Page 6 



The IllinoU Agricultural A»»ociation Record 



jMuary 24, 1925 l j^„^ . 



BOTH SIDES OF GRAIN MERGER EXPLAINED AT BLOOMINGTON MEET 



BLOOMINGTON PANTAGRAPH'S REPORT 

 ON MEETING RE-PRINTED TO PRESENT 

 L A. A. MEMBERS WITH UNBIASED FACTS 



McLean County Farm Bureau Called Meeting After Stodi 

 Saleameii for Grain Marketing Compimy Had Worked in 

 County Several Week*. 



(In order that all farm bureau membtrs in 

 lUikoit may know both tides of the meetuig 

 caUid for Jam. to by tie McLean County 

 Pahn BuretM for tke purpou ol discutwif Ike 

 facts concemimi tke Grain Uarfteting Corn- 

 pan f at tDhich t. A. A. officialt. President 

 Tkoinpson in particular, and officials of the 

 Grain Marketing Company were invited, tke 

 RfCCBD is rc-printing tke reports given OH tke 

 meeting by tke Bhomington Pantapaph 

 through its agricultural department. — EMtor.) 



GR*Y SIL\-ER AND GEO. A. 



FOX PRESEXT ARGUMENTS IN 

 BIG MERGER CONTROVERSY 

 (Monday, Jan. 12. 1925.) 

 Tke Panta^n^ph's Agricnltnral 

 Department. 

 Four hundred farmers heard 

 thej arguments for and against the 

 Grain Marketing Company and its 

 plan of buying the facilities of 

 merged Chicago grain companies, 

 in the meeting called by the Mc 

 Lean County Farm Bureau in the 

 high school Saturday evening. 

 EaOh one vas judge and jury, the 

 decision, to be whether or not he 

 personally will support the mar- 

 keting concern in its coming cam- 

 paign to sell stock. 



Gray Silver, formerly Washing- 

 ton representative of the Ameri- 

 can Farm Bureau Federation and 

 now president of the Grain Mar- 

 keting company presented an ap- 

 peal for farmer support. He was 

 aidad by Henry S. Ballard (a law- 

 yer). 



Geo. A. Fox, secretary of the 

 Illinois Agricultural Association, 

 told w*y the state farm bureau 

 federation disapproves of the prop- 

 osition and refuses endorsement. 

 He was aided by Geo. E. Prater, 

 Donald Kirkpatrick and Geo. E. 

 Wldker, all employees of the I A.A. 

 Started Liast July 



Mr. Balfard, first on the pro- 

 gram, told of the development of 

 the Grain Marketing Company. He 

 is connected~with the Ohio Farm 

 Bureau Federation and has had 

 experienae in co-operative wool 

 marketing;. The Grain Marketing 

 Company was incorporated July 

 15, 1924. Officers were elected on 

 July 20. ".'Hie contract between 

 the merging^grain concerns and 

 the company -tvas made on July 28. 

 The Grain Marketing Company be- 

 gan to function on August 5. The 

 following points wqre made by Mr. 

 Ballard: 



This plan is fundamentally the 

 application of business principles 

 to co-operative marketing by farm- 

 ers themselves. It Is a corpora- 

 tion under. the co-operative mar- 

 keting act of the State of Illinois, 

 organized so that the producers 

 may have absolute control of the 

 corporation, organized in such a 

 manner that the board of directors 

 is directly responsible to the stoek- 

 holdiers, organized so that the 

 stockholders may absolutely de- 

 termine the policy of the organiza- 

 tion. 



The contract between the com- 

 pany and the Chicago grain flrmrf 

 is such that the company secures 

 the physical properties of the three 

 leading grain firms in the coun- 

 try and expert management of 

 {hese properties. 



Tkere are 1,000,000 shares of 

 common stock of the value of }1 

 per share. And 1,000,000 shares 

 of Class A preferred stock of the 

 value of $25 each. And 500.000 

 shares of Class B preferred stock 

 of the value of )50 each, this class 

 not lor general sale but to be used 

 to secure working capital and to 

 Issue in exchange for the proper- 

 ties acquired. 



Farmers can't control the com- 

 pany unless they belong, however. 

 They must become Identified with 

 the concern to have any voice in 

 its management. 



Every possible legal precaution 

 that can be taken to set up an or- 

 ganization that would be Invul- 

 nerable to attack has been taken. 

 Gray Sliver Speaks 



Gray Silver drew a picture of 

 the background of events leading 

 up to the organization of the Grain 

 Marketing Company. He recalled 

 the development of Industry by the 

 protective system, the organization 



of the Nati>nal Grange, the awak- 

 ening of the fact that Industry 

 had been developed to a high plain 

 and agriculture had been neg- 

 lected, the Roosevelt country life 

 committee, [the organization of the 

 farm bureau movement and the 

 American J'arm Bureau Federa- 

 tion. Through It all was the evi- 

 dent need on the part of agricul- 

 ture for greater remuneration. 



He recalled the formation of the 

 farmers' elevator movement, but 

 declared that farmers' elevators 

 are today competing one with the 

 other. That system will never 

 give the farmers a larger share of 

 the consumers' dollar, he declared. 

 What was needed was a central 

 or keystone organization through 

 which all the elevators work, and 

 that keystone organization Is now 

 perfected. 



Grain Men Saw Co-operative 

 Coming 



The grain men saw the change 

 coming, he said. They knew a 

 new systeml of marketing would 

 eventually succeed. They had 

 watched the legislation for co-op- 

 erative marketing. They recalled 

 the loss that the brewing Industry 

 suffered wihen the prohibition 

 amendment was ratified and they 

 wanted to avoid such a loss to 

 their own iadustry. 



One thing Is certain, Mr. Silver 

 declared, and that Is that here are 

 splendid facilities, the best of man- 

 agement, and at a membership 

 cost of a dollar and at a small cost 

 per bushel you can buy it all. 

 Keep In mind that this Is the first 

 time the farmer has had a chance 

 of serving hjmself In this way, he 

 stated. 



Report Was Snppregsed 



When thej American Farm Bu- 

 reau Federation was seriously Con- 

 sidering this marketing plan last 

 June, John Coverdale, then secre- 

 tary, mentioDed to officials of the 

 I. A. A. that a recognized econom- 

 ist had bee^ employed to make 

 a survey of 1 the proposition. Said 

 Geo. A. Fox,J secretary of the I, A. 

 A., In presenting the other side of 

 the argument. That report was 

 received by iMr. Coverdale about 

 the middle ojf June, but was neiver 

 made available to the Illinois Ag- 

 ricultural Association. Mr. Sam 

 Thompson, president of the I.A.A. 

 and an executive of the A.F.B.F., 

 never saw the report until Sep- 

 tember and then only on direct 

 request. That report was sup- 

 pressed, Mr. Fox declared. 

 No Facts Available 



Mr. Fox then read copies of let- 

 ters between the I. A. A. and Mr. 

 Coverdale, In which the I. A. A. 

 asked for Information deemed nec- 

 essary In arriving at any conclu- 

 sions concerning the project. Au- 

 ditors' reports of each of the merg- 

 ing concerns for the past five years 

 were definitely asked for, and It 

 was presumed that these auditors' 

 reports would Include profit and 

 loss statements and might be a 

 means of separating the cash 

 transactions from the speculative 

 transactions. The first request 

 was written July 29, 1924, and 

 was acknowledged and the audi- 

 tors' reports promised within a 

 week. No reports were received. 

 A second letter was written Au- 

 gust 15, and It was acknowledged 

 and the repoorts promised as soon 

 as the several other Investigations 

 would permit. A third request 

 was written August 20, asking 

 that the audits be made Immedi- 

 ately available. There was no re- 

 ply. The reports have not been 

 received yet. 



Tlie I. A. A. Has Not Approved 



"We recognize," Mr. Fox said, 

 "that with $26,000,000 of stock 

 to be sold, a good portion of It 

 mnst be sold to farmers of Illi- 

 nois. We have not, as an associa- 

 tion, approved of the Grain Mar- 

 keting company or the sale of Its 

 stock, and tl4_e reason is that we 

 do not baTtMn our possession In- 



formation that would warrant ap- 

 proval. We do have a good deal 

 of Information that would tend in 

 the other direction." 



A Reasonable Request 



Mr. Fox used only a portion of 

 the 45 minutes allotted to the 

 I. A. A. He then called upon 

 George E. Frazer, former comp- 

 troller of the University of Illi- 

 nois, and consulting accountant of 

 the I. A. A. 



Mr. Frazer promised that his 

 story would be very short and it 

 was. He was called in consulta- 

 tion by the I. A. A. and asked 

 how he would secure a valuation 

 of the properties Involved In the 

 merger transaction. He replied 

 that the Informatlbn could be se- 

 cured from the audits of the com- 

 panies Involved. Such reports for 

 less than a five-year period would 

 be useless In determining an ac- 

 curate valuation, he declared. Mr. 

 Fox told him It would be a sim- 

 ple matter to secure the audits, 

 for' he had been promised all pos- 

 sible information. But the audits 

 were not available and the valua- 

 tion could not be determined. Mr. 

 Frazer said he had experience In 

 bank mergers and accounting, 

 himself a certified public account- 

 ant, yet In all his experience he 

 has never known a banker to put 

 a dollar Into an enterprise unless 

 the enterprise laid all the figures 

 on the table. 



The Legal Side 

 Donald Kirkpatrick, legal coun- 

 sel, was then called. He said that 

 the set-up of the company Is le- 

 gally correct with some excep- 

 tions. The state constitution gives 

 a vote to each share of stock, and 

 the Class B stock given In ex- 

 change for the property, have vot- 

 ing power. It was agreed, how- 

 ever, that the Class B stock would 

 be held in trust and deprived of 

 voting power so the producers 

 would control the concern, and It 

 is quite probable that this Is le- 

 gally possible, he said. In the 

 main, the legal set-up cannot be 

 questioned. 



The vital question is whether or 

 not the organization Is co-opera- 

 tive In that the grain will be han- 

 dled to the best Interest of the 

 producers rather than In the Inter- 

 ests of returning the utmost earn- 

 ings on the properties, said Mr. 

 Kirkpatrick. 



Elevators Not Necessary 



George R. Wicker, director of 

 the co-operative auditing depart- 

 ment of the I. A. A., had ten min- 

 utes on the program, which he de- 

 clared entirely Inadequate to pre- 

 sent all his documentary evidence, 

 but he did present the conclu- 

 sions which he claimed are backed 

 by documentary evidence. 



His survey of terminal eleva- 

 tor and grain storage and hand- 

 ling in all principal markets has 

 resulted In nothing that led bim 

 to believe that facilities such as 

 those operated at the present Ime 

 by The Grain Markelng Company 

 are necessary. Facilities are ob- 

 tainable In all markets of the 

 United States with the possible ex- 

 ception of Chicago, when wanted 

 and for the period required, and 

 at less than they can be owned. 

 That Is quite a general condition, 

 he declared, a day by day condi- 

 tion. And he thought that same 

 condition would be shown by the 

 audited reports of the concerns 

 Involved In the merger. 



Mr. Wicker also said it Is high- 

 ly necessary to avoid speculation 

 In any co-operative marketing con- 

 cern, for that has ruined more 

 co-operatives than any other sin- 

 gle thing. 



Qnestlons and Answers 



In answer to a question. Mr. 

 Silver said that the Grain Mar- 

 keting Company does not specu- 

 late, but merchandises grain, and 

 is merchandising more grain than 

 any other company. 



E. J. Carmody, a member of 

 the McLean County Farm Bureau, 

 asked why the audit reports were 

 withheld from the I. A. A. Mr. 

 Sliver said that the Information 

 upon which the negotiation was 

 based were supplied by the U. S. 

 department of agriculture. Infor- 

 mation gathered by the goveruy 

 ment, and those figures have been 

 free to anybody at all times and 

 always have been. It was. not a 

 question tft wtULt those companies 



had earned in the past, but a ques- 

 tion of what they could earn under 

 the rules and regulations when 

 filled with grain. 



Not Buying Audits 

 And In further reply to this 

 question, which was pressed by 

 several of those present, Mr. Bal- 

 lard explained that the Grain 

 Marketing Company contract was 

 to acquire the elevators of the 

 firms and the management for a 

 period of years. That is all that 

 under the contract the firms In- 

 volved were required to deliver to 

 the Grain Marketing Company. 

 The books and records and reports 

 remain the private property of the 

 vendors, they were not passed Into 

 the hands of the Grain Marketing 

 Company and never will be. "We 

 cannot take someone's private 

 property and give it to someone 

 else," he said. He indicated, how- 

 ever that access to these reports 

 had been permitted the appraisal 

 committee of the Grain Market- 

 ing Company. But as far as turn- 

 ing over the reports to the I.A.A. 

 it was an Impossibility, he said. 



The question was pressed still 

 further by farmers present, and 

 Mr. Ballard said that in a confer- 

 ence with Mr. Fox last fall he was 

 told that It was Impossible to turn 

 over the audits, but that he could 

 get any Information he wanted con- 

 cerning the finances of the grain 

 firms from either the tax Income 

 office or any of the Chicago banks. 

 Mr. Frazer answered this argu- 

 ment by saying that the tax In- 

 come office and the banks will not 

 give out Information concerning 

 any firm when forbidden by the 

 firm to give out such Information. 

 Storage of Grain 



E. D. Lawrence, member of the 

 McLean County Farm Bureau, re- 

 called that Mr. Silver had said 

 that before the organization of the 

 Grain Marketing Company the Chi- 

 cago elevators Involved were filled 

 only 30 per cent of capacity as a 

 rule, while they have been oper- 

 ated at 100 per cent capacity since 

 the marketing company was or- 

 ganized. "How do farmers bene- 

 fit by that change?" he was asked. 

 Mr. Sliver's answer was that stor- 

 age Is cheaper when the full ca- 

 pacity of a warehouse Is utilized. 



There developed many other 

 questions and answers and argu- 

 ments. One was concerning a cer- 

 tain district in Indiana that Is re- 

 ported to have been out of line 

 with seaboard prices before the 

 merger company started operating, 

 and Is now back in line again. 

 This was claimed to be true by 

 the merger people — they claimed 

 they did raise the price level In 

 that territory, but contrary argu- 

 ments were presented by Clifford 

 Gregory, editor of Prairie Farmer. 

 HOW GRAIN MERGER MEET- 

 ING WAS CALLED; RESULTS 



PLEASE I. A. A. OFFICL^LS 



Jan 13, 1025 

 Pantagraph Ag. Department 



A combination of circumstances 

 and direct action on the part of 

 the Grain Marketing Company 

 thru Its local representatives and 

 friends, particularly Mrs. Antoin- 

 ette Funk, resulted In calling the 

 grain merger meeting here last 

 Saturday, a report of which was 

 given in yesterday's Pantagraph. 

 The manner of calling that meet- 

 ing is of as much general Interest 

 as the meeting Itself. The I.A.A. 

 officials who took part are well 

 pleased with the result, altho hav- 

 ing nothing to do with the ar- 

 rangements. 



Up until about a month ago the 

 officers of the McLean County 

 Farm Bureau knew nothing about 

 the grain merger proposition be- 

 ing undertaken by the recently or- 

 ganized Grain Marketing Com- 

 pany except what they have read 

 in the news letters of the Ameri- 

 can Farm Bureau Federation and 

 the farm and dally press. They 

 knew Xn a general way about the 

 plan •aSwfihat the American Farm 

 Bureau executive committee ap- 

 proved of the plan, with the ex- 

 ception of Sam Thompson, the Il- 

 linois member. And they knew 

 that the state association with- 

 held Its endorsement after making 

 as much of an Investigation as was 

 permitted it. They knew that the 

 state association, the Illinois Agri- 

 cultural Association, bad asked 



for Information It consldere* vital- 

 ly necessary and had not been able 

 to secure that information. But 

 they did not know any of the de- 

 tails. 



A strict but publically known 

 hands-ott policy was maintained 

 by the I. A. A. 



Pressure Is Applied 

 But the situation In McLean 

 county changed about a month 

 ago. Agents of the Grain Market- 

 ing Company were sent here to 

 make a survey for a stock selling 

 campaign. They visited the farm- 

 ers' elevators, got In touch with 

 many of the farm bureau members 

 and officers, called at least one 

 general meeting. They presented 

 their arguments, urged that it is 

 a real co-operative plan and that 

 It Is a wonderful chance for farm- 

 ers to perfect the biggest market- 

 ing agency in America, utilizing 

 the skilled managerial ability of 

 expert grain men. They argued 

 that the plan was properly safe- 

 guarded In the interests of pro- 

 ducers. They asserted that all in- 

 formation had been turned ovier 

 to the Illinois Agricultural Asso- 

 ciation and there was no founda- 

 tion for the I. A. A.'s stand. They 

 pointed out that the public refusal 

 of the I. A. A. was substantially 

 a stand against the merger. Their 

 arguments were such as to cause 

 the membership of the I. A. A. to 

 demand that the I. A. A. either 

 take a strong stand against or for 

 the merger proposition. 



Confidence In the I. A. A. and 

 its officers was shaken. Some of 

 the local farm bureau men were 

 "sold" on the merger plan and 

 did not like the attitude of the 

 I. A. A. In refusing to endorse, 

 thus handicapping the merger 

 company by destroying confidence 

 of the farmers. Letters to the 

 I. A. A. officers, and even visits 

 to the I. A. A. office In Chicago, 

 did not satisfy them. 



Their position was that they 

 saw a big and valuable co-opera- 

 tive movement in the making, 

 backed by their national organi- 

 zation but not by their state asso- 

 ciation, and they lacked Informa- 

 tion that they deemed they should 

 have. 



Other local officers and members 

 were by no means "sold" on the 

 plan and they were willing to ad- 

 here to and support the I. A. A. 

 stand even tho they did not have 

 all the detailed Information. 

 Farmers Should Know All 



On December 27, In the annual 

 meeting of the M^ean County 

 Farm Bureau, a resolution was 

 passed without discussion which 

 endorsed the stand taken by the 

 I. A. A. officials. 



The following week, however, 

 Mrs. Antoinette Funk became a 

 member of the County Farm Bu- 

 reau and she demanded the right 

 to appear before the executive 

 committee. She argued that the 

 farmers of McLean county should 

 have an opportunity to know all 

 the facts concerning the Grain 

 Marketing Company and Insisted 

 that a meeting be called for that 

 purpose. The directors, them- 

 selves not knowing as much about 

 the affair as they would like, con- 

 sented to the meeting. It was 

 suggested that the I. A. A. should 

 be represented in that meeting, 

 and that was agreed. It was sug- 

 gested that the I. A. A. should 

 be asked about it before the meet- 

 ing was called, but that was 

 claimed to be entirely unneces- 

 sary by Mrs. Funk. So the meet- 

 ing was called without previous 

 notice or conference with the 

 I. A. A., and it was widely adver- 

 tised that the I. A. A. officers had 

 been especially Invited to appear. 

 An Unasual Situation 



Officers of the I. A. A. found it 

 advertised that they were Invited 

 to appear here. They had the 

 choice of coming out In the open 

 with all their information or of 

 refusing to come at all and thus 

 letting the Grain Marketing Com- 

 pany present only its side and let- 

 ting the farmers get an unfavor- 

 able Impression of the I. A. A.'s 

 stand. It was an unusual and un- 

 pleasant situation for them for 

 they did not want to actively fight 

 the marketing company which 

 would mean active opposition to 



