600 IOWA DEPARTMENT OF AGRICULTURE 



ratios you can determine cost of production in a very real sense; what 

 is the ratio which will keep enough stuff coming to market over a long 

 period of time to satisfy the consuming demand? The cost of produc- 

 tion in a cost accounting sense, while it is useful, cannot serve, in my 

 opinion, as a basis for strategic bargaining on the market. We can use 

 it in the sense of advertising for the purpose of convincing the consumer, 

 out that is ail. 



The third price-making force which I wish to consider is strategy. 

 There is a strategy to the making of prices, as we are all well aware 

 from cur past year's experience. We all know about the price drive that 

 started in late January of 1919, when we were told about the Argentine 

 corn that was coming onto the market and how they were going to take 

 off the control price of hogs and everything was going down in thirty 

 days. That was our first taste of a price drive, and then we got another 

 one back in August when the railroad men appeared before Mr. Wilson 

 and stated that they had to have lower cost of living or more wages, and 

 they preferred lower cost of living, and as a result they reduced prices 

 very nicely so far as hogs and corn were concerned, but not as to other 

 commodities. And then we have seen this last drive which started just 

 a couple of weeks ago. I noticed yesterday a dispatch that came out 

 from Washington to this effect: 



"Department of justice announces huge quantities of bacon, beef, flour, 

 butter, eggs, and canned goods have been seized from warehouses and 

 hoarders and thrown upon the market to force down prices." 



That dispatch came yesterday. Of course, we all know that for every 

 dollar that the speculators lose on this kind of thing the farmers lose a 

 thousand dollars. It shows the instruments that are used as a means of 

 strategic price making. In the first place, of course, newspaper propa- 

 ganda is used. Sometimes they use the proposition of competition from 

 a foreign country, like Argentine corn. Another thing they use is the 

 announcement of sudden buying of great quantities of pork products by 

 Great Britain, and then the sudden stopping. She has all she needs 

 now and she has stopped altogether. The first time I ever heard of this 

 strategic price force was in an article in the Saturday Evening Post 

 written by Will Irwin with reference to Herbert Hoover. He stated that 

 Mr. Hoover had a stock of 10,000 tons of beans and that those 10,000 

 tons of beans which he had bought up were dumped on the market when- 

 ever the market advanced unduly, and then on the decline Mr. Hoover 

 would buy them back, and then again dump them on the market. That 

 was strategic price making, and according to Mr. Irwin Mr. Hoover used 

 it very nicely to keep down bean prices to the gratification of the buying 

 public; but I don't know how the Michigan bean growers appreciated 

 the proposition. 



Another strategic price-making force is foreign exchange. Foreign ex- 

 change is, in a sense, a speculative market; as much a speculation as 

 the board of trade in Chicago. You can buy and sell foreign exchange. 

 Before the war foreign exchange was ordinarily weak in the fall of the 

 year, at the time we were selling our products. While at the present 

 time we do not have any absolute evidence that it is being used as a 



