492 AGRICULTURAL ECONOMICS 



unquestioned. This the exchanges are instrumental in doing. The 

 system of inspection, grading, and weighing, which they have adopted 

 with the assistance of the several state governments, has reached the 

 highest standards. Next, the rules of the exchange look to the super- 

 vision of the storage of grain in the great collecting and distributing 

 centers. According to the Chicago Board of Trade, the owner of an 

 elevator whose holdings of grain can be delivered on contracts made 

 on its floor must be of unquestioned financial standing, and his books 

 are subject to examination by the committee of the exchange The 

 elevator must be of the most improved character, properly situated, 

 and with adequate transportation connections. The receipts of snrh 

 a "regular" warehouse are acceptable as a delivery on exchange 

 contracts. 



This system of delivery by means of warehouse receipts gives to 

 the grain, cotton, and produce they represent the same quality of 

 mobility, for purposes of sale or deposit as collateral, as is given to 

 corporate property represented by stocks and bonds listed n nr 

 stock exchanges. If it were not for organized markets and the exist- 

 ence of warehouse receipts, the vast quantity of produce lying in 

 warehouses and elevators, aggregating hundreds of millions of dollars, 

 would not be available for business purposes except in a very crude 

 way. At present the greater part of the country's enormous crops 

 is purchased from the farmer by warehouse and elevator men during 

 the three or four months of the crop moving season, and is then gradu- 

 ally sold to the consuming public during the balance of the year. 

 The farmers, as a rule, demand immediate cash payment, and this 

 requires the expenditure of hundreds of thousands of dollars in excess 

 of the available capital of the buyers. This in turn necessitates on 

 their part extensive borrowing from bankers against so-called "grain 

 paper." It is necessary for the buyers to transact the business on 

 credit, and it is estimated that approximately nine-tenths of the 

 country's grain and cotton crop is originally purchased with borrowed 

 funds. 



To illustrate, we will assume that a grain buyer with $100,000 of 

 capital purchases 100,000 bushels of wheat for sale in the East. He 

 desires to liberate his capital for new purchases long before he sells 

 his present holdings. This he does by having his 100,000 bushels of 

 wheat inspected, graded, and represented by a warehouse receipt or 

 a bill of lading. He also has the same insured against loss by fire 

 and "hedged" on some exchange against loss from a decline in price. 



