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THE LIVESTOCK PRODUCER AND ARMOUR

Philip D. Armour

Foreword

THE year 1919, included as it was in the period between the signing of the Armistice and the ratification of peace, was logically a season of uncertainty, unrest and unsettled conditions. And yet American business, discounting all this, entered upon and passed through this period with full faith in a favorable outcome.

While prosperity was general, the processes of realignment of our economic relations hurt or temporarily hampered some lines of business. The livestock and packing industries did not escape entirely unharmed.

Naturally, proposed radical legislation, with accompanying agitation, and a slump in American meat exports, caused such violent disturbance of the livestock markets during the latter half of the year that both producers and packers became deeply concerned as to the immediate future of the industry.

No array of proved facts as to the low percentage of packer profits, no pointing out of the real factors controlling meat and livestock prices was sufficient to convince the disturbed element of the public and certain agents of the Government that packers' operations on the existing large scale were justifiable.

Therefore, by a recent understanding with the Government, Armour and Company will dispose of all their interests in food production, not directly associated with and dependent upon the meat packing business. In addition, Armour and other packers agree to relinquish interests in stock yards and railway terminal properties at the various market centers. The terms of the understanding permit the retention of dairy and poultry products in view of the dependence of these on such refrigerating and distributive facilities as the packers have provided.

Both patriotism and enlightened self-interest command every citizen and business to make concessions and sacrifices in times of crises, whether of war or peace; and while Armour and Company felt that they were clearly within their rights in their operations previous to this understanding with the Government, it was plainly in the line of public service to make concessions that would clear the way towards public confidence in the development of the livestock industry.

J. Ogden Armour

How and Why Livestock Market Grew

THERE was a time, within the memory of men still active in the cattle business, when the capacity and demand of the local butcher shop measured the demand for fat stock and fixed the price as well.

On driving his cattle to the village, or negotiating for their sale, it was not uncommon for the stockman to be met with the news that a neighbor had got ahead of him and glutted the market with two or three or more meat animals. No matter how good the offerings, there was no present market at any price.

This was the condition of the livestock business in the "good old days" before the establishing of the great packing centers; before the development of economical systems of slaughtering, saving the waste, and distributing dressed beef quickly and continuously to the remotest parts of the country.

Even if he is feeding only a few head, the disposal of them is not dependent upon local demand. He may double-up with his neighbors to make up a car. He may belong to a shipping association that makes a business of collecting small lots into carloads for direct shipment, and although he sells to the local stock buyer, his knowledge of what his cattle are worth at the central markets enables him to secure a fair price.

So it has come about that world demand determines prices and governs buying activities in every town and village where livestock is purchased. For local butchers everywhere are governed by prices at the central markets. The truth is that the most successful butchers no longer do their own killing, but buy their beef from packers' branch houses in the larger cities and towns or from "route cars" running from packing plants or branch houses into the smaller communities.

In doing this they get better beef at lower cost than by local slaughtering, and they can serve their customers with a safer and more satisfactory article because the animal is killed and the meat prepared under the stringent government inspection and sanitary regulations that are practiced only in the larger establishments. This insures absolute freedom from diseased conditions and careless handling.

Practical butchers, who are also feeders, have proved by test that they can ship their beef cattle hundreds of miles to the big packer, have them slaughtered, dressed and returned at less cost than they can do their own killing. This is possible because the utilization of every scrap of the animals in valuable by-products, and the saving in labor by wholesale slaughtering and handling, pay all expenses, including the freight both ways, and leave a margin for the butcher besides.

The local butcher or livestock producer can little better afford to kill and prepare his own beef than he can afford to tan the hide and make his own shoes. There was a time, even in America, when the farmer himself actually did these things. He also sheared his own sheep by hand, while his wife and daughters spun the wool into yarn and wove cloth for the family clothing. Progress has made such methods absurd, unprofitable and impracticable.

But the great machinery of economical production and distribution was not built in a day, or a year, or a decade. Armour and Company's activities began more than fifty years ago. At first the packing house was only a butcher shop on an enlarged scale, preparing and handling pork products almost exclusively. Cattle were killed for local consumption only, as there was no such thing as cold storage, refrigerator car lines or branch houses for the distribution of fresh meats.

In those days the offal from the packing houses was thrown away or buried, as is still done to considerable extent by the small butcher at the present time. The by-products industries, by which hundreds of valuable articles are now created from what was once waste, were developed through long years of scientific investigation and experimentation.

The efficiency of the Armour organization of today is the result of the accumulated efforts of thousands of trained scientific and business minds, applied through half a century to the solution of the problem of factoring and furnishing food supplies for the nation and the world by the most direct and efficient means.

Nothing less than a great and thoroughly organized concern could effect the economies that make such achievement possible. Armour and Company's growth has been, and is, simply the natural expansion of a great industry keeping pace with the progress of the producer.

Re-investment and Expansion Policy

NO amount of criticism, investigation, misrepresentations or "exposures" has ever shaken Armour and Company's faith in the fairness and final endorsement of the great body of American livestock producers.

That the consumer found grievance in recent high food prices and attributed his troubles to the packer or producer, or both, was perhaps not to be wondered at, though his reasoning was not sound. That competing food distributors should object to the extension of packer efficiency to general food distribution is easily understood from these competitors' viewpoint.

The retirement of Armour and Company from all lines of production and distribution not directly associated with meats and livestock by-products, was in response to these disturbed elements of public opinion. But these restrictions of packer activities in no way affect the relations of mutual confidence and dependence between Armour and Company and the livestock producers.

The fundamental things remain, and they are these: The livestock industry must continue to exist and expand; producers must be rewarded with fair profits; livestock markets must be maintained and made more convenient; and the markets for meat products must be enlarged and extended.

To these basic facts Armour and Company have pinned their business faith, and upon them shaped their policy. Ninety per cent of the profits of the Company have been re-invested in the business and are represented today by great packing plants at sixteen market centers, and many branch houses throughout the country, together with refrigerator car lines connecting the livestock markets with the consuming centers of the nation.

It requires no argument to show the livestock producer that his interests and profits are inseparably associated with these properties, and it is quite as plain that the necessities and conveniences of the consuming public are dependent upon and served by them.

America and the world will continue to demand more and more meat and other products from livestock. Agriculture will not successfully continue without the production of meat animals. So the future reveals no reason why Armour and Company should not continue the policy of re-investing their earnings in the business that gives the most direct and substantial support to the basic industry of animal husbandry.

Aspects of Big Business Explained

THE simple recital of an ordinary day's doings of Armour and Company's beef department will make plain a number of things that may appear mysterious to a casual observer. Each day, at the opening of the market, the manager of the beef department must carefully weigh the possibilities of his sales and shipments of beef carcasses against the receipts of cattle of the quality demanded by his trade. And he must buy accordingly.

Local conditions determine this. He may meet with unforeseen competition in the kind of meats he has ordered, or the demand for meats may have fallen off for one or a dozen of reasons, or for no discoverable reason at all. These known and unknown influences on the demand govern his market and he has to accept the situation, depending on evening up the score under more favorable conditions.

Of course a decline or advance at one or a few branch house points, from merely local causes, does not materially affect the market at the packing centers, but any widespread fluctuation from general causes is immediately reflected in cattle prices at all of the great markets.

The best way for a producer to learn what determines the price he gets for his livestock is to visit the nearest Armour branch house and get first hand information on the facts that govern meat prices at the final market.

Any Armour branch manager will welcome visitors and willingly answer questions. He will explain not only the factors that influence the general level of prices, but will point out why cuts from certain types of beef carcasses are in constant demand at the highest prices, while similar cuts from other carcasses are neglected and sell materially lower.

There is a type of beef carcass that is best and commands the best price, and it costs no more to produce than an inferior type. The same is true of mutton and pork. Any Armour branch manager will show you what these types are and the Armour Farm Bureau will furnish, without charge, information on improved methods of producing the sort of animals that are most in demand for meat purposes.

One aspect of the big packing business, the importance of which is not generally appreciated, is refrigeration. It is not too much to say that without ample means of refrigeration, both in storage and in transit, no fit and adequate supply of fresh meats and dairy products could be supplied to the public.

Food refrigeration originated with the meat packing business early in its history. At first only storage refrigeration was practiced for the purpose of conserving and equalizing the supply of fresh meats for local or near-by consumption. Then came the conception of transit refrigeration, and the refrigerator car was invented, primarily for the purpose of shipping fresh meats from the producing centers of the West to the consuming centers of the East.

From the transportation of fresh meats, the extension of the service to the carrying of fresh fruits, vegetables and dairy products was a natural and easy step, resulting in the development and maintenance of the great orchard lands and fruit and market garden areas from coast to coast, and the tremendous expansion of the indispensable industry of dairy farming all over America.

To the livestock producer refrigeration in storage and in transit means everything. Without it the great packing interests could not exist and livestock husbandry would revert to the primitive and unprofitable conditions prevailing fifty years ago and described in the preceding chapter.

These facts explain why Armour and Company have persistently opposed every attempt to deprive them of the exclusive use of their privately-owned refrigerator cars and turn them over to the railroad companies for general use. To maintain the necessary constant movement of meat products Armour must have an adequate supply of these cars every day in the year. Extended experience has proven that they would not and could not be supplied by any form of railroad administration, either governmental or corporate, yet devised.

Declining Livestock Prices and the Causes

BRIEFLY outlined herewith is a resum? of what are accepted as the chief causes contributing to the sharp decline in livestock prices during 1919.

The discontinuance of Government orders for beef was the principal thing which affected cattle prices in the late spring. From being a purchaser the Government became a seller in the domestic market. Added to this, there has been unusual labor unrest, large supplies, agitation against the high cost of living, low foreign exchange rates, and the English boycott against high prices.

The falling off in hog prices was far more serious than in the case of beef, because normal demand for hogs is based on the consideration of large exports, while the market for beef is primarily and principally domestic.

The great demand for American pork products which was confidently expected from European countries did not materialize, because of the extraordinary and unforeseen development of exchange conditions which made purchases on the American market practically impossible.

The earlier part of 1919 was marked by an unprecedented export of pork products, reaching in the month of June the high point of over 400 million pounds. From this point the drop was sharp and continuous, month by month, the figures for October showing total exports of less than 120 million pounds--a falling off of 70% in four months. These later exports were on orders booked earlier in the year, and not on new business.

Added to these principal factors, and aggravating them, were attempted boycotts of meat and proposed radical legislation for the regulation and restriction of the packing industry, and the resulting condition of uncertainty up to the very closing weeks of 1919, when the understanding between the packers and the U. S. Department of Justice was made public.

The big question is, What of the year 1920? While nothing positive can be predicted, better conditions is a practical certainty. The domestic consumption of beef is increasing to a gratifying degree; the arranging of international credits and the opening of foreign markets is a matter of comparatively short time. European need for pork products will be urgent and excessive for a considerable time, and this will not only take care of our surplus hogs, but will react favorably upon the market for cattle and sheep.

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