War time control of distribution of foods : a short history of the Distribution Division of the United States Food Administration, its personnel and achievements

Front matter

' o

WAR TIME CONTROL OF DISTRIBUTION OF FOODS o*

THE MACMILLAN COMPANY

Preface

In the attempt to present a brief history of the Distribution Division of the United States Food Administration, we have found it quite impossible to treat the activites of this division apart from that of the whole Food Administration. The work of all divisions was so closely inter-related that it is difficult to point to a single achievement of any division which could have been effected without the closest cooperation and assistance from a number of Divisions which had charge of other phases of the activity.

However, as we do not wish to write a history of the Food Administration as a whole, a task which has been left to other hands, we shall confine ourselves largely to a statement of the relation of the Distribution Division to the main Food Administration program. The fact that space does not permit us to refer especially to the activities of other divisions should not in any way detract from the importance of the service rendered by them, nor is it intended to qualify in any degree the previous statement that many of the achievements mentioned could not have been accomplished but for the cooperation of all branches of the Food Administration.

We would also call attention to the fact that in this brief statement it is impossible to give special credit to individuals for their part in the activity of this division. All worked together. All spent their days and parts of their nights pondering over the vexing problems presented. In almost all cases the net results were produced by combining the ideas and views of all and the fact that a certain individual was in charge of a section of the division does not mean that the vi PREFACE

activity of that section can be entirely attributed to this individual, but it must be attributed to the staff as a whole, as all were consulted and were always glad to render any advise or assistance possible in every important phase of the work in hand.

The following men remained connected with the Distribution Division practically from its organization till the withdrawal of the principal license regulations:

Theodore F. Whitmarsh, Chief Henry J. Lahey, Assistant

George E. Lichty, Head of Retail Section

George A. Zabriskie, Flour and Sugar, Later Head of Division Frank A. Hoey, Assistant

Charles Lester McCoy, Head of Report Section, Later head of Baking Section

Bird W. Housum, Brokers' Section

Charles Hatfield, Reports and Sugar Distribution

Frank H. Millard, Commercial Conservation, and Specialty Manufacturers' Section

Henry T. Leggett, Assistant to Mr. Whitmarsh

Clement R. Winslow, Retail Section

George W. Lawrence, Head of Coffee Section

Albert N. Merritt, Publicity and Censor

Others who were connected with the Division for a part or a greater portion of the time, and who performed important service for the Food Administration are:

Dana Tarbell Ackerly, Head of Rice, n Coffee and Specialties Section

Richard R. Williams, Jr., Head of Wholesale Section

James W. Hunt, Later Head of Wholesale Section

Louis T. Jaques, Retail Section

Walter E. Coe, Retail Section

Omar H. Cheer, Retail Section

PREFACE vii

Dana F. Ward, Retail Section Fish John Amerbach, Retail Section Meats Furman T. Nutt, Jr., Coffee Section Walter F. Blake, Coffee Section Max A. Christopher, Report Section Frank S. Tracy, Report Section Irving H. Taylor, Correspondence Mrs. Alice Gardner, Home Conservation Mrs. Albertnie H. Glenny, Home Conservation Miss Catherine C. Taussig, Home Conservation Richard J. Walsh, Publicity Duncan McDuffie, Head of Baking Section Benjamin R. Jacobs, Baking Section Harry F. Vories, Baking Section Crackers Harry D. Tipton, Baking Section A. J. Esberg, First Head of Baking Section Huntley M. Child, Baking Section Certain others were connected with the division at one time, but later became attached to other divisions. Among these were:

Enforcement Division:

Roland W. Boyden

James A. Ford

H. Parker Jones

Louis Horace Sawyer

Henry S. MacPherson Public Education:

Trell W. Yocum Coarse Grains :

John J. Stream

Joseph R. Leguenec

Scott F. Evans

Maurice E. Landauer

Matthew Purcell

G. A. Chapman

Contents

CHAPTER PAGE

I The Task Ahead 1

II The Beginnings of Sugar Control . . 8

Chapter I

The Food Control Act was passed by Congress and became effective August 10th, 1917. Mr. Hoover had, at the request of President Wilson, already come to Washington, and had gathered around him a few of the best trade advisors to be found in the country to assist him in formulating plans for the operation of the Food Administration after the law became effective. Among these men gathered as Mr. Hoover's Assistants was Mr. Theodore F. Whitmarsh, vice-president of Francis H. Leggett & Company of New York City, and at that time President also of the National Wholesale Grocers' Association. In this man was the dynamic force that was largely the source of the inspiration of every other man in the Distribution Division. Possessing almost the unlimited confidence of the Trade, he at once became a public servant of the most unflinching loyalty. At no time was the full performance of his public duty in any way affected by the fact that it might hurt the business of the trade with which he had been associated. His was the vision, and the dynamic force of performance. With him there was no uncertainty; a decision was nearly always ready on the most difficult and perplexing problems that had to be solved. He would rather be wrong and keep going till he found the right than to stagnate with the inertia of indecision. No man ever came to Washington for a conference with him who can forget his motto, " Keep your eye on the ball."

Mr. Whitmarsh was in the game to beat the Hun and for no other purpose. He would give no consideration to any plan or ideas that did not seem to have a direct relationship to this one great aim. Time and again beautiful constructive schemes of food control and trade regulation were presented to him, whereby it was claimed that many long standing abuses of trade competition could be cured, but not one moment's consideration would they be given unless it could be shown that the scheme had a direct relation to winning the war.

In fact this was the guiding principle of the whole Food Administration. Mistakes no doubt were made, but at no time was any act or regulation promulgated that was not believed to be necessary for the maximum effort required to win the war. Mr. Hoover was as firm as adamant on this point, and at no time did he " lose sight of the ball " — even for an instant.

The objective set for the Food Administration was therefore simple and definite : — To Help Win the War. The necessary steps in this direction were equally susceptible of clear and succinct enumeration.

1. To save food and prevent waste.

2. To distribute it equitably.

3. To distribute it at the lowest possible price to the consumer.

4. To prevent hoarding.

5. To save transportation.

6. To encourage production.

7. To facilitate the largest possible shipments of food to the Allies with the necessary shipments to neutrals and none to the enemy.

8. To provide for the growing needs of our army and navy.

On these fundamental principles, quoting from Mr. Whitmarsh, were to hang " all the law and the prophets (profits)." But the necessary steps by which these various principles might be put into operation presented enormously vexing and seemingly insurmountable problems. Food Distribution had always been effected previous to this time under freely competitive conditions, where self-interest had been the motive power, and the law of supply and demand the controlling factor. Economists and business men throughout the country were practically unanimous in the opinion that it would be not only inexpedient but practically impossible to obstruct seriously the law of supply and demand. But as the time approached for the actual operation of the Food Administration it became more and more apparent that radical interference with the law of supply and demand would have to be made.

The season of 1917 proved most extremely disastrous to crops in America, as well as to those in practically every allied country. In fact there was scarcely enough food in the United States for our normal consumption, while in England, France and Italy, the amount of food available would hardly have met half their normal requirements. Submarine losses and the heavy drain on shipping necessary to transport troops and military supplies, rendered it practically impossible to use the surplus food, not a large amount at best, in the southern hemisphere and the far East. The whole burden was, therefore, largely thrown on the shoulders of America, and America had to make good or lose the war.

During the summer of 1917, prices for food products increased practically 100 per cent. There seemed to be no limit to the point to which they might advance. Although wages had advanced it would have been utterly impossible for them to keep pace with an uncontrolled advance in food prices, without the complete overthrow of all industry. With supplies so seriously inadequate, it was evident that under the free operation of the law of supply and demand, those with accumulated wealth, both at home and abroad, would have whatever food they required for their comfort, and the poorer classes would get little or none. The law of supply and demand offered no remedy for such an acute situation. Under its operation there could be no hope of securing an equitable distribution of food to the great masses of workers and their families. Hunger and starvation are the most compelling forces of all human activity. Those who are starving have frequently been known to eat even their fellow beings. It is at once apparent that with gaunt hunger and starvation prevalent among the masses, the maintenance of any stable government capable of effectively carrying on the war would be impossible.

Under the operation of the law of supply and demand scarcity of food and high prices are supposed to stimulate self-interest to activity for the prevention of waste and for greater production till the deficiency is removed. But the crop of 1917 had already been produced, and science had offered no means by which food could be produced in material quantities before another harvest, no matter what stimulus might be offered by famine prices. It was obvious also that as the 1917 crop had already been produced and was now largely in the hands of manufacturers and dealers, any further advances in market prices would simply mean a profit which would accrue to them, without their having rendered any corresponding service. To be sure the same dealers and manufacturers would probably have to take corresponding losses during the readjustments which would occur at the close of the war, as there is always a sort of grim justice that works itself out in the operation of the law of supply and demand, but the exigencies of the war gave no opportunity even to consider such possible contingencies.

This country faced the stern necessity of the most extreme and arbitrary measures of conservation and control, or the loss of the war, which would practically have meant the destruction of civilization.

It was with the greatest reluctance, therefore, that the members of the staff of the Food Administration undertook the difficult and vexing task of forcing water to flow up hill, and of bringing under arbitrary control those time honored economic principles upon which our whole fabric of production, distribution and consumption had been based. But it had to be done and Mr. Hoover and Mr. Whitmarsh and the members of the staff associated with them set their faces to the grim task of doing it.

During the summer of 1917, the temper of the trades generally had been shown by expressions and resolutions of many national associations. These were almost without exception unanimous in willingness for any sacrifice necessary to win the war. The utmost confidence in the motives and leadership of Mr. Hoover was expressed, and it was obvious that the trades generally were willing to accept his views and follow his directions, regardless of any personal opinions which individuals might hold. An army without this spirit of unlimited sacrifice and confidence in leadership cannot fight, and fortunately for this country and for the world, the food trades automatically resolved themselves into an army under Mr. Hoover's leadership, and this voluntary cooperation, so generally and so generously given, eventually proved to be an enormous contributing factor in winning the war. It is safe to say that without these voluntary sacrifices of the trades the Food Administration could not have proved a success.

In order properly to capitalize this good will, it was decided to allow the trades to regulate and police themselves so far as possible. Before any important regulation was promulgated, a number of the representative men in each trade affected were called to Washington. In most instances they came fortified by the spirit of war service and sacrifice, but in all instances after a conference with Mr. Hoover and Mr. Whitmarsh and with other members of the staff, and when they understood clearly what the Government wanted, and were then asked to make suggestions for the regulation of their particular trades, it was found that they were not only willing to do everything asked of them, but were prepared to make even greater sacrifices than were thought necessary.

Thus the principle of democracy and voluntary submission to self-made regulations became one of the fundamental principles of the Food Administration, and was at all times the method by which it was primarily sought to attain the ends desired.

The months of August, September and October, 1917, were filled with such daily conferences with the representatives of the various trades. Manufacturers, wholesalers and retailers in every line of trade to be regulated were given an opportunity of expressing their views. Producers and consumers were also called in, and no source of information that might assist in the intelligent solution of the vexing problems confronting the Administration was left undrained. The wholesale and retail grocers especially gave evidence of their unswerving loyalty, and willingness to make any sacrifice that might be required. As results proved, the confidence which the Food Administration placed in this method of government by the consent of the governed was fully justified.

Chapter II The Beginnings Of Sugar Control

Even before the licensing system was perfected, the Food Administration was compelled to face an acute and perplexing situation with reference to sugar. Many of the sources of the sugar supply of the European allies in Belgium and Northern France had been destroyed. Submarine sinkings had not only caused the direct destruction of enormous quantities of raw sugar, but had rendered the shipping situation so acute that it was impossible to spare tonnage to procure the large surplus of raw sugar in Java, amounting to nearly 1,000,000 tons. Our exports of sugar for the year 1917 were eighteen times the average for the three years preceding the war. Competitive foreign buying of raw sugar in Cuba became a near-panic when a clause was inserted in the War Revenue Bill providing for the repeal of the draw-back on sugar exported from this country. While this provision was eliminated some months later, it was believed at that time that it would pass, and foreign buyers that had been depending on exportations of refined sugar from this country later in the season, feared that they would no longer be able to procure their supplies as heretofore, and there was the most eager competitive buying in Cuba. This resulted in forcing up the price of Cuban raws in about six weeks from $5.77 to $7.77 per 100 pounds, duty paid, United States seaboard basis. The advance in the price of refined sugar was equally radical.

S

THE BEGINNINGS OF SUGAR CONTROL 9

While most refiners did not officially advance their quotations beyond the $8.50 seaboard basis, on account of the extreme scarcity of available supplies, few of them if any were able to make shipments within 30 or 60 days of the time the order was received, and those who had spot stocks were able to obtain almost any price they desired for immediate shipment. In fact in August the price of spot sugar ran as high as $9.15 seaboard basis, and the demand was still unfilled.

England had reduced her sugar ration to two pounds per capita per month, and France had reduced hers to only a little over one pound per month. Their supplies were down almost to the vanishing point, and consequently it seemed impossible for them even to maintain this meager ration without liberal importations from this country. Notwithstanding the acute domestic situation, when these facts became known, Mr. Hoover immediately won the lasting gratitude of France by ordering the release for exportation to France of large stocks of sugar held at the Atlantic Seaboard, which had been intended for domestic consumption, and this country was thus brought face to face with an immediate and forced conservation of sugar.

It is not our purpose here to dwell upon the various measures of voluntary conservation, but only to mention the method of control by which the price of sugar was prevented from mounting to such heights that this commodity would have been beyond the reach of the ordinary wage earner.

In August, 1917, while the excitement was at its height, there was appointed an international sugar committee of which Mr. George M. Rolph, Head of the Sugar Division of the Food Administration, was chairman. On this committee Sir Joseph White Todd and

J. Ramsey Drake represented the allied governments, and W. A. Jamison and Earl D. Babst, with Mr. Hoover as ex officio member, represented the Food Administration. The purpose of this Committee was to check the competitive buying of Cuban raw sugar, and to bring about an equitable division of the available supplies between this country and the Allies. A Committee of refiners was appointed which consisted of the following: James A. Post, Chairman, Claus Spreckels, Charles M. Warner, George M. Earle Jr., and Robert M. Parker. This Committee agreed that the refiners would stop their competitive buying and limit their purchases to such quantities as might be authorized by the International Sugar Committee, which should also have the exclusive control of the price to be paid.

Under the operation of this Committee the price of Cuban raw sugar declined to $6.90 by September 14th, . which was fixed as the maximum for the balance of the season's crop.

Conferences were had with the refiners of cane sugar, and it was agreed that refiners would not charge a gross profit to exceed $1.30 per 100 pounds, which was to cover shrinkage and all costs of manufacture. This left them a net profit not to exceed their average earnings before the war.

By agreement with the refiners also a maximum price of $8.40 f . o. b. seaboard was fixed for cane sugar in August, which was reduced to $8.35 October first, and to $8.15 December first.

On November 30th, 1917, the International Sugar Committee negotiated its contract with the Cuban Sugar producers. Cuba was also at war with Germany, and the Committee representing the producers was found equally patriotic and ready for sacrifice so that the contract as finally accepted permitted

THE BEGINNINGS OF SUGAR CONTROL 11

a price on refined cane sugar of $7.35 seaboard, which price became effective on the seventh of January, 1918.

The beet sugar situation had to be treated in a little different way. The crop having already been produced, no excessive profits could possibly enlarge the production for the current year. The price of beet sugar up to this time had always been entirely controlled by the price of cane sugar, but pending the arrival of the new crop from Cuba it appeared that this would have afforded the domestic refiners, under the present circumstances, a profit which could hardly be justified under the law. Accordingly several conferences were held with the representatives of the beet sugar refiners, and, actuated by patriotic motives, they agreed to sell their sugar after October first, on the basis of $7.25 per 100 pounds, plus freight from seaboard. This was nearly $1.50 per 100 pounds under the prevailing market prices, and represented a voluntary sacrifice of the beet sugar interests.

The action of the Western Sugar Refining Company, and that of the California-Hawaiian Sugar Refining Company are especially to be commended, for on account of their geographical situation it was felt necessary that they should come in on the same terms as the beet sugar refiners, and as they had purchased their stocks of raw sugar based on the high prices of the preceding months, their agreement to sell on the $7.25 basis meant the direct loss of hundreds of thousands of dollars to them.

All sugar sold by the western refiners after October first was therefore on the basis of $7.25 per 100 pounds, seaboard. In order to make as little confusion as possible, the same price was made to apply on all sugar previously sold by the refiner that had not reached the purchaser on that date, regardless of the contract price at which it had been sold. This of course meant revision of existing contract prices downward in amounts of from $1.00 to $1.50 per 100 pounds.

The next problem was to see that the consumer got the benefit of the reductions brought about by these sacrifices of the refiners and producers. All jobbers were informed at first unofficially, and later by direct announcement, that they must sell sugar on the basis of actual cost regardless of market conditions, and that they would in no case be permitted to exceed the margins which they customarily made before the war. It was further announced that any margin in excess of from fifteen to twenty-five cents per hundred pounds would be considered prima facie unreasonable, and the burden of justifying such excessive margin would be on the jobber.

No specific margin was set for the retailer. It was not believed at that time that the unlicensed retailer could be controlled directly, but it was intimated that a profit of one-half to one cent per pound would be regarded as ample, and all licensees were instructed to see that during the readjustment period, sugar sold on the new basis should be resold by the retailer to the consumer at a correspondingly low price. Local food administrators were instructed to watch this situation and to report all cases of profiteering.

The result of all this was naturally a condition of great confusion in prices during the month of October. On account of the extreme car shortage, the new crop did not begin to move in large quantities till the middle of the month, and in the meantime supplies were limited to stocks of high priced sugars. Most jobbers withheld from the market any low priced sugar arriving after the first of October, till their old stocks were ex-

THE BEGINNINGS OF SUGAR CONTROL 13

hausted, but as some jobbers were out of old stocks before others, the lower priced sugar came in to compete with remaining stocks of sugar bought on the higher basis, and while there was no surplus, the effect of the offer of the low priced sugar was such that many jobbers absorbed some losses on their existing stocks.

Owing to failure of transportation facilities and to the conditions already mentioned, very acute sugar famines developed throughout the fall and early winter of 1917. On December 26th the total stocks of raw sugar on the Atlantic Seaboard were reduced to 5,946 tons, only four days' supply for New York state alone.

In many localities in the Eastern States sugar could not be procured at all for long periods of time. A method of controlling the retailer other than by voluntary persuasion was found when the license regulations were promulgated, and the price was kept fairly well under control notwithstanding the acute shortage. An effort to relieve the situation in the East was made by bringing in Louisiana sugar, but on account of an early frost, this crop was greatly reduced, and the effort met with only indifferent success. For a time practically the only relief came from the release of sugar by countries owning stocks at the seaboard held for export, on condition that the sugar so released would be replaced when the new Cuban crop should arrive. Nevertheless the fundamental fact remains that in this one of the very first efforts to control the law of supply and demand, the price was controlled, and maintained to the consumer at an average of eight and one-half to nine cents per pound through the middle Western States, and at about ten cents per pound in the North Atlantic States, prices which were probably less than half what they would have been during this period if there had been no control. Also, through the arbitrary powers exerted by the Sugar Distributing Committee, a more or less equitable distribution of the existing supplies was obtained.

More will be said later relative to sugar control, and the only reason for bringing it in at this time is that all the important phases of the regulations were agreed upon and put into effect before the licensing system became operative, which is only one of the many striking illustrations of the emergency character of all Food Administration measures.

Chapter III The Licensing System

The first license proclamation of the President was issued under date of August 14th, 1917. AH millers of wheat and rye, and elevators handling and storing the same commodities, were required to operate under a Federal License after September first. Exception was made for millers with an operating capacity of less than 100 barrels daily, and for farmers' cooperative associations.

Under date of September seventh a proclamation was issued requiring all importers, manufacturers and refiners of sugar, sugar syrups and molasses to operate under a Federal License after October first, 1917.

It was thought at first that it would not be necessary to place distributors of groceries generally under license, but as the problem was studied more minutely, it was found that the provisions of the Food Control Act and the penalties for its violation were not sufficiently definite to afford adequate control except under a licensing system, which it was felt should be applied only to the right of the dealer to handle some of the more important staple commodities rather than to the right to deal in foods generally. Accordingly under date of October eighth a proclamation was issued requiring that a license should be obtained by all importers, manufacturers and distributors of any of the following commodities:

Wheat, wheat flour, rye or rye flour,

Barley or barley flour,

Oats, oatmeal or rolled oats,

Corn, corn grits, cornmeal, hominy, corn flour, starch from corn, corn oil, corn syrup or glucose,

Rice, rice flour,

Dried beans,

Pea seed or dried peas,

Cotton seed, cottonseed oil, cottonseed cake or cottonseed meal,

Peanut oil or peanut meal,

Soya bean oil, soya bean meal, palm oil or copra oil,

Oleomargine, lard, lard substitutes, oleo oil or cooking fats,

Milk, butter or cheese,

Condensed, evaporated or powdered milk,

Fresh, canned or cured beef, pork or mutton,

Poultry or eggs,

Fresh or frozen fish,

Fresh fruits or vegetables.

Canned: Peas, dried beans, tomatoes, corn, salmon or sardines,

Dried: Prunes, apples, peaches or raisins,

Sugar, syrups or molasses.

Exception was made for retailers whose gross sales of food commodities did not exceed $100,000 per annum, as these were exempt from license under the law. Exemption was also made for farmers, and for canners whose gross production did not exceed 5,000 cases of canned goods per annum.

The license proclamation of October eighth also brought under the licensing system operators of cold storage warehouses, and elevators for the storage of corn, oats, barley, beans, rice, etc. But our concern

THE LICENSING SYSTEM 17

here is chiefly with the application of the licensing rules to dealers in the non-perishable grocery products. More specifically, the list of non-perishables which were then licensed in the hands of the distributor consisted of the following articles :

Barley flour.

Canned or cured beef, pork, and mutton:

Including : —

Veal, lamb, and ham.

Canned corn beef.

Chipped beef.

Drief beef.

Sliced bacon, whether in containers or not.

Excluding — Beef juice.

Bologna.

Canned chili meat.

Corn beef hash.

Deviled ham.

Luncheon tongue.

Mincemeat.

Potted meats.

Sausage.

Scrapple.

Tripe.

Veal loaf.

Canned corn (including canned hulled corn). Canned dried beans (including canned pork and

beans, and chili con carne with beans). Canned peas.

Canned salmon.

Canned sardines.

Canned tomatoes (including paste, pulp, and puree).

Coffee, green.

Condensed, evaporated, or powdered milk.

Cooking fats (including nut oil for cooking and edible tallow).

Corn flour.

Corn grits.

Corn meal.

Corn oil.

Cornstarch (including laundry starch).

Maple syrup.

Dried or evaporated apples, peaches, prunes, raisins.

Dried beans.

Dried peas, pea seed (including cowpeas).

Glucose.

Hominy (including canned hominy).

Lard.

Lard substitutes (including butterine, cocoanut oil* butter) .

Maple compounds.

Maple sugar.

Maple syrup.

Mixed and self-rising flours containing more than 50 per cent, of licensed flours.

Molasses (including beet molasses and sorghum).

Oatmeal.

Oleomargarine.

Oleo oil.

Rice, cleaned.

Rice flour.

Rolled oats.

Rye flour.

Sugar (including refined, clarified, plantationwashed, open-kettle, maple sugar, and corn sugar).

THE LICENSING SYSTEM 19

•Syrups (including maple syrup; excluding beverage,

medicinal, and rockcandy syrups).

Wheat flour (including graham and whole-wheat

flour).

A few additional items were added by supplementary proclamations, but in the main the above list was not materially modified.

After a few final conferences with the representatives of the wholesale and retail grocery trades, the " License Regulations Series B " were decided upon and promulgated as effective November first. Blanks for application for licenses were issued on request, and licenses were automatically granted to all distributors who filled out the application blanks and gave the required information. No charge was made for the issuance of the license, and, due to the wide publicity given, there were very few dealers who by November first had not applied for licenses.