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From Our Farms to Yours 
A Primer of Economics 
By John J. Dillon 
Part XIII 
The California fruit growers hav.e 
adopted the generally approved form. 
Their system consists of the local asso¬ 
ciation ; the required exchange; and the 
California Fruit Growers’ Exchange. 
This is the central or selling organiza¬ 
tion. Tne local association is incorporat¬ 
ed, and includes in its membership all the 
producers in the neighborhood who wish to 
associate themselves in the enterprise. 
This association owns the plants, picks 
the fruit, grades it, packs it, loads it, 
ships it, sets the price on it. receives the.* 
returns for it, pools it, and pays its own 
members for it. This local association de¬ 
cides when and whore the fruit is to be 
sold, and what price it will accept for it. 
It is controlled by a board of directors, 
elected annually by the members, and its 
business is transacted by a business man¬ 
ager selected by the board. The local 
member binds himself in a contract to sell 
his fruit through the association. lie 
may withdraw from the association any 
year in the month of September. The as¬ 
sociation has authority to join with other 
similar associations in forming exchanges, 
but the by-laws definitely provide that the 
other organizations have no authority to 
contract debts or to incur obligations for 
the local association. There are 129 of 
these local associations in the system. 
When a number of local associations 
decide to form a regional exchange, each 
association in the group elects one dele¬ 
gate, and these delegates, each represent¬ 
ing one association, organize themselves 
into a regional exchange and appoint a 
manager. There are 17 of these regional 
exchanges in the system. Each of those 
17 regional exchanges elects one delegate 
to represent it in the central or selling 
exchange, and these 17 delegates consti¬ 
tute the California Fruit Growers’ Ex¬ 
change, and perfect an organization for 
the sale of the fruit under the direction of 
the local associations and the regional 
exchanges. 
A contract to define the mutual duties 
and responsibilities of the parties to the 
contract is made between the members 
and the local association; another con¬ 
tract defines the relation between the local 
association and the regional exchange; 
and still another contract fixes the rela¬ 
tion of the regional exchange to the Cali¬ 
fornia Fruit Growers’ Exchange, which 
is the central selling agency. 
The general policy is to keep a supply 
of fruit constantly on the market in order 
to spread the distribution over the whole 
season, and not to attempt to hold it for 
a particular time or a special price. When 
a local manager and his board of trustees 
decides what volume of fruit he will sell 
in a given time, which may be a month 
or six weeks, he estimates what percent¬ 
age of the fruit held by members will be 
needed to make up the pool, and each 
grower is notified that this percentage 
will be taken from each orchard. The 
member furnishes the boxes, and carts 
the fruit to the packing house. The asso¬ 
ciation picks, grades, packs and loads the 
fruit. Then the car is turned over to the 
manager of the regional exchange, who 
bills it to the market decided upon, an I 
traces it from day to day en route. Later, 
if the information indicates that some 
other market promises a better prospect 
than the one to which the car is billed, it 
is deflected to the more promising market. 
Some large cities like New York and Chi¬ 
cago have auction markets. When the 
local and regional managers elect to sell 
at auction they decide to accept whatever 
price the fruit will bring under the ham¬ 
mer. In other markets the selling ex¬ 
change has agents who sell the fruit. The 
central exchange, however, has no author¬ 
ity to make prices or to accept offers. All 
offers must be submitted to the regional 
managers, and the selling agent must 
await instructions before he is permitted 
to close the sale. Neither the central ex¬ 
change nor its agents have any authority 
to influence shipments or to fix the price. 
It contents itself with carrying out the 
instructions of the local and regional man¬ 
agers, who consult with each other. The 
central exchange reports regularly on 
market prices and conditions to the re¬ 
gional managers, and these report to the 
local managers, so that all the locals have 
the same information at the same time. 
There is, however, no general agreement 
or understanding as to shipments or 
prices. There is no attempt to control 
markets or to create a monopoly. Each 
local manager • decides on his own judg¬ 
ment when to ship, and the prices to ac¬ 
cept. so that there is a constant competi¬ 
tion of one local manager with ali the 
others for the sale of the fruit in the mar¬ 
kets. 
The selling exchange collects the bills 
for fruit sold, and sends it all, without 
any reductions, to the regional exchange. 
The regional manager takes out his ex¬ 
pense and sends the balance to the local 
exchange. The local manager takes out 
his expense and divides the remainder be¬ 
tween the growers, pro rata, for the 
amount of fruit furnished by each At 
the beginning of the season the California 
Fruit Exchange estimates what its ex¬ 
pense will be per box, and every month it 
sends a bill to the regional exchange to 
cover its expense. This bill is promptly 
paid by check, and at the end of th<> fiscal 
year an adjustment is made of balances, 
so that the selling exchange operates for 
the year at exact cost of its service. 
In this California plan there is no gen¬ 
eral pooling, and no central control. The 
central exchange has no authority except 
to execute the orders which it receives 
from the local association, which reserves 
to itself full authority for the disposal ot 
the products, and the naming of the price 
at which it shall be sold. The central ex¬ 
change simply executes its orders, and 
furnishes the information necessary to 
an understanding of market conditions. It 
also exercises an important function in 
providing agencies in all the markets to 
which fruit is billed, and in developing a 
demand for the fruit in those markets. 
The regional exchange is not always 
necessary. It is used largely in Germany. 
In the California fruit industry it is used 
largely to receive and distribute market 
information, to provide cars, and to trace 
the movements of shipments, and issue 
selling instructions to the selling agents. 
In Denmark, where co-operation has at¬ 
tained its highest degree of development, 
the organization begins with the loral 
unit, and the selling associations and rx- 
port associations are created by the local 
independent organizations and serve th -m. 
They have no regional exchanges. These 
selling and export associations (we call 
them central associations) have no con¬ 
tact with the local producer. The local 
association is responsible for the sale of 
the product of its members and the locals 
create their own agency to do the selliug 
for them. 
In co-operation the individual must 
give up his so-called independence and 
freedom and liberty of action. In co¬ 
operation we try to overcome some of the 
defects in the system of individual bar¬ 
gaining. All the members delegate their 
authority and control of the goods to the 
association as an agent. The association 
must have authority to deliver the goods 
in order to make a good sale, or in fact 
any sale. It must give assurance of the 
quality and grade and volume of the 
goods. It must have the-authority and 
control of all the goods that the individual 
has originality. The individual must give 
it this direct authority, and delegate it to 
the association, but he may and should 
retain his control of the selling agency. 
In that way he retains indirect authority 
over the goods. The authority of the cen¬ 
tral agency may be made as strong and 
complete as is necessary, or as much so 
as through any plan that can be devised; 
but on this plan the central agency has 
just such authority and power as is dele¬ 
gated to it by the local associations, which 
are themselves in the immediate control 
of the local members, and no more. The 
central agency is the hired man > r the 
local organization, with all tho act 1 • ruy 
and control necessary to do good business. 
