DEVELOPMENT OF COOPERATIVE AUCTION WAREHOUSES 



Auction selling by cooperatively-owned and operated tobacco warehouses 

 is a comparatively recent development. The method has evolved through 

 many years' experience with other systems of marketing. 



A brief discussion of some factors related to their development will 

 serve as background for succeeding sections of the report. It will 

 also provide an improved understanding of the preliminary steps involved 

 in establishing looseleaf tobacco marketing cooperatives. 



Reasons for Organizing 



The hogshead market was the first distinctive tobacco marketing system. 



Growers pressed their tobacco into cylindrical wooden hogsheads that 



held from 800 to 1,000 pounds of tobacco. These were rolled to market 

 and sold at auction. 



This system flourished up to the end of the Civil War, and then dis- 

 appeared because of difficulties individual producers encountered in 

 raising sufficient volumes of uniform quality tobacco to pack into 

 hogsheads and lack of satisfactory transportation facilities for moving 

 hogsheads to market. 



Following the Civil War, a system of country or barn buying developed 

 and became widespread. Local buyers and speculators visited the farms 

 and purchased tobacco while it was still growing or after it was in the 

 curing barn. 



In 1873 growers in Kentucky built cooperative warehouses in which they 

 stored their tobacco while waiting for better prices. Later came packing 

 associations, sales agencies, and local pools. 



The period 1890 to 1900 was characterized by a few extremely large 

 manufacturing companies, commonly known as "tobacco trusts" due to the 

 complex of subsidiary firms which each controlled. The consolidated 

 purchasing power of each of these organizations was substantial and 

 competition among buyers limited. 



These conditions, and lack of a system to make price information 

 available to growers, led to the development of two new methods of 

 marketing: (1) The looseleaf auction system, and (2) the regional 

 pooling of tobacco through cooperatives. Of these, farmers' pools 

 were much more prevalent at the outset. After a few years the pro- 

 portion of the crop pooled declined, and growers' effectiveness in 

 bargaining successfully with manufacturing companies was reduced 

 considerably. 



