268 SPECULATION 



practices, and the farmer, thus far has not been called a 

 "speculator." 



The butter exchanges in the United States have thus far fallen 

 far short of complete success, owing to their small membership 

 and small volume of trade. 



2. Speculation: Its Services. At the very outset it must be 

 stated and emphasized that the code of ethics of the speculator, 

 organized and unorganized, is exactly as high as that of the pro- 

 ducers and consumers about him. This means that a very large 

 majority of the so-called speculative traders (commission mer- 

 chants, jobbers, " middlemen" in general) are honorable and con- 

 structive members of society and of their community; that a 

 very small minority of them are "black sheep" the traditional 

 rule for all flocks. And in the second place it must be stated and 

 emphasized that the large manufacturers of food products cannot 

 deal with widely scattered, unknown individual farmers, and can- 

 not do collective bargaining with unorganized farmers, and hence 

 the farmer's market at the present stage of economic evolution 

 must be with the men who stand between him and the miller, 

 the packer, the canner, the spinner, and so on. In other words, 

 the speculator makes the market for the farmer's products. The 

 chief service of the speculator is to create this continuous market. 

 This function is not appreciated till it is interrupted by war or 

 other calamity. This truth, recorded in the proverb, "You never 

 miss the water till the well runs dry," may be illustrated by the 

 case of the California Bean Growers. In December, 1918, the 

 California Market Director reported the following situation among 

 the farmers of that State, when the speculator was partially forced 

 out of the market: 



" . . . It has been pointed out that had there been no bean growers' asso- 

 ciation in 1918, the results would have been most disastrous to the California 

 bean industry. The conditions facing the growers were in the nature of an 

 unprecedented combination of unfavorable circumstances. 



"The small limit which the Federal Food Administration has placed on 

 the profits to be allowed to the speculative buyer, had completely destroyed 

 his speculative interest in the product. As a consequence, he was unwilling 

 to buy except from hand to mouth. This left the producer with no buyers 

 except for the merest handful of his product. Furthermore, the banks, with 

 abnormal demands made on them by the government, with large advances 

 made by them to barley and to other growers, with a weak and declining bean 

 market "staring them in the face, were in no frame of mind to look with favor 

 upon requests for financial accommodations coming from bean growers. On 

 top of it all, the bean grower found himself faced with demands upon him for 

 ready cash to meet his abnormal cost of production that stressed him to the limit. 2 



2 Third Annual Report, State Market Director of California, 1918, pp. 

 68, 69. 



