628 GENERAL FARM PROGRAM 



level declines, and until wage rates in general decline. There has been little or 

 no reduction in wage rates at present. Another reason is that as long as the 

 consumers continue to demand an increasing number of marketing services, and 

 have the means to pay for them, the marketing costs are likely to remain high. 

 A final reason might be the operating margins in the milling and baking industry. 



With this background, I shall try and explain what happens to a bushel of 

 wheat after it leaves the field. First, let me say that what happens to this 

 bushel of wheat would not have to happen to every bushel of wheat that is made 

 into bread. For example, the farmer could sell his wheat at the time of harvest, 

 or he could store his wheat and sell it later directly to a miller or grain dealer. 



Let us assume that a farmer in Umatilla County harvested wheat in August, 

 1948, and stored this wheat in an elevator for 4 months. In December 1948, he 

 sells the wheat to a grain dealer for $2.00>^ a bushel. From this the dealer deducts 

 2 cents for storage and }4 cent for the Oregon wheat tax, so the grower gets $1.98 

 net. (Storage charges are J-o cent per bushel per month for the 4 months.) 



On the same day, the dealer sells this wheat to a miller in Portland for $2.21 a 

 bushel. Freight on wheat from Pendleton to Portland last December was 16)4 

 cents a bushel. Handling charges and the dealer's margin amounted (in this 

 illustration) to 4 cents a bushel. 



This maj^ be illustrated as follows: 



Price at Portland $2. 21 



Freight charges $0. 16}^ 



Handling charges and dealers margin .04 



— .201/4 



Price at Pendleton 2. 00)4 



Less storage (>4 cent per bushel per month for 4 months) 0. 02 



Wheat tax - . OO/2 



. 02K 



Net price to grower 1. 98 



The miller now has the bushel of wheat for $2.21. On the average, a bushel 

 of wheat will yield 42.6 povmds of flour plus 17.4 pounds of mill feed. The value 

 of the mill feed byproducts influences the retail price of the flour. According 

 to the weekly trade magazine, the Northwestern Miller, on the week ending 

 December 31, 1948, the wholesale price of bluestem bakers flour in Portland was 

 $6.26 a hundred pounds. The wholesale value at the mill of the 42.6 pounds of 

 flour from the bushel of wheat was therefore $2.66 (6.26 cents per pound by 

 42.6 povmds). In addition to this the miller has the proceeds from the sale of 

 the millfeed. Of course, we must remember that in milling bread flour, the 

 miller will buy some higher protein Montana wheat for blending purposes at 

 premiums over prices paid for the Oregon varieties. 



The flour now goes to the baker at a wholesale price of 6.26 cents a pound. 

 The 42.6 pounds of flour from our bushel of wheat make 65 pounds of bread. 

 Of course a lot of other ingredients, labor, power, slicing, wrapping, and retailing 

 go into the bread in addition to the flour. At an average price of 14}^ cents a 

 pound to the baker the 65 pounds of bread from our bushel of wheat brings 

 the baker $9.43. You will remember that the wheat farmer got $1.98 for this 

 wheat when he sold it last December. 



In other words the farmer got about 3 cents for the wheat needed to make a 

 1-pound loaf of bread. The rest of the cost represented storage, freight, wages, 

 other materials, power and profits of the dealer, miller, and baker. 



Remember that these figures quoted above are assuming a price to the grower 

 of about $1.98 per bushel. Labor charges, transportation rates, and marketing 

 services might cause these figures to vary one way or another. 



I submit this analysis in support of the general recommendations of the wheat 

 league on long-range wheat policy. It will be of no benefit to American con- 

 sumers for us to set wheat price supports at levels which will put efficient growers 

 out of business. The consumer has far more to gain through maintaining the 

 purchasing power of the wheat producer than the negligible effect of a reduction 

 in the price of wheat upon the price of bread. The choice on the part of the 

 wage earner lies between (1) an extra cent in the price of a loaf of bread or (2) 

 no job and therefore no money with which to buy bread or anything else. 



