UNIVERSITY OF CALIFORNIA
COLLEGE OF AGRICULTURE
AGRICULTURAL EXPERIMENT STATION
BERKELEY, CALIFORNIA
History of Cooperation in the Marketing
of California Fresh Deciduous Fruits
ERICH KRAEMER and H. E. ERDMAN
BULLETIN 557
SEPTEMBER, 1933
CONTRIBUTION FROM THE
GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS
UNIVERSITY OF CALIFORNIA
BERKELEY, CALIFORNIA
CONTENTS
PAGE
Early horticultural history of the deciduous fruit industry 3
Beginnings of collective action 5
The California Fruit Growers' and Dealers' Association 5
Local group action by growers 7
Early influence of general-purpose farm organizations 9
Agricultural societies 9
Farmers' clubs 9
Granges (Patrons of Husbandry) 10
The California Fruit Union 13
The California Fruit Growers' and Shippers' Association 29
Continued efforts to establish a central cooperative agency 36
The California Fruit Exchange 41
Local and regional cooperative developments 69
Florin Fruit Growers' Association 70
Newcastle Fruit Growers' Association . 71
Cooperative movement in the Watsonville region 74
Corralitos Fruit Growers Incorporated 75
Loma Fruit Company 76
Sebastopol Apple Growers' Union 79
The Gravenstein Apple Growers' Association 84
The California Gravenstein Apple Growers 85
Growers' Cooperative Agency 87
Recent plans of combining growers' and dealers' interests 90
Summary of early plans 90
The California Fruit Exchange as a member of the California Fruit Dis-
tributors 92
State Bureau of Distribution 93
Beginnings of the post-war clearing-house movement 95
Clearing houses for grapes 97
Clearing houses for fresh deciduous-tree fruits 104
Grower-dealer organizations in the Watsonville region 106
Watsonville Apple Distributors 106
The second joint marketing organization 108
Watsonville Apple Growers' and Packers' Association 109
Watsonville Apple Selling Organization 110
Pajaro Valley Fruit Association 110
Grower-dealer organizations in the Sebastopol region Ill
Gravenstein Growers and Packers Ill
California Gravenstein Apple Growers 112
Summary and conclusions 117
Acknowledgments 121
History of Cooperation in the Marketing
of California Fresh Deciduous Fruits1 2
EEICH KEAEMEE3 and H. E. EEDMAN4
EARLY HORTICULTURAL HISTORY OF THE DECIDUOUS
FRUIT INDUSTRY
While the history of the California deciduous-fruit industry dates
back to the beginning of the settlement of Alta California by the Fran-
ciscan fathers in 1769, the first real signs of commercial fruit production
did not appear until the days of the Gold Rush in 1849. Commercial pro-
duction of deciduous fruits in California is, therefore, of comparatively
recent origin. But within its eighty years of existence, and particularly
since the early seventies, it has had a remarkable development.
The tree fruit which was produced about the early Missions of the
Franciscan monks was chiefly grown from seeds brought to California
by vessels bearing supplies for the Missions. As gardens and orchards
were soon planted at practically all of the Missions, it was not long
before a number of varieties of fruit were to be found there.
According to Lelong,5 as early as 1792 "there were growing, near the
Mission San Jose, apples, pears, apricots, peaches, and figs ; and at San
Buenaventura, in addition to these, oranges, limes, grapes, olives, and
pomegranates." Although there were not more than about five thousand
bearing trees in the various Missions at that time, these plantings con-
tributed much to the growth of horticulture in the state. "They showed
the possibilities in fruit culture, and furnished seeds, stock, cions,
and from the vineyards, grape cuttings, for many orchards and vine-
yards." He also states that farther north at Fort Ross, in Sonoma
County, some Russians in 1812 planted an orchard of mixed fruits,
including apples, apricots, pears, cherries, and vines. Gradually at
various points settlers planted small orchards, always for home use.
1 Eeceived for publication November 29, 1932.
2 Paper No. 40, The Giannini Foundation of Agricultural Economics.
3 Eesearch Assistant on the Giannini Foundation, resigned November 1, 1931.
4 Professor of Agricultural Economics, Agricultural Economist in the Experi-
ment Station, Agricultural Economist on the Giannini Foundation.
s Lelong, B. M. Horticultural history. California State Board of Horticulture,
Annual Ecport 1892:33-34.
[3]
4 University of California — Experiment Station
There was little or no commercial interest in the fruit growing of
those early days. However, with the increase of population during the
Gold Rush and the high prices paid for fruit at that time by the miners
and others, the situation changed. These high prices stimulated the
production of fruit for sale, particularly around the mining camps.
Some of the men who were not caught by the "gold fever" and who
devoted their efforts to fruit growing soon discovered that when fruit
was selling at $0.50 to $1.00 a pound their orchards were veritable "gold
mines. "
For a time high prices stimulated "imports" of large quantities of
dried fruits to California. By 1866 it was pointed out that "with the help
of Oregon, ... we shall be able to supply the demand for all the principal
fruits on this coast the coming year."6 Three years later after the comple-
tion of the overland railroad it was pointed out that about 300 tons of
pears, apples, grapes, and plums had been sent East by railroad and
that the eastern market might prove very advantageous "if we can lay
[our fruit] down in the eastern cities in good order and at cheap
freights."7 Still later, after reporting that "70 full cars" of fruit had
been shipped East in 1870 and 115 cars in 1871 (mostly pears), Reed3
ventured the forecast that in the future as many as 1,000 cars a year
might be shipped.
The completion of the overland railroad further stimulated plantings
for commercial fruit production. The beginning of the seventies, there-
fore, marks the real beginning of commercial production of deciduous
fruits in the state.
Shipments of fresh deciduous fruits out of California by rail increased
rapidly. In 1871 rail shipments out of the state were 916 tons. In 1880,
1,571 tons were shipped and by 1890 shipments had reached 34,042 tons.9
By 1930 shipments had mounted to more than 1,500,000 tons.10
Although the California deciduous-fruit industry is now widely
scattered over the state, with its total length of about 800 miles and an
average width of about 200 miles, there is a considerable degree of
regional specialization in production. In the course of something like
e California State Agr. Soc. Trans. 1866-67:35.
7 California State Agr. Soc. Trans. 1868-69:22.
s Reed, C. W. Fruit culture. California State Agr. Soc. Trans. 1870-71:454. (The
figure 115 may be in error.)
o Lelong, B. M. Horticultural history. California State Board of Horticulture,
Annual Report 1892:36.
io Pacific Fruit Express Company's reports of "Total California Interstate De-
ciduous Tree Fruit and Grape Shipments."
Bul. 557] Cooperative Marketing of Deciduous Fruits 5
three-fourths of a century of experimentation under the varied climatic,
soil, and topographic conditions of the state, numerous regions have
proved themselves peculiarly adapted to the production of certain
products.11
BEGINNINGS OF COLLECTIVE ACTION
Some initial efforts on the part of California deciduous-fruit growers
to improve the marketing of their products by collective action occurred
in the late sixties. These efforts were concerned with the shipment of
fresh deciduous fruits both to California points and to eastern markets.
They represented not only local group action but involved the estab-
lishment of an organization designed to benefit the deciduous-fruit in-
dustry of the state. This state-wide organization furnishes an early
example of the combining of growers' and dealers' interests in a single
enterprise.
The California Fruit Growers' and Dealers' Association. — Probably
the earliest movement for collective action in connection with the sale
of fresh deciduous fruit was a movement in 1869 to form an association
of producers and dealers. It occurred during the year in which new
markets had been opened to California products by the eagerly awaited
completion of the overland railroad, and aimed to develop these addi-
tional outlets. The question of shipping fruit to the East at once received
attention because it was generally realized that the new market area
was not only promising, but also necessary in view of the rapidly in-
creasing production of fruit in the state.12
It was also recognized by both growers and dealers that a successful
development of the eastern markets for California fresh fruit was
greatly dependent upon the support of the railroads, particularly since
freight rates were extremely high and were considered a serious handi-
cap to the development of the new business. It was likewise pointed out
ii For detailed information on the geographical distribution of the acreage of
deciduous fruits in California see California Crop Reports, issued by the Cali-
fornia Crop Eeporting Service, and California Agr. Exp. Sta. Bulletins 423 (out
of print), 429 (out of print), 445 (out of print), 452, 459, 488, 547, and Ext. Cir. 1
(out of print).
12 The selling of fruit in the East had been in the minds of Calif ornians for some
time. As early as 1858, an experimental shipment of grapes to New York by
steamer was made. The fruit was packed with sawdust in wooden boxes. In view
of the high ocean freight — 25 cents a pound for express freight and 12i cents for
slow freight — and the long way around the Horn, this shipment was extremely
speculative and probably ended in a loss. See: California Farmer 10(12) :92. 1858.
6 University of California — Experiment Station
that, if the best sales results were to be achieved, only good fruit should
be shipped, and sound methods of packing and shipping used.13
In view of these common problems, the growers and dealers met in San
Francisco on July 7, 1869. At that meeting, which was attended by about
40 persons, they decided to establish an organization for their mutual
benefit. What they thought about the expediency of united action and
what they desired to accomplish is stated briefly by the preamble of the
organization's constitution :
Whereas, It is becoming more and more apparent from year to year that the pro-
duction of fruit in this State is, and will continue to be, greatly in excess of the
demand of our limited home market, and that a fair compensation to fruit growers
requires that new markets should, if possible, be made available ; therefore, we, the
fruit growers and dealers of California, for the protection of our interests, and the
further successful development of our branch of Agriculture, form ourselves into a
permanent association, to be known as the California Fruit Growers' and Dealers'
Association.!*
The set-up of this association was very simple. It was provided that
the board of directors should represent the main fruit-growing districts
of the state. It was further declared (Article VII of the by-laws) that
the association should be open to any fruit grower or dealer upon pay-
ment of a fee of five dollars and the signing of the constitution and
by-laws.
In accordance with the desire of achieving concessions from the trans-
portation companies, a committee was immediately appointed to confer
with railway officials concerning the reduction of freight rates. This was
done pursuant to the adoption of a resolution reading as follows :
Eesolved, That an organized effort be made by the fruit growers here represented
to obtain such a reduction of the rates of freight now charged by the transconti-
nental railroad companies — through proper representation to said companies of the
absolutely prohibitory rates now ruling — of the vast amount of freight immediately
available to them in consequence of such a reduction of the rates as shall enable the
fruit grower to place his fruit in the eastern markets at a reasonable profit to himself,
and of the great future importance which this fruit trade with the East would
assume if properly encouraged.15
Although the California Fruit Growers' and Dealers' Association was
established for the purpose of fostering the selling of California fruit in
is The editor of the California Farmer in August, 1869, commented: "... we
are confident that California has a fruit market now opened to her that NEVER
CAN BE TAKEN AWAY FROM HER. A fruit market, also that we can never
glut, provided that we are wise in our shipments, and never send second-rate fruit, or
fruit poorly packed." California Farmer 32(6) :44. 1869.
3 4 California Farmer 31(24): 188. 1869. The preamble and by-laws of the Fruit
Growers' and Dealers' Association are given in this issue.
is California Farmer 31(24):188. 1869.
Bul. 557] Cooperative Marketing of Deciduous Fruits 7
the new markets in various ways, only the question of obtaining lower
freight rates from the railroad companies seems to have received atten-
tion during the shipping season of 1869. Prices paid for California fruit
in the East were still very high,16 and, most likely for this reason, the
individual interests of the members were so strong that no further joint
economic action was sought.
Whether the association survived the year of 1869 or not is uncertain
because of the lack of adequate records. However, the movement among
fruit growers and fruit dealers went on in the following year. Several
meetings took place, but these were probably of an informal sort. They
were called to discuss such questions as methods of collecting choice
fruit for the eastern markets, the kind of fruit boxes to be used, the best
time to ship, the most favorable markets, and steps to bring about a
reduction of freight rates. It seems that this movement finally brought
about some reduction in freight rates.17 But apart from that, it probably
did not accomplish much.18
Local Group Action by Growers. — A few years after the movement
among growers and dealers to foster the marketing of California fruit in
the East, one or two cases of local group action occurred in which fruit
growers alone endeavored to bring about improvements in connection
with the shipment of their produce to California markets. In Santa
Clara County the farmers had become dissatisfied with railroad services.
Meager information is available, but the following report of statements
made at a meeting of the San Jose Farmers' Club and Protective
is The editor of the California Farmer reported on an experimental shipment in
1869: "The Experiment of sending Fruit over the Pacific Eailroad to distant
points, as far as Chicago, has been tried, and good returns made, we learn, to
those who sent their Fruit. The price realized at Chicago was for Grapes fifty
cents per pound, and for pears $10 per Box. Those who pack carefully and pack
only choice fruit will make a good thing of it; but the hurry-up man and the
careless packer will lose his fruit and his labor and pay his own freight, too. We
learn that ten tons will be sent forward this week from Sacramento to Chicago,
and way Stations, equal to about Three Hundred and twenty-five Boxes. Should it
realize the same rates as the first lot, it would be equal to about four hundred
per cent above our Markets. So much our Pacific Eailroad has done for our Fruit-
growers even with all their complaints against high tariff." California Farmer 32
(3):20. 1869.
17 The California Farmer reported that the Eailroad Directors "now offer to
take fruit on their regular trains at the reduced rate of $500 per car, and will prepare
cars to carry it safe— or they will send it on express trains at $950 per car. This is
only $50 per tun of 2,000 lbs. (24 cents per lb.) or $95 per tun (expense 94 cents
per lb.). This we esteem liberal and we hope it will be justly regarded." California
Farmer 33(24) :188. 1870.
is The same journal makes the following comment: "We esteem the cause of
non-success to the meeting and Committee was the want of a union of interest
and purpose, somebody wants the buttered side of the loaf, the rule and control of
all the business, and all the profits, and our hard working growers won't submit
to it." California Farmer 33(19) :148. 1870.
8 University of California — Experiment Station
Association on April 27, 1872, indicates the nature and scope of the
activities :
Arrangements have already been made and a steamer is now running from Alviso
to San Francisco, making night trips, and carrying strawberries, vegetables, etc.,
fresh from the farms, and landing them near the markets, without the rough handling,
bruising and delay which has been experienced over the S. P. R. R. route. This has
been brought about by a number of principal farmers in Santa Clara County, com-
bining and pledging their patronage to the steamer. Before this combination of the
farmers in self-defense, the railroad managers would not listen to any complaints . . .
What then cost the farmers $1 to freight to San Francisco is now sent via Alviso by
steamboat for 60 cents, and the commission men get better prices, and are much
pleased with the arrangement. Before this move the Railroad Company refused to
put on a night train. Now they are not only willing to run a night train, but they
have reduced the price of freight to one-half the cost on the Alviso route, about one-
third the rate formerly exacted.1^
At the Napa County Farmers' Club in July, 1872, it was reported that
fruit growers and other farmers in Alameda County had combined and
hired a steamer for the transportation of their products. They were able
to ship their products at $0.62% a chest by steamer, whereas before they
had paid the railroads $1.50 a chest for small fruits.20 There may have
been other informal ventures of similar nature which were not reported
in the press.
It is possible that combined efforts of an informal kind to improve the
marketing of fruit by similar and other means occurred much earlier. It
is, however, difficult to get any evidence of such attempts because of the
scarcity of records. The instances cited did not represent any informal
or formal marketing transactions, since joint selling, although it may
have been in the minds of the members of the California Fruit Growers'
and Dealers' Association, apparently did not materialize. But, they were
the immediate forerunners of cooperative marketing activities of decid-
uous-fruit growers which subsequently developed within the ranks of
general farm organizations.
!9 Pacific Rural Press 3:289. 1872. The same plan was worked out the next
year under similar circumstances. (Pacific Rural Press 6:84. 1873.)
20 This reference may be to the aforementioned scheme. No further reference
to it has been found. Alviso is in Santa Clara County just across the Alameda
County line. Mr. Nash of the Napa Club said he had spent some time with Mr.
Lewellyn in Alameda County. He (Mr. Nash) "had found there that the farmers
had combined and hired a steamboat" etc. Pacific Rural Press 4:84. 1872.
Bul. 557] Cooperative Marketing of Deciduous Fruits
EARLY INFLUENCE OF GENERAL-PURPOSE FARM
ORGANIZATIONS
The development of business cooperation among deciduous-fruit
growers in California was influenced by three types of general-purpose
farm organizations which developed during the period from 1850 to
1880, namely, the agricultural societies, the farmers' clubs, and the
grange (Patrons of Husbandry). At first their influence was indirect,
but later it became more and more direct.
Agricultural Societies. — The State Agricultural Society, formed in
April, 1854,21 and the county and district agricultural societies were
primarily concerned with such affairs as county and state fairs. How-
ever, they fostered the spirit of organization in general, and the discus-
sion of economic questions was often prominent at their meetings.
The California State Horticultural Society, organized in 1879, 22 and
some county associations concerned themselves primarily with the hold-
ing of periodic meetings for the purpose of discussing problems involved
in the production of fruit. The State Horticultural Society, however,
took a particularly important part in the formation of the California
Fruit Union in 1885 and 1886.
Farmers' Clubs. — The farmers' clubs of the early seventies exerted a
much stronger influence on the development of cooperative marketing
than did the agricultural societies. Their number increased very quickly
in the early seventies, particularly after they had combined to form a
state organization — the California Farmers' Union.23 These clubs were
mainly discussional clubs, and while they later took up discussion of
political and general economic questions of the time, they frequently did
discuss problems of fruit marketing and in some instances this led to
action.
At a meeting of the Sacramento Farmers' Club in July, 1872, it was
proposed to overcome the existing dissatisfaction with the prevailing
2i The State Legislature on May 11, 1854, passed an act incorporating this
society and appropriating a sum for its maintenance. California State Agricul-
tural Society's Fourth Annual Fair. Official Eeport. p. v. 1857.
22 Its first officers were President, E. W. Hilgard, College of Agriculture, Berke-
ley; Vice-President, J. Lewelling, St. Helena; Secretary, E. J. Wickson, editor,
Pacific Eural Press, and later Dean of the College of Agriculture; Treasurer, G. P.
Rixford, San Francisco. See: Pacific Rural Press 18:81, 172, 297. 1879.
23 The local clubs met at Sacramento on September 23, 1872, and formed a state
organization, the California Farmers' Union. This organization has no connection
with the present organization of that name. Pacific Rural Press 4:196. 1872.
10 University of California — Experiment Station
marketing system by establishing an agency for the sale and shipment
of fruit.24 Shortly afterwards, at a meeting of the Napa Farmers' Club,
the proposal was made that the farmers obtain "a portion of the wharf"
and "ship their fruit direct, doing away with the middleman." In Jan-
uary, 1873, it was proposed that the farmers establish an agency in the
City (San Francisco) to replace the commissionmen. Nothing seems to
have come of these proposals.
The members of the Farmers' Club at San Jose, however, went so far
as to establish their own stalls in that city for the selling of all kinds of
produce. They entrusted an agent with the management of these stalls
who charged from 2% to 10 per cent commission according to the turn-
over effected.25
Not only did the fruit growers of certain farmers' clubs consider the
question of cooperation in their own communities, but they also con-
templated the possibility of collaboration between their organizations.
At a meeting of the San Jose Farmers' Club and Protective Association
in December, 1872, the following resolution was adopted: "Besolved,
That this Club will cooperate with the other clubs in such manner as
may be thought best calculated to reduce the unnecessary expense of
marketing fruit."26
Granges (Patrons of Husbandry). — The grange began active organi-
zation work in California early in 1873. 27 As granges were organized in
the various communities interest lagged in the farmers' clubs, and most
of them soon ceased to function.28 On September 17, 1873, the California
Farmers' Union formally turned its work over to the granges.29 When
the farmers' clubs gave way to the granges the marketing programs of
the former were temporarily dropped. However, marketing continued to
be a matter of dominant interest, and discussions of fruit marketing
were continued in some of the granges which replaced the farmers' clubs.
24 Pacific Rural Press 3:244; 4:36, 68. 1872. Other proposals are found in:
Pacific Rural Press 4:197. 1872; 5:84. 1873.
25 This action was taken in connection with the opposition of the farmers to
the city license system which forbade their selling their produce in the city from
wagons direct to the consumers without a license. Pacific Rural Press 4:308, 389.
1872.
26 Pacific Rural Press 4:389. 1872.
27 The first grange to be established on the Pacific Coast was that at Napa
City, California, organized March 20, 1873. Pacific Rural Press 8:52. 1874.
28 In fact, interest may have been lagging earlier. An editor commented in
February that he understood "attendance has fallen off greatly." California
Farmer 39(4) :28. 1873.
29 Pacific Rural Press 6:184. 1873. At a previous meeting the Union had rec-
ommended the formation of local granges but had urged that they affiliate with
the state Union. (Pacific Rural Press 6:153. 1873.)
Buii. 557] Cooperative Marketing of Deciduous Fruits 11
The first major result was the establishment of the Grangers' Fruit
Association. This organization was formed by delegates from various
granges in the state at a convention held at San Francisco on June 18,
1874.30 After the problems of improving the marketing conditions by
cooperative selling had been discussed in the association for some time,
the following resolution was adopted at a meeting on November 11, 1874 :
Kesolved, That it is the sense of this Meeting that the time has now arrived when
it is proper and our duty as Patrons of Husbandry and Fruit Growers to attend to
our business in the sale of our products in the markets of California and elsewhere,
and that we, the Grangers' Fruit Association of California, will now address our-
selves to the task of establishing proper agencies, depots, and other means to that
end.si
A committee was immediately appointed to draft a plan of organiza-
tion. It recommended the incorporation of a marketing agency under
the name of California Grangers' Fruit Association with its principal
place of business in San Francisco. This organization was to be estab-
lished with a capital stock of $250,000, divided into 10,000 shares of $25
each. It was to be authorized not only to sell, can, and preserve all kinds
of fruits, but also to carry on a general commercial business.32
The report of the committee was adopted, but the California Grangers'
Fruit Association never started business. The endeavors to bring it into
existence coincided with the measures taken by the California State
Grange to establish a general business association. As it was intended to
have this latter association handle all kinds of agricultural commodities,
including fruits, the fruit-growers' group decided, at a meeting on Feb-
ruary 16, 1875, not to develop a separate association but to become
members and patrons of the Grangers' Business Association.
The Grangers' Business Association was incorporated with a capital
stock of $1,000,000 divided into 40,000 shares of $25 each. As the
articles of incorporation say, it was to act "as a factor and broker and
not otherwise." It was further provided that only members of the grange
were allowed to subscribe to the capital stock. This association opened
its offices in San Francisco in March, 1875. The first Board of Directors
consisted of representatives of grain growers, wool growers, fruit
growers, dairymen, and other farmers ; this Board not only appointed
a general manager, but also a special fruit agent.
so Pacific Eural Press 8:165. 1874.
si Pacific Eural Press 8:324. 1874.
32 It is interesting to note the manifold objects of the association. The actual
combination of so many purposes was very common in the farmers' business
organizations existing in those days. It must be recalled, however, that even
today articles of incorporation often confer broad powers in order to make sure
the organization is not hampered in its operations.
12 University of California — Experiment Station
As far as fruit marketing is concerned, it seems that the organization
did sell dried fruits.33 Whether the selling of fresh deciduous fruits was
developed is doubtful. No records of such sales have been found.
Evidently the Grangers' Business Association did not bring the de-
sired results in the field of marketing fresh deciduous fruits, for one
year after it had begun business a group of grangers became interested
in the organization of a special company for the shipment of fruit to
eastern markets. This group met at the Golden Gate Grange in August,
1876, with other growers, and organized the California Fruit Shipping
Company with a capital stock of $50,000. Its membership was not con-
fined to grangers, but was open to all fruit growers. Furthermore, it was
decided that it should buy and sell all kinds of fruits, as well as act as a
forwarding and commission agent.
The movement to organize the company was stimulated by the favor-
able outcome of a number of experiments which had been made with a
new patent refrigerator car. All the organization did was to go on with
such experiments. In this connection it spent approximately $4,000
which had been received by subscription. In addition, it spent about
$3,000 in building a refrigerator car and paying the necessary royalty.34
Out of this company grew one with a broader objective — the shipping
of meat and fruit. This new enterprise, called the California Fruit and
Meat Shipping Company was interesting.35 It was to combine the fruit
and livestock interests of California, Nevada, and Utah in the joint
enterprise of shipping meat and fruit. Furthermore, the founders had in
mind the building of slaughter-houses at principal railroad shipping
points to dress meat and ship it in quarters to San Francisco and to the
East.36 The company was apparently based on the idea that the new
refrigerator car would make meat and fruit a logical combination.
The capital stock of the organization was fixed at $500,000 divided
into 50,000 shares. It was also decided that stockholders in the old Cali-
fornia Fruit Shipping Company should be entitled to turn in their
certificates for shares in the new company.
33 Arrangements for selling dried fruit in the East had already been made by
the Dairy Produce Department established by the Executive Committee of the
California State Grange. See: Carr, F. S. The Patrons of Husbandry on the
Pacific Coast, p. 181. San Francisco. 1875.
34 Pacific Eural Press 13:180. 1877.
35 At the organization meeting held in San Francisco it was explained that this
company was to be "founded upon and to take the place of the Fruit Shipping Com-
pany," and that the refrigerator car built by the old company was to be turned
over to the new. Pacific Rural Press 13:180. 1877.
36 The company apparently started in the meat packing business in Reno,
Nevada, in the fall of 1877. (Pacific Rural Press 14:274. 1877.) No satisfactory in-
formation has been obtained as to whether the company actually started business
nor what became of it.
Bui,. 557] COOPERATIVE MARKETING OF DECIDUOUS FRUITS 13
With these enterprises the first series of cooperative marketing efforts
in the fresh-deciduons-fruit industry came to an end. They had devel-
oped as protests against transportation costs and conditions, and in op-
position to prevailing business practices of fruit dealers. However, little
or nothing came of any of these organizations. It was about ten years
before another movement aimed at cooperative marketing developed
among deciduous-fruit growers.
THE CALIFORNIA FRUIT UNION
It was not until 1885, when the California Fruit Union was proposed,
that another movement for cooperative sale of fresh deciduous fruit got
definitely under way, although the marketing problem had continued to
be the subject of frequent discussions at farmers' meetings. Fruit pro-
duction had been increasing rapidly and promised to increase even more
rapidly. The state markets were already crowded and an eastern outlet
was needed. Shipments of deciduous fruits out of the state increased
from a yearly average of 2,250,000 pounds during 1871 to ] 873 inclusive,
to 19,000,000 pounds in 1883. 37 Eastern markets had been profitable and
seemed to many to offer enormous possibilities. But at prevailing high
prices market limitations became apparent to many observers. At the
Fruit Growers' Convention in November, 1882, a committee, after re-
viewing marketing conditions, concluded that "the era of high prices
cannot last. They necessarily and immediately limit the demand for any
article."38 Yet plantings were increasing. At the same convention Wick-
son39 said : "The tree plantings done in the south Santa Clara Valley
alone in the last three years, in the one single item of apricots . . . [will
produce] . . . quantities that at present prices the markets of the world
will not require and will not take."
At the Fruit Growers' Convention in September, 1884, Kimball,40 a
member of the State Board of Horticulture, painted a gloomy picture of
the outlook. California, with its innumerable pests and plant diseases,
and its great distance from markets, must compete with other states and
with the countries of the world. He said : "The question of supply and
demand will soon be an interesting one to the fruit grower. Diligence
37 See tabulation of shipments out of state annually from 1871 to 1884, as sup-
plied by A. N. Towne, Manager Southern Pacific Eailroad Company, in address of
Morris M. Estee before State Agricultural Society, September 17, 1885. Pacific
Eural Press 30:257. 1885.
38 Second Fruit Growers' Convention Proceedings 1882:49.
39 Wickson, E. J. Second Fruit Growers' Convention Report, p. 58. November, 1882.
40 Kimball, Edwin. Fourth Fruit Growers' Convention Report, p. 4-7. Septem-
ber, 1884.
14 University of California — Experiment Station
and labor may keep the orchards healthy and productive, but then to
the problem of saving the vast product, must be added the greater
problem ... of profitable sale and distribution.
"Fruit is surely . . . destined to be cheap and in over-supply ; but if
our finances suffer, we may console ourselves with the philosophical
reflection that if our pockets are lighter, humanity wins."
Obstacles to Market Expansion. — The main obstacles to the expansion
of eastern markets were considered to be : (1) high transportation rates ;
(2) slow and inadequate shipping service ; (3) a tendency for the ship-
ping companies to keep eastern markets bare; (4) markets alternately
bare and glutted because of unorganized shipment by competitive ship-
pers; and (5) a tendency for eastern retailers to operate on wide mar-
gins, which kept prices at retail very high.
In the minds. of the fruit producers, freight rates were perhaps the
item of greatest importance as an obstacle to market expansion. The
rates of $800 per minimum car of 10 tons from central California to
Chicago, the most important single market, seemed high.41 And since
large quantities were reshipped by express from Chicago,42 the cost of
getting a car of fresh fruit to eastern markets by fast freight and express
was really in the neighborhood of $1,100.43
In 1881 a fruit growers' convention44 appointed a committee to confer
with railroad officials about lower freight rates on fresh fruit, but they
accomplished nothing.45 In the fall of 1884 another committee was
appointed.46 This committee presented a memorial to the railroad
4i Only three fruit ears might be sent with any one passenger train even at
that rate. Cars might be sent by "slow freight" at $400. But the refrigerator cars
and the practice of loading such cars were still in the experimental stage. Hence
losses were heavy on such shipments.
42 Hixson, J. M., in address before Fifth Fruit Growers' Convention, 1885.
California State Board of Horticulture Biennial Eeport 1885-86:72. Also, Pacific
Rural Press 30:10. 1885.
43 See editorial in: Pacific Rural Press 27:610. 1884.
44 First Fruit Growers' Convention Report, p. 23. December, 1881. The Fruit
Growers' Convention, held under the auspices of the California State Board of
Horticulture, was the first of a long series of conventions held annually or semi-
annually since that time. These conventions will be referred to frequently, since
cooperative marketing was almost invariably discussed at these gatherings. The
reports referred to were usually published in pamphlet form. Many of the papers
were, however, published in the farm press of the time, particularly the Pacific
Rural Press.
45 It did report the indefinite suggestion that the railroad company might be
willing to reduce rates by 70 per cent of the amount of any profit which might
arise from increased shipments resulting from such reduced rates. First Fruit
Growers' Convention Report, p. 23. December, 1881.
40 This time three groups were represented. They were the Fourth Fruit
Growers' Convention, the State Horticultural Society, and the State Viticultural
Convention. Pacific Rural Press 28:353. 1884; and 29:61. 1885.
Bul. 557] Cooperative Marketing of Deciduous Fruits 15
officials arguing for a rate to Chicago of $400 on cars attached to passen-
ger trains.47 In the middle of March, 1885, the railroads announced a
reduction to $600 and $300 on fast (passenger) and slow freights
respectively. Growers were disappointed, but this doubtless spurred
them on to further action.
Development of the California Fruit Union. — A suggestion was made
at the May meeting of the State Horticultural Society,48 and again at
the June meeting, that a growers' organization for marketing fresh
deciduous fruit be formed. Hearty cooperation among leading orange
growers was cited as having forced California oranges "to the front this
season at Chicago." Concerted effort was needed to get railroad com-
panies to give "reasonable rates." And, ran the argument, "As long as
growers work through speculators they will remain in the background."
The result was the appointment of a committee to draft a form of organi-
zation.49 The subject was fully discussed at several meetings. Finally,
at the monthly meeting of the State Horticultural Society on August
28, 1885, it was decided to call a meeting of the fruit growers of the
state, since the job of forming an organization was too great an under-
taking for the Society.50 Such a meeting was held in San Francisco on
September 24.
At this meeting various plans of organization and operation were pro-
posed. Among them, A. T. Hatch, of Solano County, favored a state
organization with "subordinate stations in California for collecting the
fruit" and "... giving a single eastern dealer or firm entire charge of
the distribution of the fruit in the East."51 David Lubin, of Sacramento,
urged a plan which would obviate the need of organization by getting
the railway company to provide subdivisions in cars so that any grower
could ship a quarter of a car.52 Mr. W. H. Aiken, of Santa Cruz, urged
a state organization with local associations to assemble and pack the
fruit. A minority of the resolutions committee favored the formation of
an organization which would get lower freight rates, but which would
leave individual growers free to send fruit to whomever they desired.53
47 Pacific Eural Press 29:61. 1885.
48 Pacific Eural Press 29:541; 30:10. 1885.
49 Pacific Eural Press 30:4, 10. 1885.
so Pacific Eural Press 30:188. 1885.
5i Pacific Eural Press 30:270. 1885.
52 Pacific Eural Press 30:270. 1885. He discussed this plan in detail later as
"the accommodation car plan." See: Sacramento Eecord-Union for October 14,
1885. Briefer statement: Pacific Eural Press 30:342. 1885.
sa Statement made informally by M. M. Estee. Pacific Eural Press 30:278. 1885.
16 University of California — Experiment Station
Finally the following resolution, offered by the resolutions committee,
was passed :
Resolved, That it is the opinion of the majority of your committee that the fruit
growers should organize a corporation confiding the management of their fruit for
eastern shipment to a duly qualified Board of Directors of said corporation for the
protection of their mutual interest and the disposal of their produce.
Resolved, That the capital stock of said corporation shall be $250,000 represented
by 250,000 shares of $1 each, and that the fruit growers shall have the privilege of
subscriptions at the rate of one share of stock for each acre of bearing orchard and
vineyard of shipping grapes, the same to be an operative capital fund for mutual
protective purposes.54
The Original Plan. — The committee on resolutions at the meeting of
September 24 and 25 was made a committee on organization.55 It went to
work vigorously, and on October 1 issued a circular outlining briefly a
plan of organization, stating what it might accomplish, and asking for
subscriptions to the proposed organization. The circular pointed out
that quantities "ten times as large as the present sales" could be made
on eastern markets if "well-selected, good-conditioned fruit" were
placed there at sufficiently low prices to popularize it. It pointed out
further that these results could be gotten only by thorough organization
which would secure :
First: The proper selection and uniform reliable packing of all fruits and grapes
for shipment.
Second: The grouping together of all such shipments so as to make up entire
trainloads to points of central distribution (thence to be sent in separate carloads
to their various allotted destinations) . . .
Third: The distribution (of) such shipments to various consumption destinations,
so as to keep each market supplied and none over-stocked . . .
Fourth: The reducing to a reasonable minimum cost of packages, charges, and
commissions on making sales.
Fifth: The securing (of) prompt, accurate and reliable returns . . .
Sixth: The securing (of) reliable information concerning crops available for ship-
ment, condition of consumption markets, favorable points for introduction and
making of new markets, new varieties advisable to be planted for extension of assort-
ment and prolongation of season of shipments . . .
Seventh: The systematic control of the eastern shipment of fruits and grapes
would, in a most important degree, free the markets for local and canning con-
sumption . . . 56
54 Pacific Rural Press 30:270, 299. 1885.
ss Mr. A. T. Hatch resigned from the committee stating that he was not in
harmony with it. He was replaced by A. Block. The organization committee thus
consisted of W. H. Aiken, Santa Cruz; R. J. Trumbull, San Francisco; Abbott
Kinney, Los Angeles; A. Block, Santa Clara; H. P. Livermore, San Francisco;
F. C. De Long, Marin County; and M. M. Estee, Napa. (Pacific Rural Press 30:
278. 1885.)
so Pacific Rural Press 30:299. 1885.
Bul. 557] Cooperative Marketing of Deciduous Fruits 17
At the adjourned meeting of fruit growers held in San Francisco on
November 10 and 11 the committee reported further on the need of an
organization. It reported that President Stanford of the Southern
Pacific Company had offered to run special fast trains at $300 a car
(Pacific Coast cities to Chicago) if the growers organized so as to be
able to supply 15 cars daily (10-ton minimum) . On slow freight the rate
would be $200. The committee showed that during 1885 enough fruit
had been shipped to make such rates available had the growers been
organized. It further showed that eight-tenths of the shipments orig-
inated at Sacramento, and also that eastern market distribution was
unsatisfactory.37 It then proceeded to outline its recommendation.
The committee emphasized the idea of creating a general organization
for the whole state in order to concentrate the eastern shipments under
one management. It recommended that not only owners of orchards and
vineyards, but also cultivators of small fruits and vegetables who were
shipping East should be allowed to become stockholders. It was hoped
that the latter would find a good market for their products if they could
ship through the proposed Union and that they would facilitate the
making-up of trains by furnishing additional freight.
In order to assure the retention of control in the hands of the growers,
the committee proposed that the ownership of stock should be restricted
to fruit growers and issued on the basis of acreage. Shares should be
transferable only to persons qualified to become stockholders. Further-
more, voting by proxy should be restricted.
The committee recommended that dividends on stock be limited to 6
per cent, that 2 per cent of the net earnings be placed in a reserve fund,
and that all remaining profits be returned to stockholders in accordance
with the amount of produce shipped through the Union.
Three possibilities of selling were proposed. In the first place, the
growers were to be allowed to sell to the Union. In the second place, they
were to be entitled to ship and sell through it. In the third place, those
growers who were also shippers on their own account were to be able to
use the shipping facilities of the Union without selling to or through it.
In this latter case, it was thought advisable, however, to have the Union
exercise advisory supervision to prevent too much fruit going to the
same place.
It is also interesting to note that the committee sought to enlist sup-
port for its plan by calling attention to the plan of organization of the
Florida Fruit Exchange, which had been established in February, 1885.
57 Pacific Rural Press 30:401-402. 1885.
18 University of California — Experiment Station
The plan worked out by the Florida fruit growers was somewhat similar
to that promulgated by the California committee.58
At the close of the first day the meeting approved the committee's
recommendations and appointed a committee on by-laws.59 At the sec-
ond day 's session, by-laws were reported and adopted. Articles of incor-
poration had apparently been filed at once. Subscriptions for stock
were at once accepted and a set of officers elected60 for the new organiza-
tion called the California Fruit Union.
At the Fifth Fruit Growers' Convention, held at Los Angeles on
November 17, 18, and 19, 1885, Horatio P. Livermore, who had been a
member of the organization committee and one of its leaders, explained
the plan to the fruit growers of the southern part of the state.61 Liver-
more afterwards became the first president of the new Union. The hope
was to induce the growers in southern California to join the Union.
Livermore advanced the idea that citrus and deciduous fruits would fit
well together, since the former would use the organization in the summer
months and the latter mainly during the winter. A committee of south-
ern fruit growers was then appointed to consider the California Fruit
Union.62 The southern members of the convention thought, however,
that for the time being the best thing for them to do would be to set up
a separate local organization and after it had been brought into exist-
ence, to consult then with the California Fruit Union concerning the
question of working together to mutual advantage.63 It is interesting to
note that the idea of a joint sales force for citrus and deciduous fruit
later materialized. (See footnote 158, page 48.)
Modification of the Original Plan. — The original plan outlined above
was based on two main ideas. First, it was intended to make the Union
an association owned and controlled by the growers. Secondly, it was
desired to use it as a means of eliminating the control of the fruit busi-
ness by dealers who were considered to be working only in their own
interests. However, the plan of organization and operation as it stood
at the beginning of the existence of the Union was soon considerably
changed.
ss Pacific Eural Press 30:342-3. 1885.
59 This committee consisted of L. F. Eose, M. M. Estee, H. P. Livermore, G. W.
Hancock, A. Kinney, T. W. Madelev, L. A. Buck, and A. Block. Pacific Rural
Press 30:402. 1885.
co See original by-laws, list of subscribers, and list of directors. Pacific Rural
Press 30:397. 1885.
ci California State Board of Horticulture, Biennial Report 1885-86:78-90.
02 California State Board of Horticulture, Biennial Report 1885-86:97.
03 Pacific Rural Press 31:204. 1886.
But,. 557] Cooperative Marketing of Deciduous Fruits 19
The first important modification was made at the beginning of 1886,64
when the trustees made their decision with reference to the eastern rep-
resentation of the organization. The general understanding among the
stockholders seems to have been that a number of responsible fruit firms
or agents were to be appointed at the different eastern markets. Instead,
the trustees decided on March 10 to make Porter Bros. & Company, of
Chicago, exclusive agents for the entire district east of the Missouri
River.65 This was done in spite of the fact that many eastern firms
offered their services at much lower commission rates than Porter Bros.,
who demanded 10 per cent.66
There were two main reasons for the appointment of Porter Bros.,
even though other firms had offered to do the work for less. First, most of
the other firms were in position to operate only in restricted territories.
Porter Bros., on the other hand, already had agents and connections in
practically every large market. Secondly, and most important in the
minds of many of the leading growers who were also shippers, was the
realization that by making this firm their agent they would eliminate
the danger of competition from the then only strong rival organization
in the field.67 While this measure seemed to involve certain immediate
advantages, it likewise created the fear that it would endanger the
attempt to build up a strong growers' association because the shipping
company employed as sole agent could firmly entrench itself and leave
the cooperative weak. As subsequent events showed, the decision led to
opposition and distrust among the fruit growers and supplied material
for counter propaganda by competing shippers.
64 As a matter of fact some amendments of the by-laws made at the first annual
meeting of the California Fruit Union on January 20, 1886, were of importance.
Section 10 had provided that growers might sell to the Union fruit "duly loaded
on the cars." This section was amended to provide that stockholders might name
consignee and destination on full cars shipped through the Union and that the
Union be allowed to purchase no "fruit or vegetables from anyone." Pacific Eural
Press 31:112. 1886.
65 See copy of contract and outline of discussion leading to its signature, and
also editorials on this action. Pacific Eural Press 31:308, 296, 272. 1886.
66 As a result of this decision Livermore, who led the opposition to the appoint-
ment of a single agency, resigned as president. While he stated that personal
affairs prevented his continued service, the action of the trustees was said to be
"contrarv to his beliefs" and "offensive to his business judgment." Pacific Eural
Press 31:276, 308. 1886.
67 Adams says that they made it "the principal eastern agent of the Union, on
condition of its refraining from direct seeking for business from growers, at least
in the districts where the Union was strong." (Adams, Edward F. Modern
farmer, p. 454. San Francisco. 1899.) This is not clear from the contract. Section
8 of the contract did, however, provide: "That it [Porter Bros.] will not purchase
any other products directly or indirectly when in the opinion of the General
Manager of the California Fruit Union, the sale of the same may be detrimental
to the interests of said California Fruit Union. . . ." Pacific Eural Press 31:308.
1886.
20 University of California — Experiment Station
The second important change in the original plan occurred a year
later at the meeting of the stockholders in January, 1887, when the
by-laws of the Union were so amended as to admit to membership non-
producers engaged in buying and shipping fruit.68 The proposal to
admit the dealers had already been made at the time of organization and
again at the meeting of the stockholders in 1886. This decision was moti-
vated by the experience during the first shipping season of 1886 and by
the recommendations submitted by Harris Weinstock,69 who, on his own
initiative had made a trip to the East in the fall of that year in order to
study the marketing of California fruit there. Weinstock found that
although the Union had made efforts to regulate fruit shipments, mar-
keting conditions in the East had not been improved. On the contrary,
severe competition had taken place in the East between the California
Fruit Union and the California Fruit Growers' Association,70 a com-
peting organization established by fruit shippers and a number of
growers to avail themselves of the lower freight rates offered by the
railroads on shipments of 15-carload trains. The shipment of special
fruit trains simultaneously by both organizations had repeatedly over-
supplied the eastern markets even more seriously than in previous years,
and this oversupply had again led to disastrous price cutting and low
returns to the California growers. In addition, Porter Bros, and other
eastern concerns had further stirred up animosities by charging each
other with price-cutting to oust competitors.71 It was to avoid a repeti-
tion of this evil that Weinstock made his proposal that the California
Fruit Union and fruit shippers should combine their interests. This
proposal was discussed at the Fruit Growers' Convention at Sacramento
in November, 1886. 72 Since the majority of those present favored it, the
Convention advised the Union to adopt it. When the proposal was sub-
sequently considered at the annual meeting of the stockholders in Jan-
uary, 1887, the by-laws were amended to admit nonproducing shippers
to the Union upon the purchase of 200 shares of stock.73 By permitting
68 Pacific Kural Press 33:90. 1887.
69 Weinstock was a merchant who operated a store in Sacramento in partnership
with David Lubin who afterwards became famous in connection with the estab-
lishment of the International Institute of Agriculture in Eome. They also owned
a vineyard in the vicinity of Sacramento for some years. Both Weinstock and
Lubin became interested in the improvement of marketing conditions for decid-
uous fruits because they felt that their own mercantile business would prosper if
the growers were successful.
"0 This organization will be discussed later (page 24).
7i Pacific Eural Press 32:171. 1886.
72 California State Board of Horticulture, Biennial Report 1885-86:276-277.
•■> Pacific Rural Press 33:91. 1887.
Bui*. 557] COOPERATIVE MARKETING OF DECIDUOUS FRUITS 21
this combination of growers and shippers, the leaders of the Union de-
parted from the ideals for which many of them had fought. They con-
sidered the combination of growers and dealers as a necessary com-
promise.
The Adoption of the Auction Plan. — Weinstock's trip to the East in
1886 had still another important effect. It led to the adoption of the
auction system by the Union.74 Weinstock had written articles for the
Pacific Rural Press describing market conditions and the auction system
in detail.75 This system was not new. It had already been developed in
the sale of imported oranges in the United States. It had later been
adopted by the Florida fruit growers, who, after successfully trying it
in Boston, had made arrangements in 1886 to use the plan in New
York City.
Weinstock had become convinced that this system would also prove
satisfactory in selling California fruits in the East. He therefore in-
cluded in his recommendations to the Union the proposition to adopt
the auction plan.76 As a result the annual session of the stockholders in
January, 1887, recommended that the Board of Trustees should try it
out.77
When the Union began to experiment with the auction plan in the
New York City and Boston markets it met some opposition on the part
of commission firms. Porter Bros., who were representing the Union at
Chicago, were accused of purchasing large quantities of fruit on the
demoralized markets of Chicago during the season of 1887 and sending
it to New York for private sale while the Union was using the auction.
They were said to have sold $140,000 worth of fruit there, while the
Union sold only about $55,000 worth. The New York agents of the Union
admitted, however, that the New York market was not really "tested"
by its receipts. Mr. Porter and others who opposed the establishment of
the auction in Chicago claimed that it would slow up selling there, since
much was sold for reshipment before it arrived.78 Nevertheless, the
experiments in those cities turned out so satisfactorily that, at the
beginning of 1888, the stockholders of the Union instructed the Board
of Trustees to apply the auction plan in Chicago as well.79 Following
74 Pacific Eural Press 33:91. 1887.
75 Pacific Eural Press 32:346, 366. 1886.
76 California State Board of Horticulture, Biennial Report 1885-86:277.
77 Pacific Rural Press 33:91. 1887.
78 Pacific Rural Press 35:229, 330. 1888.
79 Pacific Rural Press 35:96. 1888. However, there was enough difference of
opinion to lead the trustees to refer the matter to growers by circular. Decision
was reached late in May. Pacific Rural Press 35:488. 1888.
22 University of California — Experiment Station
the experience of the first two years, the officers of the Union became
even more convinced that they had moved in the right direction when
they adopted this sales method, with the result that they arranged for
auctions in several other markets.
The two chief advantages claimed for the auction were that it in-
creased competition among buyers and lessened the danger of combina-
tions among them. At one place and at certain hours, large and small
buyers were brought together and made to compete with each other for
their supplies. These advantages were later somewhat lessened when
rival auctions were established at several markets and when several of
the auctions became so-called "closed auctions," to which only members
of a certain class of dealers or certain firms were admitted.80
Eastern 'Representation. — Porter Bros, held the sole agency of the
markets east of the Missouri River for only one year. In April, 1887, the
Board of Trustees instructed the manager to appoint agents immedi-
ately at Omaha, Kansas City, St. Louis, St. Paul, Boston, New York,
Philadelphia, and Baltimore, and at his discretion at certain other
markets.81 Every representative was required to give bond and to
handle no fruit not shipped through the Union. To get a better control
over the activities of the eastern agents the question of employing a
general agent was discussed in 1887.82 A. T. Hatch, president of the
organization, was finally sent East. During the season of 1888, actual
general supervision was provided in the East by the presence of Harris
Weinstock, one of the directors.83 There was probably no general super-
vision in later years.
Shipments and Sales Receipts. — A variety of fruit was shipped East,
including apricots, plums, grapes, peaches, cherries, pears, quinces, figs,
almonds, and currants. The number of individual shippers increased
from 127 in the first shipping year, 1886, to 895 in 1893 ; shipments
increased from about 400 cars to 3,000 for these same years.84 Of the
latter about 2,400 went to Union agents and the remainder were sold by
members to concerns in cities where the organization had no represen-
80 See address of Harris Weinstock in Eighteenth Fruit Growers' Convention,
Official Eeport. p. 19-20. 1894.
8! Pacific Eural Press 33:360. 1887. Porter Bros., however, represented the
Union in Chicago in 1887 and later years. After 1887 they were required to use
the auction plan. Pacific Rural Press 35:488. 1888.
82 Pacific Rural Press 33:241, 334. 1887.
83 Pacific Rural Press 35:488. 1888.
s* These and the following figures, if not otherwise stated, are taken from the
annual reports of the Union, which were published in the Pacific Rural Press and
the California Fruit Grower.
Bul. 557] Cooperative Marketing of Deciduous Fruits 23
tatives.85 Gross sales grew steadily from a third of a million dollars in
1886 to two million dollars in 1893. A large portion of these receipts
went to the transportation companies who were always said to obtain
too much.
In 1889 and 1890, the Union shipped about two-thirds of the green
fruit which left California. The only other large shipper was the Earl
Fruit Company. According to Weinstock, for several years these two
agencies handled about 90 per cent or more of the California ship-
ments.86 Later many new firms entered the fruit-shipping business with
the result that the relative amount of produce dispatched by the Union
decreased.
Financial Operations. — At the beginning the commission deducted
by the California Fruit Union from the gross receipts at terminal mar-
kets was 10.0 per cent, but in 1891 it was reduced to 7.0 per cent. Out of
these charges, the commission agents as well as the rebates and dividends
to growers, were paid. Net commission rates actually amounted to 8.7
per cent in 1889, and 6.5 per cent in 1893. The actual expenses of con-
ducting the Union were very small, about 0.6 per cent.
The Union received from payments on capital stock only $15,578.
About half of this was spent to meet operating costs during the first
season. The rest was probably spent on organization and propaganda
work. No information is available concerning disposition of later pay-
ments on stock. During the time of its existence the organization
returned $105,000 to its stockholders in the form of dividends, rebates,
and on account of claims for delay and damages collected from trans-
portation companies.87
Membership and Management. — The number of subscribers to the
capital stock of the Union who actually paid the required installments
stood at 217 at the end of the first year. In May of 1886, it had stood at
715, subscribing a total of 15,143 shares. A large number failed to pay
additional installments when called upon to do so. In January, 1894,
shortly before the dissolution of the Union, the number was 595 holding
14,510 shares. This figure was far less than the authorized 250,000 shares
(par value $1.00). The members did not all use the facilities of the
Union. During the first year it sold for only 127 men. Some of the rest
ss In May, 1888, the board voted to allow members of the Union to ship on
direct sale to any party, provided the shipper paid the Union $30 a car towards
its expenses and guaranteed as much of the freight as the Union may have pre-
paid. California Fruit Grower 1(1) :7. 1888.
86 Weinstock, Harris. Eighteenth Fruit Growers' Convention Official Report,
p. 17. 1894.
87 Number of subscribers and financial statements taken from: Pacific Rural
Press 33:90. 1887; and 47:44. 1894.
24 University op California — Experiment Station
doubtless sent cars on Union special trains or sold cars with the Union's
approval in markets where the Union was not represented. In the last
year the number of shippers was actually larger than the number of
shareholders, but some of these doubtless were the patrons of shipper
members. The Union did not require growers to sign contracts.
The active directorate of the Union throughout its history consisted
of large growers and shippers, who, before entering the Union, had
gained experience in the eastern markets. P. E. Piatt, of the W. R.
Strong Company of Sacramento, L. W. Buck, of Vacaville, a large
grower and shipper, and Harris Weinstock, merchant and grower, were
among those most active in the management of the Union during much
of its existence.
Struggle with Rival Organizations. — During its first years of exist-
ence the Union experienced interference and competition from several
rival organizations which endeavored to draw growers and business
away from it. The first rival was the California Fruit Growers' Asso-
ciation. This organization, already mentioned (page 20) was estab-
lished in March, 1886, 88 as a result of the efforts made by the indepen-
dent shippers to obtain the same reduced freight rates through large
shipments in special fruit trains as those obtained by the Union. It will
be remembered that a proposal was made at the first annual meeting of
the Union in January, 1886, to admit the independent shippers to the
Union and that this proposal had been defeated. In consequence, the
shippers under the leadership of R. D. Stephens, of Sacramento, decided
to organize themselves.
The California Fruit Growers' Association was a growers' and dealers'
organization with a capital stock of $20,000, divided into 100,000
shares (par value 20 cents). Harris Weinstock, David Lubin, R. D.
Stephens, and E. T. Earl were among those who took stock.89 The organi-
zation work proceeded so quickly that the association shipped the first
special fruit trains to the East prior to the beginning of such shipments
by the Union.90
The operations of the California Fruit Growers' Association undoubt-
edly interfered greatly with the program of the California Fruit Union
88 California State Board of Horticulture, Biennial Eeport 1885-86:27.
89 Pacific Rural Press 31:334. 1886.
so The California Fruit Growers' Association sent its second special train on
June 30, 1886. Pacific Rural Press 32:45. 1886. Some time later President A. T.
Hatch of the Union stated that the Union had not yet sent special trains because
members were selling to those who were trying to break up the Union. Pacific
I Jural Press 32:55, 261. 1886.
Bul. 557] Cooperative Marketing of Deciduous Fruits 25
during its early years. The officials and members of the Association tried
to influence the growers not to join the Union and capitalized as much
as they could on the fact that the Union was being represented by Porter
Bros. After the Union had opened its doors to the independent shippers
in the following year, most of the large dealers joined its ranks, though
the rival organization continued in business for at least one more
season.91
In 1888, another group of dealers and growers, including the Earl
Fruit Company, formed a second rival organization, the Growers' and
Shippers' Association.92 This was followed the next year by the Golden
Gate Fruit Association, which was again joined by a number of growers
and shippers dissatisfied with the California Fruit Union.93 A. T. Hatch,
who had succeeded Livermore as president of the Union, became the
head of the Golden Gate Fruit Association, which again included E. T.
Earl, of the Earl Fruit Company. According to a letter sent to the
Pacific Rural Press by R. H. Chinn, a fruit grower of Vacaville who
shipped through the organization, its operations were disappointing.94
Undoubtedly, it also hampered the growth of the California Fruit
Union and added to the confusion among the growers. It probably did
not operate for more than one season.
Achievements of the Union. — Although the Union faced the competi-
tion of rival organizations and did not receive the expected support of
the majority of the growers, it promoted the marketing of fresh decid-
uous fruit in various ways. While primarily serving a small number of
large fruit growers and dealers, it also brought some indirect advantages
to the growers on the outside. It took an active part in getting from the
railroad companies better service and lower rates. It undertook aggres-
sively the widening of eastern markets and the improving of marketing
methods in the East. It brought about the application of the auction
method to the sale of fresh deciduous fruit in the larger eastern markets
91 H. A. Fairbanks, Secretary of the Union, in a statement to stockholders in
April, 1887, referred to the two organizations in the field as "now consolidated."
Pacific Sural Press 33:334. 1887. On April 15, however, the California Fruit
Growers' Association met at Sacramento and decided to continue in business, but
to sell at home. Pacific Kural Press 33:360. 1887. In 1889 no other organization
than the Union sent special trains. Pacific Kural Press 39:68. 1890.
92 Pacific Kural Press 35:541. 1888.
93 Pacific Rural Press 37:533. 1889.
94 Chinn claimed that the organization had not been incorporated and that it
was controlled by the Earl Fruit Company. This company, he said, handled in an
arbitrary way the small lots sent to Sacramento for reloading. Instructions were
withheld and payments delayed. Seven per cent commission and, in addition,
2| cents a box for loading, telegrams, and refrigerating cars were charged. See:
Pacific Rural Press 38:418-19. 1889.
26 University of California — Experiment Station
and fought combinations of dealers who were alleged to have hampered
the development of the widest possible markets. As a result of its opera-
tions, higher prices were doubtless obtained in the distant markets as
well as in the home markets, the latter being relieved of large quantities
of fruit which would otherwise have depressed prices in California.
Furthermore, it supplied valuable market information at a time when
growers would otherwise have been poorly informed.95
The Union also fostered the development of local organizations. A
number of locals were formed96 at the suggestion of officials of the Union,
who repeatedly urged growers to get together at local points in order to
obtain carload freight rates and to improve the handling of their fruit.
Shortcomings. — Against these achievements at least three serious
shortcomings must be pointed out. In the first place, the Union did not
succeed in uniting the California growers of fresh deciduous fruits in
a cooperative enterprise owned and controlled by them. In the second
place, it failed in one of its major objectives which was to concentrate
the eastern shipments under one management. Even the admission of the
independent shippers did not accomplish this objective. In the third
place, it was sometimes slow to act or even passive when faced with
important problems.
To create a strong growers' organization was originally, as will be
remembered, one of the important aims of the Union. But the majority
of the growers did not come in nor did the control of the association
remain in the hands of the growers. It is difficult to say whether a more
aggressive membership campaign would have brought in more growers,
with a competing organization actively in the field denouncing the
Union and soliciting business for itself. At any rate, when the shippers
were taken in, in 1887, it became still more difficult to get a large share
of the growers to join. Even the employment of Porter Bros, as sole
agents in the markets east of the Missouri River in 1886 was partly
necessitated by lack of grower support, although that act further in-
creased the difficulty of getting widespread grower support. The general
enthusiasm which had existed in the year of organization soon died out
because of lack of confidence, insufficient insight into the marketing
problem, inertia on the part of growers, and hasty acceptance of counter-
»5 See editorial in: California Fruit Grower 1(3) :5. 1888.
00 See, for example, the last two annual reports. Pacific Rural Press 45:73.
1893; and 47:44. 1894. Just how many locals there were, and how many worked
through the Union is not known. These were not members as organizations, but
rather organizations of Union stockholders located in the several localities. Only
one of these organizations is now in existence — the Florin Fruit Growers' Asso-
ciation organized in 1890.
Bul. 557] Cooperative Marketing of Deciduous Fruits 27
propaganda.97 Instead of joining the Union, the majority of the farmers
continued to ship through the independent dealers whose activities
they had criticized and condemned. They thereby strengthened the
position of rival organizations expecting, however, that somehow it
would be demonstrated to them in what way a growers' association
could effectively serve them. Last, but not least, the admission of the
dealers and the passivity of the grower members enabled the former to
gain and hold the control of the Union. True enough, a change could
only be accomplished by growers' action, but, as Adams98 pointed out,
the bulk of the grower members made little or no effort to influence the
course of their organization.
As far as the failure of the Union to concentrate the eastern shipments
under one management is concerned, it was largely due to aggressive-
ness, jealousy, and suspicion among the shippers. Although most of
them had joined the Union in 1887, a split had occurred and a rival
organization had formed before the shipping season of 1888 arrived.
Moreover, in the early nineties improvements in refrigerator cars had
given small shippers an opportunity of building up fruit-shipping busi-
nesses of their own.
As to the third shortcoming — slowness and passivity when quick
decision and aggressive action were needed — the difficulty arose partly
out of diversity of interest, and partly out of sincere differences on how
certain problems should be met. Large grower-shippers undoubtedly
considered various proposals for organization or operation from the
point of view of both the prices for their own products and the addi-
tional gains from the shipping business. In some cases the shipping
97 "All were anxious to see the Union established, but few were willing to risk
the dollar per acre. The great majority of the growers remained idly at home
waiting for some one no more interested than they to come and talk to them . . .
No one was willing that the plan should be given up, but nearly all were deter-
mined that some one else should bear the burden ... As the business increased,
new shipping houses naturally made efforts to get in, with no care whatever for
the interests of the growers, which imperatively demanded, in this brand of
industry, one directing head controlling the entire volume of business. These new
firms found that their readiest means of obtaining a foothold was to instill into
the minds of growers a suspicion of their own agents; the notion was spread
widely that the eastern agents controlled the business and that, as a matter of
fact, it was not their own agency which the growers were supporting, but a private
forwarding house, and they were so utterly silly that, with that notion once in their
heads, their strong impulse was to at once rush into the arms of some opposition
concern." Adams, Edward F. Modern farmer, p. 453, 455. San Francisco. 1899.
98 "As a matter of fact, it was impossible for any but the growers themselves to
control the Fruit Union, if they would only take the trouble to attend the annual
meetings and vote for directors of their choice, or place their proxies with those
who would do so, but they did neither; the annual meetings often had to do
business without a quorum, or to go without doing business at all." Adams,
Edward F. Modern farmer, p. 456. San Francisco. 1899.
28 University of California — Experiment Station
business was doubtless the dominant interest. In either case these men
opposed such proposals as would give the Union the power demanded
by those who would make it the controlling and grower-controlled
organization.
The idealists of the group likewise differed, not only about plans which
would be most effective, but also about the degree to which the Union
should depart from its ideals to meet practical situations.
When the Board of Trustees of the California Fruit Union announced
on March 12, 1894, that the Union would retire from the field for the
season as a fruit-shipping association, there was scarcely a murmur of
objection from fruit growers. This seems surprising. The business of
the Union had increased each year, and the report made at the last
annual meeting had certainly not been pessimistic. The Union had been
formed during the hard times of the middle eighties. Total out-of-state
shipments had run at about 50 million pounds a year from 1886 to 1889.
Times had gotten better and improved marketing had helped matters.
Then in 1890 shipments jumped to 68 million pounds. The next year
they went to 101 million, in 1891 to 119 million, and in 1893, the Union's
last year, to 160 million. However, relative to the total out-of-state ship-
ments, the Union's business had decreased from about 44 per cent in
1889 and 1890 to about 30 to 33 per cent in 1891 to 1893. Such a relative
decline should probably not have mattered much had other things gone
well. But total out-of-state shipments had been increasing more rapidly
than the markets would absorb them even with such improvements as
had been made in marketing methods. Moreover, a serious business
depression had set in in the summer of 1893. The Union's returns to
shippers amounted to about $34 per ton of packed fruit." It was perhaps
only natural that shippers should blame the management.
The ideal that has been pictured during the organization period of
1885 and early 1886 had long been shattered. The Union had in reality
become little more than a glorified clearing house. Moreover, the opera-
tions of the Union had been such that most of its benefits went to mem-
bers and nonmembers alike. It is not surprising, then, that the passing
of the Union caused little stir. There were, of course, some comments.
A stockholder wrote an anonymous letter to the editor of the Pacific
Rural Press urging the reorganization of the Union.100 The editor had,
however, already published an editorial in which he concluded that :
"We cannot regard the cessation of the work of this association as of
y° Author's calculations.
ioo Pacific Rural Press 47:243. 1894.
Bui/. 557] Cooperative Marketing of Deciduous Fruits 29
any particular moment."101 The editor of the California Fruit Grower,10-
however, commented that ". . . it is safe to predict that more or less
demoralization will ensue . . . [in the market] ." The directors obviously
sensed the members' feeling, for the latter could, of course, have called
a meeting and elected a new board of directors, but they did not. One
reason why even the leading growers remained passive was that a new
marketing movement was already under way which some had urged
should serve the entire fruit industry, although it had started in the
dried-fruit industry.103
THE CALIFORNIA FRUIT GROWERS' AND SHIPPERS' ASSOCIATION
After the California Fruit Union had gone out of business in the
spring of 1894 no new central organization was formed immediately.
But, before the year ended, new efforts were made to overcome the dis-
advantages of uncoordinated action. These efforts resulted in the estab-
lishment of the California Fruit Growers' and Shippers' Association, an
organization which to some extent replaced the California Fruit Union
and maintained the combination of fruit growers and dealers in some-
what similar form for a number of years.
Steps Leading to Organization. — The shipping season of 1894 ended
with poor results and widespread dissatisfaction among the growers and
shippers. Harris Weinstock expressed the situation by saying : "We find
ourselves in 1894 back again to similar conditions that existed in 1885
and 1886 — with this difference : In those years about 1,000 carloads
glutted the markets of the East ; this year it takes nearly 7,000 carloads
to do it."104 In looking for the causes it was recognized, on the one hand,
that the general business depression of that year had reduced the
demand for fruit in the eastern cities and, on the other hand, old and
new defects in the marketing system were in part responsible for low
returns.
The ensuing discussions of the marketing system drew attention to
four main defects, three of which had been discussed long before. The
first of the older arguments was that proper and intelligent regulation
of shipments was lacking. This could be well illustrated by the new
ioi Pacific Rural Press 47:201. 1894.
102 Calif ornia Fruit Grower 14(11) :201. 1894.
103 The California Fruit Exchange, which was organized in 1893. (California
State Board of Horticulture, Biennial Eeport 1893-94:412. See also: Adams,
Edward F. Modern farmer. Chap. VI. San Francisco. 1899.) This organization was
recognized as "the authorized representative of the fruit growers of California."
(Eighteenth Fruit Growers' Convention, Official Eeport. p. 26. 1894.)
104 Eighteenth Fruit Growers' Convention, Official Report, p. 16. November,
1894.
30 University op California — Experiment Station
unfavorable events in 1894. The markets in the East had again been
glutted on account of reckless and indiscriminate shipments so that
California producers had not even gained an advantage from the short
eastern fruit crop of that year. Furthermore, instead of distributing
the fruit to a large number of cities direct, a few large centers had again
received a large percentage of the shipments.
The second older argument was that the railway service was unsatis-
factory, and that excessive refrigerator and local transportation charges
were made. The third traditional defect was the indiscriminate con-
signment of unsold fruit to eastern concerns. Since growers had received
advances from the consignees in most cases the fruit was frequently sold
on weak markets to protect such advances even though growers got
nothing further. Conditions were aggravated by the fact that commis-
sion men were often at once purchasers on their own account and con-
signees of the same class of fruit. The fourth defect lay in the abuses
which had crept into the auction system. There was repeated criticism
of the so-called "closed auctions" and of the opening of more than one
auction in certain cities. It was further charged that in some instances
dealers had entered into collusion concerning the amount they should
bid for certain lots.
United effort of all interests was generally looked upon as a means
of improving marketing conditions. How this should be attained was
the main theme of the Fruit Growers' Convention in November, 1894.
Two Plans. — At this convention two plans of organization came up
for consideration. One of them was the plan drafted by Harris Wein-
stock.105 It provided that the fruit growers and dealers should establish
another joint organization. It proposed that the auction system should
be maintained but that the abuses which had developed within that
system should be corrected. This correction was to be brought about by
the establisment of one auction room only for each city, with the pro-
vision that the auctions be open to all buyers, large and small. It also
recommended that the new organization should create a Bureau of
Information to assist in the regulation of shipments. This bureau was to
be supported by all persons engaged in shipping fruit and to be en-
trusted with the task of issuing daily bulletins on the market situa-
tion.106 The organization was further supposed to undertake other
105 Eighteenth Fruit Growers' Convention, Official Eeport. p. 20. November,
1894. It will be recalled that Weinstock led the fight which brought the dealers
into the California Fruit Union in 1887.
106 The idea of establishing a Bureau of Information, which Weinstock began
to urge at the beginning of 1894, was probably based on the example set by the
information service which the Santa Clara Fruit Exchange had developed in
1893. See: Pacific Rural Press 46:330. 1893; and 48:182. 1894.
Bul. 557] Cooperative Marketing of Deciduous Fruits 31
measures which might be considered suitable for the promotion of
fresh-deciduous-fruit sales.
The other plan was presented by the proponents of the Exchange
System107 which had recently been developed among the citrus and
dried-deciduous-fruit growers. Mr. E. P. Adams, Manager of the Cali-
fornia Fruit Exchange, which had been organized among the dried-
fruit growers late in December, 1893, urged the extension of that organ-
ization into the fresh-deciduous-fruit field.108
For the deciduous-fruit growers this plan meant that they should
band themselves into local associations or "exchanges" which, after a
sufficient number of such exchanges had been created, should become
members* of a State Exchange. This State Exchange was not only to be
the general sales agent of the local fresh-deciduous-fruit exchanges, but
also of the exchanges handling dried fruits. It was to develop the eastern
outlets, appoint representatives, and supply market information for
all.109 For the deciduous-fruit growers, this plan meant further that
107 The term "Exchange System" as used by Adams and others, refers to the
plan under which local associations are formed and these organized as parts of
a central organization. Eepeatedly, however, the name was applied to an entirely
different form of organization which was proposed for the use of the dried-fruit
growers, a form based on the butter and cheese boards, then at the height of
their usefulness in the East and Middle West. Thus at the Eighteenth Fruit
Growers' Convention in November, 1894, Mr. F. M. Eighter, of Campbell, urged
the adoption of a plan based on that of the Elgin Board of Trade. (Official Report,
p. 41-45. See also: Pacific Rural Press 49:22. 1895.) It was urged by W. R. Nutting
and actually attempted in connection with the sale of raisins at Fresno in 1911.
(See: Pacific Rural Press 82:143, 436-7. 1911. See also address by W. R. Nutting,
Forty-Second State Fruit Growers' Convention, Proceedings. December, 1912.
California State Commissioner of Horticulture, Mo. Bui. 2:504-508. 1913.)
108 Eighteenth Fruit Growers' Convention, Official Report, p. 32-33. Novem-
ber, 1894.
109 E. F. Adams, who figured as one of the foremost leaders in the movement
for the establishment of the Exchange System, explained these points at the 1894
convention in the following words: "There are a few who suppose that there
should be separate state organizations for the two interests (of dried and fresh
fruit) . . . The great mass of fruit growers, however, are interested in both
branches . . . That the two lines must be under different salaried management is
evident, but the same directory, the same capital, the same eastern agency, the
same general office, the same information, the same organizers, and the same
many things will do for both, and it is folly to proceed otherwise . . .
"The State Exchange, as the agent of the local exchanges, would appoint all
the brokers necessary in all markets, and supply their names to all contributing
exchanges, who would push the sales of their own goods through these brokers,
missing no chance of a better sale at home. Each broker will contract to supply
the State Exchange with information asked for, the State Exchange to repeat
the same by daily private bulletins to the local exchanges. Whatever further
concert of action was thought desirable would be arranged through the State
Exchange, and no one but those interested know anything about it. There would
be a regular annual convention of delegates of local exchanges . . . The State
Exchange would be the agent of the local exchanges, and do what they wished
and keep their business to themselves like other business people." Eighteenth
Fruit Growers' Convention, Official Report, p. 32-33, 34. November, 1894.
32 University of California — Experiment Station
they should again join a movement for the creation of a cooperative
marketing system owned and controlled by growers only. In other
words, no combination of growers and dealers should take place.110
The guidance of the movement for the establishment of a State
Exchange was in the hands of the officials of the California Fruit
Exchange.111 This organization had been formed late in 1893 with
the idea that it should first lead in the organizational work and later
become the general agent of the local exchanges.112 As long as the Cali-
fornia Fruit Union was in existence the Exchange had devoted its atten-
tion primarily to the organization of the dried-fruit industry. It had
stayed out of the field of fresh deciduous fruits expecting, however, that
before long the Union would become part of the new system. ■
In looking over the situation in the deciduous-fruit industry, the
directors of the California Fruit Exchange recognized, on the one hand,
that they needed both financial support from the growers and time to
carry out the organizational work. On the other hand, they saw that
something had to be done immediately for the deciduous-fruit industry.
They, therefore, supported Weinstock's plan as an appropriate device
for temporary relief. In the meantime, they intended to go ahead with
their plan of organizing the different branches of the fruit industry
and to devote much more energy to the task of bringing the deciduous-
fruit growers together in local associations. It was contemplated that
the California Fruit Exchange was to do most of the organizational
work, but that the organization proposed by Weinstock would lend its
support in building up local associations for the marketing of fresh
deciduous fruits.
The idea was again urged at the Fruit Growers' Convention of Novem-
ber, 1895. At that time, however, it was pointed out that no help could
be expected from the Fruit Growers' and Shippers' Association because
its interests and those of the Exchange "lie right in opposite direc-
tions." A. R. Sprague, later to become first manager of the California
Fresh Fruit Exchange, was particularly insistent at the November
meeting of 1895 that a more aggressive campaign be inaugurated for
no Adams made this very clear by saying: "Our associations, State and local,
will need to deal with them [the existing independent firms now engaged in the
fresh-fruit trade] . . . but the seeds of sure destruction are sowed and certain to
grow in any organization which contains adverse interests within its own bowels."
Eighteenth Fruit Growers' Convention, Official Keport. p. 33. November, 1894.
1,1 This organization must not be confused with the present California Fruit
Exchange. The latter was originally organized in 1901 as the California Fresh
Fruit Exchange. The present name was not adopted until 1907, over a decade
after the older organization of that name had ceased to function.
i '2 Pacific "Rural Press 47:3-4, 7-8, 44. 1894.
Bul. 557] Cooperative Marketing of Deciduous Fruits 33
the formation of local associations by local people, including particu-
larly the members of the convention.113
Weinstock's proposal, unanimously adopted by the Fruit Growers'
Convention of 1894, was in the form of the following resolutions :
Whereas, Owing to certain causes the shipping of green fruits to the markets of
the East has more recently proven highly unprofitable ; and whereas, a continuance
of these causes must mean ruin to untold numbers of growers and must seriously
threaten the future of the green fruit industry of our state ; and whereas, we have
reasons to believe that by united action on the part of shippers and growers many
of these causes may be removed and certain existing evils overcome ; be it therefore
Eesolved, That without reference to any great popular movement to unite the
fruit growers of the state in one organization for general purposes, but in addition
and auxiliary to that movement, this convention recommends and earnestly requests
the classes of growers and shippers above mentioned to proceed forthwith to organize
themselves into a union to be known as the Fruit Growers' and Shippers' Association
of California ; and be it further
Eesolved, That the purposes of the proposed association shall be: (1) the estab-
lishment of a Bureau of Information to regulate distribution; (2) to establish one
auction-room only in each city; (3) to make such auction-room open and free to all
buyers; (4) to do all such other things as may be conducive to the best interests of
the fresh-fruit industry of California; and be it further
Eesolved, That the President of this convention be requested to appoint a com-
mittee of five, which shall represent all the above classes of shippers, for the purpose
of taking steps to carry the above resolution into effect ; and be it further
Eesolved, That the California Fruit Exchange, as it proceeds in its work of
organization, be requested to make the importance of maintaining such association
very prominent, and to impress upon all growers the necessity of strongly supporting
it in all ways ; and be it further
Eesolved, That the members of this convention hereby pledge themselves to give
such association, when formed, our continuous and hearty support.11*
Following the adoption of the resolution a committee was appointed
to set up the organization of fruit growers and dealers. This committee
consisted of N. R. Salsbury, of Porter Bros. ; E. T. Earl, of the Earl
Fruit Company ; Frank H. Buck, of Vacaville ; David Reese, of Florin ;
J. D. Mathews, of Newcastle ; and Harris Weinstock.115
Establishment of the New Combination. — The new combination pro-
posed by Weinstock was organized in February, 1895,116 for the purpose
113 Nineteenth Fruit Growers' Convention, Official Eeport. p. 98-111. Nov. 1895.
ii4 Eighteenth Fruit Growers' Convention, Official Eeport. p. 36, 37. 1894. Also:
California State Board of Horticulture, Fifth Biennial Eeport 1895^96:67.
us Eighteenth Fruit Growers' Convention, Official Eeport. p. 46. November,
1894.
lie Pacific Eural Press 49:116. 1895. California Fruit Growers 16(8) :144. 1895.
The latter report is the more detailed. Each gives the list of representatives at
the organization meeting held in San Francisco on February 18. See also: Wein-
stock, H. Eeview of the work of the California Fruit Growers' and Shippers'
Association. Nineteenth Fruit Growers' Convention, Official Eeport. p. 10-11.
November, 1895.
34 University of California — Experiment Station
of achieving the things mentioned in the respective resolutions of the
Fruit Growers' Convention in November, 1894. It was formed without
capital stock, and was not entrusted with the function of carrying out
selling transactions.
The management of the Bureau of Information, which the California
Fruit Growers' and Shippers' Association was expected to operate, was
placed in the hands of the secretary of the organization. In regard to this
feature of the set-up, the by-laws said :
It shall be his [the secretary's] duty to issue and mail daily to each member of
the association who for such service shall pay in advance one dollar per month, a
printed bulletin setting forth without giving names of consignees or consignors the
number of cars and approximate contents that have been forwarded that day to the
various markets, and also a statement of such diversions as have been reported. The
proposed bulletin shall also set forth in a tabulated form the cars and their approxi-
mate contents due and to arrive in the various markets on the various days.
In other words, the Association's set-up provided for the operation of
what is today commonly called a clearing house, and became the first
clearing house in the California fresh-deciduous-fruit industry.117
The cost of running the California Fruit Growers' and Shippers'
Association was to be met mainly by collecting a membership fee of $20
and charging the members a certain rate in proportion to their ship-
ments. Any fruit grower, fruit-shipping firm or corporation, or member
of a cooperative fruit marketing association was allowed to join the
enterprise upon approval of the Board of Directors.
Most of the large shipping firms, cooperative associations, and several
large growers joined the organization. The National Fruit Association,
one of the large shipping firms, refused to join. The first Board of Direc-
tors consisted of N. R. Salsbury, of Porter Bros. ; E. T. Earl, of the Earl
Fruit Company; J. Z. Anderson, of the Anderson Fruit Company;
Frank TI. Buck, of Vacaville ; J. D. Mathews, of the Newcastle Coopera-
tive Fruit Company ; H. B. Stabler, of the Sutter County Fruit Growers'
Association; and Harris Weinstock, of the Orange Vale Colonization
Company.118 Weinstock was elected President. He also became General
Manager of the organization. The first Executive Committee was com-
posed of N. R. Salsbury, E. T. Earl, and Harris Weinstock. In other
words, the two leading dealer firms constituted a majority of the com-
H7 A clearing-house type of organization known as the Western Cantaloupe
Exchange has been mentioned as the first clearing house of this sort. It was set
up in Los Angeles in the spring of 1912 by the leading cantaloupe interests of the
Imperial Valley. See Commercial Bulletin (Los Angeles) vol. 28, May 10, May 31,
and July 20, 1912. The California Fruit Growers' and Shippers' Association, how-
ever, preceded the cantaloupe organization by some seventeen years.
us California Fruit Grower 16(8) :145. 1895.
Bul. 557] Cooperative Marketing of Deciduous Fruits 35
mittee. In response to a complaint that the organization was run by the
Earl Fruit Company and Porter Bros., two more members were added
to the Board of Directors and to the Executive Committee, these to be
fruit growers. The men selected were David Reese, of the Florin Fruit
Growers' Association, and A. Block, a fruit grower and shipper in Santa
Clara County who had been prominent in the affairs of the old Union.
Among the cooperative associations which joined the combination
were : Cooperative Fruit Company of Newcastle, Suisun Valley Fruit
Union, Florin Fruit Growers' Association, Sutter County Fruit Grow-
ers' Association, California Fruit Association of Vacaville, Auburn
Cooperative Fruit Company, Niles Fruit Growers' Association, Mount
Shasta Fruit Association, and Santa Cruz Mountain Fruit Exchange.119
Work of the Combination. — The Association immediately endeavored
to correct the evils of the auction system. In cases in which several auc-
tion houses had developed in eastern markets it sought to consolidate
them. Furthermore, it began to attack the closed auction system. These
efforts lasted through 1895 and 1896 and brought some favorable re-
sults.120 In some instances, however, it proved to be very difficult to
reconcile the different interests.
The Association also promptly established a Bureau of Information
or clearing house which was operated as long as the Association existed.
Its activities consisted mainly in compiling and distributing a bulletin
during the shipping season, giving data on the number of cars shipped
and their destination, which enabled shippers to better regulate their
shipments.121
us California Fruit Grower 16(8) :144. 1895. Pacific Rural Press 49:116. 1895.
It is not entirely clear from reports available that all of these organizations
actually took out memberships but representatives of them are mentioned as
having joined.
120 At any rate the single auction system was established in New York and
successfully operated during the season of 1897. Reported by Manager Weinstock
at the Fruit Growers' Convention, November, 1897. (Pacific Rural Press 54:342.
1897.) At the close of the next season he reported that the association "has suc-
ceeded in maintaining union auction houses free and open to all buyers in all the
auction markets." (Pacific Rural Press 56:381. 1898.) Later reports are less
definite on this point.
121 This "Bureau of Information" was apparently established early in the ship-
ping season of 1895. Weinstock mentions it in his report in November of that year
as one of the Association's accomplishments, referring to it as having been "of
incalculable value largely in preventing unnecessary gluts and enabling growers
and shippers to more intelligently route their fruit than was ever before possible."
There was some criticism of it on the grounds that it hid some information by
grouping some shipments under the heading of "other points." Weinstock explained
that it had been necessary to so group reports on shipments to small markets as
not to disclose the business of certain operators, otherwise these refused to let
the railroads report their shipments. Nineteenth Fruit Growers' Convention, Pro-
ceedings, p. 39-40. November, 1895.
36 University of California — Experiment Station
The activities of the Association apparently did not go beyond the
efforts to do away with the abuses of the auction system and the gather-
ing and dissemination of market information. There is no evidence that
the Association ever sold fruit. In his reports to the Fruit Growers' Con-
ventions, Weinstock never indicated that the Association had fostered
the establishment of local associations. That it would do this was a vain
hope of the directors of the California Fruit Exchange.
Although the report of President Weinstock before the Twenty -sixth
Fruit Growers' Convention in December, 1901, spoke of the past year
as "one of the most favorable years in the history of the California
fruit industry,"122 it was decided at the annual meeting in June, 1902,
to discontinue operations.
CONTINUED EFFORTS TO ESTABLISH A CENTRAL
COOPERATIVE AGENCY
Since the leaders of the movement for a comprehensive grower-owned
and grower-controlled cooperative marketing system, based on the ex-
change plan, considered the California Fruit Growers' and Shippers'
Association only an organization created to bring temporary relief, they
endeavored to carry out those promotional activities among the decid-
uous-fruit growers which they had urged at the Fruit Growers' Conven-
tion in November, 1894, and later. Furthermore, they called a conven-
tion of fruit exchanges for the purpose of discussing the establishment
of the proposed organization, the California Fruit Exchange. At this
convention, which was held in January, 1895, representatives of dried-
fruit exchanges, cooperative fresh-deciduous-fruit shipping associa-
tions, and other fruit interests were represented.123
So far as the fresh-fruit branch is concerned, a special committee was
appointed to consider the question of what, on the basis of the known
facts, the desired State Exchange would be able to do for the deciduous-
fruit growers in the near future. This committee proposed the adoption
of the following resolutions and recommendations :
Eesolved, That it is the sense of this convention that the California Fruit
Exchange, as it will be hereafter constituted, can profitably serve the fresh-fruit
trade in the following particulars:
1. It can watch over the promised expediting of fresh-fruit service as promised
by the railroads, and by frequent consultation with the railroad officials ascertain
and make known the degree of perfection or imperfection maintained, and whatever
122 Twenty-sixth Fruit Growers' Convention, Official Report, p. 16. December.
1901.
L28 Pacific Rural Press 49:52. 1895.
Bul. 557] Cooperative Marketing of Deciduous Fruits 37
can be done either by the railroads or the growers to improve the efficiency of the
service.
2. It can cause accurate official experiments to be made under disinterested
inspection of new devices for refrigeration and other devices for packing and
shipping.
3. It can, if proper eastern representation can be secured, obtain accurate official
reports upon existing eastern abuses in the fresh-fruit trade, with names and dates
of instances in sufficient detail to ensure correct knowledge of usual and average
conditions, with the remedies, if any, which can be applied, by united action.
4. It can represent that interest in any formal consultations which may be neces-
sary or wise with those engaged in the business of shipping fresh fruits, with the
view of remedying any abuses which may be found to exist in that department.
5. It can obtain and make known the prospects of crops in all competing fresh-
fruit districts, with the dates upon which their products may be likely to appear in
the markets in competition with our own — the last to be wired to us in season to
permit all to exercise judgment in forwarding.
6. That all fresh-fruit cooperative organizations who pack and sell as growers,
and all persons engaged in the same business, and sellers of fruit grown by such
persons, shall become eligible to all privileges to which dried-fruit cooperative com-
panies have by becoming stockholders of the State Fruit Exchange, and shall pay
the same percentage on gross sales of said green fruit.
All the above being preparatory and looking to effective, remedial action whenever
sufficient reliable data have been accumulated to justify such action.
The manager of the Exchange is requested officially to communicate with the
Executive Board of the Southern California Fruit Exchanges, and ascertain whether
it would be agreeable to them for the State Exchange to unite with them in the
support of an eastern agency, upon the basis that they pay the salary and direct the
agency from December to June and the State Exchange from June to December;
and if so, what would be the expense to this Exchange.
The Committee on the Fresh Fruit Trade is requested to ascertain what number
of fresh-fruit shipping associations or individuals are willing to join the Exchange
for the above objects, with the probable value of shipments from each, and to report
whether in their judgment the revenue from such associations on the same ratio
that dried-fruit associations pay is likely to be equal to the expenditure incurred in
the fresh-fruit interests.124
The report was adopted by the convention, and at first it seemed as
though the movement would go ahead quickly. Instead, it died during
the year 1895, the main reason probably being lack of support on the
part of the growers. At the Fruit Growers' Convention of November,
1895, there was an insistent urge that efforts to develop local associations
be continued. The following resolutions were adopted after much dis-
cussion :125
124 Pacific Eural Press 49:52. 1895.
125 Nineteenth Fruit Growers' Convention, Official Eeport. p. 98-111. November,
1895.
38 University of California — Experiment Station
RESOLVED, That this convention urgently recommend the formation of local
cooperative fruit-growers' unions in every one or more school districts in the
State, wherever there are any fruit interests. The purpose of these unions being to
consider the subject of cooperation, and to undertake only such and so many plans
of cooperation as are made possible by the local conditions, availing themselves of
such counsel and assistance as may be obtained from the California Fruit Ex-
change, with the purpose of securing State unity of action through district, county,
and State delegate conventions;
RESOLVED, That to forward this movement a committee of five be appointed,
who shall prepare such explanatory literature as may be necessary to the begin-
ning of the movement;
RESOLVED,That the State Board of Horticulture be requested to print and dis-
tribute such literature as may be prepared by this committee to such persons in the
various parts of the State as they may consider likely to aid the movement ;
EESOL VED, That we, as members of this convention, pledge ourselves to do all in
our power to secure such organization in our respective localities.
In accordance with the resolution, a committee of five was appointed
consisting of R. D. Stephens, B. F. Walton, A. R. Sprague, C. J. Berry,
and F. M. Righter.126 The committee reported at the next Fruit Growers'
Convention held in December, 1896. 127 The report pointed out that there
was an indisposition on the part of some growers to act together and an
utter inability on the part of many others who were financially obligated
to commission men. The committee therefore recommended against the
formation of any state association, but expressed the belief that much
good might come through local cooperation and urged its development.
However, the idea of cooperative organization of the fruit growers
remained and another movement started in 1897. This movement had
exactly the same aims as the preceding one. R. D. Stephens, a grower
and shipper, was its main leader. He not only stressed the evils of con-
signment and the burden of high refrigerator car charges, but he also
criticized the work of the California Fruit Growers' and Shippers'
Association which, he said, did not achieve the improvements predicted
at the time of its organization. When Stephens pleaded for local and
state organization at the Fruit Growers' Convention in November, 1897,
he was opposed by Weinstock who expressed the opinion that it was
impracticable to build up a state-wide growers' organization for fresh
deciduous fruits. However, Stephens succeeded in having the conven-
tion pass a resolution urging growers in the various localities to organize
for the marketing of their fruit, and to band together in a state-wide
organization.128
>-« Nineteenth Fruit Growers' Convention, Official Eeport. p. 111. November,
1895.
127 Pacific Rural Press 52:372. 1896.
128 Pacific Kural Press 54:338. 1897.
Bui,. 557] COOPERATIVE MARKETING OF DECIDUOUS FRUITS 39
Very little progress was made in central and northern California
during 1898, but the movement was more successful in the southern part
of the state. There the growers of fresh and dried deciduous fruits
established the Southern California Deciduous Fruit Exchange. It was
created in May, 1898, and became the general agent of a number of
local associations handling fresh deciduous fruits, dried fruits, and
walnuts.129 So far as its selling operations are concerned, it made an
agreement with the Southern California Fruit Exchange — the citrus
fruit organization — to use the salaried eastern sales force of the latter.130
The Fruit Growers' Convention held in November, 1898, recom-
mended a continuation of the efforts toward collective marketing, par-
ticularly among the dried-fruit growers.131 The movement to organize
the fresh-deciduous-fruit growers was given new impetus at a meeting
of fruit growers held at Sacramento, May 23, 1899. In connection with
the complaints of unsatisfactory marketing conditions for fresh and
dried fruits, a good deal was said against the excessive refrigerator car
charges which were thought to be due to the existence of a refrigerator
car combine.132 The growers resolved "that we advise the immediate
organization of a Fruit Growers' Association of Northern California.
The purpose of this organization shall be to establish a car line or any
other method of securing transportation relief and facilitate the profit-
able marketing of our fresh and dried deciduous fruits."133
The task of carrying out this decision was placed in charge of a com-
mittee of which R. D. Stephens was the chairman.134 The committee
came to the conclusion that the best thing would be to have the
prospective organization own and operate a car line itself. It worked
throughout the summer and autumn of the year in the Sacramento and
San Joaquin valleys and in other fruit sections of central and northern
129 Pacific Eural Press 55:342. 1898.
130 Pacific Eural Press 55:407. 1898.
131 For resolutions passed at this meeting see: Pacific Eural Press 56:378. 1898.
These were proposed by A. E. Sprague, Manager of the Southern California Decid-
uous Fruit Exchange, who urged the formation of local exchanges which in turn
should join a central exchange. He urged all [dried] fruit interests to consolidate.
132 Pacific Eural Press 57:322. 1899. San Francisco Chronicle 69(129) :l-2. May
24, 1899. The call for the meeting of May 23, 1899 "is the culmination of the
aggressive movement inaugurated by the San Francisco Chronicle some weeks
ago when the existence of an alleged combine of refrigerator car line interests
became evident." California Fruit Grower 24(20) :2. 1899.
133 Twenty-fourth Fruit Growers' Convention, Official Eeport. p. 19. 1899. Cali-
fornia Fruit Grower 24(21) :3. 1899.
134 The other members of this committee were W. E. Fountain, W. E. Lovdal,
F. C. Niles, E. I. Galvin, and F. A. Chadbourne. California Fruit Grower 24(21) :3.
1899.
40 University of California — Experiment Station
California seeking to get the growers behind this plan.135 It was, how-
ever, not able to gain the support of a sufficiently large number of
growers which would have justified the immediate establishment of the
proposed Fruit Growers' Association of Northern California.136 The
kinds of obstacles the committee members had to face in their organiza-
tion work were well outlined in the committee's report to the next Fruit
Growers' Convention in December, 1899. These obstacles are worthy of
note because, to a large extent, they had hindered the progress of
organization in California over and over again. The pertinent part of
the committee's report reads as follows :
The committee did all in its power to bring about an organiaztion of the fruit
growers of the State as outlined by the convention, but has failed so far to accom-
plish the desired result. It found that it was antagonized by men representing
millions of dollars, whose interests are diametrically opposed to those of the grower.
The failure to perfect an organization of the growers may be attributed to the
following: Apathy, jealousy, intimidation, dissensions, crop mortgages, concessions,
and selfishness. Apathy on the part of some who permitted others to think for them.
Jealousy on the part of others who fear that their neighbors may be more benefited
through the organization than themselves. Dissension among growers caused by
difference of opinion as to how to proceed in organizing and upon what plan. Intimi-
dation controls the action of many who are given to understand that any action on
their part to in any way aid the movement being made to organize might result in
materially impairing their personal interests. Crop mortgages prevent independent
action on the part of the mortgagees. Concessions made to growers in the way of
rebate on commissions, so much per package, or in any way that would be satisfactory
to the parties interested. Selfishness on the part of many who desire to sell to one or
the other of the great commission and shipping organizations, the opportunity for
which was offered through the agitation being made in favor of organizing the
growers for the purpose of marketing their products. Such men would say, "You
are all right, go ahead; we are with you, but we have a lot of fruit we wish to sell
f.o.b., and are now negotiating to that end. When we have sold we will be with you
heart and soul, and do all we can to aid in building up an organization that will
better protect their interests than has been done in the past. In the meantime, how-
ever, do not for the world abandon the effort to bring about a perfect and complete
organization of the State."i37
135 California Fruit Grower 24(22) :11. 1899. San Francisco Chronicle 69(129):
1-2, May 24, 1899; 69(137) :6, June 1, 1899; 69(138) :3, June 2, 1899. Pacific Eural
Press 57:322. 1899.
136 An interesting feature of this proposed organization was the "pooling" of
the stock and placing it in the hands of a board of trustees who should have the
right to vote it during the next five years. California Fruit Grower 24(25) :1. 1899.
San Francisco Chronicle 69(153) :16. June 18, 1899.
137 Twenty-fourth Annual Fruit Growers' Convention, Proceedings, p. 20. 1899.
Bui,. 557] COOPERATIVE MARKETING OF DECIDUOUS FRUITS 41
THE CALIFORNIA FRUIT EXCHANGE
The need for a fresh-fruit marketing association was again discussed
at the Fruit Growers' Convention held at Fresno in December, 1900.
A committee of fifteen was appointed with M. Theodore Kearney as
chairman, to consider the feasibility of cooperation between all the fruit
interests of the state. This committee recommended the formation of an
association for fresh-deciduous-fruit producers and proceeded to call
a convention for that purpose.138 In his call for the meeting which was
to be held at Sacramento on January 15, 1901, Kearney139 said, "The
problems presented to the fruit growers are two : (1) How to lay upon
the consumer 's table fruit perfect in quality and at the lowest cost con-
sistent with a reasonable profit to the producer and others whose
services are necessary to the industry ; (2) how best to develop a demand
for our fruits in the markets of the world."
About half of the delegates attending the meeting at Sacramento were
from Placer County. The rest were from Fresno, Sutter, Butte, Sacra-
mento, Yuba, Yolo, San Joaquin, and El Dorado counties.140
The convention soon appointed a committee on organization which
reported back to the convention after about an hour's deliberation.141 It
recommended the formation of an organization of fresh-fruit growers,
under the Cooperative Marketing Act of 1895, along the lines of the
California Raisin Growers' Association and the California Cured Fruit
Association.142 The adoption of a plan similar to the raisin plan is not
surprising since M. Theodore Kearney, Chairman of the committee was
then president of the Raisin Growers' Association. He, no doubt, influ-
enced the group to some extent, although on the other hand, the Cali-
fornia Raisin Growers' Association was at that time considered highly
successful.143
138 For a list of the other members of this committee and a copy of its recom-
mendations see: California Fruit Grower 25(655) :3. 1900. The matter of bringing
all the fruit and nut interests together into some sort of fruit producers' council
was not developed. See: Pacific Eural Press 61:89. 1901.
139 Calif ornia Fruit Grower 26(659) :12. 1901.
140 A list of men in attendance is given in: Eecord-Union (Sacramento) 100
(148) :2. Jan. 16, 1901. A preliminary meeting had been held in San Francisco on
Jan. 8. California Fruit Grower 26(659) :4. 1901.
i4i See copy of its report: Eecord-Union (Sacramento) 100(149) :2. Jan. 17,
1901.
142 The latter had been modeled after the Eaisin Association so that the two
were almost identical. Twenty-fourth Fruit Growers' Convention, Official Eeport.
p. 142-3. December, 1899. The articles of incorporation and by-laws of the Cali-
fornia Cured Fruit Association are reproduced in full in this issue.
143 It had been formed in the summer of 1898. Mr. Kearney was generally given
a good deal of credit for its establishment. The Association discontinued in the
summer of 1903.
42 University of California — Experiment Station
The organization committee recommended a list of names of men to
serve as directors during the first year. The committee's recommenda-
tions were adopted, and the temporary board proceeded at once to
organize.144 It elected E. I. Galvin as president, T. W. Madeley as secre-
tary-treasurer, and designated as an executive committee E. I. Galvin,
G. H. Cutter, and T. W. Madeley.
Although the original plan of organization was that of a centralized
or direct-membership type of association, A. R. Sprague and A. H.
Naftzger strongly urged the adoption of a federated type of organiza-
tion.145 The former had been organizer, and was still president and man-
ager of the Southern California Deciduous Fruit Exchange (see page
39), and the latter was president and general manager of the Southern
California Fruit Exchange. Both associations were of the federated
type, and both had attained a considerable measure of success. The fed-
erated plan was finally adopted.
As far as other features of the plan are concerned, it was proposed to
establish the state-wide cooperative marketing association under the
name of California Fresh Fruit Exchange,140 and to incorporate it
under the Cooperative Law of 1895. It was suggested that the organiza-
tion should be formed on a nonstock basis with a membership fee of
$5.00.147 The headquarters were to be in Sacramento.
From the explanations given by various leaders on different occasions
before and shortly after the establishment of the Exchange, it seems
that the following were substantially the aims i1
48
1. To sell the fruit of its members.
2. To eliminate or minimize the consignment of fruit.
144 Eecord-Union (Sacramento) 100(149) :2. January 17, 1901. The temporary
board of directors consisted of: B. F. Langford, San Joaquin; Wm. Johnson, Sacra-
mento; E. I. Galvin, Sacramento; F. A. Chadbourne, Solano; H. W. Meek, Alameda;
A. D. Cutts, Sutter ; J. F. Madden, Placer ; J. W. Anderson, Yolo ; T. W. Madeley,
Placer; I. N. Barton, Placer; S. L. Turner, El Dorado; O. B. Olufs, Fresno; A. R.
Sprague, Los Angeles; and Geo. H. Cutter, Sacramento.
145 Sprague, A. R. Work of the California Fresh Fruit Exchange. Twenty-sixth
Fruit Growers' Convention, Official Report, p. 51-52. 1901.
140 The name "California Fruit Exchange" was suggested, but the dried-fruit
organization which had been operating under that name some years earlier had
apparently not yet been dissolved, hence its name could not be used. On May 26, 1903,
the Exchange reincorporated under the above name. Mr. Sprague explained that it
was easier to reincorporate under the new name than to go through the necessary
court procedure to drop the word "Fresh" from the old name. The new organization
then bought the assets of the old. Pacific Rural Press 65:406. 1903.
147 Record-Union (Sacramento) 100(149) :2. January 17, 1901.
148 For more detailed information see: Kearney, M. Theodore. Pacific Rural
Press 61:84. 1901. And: Sprague, A. R. Work of the California Fresh Fruit Ex-
change. Twenty-sixth Fruit Growers' Convention Proceedings, p. 54-55. 1901.
Bul. 557] Cooperative Marketing of Deciduous Fruits 43
3. To eliminate faulty distribution which alternately gluts some mar-
kets and leaves others bare.
4. To promote grading of all fruit in accordance with a high standard,
and to market only the best quality.
5. To adopt and maintain a high standard of packing.
6. To establish associations operating local packing houses in localities
where a need developed, and to have the fruit graded and packed
under a local inspector's direction in the case of isolated orchards.
7. To let each district have a separate and distinct accounting with the
central headquarters for all fruit sold, and to make returns thereon
on the basis of actual sales for that district and not on a general
average of the season's sales for all districts.
8. To assist growers in working out their financial problems so as to
free them from the commission firms which advanced them money
and so prevented them from joining a cooperative.
9. To lower the costs of supplies of boxes, lumber, paper, and other
materials by joint purchasing.
Membership. — At the time the Exchange was established, practically
all local associations which had been formed in the preceding twenty
years had disappeared. It was, therefore, necessary to establish new local
units and to affiliate them with the Exchange. In view of this need, one
of the principal jobs of the executive committee of the Exchange at the
start was to go into the field and organize local groups. It got in touch
with the important shipping points in central California, such as
Loomis, Newcastle, Penryn, Placerville, Rumsey, Colfax, Florin, Fair
Oaks, Vacaville, Marysville, Lodi, Yuba City, Chico, Walnut Grove,
and Courtland. But, in spite of strenuous efforts, the executive com-
mittee was able to establish locals during the first season only at Loomis,
Newcastle, Penryn, Rumsey, and Placerville.149 It found one in existence
at Florin, but was not able to bring it into the Exchange at once.
Being desirous of increasing the volume of business as quickly as
possible in order to perform the business at low marketing costs, the
Exchange endeavored to spread rapidly from the shipping points where
its first local associations had been formed. In some instances the new
units that it set up succeeded, but in other instances they failed. Thus
the agencies established in Colfax and Placerville were given up after
a two years' trial, and the agency at Visalia was withdrawn after the
experience of one season. When such retrenchments occurred, the organ-
ization sustained several severe financial losses.
1*9 Sprague, A. R. Work of the California Fresh Fruit Exchange. Twenty-sixth
Fruit Growers' Convention Proceedings, p. 52. 1901.
44 University of California — Experiment Station
After the experience of the first few years, the policy of quick expan-
sion was given up. Instead, the Exchange has preferred to follow the
plan of expanding only in accordance with the spread of the cooperative
spirit among the growers.150 In 1909, the number of local associations
affiliated with the Exchange was fourteen.151 It also had at that time
followed the practice of establishing "agencies at points at which there
were no associations." These agencies were discontinued as soon as a
local association was formed and affiliated with the Exchange.152 By
1926 the number of local associations amounted to 63, and in 1931 to 80.
In addition to 80 local associations, approximately 100 so-called "con-
tract shippers" were connected with the Exchange in 1931. These
contract shippers are members who not only pack and ship their own
fruit, but who in some cases also handle the fruit of other growers. The
total approximate number of growers marketing their products through
the Exchange was 1,700 in 1916, 4,500 in 1922, and 7,500 in 1931. Out
of 7,500 growers shipping through the Exchange in 1931, approximately
7,000 were members of local associations. The remaining 500 or so were
either contract shippers or were shipping through contract shippers.
During the first few years, the Exchange was active mostly in central
California, particularly between Fresno on the south and Winters and
Auburn on the north. By 1909 it had contacts at practically every
important shipping point in the central part of the state with the excep-
tion of the apple districts centering at Sebastopol and Watsonville.
Later, it spread its activities over most of the state including the Graven-
stein apple section in Sonoma County, and has also expanded into
Arizona.
Organization Activities. — The Exchange has promoted in various
ways the establishment of new local associations. It has helped interested
150 The general manager stated in his report for 1924 that: ". . . it is unwise to
encourage the formation of associations unless growers have sufficient confidence
in cooperative marketing to lend their support to the movement .... the organiza-
tion of cooperative associations should be discouraged in any community where
the loyalty of the members to themselves and their confidence in the organization
are not manifest." California Fruit Exchange, Annual Eeport 1924:15. 1924.
isi These included: Acampo Fruit Growers' Association; Acampo Christian
Colony, through J. P. Dargitz; Auburn Fruit Growers' Association; Courtland
Fruit Growers' Company; Florin Fruit Growers' Association; Fresno Fruit Grow-
ers' Company; Linden Fruit Growers' Association; Loomis Fruit Growers' Asso-
ciation; Lodi Packing Company; Newcastle Fruit Growers' Association; Penryn
Fruit Growers' Association; Sacramento Eiver Association; Vacaville Fruit
Growers' Association; Winters Fruit Growers' Association. In addition the Ex-
change had marketing arrangements with the San Joaquin Table Grape Growers'
Association for members who desired to ship through it. See: Walker, W. C. A
growers' marketing organization. Thirty-sixth Fruit Growers' Convention Pro-
ceedings, p. 104. December, 1909.
152 Walker, W. C. A growers' marketing organization. Thirty-sixth Fruit Growers'
Convention Proceedings, p. 104. December, 1909.
Biil. 557] Cooperative Marketing of Deciduous Fruits 45
local groups in developing a wider interest in certain communities by
supplying speakers to explain the operation of the Exchange and by
discussing the experiences of other local associations. It has assisted the
growers in drawing up by-laws and developing plans of operation. In
some cases it has advanced money to new associations for the erection
of packing houses and has extended credit for supplies. It has also made
it a practice to advise with the locals on management problems, espe-
cially during their early stages, or when new managers are employed.
The Exchange has brought about a certain amount of uniformity in the
structure of local associations by recommending certain types of by-laws
and even drafting suggested standard by-laws.
In order to set up new local associations and to keep in contact with
the growers, field agents were employed as early as 1903, 1905, and 1908.
During recent years much of the field work of the Exchange has been
carried on at the seven district offices which are located at Lodi, Modesto,
Fresno, Exeter, Ontario, Winters, and San Jose. From these offices the
agents and their assistants endeavor to promote the relations of the
Exchange with the various local associations and contract shippers, and
to win over new followers among the unorganized growers.
Throughout its history the Exchange has done much in the way of
educating the growers in cooperative marketing.153 To promote educa-
tional work, the Exchange in March, 1924, began the publication of a
house organ, the Blue Anchor. This publication is not only circulated
among members, but it also reaches the various groups of the fruit trade,
state and federal agricultural officials, farm advisors, as well as uni-
versity and high school libraries.
Functions of the Local Associations. — The main functions of the local
associations are grading, packing, assembling, and loading the fruit.
In the early days practically all the packing was done in the orchards
from which the packed boxes were hauled to the loading sheds. Some
153 in his report for 1928, the general manager, Mr. Nagle, stated: "There is,
I regret to admit, too great a proportion of our membership who are not suffi-
ciently impressed with the principles of cooperation to permit of any relaxation
in our effort to carry on this educational work." (California Fruit Exchange,
Annual Keport 1928:16. 1928.)
In regard to the magazine he said : "The Blue Anchor Magazine, which is published
monthly by our standardization department and distributed to our growers and
members of the trade, not only in this country but in foreign countries as well, has
succeeded beyond all expectations. It is recognized by federal and state authorities
as the best magazine on deciduous fruits published today. Its circulation includes
nearly all the countries of the globe, and approximately 100,000 copies are dis-
tributed annually. The magazine is practically self-sustaining, and could be made
so if we were to encourage more advertising than now appears within its covers,
but we feel that too large a proportion of advertising would detract from the value
of the reading matter and defeat the original purpose of the publication." (Cali-
fornia Fruit Exchange, Annual Eeport 1928:10. 1928.)
46 University of California — Experiment Station
exceptions occurred in Fresno, Acampo, and Lodi where the fruit was
hauled to the shipping houses in lug boxes to be packed and loaded. The
practice of orchard packing led to the use of grower brands and pre-
vented the development of pooling because the individual packs varied
too widely. Since 1923, however, more and more fruit is packed in
central packing houses. This change has come because of the necessity
of improving and standardizing grade and pack in order to meet the
increasing competition of fruit produced not only in California but also
in other parts of the United States. The change has come largely as a
result of the educational effort of the Standardization Department of
the Exchange.
The district offices mentioned above (page 45) have not developed
sales functions as is true in the California Fruit Growers' Exchange.154
Such a development has, however, been given consideration. The general
manager in his report for 1927 said :
We believe that within the next few years associations in different districts will
band themselves together for the purpose of forming sub-exchanges to work with
the main exchange and operate as a link between the associations and the general
office. I believe that such a condition is justified and will materialize because within
the next five years our business will automatically double and such a change will
become necessary.iss
Apparently, in 1927, it was thought that the number of small asso-
ciations would so increase as to make such subexchanges desirable. No
such development has taken place, and the management now feels that
the present plan of having each local deal directly with the central
organization makes for speed in operation — a matter of vital impor-
tance in the fresh-deciduous-fruit business.
Representation. — As long as the number of local associations was
small each association was represented on the board of directors. As the
number of local associations became larger this plan became less satis-
factory. Hence, in 1910, the Exchange adopted the plan of providing for
associate directors. It was provided that each growers' organization
having a shipping contract with the Exchange and not being repre-
sented on the Board of Directors, should be entitled to select from its
membership some one to sit with the Board at all its sessions. The asso-
ciate directors were to enjoy all the privileges of the regular directors
with the exception of the vote. After some time, however, this system
was dropped, but any member is welcome to sit in the board of directors'
meetings as a visitor.
154 McKay, A. W., and W. McKenzie Stevens. Organization and development of a
cooperative citrus-fruit marketing agency. U. S. Dept. of Agr. Dept. Bui. 1237:
23-5. 1924.
155 California Fruit Exchange, Annual Eeport 1927:15. 1927.
Bui>. 557] Cooperative Marketing of Deciduous Fruits 47
During the early years of the Exchange directors were nominated
from the floor at the annual meeting. It came to be recognized that this
plan did not permit adequate consideration of the most desirable geo-
graphical distribution of the directorate. In order to have the directors
more fairly represent the growers, the state was divided into zones in
1924. These zones were established by a special committee after a careful
consideration of the tonnage, gross value, geographical grouping, and
accessibility to headquarters.150 Eight zones were established and the
seventeen directors allocated to these districts. In 1931157 the number of
districts was increased to nine. There have been one or two directors at
large — two in 1932, one from the south and one from the west of the state.
The directors are nominated in the several districts at meetings called
for the purpose some time before the annual meeting of the Exchange.
When several directors are to be elected from a given district — some
districts have from 3 to 4 — a district may further allocate these to sub-
districts. The names of the men nominated in the several districts are
then reported to the chairman of the nomination committee of the Board
of Directors. These names are placed in nomination at the annual meet-
ing and elected by acclamation. There is nothing to prevent individuals
from making other nominations from the floor at the annual meeting.
Such nominees would probably stand little chance of election because the
members believe the present plan insures fairness in representation.
A. R. Sprague, the former president of the Southern California Decid-
uous Fruit Exchange, was the first president and also the first general
manager of the California Fruit Exchange. Some opposition to the
practice of having one man hold both these offices arose. In 1910 the
by-laws were amended to prevent this.
In 1907 Mr. Sprague resigned and G. H. Cutter, formerly vice-presi-
dent, was made president. At the same time W. C. Walker, who had been
the eastern agent of the Exchange, was appointed general manager.
In 1910 Walker was succeeded by the present manager, J. L. Nagle, then
manager of the Newcastle Fruit Growers' Association. When G. H.
Cutter died in 1926, J. J. Brennan was elected president. There has been
very little change in the Board of Directors of the organization — a good
indication of stability in the association and confidence on the part of the
growers in their leaders.
Sales Methods and Problems. — When the Exchange was organized in
1901, President A. H. Naftzger of the Southern California Fruit Ex-
156 Pursuant to a resolution of the board of directors on November 18, 1924, a
committee consisting of C. S. Day, E. J. Coggeshall, Freeman B. Mills, and B. E.
Knapp was appointed to work out the matter of districting.
15" Letters of instruction sent out December 20, 1928, and December 3, 1931.
48 University of California — Experiment Station
change offered the services of the eastern sales staff of his organization
which consisted of over 20 salaried agents and numerous brokerage con-
nections in the principal cities. The California Fresh Fruit Exchange
(now called the California Fruit Exchange) accepted the offer. The
contract provided that the agents should handle fruit coming from only
the two organizations and that, so far as the fresh-fruit business was con-
cerned, they should receive instructions directly from the Sacramento
office.158
By making use of this selling machinery the new Exchange imme-
diately had a large number of eastern agents at its disposal. Although
these agents had not handled fresh fruit before, they were familiar with
the handling of California fruit, since the buyers of citrus fruits were
also buyers of deciduous fruits. This joint sales arrangement has con-
tinued throughout the history of the Exchange with the exception of the
two marketing seasons of 1903 and 1904 when the Southern California
Fruit Growers' Exchange sold through the California Fruit Agency, and
the California Fruit Exchange joined the California Fruit Distributors.
The system of salaried agents has evidently worked to the benefit of
both organizations. So far as the California Fruit Exchange is con-
cerned, the general manager praised the plan in his report for 1928.
He said :
Our eastern agents have voluntarily in many instances taken advantage of market
conditions by raising our prices before delivering the car. The increase in prices thus
brought to our growers will run into thousands of dollars. This fact alone is a sound
argument in patronizing an organization that has a selling agency of salaried men
instead of a corps of brokers who are frequently buyers' and not sellers' representa-
tives. I might add in this connection that the success of the California Fruit Exchange
is due largely to the fact that we are privileged to maintain an agency of salaried
men whose integrity has been tested, whose ability is unquestioned, and whose suc-
cesses are measured by the long years of efficient service they have rendered this
institution.1^
158 It is interesting to trace the history of the plan to use joint agencies in the
East for the selling of deciduous and citrus fruit. The idea seems to have originated
in the north in 1885, when the California Fruit Union was organized. It will be
remembered that at that time H. Livermore, one of the leaders of the California
Fruit Union, went to Los Angeles and advised the southern citrus fruit growers to
join the California Fruit Union and to take advantage of the eastern selling ma-
chinery which the Union intended to create. (See page 18.) The idea of using com-
mon sales agents in the East was favored; but, because the citrus-fruit growers
thought it advisable to organize separately, the plan was not then realized. It was
discussed for the second time in 1894, again following a suggestion from the north,
in connection with the movement to organize a state-wide marketing organization
for dried and fresh fruit. In this case the idea was not carried out because the
northern plan of organization did not materialize. It, therefore, took another period
of six years before the system of joint agencies for the selling of deciduous and citrus
fruit was put into effect.
150 Annual report of the General Manager for 1928, p. 5-6. 1928.
Bui,. 557] COOPERATIVE MARKETING OF DECIDUOUS FRUITS 49
Any opposition to joint selling that has arisen has come mainly from
certain groups of Valencia orange growers affiliated with the California
Fruit Growers' Exchange. One reason for taking up the plan originally
was that citrus fruits moved in greatest volume during the winter and
spring when there were no deciduous-fruit shipments. Later, however,
the development of a large volume of summer shipments of Valencia
oranges brought up the question of whether the deciduous-fruit busi-
ness did not interfere with the sales of summer oranges. The matter
finally led to a careful study of the problem which seems to have satisfied
those who objected.160
In 1910, the Exchange began the practice of offering premiums to its
eastern agents in order to increase their efficiency. This policy has
worked satisfactorily and has been continued. The number of salaried
agents in the United States and Canada was about 80 in 1931. Some of
these agents are serving only the California Fruit Exchange because the
Exchange has thought it advisable to appoint representatives in markets
with which the common agents do not stand in direct contact. The
number of common agents amounts to about 50.
As already stated (page 43), during its early years the Exchange
endeavored to increase the volume of its business as quickly as possible.
It was therefore eager to handle not only more and more fresh fruit, but
also undertook the handling of dried fruits and vegetables. In 1903, it
made arrangements for the marketing of dried fruits in the Santa Clara
Valley ; about the same time it made arrangements for the handling of
celery for the Jersey Island Packing Company in Contra Costa County.
The handling of celery in the winter time was considered to be a welcome
means of supplementing the summer-fruit business. In the same year,
the Exchange also made arrangements for the marketing of melons for
growers in Tulare County. It soon withdrew from the dried-fruit busi-
ness as well as from the handling of vegetables, and in later years it has
been much more conservative not only in taking up new lines of
products, but also in expanding its business in the sphere of fresh fruit.
This change in the attitude of the Exchange was characterized by Mr.
Cutter in his address at the annual meeting in January, 1911. At that
time Mr. Cutter pointed oat :
You would think the more business we get the better for the Exchange. We used
to think so, but it cost us lots of anxiety. For people who have never shipped, every-
thing is new. The pack is new, the business is new. They start in with the thought that
the mere affiliation with us is a guarantee that they are going to get a price whether
160 Gardner, K. B. Joint use of a sales organization by two cooperative associa-
tions. U. S. Dept. of Agr. Cir. 10:1-31. 1927.
50 University of California — Experiment Station
the price is warranted or not. If their pack is not up to grade it works a hardship on
them and on the Exchange. If their pack is second class and is put up against your
pack, which you have been ten years in perfecting, you can see how it affects your
own. If we were to take on too much of that class of business, you can see how it would
weaken the Exchange.161
In recent years the Exchange has handled only such fresh fruits as
grapes, apricots, cherries, figs, nectarines, peaches, pears, plums, apples,
pomegranates, and persimmons.
The Exchange uses mainly two methods of sale — public auction and
private sale. It endeavors to market the fruit in the way the grower-
shipper or local association manager desires to have it sold. If he wishes
to have it offered at auction, the Exchange does so.162 Many growers have
preferred to confine their sales to a few of the large auctions, although
recently there is a greater willingness among the members of the Ex-
change to have their fruit distributed over a wider area163 and to leave
the distribution more largely to the management. The management itself
has of late expressed in the following words a desire to increase the
authority of the Sales Department and has urged upon shippers the
practice of permitting sales without instructions from shippers.
I wish to impress upon our shippers one point, namely, the advisability of per-
mitting the Sales Department to make sales without instructions from the shipper.
It is not possible for the average grower, contract shipper, or association manager
to have sufficient knowledge from day to day of market conditions throughout this
country and elsewhere to enable him to place restrictions on his cars, both as to price
and to movement, with the same accuracy of judgment as would be used by our Sales
Managers. After reviewing statistics compiled in this office annually, I am convinced
that if this Sales Department were unhampered in its judgment of choice of markets
and diversions, better results in many instances could be obtained for the shipper.
It is the duty of our Sales Department to keep our shippers advised daily as to market
conditions, but our Sales Department should be given a free rein by our shippers in
carrying out the obligations of their office, and I hope that during this coming year
our growers and association managers will see to it that their cars carry unlimited
privileges so far as our Sales Department is concerned. If it becomes necessary at any
time during the season for cars to be stored, our Sales Department should not be
required to obtain the consent of the shippers before such action is taken. Prompt
action is oftentimes imperative in order to save our growers from sales losses, and
our Sales Department should be unhampered in the exercise of its judgment.16*
161 California Fruit Exchange, Annual Eeport 1911. (unpublished.)
162 The General Manager said : "Privilege of selling at auction is always accorded
a shipper, and the Exchange does not attempt to dictate the markets to which cars
are shipped. The Sales Department welcomes suggestions as to methods of sale
preferred by shipper." California Fruit Exchange, Annual Report 1916. (Un-
published.)
i«3 California Fruit Exchange, Annual Report 1929:6. 1929.
i«4 California Fruit Exchange, Annual Report 1930:7. 1930.
Bue. 557] Cooperative Marketing of Deciduous Fruits
51
In his report for 1927, the General Manager raised the question of
eventual acquisition of auctions and other selling facilities in the
terminal markets. He said :
The advisability of increasing our scope of operations to include selling facilities
such as the ownership of auctions in certain markets, has been before our directors
for some time. Whether this is practical or not at present has not been definitely
decided, but it has been urged that certain cooperatives coordinate their interests for
the purpose of maintaining their own auctions. This is a much mooted question, and
the answer may be some years away, but whether it be in my time or in yours, the time
will come when the fruit producers of California, both citrus and deciduous, will
control the marketing of the products of this state, and when this condition develops,
the producers will be obliged to maintain their own auctions.165
TABLE 1
Percentages of Auction and Private Sales by the California
Fruit Exchange, 1924-1931
Season
Number of cars
Auction sales
Private sales
1924
8,485
11,934
12,092
12,226
13,629
10,505
15,237
10,607
per cent
54
60
59
57
65
63
64
59
per cent
46
1925
40
1926
41
1927
43
1928
35
1929
37
1930
36
1931
41
Source of data:
Compiled from Annual Reports of California Fruit Exchange.
So far, the Exchange has not acquired the ownership of any auction
market, nor has it undertaken any joint measures in this direction with
other cooperatives.
From the beginning, the method of selling at auction has played an
important role. In recent years the percentage sold at auction has varied
from 57 per cent to 65 per cent. (See table 1.)
Pooling. — The practice of pooling spread slowly among the local
associations. The Loomis Fruit Growers ' Association was one of the first
units to pool its members' fruit. It decided at the beginning of 1923 to
pool the fruit of its members by size and variety in weekly periods. The
following year a number of other member associations began to pool
their fruit.
165 California Fruit Exchange, Annual Eeport 1927:16. 1927.
52 University of California — Experiment Station
The increase in the practice of pooling was largely brought about by
the criticism of the "drug store car"166 by the trade, and the advocacy
by Exchange officials of "long lines" — i.e. larger lots of uniform size and
variety.
With the adoption of measures for standardization, and the estab-
lishment of community packing houses, pooling practices spread rapidly.
By 1927 approximately 75 per cent of the tree fruit moved through the
Exchange and was pooled under first- and second-grade labels.167 One
year later, F. W. Read,168 head of the Standardization Department of
the Exchange, made the following statement :
We have eliminated the individual grower's name, and . . . are pooling in most of
the tree-fruit associations and in some of our grape associations by size and by grade
and variety, over a definite period of time. Our pools in the deciduous-fruit fields are
usually daily pools. Sometimes they are car pools, but rarely are they longer than a
daily pool. The reason for this is that with us the market fluctuates very rapidly.
It changes from day to day and from week to week, and the grower who produces
early fruit is not very prone to pool his fruit with another grower who produces a
late fruit, even of the same variety.
Advertising. — The Exchange has carefully and gradually developed
the advertising of its fruit. Before entering into a wide advertising
campaign it created definite standards of quality and devoted consid-
erable time to the education of its growers and the trade.
The organization has developed several trade-marks of its own, the
principal one of which is the Blue Anchor brand. This brand was pro-
posed by G. H. Cutter in 1903, and was used from that time to 1924
without any special restrictions for designating the fruit shipped by the
California Fruit Exchange. In 1924 it was chosen as a trade-mark for
the fruit of superior quality with the result that it now enjoys a high
reputation.
The Calex brand was introduced in 1928 for juice grapes grading
U. S. No. 1 or better. In 1929 the Exchange began to use a special Blue
Anchor label for its export shipments. This label promises to replace, in
many cases, the labels of the export firms which used to put their own
labels on their shipments. By doing so the Exchange hopes to gain for
itself part of the advertising value of labels, which formerly went to
166 The term "drug store cars," is applied to cars containing many small lots of
fruit of similar size and variety, but of varying pack and maturity packed by indi-
vidual growers. In an endeavor to meet the demand of the eastern trade, the leaders
of the Exchange urged the members of the associations to pool the fruit of even
sizes, grade, and maturity wherever possible and recommended community packing
houses to aid in accomplishing this objective.
167 California Fruit Exchange, Annual Report 1927:8. 1927.
las Read, F. W. Field work of the California Fruit Exchange. American Coopera-
tion, 1928. 1:415. 1928.
Biil. 557] Cooperative Marketing of Deciduous Fruits 53
the exporters, and thus to contribute to the development of its export
business.
At the end of 1930, the management believed that the development of
its brands had reached a point where an intensive advertising campaign
might be undertaken in the East for the next season. It was therefore
decided to launch an advertising campaign in certain eastern markets
in 1931. The plan provided for a complete advertising program utilizing
the following media: (1) newspapers, (2) trade papers, (3) outdoor
billboards, (4) radio, (5) chain store advertising, and (6) dealer service.
This campaign was restricted to the New England states in 1931 because
it was looked upon as an experiment and because it was felt that the
value of advertising deciduous fruits could better be tested if the limited
funds were spent in a restricted area than if they were spread over the
entire country.169 In 1932 the same territory was covered in much the
same way except that dealer service was extended somewhat, particu-
larly into the maritime provinces of Canada, to take advantage of
publicity obtained through radio broadcasts which extended into those
areas.
Volume of Business Handled. — During the period of more than thirty
years in which the Exchange has been active, its shipments have in-
creased steadily. Only 201 cars were shipped in 1901, while 15,237 cars
were sent out of California in 1930. (See table 2.) The greatest absolute
increase occurred in the decade from 1921 to 1930. During this time, the
number of cars shipped by the Exchange increased from 6,281 to 15,237.
The decrease in Exchange shipments in the 1931 season was caused by
poor crop and market conditions. The percentage of total cars shipped
from the state by the Exchange was greater in 1931 than 1930. These
shipments cover all produce handled by the Exchange. Among them
grapes rank first, as shown in table 2. Next in importance are pears,
peaches, and plums.
The Exchange has not only increased its shipments, but has also been
successful in expanding the area over which its fruit is distributed.
Whereas the 201 cars shipped in 1901 were sold in only 38 markets of
the United States and Canada, the fruit shipped in 1930 was sold in
approximately 500 carload markets.
The Exchange has likewise increased its sales abroad. Describing the
development of exports in his report for 1929, the General Manager said :
Ten years ago the California Fruit Exchange, realizing that the ever-increasing
production of fruits in the United States would eventually tax to capacity the
domestic markets, especially during the peak movement of these products, made a
169 California Fruit Exchange, Annual Eeport 1930:9. 1930.
54
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Bul. 557] Cooperative Marketing of Deciduous Fruits 55
survey of foreign markets with a view to developing its export business, which at
that time was almost negligible. During the intervening years, the Exchange has
quietly but persistently extended its efforts in this direction until, in 1929, it enjoyed
the fruits of those years of pioneering in this field, and it is a pleasure to report that
our export business for this past year amounted to over $1,500,000, or approximately
10 per cent of the total gross sales of the season. This is a very remarkable showing
and offers encouragement for further work in this field.
It is interesting to note that our fruits have been shipped to practically every
corner of the globe. In Europe we have made substantial shipments to Denmark,
England, and Scotland; in South America, to Brazil and Argentine on the West
Coast; and also to Central America and the Canal Zone. Transpacific shipments have
gone to the Hawaiian and Philippine Islands, China, Japan, Java, the Straits
Settlements, and New Zealand. Pears represented the heaviest tonnage of any one
variety, while apples were second, and grapes third. A number of straight cars of
plums were shipped and also a few cars of peaches. The first car of cherries ever
exported to South America was shipped by the California Fruit Exchange this past
season, with satisfactory results, the fruit having carried exceptionally well and
having met with favor from the trade.
With the arrangements recently completed for representation in the Orient and
new connections made in Europe, we have every reason to believe that within a few
years we shall be successful in establishing our brands throughout the world and
disposing of a very liberal proportion of our tonnage outside of the United States.170
The above was written at the close of the last year of a period of pros-
perity. Expansion of the export business has continued even during the
current depression. In 1931 the Exchange exported 1,018 cars exclusive
of Canadian sales, with gross sales value of $2,053,414.171
The Exchange has endeavored to develop an export pack which corre-
sponds to the demand of the foreign markets. That it has been successful
in doing this, is indicated by the increased shipments abroad. All the
shipments to Great Britain, the Orient, and Continental Europe are
made on a cash California basis.
Supply Business. — The Exchange engaged in buying operations for
its members right from the start. At first a wide variety of supplies were
purchased, even certain classes of staple groceries, but it soon found
that these purchasing operations were tying up a large amount of its
capital, and since a number of losses occurred, it became more con-
servative in later years. Its purchases are now confined to supplies which
are essential in growing and shipping fruit.
In 1930 the Supply Department handled 1,507 cars of shook and
bracing material, 30 cars of baskets, 71 cars of paper and paper products,
20 cars of nails, 81 cars of kegs, 66 cars of grape packing, and a large
170 California Fruit Exchange, Annual Report. 1929:6-7. 1929.
i7i California Fruit Exchange, Annual Report 1931:7. 1931.
56
University of California — Experiment Station
amount of spray material. Table 3 gives the volume of business and the
gains each year since 1921.
The organization claimed at the beginning that it often sold the sup-
plies at much lower prices than those prevailing in the open market.
Later it adopted a policy of selling at about prevailing prices and
included any savings in its rebates. On box shook, however, the policy
since 1921 has been to charge the associations and contract shippers
prices which left practically no margin, but on other material it has
aimed to make about 5 per cent.
TABLE 3
Compakative Statement of Supply Department,
1921 to 1931 Inclusive
Year
Supplies furnished
Net gains on supplies
1921
$1,105,316.51
1,496,766.62
2,096,449.56
1,764,939.62
2,149,007.77
2,116,658.18
1,864,327.11
2,133,413 88
1,766,478.01
2,369,122 09
$1,687,742.78
$15,290.38
1922
51,921 20
1923
67,624 22
1924
66,504 91
1925
34,898.15
1926
36,672.53
1927
46,919 85
1928
43,264.75
1929
31,334.76
1930
53,535.80
1931
$39,959.90
The purchasing activities have not only benefited growers financially,
but have also contributed to the development of a more uniform type of
supplies. The department has constantly shown a net gain at the end of
each marketing season. (See table 3.)
In spite of the advantages offered by these purchasing operations to
the members, the Exchange has had some difficulty in inducing all
the associations and contract shippers to buy their supplies through
the Supply Department. The Exchange-local contract provides that the
local may purchase supplies elsewhere if they can be obtained at lower
prices than the Exchange can quote.
Lumber Department. — In October, 1919, the Exchange took an im-
portant step when it established its own source for shook material and
boxes by purchasing a sawmill, a box factory, and 15,000 acres of timber
in Plumas and Sierra counties. The immediate purpose of this enter-
prise, in which the Exchange invested about $1,300,000, was to protect
its members against increased prices of shook material which threatened
to come at that time on account of the post-war boom in building con-
Bul. 557] Cooperative Marketing of Deciduous Fruits 57
struction. There were also, however, more fundamental reasons for this
step, namely, the desire to save for the fruit growers any profits arising
from the box business, and more particularly to place the Exchange in
a stronger bargaining position in dealing with the box manufacturers
for the purchase of a portion of its requirements.
The Exchange does not use all the timber which it cuts ; it has so far
used only about 50 per cent of it for the manufacture of boxes. The
remainder, consisting of higher or lower grades than are ordinarily
used for boxes, has been sold in the open market. The Lumber Depart-
ment has furnished about 25 per cent of the shook material requirements
of the Supply Department. In 1930, the operations of the box factory
were increased to the point where at least 33 per cent of the required
shook is manufactured within the organization.
In the first five years the Lumber Department realized high earnings.
The subsequent depression in the lumber market decreased its earnings.
Nevertheless, a surplus was made even in the very unfavorable year
1930. In addition to the timber bought in 1919, the Exchange has pur-
chased options on timber in neighboring districts which will enable it to
fill its requirements for the next forty or fifty years.
Standardization Department. — The need for standardization was
early recognized among the members of the Exchange, but little progress
was made during the first few years. Some of the members participated
in a movement for the standardization of fresh fruit around 1912. This
general movement led to the drafting of a bill for standardization in
1914, and to the enactment in 1915 of the first Standardization Act for
California fruit. However, progress was too slow to suit the Exchange
officials who recognized the importance of meeting increased eastern
competition with quality. The Board of Directors in 1923 decided to set
up a special department to carry on this work among its members.172
In 1925 the Board decided that the Blue Anchor brand should be used
only on first-quality fruit shipped by the Exchange and that its use
should be restricted to those associations or contract shippers who were
willing to abide by the special rules laid down by the Standardization
Department.173 At the same time it was thought advisable also to estab-
lish an eastern inspection service for the Blue Anchor brand and other
brands handled by the association. Such inspection was to be carried out
under the immediate supervision of the Exchange.
The Standardization Department has established standards, regu-
lated the use of brands, recommended and assisted in the establishment
i"2 California Fruit Exchange, Annual Report 1922:2. 1922. (Mimeo.)
i^s California Fruit Exchange, Annual Report 1925:7. 1925.
58 University of California — Experiment Station
of community packing houses and the perfection of grading equipment.
It has endeavored to do away with the multitude of brands, and has
encouraged the adoption of pooling by local associations. This work has
been made possible through the cooperation of local boards of directors
and packing-house managers. The Blue Anchor standards are main-
tained by a group of trained inspectors who operate under the direction
of the head of the Standardization Department and who are on the
payroll of the central Exchange.
During the past several years the Standardization Department has
not confined its work to questions of standardization. It has also given
consideration to legislative matters of interest to the Exchange or its
members, and more recently has given advice to the growers regarding
their future planting. The General Manager in his report for 1930
stated :
Despite the fact that this Standardization Department was created for the purpose
of enabling the Exchange to encourage growers in the better packing and grading of
their fruits, the increase in membership in the Exchange, together with the increased
volume of business, has necessitated the enlargement of the scope of the work origi-
nally allotted to the department. We now find the department actually a field con-
sultation department, carrying its work also into the formation of new associations.
A complete survey has been made throughout the state on a statistical basis, which
now enables the Standardization Department to intelligently recommend or dis-
courage the planting of certain varieties of fruits in certain sections.174
Traffic Department. — This department of the Exchange takes care of
all matters which have to do with the transportation of fruit. It files and
handles railroad claims, deals with general transportation problems, and
handles diversions, the supply of refrigerator cars, and other related
matters. According to the 1930 report of the General Manager, the total
claims collected by this department from the railroads during the last
ten years have amounted to more than $1,500,000. The services of this
department have doubtless also led to increased care on the part of the
carriers in the handling of the fruit.
Insurance Department. — The matter of insurance was first given con-
sideration in the Exchange in 1919. At that time, a plan was proposed
for the establishment of a mutual insurance system for the packing
houses associated with the Exchange. However, nothing was done at
that time to carry out this proposal. The question was again raised in
1921, but no decisive action was taken until 1929, and the Insurance
Department was not established until 1930. 175 The Insurance Depart-
ment handles both fire and compensation insurance.
174 California Fruit Exchange, Annual Report 1930:9. 1930.
its Blue Anchor 8(7) :19. 1931.
Bul. 557] Cooperative Marketing of Deciduous Fruits 59
Marketing Contract. — The contract between the Exchange and the
local associations is of the agency type. The contract used for some years
prior to 1932 said :
The party of the first part [the local] hereby appoints the said Exchange as its
sole marketing and selling agent for all deciduous fruits under its control (except
such fruit as shall be sold for cannery purposes and ripe fruit), for which the
Exchange shall deduct from the growers' account sales seven (7) per cent of the
gross receipts, in full compensation for such service, including eastern brokerage,
non-local telegrams and telephones and all other expenses incurred by the Exchange
in doing so.
A new contract, adopted at the beginning of the 1932 crop season,
though still of the agency type, contains distinctly different and some-
what novel wording. Paragraph 2 reads :
Exchange shall have the exclusive right to market all of said deciduous fruits
and grapes and first party [the local] shall deliver possession of the same to said
Exchange for that purpose.
In drawing up the new contract an attempt was made to specify more
simply and definitely the obligations of the two parties. The legal pro-
cedure arising out of a misunderstanding with one of the local associa-
tions brought out the fact that the old contract was vague on a number
of points. One of these points was on the interpretation of the exemption
in regard to "ripe fruit." Hence the new contract omits reference to ripe
fruits in the paragraph quoted above but covers it in a later paragraph
by excepting from the contract fruit too mature to permit shipment
under refrigeration to points over 100 miles distant from first parties'
loading station.
Another point at issue in the above-mentioned case was the right of
the Exchange to withhold the local associations' share of the various
patronage dividends. The new contract therefore states that "Said com-
missions shall be the sole property of the Exchange, it being agreed that
its marketing of said fruits and grapes represents a full and complete
consideration for said commissions."
The new contract specifies definitely that the local "shall be entitled
to patronage dividends ('withholdings repayable')" only on condition
that it "fully and faithfully complies with all of the obligations."
The contract is automatically renewed from year to year unless can-
celed by either party by written notification on or before December 31
of any year. The value of the annual withdrawal privilege was ques-
tioned by the manager in his report for 1927. He said : "Owing to the
fact that in recent years growers have been inclined to treat their agree-
ment lightly, it has been my thought that it might be well to consider
60 University op California — Experiment Station
lengthening the period of the contract from one to three years."176 The
new contract, however, has continued to use the year-to-year self -renew-
ing feature.
Financing. — Soon after the Exchange was organized it was found
that its need of capital was much larger than anticipated. It was often
necessary to make advances in order to hold members and in some cases
even to release growers from their obligations to independent fruit com-
panies.177 Additional money was required to help local associations build
loading and packing sheds and to carry on educational work. While the
organization was able to borrow money from the banks, the latter were
not willing to lend money on notes of the Exchange alone. They fre-
quently required the directors, personally, to endorse such notes.
The Exchange found itself faced with a large debt by 1907 chiefly
because of the losses sustained in connection with the policy of rapid
expansion which was followed at the outset. In order to remedy the
situation, the banks proposed that the Exchange give up its nonstock
character and reincorporate as a capital stock association. This proposal
was carried into effect at the beginning of 1907. 178 The new organization
had an authorized capital of $100,000, divided into equal shares of $100
each. In order to eliminate the danger of control by a few persons, no
individual or organization was allowed to hold more than 10 shares. In
1918, this limitation was reduced to 5,179 and when new by-laws were
adopted in 1920 the number was further reduced to 2 shares.180 By 1912,
capital stock amounting to $40,100 had been issued. At the end of 1930,
the amount of outstanding stock was $81,200. It was early advocated
that each local association should purchase a share of capital stock.
Many local associations have followed this suggestion, so that today
practically all of them own 1 or 2 shares.
So far as dividends on capital stock are concerned, it was provided in
1907 that, first, a dividend of 6 per cent should be paid out of the net
earnings of the Exchange, and, secondly, that after 20 per cent of the
net earnings was credited to a reserve, one-half of the remainder should
176 California Fruit Exchange, Annual Eeport 1927:17. 1927.
177 "To a larger extent than was counted upon, we found the grower tied up
with loans from fruit companies, so that they were not free to take their business
where their inclination led." From the 1907 report of A. E. Sprague, General
Manager of the Fruit Exchange. See also: Sprague, A. E. Work of California
Fruit Exchange. Twenty-sixth Fruit Growers' Convention, Proceedings, p. 55. 1901.
178 The reorganization meeting was held February 19, 1907. Walker, W. C. A
growers' marketing agency. Thirty-sixth Fruit Growers' Convention, Official Eeport.
p. 102. 1909.
179 Annual meeting of the California Fruit Exchange, January 18, 1918.
iso Minutes, adjourned meeting of Board of Directors of the California Fruit
Exchange, March 25, 1920. p. 363.
Bul. 557] Cooperative Marketing of Deciduous Fruits Gl
be paid to the growers as an additional dividend on stock, the other
half to be distributed in the form of a patronage dividend. This arrange-
ment resulted in very high dividends on stock in 1907 and 1908. In the
latter year the dividend was 32^ per cent. Because some considered it
undesirable for a cooperative organization to pay such high dividends
on capital stock it was provided early in 1909 that one-fourth instead of
one-half of the above remainder should be distributed as an additional
dividend on capital stock, and the other three-quarters of the remainder
distributed as a patronage dividend.181 In 1910 dividend provisions
were again changed.182 After payment of a regular dividend of 10 per
cent on paid-up stock, and adding to the reserve fund 10 per cent of
the net earnings, all the remainder was to be paid as a patronage divi-
dend. In 1922, in order to comply with the provisions of the Capper-
Volstead Act, the regular dividend was further reduced to 8 per cent.
There was little opportunity to create a reserve prior to 1907. The
value of a strong reserve was, however, recognized very early. When the
Exchange was reorganized in 1907, provisions were made for quickly
developing a substantial reserve. From 1907 to 1909, 20 per cent of the
net surplus was set aside ; from 1910 to 1911, 10 per cent ; and from
1912 to 1916, 15 per cent. As a result of this policy, the Exchange had
acquired a reserve by 1917 equal to nearly one and a half times the
amount of the paid-up capital.183
The accumulation of so large a reserve led to a change in the financing
system in 1917. A committee consisting of J. J. Brennan, F. B. Mills,
J. L. Nagle, and G. H. Cutter was appointed to work out a new plan.
This committee recommended: First, the establishing of an operating
fund ; secondly, the placing of this operating fund on a revolving basis ;
and thirdly, the refunding to growers at once of portions of their con-
tributions to the reserve which had been built up since 1907.
The plan submitted by the committee was adopted at the stockholders'
meeting of the Exchange held on January 8, 1918. It was also decided
at that meeting that the first refund of contributions to the reserve
should be made immediately, covering the amounts withheld during the
years 1907 to 1911. The newly created operating fund which is called a
"Withholdings Repayable" fund was to receive first, any saving from the
7 per cent charge made by the Exchange on all fruit handled ; secondly,
the amount accrued in excess of the cost of supplies handled; and
i8i Amendment to Article XIX of by-laws adopted at annual meeting of the
California Fruit Exchange, January 12, 1909.
182 Amendment to Article XIX of by-laws adopted at annual meeting of the
California Fruit Exchange, January 11, 1910.
iss Nagle, J. L. Fiftieth Fruit Growers' Convention, Official Keport. p. 12. 1917.
62 University of California — Experiment Station
thirdly, the sums flowing to the Exchange from any other sources. The
Withholdings Fund reached its maximum in 1929 when (December 31)
it stood at $1,870,276.72.
The possession of such a large operating fund has placed the Exchange
in position to reach out for increased business both on the shipping side
and on the supply side. Moreover, it has placed it in position to borrow
large sums at commercial banks on unsecured corporation notes.
Table 4 gives the yearly status of this "Withholdings Repayable," or
revolving fund, from its beginning. The payments from amounts in the
fund have varied from year to year. Likewise there are accounting ad-
justments from year to year in some of the items. It will be noticed that
with the decline in the volume of business in 1931 the additions to the
fund fell off. This situation was aggravated in 1932. In order to meet the
new problem the Exchange in 1931 modified its plan by setting up a
reserve of one-half of one per cent of its gross sales.184 This is presumably
to supply a more permanent reserve than is furnished by the revolving
fund.
It has repeatedly been suggested, especially since 1925, that the Ex-
change return to the status of a nonstock association. The motive behind
this movement was probably the desire to make the Exchange a mem-
bership association and to bring the organization more in legal accord
with the cooperative practices which have been developed in the Ex-
change in spite of the existence of certain privileges of the stockholders
under the law. No steps have been taken to effect the proposed change.
When the Exchange was reorganized into a stock association in 1907,
the change was made primarily because the banks asked for it. They
wanted to shift the burden of their loans and to obtain greater security.
So far as this reason is concerned, it has lost its importance since the
capital stock of $80,000 actually issued is negligible when compared
with the size of the operating fund accumulated by the Exchange and
its annual business ranging between $14,000,000 and $19,000,000 in
recent years.
Patronage Dividends. — The system of distributing patronage divi-
dends has been described on page 60. These patronage dividends were at
first paid in one sum at the end of the marketing season. Prom 1912 to
1917, the Exchange followed the policy of distributing the dividends in
two parts, the first payment being made on January 1 ; the second pay-
ment on August 1 of each year. The principle of this method of distri-
184 The Exchange actually had sufficient contracts at the beginning of the 193]
season to give it a volume of 20,000 cars. Because of crop and business conditions
only 10,864 were shipped. California Fruit Exchange, Annual Report 1931:21. 1931.
But,. 557] Cooperative Marketing of Deciduous Fruits
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64 University of California — Experiment Station
bution was later taken over into the system of the operating fund, though
the times of payment have varied.
In making refunds from receipts of a given year, the following method
has been employed in late years. The income from trading operations,
and other sources (other than commission on selling) is subtracted from
the expenses of operation.185 The remainder, spoken of as "net cost of
operation," is subtracted from the gross income obtained from the sell-
ing commission of 7 per cent. Out of the remainder the patronage divi-
dends have been declared. Between 1920 and 1931 these have varied
from 3 per cent to 5 per cent of gross sales.
It has been suggested that the charge of 7 per cent of sales be de-
creased. One of the main reasons for not acting on the suggestion is that
by charging the prevailing commercial rate the grower is more easily
shown how much he has saved by cooperative marketing.186
The Exchange has to meet an extensive demand for credit from its
local and contract shippers. It is asked to make advances for the financ-
ing of production, harvesting, and purchasing of supplies, the establish-
ment of marketing facilities and many other things. The advances made
by the Exchange have frequently reached very high figures.187 Some-
times large amounts had to be carried over to the next year.
The advances are secured by the withholdings of the Exchange in the
operating fund. They are paid back by means of deductions made from
the fruit sold through the Exchange and in some cases they enable the
members to get their necessary supplies without any outside borrowing.
After the fruit is sold, returns are made by the Exchange, usually
within twenty-five days. No individual grower accounts are kept by the
Exchange except with contract shippers. This is done by the local
associations. Returns are made by the Exchange in bulk to the several
associations and distributed by the latter to the grower members.
The Exchange has had a good influence on the financial policies of its
local units. It has advised them to create reserve funds as a precaution
against hard times and as a means of gaining a good standing with local
banks. Following its recommendations, many local associations have
185 By-laws of the California Fruit Exchange, Article XIX, p. 12. 1933.
186 Haight, L. S. Organization and orjeration of the California Fruit Exchange.
American Cooperation, 1928. 1:194. 1928.
187 In his annual report for 1929, the General Manager pointed out: "It becomes
necessary during the peak movement of our fruits to advance to our associations
and members throughout the state various sums aggregating approximately three
million dollars. These advances are made only when they are surrounded with
:m I equate security. At the end of the present season, we rind the carryover from
such advances to be less than #50,000." California Fruit Exchange, Annual
R< pert 1929:10-17. 1929.
Bul. 557] Cooperative Marketing of Deciduous Fruits 65
adopted the revolving fund system of financing themselves through
withholdings. In cases where such a withholding fund is in use, the
returns received from the Exchange may not be paid back in full
immediately, but part may be held over in the local association a certain
period of time in order to be used for the financing of its operations, the
extension of credit to members, and the establishment of marketing
facilities.
It has long been pointed out that the Exchange could substantially
increase its membership and volume of business if it were in position to
finance growers who now depend upon advances from private firms. The
suggestion was made a few years ago that the Exchange establish a
finance corporation for this purpose. A plan was actually worked out in
1931 in collaboration with governmental authorities according to which
the Federal Farm Board was to supply 60 per cent of the necessary
capital and the Exchange 40 per cent. Both sums were expected to be
used as a basis for borrowing from the Intermediate Credit Bank. After
a careful consideration of the plan, the Exchange came to the conclusion
that it was inadvisable to set up such a credit corporation at that time.
One reason for its rejection was that the Intermediate Credit Bank re-
quired that in case of loans on perishables the accounts be liquidated
every year. Another reason was that, in case a deficit occurred, it would
have to be met out of the capital impounded by the Exchange.
Results of Exchange Operations. — Starting with no local units to
federate, the leaders of the California Fruit Exchange have built up a
strong state-wide marketing organization of the exchange, or federated
type, which is grower-owned and controlled and unites about 7,500 pro-
ducers of fresh deciduous fruits. The business experience it has gained
over a period of more than thirty years and the sales machinery it has
developed in the East and abroad give it a good basis for the further
development of its selling operations. The Exchange has built up a
substantial supply business which has been of great benefit to its mem-
bers, particularly by virtue of the strategic position gained in the
shook market.
In its endeavor to follow a sound financial policy it has, since 1907,
built up a substantial reserve and created an operating fund which has
placed the Exchange in a strong financial position.
In addition, the Exchange has fostered the standardization of the
fruit of its members through its efficient Standardization Department,
has built up a high reputation for its "Blue Anchor" brand, has im-
proved fruit transportation conditions, and recently has extended its
services into the field of insurance.
66 University op California — Experiment Station
The organization has shown its willingness to follow recognized
cooperative principles. This is evident by the way in which it has limited
its interest payments on capital, by the steps taken for the improvement
of democratic control, and by its general adherence to the principle of
operation on a cost basis. Furthermore, the Exchange has cooperated,
both formally and informally, with various agencies seeking to bring
about improvements in marketing.
Competitors of the California Fruit Exchange. — Shortly after the
Exchange was established, the independent shippers also banded to-
gether and formed a marketing organization, the California Fruit Dis-
tributors. This organization included substantially the same group of
shippers as had the California Fruit Growers' and Shippers' Associa-
tion. An important reason for the establishment of this agency was the
desire on the part of the fruit-shipping companies to lessen the keen
competition which had raged among them during the preceding years.
Another reason was the need of meeting the competition of the Exchange
and preventing it from spreading its influence among their own patrons.
The organization was established in May, 1902, with headquarters at
Sacramento. The plan of organization and operation provided that it
should be a stock company with shares of only nominal value, and that
the members should market all their deciduous fruit suitable for eastern
shipments through this common agency. No individual sales were to be
made. Instead, the California Fruit Distributors was expected to dispose
of the fruit in its own name, either at auction or by f .o.b. sales. Further-
more, the organizers intended to appoint eastern representatives and
to take steps to increase the outlets by expanding the existing markets
and finding new ones. Although the agency was to take charge of the
handling of all the fruit in the East, each member was allowed to arrange
for his own inspection at places where the fruit was to be sold at auction.
In order to cover the expenses of the organization, it was decided that
$10 should be charged for each car plus 5 per cent of the sales receipts
for f.o.b. transactions, and 1 per cent of the sales receipts in addition to
the auction charges for auction sales.
A considerable number of difficulties manifested themselves when
the attempt was made to bring the various independent shipping firms
together. Referring to these difficulties, Alden Anderson, the first
General Manager of the organization, stated in 1903 :
The formation of the California Fruit Distributors was not an easy matter. Some
firms, because of location or superior packing on their part or better carrying
quality of their fruit, enjoyed advantages not common to others. Some of them
Bul. 557] Cooperative Marketing of Deciduous Fruits 67
believed that if they could keep on with prevailing methods for a short time they
could force their competitors out of business and then would have the field entirely to
themselves, while all the time they would likely be losing money for all concerned.^*
The various firms which joined the California Fruit Distributors
during 1902 were : Frank H. Buck Co. ; Porter Bros. ; Earl Fruit Co. ;
George D. Kellogg ; Schnabel Bros. Co. ; Producers Fruit Co. ; Pinkham
& McKevitt ; The Alden Anderson Fruit Co. ; Penryn Fruit Co. ; and A.
Block Fruit Co. In the next year, the California Fruit Exchange like-
wise became a member of the distributors but it belonged to this
association of dealers for only two marketing seasons.
According to its by-laws the California Fruit Distributors was gov-
erned by a board of directors consisting of eleven members and a board
of managers comprising five members.189 The latter was charged with the
task of directing the shipments, deciding on methods of sale, and naming
the prices. At the beginning it met weekly. In 1913, it was ruled that the
executive committee should meet daily during the shipping season.
Actual operations were carried out by a general manager. Alden
Anderson held the managerial position until 1909. F. B. McKevitt was
manager until 1913, in which year Chas. E. Virden followed him. For
the 1920 and 1921 marketing seasons W. J. Charlesworth acted in this
capacity for the distributors, and from 1922 on, Wilmer Sieg.
For a number of years the California Fruit Distributors handled a
large amount of fresh fruit. It started out with control of over 80 per
cent of shipments made from California. But its influence gradually
declined while that of the California Fruit Exchange and the unorgan-
ized independent firms increased. By 1917, its control had dropped to
below 50 per cent, and by 1927 the organization handled only about 20
per cent of the fresh fruit shipped out of the state. Like the California
Fruit Exchange, the California Fruit Distributors maintained its own
salaried agents at important points in the eastern markets.
As early as 1910, the California Fruit Distributors decided to carry
on an advertising campaign in the eastern markets. It was successful
in increasing the number of outlets for carload shipments. Apart from
188 Twenty-ninth Fruit Growers' Convention, Official Eeport. p. 54. 1903.
189 The members of the first board of directors were : Frank H. Buck, of Frank
H. Buck Co. ; James S. Watson, of Porter Bros. ; W. E. Gerber, of Earl Fruit Co. ;
Geo. D. Kellogg; A. H. Schnabel, of Schnabel Bros. Co.; H. A. Fairbank, of Pro-
ducers' Fruit Co. ; Alden Anderson, of Alden Anderson Fruit Co. ; Frank B. McKevitt,
. of Pinkham & McKevitt; A. C. Short, of Penryn Fruit Co.; H. E. Butler, of Penryn
Fruit Co.; and Wm. F. Pickstone. Frank H. Buck was made President; W. E.
Gerber became first Vice-President; A. C. Short, second Vice-President; Alden
Anderson, Secretary; and H. A. Fairbank, Treasurer. The first board of managers
consisted of A. J. Hechtman, of Porter Bros. ; George B. Katzenstein, of Earl Fruit
Co.; Frank B. McKevitt; George D. Kellogg; and A. H. Schnabel.
68 University of California — Experiment Station
these services in the field of selling, the agency also helped its members
in other ways. It operated a Purchasing Department for the purpose of
reducing the cost of supplies needed by its members. Furthermore, in
1913, it set up a Traffic Department for the collection of railroad claims
and the better settlement of other matters pertaining to the transporta-
tion of the fruit of its members.
After the 1921 marketing season, a number of shippers who had be-
longed to the organization left the California Fruit Distributors and
set up an organization of their own, the California Deciduous Fruit
Companies. This group consisted of the following companies : Newcastle
Fruit Company, Silva-Bergtholdt Fruit Company, Placer County
Mountain Fruit Company, United Fruit Company of California, James
Fruit Company, and the Penryn Fruit Company. Being small shippers
and mainly interested in the marketing of fruit produced by their own
members, these concerns felt that the policy of the large companies in
the California Fruit Distributors did not always harmonize with their
own interests.
This split caused a decided decrease in the strength of the California
Fruit Distributors. In view of its occurrence the California Fruit Ex-
change henceforth faced two main rival concerns. The former organiza-
tion discontinued its operations at the end of 1927. The California
Deciduous Fruit Companies, which at one time had as many as seven
members, consisted of only two agencies during the 1931 marketing
season.
The following reasons led to the decline and disappearance of the
California Fruit Distributors: (1) Some of the smaller member firms
believed that their interests were not adequately considered by the large
firms which dominated the organization ; (2) it was difficult to convince
the many new firms which were entering the shipping business, espe-
cially in fresh grapes, of the value of the organization ; (3) some of the
firms felt that they could get many of the benefits of the organization
without joining; (4) the price policy of the California Fruit Dis-
tributors was undermined by outsiders; (5) claims were made that
members of the organization themselves were cutting prices and selling
directly on their own account; and (6) the growth of the California
Fruit Exchange.
Bul. 557] Cooperative Marketing op Deciduous Fruits 69
LOCAL AND REGIONAL COOPERATIVE DEVELOPMENTS
Local units had been recognized and urged as a desirable foundation
for a state-wide cooperative marketing system at least since the move-
ment for the establishment of the California Fruit Union in 1885. Each
of the numerous efforts to form state cooperative marketing organiza-
tions led to the discussion of marketing problems. Each in turn led to
the formation of local associations here and there in the various decidu-
ous-fruit sections. Sometimes these were formed with the expectation
that they would be local units in a larger organization. Perhaps even
more they were formed to solve local marketing problems.
The California Fruit Union made some efforts to establish local
associations and the formation of some of those which were organized in
the second half of the eighties should be accredited to its activities.
However, these efforts of the Union did not proceed very far partly
because of the apathetic attitude of the growers themselves, and partly
because in some communities the leading growers were also large ship-
pers and were therefore not interested in creating local associations at
places where they were running their own shipping businesses along
with their production units.
Up to 1893, the last active year of the California Fruit Union, local
associations had been formed in at least a dozen counties including
Sacramento, Napa, Santa Clara, Alameda, El Dorado, Solano, Mariposa,
Yolo, Shasta, Placer, Sutter, Yuba, and San Diego.190 Some of these
associations were established on a county basis, others around given
shipping centers. Most of these lived only a few seasons, often only a
single season. In many cases the first organization was sooner or later
followed by a second or even a third enterprise.
The locals were usually formed for the purpose of assembling, pack-
ing, and selling the products of their members in the eastern markets as
well as in the nearby markets on the Pacific Coast. In some cases, and on
part of their business, they used the sales service of the California Fruit
Union, and in other cases, they worked independently selling to or
through such of the private shipping firms as made satisfactory offers.
Some of them took up canning and drying as well as the assembling,
packing, and selling of fresh deciduous fruits. Furthermore, a number
of them purchased supplies needed for packing either fresh or cured
fruits.
190 According to isolated references to the organization and operation of specific
associations. See index of the Pacific Rural Press of this period. Many local associa-
tions doubtless escaped mention even in the local press.
70 University of California — Experiment Station
With very few exceptions the local fresh-fruit organizations which
were formed in the eighties and nineties in northern and central Cali-
fornia had passed out of existence by 1900. The local cooperative move-
ment, therefore, suffered a decided setback. But the coming of the
California Fresh Fruit Exchange in 1901 gave new impetus to local
group action, and it was partly due to this new impetus, and partly to
the continuous organizational and educational work of the Exchange
that the local cooperative movement has grown since that time among
deciduous-fruit growers.
In the course of this new period, local cooperatives for fresh fruit
continued to spring up independently. Some of them joined the Ex-
change immediately, some later, while others contracted with private
marketing organizations for the shipment and sale of their fruit. All
in all, however, the number of fresh-fruit locals which stayed outside
the Exchange has been small.
It is obviously not practicable to discuss in detail the history of each
of the several hundred local associations that have been formed during
the past sixty years. It seems worth while, however, in order to indicate
the nature of the development, to discuss a few examples in some detail,
including a few regional groups.
Florin Fruit Growers' Association. — The Florin Fruit Growers' As-
sociation, formed in 1889 and incorporated in April, 1890, is the only
local formed in the second half of the eighties which has continued its
operations up to the present time. It was organized under the influence
of the Florin Grange and perhaps the California Fruit Union,191 and
was a successor to an earlier cooperative association, the Fruit Growers'
Association of Florin, which had been organized as early as 1877. 192 The
Florin Fruit Growers' Association was formed as a nonstock association
i9i H. A. Fairbanks, secretary of the California Fruit Union at that time, reports
attending an organization meeting and advising with those interested in its forma-
tion. He recalls specifically James Totell, who is known to have been at the first
meeting. Interview, June, 1932.
192 On May 18, 1889, the Florin Grange called a meeting to discuss the advisability
of shipping fruit cooperatively during the coming season. At a meeting of fruit
growers held on June 1 the association was formed and the by-laws of the Florin
Fruit Growers' Association adopted as a whole. The by-laws are given in full in:
Minutes of Board of Directors, p. 3.
The incorporation papers were not filed until April 9, 1890. Records in Court
House, Sacramento, California.
No information has been obtained concerning the Fruit Growers' Association
of Florin except that contained in the by-laws as adopted by the new association,
and that contained in the articles of incorporation filed in the Court House,
Sacramento, March 13, 1877. The Association had an authorized capitalization of
$10,000 divided into shares of $10 par value.
Bui,. 557] Cooperative Marketing of Deciduous Fruits 71
with, a membership fee of 50 cents. 1<K! About 70 members belonged to it
during the 1891 marketing season.
The Association shipped grapes primarily, but also handled berries
and cherries during its first years of operation. It became affiliated with
the California Fruit Union, and, after the Union disappeared, it made
Porter Bros, its agent for Chicago, Minneapolis, Omaha, New York, and
Boston, and appointed another agent for the Philadelphia market. In
1896, it sent one of its members to Oregon and Washington to handle the
strawberry business in that territory, and in 1898 it established a branch
house in Sacramento.
Apart from the collection of a membership fee, its early method of
financing consisted of a charge of 1 per cent on the sales receipts and an
additional charge of $1.00 a ton on all fruit. The association paid patron-
age dividends from the beginning. That it also devoted some attention
to the accumulation of a reserve is evident from the following resolution
which was adopted at its annual meeting in January, 1895 :
Resolved that all rebates which have usually been divided at the end of the year,
and paid to the members in cash shall be divided as usual, but shall be kept by the
association, and placed to the credits of each individual member in the book kept
for that purpose and shall be known as the "Sinking Fund" which said sums shall
bear interest at the rate of six per cent per annum and be paid to members at the
end of each year. That said profits, rebates, etc., shall accumulate year after year
till such time that the Directors of the Association think the Association has funds
enough — that when a member severs his, or her connection with the association then
the Directors shall pay to the said member all moneys due him or her less interest
for the year in which he leaves, if before the end of the year.i94
The Florin Fruit Growers' Association became affiliated with the
California Fruit Growers' and Shippers' Association early in 1895,
though nothing is known of the nature of its participations in the clear-
ing house for fresh fruits operated by that organization. In 1903 it
became a member of the California Fruit Exchange and has since then
shipped its fruit through that organization.
Newcastle Fruit Growers' Association. — One of the typical local asso-
ciations of the California Fruit Exchange, the Newcastle Fruit Growers'
Association, may be briefly described. This association, it will be remem-
bered, became one of the first members of the Exchange. It was formed
in April, 1901, as a result of the early organization work of the first
193 This fee was raised to $2.50 in 1890, to $10.00 in 1897, and is $25.00 today.
This and other information concerning this association is from the minutes of the
Board of Directors. Courtesy of T. W. Venn, secretary.
194 Annual meeting of January, 1895, from the typed Minutes of the secretary
of the Board of Directors.
72
University of California — Experiment Station
executive committee of the Exchange.195 The organizers made it a non-
stock organization, and this form has been maintained, although pro-
posals were made in 1908, 1913, and 1916 to change the association into
a capital stock organization.1*
L96
TABLE 5
Growth of Membership and Business of Newcastle Fruit Growers'
Association, 1920-1931
Year
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
Member-
ship
74
86
103
111
115
120
128
140
154
135
134
147
Carload
shipments of
Association
484
536
606
865
718
877
949
867
1,007
1,218
1,623
1,350
Total cars
shipped from
Newcastle
1,748
1,821
2,042
2,547
1,948
2,358
2,712
1,999
2,299
2,030
2,705
2,061
Percentages
shipped by
Association
28
29
30
34
37
37
35
43
44
60
60
65
Gross sales
receipts
$ 1,005,993
945,547
778,931
1,124,001
1,089,415
1,302,777
1,177,765
1,390,014
1,366,711
2,049,710
2,021,371
$ 1,735,250*
* Estimate.
Source of data:
Minutes of meetings of Board of Directors of Newcastle Fruit Growers' Association.
Despite strong competition from independent shippers, the associa-
tion has constantly increased its membership and business. In 1901 it
had 17 members. In 1911 it served 46 growers and, by 1931, its member-
ship had reached 147. Its shipments in the 1914 season amounted to 333
cars, about 20 per cent of all shipments from Newcastle. In 1931 its
shipments comprised 1,350 cars, or 65 per cent of all Newcastle ship-
ments of that year. Table 5 shows the growth of membership and busi-
ness from 1920 to 1931.
Patronage dividends have been paid from the start to members who
195 The original meeting was held at Newcastle on April 7, 1901. C. H. Kellog
acted as chairman and T. J. Madeley acted as secretary. Sprague addressed the
meeting.
This was, of course, not the first association in this section. An association of
15 growers was mentioned in the fall of 1885 as having "handled many carloads
of fruit." (See: Pacific Eural Press 30:271. 1885.) The news items columns o? the
Pacific Rural Press and the California Fruit Grower contain numerous references
to meetings of local associations at Newcastle between 1885 and 1900. The writers
are not always careful to give correct names, hence it is difficult to trace the
history of any one, although a search of local newspaper files and court house
records would reveal interesting bits of local history.
1 •■»> This and later information obtained from Minutes of the meetings of the Board
of Directors.
Bul. 557] Cooperative Marketing of Deciduous Fruits 73
marketed all their fruit through the association.197 During the early
years there does not seem to have been any definite policy of building
a reserve out of earnings. The Minutes of the meetings of the Board of
Directors contain repeated references to difficulties in getting adequate
funds. It was not until 1913 that a definite policy seems to have been
adopted. At that time the Board of Directors was authorized to use one-
half of the net earnings for the purpose of building up working capital
until such time as a change in this policy should seem advisable. In con-
nection with this decision it was also provided that the members should
be given specific credit in a retained dividend account and that their
apportioned share should be payable in case of withdrawal or dismissal
from the association. This latter provision was, however, canceled at the
following annual meeting in December, 1914.198 The policy of building
up an adequate reserve was continued until, at the annual meeting in
December, 1920, it was decided to make it a revolving fund in accord-
ance with the plan developed by the California Fruit Exchange. This
revolving fund has grown rapidly and amounted to $170,740 in 1930.
An interesting development was the establishment of a field service
in 1924. In carrying on this field service it advises and assists the pro-
ducers in their growing, harvesting, packing, and grading activities.
The association undertook its first pooling operations in 1925 in its
packing house at Monte Rio. Prior to that time fruit had been sold and
accounted for as individual lots, often under separate brands. Since that
time the proportion of its fruit handled on a pooled basis has gradually
increased. A number of brands are used. The one chosen for the best
quality is the Covered Wagon brand which comes up to the require-
ments of the Blue Anchor label.
The Newcastle Fruit Growers' Association is one of the largest and
financially strongest locals of the California Fruit Exchange. It has
enjoyed good leadership and has also contributed in a large measure to
the leadership of the central organization. Its first manager was Gr. H.
Cutter, who afterwards became president of the California Fruit
Exchange ; its second manager was J. L. Nagle, who later became general
manager of the California Fruit Exchange ; its third manager, A. T.
Wortman, was placed in charge of the Supply Department of the Ex-
change in 1916. Furthermore, in 1926 its president, J. J. Brennan, was
also made president of the California Fruit Exchange.
197 The gains on the first year's business were $592. These were apportioned to
members on the basis of the value of fruit shipped. Gains on nonmembers' fruit were
to become "common property of the association." Minutes of the Board of Directors,
March 22, 1902.
198 Annual meeting of December, 1914, from the typed Minutes of the secretary
of the Board of Directors.
74 University of California — Experiment Station
COOPERATIVE MOVEMENT IN THE WATSONVILLE REGION
As early as July, 1894, a cooperative marketing association for the
handling of apples and other fruit was organized in the Watsonville
region.199 This association was called the Pajaro Valley Fruit Exchange.
It was established at the time when the drive for the creation of local
exchanges as a foundation for the desired state Fruit Exchange was
going on in California under the leadership of E. F. Adams and others.
Probably it was a result of this organizational work.
The Pajaro Valley Fruit Exchange was formed as a stock association
with headquarters in the city of Watsonville. Its authorized capital
stock amounted to $50,000, divided into 10,000 shares of $5 each.
Interest on this capital stock was limited to 8 per cent.
The organization operated for a number of years.200 It handled apples
as well as dried prunes. As far as its apple business is concerned, it
seems to have shipped through Porter Bros.
After the Pajaro Valley Fruit Exchange had gone out of business in
June, 1903, it seems that for a long time no cooperative association
existed in the Watsonville region. An attempt on the part of the Cali-
fornia Fruit Exchange in 1909 to build up cooperative units at Watson-
ville and Aromas was unsuccessful. In the following year, however, it
succeeded in setting up the Aromas Fruit Growers' Association, but no
information is at hand to indicate that this continued for more than a
season or two. The Exchange at various times repeated its efforts to
form an association at Watsonville, but apparently in vain, for it has
had no local at that point in recent years.
The idea of cooperative marketing again gained ground in the Wat-
sonville region in 1913. In that year, in several districts of the region a
number of fruit growers decided to grade, pack, store, and sell their
products together. Three local associations were formed. In 1914 two
more came into existence. The three associations which began to operate
in 1913 were established in the Corralitos, Casserly, and Carlton dis-
tricts. They were all nonstock associations. But the Loma Fruit Com-
pany, formed in 1914, and the Aptos Fruit Growers' Association, created
in 1915, were both built up on a capital-stock basis. Apart from this
199 Pacific Rural Press 47:460. 1894.
200 A news item indicates that it was expected to ship about 40,000 boxes of apples
in the season 1897. (Pacific Eural Press 54:308. 1897.) Another mention was found
indicating that it was shipping apples in March, 1898. (Pacific Eural Press 55:147.
1898.) In June, 1903, the stockholders decided to disincorporate and divide the
RBSeta valued at about $1,500. (Pacific Rural Press 65:407. 1903.)
Bul. 557] Cooperative Marketing of Deciduous Fruits 75
difference, all five associations showed many similar features in their
structure and plan of operation.
The development and experiences of the Corralitos Fruit Growers
Incorporated and the Loma Fruit Company are more or less typical of
other associations in the region. Of the five associations mentioned they
are, by the way, the only two that have remained in existence. The
Carlton association functioned only during the 1913 season. The Cas-
serly association was active until about 1922, and the Aptos until about
1925.
Corralitos Fruit Growers Incorporated. — As mentioned above, this
enterprise belongs to the group of nonstock associations which were
organized in 1913. It was incorporated under the California Non-Profit
Corporation Law of 1909. Its first name was Corralitos Fruit Growers'
Association, but in 1919 the name was changed to Corralitos Fruit
Growers Incorporated. The association's headquarters were at first in
Corralitos, but since 1916 in Watsonville.
It is interesting to note the early voting provisions. The members were
to exercise the voting power on the basis of one vote for each acre of
bearing apple trees. This provision was, however, not to be enforced
unless specifically demanded. On ordinary matters each member was to
have one vote.
Those orchardists who joined the organization had to agree that they
would market all their fruit through the association. According to the
contract in force since 1919, they are entitled to withdraw on or before
March 1 of any year. But no withdrawal is permitted unless the grower
has delivered his crop during at least three seasons.
The association has the right to market the products of its members
in its own name and under its own brands. In 1913 it adopted the Black
Cat label. Another label which it developed is the Medal Brand. At the
beginning it shipped on consignment, but since the fall of 1914 efforts
were made to develop f .o.b. sales. Since about that time the organization
has also pooled the apples of its members. At one time it operated pack-
ing houses at Corralitos, Aromas, and Watsonville. But since 1918 the
grading, packing, and drying of the fruit have been concentrated in
Watsonville.
During the first years of its operation the financing was accomplished
by the charges made against the members for the sorting, packing, dry-
ing, and selling of the fruit, by membership fees, and by loans from
commercial banks. When the association borrowed from the banks the
directors had to sign personal notes as security for the loans.
76 University of California — Experiment Station
During the first few years the association created no reserve. At the
annual meeting in 1916 it was decided to leave it to the option of the
individual members to take out the rebate or leave it in the organization
to draw interest. In the same year the by-laws were changed to the effect
that a reserve could be accumulated at the discretion of the Board of
Directors. The directors were authorized to postpone, whenever they
thought it advisable, the distribution of any surplus. At no time, how-
ever, were such withholdings to exceed the sum of $20,000. They were
to be passed to the credit of the members and treated as a loan with
interest at 7 per cent per annum. Furthermore, certificates of indebted-
ness were ordered to be issued to each member at the end of the fiscal
year showing the amount due to them on account of the money withheld.
In 1918 it was decided to change the organization from a nonstock
association to a capital stock corporation. It seems that the promoters
of this change thought the issuing of stock was a way of supplying the
association with cheaper capital, facilitating the borrowing of money
from the banks, and avoiding the payments of interest to people holding
certificates of indebtedness who were no longer members of the asso-
ciation.
The organization was authorized to issue capital stock to the amount
of $75,000 in shares of $10 each. It may limit the issuance of stock to
the number of acres of apple trees owned or controlled by the applicant
for membership. Of the authorized capital stock there were outstanding
on June 1, 1931, shares to the amount of $33,550. At the same time, the
association had accumulated a reserve of about $10,000. During the first
few years interest was paid on capital stock. This policy was later
abandoned.
During 1913 and 1914 the association comprised only orchardists in
the Corralitos district. In the spring of 1915 it was. however, decided to
take in growers from outside the district. Around 1924 about 60 growers
seem to have belonged to it. Dissatisfaction with returns led to some
withdrawals, leaving in 1931 only about 25 orchardists selling through
the association. The number of stockholders is larger.
The association handles some business for nonmembers, but makes
refunds only to members. It handles both fresh and dried apples and
has recently also sold some apples in frozen form.
In the early years it bought spray material and shook for its members,
but recently it lias furnished onlv boxes.
Loma Fruit Company. — This organization was originally a private
packing company which in 1914 was taken over by a group of orchard-
ists who wanted to sell their crops on a cooperative basis. They decided
Bul. 557] Cooperative Marketing of Deciduous Fruits 77
to form a capital stock association, and thereby deviated from the plan
of organization of those cooperatives which had come into existence the
year before.
The authorized capital was fixed at $50,000 divided into 500 shares.
The growers had to subscribe for them on the basis of 7 cents per loose
box for the normal annual production of apples in their orchards.
Instead of paying up the subscribed stock immediately they delivered
promissory notes and agreed that payments should be made by deduc-
tions from the earnings of the association due to them.
As in the case of the Corralitos association, the growers have to agree
to sell all their apples through the association. Any grower may, how-
ever, temporarily sell outside if he files a request with the association
prior to June 1 of any year. In such case he is expected to pay a main-
tenance fee by which he contributes to the overhead expenses on the
basis of the estimated production of packed boxes.
The association handles apples and pears in fresh or dried form and
has also recently gone into the business of packing frozen apples used
for pie making. As another sideline, it took up in 1924 the handling of
lettuce for another local association, the Watsonville Vegetable Growers.
In addition to a charge to cover the cost of grading and packing, it
charges 10 per cent commission on the gross sales price for selling. It
has sold largely through brokers.
The Loma association has two packing houses and an evaporating
plant. In connection with the packing of the fruit it also supplies the
necessary boxes, which it buys in the open market.
In the early years of its existence the association occasionally sent
cars unsold when this seemed to be advantageous. This policy has, how-
ever, been abandoned. Efforts have been made to increase the f .o.b. sales
as much as possible, with the result that today a large portion of the
fruit is handled on that basis. The apples from this region are now sold
mainly in the Los Angeles, San Francisco, and other California markets.
For some time the fresh fruit was pooled but the practice was dis-
continued. The main reason given for its discontinuance is that there is
too much difference in the quality of the fruit of the various growers.
The Corralitos association, however, has maintained the pooling of its
fresh fruit, as did the Casserly and the Aptos associations while these
were in existence. As far as dried fruit is concerned, the Loma Fruit
Company applies the pooling method.
Advances made by the organization during the last few years have
amounted to 10 cents a box, a rate which is held to cover the expenses of
picking and hauling the fruit to the packing house. Like the Corralitos
78 University of California — Experiment Station
association the Loma Fruit Company at first distributed all its profits on
a patronage basis and realized only after some experience that it was
advisable to accumulate a reserve fund. In 1918 the by-laws were
amended to provide that a charge of not more than 1 cent per loose box
of apples delivered should be made each year and be deducted from the
grower's returns in order to build up a reserve. At the same time, a
guarantee was created for all f .o.b. sales made by the association. The
Board of Directors was empowered to guarantee such sales and to make
any paj^ments resulting therefrom out of the reserve fund. In accord-
ance with this provision the association has built up what it calls a
"Guarantee Reserve Fund."
When the second packing house was bought in 1919 an assessment of
4 cents per loose box for all fruit delivered in 1919 and 1920 was made
in order to provide the money necessary for the purchase. The Loma
Fruit Company has not paid any interest on capital stock during recent
years.
The by-laws of the association provide for a Committee of Crop Esti-
mates which is entrusted with the task of inspecting the orchards of
stockholders or persons desiring to become members and to determine
what amount of fruit may be produced therein. Only about 25 growers
shipped through the association during the 1931 season.
Collaboration Between Cooperatives. — As early as 1913 an endeavor
was made to get the cooperative associations which had sprung up in
the various districts to work together. It was hoped that eventually a
joint agency would be developed because it was recognized that much
more could be accomplished if the growers would cooperate to that
extent. Some collaboration actually took place, but the idea of establish-
ing a joint marketing agency for the selling of the fruit and the
purchasing of the necessary supplies was never carried out.
The Corralitos and the Casserly associations bought shook together in
1915 and during the season of 1918 the same two organizations sorted,
packed, and sold their fruit jointly.
Reasons for Dissolutions. — From the above it is evident that coopera-
tive marketing among the orchardists in the Watsonville area has not
proceeded very far. The two cooperatives that are now functioning com-
prise only a small number of orchardists, and the business handled by
them represents a very moderate percentage of the total fresh fruit
shipped out of the area.
The reasons for the discontinuance of the Carlton, Casserly, and
Aptos associations are manifold. They include dissatisfaction arising
out of mistakes made at the beginning, high overhead costs arising in
Bul. 557] Cooperative Marketing of Deciduous Fruits 79
part out of decreased volume of business which followed early disap-
pointments or lack of support by growers, individualism, suspicion, and
insufficient knowledge of the principles of cooperative marketing.
One important additional factor which has retarded the development
of cooperative marketing in the Watsonville region is the position of the
independent packers who are mostly of Slavonian origin. Practically all
these packers bought apples on the tree. Later on they leased orchards,
and finally many of them have bought land with the result that they
control about 60 per cent or more of the production in the Pajaro
Valley.201 In addition many of the independent growers are of the same
racial stock and are predisposed to deal with the packers rather than to
cooperate.
SEBASTOPOL APPLE GROWERS' UNION
Organization. — Early in 1911, a group of growers of Gravenstein
apples in the Sebastopol region decided to organize a cooperative mar-
keting association. The immediate reasons for this decision were the
belief that the packers were making large profits ; the expectation that
the growers could share in these profits and increase their returns by
marketing their fruits themselves ; the belief that improvements in the
grading of the apples were desirable ; and the desire to obtain savings
by joint buying of supplies.
The Sebastopol Apple Growers' Union was formed as a capital stock
organization with an authorized capital of $50,000 which was later
extended to $200,000. Each share was to have a par value of $10. At
first, members were not allowed to own more than $50 worth of stock.
But this restriction was changed several times with the result that since
1920 a member may hold capital stock to the amount of $300. The stock
was allotted to the growers according to the fruit delivered and was
paid for by means of deductions made from the proceeds of the apples
marketed through the organization on the basis of 5 cents a box.
Policies. — The directors were at first elected for one year, but in 1918
it was arranged that five directors should be elected for two years and
four for one year, and that, thereafter, all directors should be elected for
two years. The original contract which provided that the growers had
to deliver all their fruit to the organization was to continue from year
to year. However, the growers were allowed to withdraw in any year
upon written or personal notice to the organization between February
201 In regard to the marketing practices of the independent packers in the Watson-
ville area, see: Stokdyk, E. A., H. E. Erdman, Charles H. West, and F. W. Allen.
Marketing California apples. California Agr. Exp. Sta. Bul. 501:108-112 and
120-121. 1930.
80 University of California — Experiment Station
10 and 20. A clause in the contract provided that in case the contract
was violated the grower was to pay the association 15 cents a box. This
rate was later increased to 50 cents.
The organization has followed the policy of selling mostly through
brokers in the carlot markets in the United States and Canada, and to
exporters in case of shipments to other countries. It has favored the
development of f .o.b. sales, and has endeavored to sell as much fruit on
this basis as possible.
At first, it made returns for the Gravensteins, which represent the
bulk of its business, in two pools. In 1920 it was decided to have only
one pool for the entire season. One reason for this change was that the
growers were inclined to pick and deliver immature fruit near the close
of the first pool because prices in the second pool were usually lower
than in the first. The adoption of the one-pool system did away with this
difficulty, but led to dissatisfaction among growers in the northern part
of the Sebastopol area where apples generally mature a little earlier
than in the southern part. These growers therefore felt that the one-pool
system deprived them of a price advantage which such earlier maturity
gave them. This dissatisfaction w7as later to be an important reason for
heavy withdrawals from the Union.
The volume of business of the Union grew constantly up to 1923 when
the Union controlled over 70 per cent of all the Gravensteins shipped
out of Sonoma County. In that year it shipped 1,051,765 boxes of apples,
of which 879,560 were Gravensteins. With the increase in the quantity
of apples handled by the Union, and the spread of its activities over a
larger territory, a need arose for more packing houses. By 1919 it
operated five packing houses, and by 1923 a total of eleven, which were
located as follows : two in Sebastopol, two in Santa Rosa, and one each
in Graton, Forestville, Molino, Sago, Barlow, Stoney Point, and Trenton.
Apart from selling for its members, the Union has also been engaged
in purchasing box shook, fertilizers, and spray material. In connection
with this latter activity, the Union in 1920 and 1921 considered taking
up the manufacturing of lime-sulfur spray. The matter was dropped,
however, at that time and has not been taken up again. When the Union
delivers fertilizer and spray material the members are given credit until
the proceeds of the crop come in. Payment is then made by deductions
from the returns.
In 1915 it was decided to create a reserve by charging 2x/2 cents a box
against all apples marketed through the Union. In connection with this
plan it was later provided that these deductions should be placed to the
credit of the different growers and that 6 per cent interest should be
Bul. 557] Cooperative Marketing of Deciduous Fruits 81
paid thereon. Early in 1919, the decision was made to issue capital
stock against the various amounts accredited to the members. Since that
time the Union has continued to finance itself by withholding from 2 to
10 cents a packed box and issuing stock for the amounts so withheld.
Under this policy the issue of capital stock increased until at the end
of 1923 shares to the amount of about $194,000 were outstanding. A
large portion of this money was used to build the necessary new packing-
house facilities.
Since 1924, proposals have been made in the Union to redeem the
capital stock held by nonproducers and to keep the stock in the hands
of members actually delivering in proportion to the amount of fruit
which they market through the Union. The first proposal of this kind
was made at the annual meeting in February, 1924. It was then recom-
mended to purchase immediately at par value any stock held by non-
producers, to create a fund for this purpose, and to reissue the stock to
growers. The proposal was adopted, but decisive steps to carry out the
proposal were not taken until October, 1927, when it was resolved to
create a revolving fund by deductions from the proceeds of sales. Fol-
lowing this, it was provided in December, 1928, that all stockholders
should be permitted to surrender their stock upon the following terms :
1. A price of $6 a share was to be paid in cash, the balance in certifi-
cates of indebtedness payable on or before five years.
2. Stock was to be issued to present stockholders who had delivered
apples during the 1927 and 1928 seasons to the amount accredited to
them in the revolving fund accumulated in 1927 and 1928.
It was further provided at that time that in succeeding years addi-
tional capital stock was to be issued against any deductions and that, in
the event the owner failed to deliver his entire crop to the association, he
agreed to surrender the new stock to the Union at $5 a share. Should a
nongrower acquire new stock the Union was to be entitled to buy it at
$5 a share.
This revolving finance plan has helped to readjust the holdings of
stock so that the stock is now distributed more nearly in accordance with
the quantities of apples delivered by the members. This change has,
however, not settled the controversy over the system of voting. The
demand for the one-man-one-vote provision is still active in the Union.
To arrive at a better solution it was proposed in 1929 to create a com-
bination of equal voting power with a tonnage vote, the latter to be
applied only in specific cases. But so far no action has been taken on this
proposal.
82 University of California — Experiment Station
It will be remembered that the restrictions on the number of shares
which any member may own were changed (page 79) so that finally
shares to the amount of $300 could be held by one owner. Partly because
of this a considerable amount of stock accumulated in the hands of a
small group of members who were heavy shippers, and who, by accumu-
lating their votes in the election of directors, were able to control the
organization. In 1923 it was said that although the Union had more than
500 members it was actually controlled by about 75. Those who were
dissatisfied with this situation asked that the Union be changed into a
nonstock association and that the voting power be put on a one-man-one-
vote basis. Although a majority of the members favored such a change,
the opposition was strong enough to maintain the capital-stock structure
when the question was taken up in 1923 and 1924.
Growth of Dissatisfaction. — The dissatisfaction which resulted from
the defeat of the one-man-one-vote plan aggravated the discontent
which had already developed over the abandonment of the two-pool
system. Other difficulties which the organization experienced around
1923 were the occurrence of congestion at some of the packing plants
during the height of the season, the demand on the part of many growers
that the Union take care of the culls, which it had so far failed to do, and
a certain amount of dissatisfaction among the members with the sales
system and management of the organization.
These grievances led to open agitation against the Union in the fall
of 1923. The returns for the crop of 1922 and 1923 had been relatively
poor. Smarting under low prices, many growers blamed the Union for
the poor returns. In September, 1923, a group of approximately 150
growers from Forestville, Graton, and Trenton assembled and adopted
the following resolutions :
First, Resolved that we will not submit to the present management of our
organization for another year.
Second, Resolved that our apples be sold through the California Fruit Exchange.
Third, Resolved that we go back to the two-pool system.
Fourth, Resolved that salaries and expenses be reduced where it can possibly be
done.202
In the midst of these troubles a committee of nine consisting of
orchardists, bankers, and merchants was appointed and charged with
the task of making a thorough investigation of the apple industry, and
to submit findings to the Union in order to enable it to overcome its
difficulties. This committee studied the marketing methods and other
802 Sebastopol Journal, p. 1. September 18, 1923.
Bul. 557] Cooperative Marketing of Deciduous Fruits 83
questions pertaining to the apple industry in California and in the
Pacific Northwest. Since some difference of opinion developed among
its members, two reports were finally submitted in December, 1923.
Among other things, the majority report recommended :
1. Instead of further developing the system of selling through
brokers, to sell all apples handled by the Union through the California
Fruit Exchange with the exception of those which may be marketed in
California and foreign markets (not including Canada) .
2. To contemplate the packing of an extra fancy apple and to con-
sider the employment of their own inspectors.
3. To start an intelligent system of advertising and to build up an
advertising fund for 1924 by setting aside 1 cent per box of Graven-
steins.
4. Not to return to the two-pool system abandoned a few years ago
for the reason that, in case of two pools, growers having a considerable
percentage of their crops in the first pool would reap only slight, if any,
benefits in actual returns ; that additional expenses would be incurred ;
and that a desire on the part of many growers would develop to hasten
into the first pool to the detriment of a high standard of picking and
packing.
5. To investigate the necessity, advisability, and practicability of
building one or more precooling and cold storage plants.
6. To adopt some particular and outstanding brand and to abstain
from using the present label until the season is well advanced and the
apples have attained a sufficient percentage of color to conform with
the label.
7. To change the organization to a nonstock association with a one-
man-one-vote system.
8. To investigate the possibilities of canning and drying cull apples.
The minority report, although not clear in its expression and appar-
ently influenced by personal feelings, recommended the maintenance of
the independent brokerage selling system rather than joining the Cali-
fornia Fruit Exchange. When the members were asked to vote on the
two reports, 7,192 shares were cast for the majority report and 7,515
shares for the minority report. Thus the followers of the minority report
won out by a very narrow margin. For some time it looked as if a com-
promise could be reached between the two almost equally strong groups.
A proposal was made to let the California Fruit Exchange handle 50
per cent of the volume of the crop packed by the Union and to sell the
84 University of California — Experiment Station
other half through brokers as before.203 The California Fruit Exchange
refused to handle less than the entire crop of apples controlled by the
Union.
As no satisfactory agreement could be reached between the dissenting
groups, a considerable number of growers, primarily the Forestville
group, left the Union and formed a cooperative organization of their
own. By this split the Union lost about 20 per cent of its former member-
ship and business. The occurrence of the split also led a number of
private firms to start shipping apples from the Sebastopol area, with
the result that the business was divided up more and more between
competing units. By 1926, the Union comprised about 400 growers and
controlled only about 35 per cent of the Gravenstein crop as compared
with 70 per cent in 1923.
In recent years the Union has gained back some of its loss in member-
ship and business. In the 1931 shipping season it served more than 500
members and marketed about 40 per cent of the Gravenstein crop
shipped out of Sonoma County.
THE GRAVENSTEIN APPLE GROWERS' ASSOCIATION
The group of dissatisfied growers which withdrew from the Sebas-
topol Apple Growers' Union in the spring of 1924 at once formed the
Gravenstein Apple Growers' Cooperative Association of Sonoma County
with headquarters in Forestville. As mentioned before (page 80), this
group consisted primarily of growers in the area in which apples mature
somewhat earlier, but included some from several other areas as well.
The new cooperative naturally adopted some of the recommendations
of the majority report of the committee appointed the previous year to
study the Union. (See pages 82 to 83.) Thus it was established as a non-
stock association with equal voting power for every member. Its by-laws
provided that the territory should be divided into districts and that
each district should elect one director.
Moreover the association immediately joined the California Fruit
Exchange, a line of action which the report had particularly recom-
mended to the Union.
Since the by-laws were drafted in anticipation of the connection with
the California Fruit Exchange, they deal with the marketing contract
to be effected with the Exchange. According to the stipulations in the
by-laws, the Board of Directors is empowered to make a contract for
203 The offer made by the Sebastopol Apple (irowers' Union to the California Fruit
Exchange also involved a reservation of the right to sell through brokers in New
York, Chicago, and certain other specified markets.
Bul. 557 J Cooperative Marketing of Deciduous Fruits 85
each year unless the majority of the members decides at a special meet-
ing to discontinue the marketing agreement. Furthermore, there is a
provision for the creation of a withholding fund after the pattern of
the withholding fund developed by the Exchange.
In its first shipping season the organization had only a little more than
60 members. By 1926, its membership had increased to about 165.
Approximately the same number of growers marketed their apples
through it in the 1931 season. During the latter season, the association
handled 262,000 boxes of Gravensteins representing approximately 20
per cent of all the Gravensteins shipped out of Sonoma County.
In the 1924 and 1925 shipping seasons, the apples were handled on a
weekly pool basis. In 1926, the crop was divided into two equal pools. In
order to avoid one of the difficulties encountered by the Union when it
operated on a two-pool basis (see page 80), the new association did not
determine length of the pooling period until the end of the marketing
season. The rush to get into the first pool was thus avoided. In some of
the following seasons, the association has operated on a one-pool basis.
In 1931, however, it went back to the two-pool plan.
The necessary financing is done by making deductions from the pro-
ceeds of sales at a rate determined from time to time by the Board of
Directors. On January 1, 1931, its Withholdings Repayable Account
amounted to more than $60,000. The membership fee of $10 provides a
negligible share of the necessary funds.
The organization has four packing houses, one each in Forestville,
Graton, Trenton, and Sebastopol. In 1931 its headquarters were moved
to Sebastopol.
THE CALIFORNIA GRAVENSTEIN APPLE GROWERS
Because of the split in the Sebastopol Apple Growers' Union in 1924,
cooperative marketing among the apple growers of the Sebastopol area
suffered a decided setback from which it has not yet recovered. In 1923
over 70 per cent of the Gravenstein apples were handled by one market-
ing organization covering the whole area, while since 1924 the per-
centage marketed cooperatively has been very much lower. By 1926,
the two cooperatives discussed above controlled scarcely 50 per cent of
the Gravenstein crop. At the same time, some 15 independent shippers
participated in the apple business as a result of the rift in the ranks of
the Union. The division of the business among so many competing units
attracted attention in the fall of 1926 when attempts were made to
explain the low returns for that year's crop.
86 University of California — Experiment Station
The discussions of the marketing problem which took place at that
time resulted in the appointment of 16 small committees in as many
communities. The members of these committees met in Sebastopol in
November, 1926, to consider ways and means of developing an improved
method of marketing. Out of this gathering grew a smaller committee of
16 which appointed a still smaller group of 5 for the purpose of working
out a plan for a new organization. Several plans had been proposed
during the preceding months. These centered around two main ideas,
namely, (1) that the growers should proceed alone and aim at the
perfection of their cooperative marketing system, or (2) that the
growers and independent marketing agencies should unite their forces.
In this committee work the idea of reconciling the two main coopera-
tive groups204 and of establishing one large cooperative enterprise was
soon given up. It quickly became clear that the Sebastopol Apple
Growers' Union would not join a new organization unless 90 per cent
of the crop were signed up. The committee did not consider it possible
to get such a degree of control because of the large acreage owned by
some shippers who could not be expected to join. The other main idea
was therefore followed, namely, the proposal that a combination should
be effected of cooperative growers and independent dealers. As a result
the committee drew up a marketing scheme which led to the forma-
tion of a new organization, the California Gravenstein Apple Growers,
the most essential feature of which was the establishment and operation
of a clearing house. This marketing scheme will be discussed in a later
section205 (see pages 112 to 116).
The idea of establishing one large cooperative apple marketing organi-
zation for the Sebastopol area was, however, not given up. It was revived
soon after the clearing-house plan had failed in its second season. The
immediate cause of the revival of this idea was the work of another
research committee, which had been appointed in the early spring of
1929 for the purpose of developing a better plan of operation than the
one which had been followed in 1927 and 1928. 206
In January, 1930, the committee brought forth its recommendations207
after expressing its belief that "the problems our industry faces can
only be met by cooperative grower effort" and that "a set-up including
204 There had also developed a few smaller cooperative groups. One of these, the
Sonoma Valley Apple Growers, was involved in these deliberations and in the re-
sulting organization.
205 See also : Stokdyk, E. A., H. E. Erdman, Charles H. West, and F. W. Allen.
Marketing California apples. California Exp. Sta. Bui. 501:105-107. 1930.
206 The following persons were on the committee: E. C. Winkler, Chairman,
A. W. Banks, B. E. Ohlman, Chas. H. King, and F. P. Bailey.
207 Santa Rosa Press Democrat, p. 1. January 26, 1930.
Bul. 557] Cooperative Marketing of Deciduous Fruits 87
cooperative and independent packers as in our existing organization is
unnatural and doomed to failure as there is a divergence of interests
that cannot be reconciled." It concluded :
We therefore recommend that "central" be revamped to provide for the following :
The election of nine directors from nine districts, the boundaries of which are to
be equitably determined.
That the directors appoint a general manager; that the organization purchase
after appraisal the plants and equipment of the Sebastopol Apple Growers' Union
and the Gravenstein Apple Growers' Cooperative Association and of such indepen-
dent packers as may be deemed advisable.
Such purchase to be financed by the issuance of certificates of indebtedness similar
to those used by the Poultry Producers' Association and other successful coopera-
tives. That grower financing be provided for.
This plan has the endorsement of the Federal Farm Board and is the type of
organization eligible for the financial assistance should same be necessary or desir-
able.
Provision also to be made for affiliation with the organization on mutually satis-
factory basis of other cooperative packers and grower packers.
The report was submitted to a mass meeting of growers held in Sebas-
topol in January, 1930, and adopted by an overwhelming majority of
those present. But no action was taken to carry out its recommendations
because the merger plan did not get sufficient support at the subsequent
annual meetings of the two cooperatives involved. The main difficulties
which prevented the realization of the plan of one big cooperative for
the Sebastopol area were personal considerations, old prejudices, and
insufficient insight into the importance of the proposal on the part of
the rank and file of the growers.
GROWERS' COOPERATIVE AGENCY
One interesting venture deserves special consideration because it is
one of two known attempts on the part of California fruit growers to go
into the business of jobbing fruit to the retail trade through the forma-
tion of an association which was to be supported by various local coopera-
tive organizations. The name of the organization was the Growers'
Cooperative Agency established in San Francisco some time in the early
spring of 1902.208
The movement to organize began in the summer of 1901 with the
formation of the Sacramento River Cooperators209 in the vicinity of
Walnut Grove and Courtland. The immediate reason for its formation
2°8 The other attempt mentioned was that of a group of citrus growers who
adopted the same sort of a plan in the Oakland market in the fall of 1924.
209 California Fruit Grower, 26(685) :4. 1901.
88 University of California — Experiment Station
seems to have been an increase in the commission rates on the San
Francisco market from 8 per cent to 10 per cent.210 There were, however,
numerous other reasons. At the Twenty-sixth Fruit Growers' Conven-
tion held in December, 1901, the convention adopted the report of a
committee on "The State of the San Francisco and other Coast Markets. "
It read as follows :
To the State Horticultural Convention:
Your committee, to whom was referred the state of the San Francisco and other
coast markets, beg leave to report as follows :
In our opinion the present custom of selling fruit and produce in these markets is
wasteful and unnecessarily very expensive, more especially in the following par-
ticulars :
First : The grower, at time of shipment, does not know the quantity of competing
produce which his shipment will meet — resulting often in seriously over stocking the
markets.
Second: He has no assurance of fair treatment at all times.
Third : The charges upon the produce for freight and drayage, owing to shipment
in small amounts, is a serious burden in excess of the ten per cent brokerage ; and
added to this is the careless loss of boxes which should be returned to the shipper.
Fourth : The work of selling is now so complicated and conducted by such a multi-
tude of brokerage firms that it may perhaps be doubted if these men can afford to
do the work at much less than the present rate ; and to maintain this, which they say
is but a living rate, they have determined to cooperate, and are doing so most
effectively. .
Your committee, therefore, sees no way by which these evils can be remedied except
by the cooperation of growers who ship to these coast markets. They alone must
control both the distribution and the sale of their products, or suffer the present evils.
To this end we recommend:
First: That the growers form local associations in their several localities for
taking charge of the assembling and shipment of produce designed for coast markets,
to control as largely as possible the total output at such places.
Second : That these several local associations elect representatives, who shall make
such arrangements for shipment and sale as the interests of the producers may
require.
We further recommend that a committee of five be appointed by this Conven-
tion, to promote the formation of the above-named organizations.
A. E. Sprague,
F. M. Righter,
C. Gaines.
Upon motion, the report was adopted by the Convention.211
The Sacramento River Cooperators was formally incorporated in
April, 1902, 212 and shortly started in business by opening a store in San
210 California Fruit Grower, 27(741) :2. 1902.
211 Twenty-sixth Fruit Growers' Convention, Official Report, p. 92. December, 1901.
21-' Articles of Incorporation filed in the Court House, Sacramento, April 7, 1902.
Bul. 557] Cooperative Marketing of Deciduous Fruits 89
Francisco under the name of the Growers' Cooperative Agency. The
progress of the organization is outlined in the report made by A. R.
Sprague as Chairman, presumably of the above-mentioned committee,
and presented at the Twenty-seventh Fruit Growers' Convention held
in December, 1902.
To the State Convention of Fruit-Growers of California:
Gentlemen: Your committee to whom was referred the state of the San Fran-
cisco market, with instructions to proceed to organize upon the plan reported to the
last State Convention of Fruit-Growers, beg leave to make the following report :
We started the work of organization first upon the Sacramento River, because that
was the chief section from which perishable products are shipped to the San Fran-
cisco market. It was late in the season before an organization of the Sacramento
River growers could be secured, and while it was proposed that this organization
should be but one of several that should be centralized for the conduct of cooperative
marketing in San Francisco, the season had already become so late that if anything
was to be done during the summer of 1902, it was clearly evident that the Sacramento
growers would have to take the lead. This they did and proceeded to rent a store and
equip it for business. A large number of the heaviest growers on the Sacramento
River were included in this organization, and shipped very freely to it. The member-
ship of the California Fresh Fruit Exchange from the various sections where associa-
tions are established also shipped to this house, which was known as the "Growers'
Cooperative Agency." The business was entirely satisfactory and giving an excellent
profit until somewhat past mid-season, when the action of the San Francisco commis-
sion merchants put in force a boycott, which rendered it exceedingly 'difficult for the
Growers' Cooperative Agency to do business. Of course, it is well known that while
responsibility for the boycott is difficult to fix, its effects may be clearly traced. The
retailers and peddlers were instructed that they would be unable to buy any supplies
of the members of the Commission Merchants' Association if they did any business
with the Growers' Cooperative Agency. This extended even to dealers at San Jose,
and other points. A suit has been brought which is now before the State courts, to
secure a withdrawal of the boycott and for damages resulting from it.
At various times the growers have endeavored to secure of the commission mer-
chants permission to do a cooperative business for themselves in the San Francisco
market, but this has been in each instance refused and met with the declaration that
it would be necessary for the growers to disincorporate and refuse entirely to do
business upon the cooperative plan, or they would not be permitted to sell their own
wares in San Francisco. In the opinion of your committee, no other resource is left
to the growers of California, who ship to the San Francisco market, than to extend
the work of organizing local associations, and centralize these into an organization
which shall conduct the business of selling perishable products in the San Francisco
market. They would also recommend that the present law providing for a free market
be made effective, and provision be made for opening the same without delay.
Respectfully submitted,
A. R. Sprague
Chairman of Committee.'-1 ;!
213 Twenty-seventh California Fruit Growers' Convention, December, 1902. Cali-
fornia State Board of Horticulture, Biennial Report 1901-02:369-371.
90 University of California — Experiment Station
The above-mentioned boycott consisted in an organized refusal on the
part of the jobbers to sell to retailers who patronized the Growers' Co-
operative Agency. The boycott of the dealers became so serious that an
attempt was made to break it up by special legislation against boycotting
on state property.214 Furthermore, legal action was brought against the
dealers.215
The support of the various fruit growers' organizations apparently
did not lead to the development of other local associations. The Growers'
Cooperative Agency itself was not incorporated until August, 1904. The
organization handled not only fruits, but also vegetables grown by its
members, including cantaloupes, beans, potatoes, and asparagus, coming
mainly from the area between Isleton and Courtland.
It seems that the major difficulty of the organization arose from the
fact that it had too limited a line of fruits and vegetables, and during
the winter months "kept open merely in anticipation."216 Retailers had
to obtain most of their supplies during parts of the year from independ-
ent jobbers, and in certain lines had to obtain all of their supplies from
these dealers. The retailers were therefore at the mercy of the jobbers
from whom they bought the major portion of their supplies. The Agency
was also handicapped by lukewarm support from growers. Competitors
solicited split shipments, and doubtless in numerous cases manipulated
returns made to members of the Agency.
The Growers' Cooperative Agency continued to function until some
time in 1906 when the directors decided to discontinue operations.217
RECENT PLANS OF COMBINING GROWERS' AND DEALERS'
INTERESTS
SUMMARY OF EARLY PLANS
The first notable example of a combination of fruit dealers and grow-
ers in California was that of the California Fruit Union already dis-
cussed (pages 13 to 29). The California Fruit Growers' and Shippers'
Association also discussed above (pages 29 to 36) was another example.
During practically the entire existence of the latter organization there
was agitation for the formation of a growers' association. Such an
214 See: Pacific Rural Press 65:146. 1903. The Act referred to was Chapter
LXVI, California Statutes of 1903. For a discussion of the boycott see: Reynolds,
A. T. J. Cooperative selling. Pacific Rural Press 65:260-61. 1903.
215 Pacific Rural Press 65:114. 1903.
216 San Francisco Chronicle 77(85) : 76. April 10, 1903.
217 Statement of A. T. J. Reynolds, November 11, 1932. Mr. Reynolds' memory
was not clear on the date, but seemed to be very definite on the point that the
discontinuance followed soon after the San Francisco earthquake.
Bul. 557] Cooperative Marketing of Deciduous Fruits 91
organization appeared with the formation of the California Fresh Fruit
Exchange in 1901. The idea of joint action has continued to be a matter
of discussion and has led to the establishment of numerous organizations,
some of which have actually operated agricultural clearing houses.218
There are various reasons for the appearance and adoption of new
combination schemes: (1) The unsatisfactory experiences of the days
of the California Fruit Union and the California Fruit Growers' and
Shippers' Association were soon forgotten. (2) The rapid growth of the
industry meant that every year of good crops was one of demoralized
markets and complaints of unsatisfactory returns ; the increase in the
number of shippers made matters worse and led to an increasing demand
for the regulation of the fresh-fruit shipments to the East by some one
organization. (3) Cooperation among the fresh-fruit growers made
relatively slower progress than was hoped by the promoters of coopera-
tive marketing. (4) A sudden decision on the part of the Southern
California Fruit Exchange to join the California Fruit Agency influ-
enced the policy adopted by the northern cooperative fresh-fruit grow-
ers. (5) The efforts of Weinstock to effect his long-cherished plan of
joint action by growers and dealers for control of shipments helped to
keep the issue alive.
218 Since the term "clearing house" has been used loosely in the field of agricultural
marketing, attention is called to the distinction made here between clearing houses
and joint marketing organizations. By an "agricultural clearing house" is meant a
combination of marketing agencies having as its main purpose an orderly distribu-
tion of farm products, principally through the collection and dissemination of market
information. This market information may, but need not necessarily, include recom-
mendations concerning the adjustment of shipments to existing market demands.
Furthermore, the members of the clearing house may, or may not, be bound to
follow the recommendations. All this depends upon the strength of the clearing-house
agreement. A clearing house, however, is not supposed to make sales or to determine
the original routings of shipments. It can only make recommendations, although it
may have means of enforcing them. On the other hand, a "joint marketing organiza-
tion" is a combination of marketing agencies which actually performs selling
transactions for its members. In it the members have delegated their individual
selling function. Between a clearing house using its full power of enforcing its
recommendations and a joint marketing organization there may seem to be very
little difference. This, however, should not furnish a reason for likewise calling the
latter a clearing house, as is sometimes done.
It may also be worth while to divide clearing houses roughly into two classes:
(1) those created for the purpose of furnishing market information and which might
be called "information clearing houses"; and (2) those which, in addition, have been
given the power to enforce their recommendations. The latter might be called "regu-
lation clearing houses."
92 University of California — Experiment Station
THE CALIFORNIA FRUIT EXCHANGE AS A MEMBER OF THE
CALIFORNIA FRUIT DISTRIBUTORS
In the spring of 1903, the Southern California Fruit Exchange, a
growers' citrus organization, decided to join the independent shippers
who had formed the California Citrus Union in the formation of a joint
selling organization known as the "California Fruit Agency." Since the
California Fruit Exchange had been selling through the eastern sales
force of the Southern California Fruit Exchange, the new alignment
left the deciduous organization without sales connections. The Califor-
nia Fruit Exchange found itself faced with two alternatives, namely,
either to establish its own selling agencies in the East, or to affect a simi-
lar alliance by joining the California Fruit Distributors. Of these two
alternatives, the latter one was chosen. One writer referred to the com-
bination as "The California fruit lambs — lying down with the fruit
lions,"219 but seemed to be hopeful of good results.220
The experience of the California Fruit Exchange in the marketing
season of 1903 was very unsatisfactory. The Exchange complained of
excessive auction charges and a confusion of agents at many western
points.221 Better results were expected for the following year. When
these results were not realized the California Fruit Exchange decided
to discontinue its connection with the California Fruit Distributors at
the end of the 1904 season. On the other hand, the alliance of the south-
ern cooperative citrus-fruit growers with the independent shippers
lasted for only one marketing season.222 After both cooperative organ-
izations had returned to their previous status they decided in February,
1905, to renew their old agreement, which allowed the California Fruit
Exchange to sell its fruit through the sales organization of the Southern
California Fruit Exchange, then renamed the California Fruit Growers'
Exchange.223
219 Editorial in: Pacific Eural Press, 65:354. 1903.
220 Pacific Rural Press 65:370. 1903.
221 Report of the General Manager of the California Fruit Exchange for 1904.
(Unpublished.)
222 Eor an account of the California Fruit Agency, see: McKay, A. W., and W.
M. Stevens. Organization and development of a cooperative citrus-fruit marketing
agency. U. S. Dept. Agr. Dept. Bui. 1237:12-13. 1925.
MacCurdy, R. M. The history of the California Fruit Growers' Exchange, p. 46-48.
1925. Lloyd, J. W. Cooperative and other organized methods of marketing California
horticultural products. Illinois Univ. Studies Social Sci. 8(l):53-65. 1919.
223 Lloyd, J. W. Cooperative and other organized methods of marketing Cali-
fornia horticultural products. Illinois Univ. Studies Social Sci. 8(1) :67. 1919.
Bul. 557] Cooperative Marketing of Deciduous Fruits 93
STATE BUREAU OF DISTRIBUTION
Weinstock had repeatedly been involved in attempts to combine grow-
ers and shippers in order to bring about a better regulation of fresh-fruit
shipments to the East. At a meeting held at Lodi on January 15, 1910,
under the auspices of the San Joaquin Grape Growers' Association, he
was made a member of a committee appointed for the purpose of uniting
all the various shipping agencies into one collective body, which should
not only regulate shipments, but also establish minimum f .o.b. prices.224
The resolutions which were adopted in connection with the appointment
of the committee were as follows :
Kesolved, that the table grape growers demand that the shipping organizations
get together and arrange a collective system of distribution, in order that the fruit
may not be forced into competition with itself in the eastern markets, to the loss of
the growers, experience having shown that satisfactory results can be obtained only
where the distribution is made from this end through one channel ....
Resolved, that the shipping organizations be called upon, among other things, to
determine a minimum f.o.b. selling price, below which no fruit shall be sold.225
This plan did not succeed, nor was Weinstock able to carry out his
idea, although he continued his efforts for some years. Finally, when he
was appointed to the position of State Market Director following the
passing of the State Commission Market Act in 1915, he again brought
up the matter.226
Soon after his appointment as State Market Director, he proposed to
the citrus-fruit growers, as well as to the fresh-deciduous-fruit growers,
the establishment of a state clearing house. The establishment of a clear-
ing house for cantaloupes in the Imperial Valley encouraged him.
Although he first wanted to model the clearing house for citrus and
fresh deciduous fruits after that for cantaloupes, he was later induced
to modify the plan to the extent that the state of California should
establish and supervise the agency under the State Commission Market
224 The other members of the committee were J. J. Kindley, of Acampo; H. H.
Bennett, of Fresno; J. P. Dargitz, of Acampo; and H. M. Smith, of Lodi.
22s California Fruit Grower 41(1125) :5. 1910.
226 Note the following remark made by Weinstock at the Forty-eighth Fruit
Growers' Convention held in February, 1916, at San Bernardino:
"I have had that remedy in mind for years as a private citizen. However, I found
it impossible to have the remedy put into operation. One thought prompted me to
accept this office at the hands of the Governor. One hope led me to undertake this
very grave, serious, and burdensome responsibility of acting as your market director
and that was the thought that now would be offered me the opportunity, officially,
of carrying out the remedy for the weak spot in our marketing in the East, market-
ing that I have had in mind for years." Forty-eighth Fruit Growers' Convention
Proceedings, p. 67. February, 1916.
94 University of California — Experiment Station
Act. This modification was made because some persons objected to his
plan on the grounds that the proposed combination of growers and
shippers might conflict with the anti-trust laws. By having the state
establish and supervise the clearing house, Weinstock hoped that he
could avoid any interference with his project on the part of the federal
and state authorities.
Weinstock proposed his plan first to the citrus-fruit growers at the
Fruit Growers' Convention held in San Bernardino in February, 1916.
The plan is well outlined in the form of a pledge which he suggested for
submission to the various shipping agencies engaged in the marketing
of citrus fruit, this pledge is quoted as follows :
We, the undersigned, hereby agree to become adherents to the State Bureau of
Distributors to be organized by the State Marketing Director for the purpose of
routing and diverting the eastern citrus fruit shipments in such a manner as to
prevent gluts and to get to each market its maximum supply, it being understood
that the car dispatcher who is to perform the service of routing and diverting the
cars should be nominated in a conference of the representatives of the adherents of
the State Bureau of Distributors and appointed by the State Market Director, it
being further understood that the Market Director will appoint as an advisory
council to the car dispatcher such representatives of the adherents as by them may
be chosen, it being further understood that the adherents will continue to operate
East and West in the same independent manner as they have heretofore operated,
reserving to themselves the right to retain their present eastern machinery for distri-
bution and their present western machinery for securing and making shipments, it
being further understood that the proposed advisory council will arrange schedules
and quotas of distribution that as nearly as possible will be just and equitable to
the adherents and that the fruit will be routed and diverted in a manner to respect
as far as possible the preferences of the owner of such fruit.227
From this outline it is apparent that Weinstock did not plan to go
further than to establish a clearing house. This interpretation is
strengthened also by another explanation given by Weinstock at a later
date, which was : "This Bureau, by agreement among the adherents,
would be daily supplied with the fullest information with regard to the
movement of every car of citrus fruits and it would avert glutting the
markets through its ability to advise shippers when and where to divert
cars to their own advantage. It would not have arbitrary control over the
shipments, but would act merely in an advisory capacity, carefully
respecting preferences for certain markets."228
Although the Fruit Growers' Convention recommended that the
industry adopt the plan, Weinstock did not succeed in obtaining the
support of the California Fruit Growers' Exchange nor was he able to
227 Forty -eighth Fruit Growers' Convention, Proceedings, p. 71. February, 191C.
228 California Fruit News 54(1466) :9. 1916.
Bul. 557] Cooperative Marketing of Deciduous Fruits 95
win over the California Fruit Exchange when he proposed a similar
plan to the fresh-deciduous-fruit industry. Independent shippers of
fresh deciduous fruits, controlling about 85 per cent of the fruit sent out
of the state, were said to be willing to join the proposed State Bureau of
Distribution, but the California Fruit Exchange refused to come in. It
fought the plan on the basis of the following four main objections:
(1) It was said that there was danger of political influence on the dis-
tribution of fruit ; (2) the fear was expressed that market information
might become public to the benefit of the eastern speculative buyers ;229
(3) it was argued that the State Commission Marketing Act does not
give the State Market Director any authority for regulating the market-
ing of fruit beyond the state lines ; and (4) it was stated that the danger
of violating anti-trust laws was not eliminated by making the state
establish and supervise the distributive organization.
Another thing which prevented Weinstock from carrying his plan
into effect was the resentment which developed when he tried to stir up
antagonism against the decisions of cooperative marketing leaders who
had refused to accept it.230
BEGINNINGS OF THE POST-WAR CLEARING-HOUSE MOVEMENT
Toward the end of 1923, a new clearing-house movement started in
the California fresh-deciduous-fruit industry. This movement first
manifested itself in an attempt to set up a clearing house for table
grapes, and in the expression of hopes that after satisfactory results had
been achieved similar organizations would be established for other
fruits. A conference of marketing agencies held in San Francisco in
December, 1923, 231 recommended the formation of a clearing house for
table grapes. The proposal was supported by representatives of the fed-
eral government whose advice and assistance was sought. But in spite of
long negotiations and great efforts to sign up the distributing agencies,
no clearing house for the handling of table grapes was established.
229 The General Manager of the California Fruit Exchange at the Fruit Growers'
Convention at Napa held in November, 1916, said: "Why should our growers, after
spending sixteen years of hard labor and thousands of dollars a year in accumulating
the intelligent information, turn this information over to the state where it may be
hung upon a public file and thereby invite and create eastern competition — a compe-
tition that has spelled disaster to the industry and has proven to be a parasite."
California State Commissioner of Horticulture, Mo. Bul. 6:169. 1917.
230 Forty-ninth Fruit Growers' Convention, Proceedings, p. 170-172. 1917.
231 This conference convened at the invitation of Ealph P. Merritt, of the Sun-
Maid Eaisin Growers' Association. Merritt hoped to divert a portion of the raisin
crop into the table-grape market by improving the marketing conditions for table
grapes. (California Fruit News 69[1852]:1. January 5, 1924.) The clearing-house
plan was, as a matter of fact, suggested in June, 1923. (See editorial: Deciduous
shipments need re-establishment of clearing house. California Fruit News 67
[1823] :3. June 16, 1923.)
96 University of California — Experiment Station
In the opinion of J. E. Bergtholdt, of the Silva-Bergtholdt Company
at Newcastle, who spoke on the subject of clearing houses at the Fourth
Annual Placer County Fruit Growers' Convention held in October, 1924,
the attempt failed because too many shippers refused to give up their
individual rights of determining the routings of all their shipments as
required in the proposal. Instead of asking for so much control, Berg-
tholdt proposed that clearing houses should be entrusted with only the
following tasks: (1) to keep records of daily routings, diversions, and
dates of arrival of cars; (2) to render to each affiliated shipper daily
reports on all such routings, diversions, and scheduled daily arrivals at
the various auction markets including the Omaha gateway; and (3) to
correct distribution to the degree that would assure a regularity of
supplies to all markets according to their capacity.232
Although a new committee was formed for the purpose of continuing
the organizational efforts, no definite action was taken. Therefore, the
1925 marketing season also passed without any clearing house opera-
tions. But in the following year two important events carried the
movement forward.
One event was the establishment of an informal clearing house for
table grapes near the end of the 1926 marketing season. In this enter-
prise the California Fruit Distributors, the California Fruit Exchange,
the American Fruit Growers, and the F. H. Buck Company participated.
Since, in the opinion of the members, some good results were achieved,
the sentiment for a continuation of previous efforts to set up clearing
houses became stronger.
The other event was the establishment of the California Vineyardists
Association. This organization grew out of the Grape Car Plan devel-
oped by the American Railway Association for the 1926 marketing
season and was formed at a meeting of representatives of grape growers
held in October of that year at Fresno.233 The California Vineyardists
Association was incorporated as a nonprofit, nonstock association.234 It
was not to be a marketing association, but rather a service organization
for the entire grape industry. Although it was rather a loosely organized
association, having no contracts with grower and having no capital, it
offered a means of bringing shippers together for joint action such as for
282 Fourth Annual Placer County Fruit Growers' Convention, Proceedings, p. 68.
1924.
238 Kieffer, D. L. A shipping grape association at last. Pacific Rural Press
112:473. 1926. Also: California Produce News 29(39) :1. 1926. A preliminary meet-
ing had been held at Lodi at which an organization committee was chosen of
which B. A. Towne was made chairman. California Fruit News 74(1929) :3.
October 30, 1926.
284 California Fruit News 74(2002):7. November 20, 1926.
Bul. 557] Cooperative Marketing of Deciduous Fruits 97
clearing-house operations without fear of violation of anti-trust laws.
It was expected to take measures to improve transportation conditions ;
to foster the orderly distribution of California grapes ; to obtain favor-
able legislation ; and to promote the welfare of the grape growers in all
other possible ways.
CLEARING HOUSES FOR GRAPES
In line with its task of fostering the orderly distribution of grapes the
California Vineyardists Association immediately started to promote the
establishment of a clearing house for grapes. Subsequently, the Board
of Directors of the organization appointed a committee of seventeen for
the purpose of working out the details of the set-up. This committee, it
was decided, should comprise not only representatives of the various
shipping agencies, but also a representative of the United States Depart-
ment of Agriculture, a representative of the United States Department
of Commerce, and a representative of the California State Department
of Agriculture.
The plan which the committee of seventeen recommended was along
the following lines : The clearing house should be conducted by a man-
aging committee which was to act under the supervision and direction
of the Board of Directors of the California Vineyardists Association.
This managing committee should consist of seven active and four
advisory members. The seven active members were to include six repre-
sentatives of the shipping agencies affiliated with the clearing house and
a chairman to be selected by the California Vineyardists Association.
Furthermore, it was proposed that in each of the eight districts of the
California Vineyardists Association, district clearing-house committees
should be formed which were to carry out the instructions of the execu-
tive committee and, in addition, to support the proper operation of the
central office in any other possible way. Furthermore, it was recom-
mended that a contractual relation should be created between the
California Vineyardists Association and the shippers, and that the
clearing-house charges should be levied on a carload basis.
This plan was adopted with very few modifications. The contract
which was subsequently drawn up in collaboration with the United
States Department of Agriculture and the California State Department
of Agriculture contained the following main points:235 The shippers
agreed to supply the clearing house with a certain amount of market
information. This information was to be collected and compiled by a rep-
resentative of the United States Department of Agriculture. Further-
235 California Vineyardists Assoc. Bul. 1(3) :2. 1927.
98 University of California — Experiment Station
more, the government agency of the clearing house was authorized to
examine, if considered necessary, the records of shippers for the purpose
of perfecting the collection of information. The shippers also consented
to collect a fee of 25 cents per net ton of all grapes purchased, handled,
or shipped from the growers and to turn it over to the clearing house.
They likewise agreed to abide by the recommendations of the clearing
house. On the other hand, the California Vineyardists Association prom-
ised to furnish daily reports on marketing conditions to the members of
the organization and to advise them in their marketing policy. The
California Vineyardists Association also pledged itself to urge its
grower members to market their fruit only through shipping agencies
which belonged to the clearing house. In addition, it was provided that
the agreement should be in effect for three years with the possibility of
withdrawing annually between December 16 and 31.
This clearing house was of the information type. To attempt to make
it anything more was considered inadvisable since the shippers and
growers were unwilling to sign any contract which would give the clear-
ing house the power of enforcing its recommendations and of imposing
fines in cases of violation.
In the course of the 1927 marketing season about 300 shippers, or
about one-half of the shipping agencies engaged in the marketing of
California grapes, joined the enterprise. However, those who joined
the clearing house controlled about 75 to 80 per cent of the grape ton-
nage. During the same period the membership of the California Vine-
yardists Association rose to about 8,500 grape growers.
In its first year of operation the clearing house did little more than
experimental work. It endeavored to cut down the volume of grape ship-
ments whenever eastern markets threatened to become oversupplied.
Its recommendations included the proposal of stopping the loadings for
several days.236 But, since the California Vineyardists Association had
no authority to enforce its recommendations, and since a large number
of the shipping agencies had remained on the outside, only moderate
results were achieved.237
Although it was recommended at the end of the 1927 marketing season
that a more binding contract be adopted for the following marketing
season, no such steps were undertaken. An attempt was made to improve
the set-up along the lines of the following recommendations made by the
executive committee of the clearing house in April, 1928 :
230 California Vineyardists Assoc. Bui. 1(9) :1. 1927. Pacific Rural Press 114:
368. 1927.
237 California Vineyardists Assoc. Bui. 1(10) :4. 1927.
Bul. 557] Cooperative Marketing of Deciduous Fruits 99
(1) All shipper members of the clearing house will pay a charge of 50 cents per
car (and will collect 25 cents per ton from the grower) as their contribution to the
expenses of the Association. This charge will be regarded as an associate membership
fee on the part of the shipper. (2) Shippers will permit the manager of the clearing
house to review all car loadings and distribution records of the Departments of
Agriculture and of the railroads. (3) Shippers will report daily loadings at all
stations to the Association. (4) Members of the clearing house will include in their
written contracts with growers a provision calling attention to the charge of 25
cents per ton which the Association requests its members to contribute for the sup-
port of its general program of activities. Shippers' contracts will also include the
provision that the acceptance and delivery of grapes shall be subject to the recom-
mendations of the Clearing House Division of the California Vineyardists Associa-
tion. (5) District clearing house committees will be established this year at Ukiah,
Santa Rosa, Napa, Lodi (with subcommittee on American River), Modesto (sub-
committee at Turlock, Fresno, Exeter, and Ontario. 238
The results of clearing-house operations in 1928 were again very un-
satisfactory. The following statement of the Managing Director to the
Board of Directors of the California Vineyardists Association pictures
the results :
The Clearing House agreement became a "scrap of paper" in 1928 because many
who joined in the first instance never intended from the outset to carry out its
obligations, and intentionally violated its recommendations. Others were "slippery"
in their relations to the Association. No few shippers accumulated their profits by
the process of underweights in violation of Federal laws. Too many are entrusted
with the obligations of a "public weigh master." That unlawful practices, known
among those intimately acquainted with the industry, have been permitted, or
allowed to continue unchallenged by both State and Federal Governments, represents
a sad commentary upon enforcement agencies. Responsible shippers cannot stabilize
marketing conditions when confronted with competition from such factors. In spite
of the existence of these conditions, growers actually continue to patronize irre-
sponsible shippers notwithstanding previous experiences and warnings. As a whole,
the marketing of juice grapes presents the most aggravated picture of chaos and
irresponsibility surrounding the distribution of any commodity in America.239
Although difficult to prove statistically,240 it was generally conceded
that the clearing house did not succeed in avoiding the glutting of
juice-grape markets. Since the reason for the failure of the clearing
house operations in 1927 and 1928 lay mainly in the lack of authority
of the clearing house to enforce its recommendations, it was subsequently
decided to modify the set-up for 1929. 241 On the one hand, the relation
238 California Vineyardists Assoc. Bui. 2(4): 2. 1928.
239 California Vineyardists Assoc. Bui. 3(1) :2. 1929.
240 For an analysis of the relation of weekly shipments of California black juice
grapes in relation to weekly sales for the seasons 1925-1928, see: Mallory, L. D.,
S. R. Smith, and S. W. Shear. Factors affecting annual prices of California fresh
grapes, 1921-1929. Hilgardia 6:114-120. 1931.
24i California Vineyardists Assoc. Bui. 2(3) : 6. 1929.
100 University of California — Experiment Station
of the California Vineyardists Association with its growers was to be
strengthened by a contract providing among other things that growers
market their crop only through shippers who had entered into con-
tractual relations with the California Vineyardists Association as
members of the clearing house, a provision which had already been
urged in 1928. 242 On the other hand, a new clearing-house contract was
submitted to the shipping agencies which obligated the latter to follow
the recommendations of the California Vineyardists Association under
a penalty of $100 a car for each case of violation. The contract with the
shippers also stipulated that the clearing house should have a definite
control of all the distribution of table varieties, the volume of juice
grapes loaded, standardization, and other important marketing fac-
tors.243 In other words, the clearing house was to be given regulatory
powers.
Although the 1929 grape crop was relatively a short one, the summer
was a hectic one from the point of view of the grape growers. A special
session of Congress was considering the passage of farm relief legislation
which was apparently to provide for a Federal Farm Board. The new
contracts above mentioned, both with growers and with shippers, had
not been signed in any large numbers before the Federal Crape Stabil-
ization Corporation was formed in anticipation that it would fit into
the provisions of the Agricultural Marketing Act when the latter
became a law.244
The Stabilization Corporation,245 incorporated on May 7, 1929, as a
242 Calif ornia Vineyardists Assoc. Bui. 2(1) :2. 1928. Previous to 1929 the
grower had not been required to sign a contract.
243 For a general statement on the set-up of the clearing house, see: Stillwell,
E. W. Clearing house organization of shipping agencies for 1929. California
Grower 1(3) :5. 1929.
244 Calif ornia Vineyardists Assoc. Bui. 2(4): 1-2. 1929. Also: Conn, D. D. The
Farm Belief Act. California Grower l(l):3-5. 1929.
245 The original directors were : Donald D. Conn, Managing Director, Associated
California Fruit Industries, Inc. and California Vineyardists Association; Harry
M. Creech, President, Sun-Maid Eaisin Association and Sunland Sales, both cooper-
ative, Fresno; Scott F. Ennis, President, Pacific Fruit Exchange, San Francisco;
Roland D. Fontana, Di Giorgio Farms, largest grape grower in California, San
Francisco; H. R. Freeland, large grape grower, San Joaquin Finance Corporation,
Fresno; Joseph T. Grace, large grower, President of Grace Bros., Santa Rosa; T .T.
C. Gregory, Attorney at Law and General Counsel, Associated California Fruit
Industries, Inc., San Francsico; R. E. Hyde, large grower, Visalia; Walter Jahant,
large grower, Lodi; J. M. Leslie, President, Sun-Maid Raisin Growers of California,
Fresno ; Walton N. Moore, large grower and President of Walton N. Moore Co., San
Francisco ; J. L. Nagle, General Manager, California Fruit Exchange, a cooperative,
Sacramento; Lucius Powers, large grower, owner of Lucius Powers Fruit Co.,
Fresno; R. J. Senior, Chairman Agricultural Committee, Fresno County Chamber
of Commerce, Fresno; Paul Shoup, President, Southern Pacific Company, San
Francisco ; Lloyd S. Tenny, President, Federal Grape Stabilization Corporation, San
Francisco; A. Emory Wishon, large grower and General Manager, Great Western
Power Company, San Francisco. California Grower 1(1) :5. 1929.
Bul. 557] Cooperative Marketing of Deciduous Fruits 101
membership organization, was to: "(1) Furnish funds for production
and harvesting; (2) buy and sell grapes and raisins; (3) build or rent
plants and machinery for by-products ; (4) do everything else necessary
to direct and control marketing of grapes and deciduous crops."246
There was to be a purchase contract under which the Stabilization
Corporation would agree to buy all raisin grapes for a period of three
years at stated prices. On the basis of such contracts the Stabilization
Corporation would borrow of the proposed Federal Farm Board. The
contracts circulated among producers of fresh grapes did not provide
for purchase of grapes but did provide for the purchase by the growers
of "participation certificates" at the rate of from 2 to 5 cents per pack-
age of fresh grapes (depending upon type of grape and package), the
proceeds to build a fund for purchasing surpluses.
With the completion of the plans for the Stabilization Corporation,
its contracts and those of the California Vineyardists Association were
simultaneously circulated for signatures. As a matter of fact, there was
so much confusion in the minds of the growers that the whole program
had to be given up because sufficient signatures could not be obtained.
In the meantime, the Federal Farm Board and a group of California
bankers late in August, 1929, arranged to lend a large sum of money
to the Sun-Maid Raisin Growers to provide for a 3-cent advance a pound
on Muscats and Thompson Seedless to growers who belonged to or pooled
with Sun-Maid. A few weeks later the Stabilization Corporation, in
order to divert raisin grapes from fresh-grape markets, announced that
it would pay a bonus of an extra cent a pound on Muscat raisins in 1929.
After many growers had dried their grapes, and it was too late to make
fresh shipments, the Stabilization Corporation announced that it would
not have money to pay the bonus.247
Late in the summer another corporation, Fruit Industries, Inc., was
formed to take care of by-products, also in anticipation that the whole
scheme would fit into the program of the Federal Farm Board from
which funds were to be obtained.248 The organization included a group
of the larger California manufacturers of grape juice, wines, and other
grape products, and was to develop an enormous by-product business
as part of its stabilization program.
249
246 California Vineyardists Assoc. Bul. 2(4) :1. 1929.
247 See footnote in: Mallory, L. D., S. E. Smith, and S. W. Shear. Factors affect-
ing annual prices' of California fresh grapes, 1921-1929. Hilgardia 6:127. 1931.
248 Conn, Donald D. The Farm Relief Act. California Grower l(l):3-5. 1929.
Also: Tenny, Lloyd S. Program of the Federal Fruit Stabilization Corporation.
California Grower 1(2):30-31. 1929.
249 Conn, Donald D. Better prices will be reflected in industry control. Cali-
fornia Grower l(2):3-4. 1929. Also an advertisement: California Grower 1(2) :9.
1929. San Francisco Chronicle 134(167) :3. July 1, 1929.
102 University of California — Experiment Station
The appeals to the Federal Farm Board for financial assistance in
the fall of 1929250 resulted, in the summer of 1930, in the establishment
of the California Grape Control Board. The latter was composed of the
California Raisin Pool (represented by 10 directors), the California
Fruit Exchange (with 3 directors), the California Vineyardists As-
sociation (3 directors), the San Joaquin Grower-Shipper Association
(2 directors), Fruit Industries, Inc. (2 directors), and a director rep-
resenting the Federal Farm Board. The California Raisin Pool had
been set up to include both the Sun-Maid Raisin Growers Association
and independent raisin growers. The San Joaquin Grower-Shipper
Association was established to include a group of fresh-grape growers
who would not affiliate with the California Fruit Exchange, nor with
agencies under contract with the California Vineyardists Association.251
During the development of plans for the Grape Control Board, dis-
cussion had centered around control of the surplus, which was roughly
estimated at 300.000 tons of fresh grapes of all varieties in an average
year. The plan called for the deduction of $1.50 a ton from returns on
all grapes shipped by any of the affiliated agencies and $5.25 a ton on
raisins. It was estimated that the resulting fund would make possible
the purchase on the vine of sufficient grapes to maintain prices at
profitable levels. The required 85 per cent of the tonnage was not signed
up until late in July.252
The Grape Control contract itself did not mention clearing houses.
Hence many growers and shippers had assumed that there would be
no restriction on shipments.253 However, the Board set up a committee
to take over the operation of the clearing house previously carried on
by the California Vineyardists Association. This committee consisted
of seven men representing the three fresh-grape organizations, the
250 Congressional Eecord 71(125) :6229. November 22, 1929.
251 The San Joaquin Grower-Shipper Association was organized in June, 1930.
(See articles in: Fresno Republican, June 18, 20, and 26, 1930.) Provision to make
it a part of the Grape Control Board was made by action of the Board of Directors
of the latter on July 18, 1930. At the same time the representation of the California
Raisin Pool on the Grape Control Board was increased from 8 to 10 to preserve "the
balance of representation between the dried and fresh-fruit elements of the in-
dustry." (See: Grape Control Board swings into action. Fresno Republican, July 19,
1930.) For the general plan and a copy of the grower contract see: "The Federal
Farm Board Program for Rebuilding California's Grape Industry." Pamphlet issued
by Federal Farm Board, spring of 1930 (undated).
252 Success of the campaign was announced at Fresno on the evening of July 25.
(Fresno Republican, July 2G, 1930.) The sign-up report was accepted by the Farm
Board on July 29. (Fresno Republican, July 30, 1930.) The report placed the
tonnage under control at 88 per cent and the acreage at 85 per cent.
253 See: Shippers balk at program; control may fail for year. Fresno Republican,
August 3, 1930.
Bul. 557] Cooperative Marketing of Deciduous Fruits 103
California Vineyardists Association, the California Fruit Exchange,
and the San Joaquin Grower-Shipper Association.254
Unfortunately the clearing house committee of the Grape Control
Board did not have power to enforce its recommendations. So far as the
contract of the California Vineyardists Association with its member
shippers was concerned, it was similar to that used for the 1929 market-
ing season which included provisions for enforcement. The contract
between the San Joaquin Grower-Shipper Association and its members
was less tightly drawn. Furthermore, no special clearing-house agree-
ment was established between the California Fruit Exchange and its
members. There was, therefore, a great lack of uniformity in the
contracts.
The results of the operations during the 1930 marketing season are
given in the following statement from the report of the Grape Control
Board to the Federal Farm Board submitted in January, 1931 :
In spite of weaknesses in the set-up, recommendations made by the clearing house
committee met with satisfactory response up to the first of October. This performance
placed the industry in a very favorable statistical market situation. The number of
cars of grapes en route to market and held on tracks in the eastern markets the first
week in October was appreciably less than in any recent year. The result was that in
spite of low buying power, a dull market in September was turned into one embracing
good demand and increased prices during the early part of October.
This, the first real market activities in 1930, created an irresistible urge on the
part of both growers and shippers to load grapes and send them to market. It con-
stituted an effort to salvage something out of the crop and, in many cases, to return
losses suffered under the low price levels in the early part of the season. The
machinery for regulating shipments failed to function. Available carload supplies
increased beyond any reasonable bounds and the favorable situation of early
October became by late October most unfavorable. Prices declined to disastrous
levels. Especially heavy losses were suffered by both growers and shippers.255
Reasons for the Breaking Down of Clearing -House Operations. — In
looking for the reasons for the breakdown of clearing-house operations
in 1930, one may say that the following defects in the set-up were mainly
responsible: (1) No plan for restricting shipments on some systematic
basis was worked oiit in advance; (2) the contractual relation between
the Grape Control Board and the three affiliated fresh-grape agencies
did not grant any power to enforce the recommendations of the Grape
Control Board in regard to restriction of shipments, and did not provide
a penalty for failure to comply ; (3) differences in the contracts of the
three agencies with their members prevented a uniform application of
clearing-house recommendations; and (4) deficiencies in the organiza-
254 Fresno Eepublican, August 17 and 19, 1930.
255 Mimeographed report dated January 14, 1931.
104 University op California — Experiment Station
tion of district committees made ineffective the work of the central
clearing-house committee.
There were, of course, a large number of other factors which tended to
prevent the effectiveness of clearing-house operations. The quantity of
grapes was so large that not as much could be done by restricted ship-
ments as had been expected. Again, the number of shippers was so large
as to make control difficult. As usual there was jealousy and distrust
between the various groups, and much misunderstanding of the whole
plan. The latter could hardly have been avoided under the circum-
stances. The plan as finally adopted was in process of development until
the shipping was actually under way some two months after the sign-up
campaign had begun.256
On the basis of this experience it was proposed to improve the con-
tractual relations as well as other conditions. Recommendations were
made to make the contracts more binding ; to do away with the differ-
ences in the contracts of the marketing agencies with their members ; to
authorize the restrictions of shipments of low-grade grapes; and to
improve the collaboration with the railroads.
The suggested improvements in the contractual relations met serious
opposition. Furthermore, the 1931 crop proved to be a light one. Hence
the Grape Control Board continued its clearing house during the 1931
marketing season without the proposed regulatory features.
CLEARING HOUSES FOR FRESH DECIDUOUS-TREE FRUITS
When the California Vineyardists Association was organized in the
fall of 1926, its leaders considered for a time the organization of a
clearing house for deciduous-tree fruits as well as for grapes. It was
decided to concentrate all efforts on the formation and operation of a
grape clearing house. However, a futile attempt was made at the begin-
ning of 1927 to set up a clearing house for deciduous-tree fruits.
Early in 1928, the California Vineyardists Association joined the
movement for the establishment of a clearing house for deciduous-tree
fruits, since its leaders saw that it could advantageously combine the
operations of such a clearing house with those of its own. It helped to
organize a service organization for the deciduous-tree-fruit growers,
which was first called California Deciduous Fruit Association,257 and
later Associated California Fruit Industries, Inc. This organization was
256 Koster, F. J. The work of the California Grape Control Board, Ltd. Cali-
fornia Grower 3(1) :5. 1931.
257 Incorporated January 20, 1928, on a plan similar to that of the California
Vineyardists Association. Membership fees were $1.00, annual dues $1.00 and a
contribution of $0.25 a ton was to support its activities. California Vineyardists
Assoc. Bui. 2(2) :2. 1928.
Bul. 557] Cooperative Marketing of Deciduous Fruits 105
not to build up a special clearing-house division, but was to avail itself
of the services of the clearing-house staff of the California Vineyardists
Association and share in the expenses for the common personnel. It was
pointed out that such a combination would make it possible to maintain
an all-year-round clearing-house staff for both organizations at a reason-
able cost, whereas in case of separate operations the maintenance of the
personnel throughout the year might become too expensive because of
the seasonal character of the business.
This proposal was accepted. A close relation was created between the
California Vineyardists Association and the California Deciduous Fruit
Association by means of the provision that six of the eleven members of
the Board of Directors of the latter association should be chosen out of
the Board of Directors of the California Vineyardists Association.258
This relation was further strengthened by the decision that Managing
Director Donald D. Conn, of the California Vineyardists Association,
should also become managing director of the new organization.
The first clearing-house contract of the California Deciduous Fruit
Association, with its affiliated shipping agencies, was very similar to that
of the first clearing-house contract of the California Vineyardists Asso-
ciation. Accordingly, the deciduous- tree-fruit clearing house functioned
as an information clearing house in the 1928 marketing season. In 1929
the California Vineyardists Association decided to strengthen its clear-
ing house for regulatory purposes, but the California Deciduous Fruit
Association took no such action.
In the course of 1929, differences of opinion developed between the
California Fruit Exchange and the California Vineyardists Association
which led to the complete separation of the clearing-house work of the
two groups. During the 1930 marketing season, the clearing house of
the Associated California Fruit Industries, Inc., was, therefore, operated
separately under the management of Wilmer Sieg. In the following
year, however, the Associated California Fruit Industries, Inc., clearing
house was not maintained. Instead, an informal arrangement was per-
fected whereby, in collaboration with the United States Department of
Agriculture and the California State Department of Agriculture, a
number of shipping agencies engaged in the marketing of fresh decidu-
ous-tree fruits received certain marketing information from the repre-
sentative of the United States Department of Agriculture in San
Francisco and contributed to the cost of this service. An informal
clearing house was also operated by shippers interested in the distribu-
tion of cherries and figs to auction markets.259
258 California Vineyardists Assoc. Bul. 2(2) :2. 1928.
259 Statement by E. W. Stillwell, November 29, 1932.
106 University of California — Experiment Station
GROWER-DEALER ORGANIZATIONS IN THE WATSONVILLE REGION
Perhaps because cooperative marketing has made little headway,
industry cooperation has repeatedly been urged in the Watsonville
apple district. Several grower-dealer organizations have been formed in
this area during the past two decades. The first was established in 1915 ;
the second in 1924 ; the third in 1927 ; and the fourth in 1931.
Watsonville Apple Distributors. — In June, 1915, a group of growers,
packers, brokers, bankers, and merchants organized the Watsonville
Apple Distributors. The organization was to standardize the pack,
arrange for inspection of the fruit, establish minimum prices, and pro-
mulgate rules for storage and consignment operations. It adopted the
California Standard Apple Act of 1915 as a basis for its standardization
regulations.
The direction of the organization was placed in the hands of an execu-
tive committee of twenty-one. This committee appointed a Board of
Control of five members which handled all complaints and acted as
advisor to the California State Commissioner of Agriculture.
In the first year of its existence, the organization made great efforts
to advance the standardization and inspection work. It sold its own
inspection stamps, handled the state stamps, and contributed in a con-
siderable measure to the success of its inspection program under which
75 per cent of the 3,000 cars shipped in the 1915 season were inspected.
It endeavored to stop the shipment of immature apples and was instru-
mental in bringing about ordinances in Santa Clara and Monterey
counties which prohibited such practices. Moreover, it undertook to
establish and maintain minimum prices and endeavored to achieve
reductions in freight rates.
At the end of the year the organization had 505 members, consisting
of 249 growers, 32 packers, 12 brokers, and 212 other business men. As
there was a feeling that the work of the organization should be enlarged
and strengthened, particularly in the direction of marketing, a mass
meeting of orchardists, packers, and other persons interested in the
industry was held in Watsonville in April, 1916. At that meeting State
Market Director Weinstock and Vice-President and General Manager
Madison of the California Raisin Growers made addresses in which they
recommended taking further organizational measures which Weinstock
promised to support with the help of his office.
As a result of this meeting, a committee of nine was appointed to draw
up a plan for the establishment of a central sales agency. This com-
Bul. 557] Cooperative Marketing of Deciduous Fruits 107
mittee, which later enlarged its membership to thirty-one, submitted
its findings to the first annual meeting of the Watsonville Apple Dis-
tributors in June, 1916. It proposed to change the Watsonville Apple
Distributors into a capital-stock corporation and to make it a central
marketing agency which should be well financed and should control a
large proportion of the total crop. In order to achieve this control the
committee deemed grower-packer cooperation essential.
The capital stock was fixed at $125,000, divided into shares of par
value of $10 each. To this stock the growers were expected to subscribe
on the basis of one share per acre of bearing apple trees. The packers
were expected to purchase stock at the rate of 4 cents per packed box
of apples which, it was estimated, would correspond very closely with
the acreage basis for growers. In addition, business men were allowed
to subscribe for stock, if they so desired, but not in excess of 25 per cent
of the total amount of shares in order to keep the control of the enter-
prise in the hands of those directly engaged in the apple business. Apart
from this restriction on the sale of stock to business men, a special pro-
vision was made for the purpose of maintaining the control in the hands
of the growers and packers and preventing it from passing into the
hands of persons whose interests might become antagonistic to those
of the growers and packers. According to this provision all the stock
was to be pooled for four years and turned over to a Board of Trustees
to be selected by the stockholders.
In order to assure the control of the crop, the growers and packers
were expected to sign an agreement according to which they would
either market their fruit directly through the organization or in some
other way which would give the organization control. Thus direct selling
was to be permitted because it was foreseen that a large number of the
important packers would be unwilling to give up their established
markets and selling facilities immediately. But the organization was
to bill out the cars and collect the money on such direct sales. The agree-
ment was to bind the growers and packers for a period of four seasons.
Furthermore, it was to be safeguarded against violation by giving the
organization full power to take possession of the fruit and to collect all
necessary information.
The organization was not to become effective until at least 90 per
cent of the average crop of apples produced in the Watsonville area,
estimated at 2,000,000 packed boxes, was signed up. The Watsonville
area was described as the territory within a radius of 10 miles from the
center of the city of Watsonville.
108 University of California — Experiment Station
The proposed organization was to market fruit for its stockholders ;
to buy and sell on its own account ; to engage in the purchase of supplies
such as box shook, paper, and spray materials ; and to make advances to
its members in order to assist them in the growing, hauling, and packing
of their fruit. It was to have the power of fixing the price from time to
time. And it was to build up an advertising fund by deducting a certain
amount from the returns on all fruit sold or cleared through the asso-
ciation in order to widen the market for the apples of the Watsonville
area.
The plan was approved at the meeting of the Watsonville Apple Dis-
tributors. The by-laws were adopted and the officers for the first term
elected. But it was not possible to sign up the required 90 per cent of
the acreage. In the meantime, prices of apples rose in 1916 and the
following years along with other prices. With improved returns the
idea of organization lost in favor and the movement was discontinued.
The Second Joint Marketing Organization. — About eight years later,
in 1924, a new movement for the organization of the apple industry
developed in the Pajaro Valley, following a decline in prices in 1922
and 1923 and the accompanying dissatisfaction with marketing condi-
tions.
Mr. J. E. Gardner, a Watsonville attorney, who had assisted in the
establishment of several cooperative marketing associations and who
had also participated in the drafting of the plan for the joint marketing
organization proposed in 1916, was again asked to lend his support and
to undertake a study of a number of cooperative organizations in Cali-
fornia and the Northwest in order to find out whether some of their
features of organization and operation might be advantageously used
in the Watsonville area. As a result of this study a plan was worked out
which was based largely on that of the Sun-Maid Raisin Growers.
The plan provided for the establishment of a nonprofit, nonstock
association to be incorporated under the Cooperative Marketing Act of
1923, and the creation of a subsidiary warehouse corporation which
should be incorporated under the laws of the State of Maryland or
Delaware. This subsidiary was to have common and preferred stock.
The common stock was to be taken over by members of the parent
organization, whereas the preferred was to be sold to outsiders inter-
ested as investors.
The association, like its proposed predecessor, was to be a joint
marketing organization of growers and packers. The name chosen was
the same, Watsonville Apple Distributors. The provisions for operation
were similar to those of 1916 in that they were to disturb existing con-
Bul. 557] Cooperative Marketing of Deciduous Fruits 109
ditions as little as possible and to utilize existing equipment to the full
extent.
There were, however, a number of differences in the two plans. One
of them, already mentioned, was the provision that the association
should have no capital stock. Another difference was that the contract
period should extend over seven years. Instead of making the effective-
ness of the plan dependent on the sign-up of 90 per cent of the total
production the desired minimum control was fixed at 75 per cent.
Furthermore, the area was enlarged to include a territory with a radius
of 15 miles.
After the plan had been submitted to a mass meeting held in April,
1924, 260 a membership drive was undertaken. This campaign did not
result in the required number of signatures. There was much opposition
to the idea of a seven-year contract, and the owners of large orchards
objected to the one-man-one-vote provision, which had been included in
the plan of organization. A number of changes were therefore made in
the constitution and by-laws, largely in the interests of the packers.
Finally, however, the required acreage was signed up and the organiza-
tion was launched.261
The organization functioned for two seasons. It announced minimum
prices and tried to regulate shipments. Weekly meetings were held
during the shipping season, and, if necessary, cars were prorated in
order to prevent market gluts. As a result of dissatisfaction among the
members the agency was discontinued in 1926.
Watsonville Apple Growers' and Packers' Association. — Since the
need for organization remained, a third joint marketing organization
was formed in February, 1927. This organization, called the Watson-
ville Apple Growers' and Packers' Association, was established largely
along the lines followed in the final set-up of the agency of 1924. A
one-year marketing agreement had to be signed; its membership con-
sisted mainly of packers and packing associations ; and the territory was
extended to a region within a radius of 50 miles from Watsonville.
The organization operated for four seasons. It sold for its members,
endeavored to regulate shipments, and sought to increase the sale of
Pajaro Valley apples through advertising. Pooling was not practiced.
In order to cover its expenses, the association deducted 1 cent a box
from the sales receipts. Any surplus remaining after expenses had been
paid was refunded to the members.
260 Newman, Ralph. Watsonville seeks "one way out." Pacific Rural Press 107:
613. 1924.
26i California Produce News 27(36) :1. September 6, 1924. Pacific Rural Press
108:234. 1924.
110 University of California — Experiment Station
It has been estimated that the enterprise controlled about 75 per cent
of the shipments in the first marketing season and about 40 per cent in
the 1930 season. The Loma Fruit Company joined the organization in
1927, but later withdrew. The Corralitos association belonged to it
during the four seasons in which it was active. At the beginning, there
were about 50 members, and at the end, about 20. The reason for the
decline in membership and volume of business is that too much sus-
picion, distrust, and individualistic feeling existed among the packers
themselves on the one hand, and between the packers and growers on
the other.
Watsonville Apple Selling Organization. — A special pooling arrange-
ment was made in March, 1931, and carried out under the above name.
Not only members of the Watsonville Apple Growers' and Packers'
Association, but also nonmembers participated in it. The arrangement
was proposed at a time when a large quantity of apples, primarily
Yellow Newtowns, had accumulated in cold storage in Watsonville and
when it seemed inevitable that severe losses would occur if these apples
were sold in a disorderly way on the prevailing depressed apple market.
The pooling agreement became effective upon the sign-up of holders of
90 per cent of the loose (unpacked) Yellow Bellflowers and Yellow
Newtowns in Watsonville storage. Two separate pools were formed:
one for Yellow Bellflowers, and another for Yellow Newtowns. Further-
more, it was provided that the marketing should be done by an executive
committee consisting of five members. This committee was given title
to all the stored apples and empowered to sell them at prices which it
deemed best. It prorated the sales among the members of the pools in
proportion to the number of boxes owned by them. It retained a certain
amount from the sales receipts in order to cover expenses and to build
up a sinking fund out of which price adjustments were made at the end
of the pooling period.
The pooling operations lasted until July 1, 1931. At the time pooling
operations were started, the market price for Yellow Newtowns was
$30 a ton. This price was gradually raised to about $37. Altogether,
265,779 boxes were sold of which about 260,000 were Yellow Newtowns.
Despite this example of better results through joint marketing, no steps
were taken to continue the operation of the Watsonville Apple Growers'
and Packers' Association for the 1931 season.
Pajaro Valley Fruit Association. — As a reaction to the repeated
failures in attempts to build up an efficient marketing structure on a
large scale, another small combination was effected at the beginning of
the 1931 season. This organization intends to follow a policy of selective
Bul. 557] Cooperative Marketing of Deciduous Fruits 111
membership and to strive towards the orderly distribution of the high-
grade apples produced in the Pajaro Valley. Its leaders hope thereby
to improve the reputation of the apple industry in the Valley, for this
reputation has suffered to a considerable degree during the last few
years because of unreliable packs. It consists of the Loma Fruit Com-
pany, the Corralitos Fruit Growers Incorporated, T. J. Horgan &
Company, and Rodgers Brothers.
GROWER-DEALER ORGANIZATIONS IN THE SEBASTOPOL REGION
Gravenstein Growers and Packers. — In the Sebastopol region the first
movement for the establishment of a joint organization of cooperative
growers and independent packers occurred in 1925. The desire to
increase the sale of the Gravenstein apples by means of an intensive
advertising campaign over the entire United States to which all the
various interests of the industry should contribute was the main idea
in the minds of the promoters. Other ideas added later were orderly
distribution of the product and improvements in grading.
The movement attracted support not only in the Sebastopol region
but in the Sonoma region and Napa County as well. At the organization
meeting held in April, 1925, it was found that agencies handling over
95 per cent of the tonnage of Gravensteins grown in Sonoma and Napa
counties were inclined to join the new enterprise which was to be called
the "Gravenstein Growers and Packers."262
An ambitious program was immediately adopted. It consisted of 14
recommendations which were :
1. To secure widest possible distribution.
2. To avoid market gluts and famines.
3. To hold back shipments at peak periods.
4. To market only reputable products.
5. To sell wholesale to jobbing trade.
6. To do educational work with the trade.
7. To secure and put to effective common use complete daily market information
as to movement of products and conditions of all markets.
8. To establish grades and standards and improve packing methods.
9. To establish brands to facilitate national advertising and collectively to put on
national advertising campaigns.
10. To develop by-products out of lower grades: first, to salvage waste; second, to
save glutting markets in periods of overproduction.
262 The following persons were entrusted with the management of the organiza-
tion: J. P. McDonnell, of the Sebastopol Apple Growers' Union, president; J. M.
Garcia, of the Garbro Fruit Co., vice-president; George Burlingame, of the Sebastopol
Chamber of Commerce, secretary; and J. E. Durbin, of the Gravenstein Apple
Growers' Cooperative Association, treasurer. Clipping from Santa Kosa Press Demo-
crat. April 14, 1925.
112 University of California — Experiment Station
11. To purchase collectively the major supplies entering into the processes of
growing and preparing for market.
12. To study the methods of the shippers, to increase efficiency, eliminate waste,
and lower costs.
13. To gather statistics as to cost and trend of production and consumption, so that
all interests may be informed and thus avoid disastrous periods of overproduc-
tion, or to increase production as conditions warrant.
14. To handle national industrial problems such as: Freight and traffic questions:
tariff representations before Congress; legislation, state and national, affecting
the industry.263
The organization existed for about two years. It took a few actions
bnt it did not accomplish anything of importance along the lines men-
tioned in the program. A short crop in 1925 resulted in good prices. In
1926 prices were extremely low.264
California Gravenstein Apple Growers. — Despite the poor results
attained by the Gravenstein Growers and Packers, the movement for
joint action by growers and dealers gained new strength after the 1926
season had brought decidedly lower returns to the Gravenstein apple
industry. As previously mentioned (page 86) , in the fall of 1926 sixteen
small committees of orchardists were appointed in the various com-
munities for the purpose of working out ways of improving marketing
conditions. Out of this group of committees grew a committee of five.
This committee came to the conclusion that under prevailing conditions
it was advisable to try to unite the cooperative and private marketing
agencies instead of trying to build one big cooperative organization for
the Sebastopol region.
Starting from this premise the committee evolved a set-up which was
somewhat different from those which had previously been developed.
The plan involved the creation of a large growers' association with an
attached clearing house which was to be controlled by the organized
growers. The fundamental idea of this plan, it may be mentioned in
passing, was taken from a plan then being proposed for the prune and
apricot industries.265 The plan which the committee finally submitted
may be summarized as follows :
1. It was proposed to organize at least 80 per cent of the producers
of Gravenstein apples into a growers' organization under the name of
203 California Produce News 28(17) :1-11. 1925. Also clipping from Santa Rosa
Press Democrat. April 14, 1925.
264 Average prices a packed box were: 192-1, $1.15; 1925, $1.96; 1926, $0.39.
Sec: Rauchenstein, E. Factors affecting the price of Gravenstein apples at Sebas-
topol. Hilgardia 3:326. 1928.
-,,;" The so called "Parker plan" proposed by J. M. Parker, general manager of
the California Prune and Apricot Growers' Association. For a description of this
plan sec Sunsweet Standard 11(2):5-19. July, 1927.
Bul. 557] Cooperative Marketing of Deciduous Fruits 113
California Gravenstein Apple Growers. This organization, also referred
to as Central, was to be formed without capital stock. The voting was
to be done on a one-man-one-vote basis. Furthermore, it was provided
that any grower of Gravenstein apples who would agree to comply witli
the marketing stipulations set forth in the plan could become a member.
2. There were to be two kinds of contracts, one between the grower
and Central, and another between Central and the several marketing
agencies called "units." Among other things, the contract between
grower and Central provided that the grower should deliver all his
Gravenstein apples to one of the affiliated marketing agencies. It further
provided that the grower should notify Central not later than May 15
in 1927, and during the first twenty days of February in later years,
of the unit through which he desired to market his crop. The contract
between Central and marketing agencies, independent or cooperative,
stipulated among other things that a clearing house should be estab-
lished. It also provided that the units agree to handle no Gravenstein
apples other than those produced, acquired, or controlled by grower
members of Central except as specially mentioned in the agreement.
Moreover, there were a number of similar features in both contracts
which provided : ( 1 ) that the agreement with Central should be valid
for fifteen years with the possibility of withdrawing annually within a
certain period after the first two years had expired ; (2) that liquidated
damages of 50 cents a packed box or each 45 pounds net weight should
be paid in case of a violation or breach of contract; and (3) that the
effectiveness of the agreement should depend upon the sign-up of a
minimum of 847,000 boxes of Gravensteins, that is, 80 per cent of the
estimated commercial pack during the fruit season of 1926 in Sonoma
County.
3. It was proposed that the membership of Central was to be divided
into so-called "membership units" each one consisting of those growers
who had decided to deliver their crop to it. Each unit was to elect one
director. In a special effort to safeguard grower control, it was provided
that in the event the number of directors representing commercial mem-
bership units should exceed the number of directors representing co-
operative membership units, the total voting power of the first group
of directors was to be equal to the total voting power of the latter.
Decisions were to be made by majority vote of the directors. As to the
desired functions of Central, it was to announce minimum f .o.b. prices
from time to time after having received the advice of the Clearing
House Board, the administration of the clearing house, and the recom-
mendation of clearing house members representing two-thirds of the
114 University op California — Experiment Station
tonnage. It was further to review all claims and adjustments originating
in connection with the clearing house. It was to be entitled to direct
unsold fruit to other markets or to cold storage or to order it to be
turned into by-products. Moreover, it was to promote the interests of the
apple industry in various ways and to be entitled to assess the fruit of
its members for the purpose of covering its expenses.
4. It was suggested that the management of the Clearing House
Board should consist of representatives of each unit and an equal num-
ber of growers appointed by the directors of Central. The clearing house
was to have a secretary who should keep a daily schedule of shipments
and sales and collect other useful information. Furthermore, no agency
affiliated with the clearing house should be allowed to solicit business
or to sell at prices which were below the minimum set by Central.
With this plan, which provided for a clearing house with regulatory
powers, the committee thought it would be possible to overcome the
conflict of interests which would inevitably develop. It believed that the
plan would gain the support of practically all the Gravenstein apple
growers and the assistance of the cooperative and independent market-
ing agencies because it permitted the growers to market through mar-
keting agencies of their own choice, and permitted them to shift to
others from time to time if they so desired with only the restriction
that the agency selected be affiliated with Central and be a member of
the clearing house. The committee also felt that the plan would be
attractive to the growers because it placed control of the distribution
of the crop in the producers' hands by giving Central important powers
over the clearing house, and because it aimed to bring about a coordina-
tion of business on an industry basis.
The plan was adopted by the committee of sixteen representing the
various fruit growing districts and was approved by the important
existing marketing agencies. The California Gravenstein Apple Growers
was therefore incorporated in January, 1927. The subsequent member-
ship campaign was very successful. About 1,500 growers representing
more than 95 per cent of the Gravenstein tonnage of Sonoma and Napa
counties became members of Central. In addition, practically all the
existing marketing agencies joined the clearing house.206 Four of these
marketing agencies were cooperative associations, namely : The Sebas-
topol Apple Growers' Union ; the Gravenstein Apple Growers' Associa-
266 The names of the different units were : Garbro Fruit Company, Garcia and
Maggini Co., Geyserville Growers, Gravenstein Apple Growers' Cooperative Associa-
tion, Healdsburg Gravenstein Apple Growers, J. F. Miller & Sons, Pacific Fruit
Exchange, Pioneer Fruit Company, Geo. A. Ross & Son, Sebastopol Apple Growers'
Union, Seaton Fruit Co., and Sonoma Valley Apple Growers' Association.
Bul. 557] Cooperative Marketing of Deciduous Fruits 115
tion, which sold through the California Fruit Exchange ; the Sonoma
Valley Apple Growers' Association; and the Healdsburg Gravenstein
Apple Growers. The last two associations sold through the Federated
Fruit and Vegetable Growers, which at that time made strenuous efforts
to gain a footing in the California Gravenstein industry.
During the shipping season of 1927 the organization functioned
smoothly. The crop was but 60 per cent as large as in the previous year
and prices were good — $1.66 a box as compared with $0.39 in 1926. The
real test came with the crop of 1928, which was over twice as large as
that of 1927. Opening prices proved to be too high, but there was oppo-
sition to lowering them. Representatives of neither the cooperative nor
the private "units" were willing to propose lowering the price although
some in both groups fully realized the true situation. A total of 1,932
cars was shipped by the various units of the clearing house as compared
with 909 in the preceding season. Prices broke badly toward the latter
part of the season. Growers were not prepared for such low prices. Ac-
cusations of underhanded practices were hurled at certain private ship-
pers, and confidence in the organization fell to a point where the plan
was finally given up before the season had entirely closed. Here, as in
so many other cases, the clearing house was blamed for not controlling
a surplus when, as a matter of fact, the plan of operation and set-up
were not suitable for that purpose. No definite provision was made for
allocation of permissible shipments in case all could not be marketed at
the fixed asking prices, and no adequate machinery was provided for
carrying out any such plan. All that was done was to name a minimum
price. This was too high to move the crop at the rate it was being offered,
consequently apples began to accumulate in the hands of desperate
shippers. Then the usual thing happened — some one made concessions
and sales.
Following the annual meeting of Central in January, 1929, a com-
mittee was appointed to work out recommendations for improvement
of the plan.267 This committee made a number of recommendations
including the following :
1. That the number of sales units in the clearing house be reduced by making it
necessary that every membership unit have the equivalent of at least 7* per cent of
the previous season's total pack shipped by all units.
2. That provision be made for the employment of a general manager to be
appointed by the Directors of Central.
3. That maturity requirements be more strictly enforced during the early part of
the season.
267 Eeport of committee at special meeting of February 5, 1929. The members of
this committee were: A. B. Swain, Chairman; Harvey C. Frost, A. M. Garcia, W.
W. Monroe, E. C. Merritt, George Cassidy, and A. L. Siegle.
116 University of California — Experiment Station
4. That the membership of the clearing house consist of only one representative or
sales agent of each membership unit.
5. That the different membership units shipping through a given sales unit shall
not have more than one representative on the Board of Directors of Central.
6. That a monthly bulletin be published to improve the contact between the
organization and its members, this to be supplemented by weekly circulars during
the shipping season.
7. That consideration be given to the construction of large unit driers.
It is interesting to note that the committee stressed particularly the
importance of the appointment of a general manager. Some of the
leaders had urged the employment of a general manager from the
beginning and were inclined to lay the failure to the lack of such a
"strong man." This proposal had been rejected by the majority of the
clearing-house members.
When the committee report was discussed at a special meeting held
by Central in February, 1929, the idea of employing a general manager
was approved. The proposal to reduce the number of units in the clear-
ing house was, however, rejected, as were the proposals to change the
voting system of Central and clearing house, since the growers were not
willing to give up the special privilege accorded to them in the original
plan, and since not enough sentiment existed for placing the voting
power of the members of the Clearing House Board on a tonnage basis.
The movement for the improvement of the set-up and plan of opera-
tion of the California Gravenstein Apple Growers did not proceed
further. The recommendations evidently required too many concessions
and had come too late in the season to permit ironing out the differences.
It was therefore decided in March, 1929, to discontinue the clearing
house. It was thought advisable, however, to maintain the California
Gravenstein Apple Growers. The latter appointed a new committee for
the purpose of studying further the possibilities of improving marketing
conditions. This committee proposed to reorganize Central in such a way
as to convert it into a cooperative marketing association — the one big
cooperative for the Gravenstein apple industry which has been the ideal
of some of the leaders. Nothing came of the proposals.
Bul. 557] Cooperative Marketing of Deciduous Fruits 117
SUMMARY AND CONCLUSIONS
Cooperative marketing in the California fresh-deciduous-fruit indus-
try has been in process of development for sixty-odd years. During this
period it has gradually gained in importance. Today, approximately
8,000 growers are organized in some 90 local cooperative associations
which handle about 30 per cent of the fresh deciduous-tree fruits and
about 11 per cent of the fresh grapes shipped from California, as well
as some portion of such commodities sold in the state itself. Most of
these organizations are federated into a general sales organization, the
California Fruit Exchange.
The earliest instances of collective action were efforts to improve the
transportation of fruit. The first of these occurred in 1869 when the
completion of the overland railroad opened prospects of new markets
in the East. This organization, the California Fruit Growers' and
Dealers' Association, was a combination of growers and dealers, and
had as its major purpose the reduction of freight rates and the develop-
ment of eastern outlets. It seems to have done nothing but negotiate
with the railroads. (See pages 5 to 7.)
Examples of local collective action followed shortly thereafter and
consisted of informal efforts of local groups of farmers to reduce the
costs of shipping fruit to California markets. (See pages 7 and 8.)
The first plan for the establishment of a state-wide grower-owned and
grower-controlled cooperative marketing system for fresh deciduous
fruits was drafted in 1885. This plan led to the creation of the California
Fruit Union. It provided for the organization of a central cooperative
association with stock owned by individual fruit growers. Such local
associations as developed were to load the fruit and the Union was to
ship and sell it.
After its first year the Union became a grower-dealer organization.
It was organized during the business depression of 1885 just after
several years of marked increases in fruit shipments. Having lost its
grower character and having failed to obtain the expected market con-
trol, it passed out of existence during the business depression of 1894,
after further marked increases in shipments had led to low prices. ( See
pages 13 to 29.)
When the cooperative movement got under way among citrus-fruit
growers in southern California during the middle nineties, attention
was attracted to the advantages of a federated type of organization, the
"exchange system." The California Fruit Exchange, a dried-fruit organ-
118 University of California — Experiment Station
ization, developed in the Santa Clara Valley, and sought to spread its
influence over the state. After the California Fruit Union passed out of
existence, it sought to get the fresh-fruit growers in to form local asso-
ciations and affiliate with it. Nothing came of this movement (see pages
31 to 33).
The exchange system attracted further attention when the Southern
California Deciduous Fruit Exchange was organized for the sale of
dried fruits (page 39) . Moreover, both the manager of this organization
and of the Southern California Fruit Exchange urged the develop-
ment of a federated type of organization for the fresh-deciduous-fruit
growers.
It was not until 1901, when the California Fresh Fruit Exchange was
formed (now the California Fruit Exchange), that another state-wide
organization for the sale of fresh deciduous fruits developed. Although
it was first proposed to make this a direct membership type of association
patterned after the then successful California Raisin Growers' Asso-
ciation and the California Cured Fruit Association, the advocates of
the federated type won.
After many difficulties, particularly in the early years, the Exchange
has become a very important factor in marketing California deciduous
fruit. In 1931 it marketed 22.7 per cent of the fresh deciduous-tree fruits
and 9.7 per cent of the fresh grapes shipped out of the state. Its superior
fruit is sold under the Blue Anchor brand, which has gained a high
reputation in the United States and abroad. The Exchange furnishes
most of the supplies needed by its affiliated local associations. Further-
more, it performs valuable services in matters of standardization, adver-
tising, transportation, insurance, and public relations. It coordinates
the activities of the large majority of the existing local cooperative
associations for fresh deciduous fruits and has spread its grower con-
nections over the entire state and into Arizona. Last but not least, in
collaboration with the California Fruit Growers' Exchange (formerly
the Southern California Fruit Exchange), the organization has built
up an effective sales system and has made good progress in the develop-
ment of an export business.
So far as local and regional developments are concerned, there is
relatively little aside from the local units affiliated with the California
Fruit Exchange. There are perhaps a dozen independent cooperatives
today marketing fresh deciduous-tree fruit or grapes and, in addition,
one regional organization, the Sebastopol Apple Growers' Union. The
cooperative movement has suffered in the Sebastopol area because of a
split in the membership of the Sebastopol Apple Growers ' Union which
Btjl. 557] Cooperative Marketing of Deciduous Fruits 119
occurred in 1924. Little progress has been made so far in the Watson-
ville region.
The basic reason for the nrge to form cooperative associations
throughout the period of sixty-odd years has been low prices to growers.
The reasons given in explanation of low prices have been substantially
similar throughout the period with some variations in emphasis. The
principal reasons were: (1) High freight and refrigeration charges.
Practically every organization discussed has at some time or other par-
. ticipated in attempts to reduce these charges or to improve the services
without increasing charges. At one time there was even a strenuous
effort to form an organization of growers to develop its own refrigerator
car line (pages 39 to 40). (2) High charges by California packers and
shippers and by dealers in the East. (3) Dishonest or questionable prac-
tices on the part of shippers or on the part of the trade in eastern
markets. (4) Lack of aggressiveness on the part of private shippers in
developing new markets and correcting evils in transportation or in the
eastern markets. Much was said of wide dealers' margins in the East.
(5) Disorganization of markets. Most commonly the complaint has been
that individual markets are alternately oversupplied or undersupplied.
Sometimes, in addition, the total supply to all markets was considered
too great.
The basic reason for low prices seems to have been the pressure of
supplies on demand. Consumers' habits change slowly. Plantings were
increasing rapidly, particularly after every reasonably prosperous or
promising period. Thus from 1871 to the bumper crop year of 1876 ship-
ments increased from 916 tons to 2,101 tons, or 129 per cent. Again,
from 1876 to 1881 they increased from 2,101 tons to 3,614 tons, or 72
per cent. And to take a more recent period, from 1920 to 1925 shipments
of apricots, cherries, peaches, pears, and plums increased from 10,709
cars to 15,201, an increase of about 42 per cent.
As a result, even a year of normal yield was at most times a year when
each local newspaper editor or Chamber of Commerce enthusiast could
boast "the biggest shipment of fruit in the history of our fair city."
Every year of good crops was a year of surplus, a year when there was
much complaint of "red ink."268
Throughout the history of cooperative marketing of fresh deciduous
fruits the same names reappear again and again in a series of move-
ments— the cooperatively minded. Time and again is voiced the com-
plaint that many producers will not cooperate, or that they prefer to
268 That is, when returns in the East were so low that growers had to raise
additional funds to pay freight and refrigeration.
120 University of California — Experiment Station
listen to and deal with private firms rather than the cooperative leaders
and their organizations. The notion has been widespread, even among
many of the noncooperators, that substantial grower control on an
industry basis is not only desirable but even necessary. Yet, as one
speaker put it, "you can get one-third of the growers together in an
organization ; these can get another third to join; but no power outside
the Almighty can draw the other one-third in."269
Because the growth of cooperative activities was not sufficiently rapid
to give the degree of control desired by those who emphasized disorderly
marketing, there have been repeated attempts to combine grower and
dealer interests so as to include in the organization practically all of
the fruit. The California Fruit Growers' and Dealers' Association of
1869 (Page 5), the California Fruit Union of 1885-1894 (page 13),
and the California Fruit Growers' and Shippers' Association of 1894
to 1901 (page 29), were the forerunners of a whole group of such
organizations, attempted or realized during the past decade and a half.
Some of these involved the establishment of clearing houses which
merely supplied information ; sometimes the clearing houses were also
to have regulatory powers ; and in a few cases the organizations were
really joint selling organizations (pages 104 to 116).
General-purpose farm organizations have played an important part
in the cooperative marketing movement. The farmers' clubs of the early
seventies, the grange during the late seventies and early eighties, the
Farmers' Alliance in the early nineties, the Farmers' Educational and
Cooperative Union in the first decade of the present century, and the
farm bureau since about 1920 have all favored, encouraged, and even
promoted cooperative marketing in various lines.
The sum total of discussion of cooperation in the meetings of these
organizations, and during the various cooperative movements, has
brought up and examined almost every sort of cooperative notion. This
discussion has been crystallized into a fairly clear understanding of
cooperative practices and problems on the part of a considerable group
of growers in practically every locality. This understanding promises
continued progress in the development of the marketing system for
fresh deciduous fruits.
269 A Mr. Gordon at the Thirtieth Fruit Growers' Convention, December, 1904.
California State Commissioner of Horticulture, First Bien. Bpt. 1903-04:311-12.
Bul. 557] Cooperative Marketing of Deciduous Fruits 121
ACKNOWLEDGMENTS
The authors desire to express their appreciation for the assistance
rendered by the numerous persons who supplied information or who
made available certain records from which data were obtained.
The authors are particularly indebted to the following persons : Mr.
E. C. Merritt, Manager of the Sebastopol Apple Growers' Union; Mr.
E. W. Stillwell, then manager of the clearing house of the Grape Con-
trol Board; Mr. J. L. Nagle, Manager, and Mr. Fred Read, in charge of
the Standardization Department, of the California Fruit Exchange;
and to Professor E. A. Stokdyk and Dr. S. W. Shear of the Giannini
Foundation of Agricultural Economics of the University of Califor-
nia. All of these men not only supplied or made available important
data but also read the manuscript and offered suggestions for its im-
provement.
8w-ll,'33
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