necessity of a national food administration, and desired immediate action because of the pressure of forward contracts covering the purchase of new wheat and the forward sale of flour. They recommended that the food controller be given authority over the transportation of foodstuffs both by lake and rail; that all foreign buying of foodstuffs be under the jurisdiction of the food controller, with a view to effecting a fixed price of grain, and perhaps of grain products; that a maximum price be fixed on flour; that relative prices be fixed on coarse grains (corn, oats, barley, etc.) with reference to the prevailing price of wheat, so as to encourage their use and insure the conservation of wheat flour; that the practice of buying flour for long deferred shipment be discontinued; and that a "milling executive" composed of members of the milling industry be designated to act as intermediaries between the proposed Food Administration and the milling trade with a view to enlisting the helpful coöperation of millers generally.

A suggestion somewhat similar to this last idea was contained in a brief submitted to Mr. Hoover on June 10 by Mr. W. C. Edgar. This interesting paper called attention to the state of demoralization existing in the milling industry, growing out of the inability of the millers, unaided, to remedy the existing trade deadlock, in view of the price-fixing debate in Congress and the prevailing uncertainty as to what would be done and when. Conditions had really become critical; many millers were afraid to buy wheat, since the hedging market was closed and there might be sudden and arbitrary change in the wheat price through Congressional action. They were also unwilling to accept orders for flour, except those specifying immediate shipment, in view of the probability of repudiations if prices should be reduced. Many mills were, therefore, greatly

curtailing their output, just at the moment when commercial stocks had already been reduced to a dangerously low point.

The winter wheat crop was already beginning to move in the Southwest and the millers needed some assurance as to what would be done before they could with safety handle this wheat. Therefore, Mr. Edgar suggested that, without waiting for action by Congress, the Food Administrator, acting under the President's authorization, proceed to organize the milling industry on a cooperative basis for the purpose of working out definite plans for the regulation of the trade. A scheme of organization was proposed calling for the appointment of a Milling Executive or General Chairman, eight heads of divisions, one for each of the eight milling geographical sections of the country, and twenty-nine heads of sub-divisions. These were all to be active millers and were to receive their appointments from the Food Administrator; the whole organization to be an advisory body, appointed tentatively to work out the machinery for the control and administration of the milling industry, which could be put into operation immediately upon legal authorization by Congressional action.

This course of action was decided upon by Mr. Hoover, who on June 22, appointed a committee of nine leading members of the industry, representing the several sections of the country. This body, known as the United States Millers' Committee, conceived its duties as the perfecting of a self-controlled organization of the milling industry, acting in conjunction with the proposed Food Administration. On June 28 it reported a plan which embodied some of the principles ultimately adopted as the basis of the milling regulations. The most important single feature which had been elaborated at this time was the scheme for control

ling flour prices. It was proposed that under the intratrade agreement each mill should be entitled to sell its products on a cost plus profit basis, provided the cost of manufacturing and marketing did not exceed seventyfive cents per barrel, while the amount of profit was to be limited to twenty-five cents per barrel; the quantity of wheat that might be used in making a barrel (196 pounds) of flour was limited to 4.75 bushels (285 pounds)

a rate of flour extraction equivalent to 69 per cent. These were liberal figures, but they were deemed necessary for the accommodation of the less well equipped mills whose coöperation in the regulatory plan it was considered essential to obtain.

This whole plan for self-regulation of the industry, under the supervision of practical millers, was predicated upon the ability of the Millers' Committee to secure an agreement on the part of the mills respecting the allocation of business among them on the basis of their average output for the three preceding years. This was to be brought about by the proportionate allotment of wheat to the mills under government direction; export orders and government contracts were to be awarded on a pro rata basis to the mills through a central selling agency. By voluntary agreement the mills were also to limit their sales of flour to a period thirty days in advance; a uniform sales contract was to be used. To pay the expenses of administration a monthly assessment of one cent per barrel of output was to be levied on all mills entering the organization.

To this plan of milling regulation Mr. Hoover gave his approval in general terms, and he proceeded to the formation of the regional sub-committees but refrained from committing himself to specific plans until legal authority was granted. Early in July the Millers' Committee sent an announcement to the trade (through the

offices of the Millers' National Federation) setting forth what had already been accomplished in voluntary organization; millers were requested to signify their willingness to coöperate in the further work of the Committee. Within a few weeks favorable replies were received from mills representing a majority of the producing capacity of the country.

III

SLOW PROGRESS OF LEGISLATION

Meanwhile legislative action still dragged, and altho prices had receded from the high levels of May and early June, which materially reduced the difficulties of the mills in effecting the adjustment from the old crop to the new, the mills quite generally still refrained from buying wheat or selling flour ahead because of the risks of a declining market. In the absence of a hedging market it was impossible to bridge the gap between the current high prices of wheat and flour and the prospective lower prices when the new crop should be harvested.

On June 18, President Wilson made public a letter addressed by him to a member of Congress in which he urged the quick passage of food legislation in order that prices of foodstuffs might be reduced by putting a stop to speculation. The President declared that legislation was urgently needed before July 1, if the country was to be made safe from these dangers of speculation and oppressively high prices.

July 1 came and went, but with it came no food legislation. On July 11, the President gave to the press a letter from Mr. Hoover which called attention to the perils of delay. This statement rehearsed the fact that the farmers had received an average price of $1.51 per bushel for the 1916 wheat harvest, while the price at

Chicago had gone as high as $3.25. Flour prices are based upon current, i. e., "speculative" wheat prices; thus the consumer had been made to pay as much as 100 per cent more than the producer had received. This great increase in the margin between producer and consumer was due not so much to vicious speculation as to the fact that every link in the distribution chain had found it necessary to exact wider profit margins in order to be insured against the risks of widely fluctuating prices during a period when practically all normal price stabilizing agencies had been disrupted by the effects of war. A consequence was that large masses of people were actually being undernourished in the great consuming centers, due to the exorbitant cost of living.

Mr. Hoover's statement also called attention to the consolidation of Allied buying into the hands of a single agency, the Wheat Export Company. Thus the export price became subject to the will of this one purchaser. Not only this, but the growing shortage of ocean tonnage would necessitate spreading the export movement of the new crop over a considerable period, whereas it had normally been concentrated into the fall months. The result would probably be a serious glut in the interior terminal markets, which would place an added strain on the financial resources of the legitimate grain trade and probably necessitate the assistance of a considerable speculative element. The necessity of reliance upon the speculative element to carry the surplus stocks which would result from physical restrictions upon freedom of export movement indicated that the speculators' toll would inevitably be levied again upon both producer and consumer. To protect the farmer from a disastrous slump in the price of his wheat resulting from a glutted market, some strong and efficient government action was absolutely necessary, not only to secure a just