j^O THE BUTTER INDUSTRY IN UNITED STATES [374 



or later cause the butter trade to be organized in the same 

 way that the trades in other commodities capable of stan- 

 dardization have been organized. This fact played a 

 greater role than the conflict between producers and whole- 

 sale dealers. It is through these organized markets that a 

 system of grades can be established and prices for each 

 grade can be socialized. This feature brings fairness into 

 dealing because the producers and receivers are both in- 

 formed as to prices. Whether the initiative in organizing 

 the market is taken by the producers or the dealers, the re- 

 sult is largely the same, and the benefits accrue to both 

 classes. 



THE CONTRACT SYSTEM 



After the organization of the boards of trade and ex- 

 changes for the sale of butter, the way was paved for the 

 adoption of a different method of doing business between 

 producers and wholesale dealers. Selling on commission 

 gave way to the " contract system " by which the receiver 

 contracted with the producer to receive his butter and pay 

 for it at the exchange price. In some cases, depending 

 upon the quality, risks involved, and the terms of credit, 

 the price at which the butter is contracted, is above or below 

 the exchange quotations. This plan became possible after 

 the establishment of a true market price, and was forced 

 upon the wholesale dealers as the prevailing method through 

 competition among themselves to market the butter. It 

 became customary for dealers not only to advertise to 

 pay the market price on the day of arrival, but also 

 to send their agents through the producing territory in 

 order to enter into contracts with producers for a specified 

 time. During the spring of the year many such contracts 

 are entered into. 1 While the prevailing method in most 



1 The Elgin Dairy Report, April 4, 1904. 



