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with feed, so you could not get a tax on that. That would throw that tax up on the remaining 95 percent. Then a lot of flour is 75 percent patent. There is 20 percent clear that might pay a little of the tax, so that the tax would really be on the average over $3 per barrel. I will be glad to show you that in detail.
Senator FRAZIER. Of course, out in Senator Wheeler's territory and in my territory they figure 472 bushels to a barrel of flour. We have the high grade wheat, of course, that makes more flour, makes more bread.
Senator NORRIS. I would like to ask a question about the freight at this point in the testimony. I agree, perhaps not as to the relative importance, but it seems to me anybody who will study the subject must be impressed with the fact that the farmer is paying too high a freight rate, and while I do not think that would solve completely his problems, it is a great step in the right direction if it should be rectified. What I am interested in is how would you lower the freight that the farmer has to pay? How can it be done?
Mr. LINGHAM. I do not know, Senator Norris.
Senator NORRIS. I think I know how it could be done, but unfortunately I am in a very small minority, evidently.
Mr. LINGHAM. I believe, Senator Norris, if a conference of railroad executives were called today, possibly by the Interstate Commerce Commission, sitting informally around the table, my impression is that they will be glad to lower freight rates. Of course, now I am talking outside of my district.
Senator NORRIS. I understand, but I think you have made a practical suggestion there if we could utilize it. This committee, of course, does not have jurisdiction of it, but I would like to see it done, but if your remedy is to call in the man who is going to cut down the freight rates and get him to consent when the country is at your mercy, just begging you to lower freight rates, I do not think you have got a practical solution. You will not get reduction in that way.
Mr. LINGHAM. Well, the suggestion has been made that the Government subsidize the railroads to some extent. I would not want to make that suggestion.
Senator FRAZIER. They have been doing that, have they not, and the railroads are going broke too?
Mr. LINGHAM. Well, I do not make that as a suggestion.
Senator NORRIS. You can break down most any machine if you charge too much for its use. Mr. LINGHAM. That is what they have done, I think.
Senator NORRIS. I think so. But what I am trying to get at is, how are we going to rectify it?
Mr. LINGHAM. Well, I believe that if the meeting of the railroad executives was called, there could be some help along that line.
Senator NORRIS. Would you apply the same thing to the farmer and call him in a meeting and say: “Now, you have got to reduce your prices?” Get his consent to do it? We do not do that in a practical way to get any result if we ask the man who is loaning money, ask him to take a cheaper rate, and we can get it if he gives it to us and we do not get it if he does not want to give it to us, we do not get it. If we applied that to the railroads, we would not get any results.
Mr. Lingham. I have talked a good deal with the director of one very important road. I talked to him only Sunday and he is a very strong believer in the idea that the railroads today would be glad to reduce rates.
Senator NORRIS. Why do they not do it?
Senator WHEELER. Why do they not apply it to the Interstate Commerce Commission?
Senator NORRIS. Instead of asking for an increase of rates, why do they not apply for a reduction of rates, if that is the way they feel about it?
Mr. LINGHAM. I do not know, and I would rather you would talk to a railroad man about that.
Senator FRAZIER. How would it be if you called in the millers to see if they could not reduce the price of flour?
Senator WHEELER. You are representing the millers. Why is it that when the farmer in Montana is getting from 13 to 20 cents a bushel for his wheat, that he has to pay $5.40 for flour? Now, the thing that the people of the country have not gotten clearly is the picture of the farm situation, in my judgment, and they do not realize that the poor devil of a farmer out there is only getting 13 to 20 cents a bushel for his wheat, when the miller sells a barrel of flour for $5.40, and it only takes 472 bushels of that wheat to make a barrel of flour.
Mr. LINGHAM. Senator Wheeler, of course I cannot answer that question. The fact is that in Buffalo flour is selling at under $3 a barrel to the family; why there should be that difference out there I do not know.
Senator FRAZIER. Yes; you do know, of course. The Montana wheat is based on the Minneapolis price less the freight, and the Montana flour is based on the Minneapolis price plus the freight.
You know that as well as anybody else does. You are in the milling business, and of course you know it.
Mr. LINGHAM. Senator Frazier, I must say I do not know the freight structure in Montana.
Senator FRAZIER. Well, you know the way the price of wheat is made in Montana or North Dakota just as well as anyone does. It is based on the price at Minneapolis plus freight.
Mr. LINGHAM. I do not know.
Senator FRAZIER. And when the flour is made right there in Great Falls, Mont., the price of the flour is based on the Minneapolis price plus the freight. The farmers pay the freight both ways, whether the wheat leaves the State or the flour is made right there in the State from wheat grown in the State. You know that as well as anybody does.
Senator WHEELER. That is one of the reasons why you have got the condition that you have in the country, to a large extent, not only as to flour but as to sugar and steel and a lot of these other things; they simply go to work and charge the freight rate whether there is any freight rate in it or not. Take sugar produced right in the State of Montana, right in Billings, Mont., the farmer who buys the sugar has to pay the freight rate from San Francisco to his point.
Senator FRAZIER. The freight rate from New Orleans?
Senator WHEELER. Well, from New Orleans. The same thing is true of the millers in that section.
Mr. LINGHAM. I assure you, gentlemen, that that is a very unusual situation that you present of what the price of flour is, because flour is selling at such very low prices in the East compared to those prices you give.
Senator WHEELER. The same thing is true with reference to the gasoline that the farmer has to buy out there. He has to pay for the freight on the gasoline that is shipped up there, whether it is taken right out of the ground right there and refined right there in the city of Great Falls.
Senator NORRIS. That all brings us back to the freight rate again, the freight-rate structure, where you are paying for freight that does not exist. That is true all the way through, and what I am getting at is, how are we going to remedy it? The only remedy I have heard suggested is that we ask the railroads to change it.
Mr. LINGHAM. Using the very figures given by Mr. Simpson, for instance, the rate from Wichita to Mobile is 44 cents; if you should take only 10 cents off of that--I suppose that was per hundred-but anyway, if you took off 10 cents a bushel freight rate you would put us practically on an export basis today and get right out of your surplus.
Senator WHEELER. The reason why the millers are opposed to this licensing feature of this bill, and why the processors are objecting to the licensing feature is because of the fact that they know that if the Secretary of Agriculture is given the power to license these people he can stop these practices such as I have mentioned with reference to charging the people of Montana and other places freight where there is no freight being charged, and I for one, so far as I am concerned, shall insist upon the licensing feature in this bill if it is the only feature in the bill that passes.
Senator BANKHEAD. You have two.
Mr. LINGHAM. Of course, I think, Senator Wheeler, you are bringing up a very great exception.
Senator WHEELER. No; I am not bringing up an exception; I am bringing up what is the general rule with reference to the situation in North Dakota and Montana, not only with reference to wheat but with reference to sugar and with reference to gasoline and everything else that is produced in the State-manufactured and processed into refined products. No people under the sun can prosper under those conditions. It is time that the millers of the country saw that picture and stopped those practices, and it is time that the manufacturers and the processors of other raw materials saw it and stopped it, because if you do not stop it, you will not have any country or anybody else to buy your products.
Mr. LINGHAM. Senator Wheeler, the only reason that the mills of the country are opposing this legislation from a selfish viewpoint is that we believe it will seriously reduce the consumption, which, of course, means reduced buying of wheat.
Senator FRAZIER. You think they will buy something else?
Senator FRAZIER. Do you not produce the other products that they will buy?
Mr. LINGHAM. No; they will buy potatoes, they will buy no end of things. For instance, this would put the price of wheat flour double the price of rye flour; it would put the price of flour, I should say, four times the price of potatoes, four times the price of carrots, four times the price of corn.
Senator FRAZIER. Do you not think it would have the effect of bringing up the price of those other products?
Mr. LINGHAM. I question it.
Senator FRAZIER. If there were more demand for them? Your argument ought to work both ways; if there is more demand for them, it ought to bring up the price of potatoes, corn, and so forth.
Mr. LINGHAM. My point is this: That I think the demand for the other commodities would be spread over so many that it would not have any great effect. It might have some effect.
Senator WHEELER. What excuse—your argument does not seem to me to work out very well. If the miller is so afraid that the farmer is going to lose his customers if he raises the price of wheat, when it takes 432 bushels of wheat at 20 cents a bushel, the very highest priced wheat, would be about 90 cents that the flour should cost—that is, that the wheat in the flour would cost-and he is selling it for $5.40 in North Dakota. Now, why does not the miller stop and think: “Well, I am going to lose the customers for these farmers and reduce that wheat to where he will get a reasonable profit from it”-reduce the flour? There would not be any complaint on the part of the consumers in the East, if the farmers got a cent raise in price, if it was not taken away from them in some other way.
Mr. LINGHAM. Senator Wheeler, here is what I know about: Wheat on Saturday night was costing my mill 65 cents a bushel delivered at our mill in Lockport, on transit basis, Lockport, N.Y. We were selling that flour delivered in Boston for fancy patent, which takes fully 6 bushels to the barrel—we were selling that delivered in Boston in sacks at $5.05 per barrel. Those figures I know about definitely.
Senator FRAZIER. Do you know what it is retailed at in Boston? Mr. LINGHAM. I have no idea, but I do know-of course, we sell cheaper flour made from that same wheat at $4.45 delivered Boston.
Senator WHEELER. You do not think there was any excuse then, for a barrel of flour costing $5.40 in North Dakota when wheat out there is selling at from 13 cents to around 20 cents, do you?
Mr. LINGHAM. No, sir; I do not. I do not think there is any excuse for that price, if that price is correct.
Senator MURPHY. So as to the Montana consumer's bread there would not be any justification for increasing the price of bread to them?
Mr. LINGHAM. Senator, I just do not like to talk on figures that I have not definitely before me. A price of $5.50 for flour that is costing a mill, say, 20 cents or less a bushel is ridiculous. There is no question about that.
Senator THOMAS of Oklahoma. Of course, this wheat does not go to the mill at 20 cents. That is what the farmer gets for it, and to that must be added the profit of the elevator and the profit or the cost of transportation, freight rates, and handling at the mill. So, while the farmer only gets 20 cents, in all probability the mill has to pay 50 cents, perhaps, for that wheat.
The CHAIRMAN. What do you pay for your wheat, on an average, at your mill?
Mr. LINGHAM. We buy different grades, handle different grades of wheat. We are buying northwestern wheat in the Dakotas, and then we buy from the Southwest, and Saturday evening the price that we were paying for northwestern wheat delivered at our mill, on a transit basis, which is the lowest basis that we have, if we figure it on our local basis it would be higher, but our cost was based on 6172 cents for the northwestern wheat, and we were paying—you will be surprised to know this, Senator Frazier we were paying for Kansas wheat a premium of 6 cents a bushel over the northwestern wheat price.
Senator NORRIS. Why was that? Mr. LINGHAM. Because it is a different character of wheat that is needed for a little different purpose.
Senator NORRIS. You needed that to mix in with your higher priced wheat?
Mr. LINGHAM. Yes.
Senator NORRIS. With that premium how much did you pay for Kansas wheat?
Mr. LINGHAM. We paid 6732 cents.
Senator NORRIS. You paid more for Kansas wheat than you did for the higher class wheat?
Mr. LINGHAM. Yes, sir; hard winter wheat. We were buying another grade of wheat for pastry trade purposes at 6372 delivered at our mill. In other words, we were paying a premium for the softest wheat over the strongest wheat.
Senator NORRIS. That is out of the ordinary, is it not?
Mr. LINGHAM. Yes. Sometimes that wheat sells at 40 cents a bushel discount under hard wheat; then I have seen it sell at 40 cents a bushel premium over the hard wheat.
The CHAIRMAN. Let me get those figures right. It cost you, then, an average of about 65 cents a bushel to deliver at your mill? Mr. LINGHAM. Yes.
The CHAIRMAN. Now, you say it takes about 5 bushels of wheat to make a barrel of flour, on an average?
Mr. LINGHAM. Four and sixty-six one-hundredths, as a matter of fact.
Senator BANKHEAD. Four and two thirds.
Senator FRAZIER. This wheat at your mill, is that under the milling in bond law?
Mr. LINGHAM. No; we do not do any milling in bond at all. That is a nuisance.
The CHAIRMAN. Your wheat then costs you $2.92 a barrel?
The CHAIRMAN. You deduct the freight from that? You pay the freight to Boston, do you not?
Mr. LINGHAM. Senator Smith, to figure the prices of flour before this committee would be a most complicated matter, but I will be very glad to sit down with you and show it to you.
The CHAIRMAN. I was trying to get some idea--if it costs $2.92 to mill it, I wanted to see just about what the miller got for the barrel of flour.