins in a roar of voices. A small forest of arms waves wildly above jostling bodies. Traders dive for each other, clutch each other and watch the clock. The red figure 5 has gone out and 7/8 has in turn vanished in favor of 5/8—1/2—3/8—4—(?) Instead of going up, she's falling fast. Before the market closes the price may rebound to $1.55. Somebody will make a "clean-up" to-day and many speculators will disappear; for margins are being wiped out every minute.
To the Gallery it is a pandemonium of noise, unintelligible in the volume of it that beats against the void of the high chamber. Only one shrill voice flings up out of the roar:
"Sell fifty Oc, sev'-eights!" He offers 50,000 bushels of wheat for October delivery at $1.43 7/8 per bushel. It's that fellow down there with the blazing red tie half way up his collar. He hits out with both hands at the air as he yells. A surge of buyers overwhelms him. They scribble notes upon their sales cards and go at it again.
Down there in the mêlée those men are thinking fast. With every flash of the clock the situation changes for many of them. Some pause, watching, listening; others who have been quiet till now suddenly break in with a bellow, seemingly on the point of punching the noses of the men with whom they are doing business. Lightning calculation; instantaneous decisions! "Use your discretion" many of them have been cautioned by their firms and they are using it. A moment's hesitation may cost a thousand dollars. Trading in the Pit is no child's play; rather is it a severe strain even upon those who know every trick, every firm and the character of its dealings, every trader and his individuality, his particular methods—who know every sign and its meaning, who can read the coming shout by the first movement of the lips. And always, in and out, are darting the telegraph messenger boys with yellow slips that cause upheavals.
"Why don't they take their time and do their trading more quietly and systematically?" ventures Friend Wife up in the gallery.
"And lose a cent a bushel while they're turning around, eh?" laughs Friend Husband. "On a hundred thousand bushels that'd only be a thousand dollars. Of course that's mere car-fare!"
The dear old lady from the quiet eddies of Shelterville is shaking her head in disapprobation and communing with herself upon the iniquities of gambling.
"My, oh my! What won't men do for money! Jt-jt! Just look at 'em! Fightin' like that for money they ain't earnt! An' that nice lookin' young feller with the intelligent gold specs!—Dear me, it's enough to make a body sad!"
She could not know that but comparatively few of the traders below were representatives of brokerage firms which were trading on margins for speculating clients—that most of the traders were negotiating legitimate deals in futures for firms who actually had the grain for sale, for exporters who would take delivery of the actual wheat for shipment, for milling companies who would grind it into actual flour.
Because trading for delivery in future months affords opportunity for speculation, it is not to be condemned necessarily. It is the balance wheel which steadies the entire grain business. Even the speculating element is not without its uses at times and the layman who ventures to condemn This or That out of hand will do well to make sure he understands what he is talking about; for the business of the grain dealer is so subject to varying conditions and so involved in its methods that it is one of the most difficult to be found in the commercial world.
Trading in futures finds birth in the very natural disinclination of Mr. Baker to buy his flour by the warehouseful. He does not want to provide storage for a year's supply, even if he could stand such a large bite out of his capital without losing his balance. So while the bakery man is anxious to order his flour in large quantities for future use, he is equally anxious to have it delivered only as he needs it, paying for it only as it reaches him—say, every three months.
Before contracting for the delivery of the flour on this basis Mr. Miller must look to his wheat supply on a similar basis of So-Much every So-Often and he, too, has an eye on storage and, like his friend the baker, he "needs the dough," as they say on the street, and he does not want to part with any more hard-working money than he can help. Accordingly he looks around for somebody who has wheat for sale and will sell it right now at a fixed price but defer delivery and payment to a future date. With the price of his wheat thus nailed down, Mr. Miller can set the future price on his flour to his customers, taking delivery and paying for the wheat as he requires it for filling his flour orders.
In the meantime where is the wheat? Out near the fields where it was grown, in country elevators perhaps, ready for transportation to market as the law of supply and demand dictates instead of the whole crop being dumped at once and smothering prices below the cost of production. Or perhaps it is in store at the terminal where Mr. Exporter can handle it. It will be seen that the mutual arrangement to buy and sell for future delivery simplifies matters for everybody in the grain trade.
The manner in which the legitimate trader in futures protects himself from price fluctuation is easily understood. While a deal in cash wheat would refer to a definite shipment as shown by warehouse receipts, a deal for future delivery is merely an obligation involving a given quantity of grain at a given time at a given price. Being merely a contract and not an actual shipment, the seller does not require to produce the grain immediately nor is the buyer required to hand over the purchase price when the trade is made. Thus it is possible to buy a thousand bushels to-day for October payment and sell a thousand bushels to-morrow for October delivery, cancelling the obligation. The trade can be balanced at any time before October 1st. Again, a thousand bushels of October wheat may be bought (or sold) to-day and the future switched to May 1st by the sale (or purchase) of a thousand bushels for May delivery.
Take the man with the blazing red tie half way up his collar, the man who this morning offered to sell fifty thousand bushels for October delivery at $1.43 7/8. Suppose that he represents a company with a line of elevators at country points. To his office at Winnipeg has come word from country representatives that fifty thousand bushels have been purchased for the company. At once he enters the Pit and sells fifty thousand bushels for delivery at a future date, thereby "hedging" the cash purchase out in the country. Once this future of fifty thousand is sold the company no longer is interested in market prices so far as this grain is concerned. If the market goes up, their cash grain is that much more valuable, offsetting the loss of an equal amount on the future delivery; if the price goes down, what is lost on the cash wheat will be gained on the future. So that the difference between the price paid for the grain at the country elevators and the price at which they sold "the hedge" is the only thing which need concern the grain company and it is here they must look for expenses and profits. This method of hedging enables a grain company to make purchases in the country on much smaller margins than was possible in the early days when the marketing machinery was less completely organized. It eliminates to the greatest extent the necessity of speculating to cover risks.
The speculator's opportunity comes in connection with the fluctuations of the market in deliveries. He merely bets that prices will go up or down, as the case may be. He is not dealing in actual wheat but in margins. He buys to-day through his broker, who has a seat on the Exchange, and deposits enough money to cover a fluctuation of say ten cents per bushel. If October wheat to-day is quoted at $1.45 his deposit will keep his purchase in good standing until the price has dropped to $1.35. He must put up a further deposit then or lose the amount he has risked already, the broker selling out his holding. If the speculator is on the right side of the market—if he has guessed that it will go up and it does go up—he can sell and pocket a profit of so-many-cents per bushel, according to the number of points the price has risen. If he has bet that the market will go down the situation merely is reversed.
The machinery for handling the huge volume of business transactions in a grain exchange must be complete and smooth running to the last detail, so designed that every contingency which may arise will be under control. For simplicity and efficiency in this connection the Winnipeg Grain Exchange occupies a unique position among the great exchanges of the American continent; in fact, it is a matter for wonder that its methods have not been copied elsewhere.
The Winnipeg Grain and Produce Exchange Clearing Association is a separate organization within the Exchange and to it belong all the Exchange members who deal largely in futures. Each day the market closes at 1.15 p.m. By two o'clock every firm trading on the floor must hand in a report sheet, showing every deal made that day by the firm—the quantity of wheat bought or sold, the firm with whom the trade was made, the price, etc. If on totalling the day's transactions it is found that they entail a loss, the firm must hand over a cheque to the Clearing House to cover the loss; if a gain in price is totalled the Clearing House will issue a cheque for it to the firm so gaining. Thus, if Jones & Brown have bought wheat at $1.39 and the market closes at $1.35 they lose four cents per bushel on their purchase and must settle the difference with the Clearing House. All differences between buyers and sellers must be settled each day and if the volume of trades has been heavy, the Clearing House staff work on their books—all night, if necessary—until everything has been cleared for next day's business. The firm which loses to-day may gain by to-morrow's trades, maintaining good average business health. Any private trading which may take place after official trading hours is known as "curb" trading.
The rules of the Clearing House are very strict. Any firm which fails to report by two o'clock is fined. The Clearing House assumes responsibility for all purchases and sales and, being actually liable, keeps close tab on every firm. Each firm has a certain credit on the books of the Clearing House, allotted impartially, according to its standing, and this credit forms the fixed basis of that firm's dealings. If its activities exhaust the line of credit, the Clearing House calls for "original margins" at once—a deposit of so-many cents per bushel for every bushel involved and for every point which the market drops. The amount per bushel called for is entirely at the discretion of the Clearing House authorities and if the quantity of grain reaches dangerous proportions the deposit required may be set so high that it becomes practically equivalent to cash purchase. To "corner the market" under these conditions would require unlimited credit with the Clearing House.
When Jones & Brown are "called" for deposit margins they drop everything and obey. They have just fifteen minutes to reach the bank with that cheque, have it "marked" and rushed to the Clearing House. If they fail to arrive with it the Manager of the Clearing House will step into their office and if there were any "hemming and hawing" Jones & Brown would be reported at once to the Secretary of the Exchange who would call a hurry-up meeting of the Exchange Council and Messrs. Jones & Brown would find themselves posted and all trades with them forbidden.
All clerical errors in regard to trades are checked up by the Clearing House and fines paid in for mistakes. Only a nominal charge is made for its services—enough to pay overhead expenses—but the fines have enabled the Clearing House to accumulate a large Reserve Fund which gives it financial stability to provide for all responsibilities should occasion arise through failure of any firm. All futures which have not been cancelled before delivery date are negotiated through the Clearing House and with its assistance the grain can be placed just where it should go and tremendous quantities of it are handled without a hitch and with the utmost despatch.
Excitement in the Pit is not always over wheat. It may be oats. It was Canadian Western Oats which became the storm centre in 1911 when the Grain Growers got into difficulty with the "bears." Traders who attempt to boost prices are known as "bulls"; those who are interested in depressing the market are "bears." A trader may be a bear to-day and a bull to-morrow; thus the opposing groups are constantly changing in make-up and the firm which was a chief opponent in yesterday's trading may be lined up alongside the day following, fighting with instead of against. It is all in the day's business and the strenuous competition on the floor, into which the uninitiated visitor reads all manner of animosity and open anger, is a very misleading barometer to the actual good feeling which prevails.
In recording what now took place in the Pit in connection with the farmers' commission agency it will be well to remember that the rest of the traders would have acted in the same way toward any firm which was fool enough to leave the opening for attack. It may be that as the thing developed some of those who were specially interested in the downfall of the farmers' organization seized the opportunity to ride the situation beyond the pale of business ethics and in their eagerness to be "in at the death" revealed special vindictiveness. But in view of the long struggle with this element it was only what the Grain Growers should have expected when they ran their heads deliberately into the noose.
The situation was this: Shortly after New Year's the export demand for Canadian Western Oats became heavy and it looked as if in Great Britain and all over Europe, where the oat crop had been small, there would continue to be a shortage of oats. In spite of this situation, however, no sooner was the proposed reciprocity agreement reached between the Canadian and United States governments of the day, on January 26th, than market prices began to go down.
The then Manager of the Grain Growers' Grain Company came to the conclusion that this price lowering was a local condition and that the export market for oats was too strong to justify it or sustain it.
"I'll just step into the market and buy some oats," said he. "Later on I'll sell for export at a satisfactory figure." Accordingly, one fine morning he went into the Pit and began to buy.
The Manager's motive in attempting to sustain the market may have been of the best; but it was the first time that such methods had been attempted by the Grain Growers—methods which were not at all in keeping with the avowed principles of the Company. The Board of Control had every confidence in their Manager and, although he was merely a salaried employee and not an executive officer, he had been given a pretty free hand in the conduct of the Company's operations. Apparently it did not occur to him that he should consult the Board before entering the market on a speculative basis. Had the Board known what he was about to do they would have vetoed it; but when they did discover what was afoot it was too late to prevent the situation. It developed very swiftly.
"The Grain Growers are up to the neck in May oats," was the whisper which passed about among the other traders. That was all that was necessary.
"Sell May oats! Sell May oats!"
On every side of the Pit they were being offered by thousands of bushels—five—twenty-five—fifty thousand! The idea was to load up the Grain Growers' Grain Company to the point where their line of credit with the Clearing House would become exhausted, after which every bushel would require a marginal deposit. Then when the Company could carry no further burden the Clearing House would be forced to dump back the oats onto the market, breaking it several cents per bushel. At this lower price the traders who had obligated themselves to make these big deliveries would buy back the necessary supply of oats at a profit and everything would resume the even tenor of its way—except the Grain Growers, of course. Their serviette would be folded. Their chair would be pushed back from the table! They would bethrough!
Up until now all the troubles of the farmers in marketing their own grain may be said to have come from sources outside themselves; but in the present instance they had nobody to blame but themselves for the predicament. It arose at a time, too, when the other grain dealers were beginning to recognize the farmers as a force in the grain market—a force which had come to stay. It was unfortunate, therefore, that just as they were beginning to acquire a standing as a solid and sensible business concern, the Grain Growers' Grain Company should find themselves driven into a corner, their backs to the wall, the focus of pointing fingers and gleeful grins.
The fact that a salaried employee, not an officer of the Company, had acted on his own initiative without the consent of the directors was no excuse for a reliable business concern to tender as such. The first question flung back at them naturally would be: "Then your 'Board of Control' doesn't control, eh?" For although the Board of Control did not know what their Manager was doing until it was too late to prevent it, they should have known. That is what they were there for—to protect the shareholders from managerial mistakes.
However, there they were. The only thing they could do was to fight it out to a finish in the Pit and, if they survived, to see that no similar mistakes occurred in the future.
All sorts of rumors were flying about the corridors of the Exchange, gathering momentum as they passed from lip to lip, swelling with the heat of the excitement until it was a general guess that the Grain Growers must be loaded with anywhere between five and eight million bushels of oats more than they had been able to sell.
It was only a guess, though, and a wild one. Many traders would have given a good round sum to know exactly how the farmers' company stood on the books of the Clearing House. Only the Clearing House and the Company itself knew the true figures and the Clearing House officials were men of the highest integrity who dare not be approached for secret tips.
Thanks to the splendid export connection which had been built up in the Old Country and to the equally solid financial relations with the Home Bank, the farmers' agency was selling oats for export very rapidly. It began to look as if they would get out from under the threatening avalanche without much loss, if any.
The Company's old-time enemies apparently saw an opportunity to undermine its credit at this crisis; for attacks began to appear in print—accusations of speculation, of official negligence and so forth. If the Grain Growers could be prevented from paying for the large quantity of oats, delivery of which they would have to take on May 1st to complete the export sales made during the winter—if they could be made to fail in filling these export orders when navigation opened, they would be smashed.
But in attacking the credit of the Grain Growers, these opponents overlooked the rapid increase in paid-up capital and the ability of the farmers to secure money outside of Winnipeg. It was not being forgotten by the Grain Growers that upon the first day of May there would be delivered to them over 2,200,000 bushels of oats.
When the day arrived, therefore, the money was on hand to meet every contingency. Every bushel was paid for immediately. Within a few weeks half of the quantity was riding the waves of the Atlantic, bound for the Old Country to fill part of the sales already made there.
Before long some of the grain companies which had sold the oats were trying to buy them back. Had the farmers' company been a speculating firm they might have turned upon the market and cornered the oats with a vengeance. It was one of those rare occasions when a corner could have been operated successfully to a golden, no-quarter finish; for the export demand was sustained and the local market could have been made to pay "through the nose" for its fun.
Fishes, beasts and fowls are to eat each other, for they have no justice; but to men is given justice, which is for the best.—Hesiod.
The situation was changing indeed for the Grain Growers in Western Canada. In spite of all opposition the farmers had made themselves a factor in the grain trade and had demonstrated their ability to conduct their affairs on sound business principles. Co-operative marketing of grain no longer was an untried idea, advocated by a small group of enthusiasts. The manner in which the farmers' pioneer trading agency had weathered the stormy conditions of its passage from the beginning and the dignified stand of its directors—these gradually were earning status in the solid circles of the business world.
Out in the country also things were different. Those farmers who at first had been most certain that the trading venture would crumble away like so many other organized business efforts of farmers in the past, now were ready to admit their error—to admit that a farmers' business organization, managed by farmers, could succeed in such ample measure that its future as a going concern was assured. Instead of hovering on the outskirts of its activities, like small boys surrounding a giant fire-cracker on Victoria Day—waiting for the loud bang so freely predicted—these gentlemen were beginning to look upon it as a safe investment.
The success of the Grain Growers' Grain Company was an argument for co-operation which could not be overlooked and the co-operative spirit spread rapidly among the farmers in many districts.
It will be remembered that the promoters of the grain company had intended originally to operate under a Dominion charter but were compelled by circumstances to content themselves with provincial powers. The farmers now were finding themselves too restricted and application was made for a new charter which would facilitate the transaction of business in other provinces than Manitoba. Special powers were asked for and by special Act of Parliament the charter was granted in 1911 in the face of considerable opposition at Ottawa from those whom the farmers regarded as representing the Canadian Manufacturers' Association and the Retail Merchants' Association.
For the trend of the organized farmers was quite apparent. No secret had been made of the views entertained by the Grain Growers regarding co-operation. To familiarize every member of the various organizations with the history of co-operative achievements in other countries had been the object of many articles in theGrain Growers' Guideand much speech-making from time to time. The possibility of purchasing farm supplies co-operatively in addition to co-operative marketing of grain was being urged convincingly. And during the long winter evenings when the farmer shoved another stick into the stove it was natural for him to ask himself questions while he stood in front of it and let the paring from another Ontario apple dangle into the ash-pan.
"The fellow who made that stove paid a profit to the Iron an' Steel Trust who supplied the raw iron ore," considered he. "Then he turned around an' added a profit of his own before he let the wholesaler have it. Then the wholesaler chalked up more profit before he shipped it along to Joe Green over in town an' Joe just naturally had to soak me something before I got her aboard for home. That's profits on the profits! It's a hot proposition an' it's my money that goes up the flue!"
When he added further profits which he figured might be due to agreements between supposed competitors in prices, the Grain Grower was quite ready to believe that he had paid about twice as much for that stove as the thing would cost him legitimately if he dealt with the maker direct. Here was the High Cost of Living that everybody was talking about. The remedy? The same chance as the Other Fellow for the farmer to use the resources of Nature and, by co-operation, the reduction to a minimum of production and distribution cost.
"I've done it with my grain. Why can't I do it with what I need to buy?" That was what the Grain Grower was asking himself. "Why must I feed and clothe and buy the smokes for so many of these middlemen?"
So when the directors of the grain-trading company came before him with the suggestion of buying a timber limit in British Columbia in order to put in their own saw-mills eventually to supply building materials on the prairie, the Grain Grower slapped his leg and said: "Good boy! An' say, what about a coal mine, too?"
That was the beginning of great developments for the organized farmers of Western Canada. It was the beginning of new furrows—the opening up of new vistas of emancipation, as the farmer saw it. And as the furrows lengthened and multiplied they were destined to cause much heart-burning and antagonism in new directions.
The timber limit which the Grain Growers' Grain Company purchased was estimated to contain two hundred and twenty-two million feet of lumber. A Co-Operative Department was opened with the manufacture and sale of more than 130 carloads of flour at a saving to the farmer of fifty cents per cwt, even this small beginning registering a drop in milling company prices. Next they got in touch with the Ontario Fruit Growers' Association and sold over 4,000 bbls. of apples to Western farmers at the Eastern growers' carload-lot price, plus freight, plus a commission of ten cents per barrel. More than one hundred carloads of coal were handled in one month and the farmers then got after the lumber manufacturers for lumber by the carload at a saving of several dollars per thousand feet.
Still experimenting, the Grain Growers' Grain Company added to the list of commodities in 1912-13—fence posts, woven fence wire, barbed wire and binder twine. Followed other staples—cement, plaster, sash and doors, hardware and other builders' supplies; sheet metal roofing and siding, shingles, curbing, culverts, portable granaries, etc.; oil, salt and other miscellaneous supplies; finally, in 1914-15, farm machinery of all kinds, scales, cream separators, sewing machines and even typewriters. Of binder twine alone nearly seven million pounds was handled during this season. Thus did co-operative purchasing by the farmers pass from experiment to a permanent place in their activities.
Expansion was taking place in other directions also. In 1912 the Company leased from the Canadian Pacific Railway a terminal elevator at Fort William, capacity 2,500,000 bushels. A small cleaning elevator was acquired at the same place and, with an eye to possible developments at the Pacific Coast, a controlling interest in a small terminal elevator in British Columbia was purchased. At Port Arthur, on a six-hundred-foot lake frontage, a new elevator has just been built with a storage capacity of 600,000 bushels.
So much for terminal facilities of this farmers' pioneer trading organization. Now, what about the country elevators for government control of which the farmers had campaigned so vigorously in the three Prairie Provinces? As we have seen, the problem had been handled in Saskatchewan along very different lines to the method adopted in Manitoba. In Manitoba the 374 elevators, owned by the Provincial Government and operated by the Provincial Elevator Commission, showed a loss. It was even hinted in some quarters that the Manitoba Government had no intention in the first place of operating at anything but a loss. Whether or not there was any ground for these irreverent suspicions, the fact remained that the Government elevator system in Manitoba was beginning to assume the bulk of a snow-white elephant. The Government, not entering the field as buyers, had tried to run the elevators as a storage proposition solely. In 1910-11 the loss had exceeded $84,000 and the year following was not much better. At last the Government said in effect to the Grain Growers:
"We've lost money on this proposition. We tried it out to please you farmers, but you're still dissatisfied. Try to run 'em yourselves!"
"We'll just do that," replied the farmers, although the Grain Growers' Grain Company was not enthusiastic over the prospect of converting the elevator failure into immediate financial success.
It was too much to expect. At many points the Government owned all the elevators in sight. In some places there was too much elevator accommodation for the district's volume of business. In certain cases the elevators which had been sold to the Government were practically discards to begin with. However, the need for improvement in the service which the farmers were getting at country points was so very great that finally, in 1912, the farmers assumed control of the government system in Manitoba.
It was late in August when this came about. With only three or four weeks in which to prepare for the season's crop, make repairs, secure competent managers, travelling superintendents and office staff the results of the first season scarcely could offer a fair test. Even so, prices for street grain went up at competing points. Line elevator companies began asking the farmer for his grain instead of merely permitting him to place it in their elevators.
The farmers were quick to note this and asked that the elevator service be continued by their company. With better organization the following season brought still greater improvement in service. Prices rose. The special binning service from their own elevators the farmers found genuine, not just a last-minute privilege granted to secure their grain. In spite of bad crop conditions in 1914-15, the elevators continued to succeed under the farmers' own management and, the year following, letters of highest praise from farmers everywhere marked the complete success of the undertaking. So excellent was the service now being rendered by the Company that independent Farmers' Elevators in several instances approached the Grain Growers and sought their management.
The handling of co-operative supplies at elevator points began in 1913-14. Flour houses were erected where prices were out of proportion and at other places the elevator agents began to arrange for carload shipments and proper distribution of coal among the farmers at a saving of from two to three dollars per ton.
These co-operative lines at elevator points soon were enlarged with much success. In addition to the elevators leased from the Manitoba Government the Grain Growers' Grain Company bought outright, erected or leased sixty elevators of its own.
Those who were watching all this steadily grew more restive. The Farmers' Movement in the West was fast becoming a subject of bitter debate.
"When farmers advance to the last furrow of plowed land on the farm they breast the fence which skirts the Public Highway," argued many Men of Business. "They are climbing over the fence!"
But the organized farmers were not inclined to recognize fences in restriction of honest competition. They believed they were on the Open Range and held unswervingly on their way.
We sometimes had those little rubs which Providence sends to enhance the value of its favors.—Vicar of Wakefield.
While developing co-operative purchasing of farm supplies the pioneer business organization of the farmers had continued its policy of expansion in the grain business. The ideal of the farmers had been to reduce to the lowest possible point the cost between the producer in Western Canada and the Old Country consumer who bought most of the Western grain. By engaging in the export business they hoped to become an influence in keeping export values—the price at Port William, in other words—at a truer level.
Prior to 1912 the export activities of the Grain Growers had been restricted necessarily to an experimental basis; but on January 1st, 1912, the "Grain Growers' Export Company," as it was called, was organized for business on a larger scale.
It now becomes necessary to record a final test of the Grain Growers' Grain Company inasmuch as it demonstrated the mettle of the farmers in a significant manner—the test of serious internal disagreement. Of all the threatening situations through which this organization had passed none was more critical than this later development.
The trouble was a brew which simmered for some time before the steam of it permeated beyond directors' meetings. It began early in 1912 as an aftermath of the unfortunate deal in oats, bubbled along to a boil with the fat finally in the fire at the annual meeting of the shareholders. The consequences were ladled out during 1913 and the bill was settled in full at the annual meeting that year with a cheque for nearly a quarter of a million dollars.
Like most internal troubles in business organizations the personal equation entered into it. Certain of the directors were inclined to criticise other directors and to be somewhat dictatory as to how the farmers' business should be conducted. With the idea of improving the system of management, the directors at this stage abolished the Board of Control and the President was made Managing-Director with supervisory and disciplinary powers.
Not long after this, at a special meeting of the directors to consider future management, four of the nine directors introduced a resolution to declare the position of Managing-Director vacant. They failed to carry it—and promptly resigned.
This occurred in March. In the June columns of theGuidethese four directors addressed an open letter to the shareholders, urging full representation at the forthcoming annual meeting in order that their criticisms might be threshed out. President Crerar joined in the request for a full meeting of shareholders. If the loyalty or ability of any director was to be questioned because he refused to surrender his judgment to other directors who might disagree with him on certain matters, it was time to have an understanding. So far as he was concerned, he could not agree to become a mere speaking-tube for others who might want their own way against his own convictions of what was in the best interests of the farmers.
When the annual meeting opened, on July 16th, there was a record attendance of shareholders and during the routine preliminaries it was evident that expectancy was on tip-toe among the farmers. The split in the directorate was a vital matter.
In delivering his annual address the President detailed the business of the organization for the past year, referring but briefly to the facts which had led up to the resignation of the four directors. The Shareholders' Auditor followed with the balance sheet, giving detailed accounts of receipts, expenditures, assets and liabilities; he answered all questions asked. Then came a resolution, expressing the thanks of the shareholders to the President—and this moment was chosen by the leader of the revolt to spin his pin-wheels.
The debate began at three o'clock in the afternoon. It did not end until ten at night. The President retired from the chair and the Auditor was called on for detailed information, covering a period of several years past. In the long speech which was then made by the leader of the critics the President was declared responsible for all the alleged mismanagement and his retention in office undesirable.
To the surprise of everyone a fifth director now took the floor and joined the attack. Not having been one of the four directors who resigned, this new criticism was unexpected and the tension of the meeting grew. After amusing himself and the audience for awhile with a humorous speech, No. 5 ended by suggesting that the President was not sufficiently wicked to be driven from office.
Arose the remaining three members of the resigning quartette and, one after another, had their say. Finally, when words failed them and they rested their case, the President spoke briefly.
In the annual address, which he had delivered that morning, no attempt had been made to deny the inadequacy of the Company's office organization to cope with the exceptional crop conditions of 1911 and 1912. The latter season particularly had been very trying owing to the lateness of the crop and the wet harvesting conditions. Twenty-five per cent. of the grain, which started for market a month late, was tough, damp or wet. The arrival of snow had prevented hundreds of thousands of acres from being threshed and, on top of it all, railway traffic had become congested so that cars of grain got lost for weeks and even months and there were long delays in getting the outturns of cars after they were unloaded. Money was scarce and farmers who were being pressed for liabilities to merchants, banks and machinery companies found it hard to get cars; naturally, once they had shipped, they were in no mood for further delays.
Owing to the condition of the grain, too, the grading was so uncertain that exceptional care had been necessary in accepting bank drafts on carloads of grain for amounts nearly double their possible value under the unusual current crop conditions. Even with the greatest care the Company found that in many instances they had given greater advances than were realized when the cars were sold. The refusal of drafts, passed by some local banks for amounts the managers should have known could not be met, led to many hard things being said against the farmers' agency.
Under these conditions it was only to be expected that the work in the office would become congested badly for weeks at a stretch. Double the amount of work was entailed in handling a given quantity of grain, compared to the season before. The Company was handicapped for office space also and errors were bound to occur in a business involving so much detail that a simple mistake might lead to infinite trouble. Correspondence had not been answered as promptly as it should have been, the necessary information regarding shipments being unavailable.
All of these things had been met frankly in the President's annual address and now when he brought the day's animated debate to a close he added merely a word or two regarding the strong financial position to which the farmers' pioneer trading organization had won its way in the commercial world. He pointed out the future that lay before it. Upon personal attacks he did not comment at all.
Immediately a unanimous vote of thanks for his untiring work and loyalty was tendered Mr. Crerar. The debate was over. The following morning the officers for the ensuing year were chosen and only one of the four directors who had resigned from the old Board was re-elected. He withdrew and the whole incident was closed.
But the real test was yet to come. The withdrawal of the four directors had left but five to cope with the difficult situation of the Export Company. It had found itself with a large amount of ocean freight on its hands—freight which had been secured on favorable terms from shipping agents for use later in transporting grain which the farmers' agency expected to sell in the Old Country. It was decided to cut off the export business entirely for the time being and to re-let the ocean shipping space to other exporters. The price of ocean freight fluctuated to such an extent, however, that rather than accept an immediate loss it was thought better to use the freight, after all, making shipment to fill.
At the time of the sixth annual meeting the Export Company had stood about level on the books; but during the two succeeding months the grain shipped from Fort William went out of condition while crossing the ocean and when it arrived in port the Old Country buyers refused to look at it. Heavy charges had to be met in treating to bring it to sale condition and very heavy losses were incurred. Before the matter was cleaned up finally these losses totalled more than $230,000.
When a quarter of a million dollars has been expended in a direction where tangible results have not been in evidence—when it has been sacrificed apparently for the sake of a principle—then does the manner in which such a loss is accepted become significant. The exporting of grain had begun to receive particular attention from the shareholders of the Grain Growers' Grain Company following the season of 1907-8 when they discovered the apparent margin of profit in the export business during much of the season to be from eight to twelve cents per bushel. This had been due, no doubt, to the fact that it was a time of financial stringency and only a few exporting firms could get the money necessary to carry on the business. The export value of grain, the farmers had figured, should be its value in the world's markets, less the cost of delivering it. By engaging in the export business, obtaining their cable offers regularly from the Old Country, they felt that their competition would be a factor in governing the prices paid the farmer, thereby benefiting every farmer in the West.
That this had been accomplished the shareholders of the trading company were convinced. Therefore, instead of losing their heads as well as this large sum of money, they examined the situation coolly and sanely, making up their minds that the loss was due to the grain going out of condition because of the unusual weather which had characterized the season. No doubt the executive and directors had been handicapped by their lack of knowledge as to the methods and manner in which the export business was done; but that was to be expected and only by experience could they learn.
"Can the export part of our business be developed successfully with a little more time?" asked the farmers.
"Yes, we believe so," replied their officers.
"That's all we want to know. Write a cheque to cover this loss, reorganize the Export Company and stick to it."
This faith in their officers, in themselves and in the cause they had at heart was justified within the next two seasons when success was achieved with the subsidiary concern and the farmers were able to congratulate themselves that they had been sufficiently level-headed not to allow themselves to be stampeded from the exporting field altogether to the great weakening of their influence.
The accomplishments of the Grain Growers in marketing their own grain cannot be dismissed with careless gesture. Their severest critic must admit that the manner in which the farmers conducted themselves in the face of the situation that threatened entitles them to respect.
An old man on the point of death summoned his sons around him to give them some parting advice. He ordered his servants to bring in a faggot of sticks, and said to his eldest son: Break it. The son strained and strained, but with all his efforts was unable to break the bundle. The other sons also tried, but none of them was successful. Untie the faggots, said the father, and each of you take a stick. When they had done so, he called out to them: Now break; and each stick was easily broken. You see my meaning, said their father. Let affection bind you to one another. Together you are strong; separated you are weak.—Aesop.
Eventful years, these through which the Grain Growers of Western Canada were passing. While the Grain Growers' Grain Company was undertaking the initial experiments in co-operative purchasing of farm supplies, showing the Manitoba Government that farmers could run elevators satisfactorily and fighting its way forward to success in the exporting field, how were things getting along in Saskatchewan? With $52,000 and another four or five hundred in loose change tucked away in its hip pocket as the net profit of its first season's operations the new system of co-operative elevators had struck out "on a bee line" for Success and was swinging along at a steady gait, full of confidence. The volume of business handled through these elevators the first year had been affected by the failure of the contractors to finish construction of all the elevators by the dates specified. Even so, the new company had handled 3,261,000 bushels of grain, more than half of it being special binned.
In planning to build eighty-eight new elevators in 1912 and to purchase six, thereby bringing the total to 140 co-operative elevators, the directors thought it wise to form a construction department of their own instead of relying upon outside contractors. Also it was decided to open a commission department of their own at Winnipeg, the volume of business in sight being very encouraging. This move was not made, however, because of any dissatisfaction with the Grain Growers' Grain Company's services as selling agent; on the other hand, although crop conditions had been perhaps the most unfavorable in the history of Saskatchewan and the grain with its diversity of grades therefore very difficult to market satisfactorily, the Board of Directors acknowledged in their annual report that the wisdom of the arrangement with the Grain Growers' Grain Company had been proved by the satisfactory working of it.
The volume of business handled by the 137 elevators in operation the second year jumped to 12,900,000 bushels with a net profit of approximately $168,000, and it was apparent that the general acceptance of the co-operative scheme throughout the province would mean organization upon a large scale. This was emphasized during the 1913 grain season when 192 elevators were in operation and about 19,500,000 bushels of grain were hauled in to the co-operative elevators by farmers.
This rapid expansion of the Saskatchewan Co-Operative Elevator Company was entailing such an increase in staff organization that it became necessary to provide special office accommodation. Accordingly a site for a permanent building of their own was purchased in 1914 at Regina and the following year a modern, fireproof building was erected. It stands two storeys on a high basement, with provision for additional storeys, occupies a space of 9,375 square feet, has interior finish of oak and architecturally it is a matter of pride to the farmers who own it. This building has become the headquarters of the Saskatchewan Co-Operative Elevator Company and likewise the Saskatchewan Grain Growers' Association, the offices of the latter occupying the entire top floor.
While the erection of this building afforded visible proof of financial progress the Saskatchewan farmers were warned by the directors and the general manager of the "Co-Op" that co-operation which was allowed to degenerate into mere production of dividends would but reproduce in another form the evil it was intended to destroy. The ideal of service was the vital force which must be kept in mind and the work of the Grain Growers' Association in fostering this ideal must be encouraged.
"The Association has its great work of organization, education and agitation," stated Charles A. Dunning, the elevator company's manager, "and the company the equally great work of giving practical effect to the commercial and co-operative ideals of the Association, both institutions being branches of one united Farmers' Movement having for its object the social and economic uplift of the farming industry."
Not a little of the early success of the Saskatchewan Co-Operative Elevator Company was due to the energy and business ability which Dunning brought to bear upon its organization and development. The story of this young homesteader's rise from the ranks of the Grain Growers is worth noting. It was back in 1902 that he first reached the West—a seventeen-year-old Englishman, "green" as the grass that grew over there in Leicester. He did not know anything then about the historic meeting of pioneer grain growers which Motherwell and Dayman had assembled not long before at Indian Head. He was concerned chiefly with finding work on a farm somewhere and hired out near Yorkton, Saskatchewan, for ten dollars a month. After awhile he secured one of the Government's 160-acre slices of homestead land and proceeded to demonstrate that oxen could haul wheat twenty-five miles to a railway if their driver sat long enough on the load.
There came a day when Dunning, filled with a new feeling of independence, started for Yorkton with a load of wheat and oats. It was along towards spring when the snow was just starting to go and at a narrow place in the trail, as luck would have it, he met a farmer returning from town with an empty sleigh. In trying to pass the other fellow Dunning's sleigh upset. While helping to reload the farmer imparted the information that oats were selling for eight cents and all he had been able to get for his wheat was something like thirteen cents in Yorkton the day before! The young Englishman's new feeling of "independence" slid into his shoe-packs as he stared speechless at his neighbor. Right-about went his oxen and back home he hauled his load, angry and dismayed and realizing that something was wrong with Western conditions that could bring about such treatment.
When a branch of the Grain Growers' Association was formed at Beaverdale, not far from his homestead, it is scarcely necessary to say that young Dunning joined and took an active part in the debates. Finally he was chosen as delegate for the district at the annual Grain Growers' convention at Prince Albert on condition that he could finance the trip on $17.50. The story is told that Dunning figured by making friends with the furnace man of one of the hotels he might be allowed to sleep in the cellar for the week he would be in Prince Albert and manage to get through on this meagre expense fund! At any rate he did find a place to lay his head and, if reports be true, actually came back with money in his pocket.
It was at this convention that the young man first attracted attention. The delegates had deadlocked over a discussion in regard to a scheme for insuring crops against hailstorms in Saskatchewan, half of them favoring it and half opposing it. The young homesteader from Beaverdale got up, ran his fingers through his pompadour and outlined the possibilities of co-operative insurance which would apply only to municipalities where a majority of the farmers favored the idea. He talked so convincingly and sanely that the convention elected him as a director of the Association and later when the co-operative elevator scheme was broached he was elected vice-president of the Association and the suggestion was made that he undertake the work of organizing the new elevator concern. Incidentally, the man who suggested this was E. A. Partridge, of Sintaluta—the same Partridge who had fathered the Grain Growers' Grain Company and who already had located T. A. Crerar, of Russell, Manitoba.
Out of Dunning's suggestion at Prince Albert grew the Saskatchewan Hail Insurance Commission which was recommended to the Provincial Government by the Association in 1911 and brought into operation the following year. The legislation provided for municipal co-operative hail insurance on the principle of a provincial tax made operative by local option. Twenty-five or more rural municipalities having agreed to join to insure against hail the crops within the municipalities, authority would be granted to collect a special tax—not to exceed four cents per acre—on all land in the municipalities concerned. Administration would be in the hands of the Hail Insurance Commission, which would set the rate of the special tax. All claims and expenses would be paid from the pooled fund and all crops in the respective municipalities would be insured automatically. If damage by hail occurred insurance would be paid at the rate of five dollars per acre when crop was destroyed completely andpro rataif only partially destroyed. This co-operative insurance scheme was instituted successfully in the fall of 1912, soon spread throughout Saskatchewan and was destined eventually to carry more than twenty-five million dollars of hail insurance.
Shortly after the launching of co-operative hail insurance the discussions among the Saskatchewan farmers in regard to the co-operative purchasing of farm commodities for their own use came to a head in a request to the Provincial Government for the widening of charter powers in order that the Association might organize a co-operative trading department. In 1913 authorization to act as a marketing and purchasing agent for registered co-operative associations was granted and next year the privilege was extended to include local grain growers' associations.
Thus the Trading Department of the Saskatchewan Grain Growers' Association takes the form of a Central Office, or wholesale body, through which all the Locals can act collectively in dealing with miners, millers, manufacturers, etc. The Central sells to organized Locals only, they in turn selling to their members. The surplus earnings of the Central are distributed to the Locals which have invested capital in their Central, such distribution being made in proportion to the amount of business done with the Central by the respective Locals.