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Tobacco marketing cooperatives in the Miami Valley, Ohio

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Theses
U n p u b l i s h e d t h e s e s s u b m i t t e d f o r t h e M a s t e r ’s a n d
D o c t o r ’ s d e c r e e s a n d d e p o s i t e d in the N o r t h w e s t e r n U n i v e r s i t y
L i b r a r y a r e o p e n f or i n s p e c t i o n , but a r e to be u s e d o n l y w i t h
d u e r e g a r d to t h e r i g h t s of the a u t h o r s .
Bibliographical
r e f e r e n c e s m a y be n o t e d , but p a s s a g e s m a y be c o p i e d o n l y w i t h
the p e r m i s s i o n o f t h e a u t h o r s , a n d p r o p e r c r e d i t m u s t be
g i v e n in s u b s e q u e n t w r i t t e n or p u b l i s h e d w o r k .
Extensive
c o p y i n g o r p u b l i c a t i o n of t he t h e s i s in w h o l e or in p a r t
r e q u i r e s a l s o t h e c o n s e n t of t h e D e a n of t he G r a d u a t e S c h o o l
of N o r t h w e s t e r n U n i v e r s i t y .
h a s b e e n u s e d by the f o l l o w i n g
a t t e s t t h e i r a c c e p t a n c e of the
its
persons, whose signatures
above restrictions.
A L i b r a r y which borrows
p a t r o n s is e x p e c t e d to s e c u r e
NAME
AND
ADDRESS
t h i s t h e s i s f or u s e by
the s i g n a t u r e of e a c h u s e r .
DATE
NORTHWESTERN UNIVERSITY
TOBACCO MARKETING COOPERATIVES
IN THE MIAMI VALLEY, OHIO
A DISSERTATION
SUBMITTED TO THE GRADUATE SCHOOL
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
for the degree
DOCTOR OF PHILOSOPHY
S CH OO L OF C O M M E R C E
DEPARTMENT OF MANAGEMENT
BY
HAROLD BRUSS BAKER
EVANSTON, ILLINOIS
JULY 1940
P ro Q u e st N u m b e r: 10060860
All rights reserved
INFORMATION TO ALL USERS
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a n o te will in d ic a te th e d eletio n .
uest,
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PREFACE
The Miami Valley, Ohio, tohacco district, although
small, is important in the cigar leaf market.
Yet its his­
tory and its experiments in cooperative marketing have not
received the attention of writers in any degree comparable
to that devoted to the districts in Kentucky, Tennessee,
Virginia, the Carolinas, and Wisconsin.
In this study of the tobacco marketing cooperatives
in this district, I have sought to discover and present the
factors involved in the organizing of the associations and
the reasons for their failures to accomplish the purposes
which led to their creation.
The formation, management, and
operations of these associations, rather than the methods of
marketing the tobacco, have been my concern.
To provide an
adequate background for this analysis, I have sketched
briefly the history of the district from the introduction
and development of the cultivation of tobacco through the
periods of prosperity and depression which have been experi­
enced.
I have described in much detail many of the opera­
tions of the associations, for I have felt that only through
this means would the reader be able to secure an under­
standing and appreciation of the basic factors involved in
ii
iii
the rise and fall of these cooperatives.
It has not been my
aim to compare the experiments in cooperative marketing in
this district with those in other districts.
However, where
comparisons have seemed to add to the analysis, they have
been made•
The first two chapters of this study present a brief
description and analysis of the development of tobacco cul­
tivation in the district, of the market for this cigar leaf
tobacco, and of the marketing methods.
Chapters III-VII
take up in chronological order the different associations
which have existed, and analyze their formation and opera­
tions.
Chapter VIII is devoted to a summary of the chief
features of the operations of the associations and to the
conclusions drawn from the study.
As this report makes no attempt at a complete analy­
sis of the marketing methods In this district, it appears
that this field remains a fruitful one for future research.
Studies might well be made of the changes in marketing meth­
ods, of the relative importance of the different middlemen
and of the marketing channels, and of the relation of the
Cincinnati tobacco auction to this district.
Since little has been written about the cooperatives
In this district, I have relied mainly on my experience in
the district, on interviews with those closely associated
with the undertakings, and on the records of the associa­
tions to secure my information.
The early years of my life were spent on a farm in
iv
the district.
My father was a large tobacco grower and was
a° member of the Miami Valley Tobacco Growers’ Co-operative
Association.
I well recall the stirring events connected
with its creation and dissolution.
In 1933-1935 I was
accountant for the Ohio Cigar Leaf Tobacco Growers* Market­
ing Association.
Since 1935 I have maintained the connec­
tion by assisting in the analysis of the records and the
preparation of reports.
These contacts with the growers,
with the members and officers of the associations, and with
the actual operations of the one association have given me
opportunities to know the attitudes and problems of the
tobacco growers and to learn much about the earlier associa­
tions, as well as the present one.
It is impossible to acknowledge my indebtedness to
all who have provided information and given assistance in
the preparation of this study.
Those who were most helpful
in Interviews and In making available the records of the
associations are listed in Section VI of the Bibliography.
Out of a long standing interest in this problem I have ques­
tioned many other growers and buyers in casual meetings
since 1933*
Special acknowledgment must be given three men who,
as leaders in the district and in the associations, were
most generous In their assistance: M. E. Stern, tobacco bro­
ker of Dayton, Ohio, and sales manager (1924-1927) of the
Miami Valley Tobacco Growers* Co-operative Association; Fred
Sheaffer, Germantown, Ohio, director and president (1924-
V
1927) of the Miami Valley Tobacco Growers' Co-operative
Association; and Jesse T. Landis, Pleasant Hill, Ohio,
secretary-treasurer (1931---) of the Ohio Cigar Leaf Tobacco
Growers' Marketing Association.
I wish to express my appreciation and great indebtedness to Professor James R. Hawkinson, School of Commerce,
Northwestern University, who has guided the preparation of
this study.
To Dr. Wm. R. Spriegel and Dr. D. J. Duncan,
both of the School of Commerce, Northwestern University, I
give acknowledgment for valuable suggestions.
My wife, Annabelle Powell Baker, has given encour­
agement and assistance in all stages of the work.
Evanston, Illinois,
July 8, 1940.
OUTLINE OP CONTENTS
PREFACE
Page
ii
LIST OF TABLES
viii
LIST OF ILLUSTRATIONS
Ix
Chapter
I. THE PRODUCTION OF TOBACCO IN THE MIAMI VALLEY
1
Introduction and Development of Local Types
of Tobacco
Development of Production
Diversified Farm Economy
4
12
17
II.
THE MARKET AND MARKETING- METHODS
Competition with Other Cigar Leaf Districts
Competition from Imports
Decline of Cigars
Exports of Cigar Leaf and Cigars
Relation of Production and Consumption
Price and Farm Value of Tobacco
Marketing Methods
Sale and Delivery
Criticisms of Country-Buyer System
Other Marketing Agencies
Changes in Cigar Manufacturers
III.
EARLY COOPERATIVE VENTURES
The National Cigar Leaf Growers* Union
Warehouse Companies
Purpose
Management
Warehouses
Handling the Tobacco
Financing
Selling
Growers Tobacco Sales Company
Miami Valley Leaf Tobacco Growers
Association
Success, Failure, and Dissolution
vi
21
21
30
33
37
40
44
48
53
58
60
62
66
68
73
75
77
80
80
83
85
88
89
91
vii
IV.
THE MIAMI VALLEY TOBACCO GROWERS* CO-OPERATIVE
ASSOCIATION - FORMATION AND STRUCTURE
Organizing the Association
Membership Contract and Relations
Maintaining Membership Relations
Management
Equipment
V.
THE MIAMI VALLEY TOBACCO GROWERS* CO-OPERATIVE
ASSOCIATION - OPERATIONS
Financing
Miami Warehousing Corporation
Receiving and Handling
Sales
Expenses
Returns to Growers
Accounting Methods
Dissension and Dissolution
VI.
OHIO CIGAR LEAF TOBACCO GROWERS’ MARKETING
ASSOCIATION - FORMATION AND STRUCTURE
Formation of the Association
Membership Contract and Relations
Increasing the Membership
Maintaining Membership Relations
Management
Equipment
VII.
OHIO CIGAR LEAF TOBACCO GROWERS* MARKETING
ASSOCIATION - OPERATIONS
Financing
Handling the Tobacco
Sales
Receipts of Tobacco
Returns to Growers
Expenses
Accounting Methods
Special Activities
Removing Trash from the Market
VIII.
SUMMARY AND CONCLUSIONS
98
101
109
113
117
124
123
123
130
136
143
148
150
153
156
169
172
182
188
191
195
206
210
210
223
226
235
240
245
249
252
254
257
APPENDICES
2?Q
BIBLIOGRAPHY
319
LIST OF TABLES
Table
1. Estimated Percentage of Gross Cash Income From
Sales of Tobacco and Other Products on Ohio Farms
by Selected Counties for the Year 1929
2*
Imports of Cigar Leaf Tobacco and Cigars in
Selected Years
3*
Per Capita Consumption of Tobacco Products in
Selected Years
4*
Cigar Factories and Production in Certain States
and the United States in Selected Years
5*
Summary of Data on Cooperative Warehouse
Companies of 1912
6,
Tobacco of the 1930-1939 Crops Received by the
Ohio Cigar Leaf Tobacco Growers1 Marketing
Association
7*
Summary of Operations of Ohio Cigar Leaf Tobacco
Growers* Marketing Association of Type Pools on
Which Final Settlements have been made
8.
Analysis of Expenses of Ohio Cigar Leaf Tobacco
Growers* Marketing Association in Type Pools on
Which Final Settlements have been made (To
May 1, 1940)
viii
LIST OF ILLUSTRATIONS
Figure
1* Miami Valley Tobacco District
in 1869
Page
9
2.
Miami Valley Tobacco District
in 1909
10
3*
Miami Valley Tobacco District
in 1934
11
4.
Acreage and Production of Tobacco in Miami
Valley 1863-1939
14
5*
Cigar Leaf Tobacco Districts
22
6.
Leaf Tobacco Used in Manufacture of Cigars
35
7*
Percentage of Leaf Tobacco Used in Cigars,
Cigarettes, and Other Products
35
Production and Disappearance of Miami Valley
Tobacco 1912-1938
42
Stocks and Disappearance of Miami Valley Tobacco
1912-1938
42
10.
Average Price of Miami Valley Tobacco 1909-1939
45
11.
Farm Value of Tobacco Crop in Miami Valley
1909-1939
45
Marketing Channels of Miami Valley Tobacco
51
8#
9*
12.
13*
14.
15.
16.
Locations of Cooperative Warehouse Companies in
Miami Valley 1912
72
Organization Chart of the Miami Valley Tobacco
Growers' Co-operative Association
121
Warehouses of the Miami Valley Tobacco Growers'
Co-operative Association for the 1923 Crop
133
Miami Valley Tobacco Growers' Co-operative
Association - Summary of 1923 Crop
146
ix
X
17*
18•
19#
20.
21.
Miami Valley Tobacco Growers' Co-operative
Association - Summary of 1924 Crop
147
Organization Chart of Ohio Cigar Leaf Tobacco
Growers' Marketing Association in 1931
198
Organization Chart of Ohio Cigar Leaf Tobacco
Growers' Marketing Association after 1931
201
Receiving by Types for Crop Years 1930-1939
by Ohio Cigar Leaf Tobacco Growers' Marketing
Association
239
Time Required for Payments and Final Settlement
on 1930-1939 Crops by Ohio Cigar Leaf Tobacco
Growers' Marketing Association (To May1, 1940)
239
CHAPTER I
THE PRODUCTION OF TOBACCO IN THE MIAMI VALLEY
Cooperative ventures in tobacco marketing in the
Miami Valley of Ohio have had a history marked by fluctu­
ations in activity and by difficulties.
Under the stimulus
of recurrent periods of interest and agitation a number of
marketing associations have been formed.
These have been:
the few warehouse associations established about 1900; the
eleven cooperative warehouse companies of 1912, with the
related sales agencies; The Miami Valley Tobacco Growers'
Co-operative Association, Dayton, Ohio, 1923-1927; and the
Ohio Cigar Leaf Tobacco Growers' Marketing Association,
Greenville and Brookville, Ohio, 1931-— , with the contract­
ing group which preceded it.
These organizations have dif­
fered widely in structure and operations, but all of them,
except the last, have ceased to function after a brief life.
In order properly to analyze the activities of the
various associations and to discover the factors involved in
their creation and dissolution, an understanding of the
nature and problems of this tobacco district must be secured.
An essential part of this understanding is provided by a
description of the production of tobacco in the district.
The Miami Valley tobacco district is located in
1
southwestern Ohio and southeastern Indiana in the valleys of
the Great Miami and the Little Miami rivers*
Production
centers in seven counties In Ohio— Butler, Darke, Greene,
Miami, Montgomery, Preble, and Shelby— and one county in
Indiana--Randolph.
Other counties in the district which at
times have produced a sizeable quantity of tobacco are:
Champaign, Clark, Clinton, Logan, and Mercer counties in
Ohio, and Jay and Wayne counties in Indiana*1
The class of tobacco grown in the district is cigar
leaf, which is sun-grown and air-cured.
The leaves are rel­
atively coarse in texture and heavy in body.
the cured leaf is dark and often uneven.
The color of
Because of these
characteristics the tobacco cannot be used for cigar wrap­
pers;2 and only in those years when an unusually high grade
of leaf is produced can the select grades, which even then
are a small percentage, be used for cigar binders.2
The tobacco possesses the qualities of a good b u m
and a pleasing aroma, features making it suitable for fillers
for cigars.
purpose.
Of the total production 85^-95$ Is used for this
The farmers and warehouses in the district ordi­
narily sort and pack the tobacco In three grades#
The first,
or best, grade leaves, designated as Grade C in the classi­
fication established by the U. S. Department of Agriculture,
are locally called wrappers or binders.
As indicated above,
1See Figure 1, page 9, for location of these counties
2
Wrappers: Tobacco used for outside cover of a cigar.
Binders: Tobacco used to bind and shape the fillers. Fillers
Tobacco used to form the core of a cigar. Chas. E. Gage,
American Tobacco Types. Uses, and Markets. U. S. Department
of Agriculture Circular No. 249, p. 37.
3
very little is actually used for these purposes*
Most of
this grade is used to make the core in long-filler cigars*
The second grade, U. S. Department of Agriculture G-rades X
and Y, is called fillers*
It is used in cheaper cigars, such
as short-filler cigars, and in chewing and smoking tobacco.***
In some years, when the price is very low or the crop is
poor, the farmers strip these two grades together*
The low grade, or "trash,” leaves, which constitute
the local third grade, U. S. Department of Agriculture Grades
Y, S, and N, are the leaves from the bottom of the stalk and
the leaves which have been damaged by weather, insects, and
handling*
p
These leaves are used partly in the manufacture
of chewing and smoking tobacco and partly in the manufacture
of insecticides and feeds*
During the depression following
1929 a number of small manufacturers in the district used
some of this grade in the production of very low priced
cigars which were sold chiefly in the South.
The proportion
of a crop which falls into this grade varies from year to
year depending on the ravages of insects and on weather con­
ditions*
Hail storms and high winds during the growing sea­
son gnd an early frost before the tobacco can be harvested
may place a high percentage of the leaves in this grade*
The
percentage may be as low as 3% in a good year and as high as
■**Gage, op. cit., pp. 37# 4-3; and U. S. Department
of Agriculture, Annual Report on Tobacco Statistics. 1938.
P* 5*
p
Ibid. The Grade Y of the Department of Agriculture
includes parts of both the filler and trash grades of the
farmer.
4
15^-20^ in a poor year.
Introduction and Development of Local
Types of Tobacco
The growing of Burley tobacco along the Ohio River
in Ohio and Indiana had reached a high stage of development
by 1810,1 but the start toward commercial production in the
Miami Valley did not come until 1838.
At that time Mr.
Thomas Pomeroy of Suffield, Connecticut, moved to a farm in
Montgomery county and brought with him some seed of the
o
Connecticut Seedleaf tobacco.
He planted a small patch and
the results were so satisfactory that its cultivation spread
among his neighbors in the following years.
Before this time some tobacco of the Virginia Seed
type had been raised by the farmers in the district for
their personal consumption.^
Its cultivation apparently
did not justify attempts at commercial development.
After the successful introduction of Connecticut
Seedleaf tobacco, other types were tried and there began the
process which led to the development of the types now pecul­
iar to this district.
In order to appreciate the significance of the
differences in types and to understand the relations among
1W. W. Garner and Others, "History and Status of
Tobacco Culture,” Yearbook of Agriculture 1922t p. 404.
2
..
J. B. Killebrew, "Report on the Culture and Curing
of Tobacco In the United States," Tenth Census of the United
States 1880, Volume on Agriculture, p. 726.
3rbid.
5
the tobacco districts, the factors which led to the differ­
entiation of types and to the development of the taste of
the market for these types must be examined.
Many of the
types of tobacco have a common origin, but they have become
individualized through adaptation to and development in var­
ious localities.
A tobacco expert has described the process as
follows :
No crop is more susceptible to slight changes in
soil and subsoil than tobacco. Soil is the chief deter­
mining and limiting factor........ The different vari­
eties of tobacco have been bred under certain soil con­
ditions to meet specific requirements. These varieties,
if transfered to a new environment, would immediately
lose some of their characteristics and consequent value.^
Likewise soil drainage and climate, including the
temperature range, the amount and time of normal precipi­
tation, the relative humidity and the relative number of
hours of daylight, have been found to be important in creat­
ing a different type of tobacco in a few years after its
introduction into a district.
Methods of cultivation, fer­
tilization, harvesting and curing which are peculiar to the
district become established through experimentation and
p
custom and tend to particularize further the product.
Y/hen the extension of tobacco to a new district
results in a leaf of the texture, flavor, and aroma which
find favor with smokers, commercial production tends to
^G-age, op. clt., p . 6 5 . Dr. Gage has charge of the
Tobacco Division, Agricultural Marketing Service, U. S.
Department of Agriculture.
2Ibld.,
pp.
1, 65.
6
develop in that district and the custom or taste for that
tobacco becomes established.
Since the tobacco of each
district tends to have peculiar characteristics the compe­
tition among the districts is limited.
This situation and
the fact that smokers are very sensitive to taste of tobacco
and become set in their smoking habits make it difficult for
a new district to enter the field.
This condition is accen­
tuated by the reluctance of tobacco manufacturers to sponsor
products with new qualities which may not meet consumer
approval or at least may be very expensive to establish on
the market.
Dr. Gage has said:
Over a period of years the tastes of tobacco
consumers have become accustomed to certain qualities.
The trade that has developed by catering to these tastes
looks to certain well-defined areas for continued sup­
plies of the grades and qualities of leaf upon which
depends the continued popularity of the manufactured
product .3Tobacco is grown very widely.
At various times
every state in the union has reported some raised.
In Ohio
the reports of the State Board of Agriculture show a quan­
tity, although small in most instances, grown in every
county in almost every year--especially from 1880 to 1920.
However, these factors of soil, climate, and market taste
have resulted in a limitation and localization of commercial
production.
The early Connecticut Seedleaf underwent changes
through adaptation to the soil and climate and through
selective breeding.
The present general type is classified
■^Gage, op. clt. , p. 1.
7
as: Type 42 by the U. S. Department of Agriculture.
It is
commonly known as Gebhardt, Graham Seed, Seedleaf, and Ohio
Broadleaf•
There are some slight distinctions within the
type, but in general it is characterized by a tall plant
with broad, fairly thin leaves and by an even burn and a
fairly mild flavor.
A new type, known as Dutch or Little Dutch, was
introduced about 1869
It is reported that this type, which
was to become of great importance in the district, was
brought from Germany by a Mr. Rayendorf.2
This tobacco, now
designated by the U. S* Department of Agriculture as Type 44,
is distinct from the other types.
In comparison with the
other types the plant is smaller and the leaves narrower and
heavier bodied.
It has a unique flavor and aroma, variously
characterized as "stronger," "sweeter,11 and "having more
bite," which have led to its use in a particular style of
cigars known as stogies.
The average yield per acre for
this type is about 800 pounds in comparison with an average
of about 1100 for the other types.
Early production was
centered around Miamisburg in Montgomery county and was
comparatively small in volume.^
In the development of the
district the center of production of Dutch tobacco has
shifted to the Darke-Miami counties section.^
Type 44
^M. L. Floyd, "Tobacco," Twelfth Census of the U. S .
1900. Vol. VI, p. 501.
2Killebrew, op. cit., p. 730 .
A.
^Ibid.
See Figure 1, page 9, **or map of the district.
8
tobacco makes up about 10^-20$ of the total pounds produced
each year.**Type 43, variously known as Spanish, Zimmer Spanish,
and Ohio Zimmer, was introduced about 1870.
The seed was
brought from the West Indies to the cigar leaf districts of
Connecticut, Pennsylvania, Wisconsin, and Ohio at about the
same time.
In each district it soon differentiated itself
through adaptation.
One variety, known as Baltimore Cuba,
was developed in the district by a Mr* Sinclair and his son.
The U. S. Department of Agriculture was sufficiently impressed
with the results to distribute the seed among the farmers.^
Jacob Zimmer, a resident of Montgomery county, is credited
with the development in 1878 of the type now grown in the
Miami Valley.^
In the process of development the Spanish
plant and leaf became very similar to Type 42.
Some supposed
advantages in curing and in the aroma pushed Type 43 to the
fore so that at first it threatened to replace Type 42,
entirely.^
Until about 1933 Type 43 constituted from 45^ to
55^ of each year’s crop.^
Gradual improvements in Type 42
kept it a strong competitor of the Spanish.
As a result of
market development and changes in the taste of cigar smokers,
Seedleaf has gained and held the lead in production from
^Gage, op. cit., p. 43.
2W. W. Garner and Others, "Superior Germ Plasm in
Tobacco," Yearbook of Agriculture 1936, p. 816.
^Killebrew, op. cit., p. 729.
5Ibid., p. 504.
^Floyd, op. cit., p. 501.
Gage, op. cit., p. 43.
MIAMI VALLEY TOBACCO DISTRICT IN 1869
Red
lane
encloses
ch ief
a rr a
A
MERCER
:
a.
<
#-
^jo ,A“-.^000
oil
j a y
i
r
RANDOLPH
of
product a'on
u g l a iz e
:
j
a.
I 6s . /, OOO
i
!
L Ocj/q
EL6Y
DARK
I C ^ ^ M p /q,<5N)
I
'
ooo
VAVNE
MON
;
u
n
i
o
n
i
B U T 12
Cl i n t o n
a . i 30
IAs. !jOOO
TotaJs - •8 6 9
|a. 5,^58
j/6s.5,212^000
a- - acrej harvested,
l b s . — pounds
p ro d u c e d
S o u rce:
Ninth Census of the U.S. 1870. V. H I, pp. 140-1+, 22.^ 0, a n d
Annual 'Report of Ohio State Board. of A^rifi Jture, 1B69 . PP -573-6
Piq- I
MIAMI VALLEY
TOBACCO DISTRICT IN 1909
Red line enc-loses chief area of production
*1
t—
t
A U G LA IZ.E
CL. 9
5] m e r c e r .
■
/
4-7
ibs.zii.,
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I
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RANDOLPH
CL.
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V
T o ta ls ja . 72, y
I t s .
•9 0 9
o 3
5 5 , ^ 3 2 ., OOO
T U C K Y
cc - curea, h c L r v e s b e d
lb s ~ p o u n d s
-Scale - rni Ids
pt-ocLuucecL
\3 o a rc e . Thirteenth) Census
of the U.S^ 1910 ,
Vo/ 3ZH
fp .^ -5 8
* 6 , ^92-
•S’OO
MIAMI VALLEY TOBACCO DISTRICT IN 1934
Re_d
line
encloses
c h ie f
T•
<!
2
Ja y
,
a..2 0
|
of
production
A u g la iz e
.J.
MERCER
1
;
°
<|j
|
q !°
j
^1---------- !T
Ra n d o l p h
area,
I
----------
I
j
r v
/oo
Itos./6,000
I
I
W A YNET
a. 4165.ij000
CL.3
1
1t > s .
Lr/lL'fNt'
6 5 . /,
59,000
.UNION
Q..13
3, 0 0 0
3
M ONTGO
1
i-OGyA/V
1
I /OS '3,000
---------B U T L E R
C LI N T O N
a. 6 3 4
T o t a b -i93^
| a. 13; S O 7
i>6s. 7^3/6,000
TUCKY
ao
a.- a c r e s h a r v e s t e d
lbs.- p o u n d s h a r v e s t e d
.S o u r c e :
1J .S . C e n s u s
S c a l d
o R A t j r i r i J tu J -e ■ 1935.
Flo . 3
V o l. X ,
-
cn
3.0
i les
pp. I I 2.
e,
I3 P -
'P I
12
1933 to the present time (1940).1
Development of Production
The cultivation of tobacco spread from its early
center in Montgomery county into all the surrounding coun­
ties.
In a few years following 1850 it was introduced suc­
cessively into Greene, Warren, Preble, Miami, and Darke
countibs.
p
With the development of the district the center
of production gradually shifted to the northern part of the
district.
The maps on the preceding pages show the extent
and shape of the chief area of production at three selected
dates.
The volume of production by counties is also indi­
cated.
The graph on page 14 shows the general trend of
production in the district since 1863.
Both acreage and
Based on surveys made by the writer while with The
Ohio Cigar Leaf Tobacco Growers Marketing Association
(1933-1935), and on statements of several dealers interviewed
in August 1938 and August 1939.
2Killebrew, op. cit., p. 726.
^Reliable figures on acreage and production are
difficult, if not impossible, to secure. The task becomes
extremely hazardous when the period covered is long and
several sources have to be used. On many points no data
are available for the years before 1909. Information for
the years after 1919 is more complete and can be used with
greater confidence than that for previous periods.
Reports of state and federal agencies and personal
records and estimates of dealers and brokers were the sources
of the data used throughout this study. A table of the
production and acreage figures used in Figures 1-4 and a
list of the various sources of data on production in Ohio
13
pounds harvested are presented to provide a better picture
of the trend.
Weather conditions may result in a production
entirely out of line with normal yield and so give an errone­
ous impression of the trend.
At the same time acreage alone
is not sufficient, for its trend may be influenced to a cer­
tain degree by the pounds produced in previous years.
For
example, a high acreage with a low yield in one year may
lead to an even higher acreage the following year.
Of
course it is the pounds produced which are Important to the
and Indiana are presented as Appendix A.
The figures from these various sources were compared
and effort was made to secure comparable data for the whole
period to be used in the graphs and statements herein. The
figures reported by the states were obtained by the township
tax assessors. It was revealing and also astonishing to
find that the figures published by the federal government
were consistently above those reported by the states by about
the same percentage for every year. In fact at seven points
of comparison from 1869 to 1934 the federal figures were the
larger within the range of 16% to 20%. The figures of the
Bureau of Census and the U. 8. Department of Agriculture are
used as the basis in this study for they seemed likely to be
more reliable and consistent, especially for the latter part
of the period which is of most concern in this study. Since
the general trend rather than exact amounts is the concern
here, the figures obtained are considered adequate.
Some support for the use of the figures for this
purpose is found in the following statement of the Ohio
State Board of Agriculture In the Annual Report of Ohio
State Board of Agriculture. 1864, p. cii.
The correctness of the returns made of crops has
been doubted by many very excellent citizens of the state
and held by them as mere ’guess work’. No doubt they are
not precisely correct in every respect, but they have one
merit at least, and that is that they have been uniform,*
when there is a good crop it never fails to be indicated in
the returns, and a poor one is equally certain to do the
same...........Upon the whole we are inclined to believe
that the crop returns, as made in the state of Ohio, are as
nearly correct as the returns of merchandise, capital in­
vested in trade or manufactures, and more reliable than the
returns of personal property generally."
14
15
market.
Figure 1, page 9, shows the district in 1869 when
total production had reached approximately five and onequarter million pounds.
From 1850 until the opening of the
Civil War expansion had taken place at a rapid rate.
Dur­
ing 1861 and 1862 the disturbance of the war cut production
to about 750,000 pounds from the previously attained peak of
nearly four million pounds.
In the following year, in re­
sponse to a great demand and some adjustment of the economy,
production rose to nearly fifteen million pounds.
A combi­
nation of an oversupply on the market and special taxes the
next year reduced it sharply to about two million pounds
from which level it rose gradually until 1869.
At this
date large scale cultivation of the crop had not spread
very widely from the vicinity of its introduction, for over
70% of the total pounds was grown in Montgomery county.
A bumper crop in 1871 marked the beginning of a new
high level of production which, with various fluctuations,
showed only a slight tendency to rise until about 1898.
Following this date an expansion began which led to the peak
production in 1917 when, under the influence of a war
market, about sixty-two million pounds were produced.
Figure 2, page 10, shows the district in 1909 near this point
of greatest expansion*
The extension, after 1869 of large
sbale production to the surrounding counties is shown by
these facts: Darke county now produced nearly as much as
^Killebrew, op. cit., p. 726.
16
Montgomery county which had multiplied Its output five times;
and Miami, Preble, and Warren counties each grew far more
than the whole district had at the earlier date.
After the World War there was a contraction in pro­
duction which, in general, has continued since 1920, although
there is some indication of a slight Increase in 1939.
The
reduction up to 1939 is indicative of the difficulties which
the district has experienced.
These troubles have been
instrumental In leading to the formation of cooperative
marketing associations.
Figure 3, page 11, shows the production by counties
in the district in 1934.
The chief area of production had
now shifted to Darke county with Montgomery second and Miami
third.
The northern part of the district had become more
important than the southern part.
This was reflected in the
locations chosen for headquarters by the cooperative associ­
ations organized in 1923 and 1931.
The first had offices in
Dayton in Montgomery county while the second established
itself in Greenville in Darke county.
Since 1933 annual
production has averaged about fifteen million pounds.
The
agricultural program of the federal government in this
period has greatly influenced production.
The plan to in­
duce farmers to grow less tobacco has meant a sharp curtail­
ment in acreage and pounds produced, as shown In Figure 4,
page 14.
The continuation of the program on about the same
basis has tended also to stabilize production at the lower
level•
17
Diversified Farm Economy
Tobacco is part of a diversified farm economy in the
Miami Valley as it is also in the cigar leaf districts of
Wisconsin
and Pennsylvania.^
other crops*
It is grown in rotation with
The usual three year cycle is tobacco, wheat,
and hay or pasture#
Because tobacco is soil depleting it
usually requires heavy applications of commercial fertilizer
or manure and it is almost never grown on the same ground
two years in succession.
Tobacco has been an important money crop in the
district.
Its ranking as a source of cash income and the
diversified nature of farming in the district are shown in
the table on the following page.
Figures are given for the
five counties which in 1929 accounted for 97.6% of the
tobacco grown in the district*
The year 1929 was not an
exceptional year for tobacco production.
The pounds were
low but the price was a bit above average with the result
that the value of the product was about average for the
period 1921-1931.3
The diversity of the economy is shown by the fact
that in only one of the counties does one source provide
^E. Ela, "Selling and Price Problems in Northern
Wisconsin Cooperative Tobacco Pool,” American Cooperation
1925, I, p. 513.
2W# Frear and E. K. Hibshman, The Production of
Cigar Leaf Tobacco in Pennsylvania. U. S. Department of
Agriculture Farmers Bulletin "4ld, "p. 7*
3
U. S. Department of Agriculture First Annual Report
on Tobacco Statistics, p. 15.
18
as much as one-third of the cash income.
Although tobacco occupies a position of great impor­
tance in only Darke, Montgomery, and, to a lesser extent,
TABLE 1
ESTIMATED PERCENTAGE OF GROSS CASH INCOME FROM SALE
OF TOBACCO AND OTHER PRODUCTS ON OHIO FARMS BY
SELECTED COUNTIES FOR THE YEAR 1929*
Darke
Source
Hogs
Tobacco
Dairy
Poultry
Wheat
Cattle
Other
%
29
20
15
15
10
4
7
100
Miami
Source
Dairy
Hogs
Wheat
Tobacco
Poultry
Com
Other
%
19
15
14
14
12
10
16
100
Montgomery
Source
%
Dairy
Tobacco
Poultry
Wheat
Hogs
Cattle
Other
28
23
12
12
12
5
8
100
Preble
Source
%
Warren
Source
%
Hogs
Dairy
Wheat
Poultry
Tobacco
Cattle
Other
Dairy
28
Hogs
27
Poultry 13
Wheat
9
Tobacco 8
Cattle
6
Other
9
100
38
15
12
11
9
9
6
100
R. E. Strazheim and J. I. Falconer, The Estimated
Gross Cash Income From the Sale of Agricultural Products
from Ohio Farms by Counties--1929. Ohio State University
and Ohio Agricultural Experiment Station Mimeograph
Bulletin No. 27, pp. 6-10.
Miami counties, it has, as the accompanying table shows, a
very real part in the farm economy.
It has played an impor­
tant role in the prosperity of this district.
The average
gross cash income per acre in 1929 for the five counties
listed in the table was $21.80.
This appears very favorable
in comparison with an average of $18.24 per acre for eight
surrounding counties which produced smaller quantities of
tobacco, and with the state average of $15 per acre.-**
-^Strazheim and Falconer, op. cit.. pp. 6-10
The
19
above-mentioned decrease in production of tobacco since the
World War1 has necessitated difficult adjustments in the
economy*
The farmers have had either to find new crops or
to expand the production of old ones.
New methods of farm­
ing and new routines have had to be learned.
Old tools and
equipment, such as the curing sheds, have had to be disposed
of or converted to new uses.
Markets have had to be found
for the products to which the farmers have turned.
The
transfer has been slow and painful.
The majority of the farms in the district vary in
size from 20 to 200 acres.
The average in 1934- for the five
leading counties was 78.7 acres, in comparison with a state
average of 89.6 acres.2
In recent years tobacco growers in
the district have each raised an average of about four acres
— 4.3 acres in 1924 and 3*4 acres in 1934.-^
This average is
much smaller than it was at the peak of expansion of produc­
tion.
Some growers raise less than an acre while a few
attempt as much as twenty or twenty-five acres.
Very few
have raised as much as ten acres in any one year since 1933The small quantity of tobacco produced by each grower has
created several problems for the cooperative marketing asso­
See page 16.
2U. S. Census of Agriculture 1935. Vol. I, pp. 100107.
5Ibid., pp. 112-118, and U. S. Census of Agriculture
1925. Part I, pp. 367-378.
^Based on records of The Ohio Cigar Leaf Tobacco
G-rowers ’ Marketing Association, Brookville, Ohio, and on
personal experience of the writer.
4
ciations•
In the first place, a large number of members
have to be secured to furnish a sufficient volume of tobacco
to make efficient operation possible.
Secondly, the many
individuals with whom the associations have to deal make it
more difficult to maintain membership contacts and loyalty.
The general mechanization which has taken place in
farming has not altered the intensive cultivation and the
great amount of manual labor required in growing tobacco.
These factors have come to be of great importance in connec­
tion with the decrease in the size of the family, with the
tendency of farm youth to go to the cities, and with the
problem of securing farm labor for seasonal work.
The district is free from the problems of sharecropping, lack of diversification, extremely low incomes
with their accompanying perpetual crop debts, and low
educational standards which have characterized some other
tobacco districts.
These problems have been important in
the Kentucky-Tennessee and the Virginia-Carolina districts
where they have presented difficulties in the formation and
operation of cooperative marketing associations.^
Although
tenancy exists in the Miami Valley it has not been of such a
nature or amount as to influence the possibilities of co­
operative marketing.
J. J. Scanlan and J. M. Tinley, Business Analysis
of Tobacco G-rowers Cooperative Association, U. S. Department
of Agriculture Circular No. 100, pp. 23-26, and A. Sapiro,
“Rolling Their Own,” Survey. Vo. 50, April 1, 1923, P* 15-
CHAPTER II
THE MARKET AND MARKETING METHODS
Since about 1900 the market for Miami Valley tobacco
has undergone certain changes which have created problems
for the producers and have played a part in the cooperative
marketing movement*
Most important among these changes have
been an increase in the competition from other tobacco dis­
tricts and a decrease in the demand for cigar leaf tobacco*
As was indicated in the previous chapter on production of
tobacco, the tobacco grown in the district is used primarily
for fillers for cigars with a small percentage used in other
manufactured products and in non-tobacco items*
The cigars
made from Miami Valley tobacco are almost entirely Class A
cigars, those selling for five cents or less*
Competition with Other Cigar Leaf Districts
In supplying the raw material for cigars and other
tobacco products, the Miami Valley district has met a certain
amount of competition from the cigar leaf tobacco grown in
the Connect!cut-Massachusetts, the New York, the Pennsylvania,
the Georgia-Florida, and the Wisconsin-Minnesota districts
and in Puerto Rico, Cuba, and the Philippine Islands.
The
locations of the districts in the United States are shown
21
22
CIGAR LEAF
TOBACCO DISTRICTS
M INW.
W»5C
52 . 6 /
JO
W
VA
OHIO
MO-
TENN
AKK
WIW.
ALA.
yp«s
W?nn. Seed leaf
Crehhardt
•Spanish
D>-ttch
G
ffl - Tjfl. 5uriC|^ow
Binder Typas
Conn. oroadJeof
«&62.
Conn HavCLna S e e d
NY' Pa Havana
O. W>5C
No Wise
Wrapper Typ«s
Co o p . Shadeorown
Adapted
U.S. Dept.
from m a p in
A onua.I
R eport on Toba-ciO 5tatisti«-S, 1939, P- 2.
Fig. 5
23
on a map on the preceding page.
The amount of this compe­
tition is limited to a degree by the differentiation which
occurs in the leaf in each district as a result of adapta­
tion and cultivation.^
The Miami Valley and the Connecticut Valley districts
are unusual in having three different types of cigar tobacco
which can be grown i n t e r c h a n g e a b l y T h i s means that within
the districts there can be a certain amount of shifting,
which is advantageous for the growers of the district.
However, in view of the differentiation just noted this
shifting is not important in the competition among the
districts.
At the same time certain of the types grown in
different districts are near enough alike in essential
qualities to permit some substitution of one for another
in the manufacture of tobacco products.
The most important
competitor of the Miami Valley district and at the same time
the most important district in the production of cigar leaf
is the Pennsylvania district.
Lancaster county, which is
the largest producer of any type of tobacco in the United
States,3
and York county form the main portion of this
district.
The cultivation of tobacco was begun there as early
as 1689, but it made very little progress until about the
time production started in the Miami Valley in 1838*^
Until
■^See pp. 4-6.
2G-age, op. clt., p. 65*
^1bid., p . 42.
^Floyd, op. cit., p. 501.
24
1875 the two districts produced nearly the same quantity of
tobacco each year*
About; that time there developed in the
Pennsylvania district an expansion which resulted in an
average- production approximately twice that of the Miami
Valley district in the years preceding 1900#
Then a period
of expansion in the Miami Valley area raised its production
and the two districts once again grew about the same amounts.
In several years between 1900 and 1917 the Miami
Valley district surpassed its rival*
The peak of Pennsylvania
production was reached in 1918 with a total of about seventy
million pounds*
Since that date it has kept its commanding
position by producing, on the average, two-thirds of the
tobacco grown in the two districts*
A reduction similar to,
although not as great as, that in the Miami Valley area took
place after the close of the World War, but the contraction
did not assume very great proportions until after 1930*1
The tobacco grown in the Pennsylvania district is
classified as Type 4l, Pennsylvania Seedleaf or Broadleaf*
It is a cigar filler tobacco similar to Types 42 and 43
grown in the Miami Valley, but is of a somewhat finer texture
^To compare Pennsylvania production as indicated in
these statements with that of the Miami Valley see Figure 4,
page 14, or Appendix A, Table I. Data on Pennsylvania pro­
duction are subject to the limitations mentioned for Ohio
and Indiana, in footnote 3, page 12. For this study refer­
ence was made to the following sources: Pennsylvania Depart­
ment of Agriculture, PennsylvaniaJ s Farms, Crops, and Live­
stock. 1926, Bulletin ^45, p. 101; U. S. Department of
Agriculture, Annual Report on Tobacco Statistics, First,
p* 14, and 1939, p. 9 1 U. S. Bureau of Census, Census of the
United States. Ninth to Fifteenth; and statements and figures
in personal letters from Dr. W. S. Beach, Plant Pathologist,
Pennsylvania State College.
25
and thinner leaf.1
Because of the similarity and these
advantages it offers serious competition through the possi­
bility of substitution to a considerable extent in the manu­
facture of cigars.
MA large or small production in either
one of these areas naturally has an influence on the price
received in the other area."2
The tendency of smokers to
prefer a lighter smoke has favored the milder Pennsylvania
tobacco.
The G-eorgia-Florida district raises some cigar filler
tobacco, Type 45.
Production has never been large, averaging
about one and one-half million pounds since 1919.^
This has
been approximately 6% of the amount raised in the Miami
Valley.
The differences in texture and aroma of the tobaccos
prevent any appreciable competition.^
The Wisconsin-Minnesota area, producing Types 54 and
55, is a competitor chiefly in the scrap chewing tobacco
market.
Ordinarily about 70^ of the crop is used for the
manufacture of chewing tobacco and 30^ for the manufacture
of c i g a r s . 5
on the average, 80^ of that used for cigars is
1Gage, op. cit., p . 42.
2C. R. Arnold, The Tobacco Situation. Report of the
Agricultural College Extension Service, Ohio State University,
Jan. 11, 1932, p. 1.
^Based on figures of production given in the U. S.
Department of Agriculture, Annual Report on Tobacco Statistics,
First, p. 15, and 1939. p. 9*
4
i
G-agef QP* cit., p . 45.
5w. Collins and H. H. Bakken, The Cooperative Tobacco
Marketing Situation in Wisconsin, Farm Credit Administration
Special Report 19^
5.
26
for "binders and 20$ is for fillers.
These percentages vary
widely depending on the favorahleness of the growing season.
In a poor crop year there are few binders, a higher percent­
age of fillers, and a very high percentage of scrap or Grade
X.
Type 55, raised in northern Wisconsin and in Minnesota,
averages a higher percentage of binders than does Type 54.1
The proportion of the crop used as cigar fillers—
about 6%--has meant an average of approximately two million
pounds a year for this purpose.
Although this is a rather
small quantity, only Q% of the average production in the
Miami Valley since 1919, It is sufficient to furnish some
competition for the Miami Valley tobacco.^
Type 43 of the
Miami district Is most seriously affected, for its flavor
and aroma are similar to those of Types 54 and 55.
Grades X and S of the tobaccos of the two districts
are in most direct competition.
The Wisconsin-Minnesota
district dominates the market in supplying the manufacturers
of chewing tobacco.
The Miami Valley furnishes a relatively
small amount, from 10$ to 25% of a year's crop, for this
purpose.
As a result the price of scrap leaf tobacco Is
determined very largely by conditions in the WisconsinMinnesota district.-*
*^Based on figures of tobacco stocks given In U. S.
Department of Agriculture, Annual Report on Tobacco
Statistics. First, p. 82, and 19397 P ^ 7 »
2Personal letter from J. M. McCulloch, Viroqua, Wis.,
manager of Northern Wisconsin Co-operative Tobacco Pool,
July 2, 1939.
^From statements by J . T. Landis, Pleasant Hill*
27
Although the quantity of scrap leaf tobacco grown
in the Miami Valley district ordinarily is small, it is
important to the producers as indicated in the following
paragraph.
The scrap-chewing industry is a valuable adjunct to
the cigar industry for it provides the grower with an
outlet for large volumes of leaf not suited for cigar
manufacturing purposes# This is an important consider­
ation, for even in the most favorable season some tobac­
co, because of the position of its growth on the stalk
or because of damage will lack the quality requisite for
manufacture into cigars ; and in years of unfavorable
growing conditions and times of hail injury the quantity
of such low-grade tobacco may be great* Low as the
prices for this so-called stemming tobacco sometimes are,
they save the growers from partial or total loss Cof
these l e a v e s ? .......... The prices paid for stemming
tobacco are not always low. In years of scant supplies
they may be high enough to afford actual competition
for some grades usable in cigars.1
The grower in the Miami Valley has regarded his
11trash'* or Grade S tobacco as a significant item in his
crop and his income.
It is the first part of the crop ready
to sell; and he usually tries to dispose of it in time to
get money for Christmas shopping.
In good marketing years
this grade may bring from two to four cents per pound.
Since 1930 the price has seldom been over one and one-half
cents a pound.
for it.
In several years there have been no offers
At various times movements have gained considerable
strength to induce the farmers to return the trash leaves to
the land as fertilizer and thus aid the sale of the better
Ohio, secretary-treasurer of the Ohio Cigar Leaf Tobacco
Growers Marketing Association, during the seven years the
writer has had connections with the Association.
^Gage, op. cit., p. 37.
28
grades of tobacco by removing this potential competition
from the market
The cigar leaf tobacco grown in the Connecticut
Valley district, Types 51, 52, and 61, in the New YorkPennsylvania district, Type 53, and in a small area in
Georgla-Florida, Type 62, is used for wrappers and binders.
As in the Miami Valley and Pennsylvania districts, a small
percentage falls into Grades X and S.
The amounts in Grade
C are very small except when an unfavorable growing season
makes a quantity of the leaves unsuited for wrappers or
binders.2
In any event the competition has not assumed
significant proportions in recent years.
The competition among the cigar leaf areas is of
long standing.
In the following statement the Miami Valley
appears at a disadvantage with the others as early as 1880
when Seedleaf was the leading type.
The seedleaf of Ohio, which has been established in
the Miami Valley for 40 years. . . . . has a permanent
status in the market but is not generally sought except
in seasons when superior quality has been attained in
curing. It is not equal to the Connecticut or the
Pennsylvania........ 5
Other authorities indicate a similar ranking at
^-This movement has been sponsored since 1931 prima­
rily by the Ohio Cigar Leaf Tobacco G-rowers Marketing
Association, Brookville, Ohio.
2Based on figures of tobacco stocks in U. S.
Department of Agriculture, First Annual Report on Tobacco
Statistics, pp. 80, 81, 83*
3 j . R. Dodge, "Statistics on Manufactures of
Tobacco,” Tenth Census of the U. S. 1880, p. 893*
29
that time.^-
This position of secondary importance, to the
Pennsylvania field in particular, seems to have continued
since the early period.
Although the Miami Valley types
have heen accepted and established on the market, they seem
never to have been very secure in their position.
They
appear through most of the period to have played a minor
role in the market from which they frequently were in danger
of being forced by the competition of the other types.
The
Miami Valley types have usually been on the defensive, fac­
ing competition from the other types, rather than on the of­
fensive, providing serious competition for the other types.2
*4cillebrew, op. cit., p. 746. Reporting a statement
of a Mr. E. H. driest, Cincinnati tobacco dealer.
p
Based on the writer's study and experience in the
field and on statements of several dealers and important
producers interviewed during August 1938 and August 1939.
It is extremely difficult to draw any conclusions
about the relative standing of each district and about the
changes in this standing. Fluctuations in production and
consumption of the various types are occurring constantly
but the trends are not very clear. Incomplete and inaccu­
rate data make a careful and reliable statistical analysis
impossible. The productions in the two chief filler leaf
districts— Pennsylvania and Miami Valley— were compared on
pages 23-25 above./
Perhaps some indication of the position of the Miami
Valley types in the whole cigar market is afforded by a
comparison of the apparent amount of Miami Valley leaf used
in manufacture each year with the total amount of tobacco
leaf used in cigar manufacture each year. Of course these
items do not cover exactly the same parts of the market but
they are the best ones on which to base the calculation.
Since the proportion of Miami Valley types which goes into
cigars does not seem to have changed to any great degree,
any trend revealed in such a comparison should show the
change in the part which the Miami Valley tobaccos have had
in the cigar market. From 1912 to 1921 the annual amount
of Miami Valley tobacco used in manufacture averaged 34% of
30
Type 44, of the Miami Valley district, because of its
distinctive qualities, has been practically free from compe­
tition from the other types but its market has been limited
by the size of the market for the stogie style cigars.
Competition from Imports
Competition has come also from imports of cigar leaf
and cigars from Cuba, Puerto Rico, and the Philippines.
The
table on the following page gives the imports for certain
years since 1909.^The trends and fluctuations to be noted are the
results of demand changes in periods of war and depression
and of tariff regulations and revisions.
Since the Civil
War the general tariff policy has been to give increasing
protection to domestic leaf and finished tobacco products.
The importations from the Philippines show some effects of
the total amount of tobacco leaf used in cigar manufacture.
P o t 1922 to 1933 the percentage was 20^, and for 1934 to
1937 it was 15$. A similar comparison for Pennsylvania
Type 41 tobacco for the same periods gives the following:
36%, 30%, 2b%. This supports the tendency noted in the
comparison of productions. If any conclusion is Justified
in view of the reservations already indicated it would seem
to be that both of the main domestic filler districts have
lost but that the Miami Valley has suffered the more severe­
ly. These calculations are based on the figures of produc­
tion, tobacco stocks and tobacco manufactures, found in
U. S. Department of Agriculture, Annual Report on Tobacco
Statistics, First, p. 86, 89, 1938,
7oland 1939, p * 7 1 J
J. V. Morrow and Dudley Smith, Tobacco Shrinkage and Losses
in Weight in Handling and Storage, pp. 53, 55; Gage, op. .cit.,
p. 46, and references in footnote 1, page 24 above.
•l1909 is the first year for which data by classes
is available.
31
the changeableness of the tariff policy of the United States
toward the Islands*
TABLE 2
IMPORTS OF CIGAR LEAF TOBACCO AND CIGARS
IN SELECTED YEARS
(unit 1,000 lbs*)
YearJuly 1
1909-10
1913-14
1917-18
1921-22
1925-26
1929-30
1933-34
1937-38
Leaf Tobaceoe
Cubaa
25,147
26,618
20,367
21,365
20,961
21,772
11,371
10,085
Puerto
Rieob
Cigars and Cheroots^
Philippines0
2,924
6,308
13,125
17,438
20,514
18,929
14,087
16,376 '
7
32
7,323
504
1,129
4,007
1,925
5,395
Cuba
Puerto
Rico
Philip­
pines
(n<Dt repor :ed)
902
2,898
623
3,222
4,018
479
38ld 2,520
1,505
3,870
3,281
479
2,628
1,878
331
1,170
34
2,523
42
216
3,546
aStemmed and unstemmed filler leaves
^Stemmed filler leaves
CA11 cigar leaf
^Contains about 6,000 lbs* from other countries
eUV S- Department of Agriculture, Annual Report on
Tobacco Statistics* First, pp. 114-117, and 1939* p. 100.
^Ibid, First, pp. 119-120, and 1939, P* 101. Cigars
and cheroots may be converted from pounds to numbers on the
basis of 1000 cigars or cheroots per 18 pounds.
From 1902 to 1909 Philippine tobacco leaf and
finished tobacco products paid an import duty which was lb%
of the existing general rates on these products*
this preferential treatment was discontinued*
these items have been admitted duty free •
In 1909
Since 1914
However, from
1922 to 1930 they were subject to the United States internal
revenue tax.
Imports of tobacco leaf and tobacco products
from Puerto Rico have been free of duty since 1901.
At the
same time It should be noted that the federal farm program
on tobacco since 1933 has applied to production in Puerto
Rico.
Since 1903 the tobacco imports from Cuba have gener­
ally been charged duties 20% below full rates.
A trade
agreement with Cuba, in effect from 1934 to 1936, applied
special rates and quotas on imports.1
In 1939 a new agree-
merit on rates was placed in effect
Type 81 tobacco from Guba is mainly wrappers with
some small percentage of fillers.
The cigars from Cuba have
been mostly of the higher grades and so have not competed
with the products of Miami Valley tobacco.3
Type 46 from Puerto Rico and Type 83 from the
Philippines are mostly filler or Grade C tobaccos.
Their
finer texture and milder flavor and aroma have given them
advantages over domestic filler leaf.
Low production costs
in those territories have enabled them to enter the market
in the United States.^
Although the amount imported each
year has remained about the same in the period since the
1
Summary on Rates of Duty on Tobacco Imports into
U. S. is given in U. S. Department of Agriculture, Annual
Report on Tobacco Statistics, First, pp. 121-122, and 1939,
pp. 102-103.
N e w s w e e k , Jan. 1, 1940, p. 43.
3L. M. Coleman, U. S. Tobacco and its Market. U. S.
Department of Commerce, Trade Information Bulletin No. 757,
pp. 4, 12.
4
Ibid.
33
World War, it should ho noted that this average quantity has
been equal to the total produced in the Miami Valley and
that it has not declined as has the production in the latter
district.
The cigars from Puerto Rico and the Philippines
compete directly with those made from Ohio and Pennsylvania
tobaccos— with the exception of Type 44,
The amount imported
since the World War has fluctuated rather widely, as shown
in Table 2, with some indication of a level being estab­
lished since 1929*
There appears to be a tendency for the
imports from the Philippines to expand to make up for the
reduction in the imports from Puerto Rico resulting from
a decline in cigar manufacture t h e r e A s
in the case of
cigar leaf these imports have come into a market which has
been declining.
Decline of Cigars
To the competition from other districts and from
imports has been added the even more serious damage result­
ing from a change in the taste of smokers.
The cigar, which
provides the main market for Miami Valley tobacco, has been
declining in smokers' favor.
Figure 6, page 35, shows the
amount of leaf tobacco used in the manufacture of cigars by
years since 1900.
The decrease after 1920, becoming very
pronounced after 1929, reveals the market loss which has had
1Chas. E. Gage, The Tobacco Industry in Puerto Rico,
U. S. Department of Agriculture, Circular ^fo. 519, P* 4-5.
34
to be faced*
It must be remembered also that with impor­
tations of filler leaf remaining about constant in this
P©**iod, the Ohio and Pennsylvania districts have had to
share a decreasing percentage of a diminishing amount*
TABLE 3
PER CAPITA CONSUMPTION OF TOBACCO PRODUCTS
IN SELECTED YEARS*
Year
Cigars
1902
1906
1910
1914
1918
1922
1926
1930
1934
1938
no.
77.7
84.4
76.7
75.3
72.0
65.7
59.7
50*1
38.4
40.9
Chewing
Tobacco
lbs •
2.59
2.62
2.71
2.40
2.26
1.94
1.76
1.35
.91
.90
Smoking
Tobacco
lbs.
1.20
1.55
1.76
1.72
1.75
1.53
1.43
1.32
1.52
1.45
Ciga­
rettes
no.
33.6
A4»5
93.7
168.5
366.0
487.5
767.6
972.0
992.0
1,256.9
*U. S. Department of Agriculture, Annual
Report on Tobacco Statistics 1939. p. 7& •
When population changes are taken into account the
loss In popularity of the cigar becomes even more pro­
nounced as shown in the accompanying table of per capita
consumption of tobacco products.
The decline in the consumption of cigars is in
marked contrast to the rise in the consumption of cigarettes.
Although the Miami Valley district is not primarily concerned
with the chewing tobacco market, the fall in consumption of
35
•70
I 70
160
(60
150
(30
IOO
1900
°8
02.
Flg.6. LEAF TOBACCO USED IN MANUFACTURE OF CIGARS
( S o t t r c e : U - S . D e p a r t m e n t c f AcjricxilOure, A nr illoJ R epo rt, on Tobacco 'Statistics.
P~j r s t j p .S 9, >938j p. 7fc* D o - ta
f o r <93 7 la s t a v a ila b le .)
'
Cigarettes
192.4
190 0
*
PERCENTAGE OF
LEAF TOBACCO USED
IN CIGARS, CIGARETTES
AND OTHER PRODUCTS*
1937
O t h e r pracUxctvs inc.lu.ct.es
cbevvi'rm and. s m o k in g toba-cco a n d . s n u f f
( S o u r c e ■ L). S . D e p a r t m e n t of" A a r ic u J tu r e j A n n u a J R e p o r t on Tobacco v S ta tis tie s ,
First, p.8§,
< 9 3 6 , P-76 ;
Pi,. 7
36
chewing tobacco, shown in the table, has curtailed the mar­
ket for the lower grades of Its tobacco.
Since only a very
small quantity of the Miami Valley types is used in manufac­
turing smoking tobacco, the slight changes in the per capita
consumption of smoking tobacco— constituting an increase in
total amount consumed on account of population increase—
is of no importance for the Miami Valley producer.
A further indication of the change in smokers’ taste
is given in Figure 7, page 35 ■ The proportions of the total
amounts of* leaf tobacco used in these selected yeans in the
manufacture of the various items reveal the trend away from
cigars and chewing and smoking tobacco to cigarettes.
The
Miami Valley has been unable to get any part of the ciga­
rette market, for its tobacco is unsuited, so far as present
curing and processing methods have developed, for use in
cigarettes.
Agitation by cigar manufacturers and growers
to stimulate cigar consumption1 has not been able to reverse
or even stay the trend.
Introduction of new styles of ci­
gars, such as small cigars, have at times provided some
hopes, which, however, have been short lived.
1Typical of such agitation was the plan of a group
at Dayton, Ohio, to sponsor "National Cigar Week" in 1925.
On one day of the week designated, shops were to give a cigar
to every man who came in. Older men were to be urged to pre­
sent cigars to the young smokers with the comment, "Have a
cigar. It’s manly1’. In 1934- another group distributed
placards bearing the slogan, "Boost Your Own Business— Smoke
Cigars Made from Ohio Tobacco" .
The tobacco manufacturers and farmers generally were
opposed to prohibition for they feared that the next attack
by the prohibition forces would be made against the use of
tobacco.
37
The change to cigarettes has been accompanied by a
preference for milder cigars.
This has favored the
Pennsylvania, Puerto Rican, and Philippine tobaccos and has
encouraged their use in place of Miami Valley tobacco.
Although Type 44 has no competitor in another type of tobac­
co, it has suffered because of the loss of popularity of the
highly flavored stogies in the production of which it is
used.
In recent years this decline has been very serious.
The market is restricted pretty largely to the steel mill
and coal mine workers in the Pittaburg-V,'heeling district.1
The shift to cheaper cigars since the World War2
would seem to favor the Miami Valley types.
No definite
information appears to he available on this point*
However*
it would seem likely that it has meant a greater opportunity
for Philippine tobacco and has forced down the price of the
tobacco formerly used in higher priced cigars without ex­
panding the market for the Ohio tobacco.3
Exports of Cigar Leaf and Cigars
The export market has not been of great importance
for the tobacco of this district.^- Lack of data by classes
^From statements by J. T. Landis, op. cit.
2
Shown by withdrawals of various classes of cigars
in the records of The internal Revenue Bureau, reported in
U. S. Department of Agriculture, First Annual Report on
Tobacco Statistics, (1937), pp. 91-99.
^Agreeing with the trend noted in footnote 2, p. 29.
^Coleman, op. cit., p. 4.
38
of tobacco for years prior to 1923 prevents a determination
of the quantities of cigar leaf exported before that time.
Since that date exports of all types of cigar leaf have
never exceeded 4.4 million pounds (1928-1929) and for the
period July 1, 1923 to July 1, 1939 averaged 1.6 million
pounds each fiscal year.^-
The amount of this which came
from the Ohio area is not a matter of record, but it would
appear to be very small.
An important part of this export
is binder and wrapper leaf sent to the Philippines to be
used with Philippine fillers for cigars^ many of which are
imported into the United States.
At certain periods in the earlier history, exports
seem to have attained considerable size although the precise
condition cannot be determined.
The situation about 1880
is described as follows:
Ohio Seed-leaf is a favorite for export to Germany,
and a small quantity is taken experimentally in France.
The average export amounts to between 20,000 and 30,000
cases, and it has happened, when there has been an
accumulation of stocks, that 70,000 cases have been
exported in a single year.3
This would indicate annual exports at that time
ranging from approximately 6 to 21 million pounds.^
The
1U. S. Department of Agriculture, Annual Report on
Tobacco Statistics. First. p. 113* and 1939a P« 98*
2U. S. Department of Agriculture, Annual Report on
Tobacco Statistics. First, p. Ill, and 1939, p* 97; and
statement by Ghas. E. Gage, of the Department of Agriculture,
in a personal letter of Dec. 22, 1939•
•^Killebrew, op. cit.. p. 746.
^A case of Miami Valley tobacco ordinarily weighs
300-350 pounds net.
39
lower figure would have been nearly one-half of the average
annual production in the district, while the larger amount
would have exceeded the total production in all hut a few
years before 1880*
it would seem that the exports mentioned
had particular reference to the seedleaf raised in Medina
and Wayne counties in north central Ohio.
These counties
raised a type of seedleaf which in the curing process de­
veloped a mottled effect which made it much in demand for
export.1
However, the total production in this Wayne-Medina
district appears never to have been over a few million
pounds, and by 1900 had declined to a relatively small
p
amount.^
The report indicating that as late as 1910 one-half,
of the Miami Valley crop was exported^ would appear inaccu­
rate unless it referred to only a few .years.
.11* E. Stern,
tobacco broker of Dayton, Ohio, stated that, exports have
been of considerable size only in occasional years since the
beginning of the century, and certainly would not average
more than a few hundred cases each year since the War.^
All indications are that the export market has not been an
important item in the history of the district since the
World War and is most unlikely to provide an outlet for the
1Killebrew, op. cit., p. 601.
^Based on figures given in Ohio State Board of
Agriculture, Annual Report of Ohio State Board of Agriculture9
volumes from 1§63 to 1909 «
~~
^Dayton Daily Hews, Feb. 25, 1910, p. 4.
^Personal interview, Aug. 28, 1939.
40
product In the foreseeable future.
The exports of cigars have not been large in compar­
ison with the imports#
The average annual export from July
1, 1908 to July 1, 1939 was 268,000.pounds• The only great
variation in the period was the peak from 1917 to 1921
when an average of 765,000 pounds was exported#
A lesser
peak of 396,000 pounds was reached in 1937-1938#1
There is
no way to determine how much of the exports was Miami Valley
tobacco, but it would not appear to be of such size as to be
Important in the market#
Relation of Production and Consumption
Further light on the general market condition faced
by the district is provided by a study of the relationship
of the production of tobacco to the quantity taken by the
outlets investigated above.
An indication of the quantity
taken is given by the figures showing the disappearance
from the market.2
The relationship over a period of years
^U# S. Department of Agriculture, Annual Report on
Tobacco Statistics, First, p. 144, and 1939» p. 99*
2
Disappearance includes all withdrawals from the
supply of leaf tobacco on the market both for export and for
use by domestic manufacturers. Its computation is made from
the U. S. Department of Agriculture reports of tobacco stocks
on hand at designated times. To the production for a given
year is added the stock on hand at the beginning of the mar­
keting year— October 1 in the case of Miami Valley tobacco—
to secure the total available supply. From this figure the
stock at the end of the period— October 1 of the following
year— is subtracted to secure the disappearance for the mar­
keting year. These are at best approximations. Production
figures are mainly estimates. The stocks held by small
manufacturers and dealers are not reported. The pounds
41
between the consumption thus indicated and the production
shows the adjustment which has prevailed in the market for
the tobacco*
If production exceeds consumption the excess
becomes part of the stock carried over to the succeeding
year*
If the situation is reversed, the stock carried over
to the following year is reduced.
Figure 8, page 42, pre­
sents a comparison of production with disappearance in cor­
responding marketing years.1
So many forces, such as the
weather and the prospective prices of tobacco and of alter­
native crops, influence the amount of tobacco grown in a
year that any attempt by statistical methods to establish
a cause and effect relationship bdtween these two factors
would lack scientific basis.
Any adjustment between pro­
duction and disappearance could not be expected to occur
Immediately, but because of the other factors involved and
reported may be stemmed or unstemmed tobacco and may or may
not allow for shrinkage. A particular problem arises be­
cause the quantities held by farmers are not reported. This
means that in years such as 1930 and 1933 when farmers hold
their crops, the stocks at the ends of such years are under­
stated and the disappearance for the year overstated. When
this accumulated supply is sold and reaches the dealers to
be reported as stocks, the disappearance for that year is
understated. Unfortunately no other method of finding the
amounts consumed each year appears to be available. The
reporting of stocks by types began in 1912. Various revisions
have been made to secure greater accuracy. The latest re­
vision occurred in 1936. (U. S. Department of Agriculture,
First Annual Report on Tobacco Statistics, note 1, p. 88) .
1Thus 1919-1920 refers to 1919 production. This
means that tobacco produced in 1919 and harvested by October
1, 1919 is reported in the period Oct. 1, 1919-Oct. 1, 1920
to correspond with the marketing period for that year’s
tobacco. No overlapping with 1920 production is involved
since a crop, though harvested by October 1, is not ready
for the market until the first of December at the earliest.
42
43
the limitations of the data no attempt was made in the graph
in Figure 8 to allow for lag.
Although rather large differences appear between
production and disappearance in certain years, a general
tendency for the two to move together is evident.1
As
disappearance tended to decline from 1915 to 1925, produc­
tion also declined, but its decline began in 1917 and con­
tinued until 1927*
The rise after 1925 in disappearance was
accompanied by an increase in production.
In 1930 and 1931
production exceeded disappearnce, for while the latter was
decreasing the amount grown was increasing.
From 1935 to
1938 disappearance and production remained about constant
with disappearance a bit the larger.
The degree to which a close adjustment in this
relationship between production and disappearance obtains
is shown by a comparison of stocks on hand at the beginning
of a marketing season with disappearance during the season.
This is presented In Figure 9, page 42.
Here is revealed
any tendency toward exhaustion or accumulation of supply
It seems unlikely that the actual fluctuations in
the amounts used in domestic manufacture and in exports
were as great as the changes in disappearance would indicate.
The method which had to be used to find the amounts consumed
is probably the cause of these wide deviations from a gen­
eral trend. Although the figures for disappearance in cer­
tain years.may be inexact, the trend shown for a period of
years is a reliable Indication of the conditions in the
market. The marked variations noted in production can be
explained to a certain extent by the nature of the growing
season. In 1927 and 1928 the yield per acre was very low
while in 1930 and 1931 it was above average. (u. S. Depart­
ment of Agriculture, First Annual Report on Tobacco
Statistics, 1937 P- 15•)
44
on the market because of the failure of production to follow
consumption.
From the two charts it can be seen that, while
production tended to follow the decrease in disappearance
after 1917, it did not do so rapidly enough to prevent the
accumulation of a very large stock.
This condition had been
righted by 1929 when the same cycle was begun again.
The curing process through which filler leaf must
pass before manufacture requires about two years.
This
results in a normal stock two or three times as large as
annual consumption*
Analyzed in this way, the data used
in Figure 9 show an average stock for the period 1912-1938
2*5 times average disappearance.
The stock was far below
average in 1913-1918, as production failed to expand as
rapidly as consumption.
The situation was reversed in
1933-1934 when stocks averaged 4.95 times average disappear­
ance.
The average stock for 1935-1938 was 2.75, represent­
ing a decline from 2.87 in 1935 to 2.55 in 1938.
This
would indicate that the normal relationship between stocks
and disappearance was being re stored. ^
Price and Farm Value of Tobacco
The price received by the growers has fluctuated
widely in response to changes in demand for the finished
■^It should be noted that these figures of tobacco
stocks are given as of October 1 when the stock is the low­
est. The new crop is placed on the market soon after this
date. Figures on production and disappearance for 1912-1938
are given in Appendix A, Table II.
45
17
2.1
ie
'5
,s
•’
19
AVERAGE PR.ICE
(■for d ftta
»<
>3
*' yea^ crop*35
«
OF M I A M I V A LLEY TOBACCO
jw
Appeodijc Aj T * 6te J t )
PoMari
■7
1909-1939
"Dol la r j
i I I Ions )
lb
C fVi;11 ions)
year
crops
FARM VALUE OF
TOBACCO CROP IN MIAMI VALLEY I90Q-39
(for da.to. t o o Append I* A , 7at>Je 3L)
'
46
products, in production and supply of the leaf, and in gen­
eral price level#
The average price by years from 1909
to 1939 is shown in Figure 10, page 45.^
With the exception
of the boom years 1927-1929, there has been a downward trend
from the war prices.
A comparison of price with the annual
production shown in Figure 8 reveals tendencies both for
price to lead production and for price to complement produc­
tion in good and poor years.
Price changes can be associated to a certain degree
with changes in the relationship of production to disappear­
ance and of stocks to disappearance as shown in Figures 8
and 9, page 42.
When the ratio of stocks to disappearance
was very low in 1915-1918 the average price was high.
Of
course another cause of this high price level was the World
'War.
The price decline from 1917 to 1925 occurred while
production tended to exceed disappearance even though both
were declining.
In the same period stocks were at a high
level compared to disappearance.
Again after 1929 when an
excessive stock accumulated as production surpassed consump­
tion the price fell to a very low level.
As the excess
stock was reduced from 1935 to 1938 the price rose•
What changes in price and production have meant to
■^These prices are the averages for fillers and
wrappers for all three types together since prices are not
reported separately for types and grades. Type 44 usually
brings a higher price than the others and so compensates
for a lower yield per acre. The 1909 figures are the earli­
est available from reliable sources. Data on price and farm
value were secured fromj Chas. E. G-age, op. cit., p. 4o j and
U. S. Department of Agriculture, Annual Report on Tobacco
Statistics, First, p. 15, and 1939, p. 9.
47
the growers in the Miami Valley is indicated by the fluctu­
ations in total farm value of the crop shown in Figure 11,
page 45*
The peak in 1917 was the result of the largest
crop produced and the highest price received per pound in
the history of the district.
The decline since that date has meant a great finan­
cial loss for the farmers and has called for a shift in the
economy of the district.
The shrinkage in the dollar value
of the tobacco crop from the pre-war level to the post-1929
period was approximately 7
0
When the decline in the pur­
chasing power of the farmer* s dollar from an index of 100 in
1910-1914 to an average of 79 in 1930-19381 is taken into
consideration, the shrinkage in purchasing power from this
source between the two periods was approximately
An
index of 117 in 1917 had accentuated the abnormal income
from tobacco in that year and made the subsequent decline
in dollar income more noticeable.
The amount of income from tobacco even in the later
years gives evidence of the importance of this crop to the
district.
The decline in that income has been a factor in
the cooperative marketing movement.
In addition, the stand­
ing of Miami Valley tobacco in competition with other types
and the decline in consumption of cigars have not only influ­
enced the formation of cooperatives but have had a decided
bearing on their operations.
•^Figures for the purchasing power of the farmer's
dollar by years from 1910 to 1938 are given in Appendix A,
Table II.
46
It is significant that cooperative marketing associ­
ations were started in the two periods, 1920-1925 and 19291935 when stocks were excessive, production exceeded con­
sumption, and prices were low*
The growers turned to co­
operative marketing as a possible means of escape from or
remedy for the situation.1
Marketing Methods
The country-buyer system has dominated the marketing
of Miami Valley tobacco as it has that of cigar leaf in the
other districts.2
Under this system the buyers visit the
farms and purchase the tobacco in the growers* sheds*
There
are three types of buyers: the agent or representative of
the manufacturer, the dealer or dealer’s agent, and the
independent buyer.
The independent buyer, sometimes called the local
buyer, is a merchant middleman, but he ordinarily operates
without making a very large investment.
He has no storage
or processing facilities of his own and expects to turn his
contracts at a profit to a dealer or manufacturer by delivery
time.
Thus, he frequently has no investment except his trav­
eling expenses and such payments as he may make to bind the
contracts.^
His most important function is the assembling
^This significance will be seen in the consideration
of the cooperative associations in later chapters.
p
Gage, op* cit., p. 78.
■^This is very rarely done.
Occasionally the buyer--
49
of title to a sizeable quantity of tobacco by making con­
tracts with the individual growers*
In periods of changing
prices his risk-bearing function is very important*
The
independent buyer usually limits his activities to his local
community•
The tobacco dealer also Is a merchant middleman, but
he performs more functions in the marketing process than
does the independent buyer.
According to the scale of his
operations, the dealer does his own buying or employs agents
to do it for him.
He operates one or more warehouses in
which to store and process the tobacco.
He has usually re­
handled and resweated the tobacco before selling It to the
manufacturer.
In fact, he is often referred to as a packer.
His activities may be confined to a local area or may cover
the whole district or even several districts.
Ordinarily he
has made his profit from processing the leaf or serving as
an assembling agency, rather than from engaging in specula­
tive buying.
He does not manufacture any finished products.
At times manufacturers depend on the dealers and the
independent buyers for their supply, and at other times they
place agents in the field to buy direct from the farmers.
The very small manufacturers depend on the dealers since
they can use only certain grades.
Larger manufacturers
any one of the three types mentioned— will use a small pay­
ment of
to secure exceptionally good crops or to
start the buying in the field when the growers are reluctant
to accept the offered price. It is seldom an option payment.
Usually it is a secret payment to Just a few growers and as
such is a bonus above the price. In the trade It is re­
ferred to as "sweetening."
50
often use their own agents*
Some buyers operate certain years as independent
buyers and other years as agents for dealers or manufacturers.
Which they do depends on the opportunity for profit in buying
independently and on the commissions dealers and manufactur­
ers offer them*
The agents of dealers and manufacturers are
usually local residents who know the community and the tobac­
co growers and thus are in a position to purchase efficiently
the types and grades of tobacco desired*
Payment for the
agent* s work is a commission of one-fourth to one-half cent
per pound of the tobacco purchased.
A drawing account is
frequently provided so that no financing or risk-taking is
done by the agent*
In some instances the agent maintains
his connections with the same dealer or manufacturer for
many years, while in other cases the agent is employed by
different firms in succeeding years, depending on which
firms are active in buying in those years*
During several periods cooperative associations have
had a part in the marketing process*
Because these associ­
ations ordinarily buy no tobacco but act merely as selling
agents for the growers, they are not classed here among the
buyers*
In their other functions the associations resemble
the dealers.
The development of and the experiences with
cooperative marketing are treated in the following chapters.
Another middleman in the marketing process of leaf
tobacco is the broker.
He usually operates as a functional
middleman between the dealers or the cooperative associations
51
and the manufacturers.
He may serve either party, by locat­
ing a source of supply or by finding a purchaser.
His charge
may be based on the quantity or value of the tobacco, but
customarily it is a flat fee of one dollar per case.
Upon
rare occasions the broker purchases the tobacco in his own
MARKETING- CHANNELS OF MIAMI VALLEY TOBACCO
Manufacturer's
Agent
Producer
Manu­
facturer
Figure 12
name and pays the seller from his own funds.
He does this
either as a speculation or as a device to conceal the iden­
tities of the purchaser and seller from each other.
The
broker is the most active middleman in the export trade.
The marketing channels between the producer and the
manufacturer are indicated in the accompanying diagram.
relative importance of the different channels has changed
The
52
during the history of the district.
The dealer or dealer’s
agent appears to have been the most important buyer in the
early period, although how the country-buyer system devel­
oped in the district is not certain.
It is reported that
the crops grown about 1850-1852 were ’’all marketed in New
York."
No explanation is offered as to whether the produc­
ers or some middleman brought the tobacco to New York or how
it was handled there«
By 1880 the practice of dealers buy­
ing the tobacco in the country seems to have become estab­
lished.
Three-fourths of each crop was said to have been
bought and packed by the dealers.2
No mention is made of
the manner of marketing the remaining fourth.
After 1900 the Independent buyer rose in Importance
and until 1953 shared the primary market with the dealer or
the dealer’s agent.^
An exception to this was the crop
years of 1923 and 1924 when a cooperative association was
the most important marketing agent In the field.
Since 1930
another cooperative association has been a minor factor in
the market.^The most significant change which has taken place in
the marketing channels in recent years has been the virtual
disappearance of the Independent buyer and the decline in
the Importance of the dealer and the dealer’s agent.
1Killebrew, op. cit., p. 726.
The
2Ibid., p. 733*
•^Personal interview with M. E. Stern, tobacco broker
of Dayton, Ohio, Aug. 25, 1939.
^The part which these associations have had in the
market is indicated in the following chapters.
53
manufacturer* s agent has become the dominant middleman.
It
is reported that at present (1940) only one independent
dealer of any size, the National Leaf Tobacco Company,
Dayton, Ohio, remains in the district.
The five other deal­
ers of good size have practically ceased to operate on their
own account.
Instead, they now buy on commission for the
large manufacturers.
Recently manufacturers have tended to
send agents from the home or branch offices to purchase the
tobacco rather than to hire local tobacco men to do this
work for them*1
Sale and Delivery
During the growing season the buyer ”rides" the dis­
trict to keep informed on the acreage and the crop prospects.
Particularly desirable crops are "spotted" for possible pur­
chase.
In some instances elaborate records have been kept
on the development of the crop.
For a number of years one
p
large manufacturer with local offices used a wall-size map
of the district on which individual farms were shown.
With
colored pins the acreage and condition of the tobacco crop
on each were indicated.
At the buying season the company's
representatives were instructed to buy selected crops on the
basis of its needs.
Another guiding factor on which infor­
mation is kept is the care with which the different farmers
1Personal interview with M. E. Stern, op* cit.
^General Cigar Company at Miamisburg, Ohio, between
1925 and 1935*
54
handle their crops from cultivation to final packing.
Past
experience of buyers with a farmer and inspection at various
stages of cultivation and handling provide this information.
In a prime crop year when demand is strong the crop
may be contracted in the field or at cutting time.
This
method, the farmers maintain, has never worked well for them.
If the price rises later in the season, the grower loses.
If it falls, the growers claim that many buyers manage to
evade the contracts.
Some of the methods buyers are accused
of using to do this are: bluffing the farmer into a lower
price; rejecting the tobacco on the claim that, because of
improper handling or similar cause, it did not meet the con­
ditions set in the contract; failing to set a delivery date;
or, in an emergency, resorting to bankruptcy.
The independ­
ent buyer is criticized as the most serious offender, for he
is often a speculator and does not have large financial re­
sources -1
Because of the lessened demand and the accumulated
stocks very little field contracting has been done in the
district since the World War.
The normal sale time has been the stripping season
in December and January.
The buyer usually prefers to make
the contract at this stage, for he has an opportunity to see
the tobacco after it has been shed-cured and to observe the
manner in which the farmer sorts and packs it.
If the sale
Personal interviews with various growers during
August 1938 and August 1939, and the writer's experience in
the district.
^After the tobacco is cut in August and September It
55
occurs either in the harvesting or stripping season, delivery
is usually made upon completion of packing*
This enables the
buyer to place the tobacco (is^Jhis own warehouse where he can
re-sort it, if he so desires, and can direct it through the
very important spring sweat which brings about certain chem­
ical changes and loss of weight*
10$ of the farm—packed weight*
This loss averages about
The losses in the subsequent
sweats are less, bringing the total to about 15^.1
Since 1930 the sale date has often been delayed
until long past the usual season; and in some years buyers
have not begun active buying until late spring or summer*
This has meant that the farmer has had to stand the loss of
weight and danger of spoilage in the spring sweat*
Some
farmers have refused to sell because of the price or have had
no offers so that they have had as many as three crops on
is hung in well ventilated sheds where it cures by a natural
process* After it is cured it is brought to a moist, pliable
condition by natural or artificial means. The leaves are re­
moved from the stalks, rough sorted into three grades (see
pp* 2-3), and the wrapper and filler leaves are tied in bun­
dles or hands of about twenty leaves. These hands are laid
in and later pressed in the wooden packing cases*
^Based on the writer1s experience in the Ohio Cigar
Leaf Tobacco G-rowers* Marketing Association; and Morrow and
Smith, op* cit., p* 24. Tobacco as received from the grower
is called ”unworked” or "farmer-packed.” "Handling” includes
receiving, grading, sweating, sizing, and packing. "Rehan­
dling" includes the last three of these. "Sweat” or “sweating"
is the process in which the leaf loses moisture, its greenish
color, and harsh, raw taste. The "spring sweat" is a natural
sweat following the packing process* "Resweating" is the sub­
sequent artificial sweats induced by special packing and/or
the use of heat. In "case-" or "box-sweating" the tobacco is
left in cases for the process, while in "bulk-sweating" it is
removed and placed in special piles or "bulks." "Tabling" or
"fable-sizing!1involves passing the leaves over a table or
measuring board to sort them into grades based on length of
the leaf* "Hand-sizing" is rough sorting without tabling.
56
hand at once.
This has occurred to a serious extent in two
periods since 1900, in 1910-1912 and again in 1931-1933.1
Warehouses have existed in nearly every city and
village in the district, so that seldom has a farmer had to
deliver his crop more than five or six miles.
The use of
motor trucks has led to a centralization of the warehouses.
Payment in cash on delivery day is customary.
The tobacco grower* s cash position seldom permits him
to delay the sale.
This places him in a weak bargaining
position which may mean a lower price for his tobacco.
In
certain respects the Miami Valley grower is better able than
producers of other types of tobacco to hold his product.
Some tobacco types require an expensive drying process imme­
diately after harvest or involve considerable cash outlay in
production.
Consequently the grower has often contracted
debts which must be paid as soon as possible.2
No special equipment or expenditures are necessary
with the Miami Valley tobacco for the first part of the
curing process which occurs after the tobacco has been packed
by the farmer.
For best results the spring sweat should take
place in a dry well ventilated room and under careful obser­
vation.
With some attention from the grower it can be done
fairly safely on the farm.
The other sweats and sortings
through which the leaf must pass before manufacture require
•^This condition was important in the formation and
operations of the warehouse companies in 1912 and of the Ohio
Cigar Leaf Tobacco Growers* Marketing Association in 1931.
2H. B. Rowe, Tobacco Under the A. A. A.. p. 4l.
57
more equipment and skill than farmers are prepared to pro­
vide .
About the only cash production expenditures are for
fertilizer and for the wooden cases in which the tobacco is
packed»
These items usually are not large enough to neces­
sitate sale immediately upon completion of the stripping and
packing*
Most contracts for cases provide for payment on
delivery of the tobacco*
Nevertheless,, the grower is usual­
ly in need of cash so that immediate sale is not a matter of
indifference*
Part of the grower* s desire to sell at once
is due to his feeling that the prices before and after the
spring sweat do not show sufficient difference to compensate
for the loss of weight in the sweat.
It should be noted that all three grades of tobacco
into which the farmer ordinarily sorts his crop are not often
sold at the same time.
*fhe wrappers and fillers are sold
together and follow the process just described*
A different
group of buyers usually buys up the lowest grade or trash
leaves which can be resorted and cleaned so that part of
them can be sold to compete with the fillers.
These leaves
are sold and delivered before the other grades, frequently
by the first of December.
The buyers of these leaves may be either trash
■^Commercial fertilizer, if used, averages $10-$15
per acre. Cases cost about #2*25 each new, or $1.50 used*
This means about $5-$7 per thousand pounds or per acre grown.
The tobacco seed is not an important cost item. Most farmers
grow their own on five or six stalks, or get it from neigh­
bors* If it is purchased from a seed company the total cost
for five acres Is about $1*50*
58
dealers who operate processing warehouses or independent
trash dealers who resell to these dealers#
Occasionally
dealers in the wrapper and filler grades will handle the
trash leaves#
In some instances junk dealers have been
active buyers of this low grade#
Sometimes the trash buyers
travel through the country with trucks, buying and collect­
ing the leaves#
This is possible since each grower will
have only a few hundred to a thousand pounds.
As indicated
above, many farmers in recent years have not sold this grade
because of the poor price and the realization that it tends
to lower the price of the better grades.^
The price paid for the wrappers and fillers may be a
straight or one price quotation, or a two price quotation.
In the latter the difference between the grades ranges from
two to four cents per pound.
The straight price has become
more usual in recent years although it tends to appear when­
ever the price reaches a low level#
In some instances a
contract at a straight price may limit the percentage of
fillers to be accepted or may provide that the farmer is to
strip the two grades together.
Criticisms of Country-Buyer System
The tobacco growers have made many criticisms of the
country-buyer system of marketing.2
Most of these objections
'''See page 27.
2The criticisms given are based on the writer* s
experience in the district.
59
have related to the price the farmers have received for
their product*
The price fluctuations which frequently oc­
cur during the selling season create a great amount of un­
certainty as to the best time to sell • As indicated above,
the grower feels that when he sells early he loses if the
price rises,, and that he does not realize the gain if the
price falls **^ He prefers not to hold his crop because he
often needs the money; he realizes that the tobacco loses
weight as he holds it; and he thinks that frequently as the
season advances the buyers "get together" and lower the
price*
The lack of an organized
tobacco market and of an
information service on market conditions is a great handi­
cap*
Another criticism has been that the buyers make
practically no distinctions in their prices for differences
in the quality of the tobacco and the way in which it has
been handled.
It would appear that there is Justification
for this complaint.
As a result of the lack of price dis­
tinctions, improvements in the quality of the tobacco and
careful handling have not been encouraged.
Growers also
claim that favoritism is shown certain growers because of
their connections with the buyers*
It is doubtful whether
many of these claims could be substantiated.
Growers feel that there is too great a difference
between the prices for the tobacco leaf and for the finished
products.
A large part of this spread is charged to the
See page 54
60
costs for the services of these buyers and to the profits
which they make*
There is a feeling that these items are
unnecessarily large and that they lower the prices the grow­
ers receive*
In the minds of the growers there is a desire
to secure for themselves a part of this price spread; and it
seems to them that the elimination of the country buyers
would be a good way to accomplish this*
Finally the growers protest that they are helpless
in the determination of the price*
As individuals they lack
bargaining power in dealing with the buyers*
As far as the
growers can see, the prices are set for them by the buyers
and they must accept these prices or none*
Accusations of
"monopoly" and "agreements among the buyers" are prevalent.
These criticisms of the marketing process have
greatly influenced the cooperative movement*
Other Marketing Agencies
During the earlier history of the district the
Cincinnati tobacco auction was a factor in the marketing
process*
The sale of cigar leaf tobacco on this auction
several years before the World War is described In the
following statement:
An interesting feature of the Cincinnati market is
the fact that since some time before the Civil War, when
cigar leaf first began to be raised In the Miami Valley
and to some extent In other tributary sections, that
city has always been the center of a large trade in ci­
gar leaf in boxes of about 300 pounds net weight each,
this tobacco being inspected in the regular way and sold
from the sample at auction the same as Burley* Cincin­
nati is the only regular cigar leaf auction sale and
6l
thes^saleq111^ 6? +n the United States. At present
lelf from the
5?SP y of odds 811(1 ends or damaged
The aafe=
°1ffr districts of Ohio and Wisconsin.
Kenernliv °f„ se®diesf at the Cincinnati breaks have
8 erally ranged from 5,000 to 10,000 cases annually.1
The part which this market played in the sale of the
farmer s crop is largely a matter of conjecture.
The amount
of Miami Valley tobacco handled on the auction is not
recorded.
There is no indication of how much consisted of
sales made directly by the farmer and how much of resales by
buyers and manufacturers.
The above statement that most of
It was "odds and ends or damaged leaf" would suggest that it
was from dealers and manufacturers.
A broker experienced in
the field has said that at times a farmer or group of farm­
ers would ship their tobacco to the auction, but that the
amount sold from the farmers was very small.
his observations most of the offerings
According to
were made by dealers.2
The reports of sales in cases of tobacco on the
auction indicate that the greatest activity was from 1870
to 1890 when an average of approximately 5,300 cases— as
distinguished from hogsheads of Burley and other non-cigar
types— were sold per year.
After 1900 the sale of tobacco
in cases appears only intermittently on the records and then
only for small quantities.^
1
E. H. Mathewson, Tobacco Marketing in the U. s ..
U. S. Department of Agriculture, Bureau of Plant Industry
Bulletin 268, p. 4l (1913)* "Breaks" refers to the method
of drawing samples from a case# The wooden box is slipped
off the tobacco. The compact block of tobacco is broken at
several places and several hands are withdrawn.
2
Personal interview with M. E. Stern, op. cit.
^Data secured from volumes of Annual Report of
Cincinnati Chamber of Commerce for years covered.
62
A few attempts to establish local auctions were made
but proved unsuccessful .
No records of the scale or method
of these operations are left*
However, the quantity of
tobacco so handled is said to have been insignificant.'*'
There has never been any trading in cigar leaf tobacco on
commodity exchanges.
At several times manufacturers attempted to contract
with the farmers for the growing of tobacco. Seed was fur*
»
nished and the farmer was expected to follow the company’s
instructions in growing, stripping, and packing the tobacco.
Four or five companies made such attempts to provide for at
least part of their requirements, but none continued the
policy for more than a year at a time although some repeated
the attempts at different times.
It is doubtful whether
more than five percent of a year’s crop was contracted at
any one time.
The manufacturers declared that the farmers
did not take proper care of their crops under this method
and that they felt that it forced them to assume too great
risks in the event of a poor growing season.2
Changes in Cigar Manufacturers
A change in the number and size of cigar manufacturers
has been of great importance In the tobacco market.
When
^Personal interviews with M. E. Stern, op. oit.» and
with Walter Kenrick, Lytle, Ohio, manager of The Lytle
Warehouse Company, Aug. 28, 1939.
^Personal interview with M. E. Stern, op. cit.
63
cigars were made largely by hand the factories remained
small*
In many instances the owner had only one or two
helpers.
The introduction of machinery changed this by
encouraging mass production.
The steadily growing production of Glass A cigars
Lin contrast to higher priced cigars] coupled with a
marked reduction in the number of cigar factories pre­
sages, we believe, the early disappearance of the small
manufacturer and the concentration into a situation
analogous to that in the cigarette industry.-^
TABLE 4
CIGAR FACTORIES AND PRODUCTION IN CERTAIN STATES
AND THE UNITED STATES IN SELECTED YEARS*
Ohio
iear
F
P
1907
1912
1917
1922
1927
1932
1937
1,727
1,523
86 7
832
501
369
222
715
655
720
660
516
352
278
F
Pennsylvani a
F
P
4,498
3,677
2,173
1,746
1,140
824
603
2,147
2,207
2,419
2,176
2,205
1,783
1,930
No. of factories
w. Va.
F
P
116 128
128 152
72 100
73 89
46 79
53 50
32 95
P
Indiana United States
F
P
F
P
530
574
375
314
203
147
75
78
151
241
216
186
118
103
23,882
20,555
14,576
11,576
7,974
6,109
4,157
8,376
7,099
7,933
7,355
6,519
4,661
5,303
No. of cigars in millions
*Data from volumes of annual Report of Commissioner
of Internal Revenue for years listed. All figures are not
exacts comparable since some do not include small cigars.
The accompanying table shows the number of factories
and the amount produced for certain states and the United
States for selected years since 1907*
The states listed are
those in which the manufacturers making the greatest use of
•^Chas. D. Barney & Co., The Tobacco Industry 1929.
p. 3*
64
Miami Valley tobacco are located.1
The trend toward larger factories is evident from an
examination of the figures in the table.
While production
of cigars declined 39$ f rom 1907 to 1937, the number of cigar
factories in the United States declined 83$.
The decline in
the number of factories in Ohio alone was 87$.
The trend is shown further by the fact that in 1922
small factories--those making less than 500,000 cigars per
year--constituted 89$ of all factories and made 11.19$ of all
cigars, while seven large factories, 0.1$ of the total, made
11.75$ of the cigars.
By 1930 the small factories were 92$
of the total and produced only 5*22$ of the cigars, whereas
35 large factories, 0.5$ of the total, made 49.8$ of the
cigars.2
The reduction in the number of factories has influ­
enced the tobacco grower's market.
He has fewer possible
purchasers to compete for his product, and there is greater
opportunity for price control on the part of the manufac­
turers .
The decline in the demand for Miami Valley tobacco,
the periodic low prices, the maladjustments in production
and consumption, and the abuses which the growers feel have
1The majority of the factories which look to this
district for raw materials are in southeastern Ohio and in
and around Wheeling and Pittsburg. It was impossible to
exclude from the Pennsylvania data in Table 4 the factories
around Lancaster using principally Pennsylvania tobacco.
2G-age, op. cit., p. 53*
65
existed in the marketing system have all contributed to the
movement for the cooperative marketing of the tobacco.
As
will be shown in later chapters, these factors also have
increased the difficulties in operating the associations and
have contributed to their failures.
CHAPTER III
EARLY COOPERATIVE VENTURES
The first attempts at cooperative marketing of
tobacco in the Miami Valley appear to have been made after
1900.
Other districts had "been experimenting with this
method of sale for many years*
ation was formed in Connecticut*
As early as 1862 an associ­
In 1873, as a result of
G-ranger agitation, warehouse companies were organized in
Massachusetts and Kentucky,
These ventures at first con­
fined their activities to the building of warehouses in
which farmers could store their tobacco until better prices
were offered.
Later they undertook cooperative pooling,
The greater portion of the material for this chap­
ter was secured in personal interviews during August 1939
with people who had been closely associated with the
cooperative ventures or the tobacco industry* These indi­
viduals are listed in the bibliography. In footnotes credit
is given particular persons for any especially significant
points contributed on the different ventures. Most of the
records of the companies mentioned have been destroyed. By­
laws and minute books were available for The Farmers Tobacco
Co., Farmersville, 0.; The Union City Farmers Tobacco Co.,
Union City, Ind.; and The Lytle Farmers Tobacco Co., Lytle,
0* Part of the business records were available for The
Fanners Tobacco Co., Farmersville, 0.; The Farmers Cooperative
Cigar Leaf Tobacco Co., Verona, 0.; The Miami County Leaf
Tobacco Co., Covington, 0.; and The Union City Farmers
Tobacco Co., Union City, Ind.
66
6?
packing and selling of* their* product
Similar organizations were the first to be started
in the Miami Valley area.
only a few members.
They were local undertakings with
The general plan was to provide— usually
by renting a warehouse— a place of storage during low prices
or a receiving point to facilitate shipping.
At times to­
bacco was assembled in the houses for inspection by buyers
or for auction.
Perhaps five or six of these warehouses
were operated in the district before 1910.
case they lasted only a year or two.
In all but one
The amount of tobacco
handled by them was very small
The Lytle Warehouse Co., Lytle, Ohio, incorporated
in 1905, was the longest lived of these organizations.
It
was created because of the need for a temporary storage
place before shipment of the tobacco.
In making delivery
of their crops the tobacco growers in this community had to
load their cases directly into freight cars since there was
no warehouse in the village of Lytle.
Dissatisfied with
this inconvenience twenty-five farmers formed the company
and built the warehouse.
The use of it as a temporary stor­
age place was open to all at a uniform handling charge of
three cents per case.
When space was available some growers
stored their crops there while they awaited inspection and
"Sf. W. Fetrow, Cooperative Marketing of Agricultural
Products, Farm Credit Administration, Cooperative Division,
Bulletin No. 3» (1936) p. 79.
p
Personal Interview with 'Walter Kenrick, Lytle, Ohio,
Manager of The Lytle Warehouse Co., and of The Lytle Farmers
Tobacco Co., August 28, 1939.
68
purchase by buyers.
A charge of three cents per case per
month was made for storage
The undertaking returned a profit to the stockholders
in each year.
In 1912 a part of the warehouse was rented to
The Lytle Farmers Tobacco Co. for use in its marketing activ­
ities.
The motor truck, making possible delivery to more
distant points, removed the need for the warehouse.
In 1922
it was rented, and then in 1935 sold, to an elevator comp
pany •
As shown by its operations the company was more near­
ly a profit seeking venture than a cooperative association.
The National Cigar Leaf Growers1 Union
The second movement for grower cooperation came out
of the troubles around the beginning of the century in the
tobacco districts of Kentucky and Tennessee.
From 1890 to
1911 there was continuous strife in the Burley and DarkFired tobacco districts of these states•
The conflict arose
over the system of barn or country buying and the monopoly
of the American Tobacco Co. and the ’’Regie"— the foreign
government agents buying tobacco for export.-'
The American Society of Equity, founded in 1902
with headquarters at Indianapolis, entered the district to
encourage the re-establishment of the warehouses as they had
^Tersonal interview with Walter Kenrick, op. cit.
2
Ibid.
30 . b . Jesness, The Cooperative Marketing of Tobacco.
Ky. Agricultural Experiment Station Bulletin No. 288, p. 274.
69
existed around I873 .
The Society conducted this campaign
as part of its national program for the creation of farmers'
cooperatives.
It had gone into Wisconsin at the same time
and helped form twenty warehouse a s s o c i a t i o n s P a r t l y
because of this influence The Planters Protective Association
and The Burley Tobacco Society were organized in 1904 and
1907 respectively•
them.
Other small local groups had preceded
From 1908 to 1911 bitter warfare was waged to break
the hold of the monopoly.
The Night Riders, by destroying
crops and burning warehouses, made effective the plan of
these groups to grow no tobacco in 1908,2
Repercussions of this struggle were felt in the
Ohio cigar leaf district*
At a meeting of the Ohio Leaf
Tobacco Packers* Association--^ dealers1 organ!zation-William S t r o u p , ^ president of the American Cigar Company, a
subsidiary of the American Tobacco Company, and speaker of
the evening,, touched upon the seriousness of the situation
and cautioned the local buyers.
A part of the report of
this speech follows:
He said we must avoid the Burley troubles in
Kentucky, in which he had reference to the turmoil and
ceaseless strife consequent upon the clashing interests
there, We must fight this from the start; we can't
afford to mix in It7^
~
■^Chastina G-ardner, "Historical Sketches— #7, Tobacco
Cooperatives," Agricultural Cooperation, May 4, 1929, p. 198,
2Jesness, op. cit.. pp, 274, 277*
^Later to have an important post in the Miami Valley
Tobacco Growers' Cooperative Association, Dayton, 0., 1923-24,
4
Davton Daily News, Feb. 25, 1910, p. 4. Italics
are the writer's.
70
Occasion for concern is found in the reports that
the American Tobacco Company was trying to defeat the
Kentucky growers' association by urging the planting of
Burley in the Miami Valley district.
Agents of the company
were said to have distributed free seed to the growers to
induce them to try it.1
Apparently to forestall this and to
prevent the undoing of the cooperative work in Kentucky,
C. 0. Drayton, president of the American Society of Equity,
travelled through the Ohio district making speeches urging
the growers to organize and to establish warehouses.^
The interest which he aroused led to the formation
of the National Cigar Leaf G-rowers' Union at Dayton, Ohio,
on June 1, 1910. 3 it was to be a branch of the American
Society of Equity.
The plan of organization provided that
the members belong to local groups which together made up
the Union.
Discussion of policies and annual election of
directors were to occur at the general meetings held several
times a year.
IMo action could be taken by the directors
without the approval of the local groups.
The iniation fee
was $2.50 and the annual membership dues $1.00.
One-half
of this was paid to the American Society of Equity.
At one
1Dayton Daily News, March 9, 1910, p. 2. According
to M. E. Stern, tobacco broker, Dayton, Ohio, In a personal
interview August 25, 1939, the American Tobacco Co. had no
success with its plan. Only a few farmers tried even a small
patch. At various times individual growers have experimented
with Burley and the results have never been encouraging.
^Davton Daily News, March 25, 1910, p. 26.
^Davton Journal. June 2, 1910, p. 7.
71
time the Union claimed 6,000 members in about 25 local
groups*1
The aims of the Union as set forth in the Articles
of Incorporation were:
(1) Its object shall be continual Instruction in its
local Unions, to the end that there may be intelligent
production and handling of the tobacco crop in such a
way as to produce the very best quality possible.
(2) The second object of this Union shall be
economical intelligent cooperative marketing of the
tobacco grown by its members*2
At first the Union devoted itself to educational and
Informational work*
Headquarters at Dayton served as a
clearing house for news among the local groups.
Information
on crop condition, acreage, buyer activity, prices, and
other items of interest to growers was sent in by the mem­
bers to headquarters and from there was distributed to all
local groups.
At the frequent meetings of the locals mem­
bers discussed the problems they faced in raising and market­
ing tobacco.
Farmers* Institutes, which were being started
in nearly all townships at that time, aided the movement by
spreading word of its activity and by setting an example for
work of this nature*
In a short time members became convinced that their
program was not adequate for dealing with the situation*
Demand for the tobacco was poor and prices were low and
1Personal interview with Frank Blackford, Eldorado,
Ohio, president of the Union, August 30, 1939*
2From Articles of Incorporation, filed June 18, 1910,
with the Secretary of State of Ohio.
72
LO C A TIO N S OF COOPERATIVE WAREHOUSE
COMPANIES IN M IA M I VALLEY 1912.
. - . J ______ ^ M E R C l r J
Augla.**
-
i
.
r--1-—
------
LOq a n
,0______
11--- ^5HEL6Y
Umoo .
City*
, CH^A/|
DARKE.
R A N D O L P H -
•
Covdbafcon
Qreenvi/la.
WAVr^E
P ^ | Qfn
Verona. «j
Preble")
j ^ ONT
We&t Alex.a,r?
•Liw»o.v/;
rarmcrsvUi
Gratij.
I—
i
JB u t l e r /
K E N T U C
~CLnk.tin
L>ftie
j\w\RR_
Cl i n t q n
I
declining.
73
From 10.5 cents per pound in 1908 the price had
fallen to 7.8 cents in 1911*^ A large portion of the 1909
and 1910 crops was still in the hands of the farmers when the
1911 crop was being harvested.
The Union began to sponsor
the establishment of warehouses by the local groups as a
possible solution.
A leader in this program was Frederick Zuckerman
who became general manager of the Union and was later to be
its sales manager.
He had been a small cigar manufacturer
in Chicago and then in Dayton.
The Union continued its operations until 1913 when,
in the general confusion following the Dayton flood, it and
its local discussion groups were allowed to die.
Before
this date dissatisfaction with the sales activity ol
Zuckerman and the overshadowing development of the local
warehouse companies had greatly weakened the Union.
Warehouse Companies
At the urgence of the national Cigar Leaf Growers'
Union and its general manager Frederick Zuckerman, eleven
warehouse companies were formed in 1912 by local groups
of tobacco growers.
A map of the district showing the
locations of the warehouses is presented on the preceding
page and a summary of information on these companies is
U. S. Department of Agriculture, Yearbook of the
Department of Agriculture 1909» p. 515, and Chas. E. Gage,
American Tobacco Types. Uses, and Markets, p. 46.
74
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75
given in Table 5, page 74,
A number of others were planned
--for example, at Pleasant Hill and Brookville—
but failed
to materialize because of lack of financial support by the
growers in the local group.
Since at that time the laws of Ohio did not provide
for the formation of cooperative marketing associations, the
companies were organized as corporations for profit.
Capi­
talization of most of them was set at $10,000 of common
stock with no provision for preferred stock or bonds.
Par
value per share was $25 in nine of the companies and $5 and
$20 in the other two.
The uniform set of by-laws adopted by the companies
restricted ownership by one person to twenty shares,
members had only one share*
stock owned.
host
Voting was to be by shares of
Each stockholder was required to be a member
of the National Cigar Leaf G-rowers1 Union.
This regulation
applied only one year since the Union did not operate after
1913.
The by-laws provided that two-thirds of the stock be
subscribed and one-half of the subscription paid in before
the company started operations*
Available evidence would
indicate that only two companies--The Warren County Leaf
Tobacco Co. and The Miami Farmers Leaf Tobacco Company-observed this requirement.
Purpose
The uniform statement of purpose set forth in the
Articles of incorporation was:
76
Said corporation is formed for the purpose of estab­
lishing a Tobacco Ware House: for sweating, re-handling
and preparing for market all grades of leaf tobacco for
the growers and marketing the same; for the purpose of
issuing warehouse certificates to the growers for their
crops.
The growers were seeking to eliminate the dealers
and buyers.
They hoped thereby to remove the abuses which
-they felt they suffered at the hands of these middlemen and
to get higher prices for their product by cutting out middle­
man costs and profits.
They believed that direct dealing
with the manufacturers would mean more profits for both
o
parties without any increase in price to the public.
Very little indication is found of hopes to monop­
olize the market or to dictate prices.
In organization
activity and in operations emphasis was placed on the ware­
house company as a selling agency and upon the desirability
of disposing of each year1s crop as soon as possible--at
least in time to make way for the following crop.
The hand­
ling and curing which they undertook were to assist in mak­
ing direct connection with the manufacturer possible, for
the dealers had been doing much of this work for the manu­
facturers.
In a meeting of the national Cigar Leaf Growers'
Union in Dayton on Oct. 7 ,
1912, officers denied that there
■5
would be any attempt to form a general pool.-'
Iprom Articles of Incorporation filed by the com­
panies with the Secretary of State of Ohio.
^Dayton Daily Hews, Jan. 4, 1912, p. 16•
^I b l d ., Oct. 8, 1912, p. 5*
77
Management
Management was one of* the companies* weakest points*
In each company the determination of policies and the selec­
tion of operating officers were vested in a board of direc­
tors of five to seven members elected annually by the stock­
holders*
Although the directors often made decisions on
proposed sales and on the handling of tobacco, most of the
policy making and managing was left to the general manager*
The general manager of a company was usually one of
the stockholders*
Uniformly he held also the position of
treasurer and often that of secretary.
Since his duties
required attention only part of the year he continued his
farming activities, except in the Greenville company^ in
which the manager was a retired farmer.
The salaries of
these positions in the various companies ranged from $150
to $750 per year.
Ordinarily for the position of warehouse manager or
packer the directors hired an outsider who was experienced
in the work.
Sometimes the position was combined with that
of general manager, as in the Verona house where the general
manager learned the trade from the packer and took over his
work when he left*
2
This also was seldom a full year job
unless the company rehandled a large quantity of tobacco*
Sales were occasionally handled by an agent employed
^-Hereafter the companies will be referred to by their
location to avoid confusion from the similarity of their names.
^Personal interview with C. C. Gromwell, Verona, 0*,
manager of the Farmers Cooperative Cigar Leaf Tobacco Co.,
August 29, 1939*
78
by the company although more frequently this work was di­
rected by the general manager and was done through brokers
or dealers•
The various warehouses operated almost entirely as
independent units despite their common origin.
Those in one
company had very little information on the operations and in
some cases no knowledge of the existence of the others.
The
Verona and West Alexandria houses, were the only ones which
had direct connections.
This occurred through the arrang-
ment for the West Alexandria company to ship part of its
receivings to Verona for storage or for processing in the
trash machine •
The early tie through the Union and the
sales agencies it sponsored was never ver*y strong and was
almost entirely destroyed after the collapse of the Union
in 1913.
In the majority of companies there were no member­
ship contracts of any type.
Those which did exist had no
provisions requiring members to deliver their crops to the
companies.
Growers looked with disfavor on such a- require­
ment and the companies feared it would be illegal under
the terms of the Federal anti-trust laws and Ohio’s
Valentine anti-monopoly act.
Any cash penalty which they
might have set would, they believed, have been uncollectible.
In general the companies suffered from poor manage■^Personal interview with C. C. Cromwell, op. cit.
C. F. Taeusch, Rural Cooperation and Cooperative
Marketing in Ohio. 1913. Ohio Agricultural Experiment
Station Circular 141, p. 33.
79
ment and misguided policies.
Those placed in the positions
of general manager appear to have been sincere , honest,
industrious, but without exception they lacked the experience
and training needed for the various duties and problems of
the office.
As several of the managers explained, they knew
how to raise tobacco but they did not know the tobacco mar­
ket beyond the contacts they had had in the sale of their
own crops.
They had very little idea of how far to process
the tobacco to meet the market demand.
They had no connec­
tions with the manufacturers with whom they wanted to deal
and proved to be very inept in establishing them.1
Stockholders and managers admit that policies on
selling and financing were usually the decisions of the
moment.
There were very little planning and organising.
Accounting and record keeping were done carelessly,,if at
all.
Exact records of tobacco received and sales made were
not kept.
The treasurers at times lost distinction between
p
their personal funds and company funds.
In fact in the
lawsuit which arose over the Greenville company, the man­
ager contended that the stockholders knew he had no knowl­
edge of bookkeeping when they placed him in the position
and had done so in order to involve him in difficulties.
3
1Personal interviews with C. C. Cromwell, o p . cit♦;
John 0. Marion, Farmersville, 0., manager of The Farmers
Tobacco Co., Aug. 21, 1939; and John W. Bartel, Covington, 0.,
manager of The Miami County Leaf Tobacco Co., Aug. 28, 1939*
P
Personal interviews with a number of stockholders
and managers during August 1939.
•^Darke County Farmers Leaf Tobacco Co. vs. John
Robeson et al. Case No. 25380, Common Pleas Court of Darke
County, Ohio.
80
Warehouses
The warehouse of each company was the center of its
operations.
Three companies— those at Miamisburg, Franklin,
and Farmersville— built their own houses; two— those at
Verona and Covington--bought houses; and the others rented
them.
The Lytle Farmers Tobacco Company rented a portion of
the house built by the Lytle Warehouse Company, a farmers'
group mentioned above.1
The companies which built and bought houses had to
raise large sums of money.
was secured by borrowing.
A good portion of the amount
The company at Franklin borrowed
$5,000 to help build a $12,000 house— the largest house of
all the companies— and the Farmersville company borrowed
$2,000 in the construction of its $5,500 house.
Those com­
panies which rented houses had very little investment, for
the equipment needed was usually rented with the house.
As
a consequence these companies sold very few stock subscrip­
tions and collected even less cash.
Handling the Tobacco
Although the handling of the tobacco was generally
satisfactory, it underwent many changes and showed no saving
over the costs of private dealers.
When the companies began
they accepted only stockholders' crops which were-handled on
consignment.
Of those which operated more than two years
the companies at Union City, Franklin, and Gratis appear
1See page 67.
81
to have heen the only ones which adhered to this policy of
requiring stock ownership*
The others went through a grad­
ual process wherehy they lost their cooperative nature and
became regular profit companies whose stock was held by
small groups of farmers.
The first step ordinarily was taken when tobacco of
non-stockholders was handled on consignment.
Some companies
placed higher selling commissions or handling charges on
outsiders.
Others made a uniform charge to all, expecting
that the dividends to the stockholders would more than
cover the charges on their tobacco.
The companies which continued a number of years—
even those requiring stock ownership--began to buy tobacco
and to operate as dealers.
In the last few years of their
existence those at Greenville, Covington, and Miamisburg
purchased practically all the tobacco they handled.
The
Covington company bought some the very first year.
The failure of stockholders and others who had sold
through the warehouses to place their crops with the com­
panies year after year encouraged this move.
The rise in
market price of tobacco from 8 cents per pound in 1912 to
12 cents in 1916 and to 24 cents in 1917
growers to sell to the regular buyers.
induced many
Stockholders hoped
to profit by handling the extra tobacco both through a
reduction in the per unit overhead cost and through spec­
ulation on the rising market.
As less and less was received
■^See Figure 10, page 45.
82
on consignment from growers, the companies resorted to buying
to secure the volume needed to operate the houses#
According to a number of stockholders and managers,
the tobacco received on consignment was not pooled#
Each
crop was handled separately according to the directions of
the owner.
The charges, based on services rendered, ranged
from one or one and one-half cents per pound for receiving
and selling to three or four cents per pound for tabling,
1
resweating, and selling.
The crops which a company bought were usually
mingled and handled as appeared most profitable at the time#
At first the companies tended to do a complete handling job,
including tabling, on both consigned and purchased tobacco.
Later, as they saw that they could not do the handling more
cheaply than the private dealers and that ther money was
tied up in tobacco which was slow to move, they generally
restricted the handling to "sprigging" or removing the short
and damaged leaves from the hands of tobacco.
The warehouse companies, with one exception, received
all three grades of tobacco.
The exception was the company
at Lytle which handled only the trash leaves.
This policy
resulted from the fact that the growers of this community had
experienced particular difficulty in disposing of this grade.
Influenced by Zuckerman of the Union2 they organized a com­
pany similar to the others and then bought a machine to clean
1Personal interviews with a number of stockholders
and managers during August 1939.
o
See page 73*
83
and stem the "trash..
Two years' crops of trash leaves were processed
and a small portion of the first year's leaves sold when the
flood of 1913 inundated the warehouse.
The stock of about
125,000 pounds was seriously damaged.
It took nearly four
years to dispose of the musty leaves and to settle up the
business.
No tobacco was handled in the meantime.
The
original investment was lost and the growers received less
than one cent a pound for their leaves.^
The Verona house was the only other one which tried
to use a trash machine.
It is claimed that Zuckerman had
the machine sent to the company without the permission of
the stockholders.
They used it one year and then sold it.
The hundred cases of trash which had been processed spoiled
2
and were a total loss.
Financing
For the necessary investment the companies sold
stock and borrowed from banks by use of mortgages on the
buildings and notes signed by the directors.
No attempts
were made to use the tobacco in the warehouses as collateral
-since ownership of it remained with the individual growers.
The majority of the companies made no advances to the
growers.
When a farmer's crop was sold, the charges were
■^Personal interview with Walter Kenrick, op. cit.
^Personal interview with G. C. Cromwell, op. cit.
84
deducted and he received the balance.
At times, if the whole
crop were not sold at once, part payments were made.
Until
1916 the Verona company required the growers to advance the
expense money for the handling of their tobacco#
Upon the
sale of the crop they received the full price less the selli ng charge .■**
The original intention was that the companies would
issue receipts (called warehouse certificates in the charters)
to the growers for the tobacco received from them.
The farmers could use these as collateral for loans from the
banks.
The banks were not eager to make such loans and
charged high rates of interest.
As a result there was very
little use of the receipts for this purpose#
The Troy, Covington, and, after 1916, Verona com­
panies made some advances upon delivery of the tobacco.
To
do this the directors borrowed on their personal
notes at
6 % from the banks and made the advances at 7% to
the growers
who desired them.
This proved to be satisfactory except
in the case of the Troy company.
There advances were made
up to one-half of the crop value based on the prices set
by Zuckerman.
His estimates were too high and the price
received for the tobacco fell below the amount advanced.
An assessment was levied against the growers to meet the
loan and operating expenses.
"See page 76 above.
Members refused to pay the
2Ibia.
•^Personal interviews with John V7. Bartel, op. cit.,
and C. C. Cromwell, op. cit.
85
assessment and the company ceased operations after receiving
the first year’s crop.
In an arrangement with the stock­
holders, several directors took over the tobacco on hand as
partial compensation for their obligations on the notes.
They reorganized as a private company, The Troy Tobacco Com1
pany, in 1914, and have continued operations to date (1940).
The problem of advances became unimportant when the
companies began to buy tobacco rather than receive it on
consignment.
Even the stockholders sold their tobacco to the
companies and hoped to get additional returns through divi­
dends.
To finance these cash purchases the directors bor­
rowed from the local banks.
Usually a line of credit was
established on the basis of the general assets of the com­
pany and the personal property of the directors.
No collat­
eral was given with the notes, but each note was signed by
p
all the directors.
The lack of funds for working capital
and for advances to the growers was a significant factor in
causing these companies to change the nature of their opera­
tions and in leading to their failures.
Selling
The selling of the tobacco was the companies' major
failing.
The job was complicated by the control which the
individual grower retained over his crop.
Before a sale
was made the company referred the offer received to the
■^Personal interview with Sajnuel Makepeace, Troy, 0.,
member of The Farmers Leaf Tobacco Co., Aug. 28, 1939.
2
Personal interviews with John W. Bartel, op. cit.,
and C. C. Cromwell, op. cit.
86
owner for approval.
Sometimes the owner placed prices on
his tobacco with instructions to sell at those figures.
Owners could sell their tobacco away from the company even
after it had been placed in the warehouse and rehandled.
In
such a case the owner secured the release of his tobacco by
paying the accumulated charges.
Buyers were said to have taken advantage of this
situation to embarrass the companies.
They offered growers
who had tobacco in the houses more than they did others or
the houses.
Sometimes they insisted that the company give
them the name of the grower before they bought a crop on the
contention that they had seen the crops growing and needed
to know whether they were getting the ones which they had
selected
The desirability of disposing of crops as units to
effect easy settlements and to avoid an accumulation of the
undesirable sizes and grades made it difficult to meet or­
ders from many manufacturers who wanted only certain sizes
and grades--usually the better ones.
Growers whose crops
were not among the first to sell felt that favoritism was
being shown.
Few of the companies developed a definite sales
policy and sales department or agency.
use of a number of channels.
Most of them made
Primarily reliance was placed
on calls at the warehouse by manufacturers and buyers.
One
1Personal interviews with a number of stockholders
and managers during August 1939*
87
of the duties of the manager or secreatry was to write to
all likely buyers Inviting them to call or offering to send
samples.
The Gratis Township company used this method al­
most exclusively.*1'
Most of the companies had agents selling on commis­
sion.
The Covington company engaged an experienced tobacco
buyer, A. B. Hostetter.2
In some cases a stockholder who
became convinced that he could sell was ,fplaced on the road."
The results in these cases were very poor.
Commissions ran
as high as Q% of the sales price.
All of the companies made some use of the sales
organizations provided by the Cigar Leaf Tobacco Growers*
Union and its successors.
Frederick Zuckerman as leading
sponsor of the warehouse companies tried to secure the ex­
clusive sales agency for their tobacco.
Three of the com­
panies, the Lytle, Troy, and West Alexandria houses, entered
such agreements.
The results in the Lytle and Troy com­
panies have already been d e s c r i b e d T h e West Alexandria
company managed to break away after the first year and
attempted to rebuild its organization.
more years*
It continued two
When the directors saw that support was not
forthcoming from the growers, they sold out and dissolved the
"^Personal Interview with F. H. Williams, Gratis,
Ohio, manager of The Gratis Township Leaf Tobacco Co.,
Aug. 21, 1939.
2
Later connected with The Ohio Cigar Leaf Tobacco
Growers Marketing Association, Greenville, Ohio.
■x
^See pages 82-85*
88
company*
The capital stock was paid off in full.
1
Zuckerman acted as commission agent for the other
companies along with the other agencies which the companies
chose to use.
His method of making sales was to secure sam­
ples from the crops with the companies and then to travel
among the manufacturers displaying them.
icism was directed at his tactics.
Very bitter crit­
Companies complained that
he sold only the choice tobacco out of each crop.
They
resented his attempted interference in their plans and pol­
icies as evidenced by his urging the installation of trash
machines.
The companies felt that the tobacco, especially
that of the 1912 crop, which he sold brought a lower price
than they would have been able to secure.
There were accu­
sations that "he sold out to his old friends the trust and
the manufacturers."
Zuckerman continued for a number of
years in his attempts to sell for the companies but after
1913 few would even give him samples.2
G-rowers Tobacco Sales Company.— Dissatisfaction with
Zuckerman* s policy as sales manager of the Union led to the
formation of another sales agency, The G-rowers Tobacco Sales
Company of Dayton, incorporated Oct. 24, 1912.
The leaders
of the company were three tobacco buyers, Philip Spence of
Lebanon and Elmer Pierce and Douglass Morris of Dayton.
In
order to secure connections with the companies, they took in
^Personal interview with John Block, a tobacco buyer
of West Alexandria, Ohio, Aug. 21, 1939*
2
Personal interviews with a number of the managers
of the companies during August 1939.
89
as co-incorporators four leaders from these organizations.
Shares of $10 par from the $10,000 capitalization were sold
to stockholders of the warehouse companies#
Furthermore,
provision was made for each company to appoint a represent­
ative to the Advisory Board of The G-rowers Tobacco Sales
Company#
This company was not much more successful than
Zuckerman in securing the cooperation of the independent
houses.
The members had come to suspect that manufacturers
and dealers through these agencies were attempting to get
control of the companies in order to destroy them. .
Members had urged that the headquarters of The
G-rowers Tobacco Sales Company be in the Franklin company
house.
Instead, expensive offices were outfitted In Dayton
at the Beckel House hotel.
When the flood destroyed the
offices and the Union went out of existence, the sales com­
pany lost the little hold it had gained#
It continued as an
Independent buyer with some dealings with the warehouse com­
panies until it dissolved in 1918.
Miami Valley Leaf Tobacco G-rowers1 Association.- -In
the spring of 1919 The Miami Valley Leaf Tobacco G-rowers'
Association was formed to serve as a clearing house for market
information and to assist in the selling process.^
Although
not connected with the companies, it proposed to serve as a
sales agency for them as well as for its own members#
lasted less than a year.
It
W. S. O'Neill, as sales manager,
contracted for about 5,000 cases of tobacco from the members.
^H. E. Erdman, Organizations Among Ohio Farmers,
Ohio Agricultural Experiment Station Bulletin #342,
pp. 126-127*
90
When the price on the market did not rise to the figure in
the contracts and financial backing could not foe secured, the
contracts were breached and the Association died.1
The retention by the growers of considerable control
over their crops, the inexperienced sales management, and the
difficulties with the various sales agencies were causes of
the unsuccessful selling by the companies.
The middlemen were
not eliminated to any degree and high prices were not secured
for the tobacco.
The prices growers received through the com­
panies were seldom higher, and often lower, than those out­
siders received.
In fact, in view of the losses in several
companies, the claim that buyers tended to favor outsiders,
and the long wait to receive payments for the crops, the con­
tention of many that the outsiders received more benefit than
the members seems plausible.
Claims were made that some of
the trouble was caused by buyers and manufacturers boycotting
the companies.
Some managers reported receiving postcards
from manufacturers with whom they had never dealt instructing
them to ship no more tobacco because the last received from
p
them had not been satisfactory.
The attempt to dispose of each year's crop by the
time the next one was harvested was successful at first in
most companies.
stock.
However, many soon faced an accumulation of
At first the average length of time a grower had to
■^Personal interview with M. E. Stern, tobacco broker,
Dayton, Ohio, Aug# 25, 1939.
p
Personal Interviews with C. C. Cromwell, op. cit.;
John W. Bartel, op. cit.; and Robert Hindsley, Union City,
Ind., the son of James W. Hindsley, secretary-treasurer of
The Union City Farmers Tobacco Co., Aug# 23, 1939.
91
wait to receive his money after placing a crop on consign­
ment with the companies was one year.
In a few years this
period had been doubled.
Success, Failure, and Dissolution
Without exception the first year of operation marked
the peak of receipts of tobacco.
The volume handled by all
companies in 1912 was perhaps five million pounds or approx%
imately 10^ of the total crop.
In addition, part of that
received was of previous years* crops which farmers had been
holding.1
In the area covered by the companies approxi­
mately two-thirds of the 1912 crop was sold through the com­
panies .
By the third year the total handled had dropped
about fifty per cent.
In 1917 and 1918 the companies
remaining in operation handled a total volume of about half
a million pounds.
Even the purchasing of tobacco failed to counter­
balance the loss of receipts on consignment.
The decline In
receipts from members was due to a number of factors.
First
of all, the lack of a binding membership contract caused
members to regard their connections with the associations
^1912 was the first year all the associations op­
erated. Some of them had begun regular receiving with the
1911 crop. Others took In any 1911 tobacco which was still
held by the farmers when they began. In some instances 1908
tobacco which had not been sold was brought in. See Table
5, page 74, for estimated receipts in the first year of
operation.
92
lightly.
The inability of the companies to secure for mem­
bers higher prices than outsiders received and the long time
required to settle for the crops discouraged many growers.
The rise in market price in 1913 and especially in 1916 and
1917 led many to sell outside.
Stockholders believed that
the companies had been responsible for the rise in 1913,
but felt that they had served their purpose and so stopped
placing tobacco through this channel.
Some asserted that
this defection was responsible for the price declines In
1914 and 1915.1
The failure of some of the companies and Internal
dissension in others caused many stockholders to withdraw.
In many cases these stockholders had not paid their stock
subscriptions.
Some who had paid either disposed of their
stock to others or held it without paying further attention
to the affairs of the company.
Through all this the owner­
ship and especially the control became centered in a few
stockholders who were usually the directors.
Stockholders of several of the companies which had
purchased tobacco at the lower prices in 1912 to 1915 and
held it until 1918 made enormous profits.
For example,
this was true in the Covington company which sold its stocks
p
and warehouse at this time. . The Greenville company made
approximately $13,000 for Its stockholders up to 1918 but
thereafter ran into difficulties in the following period of
^For price trend see Figure 10, page 45.
2
Personal interview with John W. Bartel, op. pit.
93
price declines*
The troubles and early dissolution of the companies
at Lytle, Troy, and West Alexandria have already been de­
scribed .2
The Warren County Leaf Tobacco Company at Franklin
expanded its activities through an amendment to its charter
July 20, 1915*
The enlarged purpose was stated as follows:
To encourage better and more economical methods of
production, to secure better results in grading, pack­
ing, marketing and advertising our products; to buy and
sell supplies in a cooperative way; to rent, buy, build,
own, sell and control such buildings and other real
estate and personal property as may be needed in the
business; to cultivate the cooperative spirit in the
community and to do all things necessary and incident
to the successful carrying out of the above purpose.-^
The additional activity undertaken under this broad
purpose was the handling of feeds which proved to be very
profitable.
The last tobacco received was the 1918 crop.
During the last two years the company turned its tobacco
immediately to the American Tobacco Company.
Although prompt
payment was received by this method, no price advantage was
gained so members withdrew.
The quantity handled became so
small that the company decided to cease operations.
The ware­
house was sold and the stockholders received a liquidating
dividend in excess of the par of their stock.^
^Personal interview with B. G-. Edison, G-reenville, 0.,
stockholder in The Darke County Farmers Leaf Tobacco Co. Aug.
19, 1939.
^See pages 82-85 and 87-88.
3
From the Articles of Incorporation and amendment
filed with the Secretary of State of Ohio.
4
Personal interview with J. N. Robsion, president of
the company, Aug. 22, 1939.
94
The Gratis Township Leaf Tobacco Company and the
Union City Fanners Tobacco Company received the 1917 crop as
their last tobacco.
The quantities were small.
The Gratis
company dissolved without loss of investment although the
price members received for their tobacco was below market
p r i c e T h e Union City company lost its capital investment
p
through unwise purchasing of tobacco.
Lack of support from growers handicapped the opera­
tions of the Farmers Tobacco Company at Farmersville. After
receiving the 1912 crop and a small amount of the old 1911
crop and of the 1913 crop, it voted to. cease operations.
The
price realized by the members was slightly below the market
level.
The company retained its warehouse which it has rented
to date (1940) to a tobacco dealer.
From the rents it has
been able to pay the mortgage created in building the warehouse.
The greatest volume of tobacco was handled by the
company at Verona.
million pounds.
Its peak in the first year was nearly a
After that it suffered a decline.
Because
of the high market price for 1917 tobacco it took in none
that year.
It received approximately 1,000 cases of the
1919 crop, the last one handled.
A declining market price
and a boycott by the dealers caused dissatisfaction.
The
■^Personal interview with F. H. Williams, op. cit.
2
Personal interview with Robert Hindsley, op. cit.
■^Personal interview with John 0. Marion, Farmersville,
0., manager of the company, Aug. 21, 1939.
95
internal difficulties ended in the appointment of a receiver
who liquidated the company in about a year.^
The Darke County Farmers Leaf Tobacco Company at
Greenville operated the longest of any of the companies.
After the first few years most of the tobacco it received
was purchased.
It attempted to continue operations in the
period following the World War but found it difficult be­
cause of a declining market.
the 1925 crop.
The last tobacco handled was
By this time the company had become a profit
venture under the control of six directors.
tobacco was disposed of in June, 1928.
years of lawsuits.
The remaining
Then followed four
The stockholders sued the directors
and John Robeson, director and manager, for $20,363.23 and
costs and interest.
The charge was improper handling of the
affairs of the company.
It was claimed that consignments
and purchases had been mingled, that crops had been substi­
tuted and numbers changed in sales without proper record,
that shrinkage had been improperly handled, and that funds
had been diverted to the manager and directors.
Robeson
countered with a suit for $4,200 back salary, a denial of
the charges, and a plea of ignorance of enough accounting
to keep better records.
The Special Master Commissioner
and the court finally ruled that Robeson was entitled to
$1 ,239.86 out of which, as a member of the company, he had
to bear a part of the court costs and his own award.
The
records showed debts of $11,100 after all tobacco had been
^Personal interview with C. C. Cromwell, op. cit.
96
sold*'*'
The banks subsequently sued for and collected this
amount from the stockholders.
Internal troubles caused the dissolution of the
Miami Farmers Leaf Tobacco Company of Miamisburg.
crop handled was 1915 tobacco.
The last
Receipts had been about
300,000 pounds per year until the 1915 crop, but the company
had not been successful in securing good prices for the mem­
bers*
A group of members wanted to start a cigar factory in
connection with the marketing activity*
In 1917 this group
of ten organized The Miami Growers Leaf Tobacco Company with
a $20,000 capitalization and bought out the old company.
few men from the Verona company later became stockholders.
A
p
The new company purchased all of its tobacco except
that raised by the ten original stockholders.
tobacco for three years.
It took in
The greatest quantity came in the
first year, about 400 cases.
The failure of the company was
due to the purchase of wrappers in 1917 and 1918 for 26^ to
35^ per pound.
In the declining market losses were heavy*
Although stockholders were able to sell their warehouse sat­
isfactorily, they suffered in the low price for their own
tobacco and in the loss of most of their investment..
The
company made no progress with the cigar manufacturing which
it had set out to do.-^
■**Darke County Farmers Leaf Tobacco Co. vs. John
Robeson et al*, Case No. 25380, Court of Common Pleas of
Darke County, Ohio.
2
Personal interview with Harley Hippie, Miamisburg, 0.
manager of the Miami Farmers Leaf Tobacco Co., Aug. 22, 1939.
■5
Personal interview with Walter B. Byers, Miamisburg,
97
The early ventures after 1900, the National Cigar
Leaf Growers* Union, and the twelve— including the one
reorganized— warehouse companies, with the various sales
agencies were created to help the grower secure a better price
for his tobacco.
This was to be done through cooperative
action and direct dealing with the manufacturers.
was never attained to any appreciable extent.
This goal
Although the
warehouse companies appear to have started with the support
of a widespread interest among the farmers, they soon lost
their cooperative nature to become dealer agencies owned by a
few growers.
Even though they were favored through part of
the period by rising prices, they were unable to secure sat­
isfactory prices for their members' crops.
Their failures can
be attributed to a combination of circumstances— small amount
of tobacco handled, disloyalty of members, inexpert manage­
ment, poor sales practices, lack of finances, fluctuating
prices, and opposition of the buyers and manufacturers.
0., director of The Miami Growers Leaf Tobacco Co., and a
stockholder in the Miami Farmers Leaf Tobacco Co., Aug. 22,
1939.
CHAPTER IV
THE MIAMI VALLEY TOBACCO GROWERS* CO-OPERATIVE
ASSOCIATION - FORMATION AND STRUCTURE
In a few years following the close of the World War
a number of events occurred to revive interest in the co­
operative marketing of tobacco.
From an all-time high of 24
cents per pound in 1917 the average price of Miami Valley
tobacco fell to 20 cents in 1919 and then to 11 cents in
1921 .■*■ Consumption of the tobacco, as measured by the dis­
appearance from the market, also decreased.
Although the
growers reduced their production, they did not do so rapidly
enough to prevent the accumulation of a surplus stock on the
o
market.
The tobacco growers felt the effects of these changes
in a decrease in the total crop value from nearly fifteen
million dollars in 1917 to approximately three million dol­
lars in 1921.^
This dollar loss in income was intensified
by a change in the purchasing power of the farmer's dollar
from an index of 117 in 1917 to 82 in 1924.
See Figure 10, p. 45.
Data in Appendix A, Table II.
2See Figures 8 and 9, p* 4-2, for comparison of pro­
duction, consumption, and stocks during the period.
■7
A
-'See Figure 11, p. 45.
98
See Appendix A, Table II.
99
The prices for the 1922 crop were slightly higher
than those for the 1921 crop, but the buyers were not very
active in contracting for the tobacco*
In view of the loss
in popularity of the cigar*- and the failure of production to
contract as rapidly as consumption declined* the prospects
were not bright*
in this situation the tobacco growers be­
came concerned about finding some relief from their diffi­
culties*
Stimulus for cooperative action among the farmers
was provided in 1919 when the Farmers* Equity-Union of
Greenville, Illinois,, the successor to the American Society
of Equity, campaigned for members in the district.
Many of
the fanners joined, and a number of cooperatives were started.
Most of these were elevator companies, for example, The
Arcanum Equity Exchange Gompany, Arcanum, Ohio, formed in
1920.
The success of the early operations of these co­
operatives encouraged the farmers to think of extending co­
operative action to the marketing of tobacco.2
In 1921 the Burley Tobacco Growers Cooperative
Association of Kentucky was organized.
vYhen reports indi­
cated that it was bringing higher prices and more orderly
marketing to that district, the tobacco growers of the Miami
Valley became interested in making a similar experiment.^
1See pages 33-37.
2
Personal interviews with farmers in the district
during August 1938 and August 1939.
■^Ohio Farm Bureau Federation News. June 6, 1923, p. i.
100
The unfortunate experience some years earlier with the co­
operative warehouse companies was discounted on the grounds
that they had heen too small, had suffered from poor manage­
ment, and had not heen properly organ! zed.
Further impetus for the movement came from the legis­
lative consideration and the passage of laws to permit the
formation of cooperative marketing associations*
Following
the federal enactment of the Capper-Volstead Act in 1922,
Ohio placed a similar law on its statute hooks in 1923 with
the passage of the Famsworth-Greer Cooperative Bill*2
The most important force in the tohacco cooperative
movement was the Ohio Farm Bureau Federation which had heen
developing rapidly during this period*
In the course of its
program of expansion, meetings were held in every community
in Ohio to urge farmers to become members and to consider
what the Federation might do to help solve the agricultural
problems*
One question frequently placed before the Farm
Bureau leaders in these meetings in southwestern Ohio was,
"What can we do about tobacco?11•
The answer of these leaders
was that a tobacco pool should be formed; and the Federation
offered its services to help create such an organization.^
^Personal interview with Walter B* Byers, Miamisburg,
Ohio, a director of The Miami Growers Leaf Tobacco Co* and
of The Miami Valley Tobacco Growers* Cooperative Association,
Aug. 22, 1939.
20hio Farm Bureau Federation News*
April 18, 1923,
p• 4*
3
Personal interview with Fred L* Shoenberger,
Columbus, Ohio, Aug. 14, 1939. During this period Mr.
Shoenberger was organization director of the Federation.
101
Another factor responsible for interest in a possible
cooperative association was the wide-spread and continual
dissatisfaction with the country—buyer system of tobacco mar­
keting.
The growers, whether or not their criticisms were
valid, believed that this system meant low prices, uncertainty,
and discriminatory treatment in the selling of their crops.1
Organizing; the Association
The field men of the Federation sounded out the
growers* sentiment and, when it appeared favorable, arranged
a meeting of a few leading growers at Dayton, Ohio, January
17, 1923.
At that time a temporary organization was effected
to plan the association and to prepare the contracts and by­
laws.
Murray D. Lincoln, executive secretary of the Federa­
tion, and Fred L. Shoenberger, organization director, were
in charge of the meeting.2
The temporary organization moved rather slowly in
investigating possibilities and in devising plans.
At a
second meeting of sixty growers held in Dayton, May 18, 1923,
the reports of the temporary organization were discussed,
and the growers voted to undertake the formation of a co­
operative association according to the plans submitted.
An
organizing committee of fifteen^— two at large from the
1See pages 56-57*
2
Ohio Farm Bureau Federation News. Jan. 24, 1923, p. 2.
3
^The president of this committee was Frank Blackford,
Eldorado, Ohio, who had been president of the National Cigar
102
district, three each from Montgomery and Darke counties, two
each from Miami and Preble counties, and one each from Warren,
Butler,, and Greene counties--was authorized to direct the
membership campaign#
The association was to be incorporated
under Ohio* s new cooperative law and a fixed-term membership
contract
was to be employed#
A close affiliation with the
Farm Bureau was to be maintained both during formation and
afterward#
In fact, the Federation agreed to advance the
funds for and to direct the campaign through its organiza­
tion department.^
The association was to include growers of
all three types of cigar leaf in the whole district.
As plans for the membership drive developed, the
Federation employed a campaign director.
He was David Bill,
Chillicothe, Ohio, who had been a local organization manager
for the Farm Bureau under Shoenberger#
Bill was a Burley
tobacco grower and had had some experience in tobacco marketing#
4
Active organizing work began late In July 1923#
The
campaign was conducted through township meetings and personal
solicitation of the growers.
Eight leaders, Including
President Marvin, of the Burley Tobacco Growers Cooperative
Leaf Tobacco Growers* Union, 1910-1913•
page 71).
(See footnote 1,
^Qhlo Farm Bureau Federation News, June 6, 1923, p. l.
’ 2
A contract binding the member to deliver his crops
to the Association for a set number of years.
3
Ohio Farm Bureau Federation News. June 6, 1923, p. 1.
Ibid.. July 18, 1923, p. 2.
103
Association of Kentucky were brought in to address some of
the local gatherings.*^
The local meeting had been used also
by other tobacco associations as the chief instrument for
interesting growers in the cooperative plan.2
Local growers were employed at $5-#6 per day plus
expenses to assist in the meetings and to make personal
visits to the farmers to urge them to Join.
Later some com­
plaints were made that the pay of these local workers was
too high and that in some instances It amounted to a bribe
to win over influential growers who hesitated to j o i n . ^
The
county agricultural agents in the district took part in the
drive by assisting the local workers in calling on the grow­
ers.
According to reports of the campaign the organizers
made serious errors which were to cause difficulty later.
There were suggestions of 25 and 30 cents per pound for the
tobacco if the growers secured a monopoly of the supply
through an association.
In support of such statements the
successes in the Kentucky, Connecticut, and Wisconsin pools
^Ohio Farm Bureau Federation News. Aug. 1, 1923, p. 2,
and Aug. 29, 1923, p. 3. Aaron Sapiro, who had assisted in
organizing many cooperatives and who had worked with the
Burley association, offered his services to the Federation
organizers. When his offer was rejected, he came into the
district and made several unsponsored speeches. (Personal
interview with Fred L. Shoenberger, op. cit.)
2
J. J. Scanlan and J. M. Tinley, Business Analysis
of the Tobacco Growers Cooperative Association, p. 13; G-. 0.
Gatlin, Cooperative Marketing of Tobacco in Maryland, p. 3,
and Cooperative Marketing of Tobacco in Wisconsin, p. 3.
3
Personal interviews with various growers during
August 1938 and August 1939.
104
were cited.
Organizers pointed out that a seven cent rise
in price, such as the Wisconsin pool was said to have brought
about, would mean "an additional $1,300,000 to the Miami
Valley f a r m e r s R e p r e s e n t a t i v e of the appeals made to the
growers is the following statement from the official Farm
Bureau publication during the campaign#
Not the slightest objection has been raised by the
thinking grower about signing the contract, since he
realizes that a real organization is the only means to
get what tobacco is worth#
When two-thirds of the Miami Valley crop is marketed
cooperatively through this association 74$ of the leaf
tobacco in the United States will be sold by pools*
This means that our growers will control the source of
supply for the manufacturers and they will have to come
to them and offer what it really is worth.
Every grower who hasn* t signed the marketing agree­
ment yet, should do so. In addition to all the personal
advantages it will bring, the grower will keep faith
with his neighbors* He can hold up his head and say, *I
was one of the original signers and one who helped bring
better tobacco marketing conditions to the whole Miami
Valley .'2
A vicious attack was launched in the meetings and in
personal solicitation against the manufacturers and the deal­
ers.
They were blamed for all the difficulties which the
tobacco growers had experienced.
The reaction from these
accusations came when the dealers and manufacturers attempted
to defend themselves and later when they were reluctant to
buy tobacco from the Association.
■3
^Qhio Farm Bureau Federation News. Sept. 29, 1923,
p. 4.
2ibia.
^Based on the writer's observations and on personal
interviews with Association leaders during August 1938 and
August 1939* For ease of statement this organization will be
called "the Association" in this chapter and Chapter V.
105
A further error was the excessive pressure placed
on the growers to get them to sign the membership contract.
If reasoning did not prevail, threats and ridicule were
used.
Members obtained in this way could hardly be expected
to be loyal and enthusiastic.
They were not imbued with the
cooperative spirit and they did not seem to have a clear
understanding either of what they could reasonably expect
from cooperative action or what they would have to do to
make it successful.
It is difficult to assign the blame for these errors.
It would appear that Bill as campaign manager was partly at
fault.
The greater share of the blame seems to rest on the
speakers and local workers who, in their zeal to push the
organization, laid aside restraint and paid little attention
to instructions from headquarters.2
The organizing committee set two-thirds of the
tobacco acreage in the Miami Valley In 1923 as the necessary
goal before the organization would be completed.^
This pro­
vision was merely a decision of the committee and was not
incorporated in the charter, by-laws, or membership agree­
ment.
Nevertheless, the directors regarded it seriously,
and in 1925, when growers began to withdraw, the board passed
a motion to the effect that two-thirds of the acreage was not
^Personal interview with R. H. Brundrett, Dayton, 0.,
secretary-treasurer of the Association, Aug. 24, 1939.
2
Personal interviews with officers of the Association
during August 1938 and August 1939.
^Ohio Farm Bureau Federation N e w s , Feb. 21, 1924, p. 28.
106
necessary for the continuation of the Association .1
On October 20, 1923 the organizing committee reported
that the necessary acreage quota had been secured.
The
strongest support for the Association came from the southern
part of the district which raised mostly Type 42 tobacco.
In
the northern section the growers were more reluctant to join,
so that by October 1923 less than fifty per cent of the acre­
age in Darke county had been secured, while the percentage
of acreage signed in the other counties ranged from sixtysix to ninety.
p
The reasons for this reluctance, which became active
opposition in 1925 when the Association ran into difficulties,
are not clear.
Part of it seems to have been due to the fact
that the Dutch and Spanish growers, who were mostly in the
northern part of the district, had not been affected as
adversely by the price decline as had the Seedleaf growers.
There are some assertions that the tobacco buyers and manu­
facturers were more active In fostering opposition to the
movement in the northern part of the d i s t r i c t O n e expres­
sion of this belief was reported as follows:
In Darke county particularly was the opposition of
tobacco buyers and others of the strongest. Mr. Bill
states that one large tobacco company placed $200,000
on deposit in one bank and asked the bank to use its
1Personal interviews with Fred Sheaffer, Germantown,
Ohio, director of the Association, and president 1924-1927,
Aug. 25, 1938 and Aug. 22, 1939.
20hio Farm Bureau Federation News, Oct. 31, 1923, p. 4,
^Personal Interviews with growers and officers of the
Association during August 1938 and August 1939.
107
Influence to prevent the signing of membership contracts
on the part of the growers .1
After the quota of two-thirds of the tobacco acreage
in 1923 had been reached, the campaign was continued until
the Association claimed it had 6,000 members representing
seventy-five per cent of the tobacco grown in the Miami
Valley.
This was achieved after a part of the resistance in
Darke county had been overcome.2
Although the total number
of members who delivered crops the first year--4,890--was
less than the number of members claimed, the total pounds
received— nearly 20,000,000--were approximately 16% of the
total produced that year.^
The Miami Valley Tobacco Growers 1 Co-operative
Association was incorporated August 18, 1923, as soon as it
appeared that the membership campaign was likely to succeed.
It became a limited liability non-stock association under the
provisions of the new cooperative association law of Ohio.^
The incorporators were the fifteen members of the organizing
committee, who were listed as the only members of the Associ­
ation at that date.
On September 21, 1923 the same individ­
uals adopted the by-laws under which the Association was to
operate •-*
•^Ohio Farm Bureau Federation News, Oct. 31, 1923, p. 4.
2
Miami Valley Tobacco News. March 1924, p. 3.
3
See Appendix A, Table II, for total 1923 production.
A
See page 100.
Ohio Farm Bureau Federation News. June 1924, p. 8.
108
On November 8 , 1923 the Association was declared
organized and the membership contracts which had been signed
were made effective from that date.
The first meeting of the
members was held at Dayton, Ohio, December 8 , 1923, at which
time the directors were elected.
Only five of the members of
the organizing committee were placed on the board.
The
following week on the 14th and 13th the newly elected direc­
tors met, organized, and selected officers for the Associa­
tion.^
The Articles of Incorporation, in outlining the pur­
pose and scope of operations of the Association, provided
that
The operations and activities of this Association
shall be limited to activities arising out of the
processing, drying, grading, shipping,, storing, warehous­
ing, handling, manufacturing and marketing of the tobacco
or tobacco products of the Association and of its members
and others and the financing of any of the said opera­
tions .2
In order that the Association might be able properly
to conduct these activities, it was empowered to ,fborrow
money without limitation as to amount of corporate indebt­
edness or liability,1’ to own all necessary real and personal
property, and to own or guarantee the interest and dividends
on the stock and bonds of firms ”engaged in any directly
related activity or in the warehousing or handling or mar­
keting of any of the products handled by the Association.”*-5
^Ohio Farm Bureau Federation News, June 1924, p. 8 *
2
From the Articles of Incorporation of the Associa­
tion filed with the Secretary of State of Ohio.
Ibid.
109
Dayton, the largest city in the district was selected
for headquarters*
It was not as near the center of the dis­
trict as was desired, but it was chosen because many tobacco
dealers and manufacturers had offices there and because it
was thought to offer superior financial connections*1
The cost of organizing was $11,54-0 .20, approximately
$2*54- per member signed at the date of organization.2
This
money was advanced by the Ohio Farm Bureau Federation, which
was later reimbursed by the Association.
Membership Contract and Relations
The marketing agreement^ was prepared by the legal
department of the Ohio Farm Bureau Federation and was based
on the membership contract used by the Burley Tobacco Growers
h
Cooperative Association.
According to this contract the
member was required to deliver to the Association all the
tobacco grown by or for him or acquired by him during the
years 1923 to 1927 inclusive.
tracts were excluded.
Crops covered by existing con­
This type of binding, fixed-term con-
1Personal interviews with Fred Sheaffer, op. cit.
2
Figures on the operations of the Association used
throughout this study were secured from the reports sent by
the Association to the members either as special notices or
as the monthly publication of the Association; from the
audits by the Ohio Farm Bureau Federation Auditing Service
as of October 31, 1924 and February 28, 1925; and from the
audits by Wall, Hardman and Lane, Dayton, 0., as of July 31,
1925, October 31, 1925, October 31, 1926, and April 6 , 1927.
■^The Marketing Agreement is given in Appendix B.
^Personal interview with Fred Shoenberger, op. cit.
110
tract was used in practically all of the associations formed
in the period after the World War, and was a result of the
difficulties which had "been experienced previously with nonbinding agreements.1
Liquidated damages of five cents per pound, averaged
for all types and gradesr of tobacco, were to be paid in case
of breach of the contract*
In addition, the costs of any
suit to enforce the contract were to be assessed against the
member sued.
That the organizers did not intend that the right of
withdrawal from the Association be denied entirely is shown
by the following section in the by-laws.
No member shall be permitted to withdraw from the
Association during any period in which he is bound to
deliver any products to this Association under a term
contract unless consent for such withdrawal shall have
been given by the board of directors upon application to
it by such member or members desiring to withdraw.
How much discretion was permitted the board in pass­
ing on requests for withdrawal became a point of controversy
when many members attempted to withdraw in 1925
The board of directors was given the power to expel
any member who ceased to raise tobacco or who refused to
deliver his crops or to abide by the rules of the Association.
A member who violated the regulations did not cease to be a
member until the board by a majority vote passed a resolution
1H. B. Price, "What Future for Tobacco Cooperatives,"
American Cooperation 1934, p. 262.
2
See Association's By-Laws, Article XIII, Section (d).
See pages 156-163.
Ill
to that effect*
In addition to any liquidated damages a
fifty dollar penalty could be imposed for violation of the
by-laws *■*•
Non-transferrable membership certificates were issued
to the members*
to one vote*
In the elections each member was entitled
Mail voting was permitted, but the use of
proxies was denied*
If the board of directors so desired,
elections of directors and votes on specific propositions
2
could be conducted entirely by mail.
Provisions were included in both the marketing agree­
ment and the by-laws for the establishment of reserves from
the sales of members* tobacco; and no limits were placed on
the use or amount of such reserves.
In the property acquired
by the Association each member was to have an equal share,
but the interest of each member in the deductions for
reserves was based on the quantity of tobacco delivered.^
A membership fee of five dollars was charged the
growers upon joining the Association.
Payment of this could
be postponed to allow deduction from the returns due the
grower on his crop.
In addition, an annual charge of ten
dollars was to be paid by each grower as dues in the Ohio
Farm Bureau Federation.
This sum was to be a payment for the
services of the Federation to the Association and to the
^See Associations By-Laws, Article XIII, Sections
(f) and (o), Appendix B.
2Ibid., Article X I I , Section 5, and Article XIV.
^Ibid., Article XIII, Sections (h) and (m); Associa­
t i o n s Marketing Agreement, Paragraph 6 , Appendix B.
112
growers generally.
Growers who paid dues directly to the
Farm Bureau were not subject to this charge
This arrange­
ment was similar to that between the American Society of
Equity and the local cooperative warehouse companies in
1912.
2
It was partly the result of the desire of the Federa­
tion to expand its membership,^
Much criticism was directed
at the plan since members contended that the Farm Bureau did
not provide service equivalent to the dues, and that the
Association should not be used to enlarge the Farm Bureau
membership.
As a matter of fact, these dues which the Asso­
ciation collected and paid over to the Federation did not
cover all the service charges, for additional amounts were
A
paid to the Federation.
The marketing agreement stated: "the Association
agrees to buy and the grower agrees to sell and deliver to
the Association all of the tobacco produced by or for him • .
5
...”
In spite of this the Association operated as if
title to the tobacco remained with the grower.
The board
of directors even declared that the agreement was one of
agency and therefore the growers retained title and should
1
See Association's By-Laws, Article XIII, Section
(1), Appendix B*
2
See page T O .
Personal interview with Fred L. Shoenberger, op. cit.
4
On the basis of items reported in the audits of the
Association.
5
See Association's Marketing Agreement, Paragraph 2,
Appendix B.
113
pay the taxes on the tobacco placed with the Association*^
Maintaining Membership Relations
Because of the opposition which was met in forming
the Association,, the officers realized that vigorous efforts
would have to be made to maintain contacts between the mem­
bers and the Association*
given this job*
The field service department was
To accomplish the task the officers used
principally numerous local meetings such as had been held in
the period of organization.
These local meetings of members and outsiders served
several purposes: to campaign for new members, to explain
the Association*s operations, to instruct the growers in
tobacco handling, and to combat the opposition and internal
dissension which arose as early as 1924.- At some meetings
lantern slides were used to illustrate talks on Association
activities.
In addition to meetings sponsored by the Asso­
ciation, Farmers- Institutes were used as convenient gather­
ings at which to campaign for more members.
Officers claimed
that several hundred members were added by these means during
1924 .3
One of the most important functions of these meet­
ings was to instruct growers in better methods of stripping
^Ohio Farm Bureau Federation News. May 1925, p. 17 .
2Ibid.. June 1924, p. 8 .
3Ibld., November 1924, p. 20.
114
and packing their crops#
The unsatisfactory way in which
the members had handled their 1923 crops led to an attempt
to improve the handling of the 1924 crop#
During December
1924 stripping demonstrations were held in every township in
the district#
Placards of printed instructions for packing
were distributed to the g r o w e r s T h e officers believed
that a very decided improvement was noticeable in the condi­
tion of the 1924 deliveries#^
In June 1924 the board of directors proposed to
create in each township a tobacco council, composed of three
members from each school district, to serve as a link between
the administration and the members#
The purpose seems to
have been to find some agency to combat the development of
opposition and to still the criticism that members had no
way of discovering what was happening in the Association#-^
The plan for the council was never carried out, but Tobacco
Township Chairmen were appointed by the board to serve a
similar purpose#
As a part of the membership relations program the
Association published a news bulletin, the Miami Valley
Tobacco News, which was distributed to all members#
Three
issues of seven numbers--the second issue combined Nos* 2-6—
1
Ohio Farm Bureau Federation News# Dec# 1924, p# 23*
2
Personal interviews with M. E* Stern, tobacco broker
of Dayton, Ohio, and sales manager of The Miami Valley
Tobacco G-rowers Cooperative Association 1924-1926, August 25
and August 28, 1939.
Ohio Farm Bureau Federation News# June 1924, p. 8#
115
were published from October 1923 to April 1924 as separate
bulletins#
Beginning in May 1924 the bulletin was a part of
the Ohio Farm Bureau Federation News#
Most of the items in
the bulletins were designed to reassure the members as to the
progress being made#
Occasionally condensed statements from
the audits were included, but in most instances operations
were described in very general statements*
In spite of these efforts of the Association to
explain.its operations, members complained that they were
not aware of what the Association was doing.
A part of this
can be attributed to the lack of definiteness In the state­
ments of the officers and the relatively few accounting
statements of condition and operations issued*
Early in
1925 an auditor recommended that a complete monthly report
be made to the members through the bulletin,'*' but this was
not done#
Another part of the difficulty resulted from the
fact that the growers were unable to understand the financial
statements and could not discover what the reported receipts
and expenses meant in terms of their own crops#
Some of the blame for the lack of understanding rests
on the members because of their poor attendance at the local
and annual meetings.
Less than 300 of the nearly 5,000 mem­
bers attended the annual meeting in 1924^ and only one hun­
dred of the 2,500 “loyal” members were present in November
^Audit by Ohio Farm Bureau Federation Auditing
Service as of February 28, 1925#
2
Ohio Farm Bureau Federation News, Nov. 1924, p# 20#
116
1 9 2 5 The local meetings were a bit better attended but
even in the primaries the total vote was small.^
This situ­
ation seems to have resulted from a general lack of enthusi­
asm for the Association..
In connection with the work of maintaining the
membership relations the Association attempted to improve
the quality of the tobacco grown in the district.
The need
for this was emphasized when the Association discovered the
lack of standardization of the three types in the 1923
tobacco,
rior.
some varieties in each type were noticeably supe­
Therefore, the directors decided to buy seed of the
best varieties of each type and to distribute it free of
charge to the members.^
For the first year seed was purchased from a seed
company in Pennsylvania, but the tobacco did not seem to be
suited to the Miami Valley.
Later the Association selected
growers who had good varieties and hired them to raise seed.^
The dissolution of the Association prevented an adequate
test of this plan for improving the Miami Valley types.
Approximately $2,50° was spent for the seed given to the
^Ohio Farm Bureau Federation News. Nov. 1924, p. 20*
p
Personal Interviews with Fred Sheaffer, op. cit.
■3
Ohio Farm Bureau Federation News, Oct. 1924, p. 10,
and Nov. 1924, p. 20.
4
Ibid., Feb. 1925, p. 10. Those who raised the seed
devoted about one-fourth acre to the purpose. Each was paid
about $50. Very little extra expense or labor was involved
and the grower could still harvest the leaves from the seed
stalks. (Personal interviews with Fred Sheaffer, op. cit.)
117
members.
Management
Since management is so important in the success of
any business, a careful examination must be made of the struc­
ture and functioning of the management of the Association.
The control of the corporate powers and business was vested
in a board of directors of fifteen members#
were elected by the membership*
Thirteen of these
To assure representation
from all parts of the Valley, each county was made a district
and directors were apportioned among the districts on the
basis of the tobacco produced#
Thus, Darke and Montgomery
counties had three directors each, Miami and Preble counties
two each, and Warren, Butler, and Greene counties one each.
The members in Indiana and in Shelby county, Ohio, were
included in the Darke county district#
It was required that
the directors be tobacco growers, members of the Association,
and reside in the district they represented.1
Since the term
of office was one year, no continuity in the membership of
the board was assured.
A complicated procedure for the election of the
p
directors was devised.
Nominations for directors were made
by delegates chosen in local meetings.
For the 1924 election
^See Association's By-Laws, Article II, Sections 2
and 3, Appendix B.
2
The details for the election procedure were obtained
from the Resolutions issued for each election by the board
of directors as authorized in the By-Laws, Article II,
Section 2, and Article XII, Sections 6-8, Appendix B.
118
mass meetings of the members were held in each township to
nominate delegates.
Each township was:alloted one delegate
for each 250,000 pounds of tobacco grown that year.
Any
township which raised less than this amount was allowed one
delegate with a fractional vote.
Twice as many delegates
were nominated as were elected at the primaries held later
in each township.
This method of nominating delegates proved to be
too cumbersome.
So, for the 1925 election, delegates were
nominated and elected by districts.. The nominating committee
in each district was composed of the Tobacco Township Chair­
men.
The number of delegates nominated and elected was on
the same basis as in the 1923 election.
These nominations were made early in October, and
the primaries for the election of the delegates were held in
the latter part of the month.
A few days after their elec­
tion the delegates met by districts to nominate directors
for their districts.
Only as many nominations were made as
there were directors in the district.
These nominations
were then presented at the annual meeting of the members
held on the first business day In November.
No provision
was made for nominations from the floor or for the rejection
of the nominations by the members.
One point of criticism In the revolt among the mem­
bers in 1925 was this method of election.
It was claimed
that the procedure made it possible for the old directors
and officers to continue in power, and that it was expensive,
119
unwieldy, and annoying to the growers.
Court action was
brought by the insurgents in 1925 to force a change in the
method of election.^
In defense of the system it was said
that the local primaries were for the convenience of the
members and that the system resulted in the nomination of
better qualified persons than would have been the case with
nominations in a general meeting.^
Two of the fifteen, directors were selected by the
thirteen chosen by the members.
These two directors-at-
large were to "represent the interests of the general public”
and did not need to be tobacco growers or members of the
Association.
In all respects they were to have full author­
ity as directors.^
In practice they were chosen from the
membership or the officers.
Vacancies on the board were
filled by the directors; and directors so selected continued
in office until the next annual election.
The new director
who filled a vacancy had to be from the district of the
director whose place he took.^
The compensation of the directors was ten dollars
per day and necessary expenses in connection with attendance
at the monthly and special board meetings.5
Members com­
plained that there were too many directors and that their
^Ohio Farm Bureau Federation News. Nov. 1925, P* 21.
2
Personal interviews with Fred Sheaffer, op. cit.
"3
See Association's By-Laws, Article II, Section 2
(d), Appendix B.
^Ibid.» section 5*
^Ibid *» Section 10.
120
pay was too high.
In the change in management in November
1924 the directors voted to reduce their own wages to five
dollars per day.
Thereafter some vacancies on the board
were allowed to remain unfilled for considerable lengths of
time
The by-laws provided for a president,, two vicepresidents, a secretary, a treasurer, a general manager, and
any other administrative officers found necessary by the
directors.
There was an executive committee composed of
seven members of the board and an auditing committee.
These
officers and committee members were to be selected and their
compensation determined by the board.2
The relationships of the officers and departments as
developed in operations are shown on the chart on the follow­
ing page.
The president held the position of general manager
and was the active directing officer of the Association.
The vice-presidencies were in practice merely honorary posi­
tions, since these officers had no powers delegated to them
and no opportunities to serve in the absence of the presi­
dent.
The executive committee had the supervision of sell­
ing policies as its special problem.
Until November 1924
the position of sales manager was held by the general manager.
No separate department was created to handle financial
■^Personal interview with D. P. Albright, Hollansburg,
Ohio, director of the Association 1925-1927, Aug. 23, 1938.
2
See Association’s By-Laws, Articles V-IX and XV,
Appendix B.
121
problems*
This work was done by the treasurer and the presi
dent with some assistance from the executive committee#
The
positions of secretary and treasurer were combined, although
the by-laws permitted a separation and also provided that a
bank might be designated as treasurer#^
ORGANIZATION CHART OF“THE MIAMI VALLEY TOBACCO
GROWERS' CO-OPERATIVE ASSOCIATION
Members
Executive
Committee
V.-Pres
Sales
Manager
Auditing
Committee
Board of Directors
Field
Service
Director
President and
General Manager
Assistant
Manager
Tobacco
Township
Chairmen
Warehousing
Handling
Secretary
Treasurer
Miami
Warehousing
Corporation
Auditor
Accountant
Figure 14
The field service department had charge of campaigns
for members and membership information work.
In the latter
was included the preparation of the Association bulletin.
Very soon after the organization of the Association the chief
■^See Association's By-Laws, Article VII, Appendix B.
122
work of the department became the appeasement of dissatisfied
members*
During the first year the positions of assistant
manager and of field service director were combined*
The warehousing and the tobacco handling were dele­
gated to a wholly owned subsidiary, The Miami Warehousing
Corporation*
The policies and operations of the subsidiary
were closely controlled by the president and board of the
Association, several of whose directors were also directors
in the subsidiary.
In selecting the first officers the board followed
the recommendation of the Farm Bureau organizers that experi­
enced men should be chosen and paid good salaries*
Lincoln
and Shoenberger of the Federation believed that this was
necessary since the failure of so many cooperative ventures
had been traced to poor management
William Stroop, who had been a tobacco dealer in
Dayton and also president of the American Cigar Company, a
subsidiary of the American Tobacco Company, was made president
and general manager at a salary of $25,000.
Arthur A. schwagel,
an officer in a Dayton bank, became secretary-treasurer with
a salary of $8,000.
For the head of the field service depart­
ment and assistant manager, the board selected David Bill,
who had directed the membership campaign.
His salary was
$5 ,000 .
Soon after operations began members started to
•^Personal interview with Fred Shoenberger, op. clt.
Information on changes in personnel and salaries was secured
in personal interviews with Fred Sheaffer, op. cit.
123
complain about the size of the salaries and about the pre­
vious connections of Stroop.
When sales did not progress
as rapidly as members felt they should, the protest was
expressed by a change of several directors in the annual
election in November 1924 and by a complete change of
officers.
Fred Sheaffer, a prominent farmer of Germantown and
a member of the board, was made president and general man­
ager at a salary of $7,000.
Beyond his service on the board
the first year he had had no experience in the tobacco mar­
ket, except as a grower.
The job of sales manager was sepa­
rated from the work of the general manager and was given to
M. E. Stern, tobacco broker of Dayton, Ohio, at a salary of
$15,000.
The salary of the secretary-treasurer was reduced to
$5,000 and R. H. Brundrett, official of a Dayton bank, was
selected for the position.
The field service work was cur­
tailed and placed under the direction of Ray DeWeese, an
active Farm Bureau worker in Darke county, with a salary of
$2,500.
H. H. Darst, a tobacco grower of Miamisburg, Ohio,
and a director at large, was made assistant manager at a
salary of $2 ,500.
The total annual saving in salaries from these
changes was $6,000.
Less experienced men were placed In the
positions of general manager and field service director.
the other hand, a more experienced person took charge of
sales.
The members were partly satisfied by the readjust-
On
124
ment, but were somewhat critical of the appointment of Stern
as sales manager.
Equipment
The offices of the Association were located at first
in the City National Bank Building in Dayton.
These quarters
were too small and expensive, and in November 1924 a twostory building at 125 Sunrise Ave., Dayton, was leased for
four years with a purchase option.
This building housed the
offices, the sample storage, and the sample display room.'1’
Since the warehouses were leased with equipment, the
Association made only a small capital investment.
Approx­
imately $10,000 was spent on office equipment, $2,500 on
warehouse equipment, and $1,000 on improvements on the leased
warehouses.
When the Association liquidated in 1927, approx­
imately $1,300 was realized from the fixed assets.
In view
of the short life of the Association it was fortunate in not
having made extensive investments in buildings and equipment.
^Ohio Farm Bureau Federation News. Nov. 1924, p. 23.
CHAPTER V
THE MIAMI VALLEY TOBACCO GROWERS' CO-OPERATIVE
ASSOCIATION - OPERATIONS
Although the formation of The Miami Valley Tobacco
Growers* Co-operative Association, described in Chapter IV,
was begun early in 1923, the organization was not completed
until very late in that year.
Consequently, the Association
started operations with the 1923 crop, when that tobacco was
ready for delivery in the first part of 1924.
Financing
One of the first problems with which the Association
had to deal was the vital one of finances for which a fairly
satisfactory solution was found.
The plan for the Associa­
tion called for advances to the members upon delivery of the
crops.
To finance these advances in the first year a bank­
ing syndicate of 59 banks, most of which were small local
institutions, was formed.
The City Trust and Savings Bank
of Dayton acted as trustee for the syndicate which subscribed
a total of one million dollars for loans to the Association.
A similar method of borrowing for advance payments
^Ohio Farm Bureau Federation News, May 1924, pp. 1416 and March 27, 1924, p. 2.
125
126
was used during this period by the Burley Tobacco Growers
Cooperative Association*^* and by the Connecticut Valley
Tobacco Association, the latter of which arranged a subscrip­
tion of $8,000,000 from forty-seven New England and New York
banks *2
To borrow the money the Association used as collat­
eral the tobacco which the members delivered.
Each day every
warehouse prepared a list of all deliveries according to the
name of the grower, the type and the grade of tobacco.
If
the Association wished to borrow on the tobacco— and it did
on practically all it received— these lists, which served as
a type of warehouse receipt, were then sent to the trustee
of the syndicate as security for the acceptance drafts used
in borrowing*
As soon as the money was received on the
loans, the Association made an advance payment to the growers
of 50^ of the estimated value of the tobacco as established
according to type and grade by the Association and by repre­
sentatives of the syndicate*
tion 70^ of this value.^
The banks loaned the Associa­
The difference of 20^ was used for
operating expenses.
The attempts to secure financial assistance from the
Federal Intermediate Credit Bank, Louisville, Kentucky, were
blocked by the difficulty of establishing the necessary
bonded storage.
The banking syndicate was willing to lend
1Agricultural Cooperation, Dec. 17, 1923, p. 10.
2Ibid., Jan. 2, 1923, p* 10.
■^Ohlo Farm Bureau Federation News. May 1924, p. 14.
127
on the regular storage in the leased warehouses.
The
following report on the financial arrangement was issued to
the members:
A representative was sent to the Louisville Inter­
mediate Credit Bank and secured a promise of all the
money needed* The only request was that the Association
not fuss around, if it could help It, with anything less
than a million dollar loan at a time* The more money
they could lend on Association notes secured by bonded
warehouse receipts the better pleased they were.
But it wasn't necessary to go so far away. Local
banks and a Cincinnati bank have agreed to furnish funds
for the first payment on the crop.-t
A total of $851,850 at 5i% was borrowed on the 1923
crop from the syndicate*
In addition to the interest charge
there was an $8,000 annual fee to the trustee.
The syndi­
cate arrangement did not prove to be entirely satisfactory.
The Association had expected to be able to dispose of the
tobacco very soon after delivery by the members*
Approxi­
mately one-fourth of the total, five million pounds selling
for about $800,000, was sold almost as soon as it was
received.
No money had been borrowed on this.
As the
remainder stayed In storage month after month, the country
banks which had joined the syndicate became anxious for the
repayment of their loan*2
On September 2, 1924 the Indebtedness to the syndi­
cate was liquidated by the formation of a new trust agree­
ment with seven large banks— two in Dayton, three in
Columbus, one in Cincinnati, and one in Hamilton— which
^Miami Valley Tobacco News, March 1924, p. 2.
2Ohio Farm Bureau Federation News, Nov. 1924, p. 21.
128
assumed the loans.'*'
changed again.
In March 1925 the trust agreement was
This time five banks— two in Dayton, one in
Cleveland, one in Cincinnati, and one in Columbus— composed
the syndicate.
The Winters National Bank and Trust Company,
Dayton, was appointed trustee with an annual fee of $4,000,
just half of that charged by the previous trustee.2
Trouble with this financing arrangement arose not
only from the inability of the Association to sell the
tobacco soon after delivery, but also from the method of
using the warehouse receipts— the lists of tobacco in stor­
age as collateral for the loans.
Since many cases of differ­
ent grades were listed on a single receipt, the withdrawal
from storage of a few cases on each receipt when a sale or
a transfer among the warehouses was made was very difficult.
To overcome this trouble a separate receipt for each case
was suggested, but the plan was not tried and the Associa­
tion continued to use the first method.^
It appears that
some difficulty arose also because of the laxness of the
storage arrangement.
It was stated that at times during the
first year cases were removed from storage without the per­
mission of the syndicate and without the repayment of the
amount loaned on them.
Such instances were said to have
A
been few and did not lead to any serious results*
To avoid
this in the second year the Association placed the custodians
-^Ohio Farm Bureau Federation News. Nov. 1924, p. 21.
^Ibid., March 1925, p. 18.
^Ibid., May 1925, p. 21.
A
Personal interviews with Fred Sheaffer, op. cit.
129
of the storage warehouses under fidelity bonds .-*•
The possibility of borrowing at a lower rate of
interest from the Federal Intermediate Credit Bank induced
the Association to consider bonding several of the ware­
houses for the second year under the United States Ware­
house Act of 1916.^
The proposed bonding was never accom­
plished because of the uncertainty of the future of the
Association after members began to demand the right to with­
draw.
The board was authorized by the marketing agreement
to create "reserves, funds for credit, and other general
commercial purposes.*’^
No limits were imposed on the use or
size of these reserves.
Prior to the actual distribution of
the money to the members, the directors were permitted to
use all funds as they saw fit.2*- As a result, the Associa­
tion made use of reserves and of funds from the 1923 sales to
help finance advances on the 1924 crop.
A general reserve of 12^% of net sales of the 1923
crop to cover "furniture and fixtures, Warehouse Corporation
Stock, members1 overdrafts,, and cash reserves for contingen­
cies, credit and other general purposes"^ provided approx­
^Ohio Farm Bureau Federation News, April 1925, p. 18.
2
Ibid., Oct. 1924, p. 9, and Nov. 1924, p, 23.
^See Association*s Marketing Agreement, Paragraph 6,
Appendix B.
4
See Association*s By-Laws, Article XIII, Section
(p), Appendix B.
5
From a letter to the members on Aug. 27, 1925,
130
imately $200,000 of working funds in time for the 1924 crop.
In addition, over $310,000 from the sales of the 1923 crop
were used to make advances to the 1924 growers.
As a result,
the Association found It necessary to borrow only $240,000
from the syndicate on the 1924 crop.
credited with interest at
The 1923 crop was
on the $310,000
Miami Warehousing Corporation
The tasks of providing storage for and of receiving
and handling the tobacco were performed by the Association9s
subsidiary, The Miami Warehousing Corporation.
Since the
Association, as a non-stock company, could not easily issue
securities or notes to raise the funds necessary for the con­
templated investment in warehouses, this separate stock cor­
poration was created for that purpose*
An additional advan­
tage was that if the investment in and the operation of the
warehouses should not be successful, the marketing associa­
tion would not be affected as adversely as it would if it
carried on these activities itself.
Thus, the failure of the
warehouse company would not involve the Association in heavy
financial losses nor force the Association to reorganize or
to liquidate.
This device of a separate corporation was used
extensively by other tobacco cooperatives In this period.
Examples were The Tobacco Growers Cooperative Association in
the Virginia-Carolina district with five subsidiary ware­
1
Audit by Wall, Hardman, and Lane, Dayton, Ohio, as
of Oct* 31, 1925.
131
house corporations, and the Dark Tobacco Growers Cooperative
Association, Hopkinsville, Kentucky, with ten such subsid­
iaries*1
The Miami Warehousing Corporation was incorporated
January 17, 1924, with an authorized capital stock of
$100,000 in shares of $10 par*
The only stock which was sold
was $10,050 which was owned by the Association*
On the board
of directors of the Warehousing Corporation were several
directors of the Association*
The chief officers of the
Corporation were the president, the secretary-treasurer, and
the warehouse custodian.
The persons who filled these posi­
tions did not hold offices in the Association*
The warehouse
custodian, W* W. Henry, had charge of employing all the per­
sons needed to staff the warehouses and to handle the
tobacco.2
All expenses of the Warehousing Corporation were
paid by the Association.
Vouchers for the expenses were
prepared and presented to the Association which then for­
warded the money for them to the Warehousing Corporation*
In turn this company issued its own checks to its employees
and to its creditors for rent of the warehouses and for
other items.^
1Scanlan and Tinley, op. cit.. pp. 21-22; 0. B#
Jesness, op. cit., p. 281; Agricultural Cooperation, Sept.
10, 1923,
3, and Oct* 20, 1924, p. 3477 Subsidiaries in
several associations are mentioned in these references.
p
Ohio Farm Bureau Federation News, July 1924, p. 4.
•^Personal interviews with Fred Sheaffer, op. cit.
132
It was the Intention of the organizers that the
Warehousing Corporation should buy or build the warehouses
needed for operations and storage*
In view of Its short
existence the Association was fortunate in that the corpor­
ation leased the warehouses with the expectation of purchas­
ing after the storage needs had been definitely determined.
The purchase was deferred also because the officers thought
that the corporation would be able to secure the buildings
more cheaply after the Association had firmly established
itself and had driven out the other dealers who might be in
the market for the houses*1
To handle the 1923 crop the Warehousing Corporation
leased thirty-nine warehouses scattered over the district*
In addition, three houses were rented for several months as
receiving points.
The locations of these houses are shown
on the map on the following page*
The great number of houses and the scattered loca­
tions were due to the insistence of the members in each com­
munity that a receiving point be established near them.
Since the growers were required to stand the costs of deliv­
ering their crops to the Association, more centralized loca­
tions of the houses would have placed some members at a
disadvantage.
Also there was a desire to mollify the ware­
house owners who saw the Association threatening their
investments and who caused considerable opposition to the
formation of the Association until some assurance of the
1Mlaml Valley Tobacco N e w s , March 1924, p. 1.
133
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N u m b e r ,on w a re h o u s e s
KEN
Temp<jrtxi»y Receivinq
f
iTcaie
P o in t
of Mties
Fi9.i5. WAREHOUSES OF THE M IAM I V A LLE Y
TOBACCO GROWERS' C O -O P E R A TIV E A S S O C IA T IO N
FOR TH E
1 9 2 3 CROP
134
renting of their houses was given.
Most of the leases were made for a period of a year.
Seven were for two years, and two were for five years.
In
all of the contracts there were a provision for the renewal
of the lease and an option for the purchase of the house
within a specified time at a fixed price.
All hut two of
the leases called for a fixed sum rental payable monthly or
quarterly,
in the two the charge was five and three cents
per case per month on the quantity in the h o u s e O n
an
average, the fixed sum rental amounted to three cents per
case per month on the capacity of the house.^
The general distribution of the membership of the
Association is shown by the locations of the warehouses.
The
great number, eight, at G-ermantown was the result of the plan
to make that city the storage headquarters and the main
receiving point in the southern part of the district— hence
the few warehouses in Butler and Warren counties.
Tobacco
was received and stored, at least temporarily, in all the
houses.
For rehandling, the tobacco was transferred, if
necessary, to one of the sixteen houses in which this work
was done.
From these houses the warehouse custodian
attempted to collect the rehandled tobacco into the
G-ermantown houses.
The tobacco which was not rehandled was
1Personal interviews with M. E. Stern, op. cit.
p
Audit by Wall, Hardman, and Lane, Dayton, Ohio, as
of Oct. 31» 1925.
•^Ohio Farm Bureau Federation News, April 1925, p. 20.
135
sampled and left in the house by which it had been received*
The four-hand samples taken from each case of worked and
unworked tobacco were sent to the Dayton headquarters for
display or to a G-ermantown warehouse for storage.1
This system of receiving, handling, and storing was
very expensive.
It required a large staff to manage and
check the operations of so many houses.
Extra costs were
created by the transportation of the tobacco among the
houses.
This shifting likewise complicated the keeping of
records of the crops and the using of warehouse receipts for
o
borrowing.
For the second year* s operations the corporation
reduced the number of leased warehouses to fifteen— two each
in Farmersville, Germantown, Greenville, and Miamisburg, and
one each at Brookville, Pitsburg, Troy, Versailles, West
Alexandria, West Manchester, and Lytle.
Several others were
used for a few months In 1925 until all the tobacco stored
■3
in them had been sold.-'
The number of locations was reduced
from twenty-two to eleven.
Most of the discontinued houses
were either small or located in outlying parts of the dis­
trict or in small villages.
Reference to these locations on
the map on page 133 shows that some concentration had been
accomplished, yet the members were well served by convenient
^Ohio Farm Bureau Federation News. Nov. 1924, p. 21.
2Ibid♦, April 1925, p. 21.
■3
''Audit by Wall, Hardman, and Lane, Dayton, Ohio, as
of Oct. 31, 1925.
136
delivery points*
The reduction in the number of warehouses was made
because of the expected shortage in the 1924 crop and the
indications that some members would refuse to deliver this
crop*
Even so, the reduction was not great enough and a
sizeable portion of the leased storage was not u s e d A
There is evidence that the warehouse corporation
suffered from poor and dishonest management.
An audit in
October 1925 revealed a $100 shortage in a bank account and
unexplained transfers totalling $250 to the seeretarytreasurer.
Certificates of deposit were made out improperly.
Apparently a very poor check was kept on the leases of the
warehouses and the amounts of rent due, for five warehouses
were used after the expiration of the leases without the
notice required by the contracts, and an overpayment of $1,295
was made on rentals from February 1924 to October 1925.
p
As soon as the 1924 crop was all sold in August 1926
the Warehousing Corporation was dissolved.
The amount which
the Association had invested in the stock was returned.-^
Receiving and Handling
Through its subsidiary The Miami Warehousing Cor­
poration, the Association received on consignment from the
~*~0hio Farm Bureau Federation News. Jan. 1926, p. 31.
2
Audit by Wall, Hardman, and Lane, Dayton, Ohio, as
of Oct. 31, 1925*
3
Personal interview with R. H. Brundrett, op. cit.
137
growers all three types and all grades of the tobacco except
the trash leaves.
This grade was excluded because of its
extremely low price during the period, the inability of the
Association to find a market for it,, and the refusal of the
banking syndicate to loan money on it.
After some criticisms of this policy from the mem­
bers, the Association promised to sell the trash leaves for
1
the members as soon as it could find buyers.
Rather than
handle it. on consignment, the Association in 1925 bought a
small quantity--$10,741.56 of the 1923 crop and $5,165.10 of
the 1924 crop— at two cents per pound from members who were
willing to accept that price.
Out of these operations the
Association realized a commission of $306.97 to apply on the
o
costs.
The tobacco of the members was pooled, or mingled.
Each year’s crop made up a major pool with minor pools
according to types and grades for purposes of allocation of
expenses and payments to growers.
In this respect the
Association differed from the cooperative warehouse companies
of 1912, which had followed a policy of handling the members’
crops individually.
Pooling prevented many of the difficul­
ties in selling and making settlements which these earlier
^Ohlo Farm Bureau Federation News, Sept. 1924, p. 8.
2Audit( by Wall, Hardman, and Lane, Dayton, Ohio, as
of Oct. 31, 1925*
■3
See Association’s Marketing Agreement, Paragraphs
5 and 7, Appendix B.
138
companies had experienced.3"
Since the independent dealers had been resweating a
large portion of the tobacco for the manufacturers, the
Association decided that to replace the dealers it would
have to rehandle at least the better grades which it re­
ceived.
On the 1923 crop the Association undertook to do
its own rehandling through the Miami Warehousing Corporation.
Approximately two-thirds of the receivings were bulk-sweated
and either hand- or table-sized.
The undertaking was not satisfactory.
Costs were
higher by 30^-50^ than for the dealers who did the same work.
Members and directors claimed that this was due to inexperi­
enced handling crews and to inefficient management in the
Warehousing Corporation.
In reply the warehouse custodian
said that the extra expense was caused by the poor quality
of the tobacco and the careless way in which the members had
packed It.^
For the 1924 crop the Association hired the Cullman
Brothers, tobacco dealers of Middletown, to rehandle the
tobacco at one cent per pound— in comparison with the cost
of approximately 1.4 cents per pound on the 1923 crop.
About
one-third of the 1924 crop was resweated and sized under this
arrangement•^
One of the biggest tasks in handling the tobacco was
^See pages 85-86»
2
Ohio Farm Bureau Federation News. Sept.. 1924, p. 8.
3
Personal interviews with Fred Sheaffer, op. cit.
139
the grading.
The Association planned to reward the members
who raised the better quality tobacco and who were careful
in stripping and packing it.
In order that this might be
accomplished each crop was graded and, in the payments, a
difference was made In the price for each grade.
Also the
amounts of the advances to the growers upon delivery depended
on this grading.
The Association’s officers believed that
if the grading could be done before delivery, confusion at
delivery time could be avoided and preparation of the checks
for the advances would be expedited.
In February 1924 five crews of a total of twentythree men under the supervision of the warehouse custodian
began to cover the entire district to grade the tobacco in
the members' sheds.
Unseasonable weather had postponed the
stripping so that many members had not finished packing
their crops.
The Association established three grades of
wrappers, two of fillers, and three of frosted tobacco—
about a third of the 1923 crop in the Miami Valley had been
damaged by frost.
The graders were instructed to follow
very carefully the standards established for each of the
eight grades in each type.1
This method of grading proved to be one of the major
errors of the Association.
was not done impartially.
It was claimed that the grading
The graders employed were, in
most instances, growers who lacked the necessary experience.
Ohio Farm Bureau Federation News. Jan. 1924, p. 8,
and Nov. 1924, Ju 22.
140
At the same time the members were accused of deceiving the
graders as to the amounts of fillers and frosted tobacco
in their crops— it was not easy to examine the tobacco thor­
oughly In the sheds— and of finishing the packing of their
crops in a very poor manner after the grading had been done.1
One result of this method of grading was the spoil­
age of a large quantity of the tobacco after delivery to the
Association.
Only the cases indicated by the graders and
those declared by the growers upon delivery to be in need of
immediate attention were rehandled at once.
The others were
stored to be worked according to the schedule of the ware­
house custodian.
When this rehandling began many cases of
tobacco were found to have spoiled because they had been
placed In storage when in poor condition.
When this was
discovered a complete regrading was made.
A comparison of
the first and second gradings revealed a net change of nearly
three million pounds, or over 15^ of the total deliveries,
to lower grades.2
This error in grading, added to a too optimistic
schedule of values on the tobacco, caused an overpayment of
nearly $6,000 on the 1923 crop.
The advances to many growers
were greater than the total value of the crops as later com­
puted.
The Association wrote the members involved explain­
ing the situation and requesting the return of the over^"Personal interviews with Fred Sheaffer, op. cit.
o
Audit by Ohio Farm Bureau Federation Auditing
Service as of Oct. 31, 1924.
141
payment.
Available evidence would indicate that less than
§100 was returned.1
The entire affair caused the members to
distrust the Association and it added to the opposition move­
ment which resulted in the collapse of the organization#
For the 1924 crop the Association adopted the stand­
ard grades of tobacco prepared for it by F. B. Wilkinson,
marketing specialist of the U. S. Department of Agriculture#
The graders were licensed under the rules of the Department
of Agriculture.2
As a further measure to prevent the recurrence of
the grading difficulty, the Association did the grading after
the crops were delivered#
As the crops were received at the
warehouses, samples were withdrawn in the presence of the
growers*
These samples were sent to Dayton where one grader
examined and graded them all#^
This procedure also was un­
satisfactory for it required too much work from one man, and
it was too difficult to get proper samples from the crops#
If a sample large enough to be representative was taken, too
much tobacco had to be transported to and handled in the
Dayton office.
As well as requiring extra time and work at
delivery, it also meant that checks for advances to the
growers could not be prepared very soon after delivery#
4
1Audit by Wall, Hardman, and Lane, Dayton, Ohio, as
of Oct# 31, 1925.
o
Ohio Farm Bureau Federation News. Sept# 1924, p# 9#
^Ibid., March 1925, P* 18*
4
Personal interviews with Fred Sheaffer, op. cit#
142
Although only a few adjustments in the gradings of
the 1924 crop had to be made when the tobacco was rehandled,
an overpayment on advances to the growers occurred again.
The total of under §4,000, though less than the amount the
previous year, was larger in proportion to the size of the
deliveries, which were about one-fourth of the 1923 crop.
No attempt was made to collect the overpayment since it
became evident that the Association was soon to cease opera­
tions and that there would be an excess from accumulated
reserves*1" to cover this amount.
In their eagerness to keep
the members of the Association delivering their crops the
directors had set too high values on the tobacco, even with
only a 50% advance, so that a rather general overpayment
resulted.
In one respect the directors were not to blame,
for prices, which had been high when the schedule was set, fell
to extremely low levels by the time the tobacco was sold.2
Of the 1923 crop the Association received 19,769,764
pounds.
This represented approximately 16% of the total pro­
duction in the Miami Valley.^
As shown in Figure 16, page
146, the largest part of the deliveries was Type 42 tobacco.
This quantity of Seedleaf represented a larger percentage of
the total Seedleaf grown In the Valley than the deliveries of
Types 44 and 43 did of their total productions.
Perhaps one
"^See page 129.
p
Personal interviews with M. E. Stern, op. cit.
Estimated total production 25,900,000 pounds.
Appendix A, Table II.
143
reason for this was the lower price which was being offered
on the market for Type 42.1
The receipts of the 1924 crop, Figure 17, page 147,
fell to 5,233,379 pounds#
While some of this decrease can be
attributed to the change in total production from 25*9 to
25*2 million pounds from 1923 to 1924,2 most of it was due
to the members* refusal to deliver their crops#
Type 42
again dominated the deliveries mainly because membership op­
position was less in the southern section where it was grown#
The error of using too many warehouses, the mistakes
in grading, the overpayments, and the mismanagement of the
warehouses and of tobacco handling were important factors in
the membership discontent and the failure of the Association.
Sales
The Association proved to be as inept in selling as
it had in handling the tobacco.
Summaries of the sales,
expenses and payments to the growers are presented in Figures
16 and 17, pages 146 and 147*
At the outset note must be
taken of the low average price which the Association secured
for the tobacco even after part of it had been rehandled.
The net sales prices of approximately 10 and 8 cents per pound
on the 1923 and 1924 crops respectively were well below the
average valuations of about 14 cents per pound set for pur­
poses of borrowing and making advances.
The disparity was
greater than these figures indicate for the 14 cent figure was
^See page 106.
2See Appendix A, Table II.
144
intended to be the net available to growers after expenses
had been paid#
It would appear that a number of factors contributed
to this low selling price.
First of all, the Association
had to sell its tobacco on a declining market#
The price
decline which had begun about 1920 continued until 1926#1
Although the Association was able to dispose of each year's
crop within eighteen months after receiving it, this time
was sufficient to cause some loss#
A second factor was the opposition of the manufac­
turers#
The Association had earned this difficulty through
the attacks which had been made on the dealers and manufac­
turers in the period of organization.2
Consumption of
Miami Valley tobacco had been decreasing since 1918 and a
large stock of the leaf was on hand,^ so that the manufac­
turers were not forced to buy from the Association to fill
their needs#
The threats of price dictation by the farmer©^
had not gone unnoticed#
The manufacturers were not inclined
to give in easily in the struggle which seemed to be devel5
oping#
A third reason for the low selling price is found In
the salespolicies
and organization*
agerand sales manager
until November 1924, did
an aggressive sales program#
1
Stroop,general
man­
notpursue
His experience had been gained
See Appendix A, Table II #
2
See page 104.
3
4
See Appendix A, Table II#
See page 103#
5
Personal interviews with M. E. Stern, op# cit#
145
as a buyer and a packer#
He and the board of directors
appeared to be content to let the manufacturers seek out the
Association*^
This policy was similar to that which the
o
cooperative warehouse companies of 1912 had followed*
The officers seemed to believe that the Association
was in a position to force the manufacturers to come to
them and to pay the prices asked*
Periodically the general
manager and the board published the list of prices at which
they were willing to sell the different grades of tobacco*
The belief was expressed that there was little need for
worry about sales since as the tobacco aged in storage its
value was i n c r e a s i n g . ^
such an attitude did not take into
account the general decline in the market*
From March to November 1924 approximately 30% of the
1923 crop was sold*
Members were complaining about what
they felt to be the slowness in disposing of their crops and
in making final settlement*
In comparison with the experi­
ence of the cooperative warehouse companies of 1912^ and of
marketing cooperatives in other districts^ sales do not seem
to have been especially slow*
It seems likely that a large
part of the impatience of the growers arose from the trou­
bles in grading and from the overpayments.
■^Personal interviews with M* E. Stern, op. cit.
^See page 86.
Ohio Farm Bureau Federation News* Sept. 1924, pp. 8
and 10, and Dec. 1924, p. 22.
4
See pages 90-91*
5
„
H. B* Price, "What Future for Tobacco Cooperatives,"
American Cooperation 1934, p* 264*
146
MIAMI VALLEY TOBACCO GROWERS'
CO-OPERATIVE ASSOCIATION
SUMMARY OF 1923 CROP *
Pounds
Type
Type
Type
Received
44
43
42
3,061,514 lbs.
6,709,787 lbs.
9.998,465 lbs.
19.769.764 lbs.
*
per lb.
Net Sales
Expenses Applied
Cases
Administrative
Field Service
Carrying Charges
Selling
Freight Out
Handling Costs
Storage
Total
$148,556.12
100,518.20
16,260.16
66,217 *19
25,029.96
23,621.41
174,264.28
32.220.88
%
25.4
17.2
2.7
11.3
4.2
4.1
29.6
5.5
100.0
Available for Distribution
to Members
Payments to Members
In Cash
Deductions forMembership Fees
Farm Bureau Dues
10.26
... 586.688.20
.75
.51
.08
.34
.13
.12
.88
.16
2.97
,441,991.20
$1,216,773.16
23,125.00
40.780.00
Balance Retained by
Association
Balance Retained asLiquidated Damages
Other Reserves
$2,028,679.40
$6l,564.89
99.748.15
1.280.678.16
6.48
161.313.04
.81
$161.515.04
*For sources of data see footnote 2, p. 109.
Figure 16
147
MIAMI VALLEY TOBACCO GROWERS'
CO-OPERATIVE ASSOCIATION
SUMMARY OF 1924 CROP*
Pounds
Type
Type
Type
Received
44
43
42
602,828 lbs.
1,574,202 lbs.
5.056,549 lbs.
5.235.579 lbs.
per lb.
Net Sales
Expenses Applied
Cases
Admini strative
Field Service
Carrying Charges
Selling
Freight Out
Handling Costs
Storage
Miscellaneous
8.12
248.831.95
.65
1.45
.09
.41
.36
.14
1.28
.31
♦ 06
T7T5
13.6
#33,711.95
75,472.96
4,566.30
21,440.29
19,134.61
7,618.59
67,054.95
16,628.05
3,204.23
30.2
2.0
8.6
7.7
3.1
26.9
6.6
1.3
100.0
Available for Distribution
to Members
Payments to Members
In Cash
Deductions forMembership Fees
Farm Bureau Dues
#425,244.95
#176,413.02
#275,804.17
814.50
,
20 320.00
296,938.67
5,67
Overpayment to Members
#120,525.65
2.30
Overpayment Supplied by**
Liquidated Damages
#61,564.89
Other Reserves on 1923 Crop
99.748.15
Total
#161,313*04
Less, Expenses and Loss
In Liquidation
40.787.59
#120,525.65
*For sources of data see footnote 2, p. 109.
Figure 17
148
When the management was changed in November 1924, an
experienced tobacco broker, M. E. Stern of Dayton, Ohio, was
hired as sales manager#
In three months he had disposed of
the remainder of the 1923 crop#
He continued in the posi­
tion of sales manager until the Association was dissolved#
Although Stern was able to dispose of the tobacco rapidly,
he did not secure very high prices for it#
Some members
accused him of making sales without regard for price and
some Insisted that he took advantage of his position to ruin
the Association.1
Such accusations cannot be verified#
Stern explained the situation by reference to the declining
market price, the opposition of the manufacturers, and the
control which the directors exercised over his actions#
All
sales contracts had to be approved by the board of directors,
or the executive committee.
The directors were inclined to
reject all contracts In which the price did not meet the
schedule which they had established.
In one instance 5*000
cases of a certain grade of the 1924 crop were contracted
for at 10 cents per pound, but the board rejected the con­
tract.
Six months later it accepted 7 cents per pound for
the same lot.2
Expenses
An examination of the expenses applied to the 1923
Personal interviews with members of the Association
during August 1938 and August 1939.
2
Personal interviews with M. E. Stern, op. cit.
149
and 1924 crops, given in Figures 16 and 17 on pages 146 and
147, reveales that cases, administrative expense, carrying
charges, and handling costs made up the greater part of
total costs*
Because of differences in the accounting
methods used in the two years an exact comparison of the
expenses on the two crops is impossible, but certain changes
and relationships can be noted*
The expense per pound of 1924 tobacco, $.0475, was
much greater than that, $.0297, on the 1923 tobacco mainly
because many of the expenses remained relatively unchanged
while the quantity of tobacco to which the expenses were
applied decreased over 70%*
This was particularly true of
many items included in administrative expense, selling
expense, and handling costs*
In the case of storage costs
the excess storage which was leased for the 1924 crop1
caused the rise in the charge per pound of tobacco for this
item •
Administrative expense, which included the salaries
of directors, officers, and office employees, showed a small
saving on account of the reduction of salaries at the end of
the first year^ but had to bear the extra legal expense
resulting from the lawsuits with dissatisfied members*
The
largest item in selling expense was the sales manager’s
salary, which was a fixed charge*
In the handling costs were included all expenses of
receiving, grading, and rehandling the tobacco*
2
^See pages 135-136
Although
See page 123
150
the Association made a saving on the sweating and sizing
operations in the second year,1 sufficient fixed charges
were involved in the handling costs to cause an increase in
the cost per pound of tobacco handled.
Cases was the only expense item which showed a de­
crease in cost per pound.^
The Association achieved this by
inducing the case makers to agree upon a price schedule
slightly below past prices-^ and by furnishing the members
with used cases accumulated from the 1923 crop or purchased
from the tobacco manufacturers.^
The curtailment of field
service activity and the reduction of the trustee's annual
fee
kept the field service expense and the carrying charges,
which included insurance and interest, to levels consistent
with the volume of tobacco received in the second year.
This examination of expenses has shown that the
Association was not able to keep its costs down, at least-as indicated by the experience with handling costs— not low
enough to compare favorably with those of the private dealers.
Returns to G-rowers
Because of these difficulties with selling and with
expenses, the prices which members realized from the crops
■^See page 138.
o
A case cost occurs because the buyer or association
pays the grower for the cases as a separate item, but receives
no separate payment for them from the manufacturers.
^Ohlo Farm Bureau Federation News, Sept. 1924, p. 9.
4
5
Ibid., March 1923, p. 18.
See pages 123 and 128.
151
placed with the Association were very low*
The average of
$ *0648 per pound on the 1923 crop did not compare favorably
with the price of 13 cents per pound for good tobacco on
the market.'*'
However, it would seem that when the frosted
tobaeco was included the average market price was nearer
10 cents per pound.2
Even so, this difference meant a loss
of nearly $700,000 to the members.
In addition this return
included dues to the Association and to the Farm Bureau
totaling $63,905, much of which would not have been paid
by the members otherwise.
The price realized by the growers would have been
$.0081 per pound higher if the Association had not retained
$161,313*04 of the receipts from the sales of the 1923 crop
as reserves for liquidated damages and for general purposes.
Of this total, $61,564.89 was assessed as liquidated damages
on those who refused to deliver their 1924 crops.
Since few
members had as much as the liquidated damages— five cents
per pound on the 1924 crop-— -due them on the 1923 crop after
the advance payment, the Association merely claimed whatever
balances were left and made no attempt to equalize the
amount among the growers or to collect the remainder due.
In addition to this money withheld from the growers, the
Association collected in cash from the members $206.47 for
their failure to deliver 1923 crops and $379.30 on 1924
crops.
On the other hand, allowance must be made for the
***See Appendix A, Table II.
^Personal Interviews with M. E. Stern, op. cit.
152
overpayment of $5,908.49 on the 1923 crop.
As a result of
these overpayments and assessed damages, some members
received far more than they deserved while others, especially
dissenting members with good crops, suffered large losses.
The average return of $.0567 per pound to the grow­
ers on the 1924 crop was even lower than that on the 1923
one.
It is reported that the market price for the equiva­
lent type and quality was about $.085 per pound.1
Again
the difference was not to the credit of the Association.
The results appear even worse when the $21,134.50 deducted
for dues is excluded and the $120,525*65 gained from the
1923 crop is taken into consideration.
This amount for­
feited by the 1923 crop as general reserves and liquidated
damages meant an additional $.023 per pound on the 1924
crop.
Of the total of $141,313*04 which the 1923 crop lost
as reserves, $40,787*39 was used to cover the losses and
expenses of liquidation from July 1926 to April 1927*
The figures given for payments to the growers on
each crop are not quite exact.
In the last two distribu­
tions, totaling $32,656.82, payments were made to the remain­
ing members on the basis of both their 1923 and 1924 crops.
Since the 1923 accounts were closed, the entire amount was
shown as a distribution to the 1924 growers.2
No attempt was made to receive the 1925 crop on
1Personal interviews with M. E. Stern, op. cit.,
and with Fred Sheaffer, op. cit.
2Audit by Wall, Hardman, and Lane, Dayton, Ohio, as
of April 6, 1927.
153
consignment from the growers*
Since the organization was
still in existence to close out the affairs of the previous
crops, an arrangement was made in 1926 with Cullman Brothers,
Middletown, Ohio, to contract about 2,000 cases of tobacco
from the members.
The price to the growers was 12 cents per
pound and compared favorably with the market price.
These
operations involved neither commission nor expense to the
Association.^
Accounting Methods
The accounting methods of the Association were far
from satisfactory.
An examination revealed that in the
advances on the 1923 and 1924 crops errors were made in cal­
culating payments and in writing checks.
In some instances
duplicate checks were Issued and no corrections made.2
There was some Indication that each type of tobacco of the
1923 crop did not receive proper credit for sales.
Some of the suggestions made in February 1925 by an
auditor indicate specific weaknesses in the accounting meth­
ods of the Association:
1.
Rent Ledger. That a rent ledger be kept by the
warehouse company In which an account is kept with each
house used. Notation should be made of the contract
number and terms. The house should be charged with the
1
Personal interviews with Fred Sheaffer, op. cit.
2
Audit by Wall, Hardman, and Lane, Dayton, Ohio, as
of Oct. 31, 1925.
^Personal interviews with Fred Sheaffer, op. cit.
and with R. H. Brundrett, op. cit.
154
rent accrued and credited with payments*
2.
Stock Control* That the stock ledger "be kept up
daily, including a record of all transfers, workings,
and shipments, and a grand summary of all houses*
3* Insurance.
insurance values.
That more attention he given to
4. Voucher Index. That a card index he kept by
payee of all vouchers (except to growers) showing the
number and amount.
5« Duties of Employees. That the duties and
responsibilities of each position be more definitely
defined. This applies particularly to the warehouse
departments and the warehouse custodians.
9. Sales Contracts and Rejections. That a record
be kept of all sales contracts showing deliveries and
undelivered portions. That rejected cases be indicated
in some manner either on receiving the memorandum or
by building a separate stock ledger.
12. That the auditor furnish the officers each month
with a report showing receivings, sales, workings, costs
and costs per case or pound together with the ordinary
financial report.1
Following the change of officers in November 1924,
efforts were made to correct the errors which had been
committed and to establish and place into effect sounder
procedures.2
One of the problems which continued to trouble
the Association was that of cost distribution.
The two
factors complicating the task were the handling of three
types of tobacco and the holding of two years1 crops at the
same time.
In the latter case the Association had to decide
^Audit by Ohio Farm Bureau Federation Auditing
Service as of Feb. 28, 1925, p* 8*
p
Ohio Farm Bureau Federation News, March 1925, P* 18.
155
In what ratio the old and new crops were to he charged with
the current overhead expenses*
The task of distributing
the expenses over several types of tobacco had proved to be
difficult also for the Tobacco Growers Cooperative Associa­
tion in the Virginia-Carolina district and the Dark Tobacco
Growers Cooperative Association in Kentucky and Tennessee*1
The chief objection of members of the Miami Valley
association to the cost distribution was that no allowance
was made for the difference In the length of time required
to dispose of the different types*
Since Type 44 was sold
first, growers of that type felt that they had borne too
large a portion of the costs*
Expenses were not allocated
until all the tobacco of the crop year had been sold*
two-fold division of the expenses was made*
A
Expenses for
storage, handling, warehouse administration, and selling
were divided among the three types on the basis of total
pounds of each received*
Other expenses, such as those for
general administration, insurance, and interest were divided
p
on the basis of total sales value of each type*
No advan­
tage would seem to have been gained by this division, but
it would appear that some allowance should have been made
for the length of time the different types were held*
^Price, op* cit*, p* 262*
2
Audit by Wall, Hardman, and Lane, Dayton, Ohio, as
of Oct* 31* 1926*
156
Dissension and Dissolution
Dissatisfaction among the members arose very soon
after the Association was in operation.
The errors in grad­
ing and payment^* were perhaps the first matters to arouse
the distruct of the members#
Other factors contributing to
the development of dissension were the feeling that the
Association was not making sales rapidly enough, the objec­
tions to the large salaries paid the officers, the reports
of tobacco spoiled in storage, and the suggestions that the
advance payments might be the only returns to the members on
the 1923 crop.2
This rather general dissatisfaction found expression
in a change of the management in November, 1924.
At the
annual meeting of members six new directors were placed on
the board#
Immediately thereafter all the officers of the
Association were changed#
The opposition was dispelled for
a short time by this move, but within a few months it arose
again#
Early in 1925 the agitation among the members led to
the formation of a Growers’ Committee# E. P. Landis, a
member of the Association and president of a business men’s
group in Brookville, Ohio, was a leader of this committee.
At Landis' urgence the village council and the business men
of Brookville had sponsored local meetings to aid in the
1See pages 139-140.
2Ohio Farm Bureau Federation News. July, 1924, p. 4,
August, 1924, pT 87 and September, 1924, p# 8#
157
formation of the Association*
When the members who had
joined on this account became dissatisfied, they came to
Landis and the other members of these groups and asked them
what they now proposed to do*
After an investigation Landis
became convinced that a drastic change in the Association
was needed, and with eight other growers from different
parts of the district he set up the informal Growers1
Committee to see what could be done.1
In February 1925 the committee appealed to the
directors for a complete explanation of operations and for
the consideration of a plan to allow dissatisfied members to
withdraw*
When these appeals were denied, the committee
sought legal advice and aid*- Six law firms were interested
p
in the case of the dissenting members.
In fact, these
attorneys assumed the direction of the entire opposition
program which followed.
The arrangement was that the law­
yers were to finance the campaign to obtain the release of
the dissatisfied members and, in return, were to be paid $10
by each member whose release was secured*^
The first step in the campaign was an attack on the
legality of the membership contract coupled with a petition
to the board requesting a change in the by-laws to permit
^■Personal interview with E. P* Landis, Brookville,
Ohio, Aug* 30, 1939*
2The six firms were; P. A. Saylor, Eaton; Manix,
Crawford & Billingsley, Greenville; JohnV. Dye, Piqua;
Alva B* Campbell, Troy; Harry G. King, Troy; and Burkhart,
Heald & Pickrel, Dayton.
3
Personal interview with E. P. Landis, op* cit.
153
members to withdraw*
To test the legality of the contract
a number of suits were Instituted against the Association in
the names of the dissenting members on the grounds that the
contract violated Ohio’s anti-monopoly law and that the
cooperative association law of 1923 was unconstitutional
because it created a favored class of the farmers*^
This attack on the legality of the contract was
made even though the attorneys realized that it had little
chance to succeed*
A similar suit involving the almost
identical membership contract of the Burley Tobacco Growers
Cooperative Association was being tried in the courts of
Ohio at that time*
When, in September 1925, the circuit
court at Georgetown, Ohio, sustained the decisions of the
lower courts in upholding the legality of the Burley con­
tract and the constitutionality of the cooperative associa­
tion law,^ these suits against the Association were with­
drawn*^
The petitions to the board in which members requested
permission to withdraw and asked for a change in the by-laws
1
'
'
Personal interview with T* A. Billingsley,
Greenville, Ohio, one of the attorneys for the opponents,
Aug* 31, 1938*
2
Ibid*
^Case of Burley Tobacco Growers Cooperative
Association vs* List. Ohio Farm Bureau Federation News*
May 1924, p. 4, and Nov* 1925, p. 20; Agricultural
Cooperation, Sept* 8, 1924, p. 302. The decision was later
upheld by the Supreme Court of Ohio* (Agricultural
Cooperation, April 26, 1926, pp. 189-190.)
4
Personal interview with T. A. Billingsley, op* cit*
159
to simplify such action were based on Article XIII, Section
(d), and Article XIX of the by-laws.
The first of these
provisions gave the board of directors authority to allow
withdrawals upon proper application.
The second provided
that
These by-laws may be altered or amended at any
annual meeting of the members, called for that purpose
by the directors, by a vote representing a majority of
the votes cast* The written assent of a majority of the
members shall be effectual to repeal or amend any by­
laws or to adopt additional by-laws without any meeting*1
It was the latter part of this article which the
opposition planned to use*
Under the date of March 5, 1925
the Growers' Committee sent a letter to all members explain­
ing what it proposed to do and enclosed a form on which the
members might indicate approval, of the plan and might resign
from the Association.
Since the response to the letter was
very poor, the lawyers and the committee held meetings dur­
ing March, April, and May of 1925 in every community, just
as had been done when the Association was formed.
Special
petitions for an amendment to the by-laws to allow members
to withdraw were circulated at these meetings*
Supporters
of the Association attended the meetings and fist fights
occurred frequently*
Both sides made use of newspaper
stories and placards to win the support of the members*
p
In the meantime, in May 1925, the Association
decided to enforce the contract and brought suit against
1See Appendix B for the By-Laws.
2Personal interview with T. A. Billingsley, op* cit*
160
seven members who had sold their tobacco outside the Associ­
ation*
With one exception all these members resided in
Darke and Miami counties where the opposition was strongest*1
The attorneys had induced these members to sell as an invita­
tion to the Association to sue to provide a test case*
Many
of the members who had not wanted to deliver to the Associa­
tion had held their crops in their sheds awaiting the out­
come of the conflict.
Soon after the suits were filed most
of these members sold to the regular buyers*^
On June 1, 1925 the Growers’ Committee and its
attorneys announced that the petition for modification of
the by-laws had been signed by 51^ of the members*
This
petition was presented to the board of directors at the
regular monthly meeting in June 1925*
Dissension appeared
among the members of the board and, when a majority refused
to recognize the petition, three members resigned and were
immediately replaced by supporters of the Association*^
The refusal of the board was based on its contention
that the binding clause was in the marketing agreement and
not in the by-laws, and, therefore, a change in the by-laws
could not make it possible for a member to withdraw*
Although the by-laws did not stipulate the term of years for
which members agreed to deliver their crops, they made the
marketing agreement a part of the by-laws and required the
10hlo Farm Bureau Federation News, May 1925, p. 21*
2
3
Personal interview with T. A. Billingsley, op* cit*
Ohio Farm Bureau Federation News, June 1925, p* 7*
161
members to market their tobacco win accordance with the
provisions of the standard marketing agreement” .1
Further­
more, the board claimed that since all contracts were as
one contract for the purpose of binding the members to the
ii 2
same extent", to release any grower would cancel all con­
tracts.-^
Following this refusal the attorneys filed a peti­
tion on June 20, 1925 in the Common Pleas Court of
Montgomery county for the appointment of a receiver for the
Association.
It was brought in the name of four members,
one of whom had been on the board until he had resigned
earlier In the month*
In the petition the officers were
accused of abusing their powers and offices, dissipating the
funds of the Association, and conducting its affairs con­
trary to the wishes of the members.2* Without explanation
this suit was withdrawn in August and a similar suit filed
in the Common Pleas Court of Darke county.5
The next move of the opposition, while these suits
were awaiting hearing, was to prepare a slate of its own
nominations for directors to be voted on at the annual meet­
ing, November 2, 1925*
The complete process of nominating
•^See Association’s By-Laws, Article XIII, Sections
(b ), (c ), and (q ), Appendix B .
2
See Association's Marketing Agreement, Paragraph
21, Appendix B*
*5
Ohio Farm Bureau Federation News, June 1925, p* 7*
A
Ibid., July 1925, p* 6.
^Ibid.. Aug. 1925, p* 11*
162
and electing delegates, who in turn nominated directors,
was followed in separate primaries and meetings hy the
supporting and the dissenting members of the Association#
Thus, two tickets for the annual election were being pre­
pared, each claiming to be the true one#
At the same time the opposition sought an injunction
in the Montgomery county courts to halt the primary being
conducted by the board, to require recognition of the peti­
tion for amendment of the by-laws, and to permit nomination
of the directors from the floor.
Judge R. C# Patterson of
the Common Pleas Court ordered a count of the names on the
petition before making a ruling #2
At this point the board of directors and the attor­
neys for the Growers* Committee met together in Dayton on
August 25 and 26, 1925.
The directors agreed to allow all
members represented by the lawyers to withdraw, and, in
return, withdrawing members were to renounce all equities
which they might have in the Association#
The lawsuits
instituted by the Association and by the members were to be
withdrawn#
The form of the release for the members was as
follows:
For and in consideration of a general release of all
claims by ____________ _ a former member of the Associa­
tion The Miami Valley Tobacco Growers Co-operative
Association hereby releases the said _ _ _ _ _ _ _ _ from
any and all claims accrued and to accrue with respect to
the said _________
*s former membership in said
Association and former cmd present and future property
^See pages 117-118 for the election procedure.
20hio Farm Bureau Federation News, July 1925, p# 6.
163
rights in said Association.1
A total of 2,560 members was allowed to withdraw in
this manner*
An additional 300 were ejected without further
penalty for non-delivery of the 1924 crop.
A few who with­
drew later rejoined when they learned that substantial
checks for the final payment on the 1923 crop awaited them
if they supported the Association.2
A total of 2,485 mem­
bers was reported to have remained in the Association.^
A major point of controversy over the dissolution
was the part that tobacco dealers and manufacturers had in
sponsoring and financing the opposition campaign.
Reports
were that local buyers, dealers, and agents of dealers and
manufacturers attended the opposition meetings and visited
the growers to induce them to sign the petition for revision
4
of the by-laws*
One of the attorneys for the opposition
declared that none of these buyers was paid by the lawyers
to help in the campaign.
He explained that one of the local
buyers who had been very active in the opposition presented
From the form given the members. It is interesting
to note that under the date of Aug. 25, 1925 a form letter
was sent by the Association to all dissenting members warn­
ing them that unless they delivered their 1924 crops the
Association would be forced to institute suits and that the
checks for the final payment on the 1923 crop were being
withheld as liquidated damages. These letters arrived the
same day as did the notices from the attorneys that a settle­
ment permitting withdrawal had been made.
20hio Farm Bureau Federation News, Nov. 1925, p. 21.
^Ibid., Jan. 1926, p. 31*
^Personal interviews with members of the Association
during August 1938 and August 1939 *
164
a bill to the lawyers for $1,500 for his work*
The lawyers
had assumed that he, like the other buyers, dealers and
agents, was either standing his own expenses or being paid
by some one else*
When the lawyers refused to pay the bill,
this local buyer sued to collect*
Settlement was made out
of court for $ 1 0 0 Available evidence would indicate that
the tobacco buyers and manufacturers had an important part in
fomenting dissension among the members and in supporting the
faction which sought to destroy the Association*
The plea of the officers and loyal members of the
Association during the campaign was that the Association be
given a longer time in which to prove its worth*
Errors in
operations and mangement were admitted and claims were made
that from these mistakes valuable experience had been gained
which was helping the officers place the Association on a
p
sounder basis*
It would seem that improvements had been
made and that in a following year much more satisfactory
results could have been expected*
In the midst of the struggle the attorneys for the
Association recommended that the officers place the Asso­
ciation in the hands of a receiver*
Aaron Sapiro, noted
cooperative lawyer, returned^ to the district and advised
the officers to resist this move, for it might be possible
^Personal Interview*
p
Personal interviews with officers and members
during August 1938 and August 1939•
■x
See footnote 1, page 103*
165
to revive the Association after the trouble was over, and if
liquidation "became necessary it could be done by the officers
without the extra costs of receivership*
This advice was
followed and proved to be of real value*
Sapiro was retained
to assist in closing the affairs of the Association*1
In the annual meeting on November 2, 1925 the slate
of nominations for directors sponsored by the board was
elected since the opposition had already withdrawn from the
Association*
The old officers were retained by the board*
The big problem faced was whether the Association should
continue to function.
A statement of the situation and a
ballot on this question were mailed to all remaining members,
but the response was too small to furnish an idea of membership opinion.
p
The president then directed a letter to the members
in which he outlined the mistakes which had been made and
the steps taken to remedy them.
He explained that the direc­
tors felt that 15,000 cases of tobacco would have to be
assured the Association to enable it to continue on an effi­
cient basis.
made.^
He requested a reply so that plans might be
When the response again was poor, the directors held
meetings in the various communities to discuss the matter
with the members*
They found that the members were not
enthusiastic, and so voted to make no attempt to receive the
1
2
Personal Interviews with Fred Sheaffer, op. cit.
Ohio Farm Bureau Federation News* Jan. 1926, p. 51„
5Ibid.
166
1925 crop.
A small quantity was contracted from the members
for a dealer in Middletown.^
Efforts were then made to sell the remainder of the
1924 crop— approximately two-thirds of the deliveries were
still on hand on January 1, 1926— and to liquidate the
Association.
Sales were completed by August 1926 and final
disbursements prepared.
A skeleton organization was main­
tained until April 1927 in the hope that interest in cooper­
ative marketing might be revived and receiving might be
resumed with the 1926 crop.
In spite of the decline in the
average market price from 13 cents per pound in 1924 to 11.4
o
cents per pound in 1925 and 8.5 cents in 1926, the farmers
showed no desire for another attempt.
The remaining assets
were sold, a final distribution made, and the Association
was dissolved.^
Certain attitudes of the officers appear to have
contributed to the dissatisfaction which led to the dissolu­
tion.
Members complained that they were not made welcome at
the offices and that many of the officers assumed a patron­
izing air toward them and did not seem to be really inter­
ested in the tobacco growers* welfare or in the success of
the Association.^
In any event, the management does not
seem to have had close contact with the members, even though
1
See page 153-
2
See Appendix A, Table II.
^Personal Interviews with Fred Sheaffer, op. cit.
^Personal interviews with members of the Association
during August 1938 and August 1939.
extensive membership relations work was done.
Part of the
lack of contact can be attributed to the size of the organi­
zation and to the somewhat inaccessible location of the
offices in a large city, Dayton.
The change in management
in 1924 improved the situation to a certain extent, but it
seems to have come too late to overcome the discontent which
had grown up.
When the officers sought to prevent members
from withdrawing and to retain control of the Association
through manipulation of the election procedure, the members
were fully convinced that the management was not working for
their Interests.
It is likely that to have allowed members
to withdraw from the Association would have destroyed It, but
the opposition of the officers to such a plan was not able
to save the Association.
The undertaking had been an ambitious one.
Over
seventy-five percent of the 1923 crop in the Miami Valley
had been controlled by the Association.
It had arisen from
the depression in the tobacco market and the general interest
in cooperative action during that period.
Its dissolution
must be attributed to a number of factors: errors in the
organization campaign; the poor quality of the 1923 and 1924
crops; a decreasing demand for the product and a declining
market price; opposition of buyers, dealers and manufacturers
and, most important of all, poor management in membership
relations, in selling, and in the handling of tobacco.
Growers did not appear to understand cooperative principles
and what they might expect from cooperative action.
In gen­
168
eral they were never enthusiastic in their support of the
Association.
CHAPTER VI
OHIO CIGAR LEAF TOBACCO GROWERS * MARKETING
ASSOCIATION - FORMATION AND STRUCTURE
In view of the unsatisfactory record of the Miami
Valley Tobacco Growers* Co-operative Association in 19231927# considered in the two preceding chapters, it is sur­
prising that another association was started only a few
years later*
There were several factors which led to the
formation of the new association.
First of all, the growers
continued to he interested in finding some means of escaping
the evils which they believed to exist in the country-buyer
system of marketing.
They felt that if they could present a
united front to the dealers and manufacturers they could get
what they regarded as fairer treatment and fairer prices.
Secondly, low and declining prices for cigar leaf
tobacco were forcing down the growers’ incomes.
The growers
Most of the information in Chapters VI and VII was
obtained during the writer* s association, from 1933 to the
present (1940), with the directors, officers, and members of
the Ohio Cigar Leaf Tobacco Growers* Marketing Association.
The individual furnishing the most information was Jesse T.
Landis, a leader in the selling plan in 1928-1930 and
secretary-treasurer of the Association since 1931* During
1933-1935 the writer was accountant for the Association and
since that time he has maintained the connection through
work on the Association’s financial reports. The figures
on operations are from the Association’s records and reports,
many of which were prepared by the writer.
169
170
of Type 44 tobacco, the production of which after the World
war had centered in the northern part of the district in
Darke and Miami counties, were most concerned in the situa­
tion in 1927 and 1928 and became the leaders in the agitation
for another cooperative.
For several years preceding 1927,
Type 44 had brought a price above that of the other types.
This had led to a great expansion in its production.
Since
demand did not increase to the same extent, the resulting
oversupply depressed its price below that of the Seedleaf
and Spanish and kept the Dutch from rising in price as did
the other types of the 1927 crop.^
In 1928, in the search for a way to improve their
condition, a group of about ten Dutch growers in Miami county
decided to join forces and to contract with a single dealer
or manufacturer to take all their crops.
A. B. Hostetter,
an independent tobacco buyer who had been sales agent for
the Miami County Leaf Tobacco Company,2 and Jesse T. Landis,
a local grower, were leaders of the movement.
For the 1928 crop a contract was made with the
Pappenheimer and Newberg Tobacco Company of Cincinnati, Ohio.
This dealer agreed to take at 16 cents per pound all the
Dutch tobacco that this group of growers would contract*
The group thus became a local buyer interested not only in
disposing of the tobacco of its members but also in contract­
ing the crops of as many other Dutch growers as possible.
^For the general price movements see Figure 10, p. 45.
2
See page 87•
171
Contracts were offered to all Dutch growers in the
northern part of the district at 15 cents per pound.
This
allowed one cent per pound for the costs of securing the con­
tracts and of managing the plan.
Hostetter was manager.
He
employed the members of the original group to do the contract­
ing and he assumed the risk of securing enough from the one
cent per pound allowance to cover these costs.
It appears
that the compensation was so arranged that members of the
group would share in any profits.
The contracting was done early in the stripping
season and as speedily as possible to avoid competition
from the other buyers.
Approximately 60$— amounting to about
1,400,000 pounds— of the 1928 Dutch tobacco in the northern
part of the district was contracted under this plan.
The group had no formal organization and no invest­
ment beyond the time and money spent in securing the con­
tracts.
It had no receiving, storing, or handling facilities.
Delivery of the crops was made directly to the freight cars
which took the tobacco to Cincinnati or to the manufacturers
to whom it had been resold.
The arrangement was successful for the 1928 crop.
The growers who had contracted with the group received as
much as, and in some instances several cents more than, those
on the outside.
It had been profitable also for the original
group of growers and the manager who had sponsored the plan.
Because of its success the plan was continued for the
1929 crop.
The price was the same.
A few more growers con-
172
tracted their crops with the group.
After these contracts
had been signed, other buyers bought a few of the remaining
crops at 16 cents per pound.
The leaders of the contracting
group claimed that this was done to destroy their selling
arrangement.
In any event, when the group tried to continue the
plan for the 1930 crop it could secure contracts on only
about one thousand cases, or approximately one-fourth of the
previous year*s volume.
The Pappenhelmer and Newberg Tobacco
Company was not interested in this amount because it would
not give the company substantial control of the Dutch leaf
market.
Furthermore, the business depression and the decline
in tobacco prices
made the company unwilling to continue the
arrangement except at a lower price.
Formation of the Association
The leaders and those who had signed the contracts
for the sale of their tobacco through the group then began
to consider forming a cooperative marketing association to
solve their problem.
A few additional Dutch growers from
other parts of the district were Interested in the project
through Hostetter*s efforts.
Also, encouragement for the
venture was provided by the activities of the Federal Farm
Board, created by the Agricultural Marketing Act of 1929.
Late in 1930 a group of about fifteen, of whom only a few
1See Figure 10, p. 45.
173
had been in the Miami Valley pool, began working on plans
for the organization of an association•
By 1930 the growers of Types 42 and 43 tobacco also
were facing a serious market situation*
An excess stock of
all three types of tobacco had been built up*^
From a 1928
peak of 17 *5 cents per pound as an average for all three
types, the price of Miami Valley tobacco had fallen to 13*8
cents in 1929.
2
The prospect for the 1930 crop was a price
of about 10 cents.
However, in the preliminary considerations the plan
for the Association included only the Dutch growers.
were several reasons for this.
There
First, the previous Dutch
contracting group furnished a nucleus around which the organ­
ization could be built.
Second, in contrast to the growers
of Spanish and Seedleaf, the Dutch growers were relatively
few in number and localized in the northern part of the dis­
trict.
Therefore it appeared that it would be easier to
organize this group and to secure effective control of the
supply of this type of tobacco.
The desire to gain this con­
trol in the hope of being able to influence, if not dictate,
prices was one of the strongest motives in the organization
movement.
Third, the difficulty of the Miami Valley associa­
tion in handling all three types^ was an additional factor
in favor of starting with one type.
The organizers hoped to
build up an association of the Dutch growers and, after it
1
See Figures 8 and 9, p. 42.
^See pages 154-155*
2
See Figure 10, p. 45*
174
was well established and had proved its worth, to expand it
to include the growers of other types*
The sponsoring group appealed to the Agricultural
Extension Service of the College of Agriculture of Ohio
State University and to the Federal Farm Board for assist­
ance-
L* G-. Foster, Associate Professor of Rural Economics
at Ohio State University,1 William Collins, head of the
Tobacco Section of the Cooperative Division of the Federal
2
Farm Board, and Charles Rogan, associated with Collins on
the Federal Farm Board, came into the territory-
Studies
were made of the situation faced by the growers of the dis­
trict and recommendations and suggestions were offered.
These outside representatives also assisted in the formation
of the association by making speeches to groups of growers
and by helping to draw up the marketing contract and organ­
ization plans*
The interest of the Federal Farm Board was
of great Importance to the sponsoring group for the organ­
izers expected to look to the Board for financial aid for
the operations of the association.
The first formal organization meeting was held at
Greenville, Ohio, January 21, 1931*
Growers of Type 44
tobacco in the northern part of the district were the only
1Later Vice-President and Secretary of the Louisville
Bank for Cooperatives— which after 1935 assisted in financing
the Association— and since 1938 President of the Columbia
Bank for Cooperatives.
2
Afterwards in the Cooperative Division of the Farm
Credit Administration and from 1937 until his death on
December 25, 1939, Chief of the Tobacco Section of the Agri­
cultural Adjustment Administration, Department of Agriculture.
175
ones who were invited*
At this meeting an organization
committee of nine, all local residents and tobacco growers,
was created*1
This committee held a number of meetings in rapid
succession to discuss the plans for the proposed association
and to devise methods for interesting the growers*
The pro­
posal to include only Type 44 growers was abandoned in favor
of an attempt to interest growers of all three types in the
whole district*
This was done when it became evident that
the restricted plan would not provide a sufficient volume of
tobacco to permit successful operation.
A further consider­
ation was the fear that any success which the association
might have in helping the Dutch growers would cause other
growers to begin raising Dutch, thereby nullifying any bene­
fits and perhaps reproducing the difficulties of 1927 and
1928.2
The membership campaign was conducted through a
series of open meetings held in community centers in the
district*
The representatives of the Federal Farm Board
and of Ohio State University were the principal speakers at
these meetings.
It is significant to note that although the
organization committee had decided to include the growers of
1See Associations Organization Agreement, Paragraph
2, Appendix C. D. P. Albright, who had been a director of
the Miami Valley Tobacco Growers* Co-operative Association in
1925-1927, was chairman of the committee and Jesse T. Landis,
who had been a leader of the contracting group of 1928-1930,
(see page 170), was secretary.
2Se® 169-170.
176
all three types of tobacco throughout the whole district,
these meetings, with but two exceptions, were held in Darke
and Miami counties in the northern part of the district.
One reason for this is said to have been the desire to
disassociate this organization entirely from the previous
association which had centered in the southern part of the
district with headquarters at Dayton in Montgomery county.
A more important reason seems to have been that a greater
portion of the growers in the southern section had been
members of the 1923-1927 pool and were not receptive to the
idea of another attempt.
Some of the growers of Types 42
and 43 suspected that the association was being formed
primarily for the benefit of the Dutch growers.
In contrast to the arrangement in the Miami Valley
Tobacco Growers' Co-operative Association,1 no requirement
was set as to the number of growers or the amount of tobacco
which had to be contracted before the association would
start.
It was left to the organization committee to decide
when sufficient tobacco was pledged to justify the under­
taking.
The committee was expected to reach and announce
its decision on this point by November 1, 1931*
The member­
ship contracts were to become effective from the date of
this announcement*
However, if the announcement was not
made by March 1, 1931, the 1930 crop was not to be included
in the agreement.2
1See page 105.
2See Association's Organization Agreement, Paragraph
8, Appendix C.
177
The membership campaign did not receive an enthusi­
astic response.
By March 1931 less than one hundred growers
had signed contracts.
The reports of the representatives of
Ohio State University and the Federal Farm Board were not
encouraging.
They suggested that the field was not ready
and that the farmers were not sufficiently interested to
justify proceeding with the organization.
The poor response of the growers can be attributed
to several factors.
It appears that the method of conducting
the membership drive was not one of these factors, for the
campaign is said to have been thoroughly organized and well
handled.1
It relied primarily on the open meetings in the
various communities.
This had been a standard Instrument in
the organization of other tobacco marketing cooperatives.2
During the campaign there was some condemnation of the buyers
and dealers, but it did not assume the proportions which it
had in the formation of the previous association.^
Although
several organizers tried to tempt the growers with promises
of war-time prices, it appears that attempts were made to
avoid extravagant statements concerning benefits.
that this restraint hampered the campaign.
It may be
Perhaps the
greatest impediment was the growers' clear recollection of
the failure of the Miami Valley Tobacco Growers' Co-operative
Association.
1Personal letter from William Collins, representative
of the Federal Farm Board in the campaign, June 29, 1939.
2See page 103.
^See page 104.
178
The Federal Farm Board indicated that it believed
that a large number of growers should be signed before the
venture started, and that it would not be willing to provide
financial support unless contracts covering at least 5,000,000
pounds a year were secured.1
At that time, February 1931,
less than one—tenth of that amount was assured by the con­
tracts signed.
After this rebuff the organization committee turned
to the Federal Intermediate Credit Bank, Louisville, Kentucky,
as a possible source of financial aid.
When that bank indi­
cated a willingness to provide assistance if "certain condi­
tions" would be met, the committee decided to go ahead with
o
the formation of the association.
The decision to launch the undertaking was reached
at a meeting at Greenville, Ohio, February 28, 1931.
The
following resolution was adopted:
WHEREAS the organization committee of the Ohio Cigar
Leaf Tobacco Growers’ Marketing Association and other
persons Interested in the organization of such an Asso­
ciation have made a determined effort to secure a large
and adequate number of members to form a pool and handle
the 1930 crop of tobacco; and
WHEREAS the members of this committee feel that if
the organization is not formed in time to handle the 1930
crop that it will be impossible to interest the growers
in marketing the 1931 crop and thereafter through a co­
operative marketing association and that the idea and
plan of cooperative marketing of the tobacco crop in
western Ohio will suffer irreparable damage; and
WHEREAS a representative number of growers have
signed the organization and marketing agreement although
1Association1s Minute Book, p. 29.
2Ibid., p. 26.
179
not as many as the organization committee had hoped
would do so; and
WHEREAS the organization committee has consulted
representatives of the Federal Farm Board; and
WHEREAS said representatives have not been interested
in organizing or financing a small co-operative marketing
association organized for cooperatively marketing the
1930 crop of tobacco; and
WHEREAS it appears likely that Federal Farm Aid and
cooperation may be secured through the Federal Inter­
mediate Credit Bank of Louisville, Kentucky; now
Be it resolved by the organization committee of the
Ohio Cigar Leaf Tobacco Growers 1 Marketing Association,
Section I
That a sufficient number of producers of tobacco
have signed the marketing contract to justify the organ­
ization of such a cooperative marketing association.
Section II
That such Association be formed forthwith by the
signing of the requisite number of signers of the Articles
of Incorporation to be filed with the Secretary of the
State of Ohio.
Section III
That the chairman of this committee be and he is
hereby authorized and ordered to publish notice of the
formation of this cooperative marketing association by
publishing notices to that effect in one or more daily
newspapers circulating through the tobacco growing coun­
ties of western Ohio.
The Articles of Incorporation were filed with the
Secretary of State of Ohio on March 6 , 1931*
The Associa­
tion2 was organized as a non-profit association without cap­
ital stock under the cooperative association law of 1923.
On March 14, 1931 the organization meeting of all contract
Association* s Minute Book, pp. 28-29.
2In this chapter and the following one this organi­
zation will be designated as "the Association** to simplify
the statement. Other cooperative organizations will be
referred to by descriptive oh exact titles.
180
signers was held at Pleasant Hill, Ohio.
The secretary
reported that ninety-four growers had signed the contracts
and that seventy-two of them were present.'*'
Twenty more
growers signed contracts at the conclusion of the meeting.2
The Articles of Incorporation were read and the By-Laws
presented by the committee were adopted.
A board of direc­
tors was elected.
The total expense of organization was $1,519.74.
Most of this was for mileage and expenses of the organiza­
tion committee and its agents.
Committee members received
no remuneration for their time.
The Federal Farm Board and
Ohio State University paid the expenses of their representa­
tives.
The places for organization meetings had usually
been secured free of charge.
Since the organization had no
funds, payment of the expenses was deferred until financing
could be arranged.^
The $2 membership fee charged the grower
when he joined and good for the ten year term of the contract
made only a small contribution toward defraying the costs,
especially since payment of this fee was postponed in most
instances until the Association made settlement with the
A
grower for his tobacco.
This total cost of organization was not large, but
in terms of contracts signed, $13.33 per contract on the day
Association* s Minute Book, p. 32.
2Ibld., p. 52.
Abld., p. 63 . In the previous association the Ohio
Farm Bureau Federation advanced the funds for organization
expenses (see page 102).
^See Association's By-Laws, Article X, Appendic C.
181
of organization, it appears exorbitant#
It meant a heavy
item of overhead for the quantity of tobacco received the
first year.'*'
A comparison with organization costs of several
other tobacco associations is revealing.
The Tobacco Growers
Cooperative Association in the Virglnia-Carolina district was
condemned for wastefulness with a total organization expense
of $231,963*81, but this represented a cost of approximately
$2.50 per contract.2
The Dark Tobacco Growers Cooperative
Association at Hopkinsville, Kentucky, secured 55,000 mem­
bers at a cost of $42,000, or $.76 per member.3
The cost
per contract in the Miami Valley Tobacco Growers* Cooperative
Association had been $2.34.^
Thus, the Ohio Cigar Leaf Tobacco Growers' Marketing
Association began under serious handicaps, for it had no
financial resources or aid and could reasonably expect only
about 400,000 pounds of the 1930 tobacco from the few mem­
bers it had secured.
In spite of their interest in a monop­
oly of the tobacco supply, the organizers were not especially
perturbed by the small membership, for they were not desirous
of securing a great portion of the growers in the Valley at
first*
They believed that one of the serious errors of the
previous association had been the attempt to start on a grand
A h e total organization expense was charged against
the first year's crop.
2Scanlan and Tinley, op. cit.» p. 79.
Agricultural Cooperation, Sept. 10, 1923, p. 3«
4
See page 109 *
182
scale*
It was their Idea that it was better to start small,
to build soundly, and then to expand to a dominating position
in the market*
As already noted, this was one reason for
the original plan to limit the membership to Dutch growers*^At the same time the organizers realized that a very small
quantity of tobacco would not permit efficient operation,
and they hoped to secure additional members who would deliver
their 1930 crops*
While the plan to start on a moderate
scale and then to expand appears to be a sound one, the Asso­
ciation has never experienced a great growth and so has
never realized the ambition to dominate the market, for in
no year since operations began has it received as much as 6%
p
of the tobacco produced that year in the Miami Valley.
The
reasons for the failure of the Association to grow to an
important size will be considered in sections of this and the
following chapters*
It is significant to note that the support for the
Association at the time of formation came almost entirely
from Type 44 growers and from those who had not been members
of the previous association*
This has been true to a great
extent of the membership in succeeding years as the Associa­
tion has continued its operations*
Membership Contract and Relations
The organization and marketing agreements were
1See page 173
2See page 236*
183
drafted by William Collins of the Federal Farm Board
Since the membership contract is important in membership
relations, and, hence, has a bearing on the success of an
association, it is desirable to consider the provisions of
the contract, to see how these provisions have been applied,
and to note the results*
In the contract, which has remained in use since the
Association began operations, membership is open to all
tobacco growers*
This includes the landlords of farms on
which tobacco is raised, provided that they receive all or
part of their rentals in tobacco#^
Both landlord and tenant
are not required to belong, and in many instances only one
of them has delivered his share of the crop to the Associa­
tion*
This appears to have worked satisfactorily both for
the growers and the Association*
The organizers realized that the terms of the con­
tract could have considerable influence on membership loyalty
and that a proper formulation of these terms was not easy*
They wished to assure the Association of a constant quantity
of tobacco in successive years by binding the members to
deliver their crops for a term of years, but they wished
1These agreements are given in Appendix C* In their
preparation use was made of features in the agreements of the
Miami Valley Tobacco Growers' Co-operative Association, the
Burley Tobacco Growers Cooperative Association, and the
South Carolina Tobacco Growers Marketing Association* The
last of these was formed in 1930 with the assistance of the
Federal Farm Board*
P
See Association's By-Laws, Article X, Section (b),
Appendix C*
184
also to avoid the objections to a contract which could not
be terminated*
The difficulties of the previous association
with a binding, fixed-term contract**- were a warning that
such a contract would not make certain a loyal membership*
As a compromise, the marketing agreement binds the
members to deliver their crops to the Association ’’during a
period of ten years from the date of this agreement," but
makes provision for cancellation of the contract by either
party during the period*
The party desiring to be released
Is to serve notice in writing on the other party during the
month of November*
Cancellation of the contract becomes
effective on December first of that year*
When a member
withdraws he is to be readmitted to membership only after
one year and upon a majority vote of the board of directors*2
Several purposes are served by these provisions*
Therather long
period of ten years is to indicate the perma-
nance planned for the Association and to reduce the expense
and trouble of securing signatures to the contracts at fre­
quent intervals*
The stipulation that the contract Is to
run from the date it is signed is Intended to prevent all
^See pages 157-182. Since about 1930 the tobacco
associations have appeared to favor the abandonment of the
binding contract. For example, in recent years the associa­
tions in the dark tobacco district of Kentucky-Tennessee and
the pool in northern Wisconsin have used optional delivery
contracts. In the former of these the growers may offer
their crops at auction and if they do not get the price they
want, the tobacco may then be pooled through the associa­
tions. (Fetrow, W. W., Cooperative Marketing of Agricultural
Products, pp. 85-86; Collins and Bakken, op. cit*7 PP* 8-9).
p
See Association's Marketing Agreement, Paragraphs
1 and 2, Appendix C.
185
contracts from having a common date of expiration which
would necessitate a drive to renew them all at once*
With
new members being added all the time, less publicity and
effort is involved In re-signing the agreements which expire
each year*
In addition, there is no certain date at which
the Association will pass out of existence If all new oontracts are not secured.A
A simpler plan would have been to
have made the contract self-renewing from year to year with­
out a fixed duration period*
December first is set as the date of withdrawal
because it is before the usual selling and delivery season*
This makes it possible for the Association to plan for the
quantity of tobacco it can expect to receive.
It also pre­
vents the members from waiting until the buyers' prices are
known before deciding whether to deliver to the Association
or to sell outside.
Liquidated damages for the breach of the contract
are five cents per pound, as they were in the Miami Valley
o
Tobacco Growers' Co-operative Association contract.
They
are to be computed on the total pounds of tobacco which the
grower refuses to deliver to the Association under the terms
of the agreement
■^The difficulties of a complete re-signing were seen
in the failure of the Burley Tobacco Growers Cooperative
Association to secure the required percentage of renewed
contracts in 1927* (Agricultural Cooperation, Nov. 26, 1927,
p. 466.)
p
See page 110•
^See Association's Marketing Agreement, Paragraph
13, Appendix C.
186
The effectiveness of the provisions for the with­
drawal of members and for liquidated damages has not been
tested, for they have not been enforced*
Of the many mem­
bers who have stopped delivering their tobacco to the Asso­
ciation after a few crops, the files indicate that not more
than fifty gave notice of their intentions*
Most of these
were in the second year when the secretary tried to require
observance of the regulations*
No attempt has been made to
collect liquidated damages from those who have failed to
deliver without officially withdrawing*
In many instances members have not delivered their
crops each year but have brought their tobacco to the Asso­
ciation only when it has appeared profitable to do so.
No
penalty has been assessed against those who have done this.
At first the officers expressed the opinion that perhaps the
function of the Association was to serve the growers during
periods of low prices, and that members should sell outside
when the price was high.
This idea was rejected as time
reveaXed the effects of the resulting fluctuations in the
volume of deliveries on the overhead expenses per pound of
tobacco and on the problem of maintaining a stable organi­
zation.
Since 1938 the officers have especially emphasized
the fact that they expect the members to deliver all crops
to the Association.
Although no action has been taken
against those who sell some crops outside, suggestions have
been made that the Association favor the loyal members in
matters of advances and purchases of trash leaves.
187
The by-laws give the board of directors the power to
expel members who cease to raise tobacco or who refuse to
deliver
their crops or to abide by the Association's regula­
tions*
In cases of expulsion a member is to be paid "the
equitably appraised cash value of his interest in the prop­
erty of the Association*"^ These property rights are to be
in proportion to the tobacco delivered to the Association by
o
the various members*
The only time the directors have made
use of this power of expulsion was in 1937 during the dissen­
sion among the board members when it was feared that the dis­
loyal members might influence the annual e l e c t i o n . ^
no
pay­
ment for property rights was made to the expelled members*
In any case the amounts due would have been small.
In establishing the legal relationship of the Asso­
ciation
to the grower and the tobacco, the marketing agree­
ment makes
the transfer of the tobacco from the members to
the Association a purchase-and-sale transaction*
In fact,
it goes so far as to say that "this agreement is intended by
the parties to pass an absolute title to the Association to
each of the crops covered hereby ..........
However,the
Association in Its operations has insisted that the title
remains with the grower*
It has refused to pay taxes on the
■^See Association's By-Laws, Article XI, Appendix G*
2Ibid*, Article XIII.
■^See page 205*
^See Association's Marketing Agreement, Paragraph 1,
Appendix C.
188
tobacco In its warehouses on the grounds that it does not
own the tobacco, and that it is the duty of each member to
report for taxation in his own county the tobacco he has
with the Association.
This had been the position taken by
the previous association with a similar purchase-and-sale
membership contract.1 Under the terms of the marketing
o
agreement the Association has borrowed on and insured the
tobacco in its possession without question as to the owner­
ship of the tobacco.
The Association has denied members the right either
to remove the tobacco or to sell it to some other person or
firm after it has been placed with the Association.
This
has been based, not on the ownership of the tobacco, but on
the agency agreement that the Association is to handle and
sell the tobacco and on the claim that to permit such with­
drawal would contradict the permission to pool the tobacco
by types and grades.
3
Increasing the Membership
An immediate concern of the Association after it
had organized was to secure additional members, for the offi­
cers realized the importance of increasing the volume of
tobacco the Association would receive.
A number of methods
1See page 112.
o
See Association’s Marketing Agreement, Paragraph 6,
Appendix C •
^Ibid., Paragraph 4.
189
of soliciting membership have been employed.
During the
first year, 1931, the general manager was expected to con­
duct the membership campaign and to bear its costs out of
his commission.
A large membership was to his advantage,
for he was paid on the basis of the total pounds received by
the Association.-^
From the number of crops received the
first year, it appears that he added fifty or sixty growers
to the membership.
When the management was changed in January 1932,2 a
new plan for securing members was adopted.
Agents were
appointed by the board of directors to conduct a membership
drive.
These agents were the members of the board, the ware­
house manager, the secretary-treasurer, and Irvin Richter, a
member.
Compensation was to be one-fourth cent per pound on
the first crop delivered by the new members*^
Because of
trouble which developed between Richter and the board, the
plan was modified in April 1932 by the creation of a field
committee consisting of the directors and the employees of
the Association.
Compensation was limited to expenses
4
incurred in the work.
This action of the board really
brought an end to the campaign, for the committee never func­
tioned.
Most of its members continued to urge growers to
Join, but no special effort was devoted to this work.
Richter was paid $471.83 for his services in securing
new members.
1
Until 1938 no other agent or member of the
See page 199.
2
See page 201.
^Association’s Minute Book, p. 85*
^Ibid., p. 92.
190
field committee was paid for his work.
In 1938# when dissen­
sion was embroiling the directors, Richard McG-uire, who had
been warehouse manager for the Association since January
1932, brought suit for $1,219.98 plus interest from January
1, 1933 as payment for his services in the membership cam­
paign.
The case was settled for $250 and costs.
The only other attempt to employ agents to secure
new members was made in September 1933 when Wm. B. Wilson,
a retired farmer of Brookville, Ohio, was named representa­
tive for this purpose.
He was to receive a dollar for each
contract he turned in to the office.
According to the
records he was able to secure three new members.
Thus, the Association has not been aggressive in
seeking new members.
It has depended upon its old members
to spread reports of its activities and to induce other
growers to join.
Most of the new members have come to the
Association in this manner.
The cost of a membership cam­
paign and the unwillingness of officers and members to
solicit growers for membership without pay for their services
have deterred the Association from a vigorous drive.
Another
factor has been the fear on the part of the officers that
such a campaign would arouse the opposition of the dealers
and of those manufacturers who buy part of their tobacco
from the growers.
However, it appears that one reason for
the Association remaining small has been the lack of effort
to secure members, and that if it desires to reach a greater
size it will have to resort to publicity and active campaign-
191
lng among the growers.
The desirability of such action was suggested to the
Association by H. M. Bain, Principal Agricultural Economist
of the Farm Credit Administration when, in the summer and
fall of 1939, he visited the Association several times to
discuss the possibilities of enlarging the membership.
He
indicated that the federal government would provide funds
for an educational campaign in the district.
To date (May
1940) no definite steps in this direction have been taken.
The active membership of the Association has varied
from about 50 to 500.
The changes are shown in the deliv­
eries of tobacco to the Association, considered below.^
The
provision in the membership contract making it possible for
members to withdraw, and the policy of the board of directors
in not requiring observance of the contract, even when the
few withdrawal regulations have not been followed, have been
important causes of the fluctuations in the membership.
Approximately 1,000 different growers have been members since
1931, while not more than thirty have been members continu­
ously since 1931*
Maintaining Membership Relations
The Association has made no great effort to maintain
contact with the members.
It has not even Issued the member-
ship certificates required by the by-laws,
p
since the direc-
1See page 236.
2See Association's By-Laws, Article XI, Appendix C.
192
tors have felt that they have not been necessary*
It has
never had a field service or membership relations department
and has not attempted to keep the members informed of its
activities*
In most respects it appears that the least
possible information has been disseminated*
No bulletins or
statements of operations have ever been published and given
to the members*
As an example of the practice of keeping
information from the members, an investment by the directors
in 1934 of $2,500 in a chemical plant^- has never been report­
ed to the membership*
The annual meetings and such special meetings as
have been called have been the only occasions when reports
have been given generally to the members*
A part of these
reports has consisted of sections— usually the balance sheet
and the inventory schedule— of the accountant* s or auditor's
annual report.
given in totals.
Sales and expenses, when reported, have been
Other sections of the financial reports,
such as the summaries of operations of the different pools
by crop year and type of tobacco, have usually been omitted.
The secretary-treasurer and directors, often in response to
questions, have made general comments on the sales activities
and the hopes for the future.
The average attendance— about one-third of the active
membership— at the annual and special meetings has been
satisfactory, but the amount of information imparted has not
enlightened the members on the detailed operations of the
1See page 255*
193
Association*
At a special meeting in 1933 the members voted
to have quarterly rather than annual meetings,^* but the plan
was not put into effect.
The annual reports of the accountant or auditor have
been placed on file in the office for the inspection of the
members, but no member has availed himself of the privilege.
In addition no use has been made of the provision in the by­
laws that a member or his duly authorized representative may
examine
the books of the Association and such papers as may
be placed on file by vote of the Board of Directors.”2
The members have learned very little of the sales
prices and the expenses of the Association*
In making final
settlement on a type pool the Association has merely indi­
cated to each member the number of payments and the total
that It has paid on his crop*
No summaries of deliveries,
sales, and expenditures of type pools, nor any analysis of
sales or costs have been given to the members.
In spite of this practice members have made little
complaint of a lack of information and have never revolted,
as did the members of the Miami Valley Tobacco Growers*
Co-operative Association, which did extensive membership
relations work.^
Several factors appear to have been respon­
sible for the satisfactory management-membership relations
notwithstanding the few efforts made to maintain such
Association* s Minute Book, p. 128.
2
See Association's By-Laws, Article VIII, Appendix C.
A e e pages 113-117, 156-163#
194
relations
First, the members have been made welcome at the
offices, which have been in small towns where they have been
readily accessible to the growers*
In this connection the
Association has made its only attempt, beyond the membership
meetings, to maintain contacts with its members*
The offi­
cers have urged members to call at the office and warehouse
to see the tobacco being rehandled and to learn what the
Association is doing*
A majority of the members have taken
advantage of the Invitation and have called a number of
times during each year*
On these occasions, however, very
little specific Information has been furnished, but the mem­
bers appear to have been satisfied with the general state­
ments made*
Second, the membership has been small and most of
the officers have been farmers with a very real concern in
the welfare of the tobacco growers.
This has resulted In a
close acquaintance between the officers and the members on
the basis of a common interest and a common viewpoint.
The
members' feeling of being close to the Association, or at
least to its officers, may have made up for the lack of facts
on Its operations.
The members have seemed confident that
they would receive fair treatment from the Association,
although It might not secure high prices for their tobacco.
Third, the ease of withdrawing from the Association
1To contrast this situation with that in the pre­
vious Association see pages 166-167 *
195
has made a revolt unnecessary*
When members have become
dissatisfied because of the slowness of the Association in
making sales or payments, or because of poor returns on their
crops, they merely have not delivered the succeeding crops*
Individual members have done much complaining,
especially in the period 1933-1957, about needing the money
from the crops placed with the Association, but no organized
opposition has ever appeared.
No member has ever brought
legal action against the Association.
Several in 1935-1937
asked for the right to remove their crops or to sell them
out of the Association warehouse.
When the requests were
denied, no further action was taken.
Management
An examination of the management of the Association
may well begin with the board of directors of seven elected
members and one public director.
The elected members, who
must belong to the Association, serve terms of three years
with the terms so arranged that not more than three of them
expire in any year.1
This provides a desirable continuity in
the membership of the board.
Nominations for the positions on the board are pre­
pared by a nominating committee of the board and are also
made from the floor at the annual meeting.
According to the
by-laws, the nominations of the board are to be reported to
^See Association's By-Laws, Article II, Section 1,
Appendix C.
196
the members in the notice of the annual meeting mailed ten
days before the meeting,1 but this has never been done*
At the election at the annual meeting in February
each member has one vote#
Vote by mail was permitted by the
by-laws, but was denied by an amendment adopted at the
annual meeting in February 1934.^
Vacancies on the board are
filled by the other directors, and such new directors serve
until the next annual meeting.^
Directors have always been elected at large although
provision is made that they may be chosen "from districts or
classes of growers11 as established "equitably” by the board.^
However, the officers and directors have been successful In
their endeavor to see that all sections of the district and
the growers of all three types of tobacco are represented on
the board#
Since 1933 the Association has operated with only
six elected directors#
When a vacancy occurred because of
the death of a director, the position was not filled.
Other
vacancies, which have arisen from resignations have not been
filled until the following annual meeting.
This policy has
been in the interest of economy.
The directors have maintained a close contact with
1See Association's By-Laws, Article IX, Sections 3
and 6, Appendix C .
2Xbid., and Association's Minute Book, p# 134.
5See Association's By-Laws, Article II, Section 5,
Appendix C .
^Ibid., Section 3-
197
and control over the affairs of the Association, especially
in the matters of insurance, finances, and sales*
They seem
to have been consciencious in their duties and deeply Inter­
ested in the success of the Association#
Three of the
present (May 1940) directors have been on the board since
organization in 1931#
The public director was to be appointed by the
Director of Agricultural Extension Service of Ohio State
University with the approval of the board of the Association?*
Despite requests from the Association no public director has
ever been appointed.
Officers of the Association declare
that the director's compensation of $3 per day, plus an
allowance for actual expenses and a car expense of five cents
per mile while travelling on Association business,2 is not
sufficiently attractive to those who might be appointed.
According to the by-laws the directors are to place
the immediate operation of the Association In the hands of
a "President, Vice-President, Secretary and Treasurer to­
gether with any other administrative officers that the Board
of Directors may see fit in its discretion to provide for by
resolution#”
The personnel, tenure, and salaries for these
positions are determined by the board.^
The organization structure soon after the Association
^See Association's By-Laws, Article II, Section 4,
Appendix C •
2Ibid#, Article III#
^ibid#, Article VI#
began operations is shown in the accompanying chart*
In
contrast to the arrangement in the Miami Valley Tobacco
Growers* Co-operative Association^ the president of the
ORGANIZATION CHART OF OHIO CIGAR LEAF TOBACCO
GROWERS’ MARKETING ASSOCIATION IN 1931
Members
Board of Directors
President and
Chairman of the Board
Vice-President
General
Manager
SecretaryTreasurer
Finance
Accountant
Warehouse
Manager
Sales
Membership
Campaign
Handlers,
Packers
Figure 18
Association has not been the active directing officer, but
merely the head of the board of directors*
D* P. Albright,
who had been president of the organization committee, held
this position from the time of organization in 1931 until
1939*
The vice-president has no duties beyond advising with
the president and serving in his absence.
^"See page 120*
199
For the first year the board created the position of
general manager and gave it to A« B. Hostetter, an independ­
ent buyer and a leader in the formation of the Association*
Hostetter had charge of all activities in handling the
tobacco, including the selling of it, had control of the
accounting records, and was to conduct the membership cam­
paign*
He hired all office, field and warehouse workers*
The remuneration for the position was a commission of one
cent per pound on all tobacco received by the Association,
and from this commission he paid the accountant, the field
men, and the warehouse manager*
The board hoped by this
plan to place an
effective check on overhead costs* It
appears that the
plan was partly successful*^
Jesse T*
secretary of the
Landis, a local tobacco grower who had been
organization committee, was placedin the
position of secretary-treasurer.
During the first year his
duties consisted of serving as secretary to the board, of
approving all bills and signing the checks, and of arranging,
with the assistance of the board, for the financing of the
Association.
This organization structure remained in effect from
March 1931 to January 1932, when the board forced Hostetter
to resign as general manager*
for this action.2
Several reasons were advanced
The board felt that one factor in their
^-See page 246.
2These reasons are from statements of the officers
during the writer* s association with them from 1933 to date
(1940).
200
inability to secure financial aid from the Federal Inter­
mediate Credit Bank1 was the manager’s former activity as a
tobacco buyer#
It seems unlikely that there was any validity
in this belief.
A second objection to Hostetter arose over sales of
the tobacco.
The board became impatient when all the 1930
tobacco was not sold within six months after it was received.
Landis visited several manufacturers and disposed of a large
quantity at good prices.
This led to accusations that
Hostetter was not handling sales properly.
On one large sale
which Hostetter made, the manufacturer gave him a check for
$1,000 as a brokerage fee.
Hostetter claimed that he had
not known about the fee when the contract was made, and he
turned the check over to the Association.
Instead of
expressing gratitude, the board suspected that there might
have been other checks which were not turned over to it.
The final event leading to the dismissal of Hostetter
was the discovery that the accountant and the warehouse man­
ager had changed the numbers on certain cases of tobacco and
that several of the cases Involved were missing.
It appears
that Hostetter was a victem of circumstances and was not
guilty of wrong doing.
He received $5*297*50 from the Asso­
ciation as his commission for the year’s operations and out
of this paid the salaries of the warehouse manager and of
the accountant and the expenses of the membership solicitors.
In the reorganization of the management after
See page 211•
201
Hostetter1s dismissal, the hoard abolished the position of
general manager and transferred most of the duties of this
position to the secretary-treasurer who became the active
ORGANIZATION CHART OF OHIO CIGAR LEAF TOBACCO
GROWERS* MARKETING ASSOCIATION AFTER 1931
Members
Board of Directors
President and
Chairman of the Board
Vice-President
SecretaryTreasurer
Warehouse
Manager
Handlers
Packers
General
Supervision
Finance
Sales
Accountant
Figure 19
head of all operations#
The secretary-treasurer was employed
on a salary basis at #130 per month#
The warehouse manager
and the accountant were employed by and made responsible to
the board as well as to the secretary-treasurer#
The sala­
ries of these positions were set at #25 and #17*50 per week
respectively #
The revised organization structure which has been in
use since January 1932 is shown in Figure 19#
As noted in
202
the diagram the secretary-treasurer has complete charge of
activities from general supervision to finance and sales#
The work of campaigning for new members was given temporar­
ily to a group of agents on a commission--later an expense—
basis, and was soon discontinued
Since August 1937, because of the sale at that date
of all accumulated holdings and because of reduced receipts
of tobacco in the following years, the secretary-treasurer
and the warehouse manager have been on part time employment.
The accounting has been done only occasionally#
The salary
of the secretary-treasurer in this period has been #50 per
month plus a travelling allowance of five cents per mile.
An Increase in the Association^ activities in 1939-1940
would indicate that a full time staff may be needed again.
The organization plan has never received careful
study#
No analysis has been made of the functions involved
in a proper operation of the Association.
The practice has
been to hire the fewest possible persons to carry on a min­
imum of activities.
To be sure, the volume of tobacco han­
dled has never justified an elaborate organization#
Only in
such a small company is it feasible for an officer to under­
take all the duties, including routine work, which have
rested on the secretary-treasurer of the Association since
January 1932.
In practice the sales duties have received
very little attention, not so much because the secretarytreasurer has lacked time for the work but because he has
1See page 189.
203
"been at a loss for a method of doing the work.
The arrange­
ment of having the warehouse manger and accountant respon­
sible to both the board and the secretary-treasurer has
worked satisfactorily except in 1935-1937 when several direc­
tors opposed the actions of the secretary-treasurer .**■
In the matters of personnel and salaries the Associ­
ation has gone almost to the other extreme from the Miami
Valley Tobacco Growers’ Co-operative Association.
The sal­
aries of $1,300 for the warehouse manager and $1,560 for the
secretary-treasurer in the Ohio Cigar Leaf Tobacco Growers'
Marketing Association are in sharp contrast to the salaries
of $5,000 and $25,000— or even, as after the first year,
$2,500 and $7,000— for positions of corresponding importance
in the 1923-1927 association.2
Except for the first year of operation, when
Hostetter was manager, the Association has been under the
direction of persons who have been tobacco growers but who
have been relatively inexperienced in tobacco marketing.
This has been true of both directors and operating officers.
The ten years of experience in the Association do not appear
1
■5
See page 204*
2
See pages 122-123.
The secretary-treasurer had secured some experience
and contacts through the contracting group in 1928-1930 (see
page 170). The vice-president (president since 1939) had
been manager of the Miami County Leaf Tobacco Co. of 1912,
and the director who was president in 1931-1939 had been a
director in the Miami Valley Tobacco Growers' Co-operative
Association in 1925-1927* One of the more recent directors
had been manager of the Farmers Cooperative Cigar Leaf
Tobacco Co* of 1912. The experience secured in this manner
had been limited and has not proved to be of much assistance
In the management of the Association.
204
to have provided them with the knowledge, skill and contacts
necessary for most efficient management*
The warehouse man­
agers since 1932 have been exceptions, for they have been
well qualified for their work by experience in grading,
rehandling, and repacking tobacco.
The policy on personnel and salaries has been in
part a reaction from the growers' unfavorable reception of
the policy of the earlier association.
The organizers
believed that the Association had a better chance to succeed
if it was operated "by the farmers for the farmers.”
Hon­
esty, sincerity, and a close relationship with the farm and
the growers were held to outweigh experience.
During most
of the period the low salaries have been necessary as a
matter of economy.
How this policy has influenced opera­
tions, especially sales, will be discussed in the following
chapter.
Discord among the directors and operating officers
disturbed the Association's operations from 1935 to 1937*
The disagreement was over the sales policy of the secretarytreasurer.
In 1935, when the Federal Intermediate Credit
Bank became insistent that the large stock of tobacco on
hand be sold,1 several members of the board, including the
president, were convinced that a more vigorous selling pro­
gram was necessary, and that the secretary-treasurer had
been obstructing rather than pushing sales.
The first open controversy came over a different
1See page 218*
205
Issue, the matter of selecting a company with which to place
the insurance carried by the Association.
From this point
on the dissension became increasingly bitter.
The secretary-
treasurer won three directors to his side so that the board
was
evenly divided.
The warehouse manager and
theaccount­
ant
were aligned against the secretary-treasurer.
In 1937,
when a huge stock had accumulated and sales were slow, the
president, with the approval of all the other directors,
sold the entire stock of tobacco on hand.1
This did not put an end to the trouble, for the
secretary-treasurer insisted that he could have sold the
tobacco, if given time, at much better prices.
He accused
the president of receiving a private fee for the sale.
Both
sides appealed to the members for support, but the members
were not greatly alarmed about the matter.
Although the
returns on their crops were rather small, they were relieved
to have the tobacco sold
Each side became
and settlement made.
afraid that the other
would attempt
to gain control of the board at the annual election in 1938
by appealing to the members who were no longer delivering
tobacco to the Association.
Therefore, a motion was passed
at the regular board meeting in January 1933 striking from
the membership rolls all those who had not delivered their
1937 crops.
This left only 67 members eligible to attend
1See page 233. It is interesting to note that in
1932 Landis had secured direction of the Association by
selling some tobacco over the head of Hostetter, who was
then general manager. (See page 200).
206
the annual meeting in February.
Neither side gained in the
election since the directors whose terms expired were re­
elected.
In February 1939 the president and another dis­
senting director resigned.
Since that date harmony has pre­
vailed on the board with the secretary-treasurer dominant in
policy making.
Although the directors have been Interested
and active in the operations of the Association, the secretarytreasurer has guided the Association's activities and has
kept it alive.
Equipment
The headquarters of the Association were established
at Greenville, Ohio.
This was in the center of the northern
part of the district where nearly all the members at that
time lived.
The Association secured adequate facilities by
renting a two-story brick building which had been used for a
number of years as a tobacco warehouse.
This provided stor­
age space for approximately 20,000 cases and rooms for re­
sweating and rehandling the tobacco.
attached to the warehouse.
An office building was
The rent was five cents per case
per month on the tobacco in storage plus an annual charge of
$200 for the use of the office building, of all the necessary
tools and equipment, and of the rehandling room in the base­
ment.
The minimum monthly rental for tobacco storage was
$100.
In 1933 a section of the warehouse was licensed and
bonded under the United States Warehouse Act of 1916.
This
207
made it possible for the Association to borrow easily and at
low rates of interest by using warehouse receipts on tobacco
in bonded storage.1
After the Association expanded in 1932-1933 and its
members were located in all parts of the district, the mem­
bers in the southern section began to agitate for a second
warehouse located farther south.
They felt that they were
at a disadvantage with the members in the northern section
because of the distance they had to deliver their crops.
During 1934 and 1935 the officers investigated possible
locations at Brookville, Germantown, and Miamisburg.
The
problem of added cost to the Association and the uncertainty
of the future prevented any action.
It seems likely that
the use of a warehouse in this section would have brought
some new members to the Association, but it is not certain
that it would have been worth the cost.
At various times the officers and members discussed
purchasing the Greenville warehouse and office building.
The marketing agreement provided that the Association might
acquire the necessary plant and facilities either directly
or through subsidiary corporations.
To secure the necessary
funds, sums could be deducted from the sales of members'
crops and certificates issued to the members for these deductions representing their equities in the assets purchased.
2
1See page 213#
2See Association’s Marketing Agreement, Paragraph 9,
Appendix C .
208
Although the Association was offered the building at
what the officers felt was a low price of $18,000, it was
not in a position to borrow the money or to deduct enough from
the amounts due the members to raise this sum.
On May 6, 1937,
the directors voted to sell stock of $10 per share to the
members for this purpose.1
No definite plans were developed
and the project died with this action by the board.
In December 1937, after the whole stock of tobacco
had been sold,
p
the Association vacated the Greenville ware­
house and moved Its headquarters to Brookville, Ohio.
The
volume of tobacco it seemed likely to receive on the 1937
crop made the minimum rental of $100 in the Greenville house
too high.
At Brookville the Association rented a small frame
tobacco warehouse with a capacity of approximately 2,500
cases.
Office rooms were located in the warehouse.
In 1938
a bonded storage section was constructed in part of the
building.
Rental was set at a flat fee of $40 per month.
In construction and facilities, except shipping, the Brookville
house is inferior to the Greenville warehouse.
Since the
Brookville warehouse had very little equipment, the Associa­
tion had to make an investment of $500 in fixed assets.
On
the other hand, Brookville offers the advantages of a more
central location for the present membership and of a commu­
nity seemingly more friendly to the idea of cooperative
action.
i
Association's Minute Book, p. 180.
2
See page 233*
209
This warehouse was adequate for the operations of
the 1937 and 1938 crops, but in March 1940, with some of the
old crops still on hand and increased deliveries of the 1939
crop, the storage and working space was found to be too
small.
Another Brookville warehouse with a capacity of about
900 cases was rented and immediately bonded.
The use of two
warehouses has already (May 1940) proved to be inconvenient
and expensive.
A third warehouse will soon be needed unless
deliveries of future crops decline or the accumulated stock
is sold.
Because of the fluctuations in the volume of tobacco
handled from year to year, the Association would seem to
have been fortunate in having no great fixed investment.
Rented facilities have been adequate, and it seems very
likely that they have been cheaper in operation than owned
facilities would have been.
CHAPTER VII
OHIO CIGAR LEAF TOBACCO GROWERS' MARKETING
ASSOCIATION - OPERATIONS
The Ohio Cigar Leaf Tobacco Growers' Marketing
Association, the formation of which was described in the
preceding chapter, began operations in April 1931 with
approximately one hundred members.
In spite of the small
quantity of tobacco which the Association could expect to
receive from these few growers, the members determined to
make this attempt to Improve the marketing of their product.
The work of organizing the Association had been completed in
less than four months, but the late start of the movement
delayed the receiving of the 1930 crop past the usual season
in January and February.
Financing
The problem of securing funds to process the tobacco
and to make advances to the members before sales are made
has been one of the most serious faced by the Association.
As previously noted1 the possibility of securing assistance
from either the Federal Farm Board or the Federal Intermediate
“^See pages 174 and 178.
210
211
Credit Bank was an important factor in the decision to start
the Association.
The hope of securing loans from a government agency
was not fulfilled until March 1933*
After failing to secure
this aid in 1931, the directors agreed to release from the
marketing agreement delivery of the 1930 crop by any member
who requested it.'*’ Very few members sought release.
Part
of the loyalty was due to a strong belief in the organiza­
tion, and part to the low prices in the market.
From April 1931 to March 1933 many different plans
for securing funds were tried.
Aid was sought from "a New
York firm through Dayton banks.”2
When the banks in the
district could not be interested in forming a syndicate sim­
ilar to the one used by the Miami Valley Tobacco Growers1
Co-operative Association,^a plan to form a separate finance
company to borrow from local banks and government agencies
was proposed, and then discarded.
Unavailing approaches
were made to the Reconstruction Finance Corporation and the
Regional Agricultural Credit Corporation.
Discussions were
continued throughout the period with the Federal Intermediate
Credit Bank at Louisville.
At one time the Association was
ready to borrow from the Continental Credit Corporation and
the Lawrence Warehouse Company of Winchester and Indianapolis,
4
Indiana, but decided against the plan when it appeared to
^Association's Minute Book, p. 56.
2
4
Ibid., p. 55.
"5
See page 125.
John W. Moore, Indianapolis, Ind., president of
212
be too expensive and to give too much control over the Asso­
ciation to those furnishing the funds*
In the meantime, aid was secured from local banks*
In May 1931 the Second National Bank, Greenville, Ohio,
loaned the Association $10,000 at 1% interest on a note
endorsed by the directors and the secretary-treasurer and
secured by 1,233 cases of tobacco*
The Association was able
to repay this loan In five months from the proceeds of sev­
eral large sales.
During the first years the officers used all the
money from sales to repay loans and to make payments to mem­
bers, thus leaving no working funds In the Association.
result was almost continuous financial stringency.
The
This
became especially serious whenever loans could not be secured,
as happened in August 1931 when the banks refused to loan on
the unworked tobacco^ on hand.
In this crisis the owner of
the warehouse advanced during September-November 1931 approx­
imately $1,000 for wages in addition to $300 of deferred
rent to enable the Association to finish handling the 1930
tobacco.
The same sequence of sales and payments was repeated
in December 1931, and the cycle was completed when the Asso­
ciation had no funds with which to work the 1931 tobacco
these companies, figured in the news in 1938 in a suit charg­
ing the defrauding of a number of banks of $1,200,000 through
the improper use of warehouse receipts. (New York Times, Dec.
29, 1938, p. 3.)
For explanation of term see footnote 1, p. 55*
213
when it was received early in 1932.
A total of $17,000 was
borrowed from local banks with the tobacco as security, but
this amount was not sufficient to finance the handling of
the large volume of 1931 tobacco.
Few sales were made in
1932, so scarcely any funds were obtained from this source.
This time the employees of the Association made it
possible to continue operations by agreeing to work and to
wait for their pay until a loan could be secured.
The ware­
house owner agreed to the postponement of rent payments on
the same basis.
These agreements were made in view of the
fact that plans were moving forward to create a federally
bonded storage which would enable the Association to use
warehouse receipts for loans from the Federal Intermediate
Credit Bank.
On March 16, 1933, a loan of $40,900 at 3% interest
was obtained from the Federal Intermediate Credit Bank.
By
this date the accrued expenses amounted to $2,139*70 for
storage, $1,477.25 for salaries, and $4,546.50 for wages.
From the loan, these obligations and the debt of $17,000 to
the local banks were paid.
The $40,900 loan from the Federal Intermediate Credit
Bank was repaid in June 1933, six months before it was due,
from the proceeds of sales in that month.
In their eagerness
to establish a good reputation with the Bank, the officers
repaid the entire loan, although only approximately onehalf of the tobacco used as security for the loan had been
sold.
When the other half remained unsold and working capi­
214
tal ran low in 1934, the Association found that the Bank
would not loan a second time on these uncancelled warehouse
receipts on the 1931 crop.
As a consequence it was forced
to borrow $12,000 at 6% on these receipts from a local bank.
At this time the officers began to realize their
mistake in using all the proceeds from sales, as soon as
those sales were made, for payments to the members.
They saw
that they could not depend on quick or steady sales to fur­
nish the necessary working capital.
Therefore, they began
to retain a considerable portion of the funds from sales for
this purpose.
This has meant that one year’s crop has tended
to finance the handling of the following one.
No adjustment
for interest has ever been made among the crops.
It is not clear whether the officers erred by re­
paying all loans possible as soon as funds were provided by
sales.
For example, if they had repaid only half of the
loan at the Federal Intermediate Credit Bank, they might
have been in an even worse position in 1934.
Very likely
they could not have resisted the pressure from the members
to use the funds for payments on the crops; in which case
there would have been no tobacco available as collateral
for a new loan when funds were needed, for it would have
been pledged on existing loans.
If they had kept the funds
for use in operations the interest cost would have been
large and the Federal Intermediate Credit Bank might have
refused to wait so long for repayment and probably would
have refused to make loans on the succeeding year crops.
215
With the creation of the honded storage and the
establishment of connections at the Federal Intermediate
Credit Bank, the Association entered a period of easier and
cheaper financing#
195^ crops.
It borrowed from the Bank on the 1931-
The borrowing plan required the Association to
make an application for a loan on each year crop.
In this
application, usually prepared in November or December pre­
ceding the receiving season, the Association set forth the
total sum that it might desire to borrow on that year crop.
It also presented to the Bank a schedule of estimated values
of the wrappers--loans were not make on fillers or warehouse
-i
leaves-1-— by types and grades based on the method of packing.
p
This schedule of market values was subject to revision by
the Bank, usually in consultation with the officers of the
Association.
The Bank loaned up to 60% of the schedule of
values.
The total amount available for loans on a year crop
Warehouse leaves consist of the better quality
filler leaves and of the short or slightly damaged wrapper
leaves thrown out in the rehandling process.
2These
farmer-packed,
these extremes
the amount and
grades of wrappers range from unworked, or
to tabled, bulk-sweated wrappers. Between
there are several classifications based on
method of rehandling and resweating.
The word ''grade” is used in three different connec­
tions by the Association. There are the three major grades-wrappers, fillers, and trash and warehouse leaves. The sub­
divisions made of the wrappers are also called grades, and
the Association has one set of grades for grading the growers'
crops and one set, as indicated above, for the repacked wrap­
pers. Thus, grade A of wrappers may mean either the best
grade of farmer-packed wrappers or tabled, bulk-sweated wrap­
pers. (Terms on handling are explained in footnote 1, p. 55.)
216
was set at $100,000 on the 1931-1933 crops and at $75,000
on the 1934 crop.
These amounts were, in most instances,
over twice as large as the sums "borrowed by the Association
on any year crop, but they were kept as these levels because
a larger sum might be needed in some year if deliveries
should increase.
Ordinarily the Association borrowed on the
tobacco as soon as it had been rehandled and placed in bonded
storage.
The tobacco was rehandled in lots of sufficient
size to serve as collateral for notes of $2,000 to $4,000.
The notes were made out for a period of nine months, with
provision for an extension for a like period of time upon
application by the Association and approval by the Bank.
The interest rate was 3% in 1933 and 2.% after January 1934.
These loans from the Federal Intermediate Credit
Bank provided funds to finance the rehandling of the tobacco
and to make some small payments to the growers before the
sale of the tobacco, but they did not enable the Association
to make advance payments upon the delivery of the crops.
The payments to the growers from these loans were distributed
on the bases of the comparative lengths of time the different
year crops had been in the warehouse and of the equity of
each type pool as shown by the balance between its sales and
applied expenses.
For the greater part of the payments on
their crops the growers had to wait until the tobacco was
sold.
The Association realized that its inability to make
payments at the time of delivery kept many growers from
becoming members, and it tried to compensate for this by
217
making it possible for the members to borrow on the crops
placed in the warehouse#
Twenty-eight banks in the district
agreed to loan to the members individually on the receiving
records issued at the time of delivery#
These receiving
records listed the total amount of the member1s crop by
grades.
On the back of the record was a form for the assign­
ment of the grower's Interest in the crop.
The Association
worked with the banks in establishing fair values on the
tobacco to serve as a basis for the loans.
the interest rate on such loans was 7^#
In most instances
Whenever a bank made
a loan on a receiving record, it forwarded the record to the
Association which then made payments on that crop directly
to the bank until notice was received that the loan had been
repaid.
Many members secured loans by this method, but it
was not entirely satisfactory.
Members complained that the
interest rate was too high, and the banks complained that the
loans ran too long if they waited for them to be repaid by
payments on the crops.
In 1935 the Association became interested in secur­
ing from the Louisville Bank for Cooperatives loans which
would make possible advance payments at the time of delivery.
Until this time the Bank for Cooperatives had been willing
to loan to the Association only at a higher rate of interest
than was charged by the Federal Intermediate Credit Bank.
An additional reason for desiring to change banks
was the hope that the Louisville Bank for Cooperatives would
have a more liberal policy on the renewal of loans.
When
218
sales were slow in 1933-1935, the Association was forced to
ask for the renewal of practically every note as it came due.
several were renewed twice. Although
ted the renewal
of
the loan plan permit­
the notes upon theapplication of the
Association, the Federal Intermediate Credit Bank became dis­
turbed as the debt mounted.
Loans were made on the new
crops, while the loans on the old crops continued largely
unpaid.
By the latter part of 1935 the total debt to the
Federal Intermediate Credit Bank on the 1932, 1933, and 1934crops exceeded $50,000.
In addition the Association owed
$12,000 to the Second National Bank, G-reenville, Ohio, on a
note secured by warehouse receipts on the 1931 crop.
In
1934 the Federal Intermediate Credit Bank began to press the
Association to sell the tobacco in order to repay the loans.
As time went on
it
became more insistent and suggested that
it might refuse
to
renew the notes inthe future.
On December 9, 1935 the Association transferred all
its borrowing to the Louisville Bank for Cooperatives.
A
total loan of $70,353*53 was secured on all outstanding ware­
house receipts on the 1931-1934 crops.
The Indebtedness to
the Federal Intermediate Credit Bank and the Second National
Bank of Greenville was paid.
At the same time arrangements
were made to borrow from the Bank for Cooperatives on the
1935 crop, which would be received in January and February
of the coming year.
The plan for borrowing from the Bank for Cooperatives,
219
still in use, has been similar to that with the Federal
Intermediate Credit Bank.
An annual application is prepared
covering a year crop of tobacco.
A schedule of values on
the different types and grades of tobacco is established
each year by the Bank and the Association.
In contrast to
the arrangement with the Federal Intermediate Credit Bank,'*'
these values are set at the amount to be loaned per pound.
Under the new plan two types of loans are made: commodity
loans and loans for working funds.
The former are based on
the security of warehouse receipts on tobacco in bonded
storage.
The latter are made on the general assets and
credit of the Association.
The Association has borrowed from the Bank for
Cooperatives on the 1935 and following crops, with the excep­
tion of the 1937 crop.
The discord among the directors2
and the lack of bonded storage at that time in the Brookville
warehouse caused the Bank to refuse to loan on the 1937
tobacco.
For the 1935 and 1936 crops the total funds avail­
able for each crop were $100,000 on the commodity loan and
$10,000 on the working fund loan.
Because of the reduction
in the amount of tobacco received by the Association, the
loan limits on the 1938 and 1939 crops were reduced to
$25,000 and $3,000 on the commodity and working fund loans
respectively.
The total amounts of the working fund loans have
been used, but, until the 1939 crop, the limits of the
1
See page 215.
2See pages 204-206.
220
commodity loans were well above the Association's require­
ments .
If the volume of tobacco delivered to the Associa­
tion continues to rise as it did on the 1939 crop, higher
loan limits will be needed in succeeding years.
The Interest rate charged by the Bank for Coopera­
tives was 2% until March 1, 1939, when it was lowered to li%*
The maturity of the notes has varied in the different years.
On the 1936 crop the notes were made out for a period of
nine months.
year.
On the 1938 crop the time was extended to one
The arrangement on the 1939 crop loans has been that
all notes will be due on January 1, 1941, which means that
the notes will have a life of eight to eleven months.
This
plan may work a hardship on the Association because of the
task of preparing for a common maturity date of the total
year crop borrowings.
The Bank has been willing to renew,
whenever necessary, the notes as they have come due, but the
debt has not accumulated as it did on the loans from the
Federal Intermediate Credit Bank, so that no test has been
made of the limits to which the Bank for Cooperatives is
willing to extend credit to the Association.
With the loans from the Bank for Cooperatives the
Association has been able to make advances to the members on
their crops at the time of delivery or shortly thereafter.
These advances have been made on the wrapper grades only.
The advances on the three grades of wrappers established by
the Association were 5, 4, and 3 cents per pound on the
1935-1936 crops and 6 , 5, and 4 cents on the 1937-1939 crops.
221
The officers have attempted to make the advance payments
approximately one-half of the market value.
The Association rehandles the tobacco before placing
it in bonded storage.
The rehandling costs are financed
with the working fund loans.
It requires approximately two
weeks from the delivery date to rehandle the tobacco, place
it in storage, and prepare the warehouse receipts.
Many
members wait for their advance payments until their crops
are worked and the l.oan secured.
For members who do not
wish to wait, the Association has followed the policy of
making small preliminary advances from the working fund
loans.
The Association has continued to secure small loans
of $500 to $4,000 from local banks to tide over the periods
while it is waiting for loans to be completed with the Bank
for Cooperatives.
These loans are made on notes without
collateral but are endorsed by the directors and the
secretary-treasurer.
Another means of financing which has been of increas­
ing importance has been the Reserve for Working Funds created
by a 2% reserve on all sales and from profits from special
operations .1
The marketing agreement empowered the Associa­
tion to deduct from the sales of the members' tobacco
reserve funds for credits and other commercial purposes,
said funds not to exceed two per cent of the gross resale
price. Such reserve funds may be used by the Associa­
tion, in its conclusive discretion, for any proper pur­
pose. Upon dissolution of the Association, or earlier,
■^See pages 252 -2 5 3 .
as determined "by the Board of Directors, a portion or all
of such funds or the unexpended portion thereof shall he
distributed to the members in accordance with their con­
tribution thereto. Such funds shall be subject to any
liabilities of the Association.
At the annual, meeting on February 6 , 1934, the mem­
bers approved the suggestion of the board of directors that
such a 2% reserve be created and that it be deducted from
the sales of all type pools on which final settlement had
not been made.
2
Since the payments on the 1931 type pools
had not been completed, the action retroactively affected
the sales of all tobacco after the 1930 crop.
On March 26, 1940, the Reserve for Working Funds was
$5,980.53.
This total included the profits, on special oper­
ations,^ but from it had been deducted $2,500 for an invest4
ment made by the directors in a chemical plant, and
$2,357*42 for operating expenses during 1936-1937.^
The ad­
vances to the growers on the 1937 crop, when the Association
received no aid from the Bank for Cooperatives, were made
from funds retained in the Association by this reserve.
The Association’s early difficulties in securing
adequate funds for operation, and its inability to make
advance payments to the members hampered its growth.
The
ease, since 1933, and especially since 1935, with which it
has been able to obtain loans at low rates of interest from
A e e Association’s Marketing Agreement, Paragraph 5,
Appendix C.
-7
Association’s Minute Book, p. 137.
^See page 255.
See page 252.
5See page 246*
223
the Federal Intermediate Credit Bank and the Louisville Bank
for Cooperatives has probably been the chief factor which
has made it possible for the Association to continue opera­
tions as long as it has; but these loans have not enabled
the Association to grow to an important size.
The factors
which have hindered the Association will be considered in
following sections of this chapter.
Handling the Tobacco
Following a policy similar to that of the Miami
Valley Tobacco Growers' Co-operative Association,^ the Ohio
Cigar Leaf Tobacco Growers' Marketing Association has
received on consignment from the members only the wrapper
and filler grades of the three types of tobacco.
Because of the small volume of tobacco handled each
year— 139,169 to 1,931,220 pounds2— the problem of receiving,
grading and rehandling has been easy compared with that faced
by the Miami Valley Tobacco Growers’ Co-operative Associa-2)
tion.
Until the 1939 crop the Ohio Cigar Leaf Tobacco
Growers 1 Marketing Association was able to store and handle
all its tobacco in one warehouse.
For the 1939 crop two
warehouses have been necessary, but both have been in the
same village.
The location of the office either adjacent to
or in the warehouse has greatly facilitated supervision of
operations and reduced expenses of management.^
1See pages 135-139.
^See pages 138-140.
2See page 236*
4
See pages 206-209.
224
The grading of the crops has been done by a feder­
ally licensed grader at the time the tobacco is worked.
The
Association has established three grades of wrappers, one of
fillers and one of warehouse leaves,'*' in grading the mem­
bers 1 crops.
The last two grades are usually combined for
purposes of expense application and settlement to the grow­
ers .
The U. S. Department of Agriculture, through the
bonded-warehouse inspectors, has urged the Association to
adopt the grading system standardized by the government
tobacco experts.
The Association has refused on the grounds
that the suggested grading system is too complicated, that
it would be too costly to pack the tobacco in these grades,
that it would require special training of the warehouse
workers doing sorting and sizing, and that it would not be
as intelligible to the members as the present system.
No
difficulties, such as those experienced by the Miami Valley
p
Tobacco Growers' Co-operative Association, have ever arisen
because of the method of grading, and very few objections
have been raised by the members, except the expected objec­
tion that the grades should have been higher.
In all except the first year, the Association has
pooled or mingled the members' tobacco, as provided for In
the marketing agreement.^
1
3
On the 1930 crop each member's
See footnote 1, p. 215*
2
See pages 139-140.
See Association's Marketing Agreement, Paragraph 4,
Appendix C .
225
tobacco was worked and repacked separately*
However, the
crops were not sold separately, and settlements to the mem­
bers were made by grades in the type pools rather than by
crops.
Nothing seems to have been gained, and the expense
of handling was increased.
In handling the tobacco, pools are created for each
type in each crop year.
Accounts of sales and expenses are
kept on the basis of these pools, and each pool is settled
separately.
The amount of rehandling done on each crop has
varied during the history of the Association.
the fillers are sold as received.
Ordinarily
In several years some of
the better fillers have been made into warehouse leaves.^
The officers believe that they have been able to get better
prices for the fillers by doing this.
Of the 1931 crop the Association tabled and bulksweated most of the wrappers.
2
When this complete process
resulted in costs which appeared to be higher than those of
private dealers for similar work^ and the Association saw
its funds tied up in tobacco which was slow to move, the
amount of rehandling on the following crops was reduced.
On these crops the wrappers have been hand-sized and some­
times bulk-sweated, though more frequently box-sweated.
Since
the 1936 crop a part of the wrappers has not been sweated,
1See footnote 1, p. 215.
2
3
The special terms are explained in footnote 1, p. 5 5 .
See page 249#
226
other than in the natural sweat after repacking.
For many
of the customers of the Association, the hand-sizing and
box- or bulk-sweating is necessary since they do not have
facilities for these operations.
The rehandling work of the
Association is complicated by the fact that the manufacturers
differ on the amount and kind of processing which they want
done on the tobacco before they buy it.
This change made by the Association in its rehandling
practices: over the years was characteristic also of the oper­
ations of the cooperative warehouse companies1 and, to a
certain extent, of the Miami Valley Tobacco Growers' Cop
operative Association.
In general the handling operations, which have been
directed by competent warehouse managers,-^ have been well
done.
This is true In spite of the fact that, mainly because
of the small volume of tobacco handled, the handling costs
do not seem, to have shown a saving over those of the private
4
dealers.
Sales
Selling has been a weak point in the Association* s
operations.
An examination of its policies and practices in
making sales reveals several causes of its shortcomings.
In
the first place, the selling function has not been given the
1See page 82.
2See page 138.
^See page 204.
^See page 249.
227
attention and the position in operations which it seems to
deserve*
This is shown by three facts: no separate sales
department has been established and no regular sales manager
has been employed; for the most part, those who have had
charge of sales have not been experienced in the work; and
a definite, aggressive sales program has not been developed.
As noted earlier,1 the sales during the first year
were handled by the general manager, Hostetter, and after
the reorganization in 1932 by the secretary-treasurer, Landis.
In both instances selling was only a part of the men's
activities.
Although Hostetter had thirty years' experi­
ence as an independent buyer, a dealer's agent, and the
agent for the Miami County Leaf Tobacco Company,
p
he does
not appear to have known how to handle the selling for the
Association.
The short time--less than a year— during which
he held the position may not have afforded opportunity for
him to show what he could do.
Landis' selling experience
had been limited to his activities in the selling group of
1928-1930,^ and to a few sales for the Association.
The
directors, who, through the setting of prices, have taken an
active part in the selling, have also had little experience.^
The placing of operations in the hands of farmers, who have
been inexperienced in tobacco marketing, has been a part of
the management policy of the Association.^
The results in
the sales operations, as shown in the following pages, have
-1
See pages 199, 202.
^See footnote 3, P* 203.
p
See page 87-
^See page 170.
^See pages 203-204.
228
not been satisfactory.
The failure to develop a definite, aggressive sales
program can be attributed, in part at least, to the inexpe­
rience of the persons in charge of sales.
The Association
appears to have made haphazard experiments with a number of
methods without developing any one, and has not been aggres­
sive in those which it has used.
The chief method has been
to wait for the dealers, brokers, and manufacturers to come
to the Association to buy.
This also characterized the
selling of the earlier cooperative ventures.1
To supplement this "waiting" policy the secretarytreasurer has at times addressed personal letters to dealers
and manufacturers offering lots of tobacco in which they
might be interested.
poor.
Results from these efforts have been
A third sales method has been the trips made by the
secretary-treasurer once or twice each year through Ohio,
western West Virginia, western Pennsylvania, and, sometimes,
eastern Indiana to call on the manufacturers.
The Associa­
tion’s records show that frequently the sales made have not
equalled the expenses of the trip, but that the sales which
have come from contacts made on these trips have been a bit
more gratifying.
The Association tried another method in 1933 when a
special sales agent without any tobacco selling experience
was placed on the road.
He was a member of the board of
directors and was employed at ,1$3 per day and not in excess
1See pages 8 6 , 145.
229
of $3 per day travelling expenses"1 to call on the manufac­
turers*
Two weeks 1 activity resulted in sales totaling $120
before the director-salesman gave up the Job*
Various brokers have sold tobacco for the Associa­
tion, but the iniative has usually come from the brokers
rather than from the Association*
The only broker who has
maintained a continuous relationship by carrying samples of
the Association's tobacco all the time has been J* Levin of
Cleveland, Ohio*
He specializes in selling to small stogie
manufacturers and has brought a fairly large volume of busi­
ness to the Association.
In its selling efforts the Association has vacil­
lated between appealing to the large and to the small manu­
facturers.
Hostetter followed a policy of selling in large
lots as much as possible.
In 1932, when sales were slow,
Landis decided to seek a market among the small manufactur­
ers.
The periodic trips among them were part of this plan.
Landis believed that the Association might win these manu­
facturers with appeals of lower prices through direct dealing
with the producers, and with offers of superior accomodations
on credit and timing of shipments.
At one time the officers
hoped that these connections might provide an outlet for the
total supply of the Association's tobacco.
Approximately forty small manufacturers, most of them
located in Wheeling, West Virginia, Pittsburg, Pennsylvania,
and small towns in southeastern Ohio, were added to the
1 Association's Minute Book, p. 114.
230
customer list between 1932 and 1935*
Several have become
valuable customers, but most of them have bought only a few
cases.
In general, selling to the small manufacturers has
not been successful.
Their demand has not been great enough
to take all the Association'stobacco*
Most of them have
insisted on the better grades since they have no use for the
short sizes and lower grades.
This has left the Association
with a poor grading, which has been difficult to sell to the
large manufacturers on whom the Association has had to
depend in order to have an outlet for its total supply.
Other problems which have arisen in selling to the small
manufacturers have been losses on bad debts and a high pro­
portion of sales returns.
Since 1936 the Association has again sought to dis­
pose of its tobacco primarily to the large manufacturers*
Orders have been taken from the small manufacturers for one
or two cases, but no great effort has been made to expand
this business.
A second failing, in addition to a lack of attention
to the selling function, in the Association's sales opera­
tions has been certain practices which have antagonized the
dealers, brokers, and manufacturers.
The officers have fre­
quently accused these individuals of unfair treatment of the
growers and of the Association.
have not gone unnoticed.
Naturally these accusations
Several Important brokers and
dealers in the trade have been alienated by the officers'
attempts to induce manufacturers who have bought tobacco
231
from the Association through these agencies to deal directly
in future purchases.
A third error in sales operations has been the pric­
ing practices, one of which has been to raise the quoted
prices whenever a customer begins to show interest in a lot
of tobacco but does not buy at once.
lost by such actions.
Many sales have been
A second and more harmful practice has
been the attempts at price setting.
The directors and the
secretary-treasurer have set prices, which they have regarded
as fair, on the various types and grades of tobacco, and then
have held it in the hope of getting these prices.
This prac­
tice, in which the officers have persisted, has not been
founded on a careful study of the market, and the Associa­
tion has seldom received the prices set.
Several ideas,
beyond the ordinary desire to secure the highest possible
prices, appear to have Induced the officers to make these
attempts.
First, they have felt that the tobacco grower has
a right to expect prices which will cover the cost of pro­
duction.
Their insistence on certain prices for the tobacco
has often been backed by the statement, "The farmers cannot
afford to raise it for less."
Second, they have believed
that sooner or later the manufacturers would be forced to
buy the Association’s tobacco at its prices to fill their
needs.
This belief certainly has not taken into account the
small part the Association has had in the district,1 and has
not been justified by the Association's experience.
1See Table 6 , p. 236.
232
A third idea which has induced the officers to
attempt price setting has been an overemphasis on the fact
that tobacco tends to increase in value as it ages.
The
officers have assumed that this rise in value would cover
any costs involved in holding the tobacco, and that their
prices should rise automatically to keep pace with the ris­
ing value.
Occasionally the secretary-treasurer has written
letters to prospective customers saying that on a certain
date— usually January first of the following year~-all
prices would advance one cent per pound to allow for the
increased value from aging.
has not
Needless to say, the Association
been in a position to get the
higher
price.
As a result of its lack of attention to the selling
function and as a result of its pricing practices, the Asso­
ciation has usually been a tobacco "holding company" rather
than a selling agency .1
The accumulation of tobacco in
storage has assumed serious proportions on three occasions.
The first of these was in the early part of 1933 after very
few sales had been made in 1932.
Two big sales relieved the
situation.
The worst condition culminated in the spring of 1937.
Large portions of the 1931, 1933, 1934, and 1935 crops, as
well
as the 1936 crop, were on hand. The total
approximated
1This failing has been rather common in tobacco
cooperatives. For examples in the Burley and the Wisconsin
district pools see: Verna Elsinger, "The Burley Tobacco
G-rowers Experiment," American Cooperation 1928. Vol. II, p.
539; and E. Ela, "Operating a Tobacco Cooperative Under the
New Deal," American Cooperation 1934, pp. 245-247.
233
35^ of all deliveries of these crops and was 90% of the
deliveries on the 1933-1936 crops.
The 1932 crop had been
of very poor quality and had been disposed of at low prices
during 1935-1936.
As this stock accumulated after 1933 the Federal
Intermediate Credit Bank began to urge the Association to
make sales .1
Several members of the board became concerned
and insisted that the secretary-treasurer dispose of the
tobacco even at very low prices if necessary.
When the
secretary-treasurer demurred, saying that if the Association
would just "sit tight" it would get its prices, the president
of the board decided to try to sell the tobacco.
A contract,
signed by all of the directors, disposed of the entire stock
of tobacco--approximately 1 ,100,000 pounds— »at 12J cents per
pound, a low but acceptable price.
The only tobacco left in
the Association warehouse was 33 cases of warehouse leaves
which had been previously contracted to a manufacturer.
The third peak in the accumulation of tobacco in
storage was reached in the fall of 1939.
Because the deliv­
eries of the 1937 and 1938 crops had been small, the situa­
tion was not very serious and the danger was removed by
several large sales.
The Association roust expect to carry a stock of some
size if it desires to deal with the manufacturers, many of
whom are not interested in buying tobacco until it has aged
a year or two.
How large a stock the Association should be
1See page 218.
234
prepared to carry is very hard to determine, but it is clear
that the carrying of the stock creates the problem of secur­
ing funds to finance the costs involved and to make payments
to members before the sales are made*
The results of the Association’s sales operations
are shown in the average sales prices, Table 7, page 242,
secured for the tobacco*
That these prices for the tobacco,
much of which has been rehandled, have not been very high
is shown by a comparison with the average market prices for
unworked tobacco on the farm, Table 7*
As explained later,
these prices, in general, have not been high enough to give
the members returns on their crops above the market prices.^*
Even so, the Ohio Cigar Leaf Tobacco Growers 1 Marketing
Association has been more successful than the Miami Valley
Tobacco Growers’ Co-operative Association2 in securing sat­
isfactory prices on sales.
Causes beyond the control of the Ohio Cigar Leaf
Tobacco Growers’ Marketing Association have been responsible
for part of its difficulty in making sales at good prices.
These causes have been the decrease in the consumption of
Miami Valley tobacco and the decline in the market price of
tobacco, especially during the period 1931-1933.
■5
It would
seem that such conditions would have made it difficult even
for skilled salesmen to have made a good record for the
Association.
1
However, since selling is its primary function,
See page 244.
■5
See Appendix A, Table II .
p
See page 143.
235
the Association will need to find ways of doing a better
selling job before it can hope to serve effectively the
tobacco growers, and to develop to a size which will make
it Important in the tobacco market.
Receipts of Tobacco
The Association has experienced a wide fluctuation
in the amount of tobacco received from year to year.
Table
6, on the following page, shows the number of crops and the
total pounds of tobacco on each year crop delivered to the
Association by members since operations began.
The fluctuations revealed by this table can be
attributed to four factors: the ease with which a member
has been able to withdraw from the Association, the fluctua­
tions in the production of tobacco in the Miami Valley, the
changes in the condition of the tobacco market, and the
returns which the Association has been able to make to its
members.
As noted earlier,'*' the withdrawal of members from the
Association is made possible by a provision in the marketing
agreement and by the policy of the directors of not penaliz­
ing those who fail to deliver without formally withdrawing.
This has meant that the Association has received large quan­
tities some years and small amounts others, for the members
have tended to deliver their crops only when they have
See pages 184-186.
236
thought it would be profitable to do so.
However, it is
likely that the Association, after a few years' operations,
would have met a fate similar to that of the Miami Valley
TABLE 6
TOBACCO OF THE 1930-1939 CROPS RECEIVED BY THE OHIO
CIGAR LEAF TOBACCO GROWERS' MARKETING ASSOCIATION0Year
Crop
No.
of *
Crops
Pounds
of
Tobacco
1930
1931
1932
1933
1934
1935
1936
1937
3-938,
1939a
140
647,130
1,931,220
1,125,875
421,404
212,994
736,646
215,633
139,169
297,386
524,515
380
330
172
74
209
86
47
126
194
%
Total
Prod *0
2*0
5.7
4*7
3.3
1.3
4*2
1.6
.9
2*4
3.1
^ o r sources of data see footnote 1 , p. 169.
Number of units of deliveries* Tobacco delivered
by one grower or by a landlord and his tenant counts as
one crop*
cThe percentage which the tobacco received by the
Association constitutes of the total production in the
Miami Valley*
^Includes deliveries to May 1, 1940. An additional
50,000 pounds may be delivered in the course of time*
V
Tobacco Growers* Co-operative Association,^ if it had at­
tempted to force the members to deliver all their crops.
A substantial part of the variations over the years
in the total pounds of tobacco received by the Association
■^See pages 156 -1 6 6 *
237
can be accounted for by the changes in the amounts of tobacco
produced in the Miami Valley.
For example, while the volume
of tobacco delivered to the Association decreased 78% from
the 1931 to the 1933 crop, in the same period the quantity
of tobacco grown was reduced 62%.
As can be seen from Table
6 , page 236, the pounds of tobacco received have varied much
more than the number of crops, for with one-half as many
crops of the 1939 as of the 1931 tobacco the Association
received only about one-fourth as much tobacco.
However, as
is indicated by the figures in Table 6 showing the relation
of the Association's receipts of tobacco to total production
in the Miami Valley over the years, the Association has not
had a constant position in the market.
Also, its role has
been only a minor one.
The condition of the tobacco market, as to both the
price and the buyers’ activity, is reflected in the amounts
of tobacco received by the Association.
Low market prices
for the 1931-1933 crops brought the Association fairly large
quantities.
A rise in price for the 1934 crop and a subse­
quent fall in price for the 1935 crop were accompanied by
reverse movements in the receivings of the Association.
At times the amounts the growers have delivered to
the Association have been Influenced by the activity of the
buyers in purchasing the tobacco and by a change in the mar­
ket price during the season.
marketing of the 1939 crop.
These forces operated in the
Early in January 1940 the buy­
ers were offering 12 cents per pound.
After a week of
238
intensive buying the price fell to about 8 cents per pound,
and the buyers were not eager to make purchases even at that
figure*
The growers reacted by delivering their crops to
the Association, as is shown by the increase in the amount of
1939 tobacco received.
For many growers the Association has served as a
last resort#
When they have been unable to sell their crops
to the buyers they have brought them to the Association.
In
periods of extremely low prices the same thing has occurred.
The attitude of many growers is revealed in the frequent
comment to the officers: "I don’t seem able to get anything
for it, so I'd rather 'give' it to you fellows than to the
buyers
Further illustration of the factors influencing the
quantity of tobacco received is provided by an analysis by
types of the deliveries to the Association, Figure 20, page
239.
The growers’ changes from raising one type to raising
another, and the market demand for the different types over
the years are revealed in the tobacco received by the Asso­
ciation#
As an example of the latter, one factor in the
proportionately small deliveries of Type 43 of the 1937 crop
was the good market price on the farm for that type.
The
large quantity of 1931 Type 44 tobacco received was the
result of the fact that the Association was started in that
crop year by the Type 44 growers .1
1 See page 182.
239
I 6s.
900
BOO
70 0
TOO
ftOO
500
400
500
too
100
>930
Flo.20.
■991
<932.
1933
1934
R EC EIV IN G BY TYPES FO R
BY O HIO C IG A R LEAF TOBACCO
1937
1936
935
<996
*939
O
C R O P YEA R S
1930-1939
GROWERS MARKETINq ASSOC.
Months
2H
IS 90
30
40
Z2ZE
SAX V I
*933
VT7
W UAXI
1937
1936
Poym ent
1
VJLA
44
4
3
44 ■
I
LAi
23
yxaaaaA/^
Pirst
Second
T h ird
Fourth
Fined
Settletnoni
*939
v
'V
JV
JO
t
A-
94
OO
(
,0.^1. T IM E REQ UIRED FOR PAYMENTS AND FINAL S E T T L E M E N T ON
1930-39 CROPS BY OHIO CIGAR LEAF TOBACCO GROWERS MARKETING A550C
(to M a y
Ij 1940)
Returns to Growers
A significant factor in the quantity of tobacco
received by the Association has been the returns it has made
to the growers.
The time required to make settlement on
the type pools, as well as the size of the returns, has been
important.
As shown in Figure 21, page 239, there has been
a great variation among the pools and the crop years in the
total time required for settlement, in the number of sepa­
rate payments made, and in the timing of these payments*
The policy of making advance payments on delivery
began with the 1935 crop and brought an increase in the
total received on that crop, Figure 20.
The extremely long
time required to make final settlements on the 1931-1933
crops caused a reduction in the deliveries of the 1933 and
following crops.
The noticeable shortening in the time
required to settle the type pools from the 1931 to the 1936
crops came about in the "clean-up” sale in 19371 when the
remaining tobacco of all these crop years was sold and final
settlements on all type pools involved were made at practi­
cally the same time.
Without doubt the fact that the Type
42 pools were the first to be settled on the 1937 and 1938
crops was responsible for the great increase, shown in Fig­
ure 20, in the Type 42 deliveries of the 1939 crop.
The disproportionate— in relation to its percentage
in total production— quantity of Type 44 tobacco received in
1See page 233*
241
most crop years, particularly 1934-, 1936, 1937 and 1938, as
shown in Figure 20, has been the consequence of two factors.
Ordinarily the Association has required a shorter time to
settle the pools of this type, Figure 21, and has been able
to return somewhat better prices to the Type 44 growers,
Table 7, page 242.
The operations of the type pools on which final
settlements have been made (to May 1, 1940), are summarized
in Table 7, page 242.
From the figures presented there, the
size of the returns which the Association has made to the
growers on the type pools in each year crop can be compared
with the average market prices for the tobacco on the farms.
In making these comparisons certain factors must be taken
into consideration.
First, market prices by types are not
available, and, since the prices of the three types vary in
relation to each other in succeeding years, no direct com­
parison of the market price in one year with the return by
the Association on each type in that year is possible.
Also,
because the Association has not received the three types in
the same proportions in which they have made up total produc­
tion, the average return on a crop year in the Association
is not on the same basis as the average market price.
In
addition, it must be remembered that the average market prices
are estimates.
Second, the quality of the tobacco on the market com­
pared with that of the tobacco received by the Association
must be kept in mind.
One aspect of this is shown in Table 7
242
TABLE 7
SUMMARY OF OPERATIONS OF OHIO CIGAR LEAF TOBACCO
GROWERS’ MARKETING ASSOCIATION OF TYPE POOLS
ON WHICH FINAL SETTLEMENTS HAVE BEEN MADEa
Tobacco Received
Year
1930
1931
1932
1933
1934
1935
1936
Type
44
43
42
44
43
42
44
43
42
44
43
42
44
43
42
44
43 ,
42
44
43
42
Total
Pounds
536,667
14,978
95.489
547,135
290,369
836,014
804.837
1,931,220
f°
87
81
85
m
69
13
19
15
14
Av.
Sales
Price
per Ih.
Av.
Cost
per3b.
&
8.85
2.03
11.88
11.90
9.37
7.98
8.07
42
So
31
34
58
40
437.694
1,125,875
63
77
72
73
37
23
28
27
75,571
169,409
176,424
421,404
77
78
74
76
68,911
67,971
80
76
76,112
82
212,994
79
21
65,327
345,547
325.772
73^45
77
73
74
74
23
27
26
26
8.54
8.70
78,930
51,187
8.5,516
215,633
74
41
26
12.22
8.05
68
6^
59
32
36
12.61
149,369
538,812
66
23
7.01
7.61
6.96
5.90
5-83
6.01
9.48
22
8.20
26
24
9.09
8.79
20
10.30
24
18
9.69
11.22
10.43
11.11
8.38
2.01
2.01
2.02
2.62
2.94
2.15
2.56
2.05
2.52
2.34
2.39
2.93
3.78
3*64
3.57
Av.
Return
Mkt.
to
G-rower Pr.
per lb. perlbr
6.82
9.87
9.89
7.35
5.36
5.13
4.86
5.05
*
10.1
5.5
4.91
3.38
3.49
3.62
4.0
6.55
4.42
5.45
5.22
6.0
1.53
3.80
3.70
3.03
8.77
5.89
7.40'
8.6
1.68
9.43
6.73
6.85
7.03
7.2
1.65
1.69
1.67
7.52
11.43
11.39
.79
1.55
1.96
1.43
10.65
9.96
9.5
6.50
1937
42
48,893
72
28
11.19
2.61
8.58
8.8
1938
42
35,723
65
35
10.28
1.92
8.36
8.8
aFor sources of data see footnote 1, 169.
Wrapper grade.
cFillers and warehouse leaves.
“For tobacco on farm. See Appendix A, Table II.
243
in the percentages of wrappers and of fillers and leaves in
each type pool*
Since the latter sell for approximately
one-half the price of wrappers, the proportion of these
grades in a type pool influences the sale price and hence
the return to the grower*
Although a definite comparison of
the general quality of the tobacco received by the Associa­
tion with that of the entire year crop cannot be made, it
appears that the Association's tobacco has been somewhat
below average quality.
This is in accord with the idea that
much of the tobacco received by the Association is delivered
by growers who have difficulty in disposing of their crops,
often because of their poor quality, to the buyers .1
Although the buyers are not inclined to make much allowance
in price for differences in quality, they are not anxious to
buy the poorer crops, and are more likely to penalize very
poor crops than to allow a premium for very good ones.
The
officers of the Association tend to agree that the quality
of tobacco they have received has been slightly below aver­
age .
Third, allowance must also be made for the fact that
non-members have received the market price in cash at deliv­
ery time, while the members have had to wait from three
months to five years to secure their complete returns.
A comparison of the market prices and the returns
to the members, as given in Table 7, would indicate that the
Association has not been able to obtain for its members
1See page 2 38 .
244
prices higher than, or as high as, those secured by growers
outside the Association*
In view of the factors just con­
sidered, it is impossible to say just how great the differ­
ences have been, although they do appear to have been to the
disadvantage of the members.
With the exception of the 1930
crop they do not seem to have been large.
In that year the
low average return shown by the Association was caused by
the great quantity of low-priced Type 44 tobacco which it
handled.
On the 1936 crop the Association showed a return
above the average market price.
At least, the Ohio Cigar
Leaf Tobacco G-rowers1 Marketing Association has been able to
make better returns to its members than the Miami Valley
Tobacco Growers’ Co-operative Association.1
The Ohio Cigar Leaf Tobacco Growers 1 Marketing Asso­
ciation’s records reveal that one group of growers has
gained by placing its tobacco with the Association.
growers have been those with very good crops.
These
Such crops
rarely receive a price advantage in the market, while the
Association makes its settlements on the basis of the crop
grading in order to reward the growers of good quality
tobacco.
For example, a grower with a good 1935 Type 42
crop--15^ fillers and leaves, 80^ A wrappers and 5% B wrap­
pers— received an average return of 8.1 cents per pound,
which was well above the market price of 7.2 cents.
A num­
ber of growers have been able to secure this advantage con­
sistently, but they have been too few to raise the average
^See pages 150-152.
245
quality of the total deliveries*
The Association has re­
ceived the extremes of the very good and the poor crops.
The effect which the Association has had on the mar­
ket price is largely a matter of conjecture.
Officers and
members claim that it has meant higher prices for all growers.
It appears that in some parts of the district, where the
Association has been strongest, it has brought higher prices
in some years*
In view of the small quantity of tobacco
handled by the Association, it seems doubtful whether it
could have had a very great effect.
Expenses
The returns to the growers have been determined not
only by the prices which the Association has received on its
sales1 but also by the expenses of handling the tobacco.
The Association^ biggest problem in expenses has been that
of trying to keep costs comparable with the varying volume
of tobacco, especially when that volume has decreased.
In Table 7, page 242, are given the average costs
applied per pound on the type pools of the different year
crops.
The high expenses on the 1933 and 1934 crops are the
results both of the long periods these crops were held and
of large overheads applied to small volumes of tobacco.
Only the great volume of tobacco of the 1931 crop prevented
a very high expense on that crop because of the length, of
1See page 234.
246
time that it was in storage*
The low charges against the
1935 and 1936 crops were due both to the short time they
were held and to the fact that approximately $2,400 of the
overhead expenses incurred in the years 1936-1937 was closed
against the Reserve for Working Funds-
This was done pri­
marily to make possible good returns on these crops#
An analysis of the expenses is presented in Table 8
on the following page.
The classes of expenses given are
based on those used by the Association.
Since the chief
items which would ordinarily be listed as selling expenses-brokerage and sales salary— are charged to the sales and
administrative expense accounts respectively, there is no
separate class of selling expenses.
The figures for the 1930 crop are not directly com­
parable with those for following years.
This is true because
of the arrangement on that crop under which the general man­
ager received a commission on the volume of tobacco handled
and from that commission paid the salaries of the accountant
and the warehouse manager and the costs of the membership
campaign.1
The salary of the warehouse manager and the
expense of soliciting new members were included in adminis­
trative expense on the 1930 crop, while on the following
crop years they have been classified as labor and miscella­
neous expense respectively.
It appears that the expense
arrangement on the 1930 crop was largely responsible for the
reasonably low operating cost per pound of tobacco.
1See page 199.
247
TABLE 8
ANALYSIS OF EXPENSES OF OHIO CIGAR LEAF TOBACCO
GROWERS' MARKETING ASSOCIATION ON TYPE POOLS
ON WHICH FINAL SETTLEMENTS HAVE BEEN MADE
(To May 1, 1940)*
Year
1930
1931
1932
1933
1934
1935
Type
Total
Cost
44
43
42
2.03
44
43
42
2.62
44
43
42
2.05
2.01
2.01
Ware­
Labor Cases Stor­
age house
.75
.70
.70
Admin­ Fin­ Misistra­ an­
cl.
cial
tive
in c<3nts p€sr pourid - - .12
.12
.20
.72
—
.21
.72
.12
.13
.21
.12
.72
— .13
.16
.22
1.09
.91
.89
.53
.70
.40
.23
.36
.27
.14
.17
.10
.14
.34
.40
.40
.35
.38
.44
.08
2.34
.74
.97
.71
.31
.39
.40
44
43
42
2.93
3.78
3.64
.85
.69
.56
.61
.61
•61
.29
.44
.43
.21
.36
.36
•65
1.14
1.14
44
43
42
1.53
3.80
.76
1.34
1.39
.24
.24
.24-
.16
.38
.37
.08
.41
.38
.18
.90
.42
.41
.36
.31
.31
.32
.16
.21
.15
.17
.19
.18
44
43
42
2.94
2.15
2.52
2.70
1.68
1.65
1.69
.11
.12
.12
.13
.13
.25
.32
.19
.22
.26
.16
.18
.06
.20
.20
.07
.07
.21
.11
.18
.36
.36
.18
.07
.36
.34
.04
.17
.17
.16
.02
.02
.21
.40
.39
.43
.20
.20
.20
.11
.03
.10 , .22
.12
.29
.19
.38
.58
•06
.11
.15
.04
.07
.81
.18
.17
.03
.02
44
43
42
.79
1.55
1.96
.50
.55
193T
42
2.61
.49
.26
.31
.35
.82
.23
.15
1938
42
1.92
.68
.16
.19
.20
.48
.14
.07
1936
#For sources of the data see footnote 1, p. 169.
248
The officers have been fairly successful in avoid­
ing fixed charges.
This has been true especially since the
1936 crop when administrative salaries were reduced to very
low levels .1
However, the effects of a smaller quantity of
tobacco in raising the costs applied per pound can be seen
in the administrative and warehouse expenses and also in
labor costs, as shown in Table 8 , page 247*
The financial expenses— insurance and interest—
and storage charges reflect chiefly the length of time the
tobacco has been in storage.
The labor costs have varied
with the amount of rehandling done on the type pools and
also with the amount handled, since it has generally proved
to be cheaper to handle a large quantity.
The cases expense shows some Interesting fluctua­
tions.
On the 1930 crop the growers received no payment for
their cases, so the return they received per pound was
really lower than the figure given in Table 7, page 242.
Much of Types 44 and 42 of the 1931 crop and a large part of
all types of the 1932 crop were sold in bales, so that the
cases cost on these type pools was relatively low.
With the
1934 crop the Association began to deal in new and used
cases2 and was able to make substantial savings, as shown by
the cases costs on succeeding crops.
The expenses of the Ohio Cigar Leaf Tobacco G-rowers*
Marketing Association compare favorably with those of the
Miami Valley Tobacco Growers* Co-operative Association,^
1
O
See page 202.
"7L
See page 252.
•'See pages 148-150.
249
even though the latter handled much greater quantities of
tobacco in the two years of its operations.
The former has
avoided a great increase in expenses per pound of tobacco as
the volume has decreased.
Although expenses have been fairly
well controlled in the Ohio Cigar Leaf Tobacco Growers1 Mar­
keting Association, they do not appear to have been below
the costs of private dealers,'*' for the returns to the mem­
bers have not, in general, been higher than the market
prices on the farm.
Of course the returns have been influ­
enced also by the prices which the Association has secured
on its sales.
2
The small volume of tobacco handled and the
long time it has been held in storage have been most impor­
tant in preventing the Association from making a better
expense record.
Accounting Methods
Since the 1930 crop the Association has had no seri­
ous difficulty with its accounting.
An overpayment, such as
Unfortunately it seems impossible to get cost fig­
ures from the private dealers to compare with those of the
associations. A rough estimate— used by the associations—
of dealers1 costs is the difference between the price paid
for the tobacco in the country and the price the manufactur­
ers pay the dealers and associations for the rehandled
tobacco. The associations feel that this is a fairly relia­
ble measure since they regard the dealers as very influen­
tial in setting both of these prices. The associations
judge their own efficiency in rehandling by comparing their
costs with this difference. This reasoning was the basis of
the estimates which members and officers of the associations
gave the writer in interviews in August 1938 and August 1939
on the question of the efficiency of their operations.
2See page 234.
250
those which occurred twice to a grave extent in the Miami
Valley Tobacco Growers' Co-operative Association,^ was made
on the 1930 crop.
The total was approximately $375 and
arose from the efforts of an incompetent accountant to dis­
tribute funds in the final settlement on that crop.
The
amount was finally charged against the membership dues
account•
The most serious accounting problem has been that of
cost allocation by crop years and types.
Labor, cases, and
storage costs have been treated as direct items and have
presented very little difficulty.
The overhead items of
administrative, financial, warehouse and miscellaneous costs
have caused the trouble.
In making this distribution the
officers seem to have reached a more satisfactory solution
than did the Miami Valley Tobacco Growers’ Co-operative
Association. p
Allowance has been made for the grade of the
tobacco by charging wrappers twice as heavily as fillers and
leaves.
The length of time the tobacco has remained in stor­
age has been taken into consideration.
To do this the offi­
cers have made the older crops on hand bear a lower propor­
tion of the current overhead by placing them in the ratio of
1, 2, 4, 8, etc. per pound from the oldest to the most
recent crop year.
In general this arrangement can be justi­
fied by the less attention required by the crops which are
worked and in storage.
It is also a convenient method of
saving any old crops which are slow to sell from an extremely
■**See pages 140-142.
2
See page 155.
251
heavy burden of overhead costs*
Although this plan of overhead allocation has proved
generally satisfactory, it has not faced fairly the problem
of the type pools which are disposed of in less than a
year’s time, as was the 1936 Type 44 pool.^
The type pool
is charged with overhead only while it is on hand, so that
whenever it is sold before the end of its first storage year
the other type pools of the year crop are forced to stand
nearly all the overhead of that year.
If all type pools of
a year were sold before the end of their first year in the
warehouse, a very distinct problem would be raised.
It
would seem that a type pool, although disposed of very early,
should bear a portion of the entire overhead for its first
storage year.
Following the readjustment in 1937,
2
the accounting
work has been greatly handicapped by the fact that an account­
ant has not been employed regularly and the work has been
done only sporadically--sometimes once every six months*
This has complicated cost distribution and final settlement
on the type pools.
Since 1933 no independent audits have been made of
the Association’s books*
The Federal Intermediate Credit
Bank and the Bank for Cooperatives have been satisfied to
accept the statements prepared by the accountants.
There
have never been any suggestions of misuse of funds or impro­
per accounting— other than the overpayment on the 1930 crop—
1See Figure 21, p* 239*
2See page 202.
252
and no complaints have been made by the members about the
accounting.
Special Activities
Certain activities which the Association has under­
taken in connection with its regular functions of handling
and selling tobacco deserve mention.
One of the most impor­
tant of these, from the point of view of the saving and
profit it has meant, has been the operations in tobacco
cases.
Since the 1934 crop the Association has bought lum­
ber and made cases, on each of which it has been able to
save approximately 25 cents— about 10% of the total cost.
In addition, the Association has bought used cases from sev­
eral manufacturers.
It has furnished these cases to the
members to use in delivering their crops and has sold them
to outsiders.
This has meant not only a lower case cost
charged against the tobacco, as indicated earlier,1 but also
a profit of over $2,200 which has been transferred to the
Reserve for Working Funds.
Since 1934 the Association has bought some tobacco
for resale.
This has been done for several reasons.
Some
exceptionally good crops have been purchased to improve the
grading of the tobacco of the members.
Some have been bought
to fill the needs of regular customers of the Association or
as a speculation.
The most important operations have been
1See page 248.
253
in trash leaves, which the Association has never handled on
consignment.
Of the 1938 crop it bought 37,000 pounds and
of the 1939 crop approximately 100,000 pounds.
The price
paid was three cents per pound, which was well above the
price in the preceding years.
The officers have sought both
to make a profit on this tobacco and to advertise the Asso­
ciation among the growers.
The hope has been that those who
sell this low grade to the Association may be induced to
deliver the better grades on consignment.
It appears that
this plan has been partly successful.
On total operations in this purchased tobacco from
August 1934 up to, but not including, the 1939 trash leaves,
the Association realized a profit of $590, which was added
to the Reserve for Working Funds.
This profit was about 6%
on the Investment.
At various times the Association has been inter­
ested in sponsoring or operating a cigar factory.
Discus­
sions have been held with manufacturers, but no definite
steps have ever been taken.
To help several customers and
to encourage the sale of its tobacco the Association has
taken cigars in payment of part of the sales accounts*
These cigars have been placed in stores throughout the dis­
trict.
The secretary-treasurer has sponsored the plan and
assumed the risks.
It has not been of significance except
as it has enabled the Association to collect several rela­
tively small accounts.
A more important movement toward cigar making came
254
in 1933 when the Association decided to become a quasimanufacturer to prepare short-filler scrap for cigars.
The
plan was to buy a scrap or shredding machine, but as an
experiment the Association hired a manufacturer to shred
about thirty cases.
The results were so unsatisfactory that
the project was abandoned.
This plan had originated when
the Association was seeking its major outlet among the small
manufacturers,1 many of whom made short-filler cigars but
did not have a machine to shred the leaf.
Removing Trash from the Market
Prior to 1938, when the Association began to buy
trash leaves, it was a leading crusader to have the trash
tobacco removed from the market.
The officers felt that
this low grade offered serious competition to the better
grades.
Three different avenues of attack were used in this
drive.
The Association encouraged the growers to use the
trash for fertilizer or to mix it with their poultry feeds.
Many were induced to do so.
The second attack was an endeavor to secure a law In
Ohio to prohibit the sale of trash leaves.
A member of the
Association who was a representative in the Ohio General
Assembly proposed bills in 1933 and in 1935 for this purpose.
The bills claimed that the trash leaves consisted of the
1See page 229.
255
’’unclean, unsanitary, and unsound leaves” which were ’’unfit
for human consumption.”1
On both occasions the bill passed
the house but died in a committee of the senate.
The final means by which the Association sought to
remove the trash from the market was the establishment of a
chemical extraction plant.
Early in 1934 an inventor and a
promoter from New York City approached the Association with
a new process of extracing nicotine, malic and citric acids
from tobacco, and presented figures to show the great profit
possibilities.
After several months’ deliberations2 the
directors voted to invest $2,500 In the venture.
charged against the Reserve for Working Funds.
This was
The Eastern
Dark Fired Tobacco Growers Association, Springfield, Tennes­
see, and the Western Dark Fired Tobacco Growers Association,
Murray, Kentucky, each invested $5,000.
A pilot plant was
built in New Jersey and each Association shipped some tobacco
for a test.
The main plant was to be built in Kentucky and
each Association was to provide an established percentage of
the low grade tobacco used.
Reports from the pilot plant
^■House Bill No. 55, Ohio General Assembly, 91st,
Regular Session, 1935-1936.
o
Investigations by the writer revealed that the
inventor of the new process had a poor reputation in chemi­
cal circles and that experiments of government experts and
of private chemical firms had shown that it was too expen­
sive to extract these or any other chemicals from Miami
Valley tobacco. The Virginia Dark-Fired Tobacco Growers
Association has operated a nicotine plant to which it has
diverted its poor tobacco whenever the price has fallen
below a certain level. The venture appears to have been
successful with this type of tobacco. (Cooperative Journal.
July-August 1937, PP* 116-117.)
256
were sketchy and finally, in 1936, they stopped coming.
Nothing has been heard of the inventor or the promoter since.
The Ohio Cigar Leaf Tobacco Growers1 Marketing
Association has never been an important factor in the tobacco
market.
It started small and has remained small.
It has
gone through many periods of difficulty, but has managed to
survive.
For the most part members have not been loyal to
the Association, but have used it as a last resort in bad
times or as a place to dispose of their poor tobacco.
An
examination of operations has shown that the rehandling of
the tobacco and the control of expenses have been generally
satisfactory.
Sales have been a weak point.
Mainly because
of the failure with sales and because of the small volume of
tobacco handled, the Association has not been able to make
an average return to the growers above the market price.
CHAPTER VIII
SUMMARY AND CONCLUSIONS
The various lines of investigation followed in the
analysis of the tobacco marketing cooperatives which have
existed in the Miami Valley, Ohio, can now be brought to­
gether and summarized.
Conclusions as to the factors which
have led to the formation and caused the failures of these
ventures can be drawn.
Let it be noted at once that no new
factors have been discovered; nor was a search for them the
reason for the study.
The purpose has been to discover the
factors, new or old, involved in the histories of the co­
operatives in this particular district.
It appears that no attempts at cooperative marketing
of tobacco were made in the Miami Valley before 1900.
Soon
after that time a few local warehouse associations were set
up, but they did not survive long.
The National Cigar Leaf
Growers' Union of 1910 sponsored the first important move­
ment, which resulted in the formation of the eleven coopera­
tive warehouse companies of 1912, and of the related sales
agencies.
The Miami Valley Tobacco Growers' Co-operative
Association of 1923-1927 and the Ohio Cigar Leaf Tobacco
Growers' Marketing Association of 1931—
257
with its fore-
258
runner, the selling group of 1928-1930, complete the list of
attempts to market tobacco cooperatively*
The creation of these associations1, has been traced
to four factors or causes*
The most important of these was
depressions in the tobacco market.
In the three periods
since 1909-1910-1912, 1920-1926, and 1929-1933— when prices
were low or declining, demand weak, and the outlook for the
growers discouraging, cooperative marketing was tried as a
remedy for the situation.
Of the associations mentioned
above all the important ones were created in these periods*
Another factor in the formation of the associations
in these periods was the encouragement which the growers in
the Miami Valley received from the apparent success of ex­
periments in cooperative marketing in other tobacco dis­
tricts, chiefly the Burley district of Kentucky.
A third factor providing part of the impetus for the
creation of the cooperatives was the activities of certain
organizations, and the passage of laws favorable to coopera­
tive marketing.
These organizations and laws were a part of
the recurrent periods of interest, both in this district and
in the whole country, in cooperative action in agriculture.
The American Society of Equity in 1912 and the Ohio Farm
Bureau Federation in 1923 sponsored and directed the crea­
tion of the associations.
To a lesser degree the Farmers’
Equity Union was a factor in arousing interest in the moveFor ease of statement all these organizations,
Including the cooperative warehouse companies, will be
referred to throughout this chapter as associations.
259
ment in 1925.
The Capper-Volstead Act of 1922, Ohio’s
Farnsworth-Greer Cooperative Bill of 1923, and the Agricul­
tural Marketing Act of 1929 were both expressions of and
contributors to interest in cooperative marketing#
Repre­
sentatives of the Federal Farm Board, created by the last of
these acts, actively participated in the organizing of the
Ohio Cigar Leaf Tobacco Growers* Marketing Association in
1931*
The final factor in the creation of these coopera­
tives was the growers' dissatisfaction with the countrybuyer system of marketing*
Some growers sought relief from
the low prices, uncertainty, and discrimination which they
felt this system involved.
Others were interested in secur­
ing for themselves in higher prices the money which went to
the middlemen as costs and profits.
They believed that by
direct dealing between producers and manufacturers some of
the operations in handling and marketing could be eliminated,
and that others could be
performed more efficiently. In the
associations formed in 1923 and in 1931
the objection to the
existing system was expressed in a desire to monopolize the
market and to dictate prices.
In the ventures started soon
after 1900 the lack of proper facilities to market the to­
bacco, as well as objections to the system, appears to have
led to the establishment of warehouses.
Significant size
and importance in the market
never been attained by any of these ventures except the
Miami Valley Tobacco Growers’ Co-operative Association*
have
260
That association handled 76% of the 1923 crop and 21% of the
1924 crop, but these were the only year crops received*
The
eleven cooperative warehouse companies of 1912, in spite of
their number, never received over 10% of the total Miami
Valley production in any year, and most of them were out of
existence after a few years.
Those which survived a bit
longer tended to become profit seeking ventures in the con­
trol of a few growers.
The Ohio Cigar Leaf Tobacco Growers'
Marketing Association has had a relatively long life (since
1931) in which it has overcome imposing obstacles.
Yet, its
operations have been even more limited than those of the
earlier undertakings, for of the 1931 crop, when It attained
its greatest size, it handled less than 6% of the tobacco
grown in the district.
All these associations have tended
to reach their maximum size in the first years of operation
and then to decline and, in a few years, with the exception
of the Ohio Cigar Leaf Tobacco Growers' Marketing Associa­
tion, to pass out of existence.
The mistakes and difficulties which have caused
these failures— for so the operations of these associations
must be regarded— have been many.
They can be classified
into two groups: internal factors, causes arising within the
organizations; and external factors, causes beyond the con­
trol of the associations.
One of the internal factors was
the serious errors made in organizing the associations*
To
create enthusiasm among the growers the organizers and offi­
cers often have condemned the tobacco buyers and manufactur-
261
ers.
These individuals in return frequently have provided
effective opposition by refusing to buy from the associa­
tions and by Inducing growers not to support them.
A second error in the formation of many of the asso­
ciations was the use of extravagant promises and excessive
pressure to induce growers to join.
When the associations
were unable to fulfill the promises, the disillusioned mem­
bers withdrew.
Perhaps the organizers and officers were
guilty only of over-optimism in this respect, but their
methods of getting members jeopardized the chances for suc­
cess of the associations.
A third error in setting up the associations was the
inadequate attention given to the organization structure and
to the functions essential for successful operation.
The
duties of the various officers were not well planned or de­
fined.
The selling function was almost never accorded the
position which it should have had.
The results have been
inefficient management and poor sales records.
Closely related to the errors made in securing mem­
bers has been another Internal factor which has contributed
to the failures of the associations.
These organizations,
with the possible exception of the cooperative warehouse
companies of 1912, have never been supported by the great
mass of growers.
the few.
They were formed and have been operated by
As a result, the members generally have had no
deep Interest in the associations, and have not remained
loyal.
It appears that they have not known what they might
262
reasonably expect of cooperative action, and have not real­
ized what they must do to make the undertakings successful.
They have tended to use the associations only when it has
appeared profitable to do so.
The Ohio Cigar Leaf Tobacco
Growers’ Marketing Association especially has served often
as a dumping ground during periods of low prices and for
poor tobacco.
From the histories of these associations it is dif­
ficult to draw conclusions as to the effects of different
kinds of membership contracts and of membership relations
programs on the loyalty of the members.
In the cooperative
warehouse companies of 1912 there were usually no written
membership agreements and no membership relations work.
The
resulting unstable memberships of these companies appear to
have been an Important factor in their dissolutions.
On the other hand, the Miami Valley Tobacco Growers'
Co-operative Association attempted to bind the members to
Itself for five years without possibility of release.
It
also conducted a vigorous membership campaign and an exten­
sive membership relations program.
Yet, its members com­
plained of a lack of contact with the association, and of a
lack of control over Its operations; they rose in a revolt
which destroyed the undertaking after only two years of
operation.
At almost the other extreme the Ohio Cigar Leaf
Tobacco Growers' Marketing Association has made it very easy
for members to withdraw or to deliver just those crops which
they have chosen to deliver.
It has been inclined to wait
263
for the growers to seek to join, and has slighted membership
relations work, even to the point of being reluctant to give
information to its members*
Very likely because of the ease
with which members have been able to withdraw when they have
become dissatisfied, this association has heard little crit­
icism of its relations with the members, and has never been
troubled by opposition from them*
Although the Ohio Cigar
Leaf Tobacco Growers1 Marketing Association has been enabled
by this policy of leniency toward members to survive much
longer than the Miami Valley Tobacco G-rowers1 Co-operative
Association, it has at the same time been condemned to suf­
fer wide fluctuations in the quantity of tobacco received.
Neither policy seems to offer a solution to the problem of
membership loyalty*
The examination of the associations has shown that
factors other than the formal membership relations work have
entered into the membership-management relations*
These
have been the size of the organizations; the personnel, sal­
aries, and attitudes of the managements; and the accessibil­
ity of headquarters to the members*
The great size of the
Miami Valley Tobacco Growers1 Co-operative Association and
the location of its offices in a large city, Dayton, where
they seemed remote and inaccessible to the growers, made
difficult a close relationship between members and manage­
ment.
This situation existed in spite of the membership
relations work already mentioned and the fact that directors
were chosen by an elaborate process intended to keep the
264
control in the hands of the members*
The members of this
association were suspicious of the experienced tobacco men,
"outsiders,” hired to manage the association, and resentful
of the high salaries paid them*
The difference between the
members and the management reached its climax in 1925 when,
in the face of membership demands for more information and
for a withdrawal provision in the by-laws, officers sought
to use the election procedure to retain control of the asso­
ciation*
In contrast, the cooperative warehouse companies and
the Ohio Cigar Leaf Tobacco Growers1 Marketing Association
have been small and their officers, though lacking in exper­
ience, have been closely acquainted with the growers and
deeply concerned in the success of the undertakings*
salaries paid have been low*
The
The offices have been located
in small towns and the members have been made to feel that
they are welcome to call.
Although approval cannot be given
to very small associations and to inexperience and low sal­
aries for the management, the suggestion may be made that
important reasons for the friendly relations between the
managements of these associations and their members may be
found in the personnel and attitudes of the management and
in the accessibility of the offices to the members.
A third important internal factor involved in the
failures of the associations has been mismanagement.
From
the examination of the associations' operations it appears
that one reason for this has been the officers* failures to
265
plan operations carefully•
Instead of driving toward well-
conceived goals, they seem to have moved with the flow of
events*
There were fewer indications of lack of planning in
the Miami Valley Tobacco Growers* Co-operative Association
than there have been in the other associations.
One evidence of the mismanagement was the poor ac­
counting methods of the Miami Valley Tobacco Growers* Co­
operative Association, and the lack of accounting in most of
the cooperative warehouse companies*
Mismanagement does not appear to have occurred in
the handling of the tobacco, except in the Miami Valley
Tobacco Growers* Co-operative Association*
In that organi­
zation errors beset the handling activity from grading to
repacking to such an extent that they must rank as a major
cause of the failure of the association*
One of these was
the mistake of using too many warehouses scattered through­
out the whole district.
This not only complicated the prob­
lem of control but also was very expensive.
In this respect
the other associations, with smaller quantities of tobacco
and only one or two warehouses each, have made better rec­
ords •
It is difficult to judge the efficiency of the man­
agements from the costs of operations because of the few
available bases for comparison.
From the data obtainable
it appears that the associations generally have not been
able to perform the handling and marketing functions cheaper
than, or, in many instances, as cheaply as, the private
266
buyers and dealers.
Although the Ohio Cigar Leaf Tobacco
Growers1 Marketing Association has been able to overcome to
a great degree the problem of fixed costs with fluctuations *
in the quantity of tobacco handled--a problem which the
Miami Valley Tobacco Growers' Co-operative Association did
not solve--!t does not appear to have made a saving in oper­
ating costs.
That the associations realized their weakness
in this respect is shown by the fact that nearly all of them
began by doing a complete rehandling job on the tobacco, and
later reduced the operations to the minimum necessary to
satisfy the customers.
This poor showing can be attributed
to poor managements and high overheads, and to the small,
varying quantities of tobacco which most of the associations
have handled.
To what extent the poor management has been caused
by the inexperience of the officers is inconclusive from the
histories of the associations.
Most of them have employed
as managers farmers inexperienced in the tobacco market, but
the Miami Valley Tobacco Growers' Co-operative Association,
as it began operations, hired supposedly competent men exper­
ienced in tobacco marketing.
Yet, in nearly every phase of
the management of that association the officers, especially
in the first year, committed many blunders.
In fact, in the
second year with several less experienced officers a notice­
able improvement was made.
It seems likely that the errors
made by the experienced tobacco men were due to the great
size of the new undertaking and to the fact that the officers
267
were not experienced in managing farmers' cooperatives and
were not vitally interested in the success of the venture.
However, the officers must possess more than close contacts
with the growers' problems and a deep interest in the under­
taking to insure good management.
This has been shown by
the experience of the other associations and of the Miami
Valley Tobacco Growers' Co-operative Association after the
management was changed in 1924.
Probably the generally sat­
isfactory records in tobacco handling in the cooperative
warehouse companies and the Ohio Cigar Leaf Tobacco Growers'
Marketing Association have been made because experienced
warehouse managers have usually been employed#
In many instances the officers seem to have been
imbued, perhaps because of their inexperience, with an over­
optimism which has led to serious mistakes.
Extravagant
promises, which could not be fulfilled, have been made to
members, who have thereby been turned against the associa­
tions.
In the Miami Valley Tobacco Growers' Co-operative
Association too high estimates were placed on the tobacco
with resulting overpayments on the advances to the members-an important factor in the failure of the association.
Induced partly by this over-optimism, officers have attempted,
with unfortunate results, to set arbitrary prices on their
tobacco.
A fourth internal factor which, at some time or
other, has caused trouble for all the associations except
the Miami Valley Tobacco Growers* Co-operative Association
268
has been a lack of funds for operations and for advances to
the members.
That association obtained adequate funds from
a bankers' syndicate, but the plan was expensive and diffi­
culties were encountered in administering it and In making
repayments.
The cooperative warehouse companies of 1912
devised no adequate methods of dealing with the problem.
After several years of financial stringency, the Ohio Cigar
Leaf Tobacco Growers' Marketing Association has been able to
secure all the funds necessary— except In emergencies cre­
ated by its sales practices— at low rates of interest by
borrowing on tobacco in bonded storage from the Federal
Intermediate Credit Bank, Louisville, Kentucky, and the
Louisville Bank for Cooperatives.
It seems no exaggeration
to say that the continued operation of this association has
been made possible by these loans.
The credit facilities
provided by these government-established financial Institu­
tions have solved one of the biggest problems of tobacco
cooperatives•
The gravest failing of the associations has been in
selling, their primary function.
Although this factor might
be included in management, it has been so important that it
deserves separate consideration.
The officers have appeared
to be at a loss for a way to attack the problem.
Many dif­
ferent methods have been tried but none of them has been
carefully developed and aggressively used.
For the most
part the officers have waited for the dealers and manufac­
turers to come to them to make purchases.
In conducting
269
sales operations little attention has been given to the
supply and demand in the market.
The prices which the associations have been able to
secure for their tobacco generally have not been high enough
to give the members returns above the prices for tobacco on
the farm.
Of course, part of the poor returns must be
attributed to the associations' inability, as mentioned pre­
viously, to make a saving on the costs of handling and mar­
keting.
At times, especially in the Miami Valley Tobacco
Growers' Co-operative Association, the members have suffered
great losses in view of the prices which they might have
secured from sale to the private buyers.
In attempting to secure better prices the officers
have made the mistake of setting high prices and then hold­
ing the tobacco in the futile hope that the manufacturers
would be forced to pay the prices asked.
Instead of bring­
ing higher prices, this practice has caused higher costs and
the postponement of payments to the members.
The long time,
in some instances from three to five years, which the mem­
bers have had to wait for final settlement on their crops
has not only reduced the real returns on the crops but also
caused many members to withdraw.
The record of the Ohio
Cigar Leaf Tobacco Growers* Marketing Association has been
very poor in this respect, especially on the 1931 crop on
which it required over five years to make settlement on the
Types 43 and 42 pools.
Whether the associations have done much toward cor-
270
recting the evils which, the growers have felt to exist in
the country-buyer system of marketing is problematical•
The
different associations either have not been large enough or
have not operated long enough to show whether they could
stabilize prices.
The expressed intention of increasing the
price to the growers by adding to it the profits of the dis­
placed middlemen and the anticipated savings in performing
the handling and marketing functions has not been realized.
The decline of the independent buyer--the buyer most objected
to by the growers--does not seem to have resulted from the
work of the cooperatives.
It appears that in some years, in
at least some sections of the district, the associations
have been able to bring higher prices for the tobacco.
It
seems also that because of losses suffered in selling through
the associations members have gained less from these higher
prices than the outsiders.
In most of the associations the officers who have
had charge of sales have had little experience in tobacco
marketing.
During part of its history the Miami Valley
Tobacco Growers’ Co-operative Association employed an exper­
ienced tobacco salesman who was able to dispose of the to­
bacco rapidly but not to secure good prices for it.
His
failure seems to have been due to changes in the market and
to the conditions under which he worked.
From an examination of the failures of the associa­
tions several suggestions can be made for a more satisfac­
tory performance of the vital function of selling.
First,
271
the association should give the proper emphasis to this
function by placing it in the charge of an officer trained
and experienced in the work and able to devote adequate time
to it*
Second, this officer should understand the operation
of a farmers’ cooperative marketing association and should
have an interest in the tobacco growers’ welfare*
Third, a
careful study should be made of the market for the product
and of the methods of selling*
Out of this study a definite
program should be developed and followed aggressively.
Fourth, arbitrary price setting should be abandoned in favor
of a pricing policy based on a careful study of market con­
ditions .
A sixth internal factor responsible for the failure
of the associations has been the attempts to operate on too
small a volume of tobacco.
This cause has been demonstrated
in the operations of the cooperative warehouse companies and
of the Ohio Cigar Leaf Tobacco Growers1 Marketing Association.
How many pounds of tobacco or what percent of the production
in the district must be received to make possible effective
operation is hard to determine.
Perhaps the minimum of five
million pounds suggested by the Federal Farm Board1 and by
the officers of the Miami Valley Tobacco Growers’ Co-operative
Association2 is a fair estimate.
At least, the volume should
be great enough that the association would have some voice
in the market and that it would be possible to employ good
management and to conduct a strong sales program without
1See page 178.
2
See page 165*
272
burdening each pound of tobacco with a high operating cost.
The difficulties of the Miami Valley Tobacco Growers1 Co­
operative Association with the large quantity of tobacco
which it received the first year appear to have been caused
not by the amount of the tobacco itself but by the attempt
to start on a large scale without adequate preparation for
the task.
A final internal factor which has contributed to the
failure of these associations has been internal dissension.
This has occurred not only as revolts of the members against
the associations, as in the Miami Valley Tobacco Growers’ Co­
operative Association, but also as discord among the direc­
tors and officers.
The operations of the Ohio Cigar Leaf
Tobacco Growers’ Marketing Association were hampered from
1935 to 1939 by this latter type of trouble.
On one point the associations have had a uniformly
good record.
They have avoided the mistake of extensive
investments in fixed assets, for in view of the short lives
of most of the associations such investments would very
likely have meant losses.
The few cooperative warehouse com­
panies which owned their buildings were able either to dis­
pose of them satisfactorily during the period of war prices
or to rent them for a fair return.
Most of the associations
found rented buildings and equipment adequate for operations.
External factors have also contributed to the lack
of success of these associations.
The first of these has
been a decline in the demand for Miami Valley tobacco.
The
273
consumption of cigars, which provide the chief market for
this tobacco, has decreased rapidly.
Tobacco from the other
domestic cigar leaf districts and imports from Puerto Rico
and the Philippines have been taking a greater portion of
the remaining cigar filler-leaf market.
Oversupplies of
Miami Valley tobacco on the market, in spite of reduced pro­
duction, and lower prices for this tobacco have been the
results of these developments.
The associations have had to
fight against these odds without hope of being able to re­
verse the trends.
A second external factor has been changes in the
market price for tobacco.
Many of the cooperative warehouse
companies went out of existence when market prices rose
during the war and members deserted the companies because
they no longer felt the need for their services.
A rapidly
declining market price was an important factor in the de­
struction of the Miami Valley Tobacco Growers1 Go-operative
Association, for it made it impossible for the association to
make a fair return to its members.
The associations do not
appear to have been able, in many instances, to take advan­
tage of rising prices on tobacco received during low price
periods•
The opposition of the buyers and manufacturers,
largely earned by the unwise statements and actions of mem­
bers and officers of the associations, has already been men­
tioned.
The nature of the cigar leaf tobacco market has
also been a factor in the difficulties of the associations.
274
The concentration of cigar manufacturing in the hands of a
few large firms has narrowed the market on which the asso­
ciations sell their product.
The quoting of prices and the
making of sales have "been complicated by the facts that
cigar leaf tobacco has not been traded on a commodity ex­
change, that there has been no central market for it, and
that information on market prices, supply, and demand has
been hard to obtain.
It is interesting to note that of the twenty inter­
nal causes for the failures of cooperative marketing asso­
ciations listed by the Federal Farm Board in a report in
1932,1 fifteen played some part in the failures of the
tobacco cooperatives in the Miami Valley*
Some of the more
important causes listed were: errors made in forming the
association, disloyalty of members, poor sales programs,
incompetent management, high operating costs, and lack of
sufficient capital.
No internal factors were found in the
Miami Valley associations which were not listed by the Fed­
eral Farm Board*
On the other hand, causes listed by this
board which do not appear to have been involved in the failFederal Farm Board, Cooperative Marketing of Farm
Products. Bulletin No. 10, June 1932, p. 13* This is one of
the most extensive lists available. Similar, though not as
detailed, lists of factors are given by other authorities,
who also list general external factors. See: H. H. Bakken
and M. A. Schaars, The Economics of Cooperative Marketing
(New York: McGraw-Hill, 1937), pp. 196-203; F. E. Clark and
L. D. H. Weld, Marketing Agricultural Products in the United
States (New York: Macmillan, 1932), pp. 568-572; H. B. Price,
op. cit.; J. W. Jones and 0. B. Jesness, Membership Relations
of Cooperative Associations (Cotton and Tobacco), U . S .
Department of Agriculture Department Circular No. 407,
January 1927.
275
ures of these associations were: hasty organization, direc­
tors serving as paid employees, wasting funds to meet compe­
tition from private agencies, failure to create reserves,
and excessive investment in fixed assets.
The last of these
the associations in the Miami Valley have been careful to
avoid.
Since the cooperative warehouse companies soon became
profit ventures they were not in a position to use the same
type of reserves as the other associations.
Out of the many attempts at cooperative tobacco mar­
keting in the Miami Valley, only the Ohio Cigar Leaf Tobacco
Growers' Marketing Association continues (July 1940) to
operate, and it on only a very small scale.
The future for
cooperative marketing in this district is not promising.
Before any great success can be achieved, problems of man­
agement and selling must be solved to make possible better
returns to the members.
No test has been provided of what
cooperatives might be able to do in this district under man­
agement skilled in the work of cooperative marketing and
interested in the tobacco growers' welfare, but it seems
reasonable to suppose that such management would be more
successful than the managements of these undertakings have
been.
Of equal importance is the need for growers to be
interested in and instructed in cooperative action.
Whether
these conditions can be brought about and operations suc­
cessfully carried on in the face of the general market situ­
ation for Miami Valley tobacco, are unanswered questions.
If the Ohio Cigar Leaf Tobacco Growers' Marketing Association
276
is to attempt to prove that cooperative marketing of tobacco
can be done successfully in this district, it should begin
by Increasing its membership and by devising a better sales
program.
By way of summarization the following factors may be
listed as those involved in the creation and the failures of
the tobacco marketing cooperatives in the Miami Valley:
I. Factors leading to the formation of the associations#
A# Depressions in the tobacco market#
B# Formation of tobacco cooperatives In other districts#
C# Activities of certain organizations and passage of
laws favorable to cooperative marketing*
1# American Society of Equity, Ohio Farm Bureau
Federation, Ohio State University, Federal Farm
Board.
2# Capper-Volstead Act of 1922, Ohio’s FamsworthGreer Cooperative Bill of 1923, Agricultural
Marketing Act of 1929#
D. Growers* dissatisfaction with the country-buyer
system of marketing#
II# Factors causing the failures of the associations#
A# Internal factors.
1# Errors made In forming the associations.
a. Condemnations of tobacco buyers and manufac­
turers#
b# Extravagant promises and excessive pressure
used to induce growers to join#
c. Inadequate attention to organization structure
and to the functions essential to operations#
2# Lack of support from the great body of growers,
a# Formed and directed by the few#
b. Cooperative action not understood by growers.
c. Poor membership-management relations*
3• Mlsmanagem ent•
a# Lack of planning*
277
b. Poor accounting methods*
c* Errors in handling the tobacco*
d* Inability to reduce operating costs below those
of private dealers*
e* Managers inexperienced In cooperative marketing
and uninterested in tobacco growers* Y/elfare*
4* Lack of funds for operations and for advances to
members.
5* Poor sales programs.
a. No well developed program aggressively pursued.
b. Low prices secured on sales.
c. Attempts at price setting.
6. Too small volume of tobacco handled.
7* Internal dissension.
B. External factors.
1. Declining demand for Miami Valley tobacco.
2. Changes in market price for tobacco.
3. Opposition of private interests.
4. Nature of the cigar leaf tobacco market.
a. Restricted market.
b. Lack of central tobacco market, of trading in
tobacco on commodity exchange, and of market
information.
APPENDICES
A.
MIAMI VALLEY TOBACCO STATISTICS
Table I • Acreage and Production of Tobacco in
the Miami Valley 1863-1939
Table II. Production, Disappearance, and Value
of Tobacco, with Index of Purchasing Power of
Farmers * Dollar in the Miami Valley1909-1939
B. ORGANIZATION PAPERS OF THE MIAMI VALLEYTOBACCO
GROWERS' CO-OPERATIVE ASSOCIATION
1 • Marketing Agreement
2. By-Laws
Page
279
279
281
283
283
289
C . ORGANIZATION PAPERS OF THE OHIO CIGARLEAF TOBACCO
GROWERS' MARKETING ASSOCIATION
1. Organization Agreement
2. Marketing Agreement
3* By-Laws
278
302
302
305
310
APPENDIX A
MIAMI VALLEY TOBACCO STATISTICS
TABLE I. ACREAGE AND PRODUCTION OF TOBACCO
IN THE MIAMI VALLEY 1863-1939*
Year
Acreage
1863
1865
1867
1869
1871
1873
1875
1877
1879
1881
1883
1885
1887
1889
1891
1893
1895
1897
1899
1901
16,400
4,400
7,900
5,500
17,800
18,900
11,600
14,300
15,400
17,600
12,400
18,900
17,900
21,300
28,800
31,700
24,700
30,700
52,600
50,100
Production
(th. lbs.)
Year
Acreage
Production
(til. lbs.)
14,800
3,000
5,600
5,200
24,900
16,400
10,000
11,500
17,200
13,000
10,300
20,000
16,700
18,000
26,400
19,200
19,900
24,500
48,400
33,400
1903
1905
1907
1909
1911
1913
1915
1917
1919
1921
1923
1925
1927
1929
1931
1933
1935
1937
1939
45,400
58,000
67,700
71,600
60,000
51,300
60,300
63,600
47,100
29,900
28,000
34,900
16,500
28,600
33,800
14,100
16,200
16,100
16,300
31,500
46,800
48,900
54,600
55,800
37,400
54,300
61,700
39,000
28,200
25,900
34,100
12,200
21,500
33,700
12,700
17,400
15,700
16,800
^The following sources were referred to in securing
this data and that used in Figures 1-3, PP* 9-11 • For the
limitations of the data see footnote 3, p* 12*
DATA FOR OHIO BY COUNTIES:
Annual Report of the Ohio State Board of Agriculture,
1863~190'9, The first report on tobacco production by
counties was given for the year 1863*
Annual Report of the Secretary of State of Ohio,
1891-1897* For some reason the statistics for these years
were published in this report rather than in that of the
279
280
agricultural board.
DATA FOR INDIANA B3C COUNTIES:
Annual Report of the Indiana state Board of Asrlculture, I865-168Q a
Report of (Indiana) Department of Statistics, 18811909* (Bureau of Statistics since 1905; Annual lSSl-1884,
Biennial since 1885)*
DATA FOR BOTH STATES BY COUNTIES:
Census of the United States, Seventh to Fifteenth#
U # S. Census of Agriculture, 1925 and 1935*
DATA FOR BOTH STATES NOT BY COUNTIES:
Chas. E# Gage, A id eric an Tobacco Types, Uses, and
Markets# pp# 46-47# Data for 1909-1932#
U# S# Department of Agriculture, Annual Report on
Tobacco Statistics# Statistical Bulletins: #58 (data to
1935), #63 (1937), #67 (1938), and report for 1939 issued
by the Agricultural Marketing Service#
U# S. Department of Agriculture, Crop Report as of
October 1# 1939# issued by the Agricultural Marketing
Service*
The personal records and estimates of several
dealers and a broker interviewed during August 1938 and
August 1939#
281
TABLE II. PRODUCTION, DISAPPEARANCE, AND VALUE OF TOBACCO,
WITH INDEX OF PURCHASING- POWER OF FARMERS' DOLLAR,
IN THE MIAMI VALLEY 1909-1939
Year
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1925
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
Brodyo- Stocks
tlon*- Oct.?
Total
SWtir
Minim
rbs.
MITttm
lbs.
Minim
lbs.
54.6
56.0
55.8
53.5
37.4
54.1
54.3
58.2
61.7
53.0
39.0
38.6
28.2
26.6
25.9
25.2
34.1
21.8
12.2
15.6
21.5
32.8
33.7
24.2
12.7
16.3
17.4
13.2
15.1
12.2
a
a
a
101.9
95.9
78.2
84.2
68.2
73.5
76.0
78.9
90.9
89.4
84.2
84.9
84.6
64.4
82.0
66.0
55.1
46.4
42.2
61.9
66.0
62.4
63.4
65.8
60.2
51.7
48.0
42.0
16.8
----
155*4
133*3
132*3
138.5
126.4
135.2
129.0
117.9
129.5
117.6
110.8
110.8
109.8
98.5
103.8
78.2
70.7
67.9
75.0
95.6
90.2
75.1
79.7
83.2
73.4
66.8
60.2
58.8
Disap­
pear­
ance
MITHm
lbs.
— —
59.5
55.1
48.1
70.3
52.9
59.2
50.1
27.0
40.1
33.4
25.9
26.2
45.4
16.5
37.8
23.1
24.3
25.7
13.1
29.6
27.8
11.7
13.9
23.0
21.7
18.8
18.8
— —
Stock
times
Disap­
pear­
ance
— —
1.71
1.74
1.63
1.20
1.31
1.24
1.52
2.92
2.27
2.68
3.23
3.24
1.86
3.90
2.17
2.86
2.27
1.80
3.22
2.09
2.37
5.33
4.56
2.87
2.82
2.75
2.55
—
Av.
Price
z&
Pur.
Crop
Pwr.
Value1
of
Farm
ths .
*
t
9.5
8.2
7.8
8.0
11.0
9.1
9.0
12.0
24.0
16.0
20.0
16.0
11.0
14.0
13.0
13.0
11.4
8.5
15.6
17.5
13.8
10.1
5.5
4*0
6.0
8.6
7.2
9.5
8.8
8.8
8.5
5,186
4,592
4,352
4,277
4,119
4,927
4,384
6,984
14,806
8,480
7,797
6,174
3,106
3,726
3,364
3,275
3,883
1,854
1,904
2,732
2,960
3,307
1,855
967
760
1,404
1,254
1,250
1,330
1,077
1,428
f
a
104
94
100
100
101
93
95
117
115
105
105
82
89
93
94
99
94
91
96
95
87
70
6l
64
73
86
92
93
78
a
aData not available.
^ h a s . E. G-age, American Tobacco Types, Uses, and
Markets, p. 46; U. S. Department of Agriculture, Annual
Report on Tobacco Statistics. First. p. 15, 1959. p. 9;
U. S. Department of Agriculture, Crop Report as of October 1 ,
1939; reports of growers and dealers interviewed during March
1940 on the price for 1939 tobacco.
2J. V. Morrow and D. Smith, Tobacco Shrinkage and
Losses in Weight In Handling and Storage, p. 55; U. S.
282
Department of Agriculture, Annual Report on Tobacco Statistics
1939, p. 49.
------------------------The index number of the purchasing power of the
farmers1 dollar was computed as the ratio of the index number
of prices received by the farmers for all their products to
the index number of prices paid by the farmers for all com­
modities purchased. These index numbers (base 100 for the
period 1910-1914) are given in U. S. Department of Agri­
culture, Agricultural Statistics 1959. pp. 496-497.
The limitations of the index computed must be noted.
The income index is for all commodities sold rather than
just for tobacco in the Miami Valley district and is for the
calendar year while the tobacco income is ordinarily received
between December first of one year and April first of the
following year* These appears no way of determining when
this income is spent* Perhaps it is used to pay debts on
goods purchased the preceding year, or perhaps it is saved
and spread in purchases over the following year. The expen­
diture index is for the whole country rather than for the
Miami Valley tobacco growers alone.
In this table the index of purchasing power in a
calendar year is associated with the crop income which most
frequently is received in the first part of the following
year. This was done since allowance for lag cannot be
clearly justified and confusion of dates might result from
any change. The method followed here was approved as perhaps
the most satisfactory possible on the basis of the data
available by D. S. Anderson, Associate Professor of Agri­
cultural Economics, College of Agriculture, University of
Wisconsin in a letter of June 26, 1940 and by 0. C. Stine,
head of the Statistical and Historical Research Division of
the Bureau of Agricultural Economics, U. S. Department of
Agriculture in a letter of July 3, 1940.
APPENDIX B
ORGANIZATION PAPERS OF THE MIAMI VALLEY TOBACCO
G-ROWERS' CO-OPERATIVE ASSOCIATION
1.
MARKETING AGREEMENT
The Miami Valley Tobacco Growers' Co-operative
Association, hereinafter called the Association, party of
the first part, and the undersigned Grower, party of the
second part, agree:
1* The grower Is a member of the Association and is
helping to carry out the express aims of the Association for
co-operative marketing, for minimizing speculation and waste
and stabilizing tobacco markets in the interest of the grower
and the public through this and similar obligations under­
taken by other growers*
2.
The Association agrees to buy and the grower
agrees to sell and deliver to the Association all of the
tobacco produced by or for him or acquired by him as land­
lord or lessor during the years 1923, 1924, 1925, 1926 and
1927, under the terms and conditions hereinafter contained.
3* The growerexpressly warrants that he has not
heretofore contracted to sell, market or deliver any of his
said tobacco to any person, firm or corporation, except as
noted at the end of this agreement. Any tobacco covered by
such existing contracts or crop mortgages shall be excluded
from the terms hereof for the period and to the extent noted.
4* (a) All tobacco shall be delivered at the earli­
est reasonable time after cutting, curing, drying, firing
when customary, stripping and packing, to the order of the
Association, at the warehouse or plant controlled or speci­
fied by the Association, or at the nearest warehouse, if the
Association controls or specifies no warehouse or plant in
that immediate district; or by shipment as directed to the
Association; and by delivery to the Association of the in­
dorsed warehouse or other receipts or bills of lading, prop­
erly directed.
(b) Any deduction, allowance or loss that the
283
284
Association may make or suffer on account of inferior grade,
quality or condition at delivery shall be charged against
the grower individually and deducted against him from any
sums: due or that may hereafter become due from the Associ­
ation to the grower#
(c) The Association shall make rules and regula­
tions and provide inspectors or graders to standardize and
grade the quality and method and manner of handling, curing
and shipping such tobacco; and the grower agrees to observe
and to perform any such rules and regulations and to adopt
the grading established by the State and Federal authorities
and the Association#
5* The Association shall pool or mingle the tobacco
of the G-rower with tobacco of a like type, grade and quality
delivered in the same crop-year by other growers. The Asso­
ciation shall classify the tobacco and its classification
shall be conclusive.
The tobacco delivered in any crop-year to any point
at the order of the Association shall be handled in one
major pool; and the minor pools shall first be by type and
then by grade and quality within each grade#
6* The Association agrees to resell such tobacco,
together with tobacco of like type, grade and quality de­
livered by other growers under similar contracts, at the
best prices obtainable by it under market conditions; and to
pay over the net amount received therefrom (less freight,
insurance and interest), as payment in full to the grower
and growers named in contracts, similar hereto, according to
the tobacco delivered by each of them, after deducting
therefrom within the discretion of the Association, the
costs of maintaining the Association and of handling, grad­
ing, and marketing such tobacco; and of creating reserves,
funds for credit, and other general commercial purposes.
The annual surplus from such deductions must be prorated
among the growers delivering tobacco in the year on the ba­
sis of deliveries.
7. The grower agrees that the Association may handle,
in its discretion, some of the tobacco in one way and some
in another; may sell some upon delivery, may cure or process
or manufacture all or any portion thereof, but the net pro­
ceeds of all tobacco or tobacco products of like type, qual­
ity and grade, less charges, costs, advances and reserves,
shall be delivered ratably among the growers in proportion
to their deliveries to each pool, payments to be made from
time to time until all the accounts of each pool are settled.
The Association may contract with the owners of proc­
essing plants to process and store tobacco delivered by the
members of the Association.
8. The Association may sell the said tobacco, within
285
or without the United States, directly to manufacturers or
exporters or otherwise at such time and in such form and upon
such conditions and terms as it may deem profitable, fair and
advantageous to the grower; and it may sell all or any part
of the tobacco with or through any other agency now or here­
after established for the co-operative marketing of the to­
bacco of other growers, under such conditions as will serve
the joint interest of the growers and the public; and any
proportionate expenses connected therewith shall be deemed
marketing costs under paragraph 6•
9* The grower agrees that the Association may borrow
money in its name on the tobacco, through drafts, accept­
ances, notes or otherwise, or on any warehouse receipts or
bills of lading or upon any accounts for the sale of tobacco
or on any commercial paper delivered therefor# The Associa­
tion shall prorate the money so received among the growers
equitably^ as it may determine, for each district and period
of delivery*
10* The Association may establish selling offices,
warehouses, plants, marketing, statistical or other agencies
in any place*
11.
The grower shall have the right to stop growing
tobacco and to grow anything else at any time at his free
discretion; but if he produces any tobacco or acquires any
interest in any tobacco, as landlord or lessor, produced
within the territory in which this Association operates,
during the term hereof, it shall all be included under the
terms of this agreement and must be sold only to the Associ­
ation*
12* Nothing in this agreement shall be interpreted
as compelling the grower to grow any specified quantity of
tobacco each year; but he shall deliver all the tobacco pro­
duced by or for him*
13* (a) This agreement shall be binding upon the
grower as long as he produces tobacco directly or indirectly,
or has the legal right to exercise control of any commercial
tobacco or any interest therein as a producer or landlord
produced within the territory in which this Association op­
erates during the term of this contract.
(b) If this agreement is signed by the members
of a co-partnership, it shall apply to them and each of them
individually in the event of the dissolution or termination
of the said co-partnership and to their proportionate inter­
ests therein under any circumstances.
(c) The grower agrees that no member of his fam­
ily or his tenants have any control or interest in his share
of the crop as indicated below, or otherwise.
286
(&) If the grower places any lien or crop mort­
gage upon any of his crops during the term hereof, the
Association shall have the right to take delivery of his
tobacco and to pay off all or part of the lien or crop mort­
gage for the account of the grower and to charge the same
against him individually.
The grower may place a lien or crop mortgage up­
on his tobacco, and shall notify the Association prior to
making any such mortgage. The Association will assist and
advise the grower in any such transaction as far as it deems
proper.
14. From time to time the grower agrees to mail the
Association any statistical data requested, on the forms
provided for that purpose by the Association.
15* (a) The grower hereby expressly authorizes the
Association to deliver to any warehousing or other corpora­
tion organized for co-operation with this Association any
or all of his tobacco for handling, processing, or manufac­
turing, or storing; and to charge against his tobacco and
his prorated share of the funds necessary to create a re­
serve equivalent to one class of its preferred stock annual­
ly plus bonus to retire the said class; and to pay the divi­
dends on all outstanding stock thereof.
(b)
The grower shall be charged for such dedu
tions only on account of warehouses or plants within his
district or for his benefit, to be determined conclusively
by the Association; and for such deductions the grower shall
receive a proportionate interest in such corporation.
16. If the grower has on hand, upon the date of mail­
ing notice of the actual incorporation of the Association,
any tobacco of the 1922 or any other crop, free of liens and
capable of delivery, he shall deliver such tobacco to the
Association as it may direct, to be graded by the Association
and marketed by it, in pools wholly separate from all other
deliveries hereunder, but generally in the manner herein set
forth.
17. This agreement is one of a series generally
similar in terms comprising with all such agreements, signed
by individual growers or otherwise, one single contract be­
tween the Association and the said growers collectively and
Individually obligated under all of the terms thereof. The
Association shall be deemed to be acting in its own name for
all such growers In any action or legal proceedings on or
arising out of this contract.
18♦ (a) Inasmuch as the remedy at law would be In­
adequate and Inasmuch as it is now and ever will be Imprac­
ticable and extremely difficult to determine the actual
damage resulting to the Association should the grower fail
287
so to sell and deliver all of his tobacco to the Association,
the grower hereby agrees to pay to the Association for all
tobacco delivered, consigned, marketed or with-held by or
for him, other than in accordance with the terms hereof, the
sum of five cents per pound as liquidated damages, averaged
for all types and grades of tobacco, for the breach of this
contract; all parties agreeing that this contract is one of
a series dependent for its true value upon the adherence of
each and all of the growers to each and all of the said con­
tracts *
(b)
If the Association brings any action whatso­
ever by reason of a breach or threatened breach thereof, the
grower agrees to pay to the Association all costs of court,
costs for bond and otherwise, expenses of travel and all ex­
penses arising out of or caused by the litigation expended or
incurred by it in such proceedings; and all such costs and
expenses shall be included in the judgment and shall be en­
titled to the benefit of any lien securing any judgment here­
under.
19. The parties agree that there are no oral or
other conditions, promises, covenants, representations or
inducements in addition to or at variance with any of the
terms hereof; and that this agreement represents the volun­
tary and clear understanding of both parties fully and com­
pletely.
20. The Association is also authorized to execute
contracts or affiliation agreements with county, state and
national farm bureaus for the purpose of securing the serv­
ices of the various service departments such as organization,
auditing, traffic, legal, statistical, publicity and the
like that are being maintained by these farm bureaus and the
grower expressly authorizes the Association to pay such sum
for these services as may be agreed upon by the directors of
the Association and the farm bureau.
The Association is expressly authorized to exercise
any or all of the grading, inspecting, marketing, or other
powers or rights granted hereunder, through any central
agency to be organized for co-ordinating the activities of
this, and similar co-operative marketing associations in this
and other states.
Any cost of maintaining such central agency shall be
prorated among the said Associations on the basis of the gross
sale proceeds from the products delivered to them respectively
or otherwise; and shall be considered part of the costs and
deductions provided for in Paragraph 6.
21. It is expressly agreed that this instrument is
one of a series substantially identical in terms. All such
instruments shall be deemed one contract for the purpose of
binding the subscribers to the same extent as if all of the
subscribers had signed one such contract.
288
It is further agreed that said Association shall
issue to the grower a monthly paper called "The Miami Valley
Tobacco News11, for which the grower agrees to pay said Asso­
ciation 50 cents a year#
Head, considered and signed at _____________________
this ____________ day of _ _ _______________ 1923#
(Do not sign without reading)
Grower
Post Office Address
County_____________________ state_
My acreage in 1923 is
____ .
______________
Share of 1923 crop owned by me is
Check whether landlord (
) or tenant (
).
The Miami Valley Tobacco Growers Co-operative Association
By
______________
President
289
2. BY-LAWS
t, ^ 4.?e * tile undersl6n®d, together constituting and being
all of the members, directors and incorporators of The Miami
Valley Tobacco Growers' Co-operative Association, a co­
operative marketing association, without capital stock and
not conducted for profit, do hereby adopt the following code
by-laws as and for the by-laws of said Association:
ARTICLE I
The Miami Valley Tobacco Growers1 Co-operative
Association may be hereinafter referred to as the Association*
The purposes for which this Association is formed are
set forth in the second paragraph of the Articles of Incor­
poration of the Association.
ARTICLE II
Board of Directors
Section 1. The corporate powers, business and prop­
erty of the Association shall be exercised, conducted and
controlled by a board of directors consisting of fifteen
members•
Sec. 2* (a) The directors named in the Articles of
Incorporation shall serve only until their successors are
elected and qualified as herein provided. Whenever in the
judgement of the directors named in the Articles of Incor­
poration a sufficient number of members have been secured
for the Association to begin its business, the president
shall call a special meeting of the members for the selec­
tion of delegates to nominate directors in accordance with
the provisions of Sections 6, 7, and 8 of Article XII. The
delegates thus selected shall meet at such time and place as
the board of directors shall determine and shall nominate
from among the members residing in each district the number
of directors to which such district is entitled. Thereafter
the president shall call a special meeting of the members to
elect directors from the persons so nominated and ten days
notice of such meeting shall be given to each member in
writing.
(b) The directors shall be elected annually
at the regular annual meeting of the members from the member­
ship of the Association (except as hereinafter provided) and
shall hold office until their successors shall have been
elected and shall have qualified.
(c) The members shall elect thirteen direc­
tors from among members actually residing and growing
tobacco in the respective districts from which elected.
These districts shall first be the districts
290
specified by the organization committee as follows: District
No. 1, Montgomery County; District No. 2, Darke County;
District No. 3, Preble County; District No. 4, Miami County;
District No. 5, Warren County; District No. 6, Butler County;
and District No. 7, Greene County.
For the purpose of forming the first board
of directors the above districts shall be entitled to the
following number: District No. 1, three; District No. 2,
three; District No. 3, two; District No. 4, two; District No.
5, one; District No. 6, one; District No. 7, one. Thereafter
such districts, or any others that may hereafter be provided
for,.shall be entitled to directors upon such basis of esti­
mated production as may hereafter be provided for. Annually
at least twenty days prior to the primary meetings, the board
of directors may change the said districts so as to maintain
at all times fair and equitable representation of the tobacco
producing districts included in the membership.
(d)
Two directors shall be persons el
by the thirteen directors chosen by the members and when
elected shall have full authority as directors and shall
primarily represent the interests of the general public in
the conduct of the Association. These directors need not be
growers of tobacco. Upon qualification such directors shall
have the right to vote upon all questions coming before the
board of directors.
Sec. 3« Vacancies on the board of directors shall be
filled by the other directors in office and such new direc­
tors shall hold office until the election of their successors
by the members•
In filling any vacancy on the board of directors, the
directors shall select a member actually residing and growing
tobacco in the district from which the director is missing,
or if the vacancy is one of the public directors, it shall be
filled by the selection of some person residing in the ter­
ritory in which the Association operates.
Any director, except public directors, who ceases to
be a member or who violates any contract with this Associa­
tion in any particular, shall cease to be a member of the
board as soon as a majority thereof pass a resolution to
such effect.
Sec* 4. Within ten days after each election of
directors on the first business day in November of each
year after 1923 the newly elected directors shall hold a
regular meeting and organize by the election of a president,
two vice presidents, a secretary and a treasurer, and trans­
act any other necessary business. Such officers shall hold
office for one year and until their successors are elected
and take office. Notice of such meeting is hereby dispensed
with. The first officers shall hold office until the elec­
tion of their successors in 1924.
291
Sec. 5* In addition to the finst meeting provided
for above, a regular meeting of the directors shall be held
monthly at such time and place as the board may determine*
Sec* 6. Notice of the regular meetings of the direc­
tors shall be mailed to each director at his last known ad­
dress at least five days prior to the time of such meeting*
Sec* 7♦ Special meetings of the board of directors
shall be held whenever called by the president or by a
majority of the directors* Any and ail business may be
transacted at such special meeting. Each call for a special
meeting shall be in writing signed by the president or
directors making the same, addressed and delivered to the
secretary, and shall state the time and place of such meet­
ings •
Sec* 8. Notice of each special meeting of the direc­
tors shall be telegraphed or telephoned to each director at
his last known place of residence at least two days prior to
the time of such meetings*
Sec* 9* Eight directors shall constitute a quorum of
the board at all meetings.
Sec. 10. The directors shall receive no compensation
for their services other than their actual necessary expenses
incurred in attending meetings of the board of directors and
a per diem of ten dollars for the time actually covered by
attendance at meetings and traveling thereto and therefrom*
The directors may at their discretion provide reason­
able compensation for the members of the Executive Committee
of the board plus all actual necessary expenses.
ARTICLE III
Powers of Directors
The directors shall have the power:
1.
To conduct, manage and control the affairs and
business of the Association and to make rules and regula­
tions for the guidance of the officers in the management
of its affairs.
2* To appoint and remove at pleasure all officers,
agents and employes of the Association; prescribe their
duties, fix their compensation and require from such as han­
dle any money, negotiable instruments or other property of
the Association, adequate bonds for the faithful performance
of their duties and obligations.
3* To call special meetings of the members when they
deem it necessary and they must call a meeting at any time
upon the written request of one-tenth of the members.
4.
To make and enter into agreements with the fac­
tories, buyers or others for the sale, marketing or consign-
292
ment of the 'tobacco grown by members of the Association or
products therefrom.
5. To carry out the marketing contracts of the
Association and growers in any way advantageous to the
Association representing all growers collectively.
6. To select one or more banks to act as depository
or depositories of the funds of the Association and to deter­
mine the manner of receiving, depositing and disbursing the
funds of the Association and the forms of checks and the
person or persons by whom the same shall be signed, with the
power to change at will such depositories and the person or
persons signing said checks and the form thereof.
ARTICLE IV
Duties of Directors
It shall be the duty of the board of directors:
1. To keep a complete record of all its acts and of
the proceedings of its meetings and to present a full state­
ment at the regular annual meeting of the members showing in
detail the condition of the affairs of the Association.
2. To supervise all officers, agents and employes
and see that their duties are properly performed.
3* To cause to be issued appropriate certificates of
membership.
4.
To install such system of bookkeeping and auditing
that each member may know and be advised from time to time
fully concerning the receipts and disbursements of the Asso­
ciation.
ARTICLE V
Officers
The officers of the Association shall be a president,
two vice presidents, secretary and treasurer, together with
any other administrative officers whom the Board of Directors
may see fit in its discretion to provide for by resolution
entered upon the minutes.
The Board may appoint assistant secretaries in its
discretion and may delegate to them any and all duties of
the secretary hereunder or any other duties.
The compensation of all officers, agents and
employes shall be fixed by the board of directors.
The secretary and treasurer need not be members of
the board of directors or of the Association.
ARTICLE VI
President
The president shall:
1. Preside over all meetings of members and directors.
293
2.
Subject to tile advice of the directors, direct
the affairs of the Association..
3« Call special meetings of the board of directors
whenever in his judgment the interests of the Association
require the same.
4. Sign as president all certificates of membership
and all contracts, notes, deeds, mortgages and other instru­
ments when so directed by the board of directors.
5. Discharge such other duties as may be required of
him by these By-Laws or the board of directors.
If at any time the president shall be unable to act,
a vice president shall take his place and perform his duties
and if a vice president shall be unable to act, the board
shall appoint a*director to do so.
ARTICLE VII
Secretary and Treasurer
It-shall be the duty of the secretary:
1. To keep a record of the proceedings of the meet­
ings of the board of directors and of the members.
2. To keep the corporate seal and the book of blank
membership certificates, fill up and countersign all certif­
icates issued and affix said corporate seal to all papers
requiring the seal, and to sign with the president such in­
struments as are by law required by him to be signed.
3* To keep a proper membership record showing the
name of each member of the Association, the number of his
membership certificate and the date of issuance, surrender,
cancellation, forfeiture or transfer.
4. To receive and deposit all funds of the Associa­
tion, to be paid out only on check drawn as herein provided,
and account for all receipts, disbursements and balances on
hand.
5. To furnish a bond in such form and in such amount
as the board of directors may from time to time require.
6. To execute and sign all contracts, notes, papers
and documents as such secretary.
7. To act as secretary of the executive committee.
8. To discharge such other duties as pertain to his
office or may be prescribed by the board of directors.
It shall be the duty of the treasurer to take gen­
eral charge of the funds of the Association as directed by
the board of directors.
The treasurer may be the same person as the secretary
or the treasurer need not be a natural person, but may be a
bank. In such case the secretary shall perform the usual
accounting duties of the treasurer except that the funds of
the Association shall be deposited only as authorized by the
board of directors.
ARTICLE VIII
294
Executive ~jGommi tt ee
(a)
The board of directors shall appoint an executive
committee of seven members of which the president shall be a
member, determine its tenure of office and its powers and
duties•
*
(b) The executive committee shall have such duties
and1powers as may from time to time be prescribed by the
board of directors and these duties and powers may be all or
any part of the duties and powers of said board of directors,
subject, however, to the general approval and control of the
board of directors.
(c) The executive committee shall also be the selling
committee of the Association. Such committee shall study the
problems of the particular types of tobacco grown by its mem­
bers and shall make such recommendations to the board of
directors concerning the problems and policies affecting
such types as in its judgment seems best.
(d) Copies of the minutes of the meetings of the
executive committee and any reports thereof shall be furnished to all of the members of the board of directors.
ARTICLE IX
Auditing Committee
The board of directors shall appoint an auditing
committee among its members, determine the number of its mem­
bers and its tenure of office. The board may prescribe rules
and regulations with reference to the manner and form in
which* claims shall be presented against the Association and
the manner of auditing the same, and in lieu of any such ac­
tion by the board, the auditing committee may prescribe rules
and regulations with reference to its meetings and procedure.
The board shall cause an annual audit of the, affairs
of the Association to be made by the auditing department of
The Ohio Farm Bureau Federation, or If such auditing depart­
ment is unable to make such audit, then by some certified
publlc ac count ant •
ARTICLE X
Books and Papers
The books and such papers of the Association as may
be placed on file by a vote of the board of directors and
members shall at all times during business hours be subject
to the inspection of the board and of any member of the
Association or his representative duly authorized In writ­
ing.
295
ARTICLE XI
Association News
The Association shall cause to be printed a monthly
paper which shall contain news of general interest to the
members of the Association and which shall cost not to ex­
ceed fifty cents per member and shall be mailed monthly to
all members of the Association*
ARTICLE XII
Meetings of Members
Section 1. Regular meetings of the members shall be
held at the office of the Association at ten o*clock on the
first business day of November of each year for the purpose
of electing directors and transacting any and all business
which may properly come before the meeting*
Sec* 2* Except when otherwise prescribed by law or
elsewhere in these by-laws, special meetings of the members
may be called at any time by the president or by a majority
of the board of directors or by one-tenth of the membership.
Each special call shall be in writing and shall state the
time, place and purpose of such meetings; no business to be
transacted other than as is stated in the call*
Sec* 3* Notice in writing of each regular meeting of
the members shall be given. Such notice must state the time
and place of the meeting and that the purposes thereof are
the election of a~ board of directors and the transaction of
such other business as may come before the meeting. A copy
of such notice shall be mailed to each member of the Associa­
tion at least ten day a prior to the time for holding such
meeting*
given by
meeting,
upon the
the time
Sec* 4. Notice of each special meeting shall be
mailing to each member a copy of the call for such
addressed to him at such address as shall appear
books of the Association at least ten days prior to
fixed for such meeting.
Sec* 5* At any meeting ten per cent of the member­
ship who are present in person or present as voting by mail
shall constitute a quorum for all purposes including the
election of directors.
Specific propositions,, including the election of
directors, may be voted on by mail.
Sec. 6. The members in each district shall meet
annually for a primary election to be held In the district
in such county or counties and conducted as, where and when
specified by the directors, and shall select one delegate
296
for each quarter million or majority fraction of one quarter
million pounds of tobacco produced during the preceding year
by the members in such districts* The said delegates shall
then meet where, when and as Instructed by the directors and
shall nominate from the members residing in such district the
number of directors to which each of said districts is en­
titled, to be voted upon by the members as hereinbefore pro­
vided ♦
If unable to attend in person, members may vote at
the primary meetings by mail on a signed ballot prepared
under the direction of the board of directors# Participation
in such primary meetings or elections, in person or by mail
ballot, shall be included as attendance in calculating the
quorum for the annual meeting of members, and all votes shall
be deemed cast for the directors nominated by the district
delegates as the directors for the respective districts.
Sec# 7# The directors shall be elected at the annual
meetings to be held on the first business day in November of
each year; and the primary meetings shall be deemed binding
upon an attendance at this meeting, and the directors nomi­
nated by the delegates shall be deemed elected at the said
annual meeting by all the votes cast throughout all the
districts*
Sec. 8. The board of directors shall from time to
time determine the rules of conduct of the primary or other
elections, and shall determine the conditions and the circum­
stances under which ballots shall be received, and may make
any rules and regulations to control the procedure or accept­
ance of ballots at any such elections*
ARTICLE XIII
General Provisions Concerning Members
(a) This Association is organized without capital
stock for the purpose of serving its members and providing
facilities upon uniform rules and regulations to be pre­
scribed by the board of directors of the Association.
(b) Any person, firm or corporation, or a manager
or officer of any corporation or a member of any firm en­
gaged in the production of tobacco may be admitted to the
Association and shall have voting power and preperty rights
In accordance with the general rules herein stated. The
Association may include In its membership any tobacco grower,
including the landlord or tenant or lessor or lessee of the
land on whichi tobacco is grown, provided the landlord or
lessor receives all or part of the rental in tobacco. All
members agree to abide by all of the rules, regulations and
By-Laws of the Association with reference to the handling
and marketing of their tobacco or tobacco products. All mem­
bers shall sign standard marketing agreements from time to
297
time covering the tobacco or tobacco products produced by or
for them, when and as such agreements are approved by the
board of directors and presented to the members for signature
and acceptance*
The present tobacco marketing agreement is attached
hereto and made a part hereof, as embodied in the Association
Agreement* All members shall be bound by all the terms of
any such agreement*
(c) All members shall be bound by the obligations
and provisions of the original Association Agreement, a copy
of which is attached hereto and made a part hereof*
(d) No member shall be permitted to withdraw from
this Association during any period in which he is bound to
deliver any products to this Association under a term con­
tract unless consent for such withdrawal shall have been
given by the board of directors upon application to it by
such member or members desiring to withdraw*
(e) This Association shall issue a certificate of
membership to each member who has signed a marketing agree­
ment in such form as may be provided by the directors, but
said membership shall not, nor shall said membership certif­
icate be assigned by said member to any other person; nor
shall a purchaser at execution sale or any other person who
may succeed by operation of law or otherwise to the property
interestSr of a member be entitled to membership or to become
a member of the Association by virtue of such transfer* The
board of directors of the Association may, however, consent
to any assignment and transfer and the acceptance of the
assignee or transferee as a member of the Association* The
Board shall establish reasonable rules and regulations
authorizing the acceptance of a transferee and recognizing
as a member the purchaser of a member* s land or lease, who
acquires such certificate of membership after signing a mar­
keting agreement and determine the conditions under which the
executor, executrix, the administrator or administratrix of a
deceased member may continue as a member representing such
deceased member and the requirements for the issuance and
transfer of an appropriate membership certificate to the suc­
cessor or successors in interest of such member* s land or
lease, and likewise the conditions for transfer of rights
and certificate to a purchaser at execution sale and any
successor by operation or law.
(f) No person shall be or remain a member of this
Association unless he is and remains qualified as provided
in paragraph (b) of Article XIII hereof; nor unless he shall
market all the tobacco grown or owned by him in compliance
with all the terms and provisions of the marketing agreements
referred to in paragraph (b) of Article XIII hereof and then
in force; but no person shall cease to be a member hereof
unless and until the board of directors by a majority vote
298
passes a specific resolution to that effect.
If any member shall cease, fail, neglect or refuse
for any reason whatsoever to market all or any of the tobacco
owned or grown by him, as provided by the said marketing
agreements, then the board of directors may cancel his
membership and his certificate and expel him from membership
in this Association and all of his rights and interest there­
in shall by th&t act be cancelled and such member shall be
entitled only to payment, as provided by law, of the equitably appraised cash value of his interest in the property of
the Association*
The expulsion of any member for any penalty imposed
upon him for the breach of any of these by-laws shall be sep­
arate from and in addition to the provisions of the standard
marketing agreements in reference to liquidated damages, or
other remedies* It is expressly understood that the Associa­
tion may exercise any rights whatsoever under the said stand­
ard marketing agreements for a breach of such agreements and,
in addition, impose any penalty set forth In these by-laws
for the express violation of a by-law*,
(g) The voting power of the members of this Associa­
tion shall be equal; and each and every member hereof shall
have one vote*
(h) The property rights and interest of each member
in the property of the Association shall be equal; and each
and every member hereof shall have one unit of property
rights and interests.
(I) The Association, by action of the board of direc­
tors, shall have the full right to purchase the full interest
of any member In the property or other rights of the Associa­
tion, at the book value hereof, whenever in the judgment of
the said board it is essential to the Interests of the Asso­
ciation to do so; and the statement of book value thereof by
the board of directors shall be conclusive* Any member
whose rights are so purchased shall cease to be a member of
the Association and his membership certificate shall there­
upon be cancelled*
( f) Any person, firm or corporation properly quali­
fied may be admitted to the Association and shall have voting
power and property and property rights therein on the same
basis as all other members, in accordance with the general
rules hereinabove stated*
(k) The board of directors shall have the power to
establish and to revise and amend from time to time rules
and regulations by which each member shall be governed with
reference to the proper handling and shipping of tobacco and
to secure a proper grading and standard of quality#
(1) Every person shall pay to the Association upon
299
entering the Assooiation a membership fee, and payable upon
entrance, of Five ($5-00) Dollars. If the said entrance fee
is not paid in cash the same shall be charged against the
account of the member and be deducted from his net returns
under the standard marketing agreement and these by-laws.
For the purpose of providing field service and other
services for the benefit of the Association and its members
each member shall pay an annual dues of Ten ($10*00) Dollars;
provided, however, that where any such member is also a paidup member of his county, state and American Farm Bureau
Federation he shall not be required to pay such annual dues.Should any member at any time fail, neglect or refuse to pay
said farm bureau membership fee then such member shall pay
to the Association the annual membership fee as herein pro­
vided.. Said annual membership fee shall be used for the
purpose of compensating said farm bureau for the field and
other services which will be rendered by said farm bureaus
to the Association and its members.
(m) All expenses of maintaining the Association,
including among other things, rent, salaries, taxes, insur­
ance, office and inspection expense, building, reserves,
marketing and all other expenses, shall be met so far as
possible from the membership fees and thereafter from the
charge provided in the marketing agreements.
Any surplus over and above the actual expenditures
and obligations of the Association shall be conclusively
presumed to be a surplus arising out of the cost or charges
referred to in paragraph 6 of the standard marketing agree­
ments •
(n) The members shall not be liable for debts of
this corporation except to the extent of any unpaid portion
of their entrance of membership fees herein.
(o) In the event that any member knowingly violates
any of these by-laws, he shall be liable to the Association
for the payment of a penalty of Fifty Dollars for each and
every such violation.
Such penalties shall be imposed only by affirmative
vote of at least eight of the directors and shall be in
addition to any other punishments or penalties under these
by-laws and in addition to any rights, vested in the Associ­
ation under the standard marketing agreements for any viola­
tion thereof.
(p) The board of directors of this Association will
provide for separate pools in the marketing of tobacco of
type, grade, quality or other commercial classification.
All returns to the members of this Association shall
be based on the net proceeds from each of the said pools,
less all charges provided in the marketing agreement and by­
laws of this Association, depending on their individual de­
liveries to each of said pools, and all such payments shall
300
be made as and when and in such percentages or proportions as
the board of directors may deem advisable*.
Prior to actual distribution to the grower members,
the board of directors of the Association will be authorized
to use; any of the funds in the possession of the Association
or any property or assets or claims or rights of the Associa­
tion for any of the purposes or activities of the Associa­
tion within the general provisions of Article II of the
Articles of Incorporation.
(q) Each member agrees to market the tobacco grown
or owned by him, In accordance with the provisions of the
standard marketing agreement; and each member admits that it
would be extremely difficult and Impracticable to fix the
amount of damages, which the Association or its members would
suffer if he should neglect, refuse, or fail to keep and
perform the terms, conditions and agreements herein and in
his marketing agreements contained, as to such marketing;
and therefore It is expressly understood and agreed by and
between each of the members of the Association, including
any persons hereafter becoming members and acknowledging
notice and acceptance of these by-laws, that if he shall re­
fuse,, neglect or fail to market his tobacco through the
facilities and In the manner provided by the Association and
in accordance with the terms of the agreements,, such member
shall pay to the Association as liquidated damages, upon
demand of the Association the sums set forth in the said
marketing agreement.
ARTICLE XIV
Voting
Any member shall be permitted to vote at any pri­
mary or other meetings in person; or he may vote by mail
on a ballot to be prepared by order of the board of directors.
But no proxies shall be voted In this Association.
ARTICLE XV
G-eneral Manager
The board of directors may,, in its discretion, ap­
point a general manager, who shall hold office at the pleas­
ure of and on terms and conditions set by the board of direc­
tors. Any director, officer or other person may be elected
to serve as manager. The general manager shall perform such
duties as may be directed by the board of directors.
ARTICLE XVI
Borrowing Money
The Association shall have the power, by affirmative
301
vote of at least eight directors, to borrow money for any
corporate purposes, on open account or upon any assets of
the Association or on any property of members in its posses­
sion, or upon any accounts thereof, or any property not yet
distributed to the members, in such amounta and upon such
terms and conditions as may from time to time seem to the
board of directors advisable or necessary or as the board
mayTdirect its executive committee to determine.
ARTICLE XVII
Any officer or stockholder or manager or member of
any corporation or firm which has signed the marketing agree­
ment of the Association, and has become a member thereof,
shall be eligible as a director of the Association; and for
this purpose a membership certificate may be issued in the
name of any such individual to be charged against or credited
to the account of the corporation or firm of which he is an
officer, stockholder, manager, or member, upon the written
request of such corporation or firm*
When any such individual ceases to be a director of
the Association such membership certificate or all of the
rights and interests represented thereby, shall be transferred
again to the said corporation or firm represented by such
person.
ARTICLE XVIII
The Seal of the Association shall contain these
words and figures:
“Miami Valley Tobacco Growers1 Co-operative Association,
Incorporated 1923,"
in circular form.
ARTICLE XIX
These by-laws may be altered or amended at any an­
nual meeting of the members, called for that purpose by the
directors, by a vote representing a majority of the votes
cast. The written assent of a majority of the members shall
be effectual to repeal or amend any by-laws or to adopt
additional by-laws without any meeting.
APPENDIX G
ORGANIZATION PAPERS OF THE OHIO CIGAR LEAF TOBACCO
GROWERS' MARKETING ASSOCIATION
1.
ORGANIZATION AGREEMENT
We, the undersigned, in order to insure the efficient
production, warehousing and marketing of tobacco grown by us;
to promote, foster and encourage the marketing of tobacco
cooperatively; to reduce speculation with reference thereto;
to stabilize the markets for and the values of tobacco; to
enable the growers of tobacco to obtain benefits under the
Agricultural Marketing Act; and for such purposes to co­
operate with the Federal Farm Board and other State and
National Agencies; propose to organize a nonprofit co­
operative association without capital stock as hereinafter
provided•
In consideration of the premises, and of our mutual
undertakings, and of the agreement of each and every party
hereto, we, producers of tobacco, hereby agree as follows,
each for himself and collectively, for the express benefit
of and for the Association to be organized as follows:
1. We will become members of the Ohio Cigar Leaf
Tobacco Growers’ Marketing Association, a nonprofit associa­
tion without capital stock, to be organized under the
Cooperative Marketing Act of Ohio.
2. (a) The Association shall be organized with suit­
able articles of incorporation and by-laws as determined by
an organization committee consisting of the following per­
sons : D. P. Albright, Hollansburg, 0.; C. C. Karr, Arcanum,
0*; John W. Bartel,. Covington, 0.; Chas. George, Yorkshire,
0.; Irvin Richter, Pitsburg, 0*; Jesse T. Landis, Pleasant
Hill, 0.; 0. J. Sutton,. Union City, Ind.; 0. R. Welkert,
Gettysburg, 0.; Henry Bowman, Versailles, 0.
(h)
If any member or members of this committee
shall resign or be unable to act,, the remainder of the com­
mittee may elect a successor to fill any such vacancy, or
may/ increase its membership if deemed necessary. The said
organization committee may appoint an executive committee to
conduct the details of Its affairs. The said committee, or
302
303
its executive committee, may incur necessary obligations for
and on behalf of the committee and the Association to be
organized, make necessary expenditures and take any such ac­
tion as may be deemed advisable to secure subscribers hereto*
3* The by-laws of the Association shall provide,
among other things, that:
(a) There shall be an annual audit of the books and
records of the Association by certified public accountants,
a report of the findings to be made to the members of the
Association*
(b) No director, except the president, shall be a
salaried officer of the Association, and no director, officer
or employee of the Association shall do business for profit
with the Association. Directors:, other than the president,
shall only be paid a per diem and expenses when attending
meetings or attending to special business for the Associa­
tion.
(c) All the officers or employees of the Association
who handle funds of the Association shall be bonded.
4.
The Association may admit to membership only
tobacco growers, or the landlord or tenant, or lessor or
lessee,, of land on which tobacco is grown, provided the land­
lord or lessor receives all or part of the rental in tobacco.
5* (a) The Association shall be managed by a board of
directors which, until the election of their successors shall
be those chosen by the organization committee as incorpora­
tors. The directors may be elected at large, or from five
or more districts, from among members actually residing and
growing tobacco in such districts; the area included in said
districts to be fixed equitably by the organization committee,
subject to reallocation by the directors of the Association;
all as provided in its by-laws.
(b) A public director shall be nominated by the
Director of the Agricultural Extension Service of Ohio, and
approved by a majority vote of the elected directors. Such
public director need not be a grower of tobacco.
6. Every member of the Association shall have one
vote *
7. Every member shall pay an entrance fee of two
dollars. If such fee is not paid upon the signing of this
agreement, it shall be deducted from the first returns due
to the Grower under the marketing agreement.
8. (a) If by November 1, 1931, there is not a suffi­
cient quantity of tobacco pledged by growers on contracts
304
identical with this, in the opinion of the organization
committee, to enable the Association to operate efficiently,
the organization committee shall give notice to this effect
in one or more newspapers of general circulation in the
tobacco-growing counties of the Miami Valley of Ohio, and
this agreement shall then be deemed cancelled, otherwise to
remain in full force and effect*
(b)
If, however, on or before November 1, 1931,
after the organization committee has reviewed carefully all
facts and figures pertaining to the sign-up and has consid­
ered other conditions affecting the proposed organization,
and has consulted and sought the advice of the Federal Farm
Board, the organization committee is then of the opinion
that sufficient sign-up has been secured to enable the Asso­
ciation to operate efficiently, the committee shall give
notice to this effect In one or more newspapers of general
circulation in the tobacco-growing counties of the Miami
Valley of Ohio, In the form of a written statement signed
by the chairman. Thereafter all subscribers hereto shall
deliver their tobacco to the Association in accordance with
the Marketing Agreement; provided that if the organization
committee does not give such notice by March 1, 1931, then
this agreement shall not cover tobacco grown In 1930.
9* The organization committee shall keep a true and
detailed account of all receipts and expenditures of every
kind and shall render a written report thereof to the board
of directors of the Association when organized, and shall
thereupon turn over to the Association any balance remaining
in its hands free of obligation. If it is not so organized,
such unexpended balance shall be prorated among the signers
hereof who have paid their organization fees.
10. The subscriber applies for membership in the
Association when organized and expressly agrees that signature
to the Marketing Agreement shall be deemed to all intenos
and purposes the same as signature to this Organization
Agreement; all of which shall be irrevocable except as pro­
vided in section 8 of this Organization Agreement, section
2 of the Marketing Agreement, or the by-laws of the Associa­
tion, and he so agrees in order to Induce other growers to
sign this agreement for his benefit, as well as their own
general benefit and the public welfare.
11. Acceptance of this application for membership
and the Marketing Agreement shall be deemed conclusive upon
the mailing, by the Association, of a notice to that effect
to the subscriber at his address noted below and such mail­
ing and notice shall be conclusively established by the
affidavit of the Secretary of the Association.
12. The subscriber agrees to be bound by the terms
of the following Marketing Agreement.
305
2.
MARKETING- AGREEMENT
The Ohio Cigar Leaf Tobacco Growers' Marketing
Association, a non-profit association incorporated under the
Cooperative Marketing Act of Ohio, hereinafter called the
Association, and the undersigned, hereinafter called the
Grower, agree:
1.
The Association buys and the Grower sells and
agrees to deliver to the Association all the tobacco pro­
duced by or for him, or acquired by him as landlord or lessee
during a period of ten years from the date of this agreement,
unless this agreement is terminated as hereinafter provided.
This agreement Is intended by the parties to pass an absolute
title to the Association to each of the crops covered hereby
as soon as any such crop has a potential existence, but until
delivery the tobacco is at the risk of the Grower.
2* After the Association has been in operation for
the receiving of tobacco of one crop year,; either party
hereto may cancel this agreement on December 1st of any year
thereafter by notifying the other party in writing of this
intention; such notice to be given during the month of
November, immediately prior to the effective date of cancel­
lation. When any grower has exercised this privilege of
cancellation he shall not be readmitted to membership until
the expiration of one year, and then only by a majority vote
of the Board of Directors of the Association.
3* (a) All tobacco shall
reasonable time after cutting or
Association, at the warehouse or
or specified by the Association;
to the Association.
be delivered at the earliest
curing, to the order of the
plant controlled, operated,
or by shipment, as directed,
(b)The Association shall make rules and regula­
tions and provide inspectors or graders for receiving and
grading the tobacco; and the Grower agrees to observe any
suchrules
and regulations and to abide by such grading.
4. The Association may pool or mingle the tobacco of
the Grower with tobacco of like type, grade and quality de­
livered in the same crop year by other growers. The Board
of Directors is authorized to determine the regions to be
included In such pool or pools, the period or periods during
which such pools shall be in operation, and the types, grades
and qualities of tobacco which shall be included in each of
the various pools.
5. The Association will resell all tobacco delivered
by theGrower, together with tobacco of like type, grade and
quality delivered by other growers under similar contracts,
at the best prices obtainable by it under market conditions,
306
and will pay over the net amount received therefrom less
freight, insurance: and interest, as payment in full to the
Grower and growers named in contracts similar hereto, accord­
ing to the tobacco delivered by each of them, after deducting
therefrom, within the discretion of the Association, the sums
referred to in Section 9; the costs of maintaining the Asso­
ciation and of handling, grading, redrying, storing, prepar­
ing for market and marketing such tobacco; and reserve funds
for credits and other commercial purposes, said funds not to
exceed two per cent of the gross resale price# Such reserve
funds may be used by the Association, in its conclusive dis­
cretion, for any proper purpose# Upon dissolution of the
Association, or earlier, as determined by the Board of
Directors, a portion or all of such funds or the unexpended
part thereof shall be distributed to the members in accord­
ance with their contributions thereto. Such funds shall be
subject to any liabilities of the Association#
6% The G-rower agrees that the Association, in its
name, may borrow money on any or all tobacco in its posses­
sion, through drafts, acceptances, notes, or otherwise, or
on any warehouse receipts or bills of lading, or upon any
accounts for the sale of tobacco, or upon commercial paper
delivered therefor; and that, in addition,, the Association
may pledge any such tobacco as security for any of its obli' gations# The Association shall distribute the money so bor­
rowed, as advances or partial payments, equitably among the
growers in proportion to their deliveries to the Association,
or may use any part thereof in the proper operation of its
business, as it may determine#
7# The Association may sell the said tobacco within
or'-without the United States, directly to manufacturers or
exporters or otherwise, at such time and in such form and
upon such conditions and terms as it may deem profitable,
fair and advantageous to the growers; and it may sell all or
any part of the tobacco with or through any other agency for
the cooperative marketing of tobacco, and any proportionate
expenses connected therewith shall be deemed marketing costs
under Section 5 hereof•
8# The Association may federate for any or all pur­
poses with any other cooperative marketing association, the
methods and contracts of which are satisfactory to the Board
of Directors of this Association; and all costs of operation
of such federation and/or central agency, incorporated or
otherwise, which may be formed by them shall constitute mar­
keting costs under section 5 hereof» The Association agrees
that tobacco delivered by members of this Association shall
not be pooled or mingled with tobacco delivered by members
of other associations which may become members of any pro­
posed federation, and that the Association will not enter
into any agreement obligating it to pay more than its pro­
portionate share of the expense of organizing and operating
307
any such federation or central agency.
9. (a) The Association may establish selling offices,
warehouses or plants; statistical, marketing or other agen­
cies in any place; may acquire by lease or purchase, when
necessary, plants or facilities; and may acquire, hold con­
trol and guarantee the evidences of indebtedness, common
and/or preferred stock and/or the interest or dividends of
any corporation formed for the purpose of carrying on any
activity incident to the production, handling, marketing,
manufacturing or processing of tobacco or tobacco products.
The G-rower expressly authorizes the Association to have de­
livered to any warehousing or other corporation or agency,
any or all of his tobacco for handling, processing, manufac­
turing or storing.
(b) To finance or pay for any and/or all of the
above transactions and the interest on the certificates here­
inafter referred to, the Association is authorized to charge
the cost thereof against the tobacco sold hereunder and de­
duct such charges from the proceeds thereof. Such charges
and/or deductions are to be made as prorated annual deduc­
tions or charges running against deliveries of various years:
upon a basis to be fixed at or before the incurring, by the
Association, of the indebtedness or obligation, when in the
conclusive Judgment of the Board of Directors a single charge
or deduction would be inequitable.
(c) The Association, after the sale of each crop,
shall issue to the Grower a certificate evidencing deductions
made for the purpose of acquiring such facilities or securi­
ties, or for retiring such certificates, which certificates
shall bear interest at five per cent per annum, callable, in
the order in which issued, in whole or in part at par by the
Association on dissolution or earlier as determined by the
Board of Directors; or in lieu of such payment, the Associa­
tion may cause to be issued to the Grower securities propor­
tionate to the outstanding certificates, evidencing a lien
upon the property acquired with such deductions, or common
or preferred stock in a corporation or corporations owning
such properties•
10. The Grower expressly warrants that he has not
heretofore contracted to sell, market or deliver any of his
said tobacco to any person, firm or corporation, except as
noted at the end of this agreement. Any tobacco covered by
such existing contracts or crop mortgages shall be excluded
from the terms hereof for the period and to the extent noted,
if the lien holder insists upon the exercise of any right of
possession or sale.
11. The Grower is authorized to place a crop mortgage
upon any of the crops grown by him during the life hereof,
subject to the right of the Association to have any such crop
308
of tobacco delivered hereunder, but in settling with. Grower
the amount of any such mortgage with interest shall first be
paid to the mortgagee, provided that the Association has
received actual notice thereof# The Association may pay off
all or any part of any such crop mortgage for his account
and charge the same against him individually#
12# This agreement is one of a series generally
similar in terms comprising with all such agreements, signed
by individual growers, or otherwise, one single contract be­
tween the Association and the said growers, but it is mutual­
ly agreed that the cancellation of any agreement or agreements
in this series shall not operate to invalidate this agreement,
and that the Association may enter into agreements with other
growers differing in terms from those contained herein with­
out invalidating this agreement, provided that the Grower at
his request may sign a similar contract as a substitute for
this agreement.
13* (a) Inasmuch as the remedy at law would be in­
adequate, and inasmuch as it is now and ever will be imprac­
ticable and extremely difficult to determine the actual dam­
age resulting to the Association, should the Grower fail so
to deliver all of his tobacco, the Grower hereby agrees to
pay to the Association for all tobacco delivered, consigned
or marketed, or withheld by or for him, other than in accord­
ance with the terms hereof, the sum of five cents per pound
as liquidated damages, averaged for all types and grades of
tobacco, for the breach of this contract; all parties agree­
ing that this contract is one of a series dependent for its
true value upon the adherence of each and all of the growers
to each and all of the said contracts.
, (b) The Grower agrees that, in the event of the
breach or threatened breach by him of any provision hereof
regarding delivery of tobacco, the Association shall be en­
titled to an injunction to prevent a breach or further breach
thereof, and to a decree for the specific performance hereof;
and the parties agree that this is a contract for the pur­
chase and sale of personal property under special circum­
stances and conditions.
14. By signing this Marketing Agreement the Grower
applies for membership in the Association and the signing
hereof by the Association shall constitute an acceptance
thereof.
15# The parties agree that there are no oral or other
conditions, promises, covenants, representations or induce­
ments in addition to or at variance with any of the terms
hereof; and that this agreement represents the voluntary and
clear understanding of both parties fully and completely.
309
Read, considered and signed at
IP113-0 _ _ ___________ day of
(Do not sign without readingT"
_____________
“
’
—
Grower* s. signature_______
(Sign here)
CPrint Grower*s Name here)
Address
T r .F.D* or Street No.)
Township _____________
(Town)
County___ _______
State______ _ _ __________
1930 Total production was _________________ acres.
My share as (Landlord) (Tenant) was _______________ per cent.
1931 Total production w a s _______________
acres.
My share as (Landlord) (Tenant) will he ___________ per cent.
(Strike out word not applicable)
Witness sign here ____________________________________
Address of witness
Accepted by the Association as of t h e
day of
193___ in accordance with the resolution of the Board of
Directors.
Ohio Cigar Leaf Tobacco Growers* Marketing Association
By ________________________ ____________
Secretary
If any liens exist against tobacco at time Grower signs he
should give details here:
310
3.
BY-LAWS
We, the undersigned, being a majority of the members
of the Ohio Cigar Leaf Tobacco Growers’ Marketing Association,
a cooperative marketing association without capital stock
and conducted not for profit, do hereby adopt the following
Code of Regulations and By-Laws for the regulation of said
Association.
ARTICLE I.
The Ohio Cigar Leaf Tobacco Growers* Marketing
Association may be hereinafter referred to as the Association.
The purpose or purposes for which this Association
is formed are set forth in the Articles of Incorporation, and
it shall have all powers and privileges granted by the
General Code, Sections 10186-1 to 10186-30 inclusive.
ARTICLE II.
BOARD OP DIRECTORS.
Section 1. The corporate powers, business and prop­
erty of the corporation shall be exercised, conducted, man­
aged and controlled by a Board of Directors of 7 elected mem­
bers,. and the public director provided for in Article II
Section 4 of these Regulations.
Section 2. Term of Directors. The members of the
Board of Directors shall be elected to serve for three years
provided however that at the first election three shall be
chosen for three years, two for two years,, and two for one
year, and thereafter at each annual meeting of the members
the successors to the members whose terms have expired shall
be elected for three years. The members of the Board shall
hold office until their successors are elected and qualified.
Section 3« The first board may be elected at large,
and thereafter, if the members so determine,, the election
shall be from districts or classes of growers. In such case
the directors shall equitably fix the districts and/or allo­
cate the directors to the several classes of growers and may
reapportion and/or reallocate the membership of the board
from time to time as appears equitable.
Section 4. A public director shall be appointed by
the Director of Agricultural Extension Service of Ohio and
approved by a majority vote of the elected directors.
Section 5» Vacancies.
(a) Vacancies in the Board of Directors shall be
filled by the other Directors in office and such new Direc­
tors shall hold office until the next annual meeting of the
members and until their successors are elected and qualified.
(b)
Any Director who ceases to be a member or who
311
violates any contract with, the Association or any provision
of the Regulations shall cease to be a member of the Board
as soon as the Board of Directors shall pass a resolution to
that effect*
Section 6. Meetings of Directors.
(a) Immediately after each election of Directors,
the newly elected Directors shall hold a regular meeting and
organize by the election of a President, Vice-President,
Secretary and Treasurer and transact any other business law­
fully coming before said meeting* Notice of such meeting is
hereby dispensed with.
(b) Said Board of Directors shall meet regularly at
such time and place as it may determine*
(c) Notice of the regular meetings of the Board of
Directors shall be mailed to each Director at his last known
address at least three days prior to the time of such meeting*
(d) Special meetings of the Board of Directors shall
be held whenever called by the President or by a majority of
the Directors* Any and all business may be transacted at a
special meeting. Each call for a special meeting shall be
in writing signed by the person or persons making the same,
addressed and delivered to the Secretary, and shall state
the time and place of such meeting.
(e) Notice of special meetings of the Board of
Directors shall be telegraphed or mailed to each Director at
his last known address 24 hours prior to the date of such
meeting: provided, however, that at any special meeting at
which all of the directors are present notice of such meet­
ing shall be deemed to have been waived.
ARTICLE III.
COMPENSATION OF DIRECTORS.
Section 1. The Directors shall receive no compensa­
tion for their services as directors other than re-imbursement
for money actually expended by them which is hereby fixed at
five cents per mile In attending the meetings of the Board
and other necessary traveling and hotel expenses when travel­
ing upon business of the Association and a per diem of $3#00
for the time actually spent in attendance at meetings and
upon authorized business of the Association.
Section 2. No Director shall be a salaried officer
or employee of the Association; except the secretary.
ARTICLE IV.
The Directors shall have power:
1* To conduct, manage and control the affairs and
business of the Association and to make necessary rules and
312
regulations for th© guidance of the officers in the manage­
ment of its affairs•
2# To appoint and remove at pleasure all officers,
agents and employees of the Association, prescribe their
duties and fix their compensation and to require from them
security for the faithful performance of their duties,
3« To call special meetings of members when they
deem it necessary and they must call a meeting at any time
upon the written request of one-tenth of the members*
4. To make and enter into agreements with factories,
packers or others for the packing, processing, handling, in­
suring, marketing of the tobacco grown by members of the
Association and to do all things necessary to accomplish the
purposes of the Association.
5* To carry out the marketing contracts of the Asso­
ciation and growers in every way advantageous to the Associa­
tion representing the members collectively.
6. To select one or more banks to act as the depos­
itory of the funds of the Association, to determine the man­
ner of receiving, depositing and disbursing the funds of the
Association, the form of checks and the person or persons by
whom the same shall be signed with the power to change such
banks and the person or persons signing said checks and the
form thereof at will.
ARTICLE V.
DUTIES OF DIRECTORS.
It shall be the duty of the Board of Directors:
1. To keep a complete record of all its acts and the
proceedings of its meetings, and to present a full statement
at the regular meetings of the members, showing in detail the
condition of the affairs of the Association.
2. To supervise all officers, agents and employees
and see that their duties are properly performed.
ARTICLE VI.
OFFICERS.
The officers of the Association shall be a President,
Vice-President, Secretary and Treasurer together with any
other administrative officers that the Board of Directors
may see fit in its discretion to provide for by resolution.
The Board may appoint assistant secretaries and may
delegate to them any or all of the duties of the Secretary
hereunder or any other duties.
The compensation and tenure of all officers shall be
fixed by the Board of Directors.
The Secretary and/or Treasurer may not be members of
the Board of Directors of the Association.
The offices of Secretary and Treasurer may at the
discretion of the Board be held by the same person.
(b)
President. If at any time the President shall
be unable to act, a Vice-President shall take his place and
perform his dutiesi and if the Vice-President shall be unable
313
to act,, the Board shall appoint a Director to do so. The
President, such Vice-President or Director shall:
1# Preside over all meetings of members and Directors.
2. Subject to the advice of the Directors, direct the
affairs of the Association.
3. Call the Directors together whenever necessary.
4* Sign, as President, all Certificates of Member­
ship and all contracts, notes and other instruments when so
directed by the Board of Directors.
5* Discharge such other duties as may be required of
him by these By-Laws or by the Board of Directors.
6. Report at each annual meeting of the members,
salaries of officers and department heads, and the average
salary of minor employees in each department.
(c) Secretary. It shall be the duty of the
Secretary:
1. To keep a record of the proceedings of the meet­
ings of the Board of Directors and of members.
2. To keep the corporate seal and book of blank
membership certificates; fill up and countersign all certif­
icates issued and affix said corporate seal to all papers
requiring a seal.
3. To keep a proper membership book, showing the
name of each member of the Association, the number of his
membership and date of issuance, surrender, cancellation,
forfeiture or transfer.
4. To execute and sign contracts, notes and papers
and documents as Secretary.
5* To discharge such other duties as pertain to his
office or may be prescribed by the Board of Directors*
(d) Treasurer. It shall be the duty of the
Treasurer:
1. To receive and have in charge all moneys belong­
ing to the Association and to disburse the same as may be
ordered by the Board of Directors.
2. To keep an accurate account of the moneys re­
ceived and disbursed by him and generally perform such duties
as may be required of him by the Board of Directors.
3. Upon the expiration of his term of office he shall
turn over to his successor or the Board of Directors all
money or property of the Association in his hands.
ARTICLE VII.
AUDITING COMMITTEE.
The Board of Directors may appoint an Auditing Com­
mittee from among its members, determine the number of its
members and its tenure of office. The Board may prescribe
rules and regulations and the manner of auditing the same;
in lieu of such action by the Board, the Auditing Committee
may prescribe such rules and regulations with reference to
its meeting and procedure.
The Board, in its discretion, may delegate these
314
functions to an Auditor.
Semi-annual audits shall be made by a certified
public accountant and report shall be filed by him with the
Board of Directors prior to the annual meeting.
There shall be an- annual examination of the affairs
of the Association by public agencies, and reports to member­
ship of their findings.
ARTICLE VIII.
BOOKS AND PAPERS.
The books of the Association and such papers as may
be placed on file by vote of the Board of Directors shall at
all times,, during business hours, be subject to the inspec­
tion of the Board and of any member of the Association or
his representative, duly authorized in writing.
ARTICLE IX.
MEETING'S OF MEMBERS.
Section 1. Regular Meetings. The regular meeting
of the members shall be held on the first Tuesday In the
month of February of each year for the purpose of electing
a Board of Directors and of transacting such other business
as may come before the meeting. The Board of Directors shall
select the time and place of the meeting.
Section 2. Special Meetings. Except where other­
wise prescribed by law or elsewhere in these regulations, a
special meeting of the members may be called at any time by
the President or by a majority of the Board of Directors or
by one-tenth of the membership. Each such call shall be in
writing and shall state the time, place and purpose of such
meeting. No business shall be transacted at a special meet­
ing other than as is stated in the purposes for the call.
Section 3* Notice of Regular Meetings. Notice of
each regular meeting of the members shall be given. Such
notice must state the time and place of the meeting; and
that the purposes thereof are the election of a Board of
Directors and the transaction of such other business as may
come before the meeting. A copy thereof shall be mailed to
each member of the Association at least ten days prior to
the time for holding such meetings.
Section 4. Notice of Special Meetings. Notice of
each special meeting shall be given by mailing each member
a copy of the call for such meeting, as his address shall
appear upon the books of the Association, at least ten days
prior to the time fixed for such meeting.
Section 5. Quorum. At
members and in numbers at least
present by voting by mail shall
purposes including the election
otherwise provided by law.
any meeting one-tenth of the
fifty present In persons or
constitute a quorum for all
of Directors except when
315
Section 6. Election of Directors* At least ninety
days prior to the annual meeting the Board of Directors
shall select a nominating committee of five which committee
shall make nominations for the offices of Director for the
next ensuing term and shall report their nominations to the
Board of Directors for approval and thereupon the Board of
Directors shall in the notice for said annual meeting set
forth the nominations so approved; provided, however, that at
any annual meeting at which Directors are to he elected, any
member may be nominated from the floor*
Members may vote at any meeting by being present in
person and the Board of Directors shall by resolution provide
for the voting upon any question or the election of Directors
by mail and the determination of any calculation of the
quorum at any such meeting on votes cast by mail shall be
considered as though the member was present.
ARTICLE X.
GENERAL PROVISIONS CONCERNING MEMBERS *
(a) This Association is organized without capital
stock, for the purpose of serving its members only and pro­
viding all of its facilities to them upon uniform rules and
regulations to be prescribed by the Board of Directors of
the Association.
(b) Members* Any person engaged in the production
of tobacco may be admitted to the Association and have the
voting power and property rights therein including the land­
lord or tenant, lessor or lessee of land on which tobacco
is grown provided the landlord or lessor receives all or
part of the tobacco.
All members shall agree to abide by these by-laws,
regulations, rules and resolutions of the Board of Directors.
The membership fee shall be Two Dollars ($2.00)
provided that if said membership fee is not paid when the
member joins, it shall be charged to the account of the mem­
ber and deducted from his first returns under the Marketing
Agreement and these regulations.
All members shall sign the Standard Marketing
Agreement from time to time covering the tobacco grown and
produced by or for them when and as such agreements are ap­
proved by the Board of Directors and presented to the mem­
bers for signature and acceptance.
The present Tobacco Marketing Agreement is attached
hereto and made a part of these Regulations.
All members shall be bound by the obligations and
provisions of said agreement.
ARTICLE XI.
MEMBERSHIP CERTIFICATE.
This Association shall issue a Certificate of
Membership to each member who has signed a Marketing Agree­
ment, in such form as may be provided by the Directors; but
said membership shall not, nor shall said Certificate
316
thereof, he assigned hy said member to any other person; nor
shall a purchaser at execution sale, or any other person who
may succeed, by operation of law or otherwise, to the property
interest of a member, be entitled to membership or to become
a member of the Association by virtue of such transfer# The
Board of Directors of the Association may, however, consent
to any assignment and transfer and the acceptance of the
assignee or transferee as a member of the Association. The
Board of Directors will establish reasonable rules and reg­
ulations authorizing the acceptance of a transferee and rec­
ognizing as a member the purchaser of a member's land or
lease, wino acquires such member*s certificate of membership
after signing the Marketing Agreement; and determine the
conditions under which the executor or administrator of a
deceased member may continue as a member representing such
deceased member; and the requirements for the issuance and
transfer of an appropriate membership certificate to the
successor or successors in interest of such member* s land or
lease and likewise the conditions for transfer of rights and
certificate to the purchaser at execution sale and any such
lessor by operation of law.
No person shall be or remain a member of this
Association unless he is and remains qualified as provided
in Paragraph (b) of Article X; nor unless he shall market
all tobacco grown or owned by him in compliance with all the
terms and provisions of the Marketing Agreement, but no such
person shall cease to be a member thereof nor be relieved of
the duties and obligations of membership unless and until
the Board of Directors passes a resolution to that effect.
If any person shall cease, fail, neglect, or refuse
for any reason whatever to market all or any of the tobacco
owned by him as provided by the said Marketing Agreement,
then the Board of Directors may cancel his membership and
his certificate and expel him from membership in this Associ­
ation; and all his rights and interest therein shall by that
act be cancelled and such member shall be entitled only to
payment, as provided by law, of the equitably appraised cash
value of his Interest in the property of the Association,
provided, however, that such expelled member shall not be
entitled to receive any money from the Association until all
monies, dues and penalties due the Association have been
paid to it.
The expulsion of any member or any penalty imposed
upon him for the breach of any of these Regulations shall be
separate from and in addition to the provisions of the
Standard Marketing Agreement in reference to liquidated dam­
ages, or other remedies. It is expressly understood that the
Association may exercise any rights whatsoever under the said
Standard Marketing Agreement for a breach of such agreements
and in addition impose any penalty set forth in these Regu­
lations for the express violation of a Regulation.
ARTICLE XII.
VOTING POWER OF MEMBERS.
317
The voting power of the members of this Association
shall be equal, and each and every member hereof shall have
one vote*
.ARTICLE XIII.
PROPERTY RIGHTS AND INTEREST.
The property rights and interest of each member in
the property of the Association shall be in proportion to
the tobacco grown and delivered by such member to the Asso­
ciation.
The Association, by action of the Board of Directors,
shall have the full right to purchase the full interest of
any member in the property or other rights of the Association,
at the book value thereof, whenever, in the judgment of the
said Board, It is essential to the Interests of the Associa­
tion so to d o ; and the statement of book value thereof by
the Board of Directors shall be conclusive. Any member
whose rights are so purchased shall cease to be a member of
the Association, and his membership certificate shall there­
upon be cancelled*
ARTICLE XIV*
NEW MEMBERS.
Any person properly qualified may be admitted to
membership In the Association upon agreeing In writing to
abide by the rules, by-laws and regulations of the Associa­
tion and upon the signing of the Marketing Agreement upon
affirmative vote of the Board of Directors.
ARTICLE XV.
(a) The members shall pack, grade and sort the
tobacco grown by them and deliver It to the Association in
accordance with the rules and regulations of the Board of
Directors, and if any member delivers tobacco to the Associa­
tion in violation of the aforesaid rules, the Receiving Agent
may reject said tobacco or may cause the same to be properly
packed, graded and sorted in accordance with the rules and
regulations and in such event the offending member shall be
charged with the cost thereof; provided, however, that any
member feeling aggrieved at the action of the Receiving
Agent shall appeal to the Board of Directors and the decision
of the said Board shall be final*
(b) The Board of Directors shall have the power to
establish, revise and amend from time to time rules and
regulations in reference to the grading and classification
and standard or quality of the tobacco grown, delivered and
to be marketed by this Association.
ARTICLE XVI.
EXPENSE OF MAINTAINING THE ASSOCIATION
All expenses of maintaining the organization, includ­
ing, among other things, rent, salaries, office, inspection
318
expenses, building, reserves, marketing and other expenses,
shall be made so far as possible from membership fees and
thereafter from the charge provided in the Marketing Agree­
ment •
ARTICLE XVII.
(a) The Board of Directors shall provide for separate
pools in the marketing of tobacco by kind, grade, quality or
other commercial classification.
(b) All returns to the members of this Association
shall be based upon the net proceeds for each of said pools
less all charges provided in the Marketing Agreement and the
By-Laws and Regulations of this Association depending upon
the individual deliveries to each of the said pools, and all
such payments shall be made as, and when, and In such per­
centages or proportion as the Board of Directors may deem
advisable.
the
use
any
for
(c) Prior to the actual distribution to the members,
Board of Directors of the Association is authorized to
any of the funds in the possession of the Association or
property or assets or claims or rights of the Association
the purpose or activities of the same.
ARTICLE XVIII.
CO-OPERATION WITH OTHER AGENCIES.
The Board of Directors may make such provisions as
are necessary for complying with or taking advantage of the
Agricultural Marketing Act and/or other Acts of Congress
providing for the assistance of agriculture and/or the lend­
ing of financial aid to producers of agricultural products
and/or co-operative marketing association of such producers
and for working in harmony with the governmental agencies.
These regulations may be altered or amended at any
regular meeting of the members or at any other meeting of
the members called for that purpose by the Directors by a
vote of the majority of the votes cast, except as otherwise
provided by the General Code of Ohio.
BIBLIOGRAPHY
Page
H
H
•
I.
III.
IV*
V.
VI.
BOOKS
320
PUBLIC DOCUMENTS
320
ARTICLES, NEWSPAPERS, AND PERIODICALS
325
UNPUBLISHED MATERIALS
327
PERSONAL LETTERS
328
PERSONAL INTERVIEWS
329
319
BIBLIOGRAPHY
I . Books
Baker, Jacob, Cooperative Enterprise (New York: Vanguard
Press, 1937TT
Evans, Prank and Stokdyk;, E. A., The Law of Agricultural
Co-operative Marketing (Rochester, New York: Lawyers
Co-operative Publishing Co*, 1937).
Hibbard, B. H*, Marketing Agricultural Products (New York:
D. Appleton & Co*, 1921).
~~
Jesness, 0. B*, The Cooperative Marketing of Farm Products
(Philadelphia: J* B7 Lippineott Co., 1923).
Rowe, Harold B*, Tobacco Under the A. A. A* (Washington:
Brookings Institution, 1935). A section pp. 27-84
gives a good description of tobacco production and
marketing.
Steen, Herman, Cooperative Marketing (Garden City, New
York: Doubleday, Page & Co., 1923).
II. Public Documents
Arnold, C. R. , The Tobacco Situation (U. S. Department of
Agriculture and Ohio State University Agricultural
College Extension Service, mimeograph, Jan. 11, 1932).
Christensen, Chris L., Business Set-Up of a Cooperative
Marketing Association (U. S. Department of Agriculture
Department Circular No* 403, November 1926).
-, Farmers Cooperative Associations in the United
States 1929 (u. S* Department of Agriculture Circular
No. 94, August 1929). Includes a good history of the
movement In tobacco marketing to that date.
320
321
Coleman, Louise M., United States Tobacco and its Market
(U. S. Department of Commerce Bureau of Foreign and
Domestic Trade Information Bulletin No. 757, May 1931).
Of particular value on the foreign trade in tobacco.
Collins, Wm. and Bakken, Henry H., The Cooperative Tobacco
Marketing Situation In Wisconsin^Farm Credit Adminiatration Cooperative Division Special Report No. 19,
mimeograph, November 1937).
Dodge, J. R., "Statistics of Manufactures of Tobacco," Tenth
Census of the United States 1880, Volume on G-eneral
Statistics, pp. 881-947 (U. S. Census Office, 1883).
Elsworth, R. H., Agricultural Cooperative Associations,
Marketing and Purchasing, 1925 (u. S. Department of
Agriculture Technical Bulletin No. 40, June 1928).
. Cooperative Marketing and Purchasing 1920-1930
(U . S . Department of Agriculture Circular No. 121,
August 1930)•
________ , Development and Present Status of Farmers* Cooper­
ative Business Organizations (U. sT Department of Agri­
culture Department Bulletin No. 1302, Dec. 29, 1924).
________ , Statistics of Farmers* Cooperative Business Organ­
izations 1920-1935 (Farm Gredit Administration Cooperative Division Bulletin No. 6, May 1936).
Erdman, H. E., Organizations Among Ohio Farmers (Ohio Agri­
cultural Experiment Station Bulletin No. 3^2, June 1920).
Brief reference to the cooperative warehouse companies.
Fetrow, Ward W., Cooperative Marketing of Agricultural
Products (Farm Credit Administration Cooperative Division
Bulletin No. 9, October 1936).
Floyd, Marcus L., "Tobacco," Twelfth Census of the United
States 1900, Vol. VI, pp. 499-504 (U. S. Census Office,
W 52T.
------------- “
Frear, Wm. and Hibshman, E. K., The Production of Cigar Leaf
Tobacco in Pennsylvania (U. S. Department of Agriculture
Farmers Bulletin No~* 4l6, March 1918).
Cage, Charles E., American Tobacco Types, Uses and Markets
(U. S. Department of Agriculture Circular No. 249,
January 1933). An excellent description of the develop­
ment of tobacco types and of the history of production
and marketing of tobacco.
The Tobacco Industry in Puerto Rico (U. S. Department,Qf Agriculture Circular No. 519, March 1939). This
322
describes the changes in Puerto Rican tobacco produc­
tion and manufactures affecting the cigar leaf districts
in the United States*
Gamer, W* W., Tobacco Culture (U* 3* Department of Agri­
culture Farmers Bulletin No. 571, September 1936).
Emphasizes the localization of tobacco culture*
Gamer, W* W* and Others, "History and Status of Tobacco
Culture," United States Department of Agriculture Year­
book 1922, p p . 395 - 4 6 6 (1923)• Very good*
________ » "Superior Germ Plasm in Tobacco," United States
Department of Agriculture, Yearbook of Agriculture 1936,
pp. 785-830 (1936).
Gatlin, G. 0., Preliminary reports on tobacco marketing:
Cooperative Marketing of Tobacco in Maryland;
Cooperative Marketing of Tobacco in Wisconsin;
Cooperative Marketing of Burley Tobacco;
Cooperative Marketing of Tobacco in the Miami Valley of
Ohio (U . S . Department of Agriculture Bureau of Agri­
cultural Economics Division of Cooperative Marketing,
mimeographed, 1926)• These reports are very brief and
merely outline the history in each district.
Holmes, G. K*, 11Three Centuries of Tobacco," United States
Department of Agriculture Yearbook 1919, pp. 151-175 C1920).
Hulbert, L. S., Legal Phases of the Cooperative Association
(U. S. Department of Agriculture Department Bulletin No.
1106, 1929).
Indiana Department of Statistics (Bureau of Statistics after
1905), Annual Report. (Biennial after 1884), for the
years 1881-1909.Statistics of tobacco production in
Indiana.
Indiana State Board of Agriculture, Annual Report for the
years 1863-1880. Statistics of tobacco production.
Jesness, 0. B., The Cooperative Marketing of Tobacco
(Kentucky Agricultural Experiment Station Bulletin No.
288, October 1928). Especially good on Burley district.
Jesness, 0. B. and Kerr, W. H., Cooperative Purchasing and
Marketing Organizations among Farmers in the United
States (U* S. Department of Agriculture Bulletin No.
547, September 1917)•
Jones, J. W., Membership Relations of Cooperative Associations (Farm Credit Administration Cooperative Division
Bulletin No. 9, October 1936). Excellent discussion of
the problems of membership contacts and loyalty.
323
Jones, J. W. and. Jesness, 0. B •, Membership Relations of
Cooperative Associations (Cotton and Tobacco) (u. S.
Department of Agriculture Department Circular No* 407,
January 1927).
Killebrew, J, B., ”Report on the Culture and Curing of
Tobacco in the United States,” Tenth Census of the United
States 1880, Volume on General Statistics, p p 583-880
T u . S. Census Office, 1883). Very valuable as a source
of early history. Chapter XIII, pp. 707-729, deals with
Ohio and has a very complete description of the
introduction and development of tobacco in this district.
Manny, T . B ., How Ohio Farmers Think of Farmer-Owned Business
Organizations in that State (U. S . Department of Agriculture Circular No* 240, August 1932). Reports some
reactions of growers who had been In tobacco pools.
Mathewson, £• H., Tobacco Marketing in the United States
(U. S. Department of Agriculture Bureau of Plant Industry
Bulletin No. 268, 1913).
Morrow, J. V. and Smith, Dudley, Tobacco Shrinkages and
Losses in Weight in Handling and Storage (U.S. Depart­
ment of Agriculture Circular No. 435, July 1937).
Includes statistics on stocks of cigar leaf tobacco from
the beginning of records in 1912.
Ohio, Secretary of State, Annual Report for the years 18911897. Statistics on tobacco production by counties.
Ohio State Board of Agriculture, Annual Report for the years
1863-1909. Statistics on tobacco production.
Pennsylvania Department of Agriculture, Pennsylvania1s
Farms. Crops and Livestock 1926 (Bulletin No. 445, May
1927). Data on tobacco production Table 77, p. 101.
Scanlan, John J. and Tinley, J. M., Business Analysis of
the Tobacco Growers Cooperative Association (U. S.
Department of Agriculture Circular No. 100, October
1929). A thorough analysis of the formation and operations
of this association.
Strazheim, R. E. and Falconer, J. I., An Estimated Gross
Cash Income from the Sale of Agricultural Products from
Ohio Farms by Counties 1927 (Ohio State University and
Ohio Agricultural Experiment Station Mimeograph Bulletin
No. 22, October 1929). Tobacco as a cash crop.
, The Estimated Gross Cash Income from the Sale of
Agricultural Products from Ohio Farms by Counties 1929
Ohio State University and Ohio Agricultural Experiment
Station Mimeograph Bulletin No* 27, September 1930).
324
Taeusch, C. F., Rural Cooperation and Cooperative Marketing
1913 (Ohio Agricultural Experiment Station
Circular No# 141, Dec# 15, 1913)# Contains a short
description of the cooperative warehouse companies#
U# S. Bureau of Census, Thirteenth Census of the United
States 1910. Vols* VI, VII (1913). This and the--following census reports contain data on cigar leaf
tobacco production by counties in Ohio and Indiana.
» Fourteenth Census of the United States 1920,
Vol. VI, Agriculture Part I (1922).
________ » United States Census of Agriculture, 1925, Part I
The Northern States (1927).
________ * Fifteenth Census of the United States 1930, Vol.
II, Agriculture Part I (1932).
___ $ United States Census of Agriculture, 1935. Vol. I
(1936).
U. S. Census, Superintendent of, Seventh Census of the
United States 1850 (1853).
________ , Eighth Census of the United States i860, Volume on
Agriculture in the United States (1864).
, Ninth Census of the United States 1870, Volume on
Industry and Wealth (1872).
U. S. Census Office, Tenth Census of the United States 1880,
Volume on General Statistics (1883)* Special sections
devoted to tobacco, pp. 583-947, are very good.
________, Eleventh Census of the United States 1890, Vol.
III, Statistics of Agriculture (1895).
________, Twelfth Census of the United States 1900, Vol. VI,
Agriculture, Part II, pp # 499-50^ (1902). A short
special section on tobacco, in addition to data.
U. S. Commissioner of Internal Revenue, Annual Report for
the years 1899-1937. Data on cigar manufacturers.
U. S. Department of Agriculture, Yearbook for the years
1905-1935. Production and price data on tobacco.
________ , Agricultural Statistics 1939 (1940). Data on
purchasing power of farmer s dollar, pp. 496-7.
U. S. Department of Agriculture, Agricultural Marketing
Service, Annual Report on Tobacco Statistics 1939
(September 1939). This, with the earlier reports,
325
provides an important source of data on tobacco produc­
tion, price, and consumption.
-------— » C**QP Report as of October 1, 1939 (mimeographed,
October 10, 1939).
---------- ----______9 Stocks of Leaf Tobacco Owned by Dealers and Manu­
facturers, October l a 1939 (mimeographed. Nov. 21. 1939).
U..S. Department of Agriculture, Bureau of Agricultural
Economics, First Annual Report on Tobacco Statistics.
Statistical Bulletin No. 5o (May 1937).
_______ , Annual Report on Tobacco Statistics 1937.
Statistical Bulletin No. 63 (February 1938).
________ , Annual Report on Tobacco Statistics 1938.
Statistical Bulletin No. 67 (December 1938).
________ , The Tobacco Outlook for 1939 (Nov. 4, 1938). Stocks
and market situation.
U. S. Federal Farm Board, Cooperative Marketing Makes Steady
Growth, Bulletin No. 8 (April 1932).
________ , Cooperative Marketing of Farm Products. Bulletin
No. 10 (June 1932)• Especially pp. 70-75.
________ , First Annual Report 1930 (1931). Reports activity
in sponsoring tobacco cooperatives pp. 21-2.
_____, Statistics of Farmers1 Selling and Buying Associa­
tions, United States. 1863-1931, Bulletin No. 9 (June
1932). Tobacco cooperatives pp. 59-61.
U. S. Federal Trade Commission, Cooperative Marketing, pp.
XXXIV-XXXVII, 186-203, 306-310 (U. S. Congress, 70th,
First Session. Senate Document 95, 1928). A letter of
transmittal and a report to Congress on cooperative
marketing in the U. S. Good review up to that date.
III. Articles, Newspapers, and Periodicals
Agricultural Cooperation, U. S. Department of Agriculture
Bureau of Agricultural Economics, bi-weekly mimeograph
1923-1929. Contains many reports on tobacco pools.
Barth, Harry A., “Cooperation in the Blue Grass,” Journal of
Political Economy, Vol. 33, August 1925, pp. 455-465.
326
Baruch, B. M., "Developing Plans for Tobacco Marketing
Organization,11 Commercial and Financial Chronicle, Vol.
112, Jan. 29, 1921, p^ 4-28. Possibilities of dealing
In tobacco on commodity exchanges.
Christensen, Chris L., "The Place of Pooling in Cooperative
Marketing," American Cooperation 1928. Vol. II, pp. 122134 (American Institute of Cooperation, Washington, 1928).
Cincinnati Chamber of Commerce, Annual Report, especially for
the years 1877, 1882, 1887, 1594", “and 1909. Contain
brief reports on the Cincinnati tobacco market.
Collins, Wm., "Present Status of Cooperatives in Tobacco
Marketing," American Cooperation 1933. pp. 521-532
(American Institute of Cooperation, Washington, 1933)*
Cooperative Marketing Journal (Cooperative Journal after
1934) (National Cooperative Council, monthly December
1926 to July 1928, bi-monthly September 1928 to
December 1938, Washington).
Corey, Merton L., "Market Control vs. Sound Business Manage­
ment," American Cooperation 1928, Vol. II, pp. 424-435
(American Institute of Cooperation, Washington, 1928).
Dayton Daily News, issues for 1910-1914.
Dayton Journal, issues for 1910-1914.
Ela, Emerson, "Operating a Tobaaco Cooperative Under the New
Deal," American Cooperation 1934, pp. 245-255 (American
Institute of Cooperation, Washington, 1934).
, "Selling and Price Problems of the Northern Wis­
consin Cooperative Tobacco Pool," American Cooperation
1925, Vol. I, pp. 512-523 (American Institute of
Cooperation, Washington, 1925).
Elsinger, Verna, "The Burley Tobacco Growers Experiment,"
American Cooperation 1928. Vol. II, pp. 499-621
(American Institute of Cooperation, Washington, 1928).
A complete report of the operations of this venture.
Hutson, J. B., "Application of the Agricultural Adjustment
Act to Tobacco Competition," American Cooperation I933>
pp. 477-488 (American Institute of Cooperation,
Washington, 1933)•
Jones, J. W., "Some Causes of the Difficulties of the Dark
Tobacco Association," American Cooperation .1927, Vol. I,
pp. 60-72 (American Institute of Cooperation, Washington,
1927).
327
Mathews, John L., "The Farmers Union and the Tobacco Pool,"
Atlantic. Vol. 102, October 1908, pp. 482-491.
3. Valley Tobacco News, published by the Miami Valley
Tobacco Growers Co-operative Association, Dayton, 0 *
First issue October 1923, monthly issues of November
1923 to March 1924 combined in one number. Last issue
April 1924. Generalized reports of operations*
Miller, E. E., "The American Fanner as a Cooperator," Forum.
Vol. 52, October 1914, pp. 595-602.
Morrow, j. V., "Tobacco Types Make the Flavor," Marketing
Activities. April 1940, pp. 9-15 (Issued monthly by the
U. S. Department of Agriculture Agricultural Marketing
Service, Washington). A good description of the use of
different types of tobacco in tobacco products.
Ohio Farm Bureau Federation News, published by Ohio Farm
Bureau Federation, Columbus, 0. Issues 1923-1927
(weekly to May 1924, thereafter monthly). After April
1924 contained a section which was the official publi­
cation of the Miami Valley Tobacco Growers1 Co-operative
Association.
Price, H. B., "What Future for Tobacco Cooperatives,"
American Cooperation 1934. pp. 256-266 (American
Institute of Cooperation, Washington, 1934). Excellent
presentation of the difficulties faced.
Price, H. B. and Others, "Outlook for Cooperative Marketing
of Tobacco," Journal of Farm Economics. Vol. 15, October
1933, PP» 720-722. Fine analysis of unsolved problems.
Saplro, Aaron, "Rolling Their Own," Survey. Vol. 50, April 1,
1923, pp. 15-19 ff. Problems in the Burley district.
Stokdyk, E. A.. "The Modern Set-up in Cooperative Financial
Structure, American Cooperation 1938. pp. 705-710
(American Institute of Cooperation, Washington, 1938).
Taylor, Carl C., "The Story and the Lesson of the Tri-State
Tobacco Cooperative Association," American Cooperation
1935, pp. 489-519 (American Institute of Cooperation,
Washington, 1933)•
The Tobacco Industry-Annual Review, published by Chas. D.
Barney & Co., New York. Reports for 1926 and 1929.
IV. Unpublished Materials
328
Articles of Incorporation of the: National Cigar Leaf
Growers* Union, twelve--including the one reorganized——
cooperative warehouse companies of 1912, Growers Sales
Co#, Miami Valley Tobacco Growers Cooperative Associa­
tion of 1919, Miami Valley Tobacco Growers* Co-operative
Association, Miami Warehousing Corporation, and Ohio
Cigar Leaf Tobacco Growers* Marketing Association from
the files of the Secretary of State of Ohio.
By-Laws and Minute Books of: The Farmers Tobacco Co.,
Farmersville, 0.; The Union City Farmers Tobacco Co.,
Union City, Ind.; The Lytle Farmers Tobacco Co., Lytle,
0.; The Miami Valley Tobacco Growers* Co-operative
Association, Dayton, 0. — By-Laws printed and only part
of Minute Book available; and The Ohio Cigar Leaf
Tobacco Growers Marketing Association, Greenville, 0.
Business Records— in part of The Farmers Tobacco Co.,
Farmersville, 0.; The Farmers Cooperative Cigar Leaf
Tobacco Co., Verona, 0.; The Miami County Leaf Tobacco
Co., Covington, 0.; The Union City Farmers Tobacco Co.,
Union City, Ind.; and The Miami Valley Tobacco Growers
Co-operative Association, Dayton, 0. In addition the
following audits of this last association were used:
by the Ohio Farm Bureau Federation Auditing Service,
Columbus, Ohio, as of Oct. 31* 1924 and Feb. 28, 1925;
and by Wall, Hardman, and Lane, Dayton, Ohio, as of
July 31* 1925, October 31* 1925, October 31, 1926, and
April 6 , 1927.
— in full of the Ohio Cigar Leaf Tobacco
Growers* Marketing Association, Greenville and Brookville,
Ohio •
Darke County Farmers Leaf Tobacco Co. vs. John Robeson et al.,
Case No. 25380, Court of Common Pleas of Darke County,
Ohio. Complete court records of the case.
Eastwood, George R., History of Cooperative Marketing of
Tobacco in the Miami Valley (Unpublished thesis for
M.Sc. degree at Ohio State University, 1931)* A sketchy
and poorly executed report.
Marketing or Membership Agreements o f : the Miami Valley
Tobacco Growers* Co-operative Association, Dayton, 0.
(printed); and the Ohio Cigar Leaf Tobacco Growers’
Marketing Association, Greenville and Brookville, Ohio
(printed).
V. Personal Letters
Bain, H. M., Principal Agricultural Economist, Farm Credit
329
Administration, Washington, D. C. March 25, 1939.
Beach, W. S., Associate Professor of Plant Pathology, Penn­
sylvania State College, State College, Pa. Nov. 6 and
Nov. 20, 1939.
Collins, W m •, Chief of Tobacco Section, U. S* Department of
Agriculture Agricultural Adjustment Administration,
Washington, D. C. June 29, 1939.
Elsworth, R. H., History and Statistics of Cooperation, Farm
Credit Administration, Washington, D. C. July 28, 1939.
Foster, L. G., President of Columbia Bank for Cooperatives,
Columbia, S. Car. (Formerly vice-president and secretary
of the Louisville Bank for Cooperatives, Louisville, KyJ
July 26, 1939.
Gage, Charles E., In Charge of Tobacco Division, U. S.
Department of Agriculture Agricultural Marketing Service,
Washington, D. C. Nov. 4 and Dec. 22, 1939.
McCulloch, J. R., Warehouse Manager of Northern Wisconsin
Co-operative Tobacco Pool, Viroqua, Wis. July 12, 1939.
Melton, LeRoy, President of Farmers Equity Union, Greenville,
111. Nov. 17, 1939.
VI. Personal Interviews
Albright, D. P., director of Miami Valley Tobacco Growers1
Oo-operative Association 1924-1927 and president of Ohio
Cigar Leaf Tobacco Growers1 Marketing Association 19311939, Hollansburg, Ohio, August 23, 1938.
Albright, J. K., incorporator of Darke County Farmers Leaf
Tobacco Co., Greenville, 0., August 19, 1939.
Bartel, John W., director and manager of the Miami County
Leaf Tobacco Co. and director and president (1939-- ; of
Ohio Cigar Leaf Tobacco Growers#‘ Marketing Association,
Covington, Ohio, August 28, 1939*
Blackford, Frank, president of the National Cigar Leaf
Growers* Union, president of the organizing committee of
the Miami Valley Tobacco Growers* Co-operative Associa­
tion, and member of the Ohio Cigar Leaf Tobacco Growers'
Marketing Association, Eldorado, 0., August 30, 1939.
Block, John, Independent buyer of West Alexandria, Ohio,
330
August 21, 1939.
Brown, J* E., Incorporator of Darke County Farmers Leaf
Tobacco Co., Greenville, 0., Aug. 23, 1939.
Brubaker, Harvey, director of the Gratis Township Leaf
Tobacco Co., Gratis, 0., Aug. 21, 1939.
Brundrett, R. H., secretary-treasurer of the Miami Valley
Tobacco Growers' Co-operative Association (1924-1927),
Dayton, 0., Aug. 24, 1939.
Byers, Walter B., member of Miami Farmers Leaf Tobacco Co.
and director of Miami Growers Leaf Tobacco Co.,
Miamisburg, 0., Aug. 22, 1939.
Cromwell, C. C., manager of the Farmers Cooperative Cigar
Leaf Tobacco Co. and director (1933-- ) of the Ohio
Cigar Leaf Tobacco Growers' Marketing Association,
Verona, 0., Aug. 29, 1939.
Eidson, B. K*, director of Darke County Farmers Leaf Tobacco
Co., Greenville, 0., Aug. 19 and 26, 1939.
Fox, Frank M., secretary and manager of the Warren County
Leaf Tobacco Co., Carlisle, 0., Aug. 22, 1939.
Friend, Robert, member of the Lytle Farmers Tobacco Co.,
Lytle, 0., Aug. 28, 1939.
Hindsley, Robert, son of James W. HIndsley, secretarytreasurer of the Union City Farmers Tobacco Co., Union
City, Ind., Aug. 23, 1939.
Hippie, Harley, manager of the Miami Farmers Leaf Tobacco
Co., Miamisburg, 0., Aug. 22, 1939.
Kenrick, Walter, manager of the Lytle Warehouse Co., and of
the Lytle Farmers Tobacco Co., Lytle, 0., Aug. 28, 1939.
Ketrow, C. C., director of the Union City Farmers Tobacco
Co., Greenville, 0., Aug. 26, 1939.
Leisz, Chas., member of the Miami Farmers Leaf Tobacco Co.,
Miamisburg, 0., Aug. 22, 1939.
Loxley, Benjamin, Jr., member of Miami County Leaf Tobacco
Co., Covington, 0., Aug. 28, 1939.
Makepeace, Samuel, member of Farmers Leaf Tobacco Co., Troy,
0., Aug. 28, 1939.
Marion, John 0., director and manager of the Farmers Tobacco
Co., Farmersville, 0., Aug. 21, 1939.
331
Robsion, J# M., president of Warren County Leaf Tobacco Co#,
Franklin, 0., Aug* 22, 1939.
Sheaffer, Fred, director and president (1924-1927) of Miami
Valley Tobacco Growers* Co-operative Association,
Germantown, 0., Aug. 25, 1938 and Aug. 22, 1939.
Shoenberger, Fred L., organization director of Ohio Farm
Bureau Federation (1919-1928), now secretary-treasurer
of Ohio Dairy Products Association, Columbus, 0., Aug.
14, 1939.
Stern. M. E., tobacco broker and sales manager of Miami Valley
Tobacco Growers* Co-operative Association,(1924-1927),
Dayton, 0., Aug# 25 and 28, 1939.
Williams, F. H.,
Co., Gratis,
secretary of Gratis Township Leaf Tobacco
0., Aug. 21, 1939.
Statements of Jesse T. l»andis, Pleasant Hill, 0., secretarytreasurer of the OhioCigar Leaf Tobacco Growers*
Marketing Association and of the directors of that
association during the writer*s connections with them
since 1933.
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