## The Project Gutenberg eBook of The Livestock Producer and Armour

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Title: The Livestock Producer and Armour

Publisher: Armour and Company

Release date: February 18, 2016 [eBook #51244]
Most recently updated: October 23, 2024

Language: English

Credits: Produced by Emmy, MWS and the Online Distributed
Proofreading Team at http://www.pgdp.net (This file was
produced from images generously made available by The
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*** START OF THE PROJECT GUTENBERG EBOOK THE LIVESTOCK PRODUCER AND ARMOUR ***

# THE LIVESTOCK PRODUCER AND ARMOUR

[1]

THE LIVESTOCK
PRODUCER AND
ARMOUR
The success of capital lies in ministering to the people, not in taking advantage of them
Philip D. Armour
1920
ARMOUR and COMPANY
CHICAGO

[2]

- George B. Robbins
- C. H. MacDowell
- Everett Wilson
- Arthur Meeker
- Frank W. Waddell
- Charles W. Armour
- Laurance H. Armour
- J. Ogden Armour
- A. Watson Armour
- Philip D. Armour
- F. Edson White
- E. A. Valentine
- Frederick W. Croll
- Robert J. Dunham

[3]

## Foreword

THE year 1919, included as it was in the period between the signing of the Armistice and the ratification of peace, was logically a season of uncertainty, unrest and unsettled conditions. And yet American business, discounting all this, entered upon and passed through this period with full faith in a favorable outcome.

While prosperity was general, the processes of realignment of our economic relations hurt or temporarily hampered some lines of business. The livestock and packing industries did not escape entirely unharmed.

Naturally, proposed radical legislation, with accompanying agitation, and a slump in American meat exports, caused such violent disturbance of the livestock markets during the latter half of the year that both producers and packers became deeply concerned as to the immediate future of the industry.

No array of proved facts as to the low percentage of packer profits, no pointing out of the real factors controlling meat and livestock prices was sufficient to convince the disturbed element of the public and certain agents of the Government that packers’ operations on the existing large scale were justifiable.

Therefore, by a recent understanding with the Government, Armour and Company will dispose of all their interests in food production, not directly associated with and dependent upon the meat packing business. In addition, Armour and other packers agree to relinquish interests in stock yards and railway terminal properties at the various market centers. The terms of the understanding permit the retention of dairy and poultry products in view of the dependence of these on such refrigerating and distributive facilities as the packers have provided.

Both patriotism and enlightened self-interest command every citizen and business to make concessions and sacrifices in times of crises, whether of war or peace; and while Armour and Company felt that they were clearly within their rights in their operations previous to this understanding with the Government, it was plainly in the line of public service to make concessions that would clear the way towards public confidence in the development of the livestock industry.

J. Ogden Armour

[4]

Running against a “glutted market” in the “good old days.” Today the stockman’s market is nation-wide.

[5]

## How and Why Livestock Market Grew

THERE was a time, within the memory of men still active in the cattle business, when the capacity and demand of the local butcher shop measured the demand for fat stock and fixed the price as well.

On driving his cattle to the village, or negotiating for their sale, it was not uncommon for the stockman to be met with the news that a neighbor had got ahead of him and glutted the market with two or three or more meat animals. No matter how good the offerings, there was no present market at any price.

This was the condition of the livestock business in the “good old days” before the establishing of the great packing centers; before the development of economical systems of slaughtering, saving the waste, and distributing dressed beef quickly and continuously to the remotest parts of the country.

No stockman now considers the demand of the local butcher as a serious factor in making or breaking the market for his cattle. If he is feeding a carload or more, he has an approximate date set for the finishing of his feed. By keeping in close touch with the supply of cattle in the country, their movement and the trend of prices, he chooses what appears to be the most favorable day and ships them to the market.

Even if he is feeding only a few head, the disposal of them is not dependent upon local demand. He may double-up with his neighbors to make up a car. He may belong to a shipping association that makes a business of collecting small lots into carloads for direct shipment, and although he sells to the local stock buyer, his knowledge of what his cattle are worth at the central markets enables him to secure a fair price.

So it has come about that world demand determines prices and governs buying activities in every town and village where livestock is purchased. For local butchers everywhere are governed by prices at the central markets. The truth is that the most successful butchers no longer do their own killing, but buy their beef from packers’ branch houses in the larger cities and towns or from “route cars” running from packing plants or branch houses into the smaller communities.

In doing this they get better beef at lower cost than by local slaughtering, and they can serve their customers with a safer and more satisfactory article because the animal is killed and the meat prepared under the stringent government inspection and sanitary[6] regulations that are practiced only in the larger establishments. This insures absolute freedom from diseased conditions and careless handling.

Practical butchers, who are also feeders, have proved by test that they can ship their beef cattle hundreds of miles to the big packer, have them slaughtered, dressed and returned at less cost than they can do their own killing. This is possible because the utilization of every scrap of the animals in valuable by-products, and the saving in labor by wholesale slaughtering and handling, pay all expenses, including the freight both ways, and leave a margin for the butcher besides.

The local butcher or livestock producer can little better afford to kill and prepare his own beef than he can afford to tan the hide and make his own shoes. There was a time, even in America, when the farmer himself actually did these things. He also sheared his own sheep by hand, while his wife and daughters spun the wool into yarn and wove cloth for the family clothing. Progress has made such methods absurd, unprofitable and impracticable.

But the great machinery of economical production and distribution was not built in a day, or a year, or a decade. Armour and Company’s activities began more than fifty years ago. At first the packing house was only a butcher shop on an enlarged scale, preparing and handling pork products almost exclusively. Cattle were killed for local consumption only, as there was no such thing as cold storage, refrigerator car lines or branch houses for the distribution of fresh meats.

In those days the offal from the packing houses was thrown away or buried, as is still done to considerable extent by the small butcher at the present time. The by-products industries, by which hundreds of valuable articles are now created from what was once waste, were developed through long years of scientific investigation and experimentation.

The efficiency of the Armour organization of today is the result of the accumulated efforts of thousands of trained scientific and business minds, applied through half a century to the solution of the problem of factoring and furnishing food supplies for the nation and the world by the most direct and efficient means.

Nothing less than a great and thoroughly organized concern could effect the economies that make such achievement possible. Armour and Company’s growth has been, and is, simply the natural expansion of a great industry keeping pace with the progress of the producer.

[7]

## Re-investment and Expansion Policy

NO amount of criticism, investigation, misrepresentations or “exposures” has ever shaken Armour and Company’s faith in the fairness and final endorsement of the great body of American livestock producers.

That the consumer found grievance in recent high food prices and attributed his troubles to the packer or producer, or both, was perhaps not to be wondered at, though his reasoning was not sound. That competing food distributors should object to the extension of packer efficiency to general food distribution is easily understood from these competitors’ viewpoint.

The retirement of Armour and Company from all lines of production and distribution not directly associated with meats and livestock by-products, was in response to these disturbed elements of public opinion. But these restrictions of packer activities in no way affect the relations of mutual confidence and dependence between Armour and Company and the livestock producers.

The fundamental things remain, and they are these: The livestock industry must continue to exist and expand; producers must be rewarded with fair profits; livestock markets must be maintained and made more convenient; and the markets for meat products must be enlarged and extended.

To these basic facts Armour and Company have pinned their business faith, and upon them shaped their policy. Ninety per cent of the profits of the Company have been re-invested in the business and are represented today by great packing plants at sixteen market centers, and many branch houses throughout the country, together with refrigerator car lines connecting the livestock markets with the consuming centers of the nation.

It requires no argument to show the livestock producer that his interests and profits are inseparably associated with these properties, and it is quite as plain that the necessities and conveniences of the consuming public are dependent upon and served by them.

America and the world will continue to demand more and more meat and other products from livestock. Agriculture will not successfully continue without the production of meat animals. So the future reveals no reason why Armour and Company should not continue the policy of re-investing their earnings in the business that gives the most direct and substantial support to the basic industry of animal husbandry.[8]

The packer must, with utmost carefulness, balance his daily purchases against his daily sales.

[9]

## Aspects of Big Business Explained

THE simple recital of an ordinary day’s doings of Armour and Company’s beef department will make plain a number of things that may appear mysterious to a casual observer. Each day, at the opening of the market, the manager of the beef department must carefully weigh the possibilities of his sales and shipments of beef carcasses against the receipts of cattle of the quality demanded by his trade. And he must buy accordingly.

The prevailing idea that, because of cold storage facilities at the packing centers, unlimited numbers of cattle of all grades and qualities can be absorbed and slaughtered, is wrong. For even though cold storage capacity were unlimited, beef cannot be held. Each day’s kill must find room in chill and storage rooms by the shipment of about an equal number of carcasses out of storage to Armour’s branch houses located in all parts of the country.

These branch houses must, in turn, dispose of each shipment promptly to make room for new arrivals. Each branch manager receives a memorandum of the cost of the beef, and of course is expected to sell it at a profit. But he must sell it within a very limited time, even if he cannot show a profit.

Local conditions determine this. He may meet with unforeseen competition in the kind of meats he has ordered, or the demand for meats may have fallen off for one or a dozen of reasons, or for no discoverable reason at all. These known and unknown influences on the demand govern his market and he has to accept the situation, depending on evening up the score under more favorable conditions.

Of course a decline or advance at one or a few branch house points, from merely local causes, does not materially affect the market at the packing centers, but any widespread fluctuation from general causes is immediately reflected in cattle prices at all of the great markets.

The best way for a producer to learn what determines the price he gets for his livestock is to visit the nearest Armour branch house and get first hand information on the facts that govern meat prices at the final market.

Any Armour branch manager will welcome visitors and willingly answer questions. He will explain not only the factors that influence the general level of prices, but will point out why cuts from certain types of beef carcasses are in constant demand at[10] the highest prices, while similar cuts from other carcasses are neglected and sell materially lower.

There is a type of beef carcass that is best and commands the best price, and it costs no more to produce than an inferior type. The same is true of mutton and pork. Any Armour branch manager will show you what these types are and the Armour Farm Bureau will furnish, without charge, information on improved methods of producing the sort of animals that are most in demand for meat purposes.

One aspect of the big packing business, the importance of which is not generally appreciated, is refrigeration. It is not too much to say that without ample means of refrigeration, both in storage and in transit, no fit and adequate supply of fresh meats and dairy products could be supplied to the public.

Food refrigeration originated with the meat packing business early in its history. At first only storage refrigeration was practiced for the purpose of conserving and equalizing the supply of fresh meats for local or near-by consumption. Then came the conception of transit refrigeration, and the refrigerator car was invented, primarily for the purpose of shipping fresh meats from the producing centers of the West to the consuming centers of the East.

From the transportation of fresh meats, the extension of the service to the carrying of fresh fruits, vegetables and dairy products was a natural and easy step, resulting in the development and maintenance of the great orchard lands and fruit and market garden areas from coast to coast, and the tremendous expansion of the indispensable industry of dairy farming all over America.

To the livestock producer refrigeration in storage and in transit means everything. Without it the great packing interests could not exist and livestock husbandry would revert to the primitive and unprofitable conditions prevailing fifty years ago and described in the preceding chapter.

These facts explain why Armour and Company have persistently opposed every attempt to deprive them of the exclusive use of their privately-owned refrigerator cars and turn them over to the railroad companies for general use. To maintain the necessary constant movement of meat products Armour must have an adequate supply of these cars every day in the year. Extended experience has proven that they would not and could not be supplied by any form of railroad administration, either governmental or corporate, yet devised.

[11]

## Declining Livestock Prices and the Causes

BRIEFLY outlined herewith is a resumé of what are accepted as the chief causes contributing to the sharp decline in livestock prices during 1919.

The discontinuance of Government orders for beef was the principal thing which affected cattle prices in the late spring. From being a purchaser the Government became a seller in the domestic market. Added to this, there has been unusual labor unrest, large supplies, agitation against the high cost of living, low foreign exchange rates, and the English boycott against high prices.

The falling off in hog prices was far more serious than in the case of beef, because normal demand for hogs is based on the consideration of large exports, while the market for beef is primarily and principally domestic.

The great demand for American pork products which was confidently expected from European countries did not materialize, because of the extraordinary and unforeseen development of exchange conditions which made purchases on the American market practically impossible.

The earlier part of 1919 was marked by an unprecedented export of pork products, reaching in the month of June the high point of over 400 million pounds. From this point the drop was sharp and continuous, month by month, the figures for October showing total exports of less than 120 million pounds—a falling off of 70% in four months. These later exports were on orders booked earlier in the year, and not on new business.

Added to these principal factors, and aggravating them, were attempted boycotts of meat and proposed radical legislation for the regulation and restriction of the packing industry, and the resulting condition of uncertainty up to the very closing weeks of 1919, when the understanding between the packers and the U. S. Department of Justice was made public.

The big question is, What of the year 1920? While nothing positive can be predicted, better conditions is a practical certainty. The domestic consumption of beef is increasing to a gratifying degree; the arranging of international credits and the opening of foreign markets is a matter of comparatively short time. European need for pork products will be urgent and excessive for a considerable time, and this will not only take care of our surplus hogs, but will react favorably upon the market for cattle and sheep.

[12]

## Standard Breeds of Beef Cattle

Transcriber's Note: If supported by the reader's device, a larger version of this image may be seen by clicking on the image.

### ABERDEEN-ANGUS

Early maturing; transmits polled character; high dressing percentage; high proportion valuable cuts.

### SHORTHORN

Greatest weight for age; dress out well at slaughter; quiet disposition; strong milking tendencies.

### GALLOWAY

Prepotent; adapted to rugged regions; high carcass value; valuable hide.[13]

### POLLED SHORTHORN

Characteristics similar to Shorthorn except polled; some strains dual purpose.

### HEREFORD

Best grazing breed; matures early; fattens rapidly; good weight for age.

### RED POLLED

Strictly dual purpose; fair grazers; early maturing.

[14]

## The Livestock Situation

RIGHT now is a good time to stick to the middle of the highway of common sense. As shown in earlier chapters, the conditions adverse to the business can be only temporary, and even the losses incurred may be turned to profit in the end, if the livestock men shall learn the lesson of economy and efficiency of production and more complete co-operation among themselves and with the packing industry.

Recent experiences will impel some producers to curtail or discontinue their operations temporarily, but others will take their places and quantity of production will be maintained while quality will be increased.

High-priced land, grain and labor will compel stockmen to grade up their herds, to discriminate more closely in the purchase of feeding stock, to improve feeding methods and to keep exact records of costs. For at the higher level of costs and values all around, as compared with prewar times, both the risks and rewards of the business will be greater.

As co-operative activities are extended among producers, it may be found advisable for livestock associations to employ expert buyers at the various markets whose duty shall be the filling of orders for association members, for the choice of feeders cannot be safely based on personal fancy. The only true guide is unbiased judgment as to what the market demands in the finished product and what type of feeding cattle will yield the result.

An experienced buyer of keen judgment, constantly in touch with the market, should prove as valuable to producers as the expert buyer of fat cattle is to the packer.

Such expert selection of feeders would take the guesswork out of the first and most important step in feeding.

Generally speaking, the consumers’ demand is constantly for better meats from comparatively young animals. Taking the situation the country over with present prices of feed stuffs considered, it has been found that beef cattle make most money for the producer if not held past the age of two years. But there is no hard-and-fast rule for the guidance of every individual producer; the heavy, well-finished cattle always bring high prices. Only by keeping an accurate feeding record can the producer decide for himself what policy is most advantageous in his case, or determine when his steers stop making sufficient gains to compensate him for the feed required.

[15]

## Armour’s 1919 Livestock Purchases

RISING prices of farm land and feed have changed entirely the character of livestock received on the market as compared to twenty years ago. The period following the war shows all conditions more or less accentuated, and one can trace very definitely the tendency to market animals younger and to feed to lesser ripeness than prevailed in the earlier years of the last decade. In 1919 Armour and Company purchased 12,235,451 head of livestock, while in 1918 they purchased 11,398,131. Yet the animals bought last year weighed actually fewer pounds, in spite of their greater numbers, than those received the year preceding; the former weight being 3,740,347,223 pounds and the latter 3,939,278,534 pounds. Furthermore, the animals of 1919 cost over nineteen million dollars more. The following table presents these facts on a percentage basis:

Increased number animals 1919 over 1918 | 7.3%
Decrease in total weight animal purchases | 5.0%
Increase in cost of animals | 3.7%
Increased price per pound live weight | 1.2¢

Probably the fundamental factor in bringing about these conditions, which are distinctly unfavorable from a quality trade standpoint, is the feeder’s expectation of declining prices. This attitude has driven all the animals to market almost as soon as they were in merchantable form. The late winter months of 1919-20 saw an opposite tendency among hog feeders, but this was not sufficiently marked to check the general trend.

Another factor in stimulating this hurried marketing has been the belief that more money could be made by selling the grain crop than by feeding it. This has given short rations to many animals that would have made suitable market records if handled properly, but it has enabled farmers to cash in their grain and meat crops while prices were relatively high.

In terms of permanent agriculture it would have been better to leave a greater share of this cash invested in a further development of livestock, but the war order against feeding wheat placed the situation in some western states beyond the control of the average stockman. As a general practice in production this incomplete utilization of livestock must be deplored, although one cannot criticize the tendency under the special market conditions of 1919 and early 1920.

[16]

## Financial Aspects of Livestock Industry

ONE of the most significant and gratifying gains in the livestock business during the decade just past is the recognition of its financial soundness. This is reflected in the changed attitude of financiers and investors towards cattle paper. While a decade ago bankers in the great financial centers looked with suspicion upon such securities, now bankers and business men throughout the country purchase approximately $500,000,000 of cattle paper annually and regard it as among the safest investments.

Melvin A. Traylor, President of the First Trust and Savings Bank of Chicago, declares that “loans on livestock are the best of all investments,” and President Thos. P. Martin, of the Oklahoma Stock Yards Bank, Oklahoma City, agrees with him. This latter bank loaned $45,000,000 in seven years to cattle producers in Oklahoma, Texas and New Mexico, only fifty dollars of the amount loaned being lost. It is doubtful if any other industrial securities could make a better or even an equal showing.

There is still some difficulty in arranging loans in some sections of the country, where bankers have not yet realized the changed conditions of the business and farmers have not given the proper emphasis to the improvement of livestock production. But generally speaking the cattle feeder with good judgment in the breeding and selection of feeders meets with no obstacles in financing his operations.

Most country bankers freely accept cattle paper because it is readily rediscounted in the country’s financial centers. But many of them urge the borrowing feeders to keep accounts and determine accurately their profits and losses.

This is to the interest of the feeder and the cattle industry as a whole. For if the business is ever to be placed on a cost-of-production basis for the reckoning of market prices, it must be done by an accumulation of thousands of actual tests in feeding practice. It is plain that each individual feeder could not set or ask a certain percentage of profit, since a poor judge of stock and a careless feeder would demand more for an inferior product than the more efficient feeder would ask for a better article.

The feasibility of any such scheme of regulating prices does not now appear, but it is clear in any case that each lot of cattle would have to be appraised at what their production ought to cost, considering quality, and not what it actually did cost.[17]

Bankers now recognize cattle loans as good investments, and the skilled stockman has access to needed funds.

[18]

## Losses on Declining Markets

THAT the packing industry suffers with the livestock producers on a falling market was never more clearly emphasized than in the year 1919. Armour and Company’s losses on dressed beef alone amounted, in the twelve months, to several million dollars; and on the sale of pork products the losses were even greater.

These losses are figured on the basis of the primary sales, which include not only the meat but the hides and all other by-products derived from the animals.

Such deficits do not mean that the Armour organization, as a whole, suffered a net loss for the year. But there is no mystery about the methods of countering these deficits. They are offset by the profit made in manufacturing by-products into merchantable commodities. Each by-product industry in the Armour organization is placed on its own responsibility. It must pay to the beef, hog, or sheep killing department the market value for its raw materials—the same price it would pay if it purchased on the outside market.

For example, the beef department buys its cattle to the best possible advantage in competition with other buyers, and sells the beef at the best price obtainable. The hides go to the tannery at prices ruling on the open market. If the Armour tannery cannot pay this price the hides go to outside buyers. To sell at less would be favoring the tannery at the expense of the beef department, or robbing Peter to pay Paul.

The same business methods are pursued with every scrap of the animal, whether used in making glue, soap, sand-paper, drugs, fertilizers, or any other commodity.

While on this basis Armour and Company sustained heavy losses in their meat departments, the by-product industries showed profits, as they usually do, because their products are not so perishable and are not so much influenced by market fluctuations.

These by-product industries are, in short, the insurance of the packers against crippling losses, and may be likened to the activities of the up-to-date livestock farmer, who diversifies his operations by feeding cattle and hogs and by keeping fowls, sheep and dairy cows, so that if he loses on cattle or hogs he may offset his losses by better prices for lambs, wool, butter, eggs, poultry, or a money crop.

[19]

## Why Prices Fluctuate

PRICES for livestock are not controlled by packers, and only to a limited extent by the supply of cattle in the market. They go up or down in response to the price the consumer is willing to pay for meat.

Note how closely the two lines in the chart, representing prices of cattle and dressed beef, follow each other through the two and a half years covered by the graph. America’s twenty million food shoppers determine the dressed beef price, by their willingness or refusal to accept beef at the price asked in competition with other food. And naturally dressed beef prices react directly and at once on cattle prices.

It is often necessary for the packer to take a marginal loss on beef in order to stimulate demand, but he must at once hedge against this loss by buying cattle cheaper. He tries to fit the price he pays for cattle each day to the price he is obtaining for beef. Only by so doing can he maintain his business on present small margins. Large receipts of fish, poultry, game, eggs, vegetables or fruit at certain seasons also affect the price the public is willing to pay for beef, and this is reflected in the price the packer can afford to pay for the live animal.

It is plain that the packer cannot determine retail meat prices, simply because he cannot say to the consumer at the butcher’s counter, “You must buy meat and you must pay such and such a price.” Because he cannot do this he cannot control the prices of livestock.

WHAT MAKES THE PRICE OF CATTLE
THIS CHART SHOWS THAT DEMAND BY CONSUMERS IS THE BIG FACTOR
Transcriber's Note: If supported by the reader's device, a larger version of this image may be seen by clicking on the image.

[20]

## What Efficient Distribution Means

LIVESTOCK producers are, of course, engaged in an absolutely indispensable industry. Of scarcely less importance is the packing business. For upon food production and preparation depend all other industries and activities.

But it is profitable and enlightening to ask, of what use would be production and preparation without means for delivering the food to the consumer? The mere asking brings realization of the prime importance of ample and uninterrupted transportation and distribution of packing house products to consumers through the retailers of the country.

And this, in turn, brings us to the consideration of the packers’ salesmen in the hundreds of cities and towns throughout America, which as a whole make up the final market for the producer’s livestock.

With the sale of his meat animals by the commission man at the primary market, the owner seems to witness the end of the transaction as far as he is concerned. But does he?

Could the commission man sell and the packer buy the livestock if it were not for another salesman and another buyer out at the farthest end of the market system transacting business with each other in the retail market?

Again the question answers itself. For the packer’s salesman is literally the salesman of the livestock producer at the final market, upon which all other markets depend. The advertising and educational activities conducted by the packer continuously broaden and intensify the ultimate market for the products which the livestock man produces. It devolves upon these agencies to keep the meat products moving towards final consumption, just as the man at the measuring spout of the old-fashioned threshing machine had to keep the grain out of the way and prevent congestion.

There are two distinct divisions of the process of turning livestock into available meat supplies. First, the production, shipment and sale of livestock. Second, the preparation, transportation and distribution of meat products to retailers. The two are interrelated and absolutely dependent one upon the other.

The opportunity for organized producers to take complete possession of their end of the process by assuming control of the stockyards, is offered in the passing of that control from the packing industries by virtue of the recent understanding with the U. S. Government.[21]

The packer’s salesman is literally the farmer’s salesman in the thousands of “final markets” throughout the land.

[22]

## Farming as a Business

ALL business undertakings are ventures. Under the best of conditions there are fat and lean years, and the possibility of failure, due to poor management, lack of capital, or adversity, is always present.

Farming is no exception. It is in essence a business proposition, and should be so regarded.

A knowledge of crops, of soils and tillage, of livestock breeding and feeding and other purely agricultural subjects constitutes but one side of the farming industry. On top of this come the important matters of business management—the buying of seeds, fertilizers, feed stuffs, livestock and general equipment and supplies; the erecting and maintenance of buildings; the arrangements for necessary credit; keeping in touch with market conditions and prices; the hiring of help, and finally the establishing and operation of an accurate cost-accounting system.

Yet when all is said and done, records indicate that farming offers more chances of success than almost any other line of business endeavor. A retail merchant, according to statistics, has from two to four chances in ten to conduct his business successfully for fifteen years; a manufacturer has from two to seven chances to do the same. Farming is conspicuous for its small percentage of out-and-out failures. Living is practically assured, which gives the farmer a distinct working advantage to begin with. He enjoys a cash market and is not called upon to suffer bad debt losses. He is in an industry that is absolutely essential, which cannot be destroyed by any shifting of circumstances.

The greatest need is doubtless for cost-accounting systems which will serve as a guide, not only to prevent unwise purchases, but to indicate wise expenditures in improvements that will bring a good return on investment, and to show definitely the amount of profit obtained on each transaction. Next to this in importance is perhaps the need for a thorough understanding of crop rotation and the principle of diversified farming as a means of offsetting losses in one line with gains in another. The securing of credit to enable expansion, and the adoption of labor-saving devices are also essential.

Profits and losses in farming must be reckoned, as in all other businesses, on averages over a term of years. But the future offers better assurance than ever before to the man who is a good agriculturist and at the same time a skillful business manager.

[23]

## We Stand or Fall Together

WITH some elements of the American public there seems to persist the conviction that the great packing concerns are seeking the injury of livestock producers to their own enrichment. How such an idea can be seriously harbored by thinking men is hard to understand. For the packing industry to plan for the farmer anything but prosperity is to endanger or destroy the source of supply of the raw material by which it lives and grows.

It should be perfectly plain that the packers are selfishly interested in encouraging the producer. Their selling efforts are directed towards disposing of the largest possible volume of meat products, at the best price obtainable in competition with other foods, in order that they may maintain large volume of livestock purchases at prices that will encourage both quantity and quality of production.

Between the producer and the consumer, between the buying and the selling price, the packers operate upon a smaller margin of profit than any other large industry. On invested capital they have realized an average of about 9 per cent over a term of years, on volume of sales about 2 per cent, and on each pound of meat less than one-half of a cent.

At the same time the risks of the business are greater than in other lines, both on account of the perishable nature of the product and the violent fluctuations of food prices, the causes for which cannot always be foreseen.

The comparative low prices of hogs and pork products at the end of 1919 is a case in point. The packing business entered upon the year in the belief that the world shortage of food would maintain pork prices at high levels for a number of years; that European demand would absorb even a larger surplus of American hogs than the pre-war period. The earlier months of 1919 confirmed this belief. The foreign demand was very brisk, exports reached unprecedented volume and prices were maintained.

Then came the unlooked-for event. Foreign exchange rates fell to so low a point that Europeans could no longer afford to buy American meats. The packers extended credit for a time, but the limit of safety was soon reached, and when the year closed very little American pork was being exported and no new contracts were being made.[24]

The result was great loss to both producers and packers. Armour and Company alone packed millions of pounds of pork during the period of high prices, much of which was still in the course of curing when the slump in the market came.

But the conditions that caused this decline and loss are exceptional and only temporary. The great foreign need for American meats still exists—the greatest need in the world’s history. The ability of Europe to buy will be restored with the full restoration of peace and the arrangement of international credits. The result will be a return of profits and prosperity to both producers and packers of pork.

The facts to keep in mind are these:

First, there must finally be a realignment of prices on all livestock and meats, to levels below the prevailing high war prices. A fair balance must be struck between the interests of the consumer and those of the producer. Prices for meat must be sufficiently attractive to consumers to insure an adequate volume of sales; on the other hand prices for livestock must be sufficiently high to encourage production. Only on this basis can the industry thrive.

Second, the utmost care must be taken in breeding and buying of feeding stock and the most exacting economy practiced in feeding methods.

Third, the producer must realize that the packer is his natural ally in maintaining the prosperity of the two inseparable branches of the livestock industry—production and packing.

It is a reassuring sign that producers and packers are already getting together on a platform of better understanding of their mutual interests, both for protection against disturbing agitation and legislation and for the correction of whatever inequalities or abuses may exist in the shipping and marketing of livestock.

Armour and Company’s Farm Bureau was established three years ago as a point of contact with livestock men, through which better methods of breeding, feeding, shipping and marketing could be promoted.

Being in constant touch with the requirements of the markets, Armour and Company know the types of meat animals which are most demanded and which bring the largest profit to the stockman. The Farm Bureau has available many facts regarding the economical production of these types, and these facts can be had by addressing the Bureau, care of Armour and Company, Chicago.

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