University of South Carolina Libraries
State Warehou Its Workim Details of Its Effective Plan ed?How the Warehouses ai Carried?Something of the rin, The Author of the A. Who Established the Sy& lem Discussed by S (By Jno. K. Anil.) Since the invention of the gin, the social, economic and political fabric of the South has been woven of cotton, and its'Dlace is large in the affairs of nations. When Henry W. Grady, in his beautiful tribute to the "royal plant," said that "the trespass of a little worm upon its green leaf means more to England and to English homes than the advance of a Russian army would upon her Asian frontier," little j did he dream that only a few years after his death England and Russia would be allies in a world-war which has embraced nearly ail the states across the waters; but this great struggle of the nations has emphasized the kingly importance of the staple whose praises he sang, for it has demonstrated that cotton, as State "Warehouse Commissioner McLaurin has pointed Out, IS au luitiuauviiai jt/viai.1- | cal as well as an e^uomic issue. It was the foundation of ante-bellum j civilization in the South; upon it the institution of slavery rested; in the issues which developed out of its growth and marketing grew the issues which joined the North and the South in a death struggle from '61 to '65; upon it, in the half century which has passed 6ince Appomattox, the structure of the ivew souin nas oeeu reaieu. And yet, even with a monopoly in I the production of a crop of such vital importance to almost the entire world, the growers of cotton, unorganized and scattered over a fouth of the United States, have never yet been in position to demand a fair and just price for their commodity, even though the world must have it. Some years they haive received good prices; some years, with a bountiful crop passing 4 V ' n Ko-ny^C! thor VliJVO iuiuugii Hldi uauus, wuyj v * - , actual want. The law of supply and demand has been suspended, so far as they were concerned, and large fluctuations in the price of cotiton have been caused and governed by powers entirely foreign to their interests. That such a condition should have existed during the years up to the present would seem incredible, if the evidence were not before our eyes. We are living in the midst of this condition. and it has been with us so long that it had almost come, to be taken as j a matter o' ourse. Men of ability have studied the situation, and various remedies have been suggested, and many of them have been tried. Farmers' organizations, local, state and national, has been attempted, but without relief, and most of these organizations haive been short lived. TTarious measures regulating the exchanges have been proposed in congress, and some of them have become laws, but they have not reached the growers of cotton?tne men wnose ton j furnishes the stap^ clothing of the world. The Author of the Warehouse Law. When the assassination of a prince of Austria and his consort plunged the nations of Europe into war, the South stood face to face with commercial disaster. With a 16,000,000-bale crop * - * J r i i ! on nana, cotton went aown iar ueiuw the cost of production. Financial crashes came; a period of despondency and demoralization ensued; and a panic engulfing the cotton states seemed imminent. Several of the Southern governors called special sessions of their legislatures to deal with the situation, and among these was Governor Blease of South Carolina. In the state senate Marlboro county, in many respects the leading cotton coun- j ty of the South, was represented by j Senator John Lowndes McLaurin?a man long prominently identified with thp affaire nf tnp stale and of the na tion. He was attorney general of the state back in the eany nineties, when Tillman was governor; he went out of national house of representatives, the attorney general's office into the where his ability was soon recognized and he was made a member of the ways and means committee of the J house; upon the death of the lamented Senator Josepr H. Earle he was appointed United States senator from South Carolina, and was electee to sue- j ceed himself by an overwhelming uni'! jority; in the United States senate ^5 constructive mind lead him forward into the advocacy of measures which, with what now appears to be prophetic vision, he foresaw the nation must espouse to conserve her power for good in the affairs of the world. His nartv. however, had not vet seen the light, and his larger vision had led to an estrangement between bim and some of its leaders, and particularly his colleague from South Carolina, who was at that time the dominant figure in state politics. His retirement from national political life followed, and he had gone back to his i\'arlboro home to see the very measures for the advocacy of which his colleagues had attempted to read him 4 V. rv + "Ka/?ATV1 A UU L VI LUC JL/T7ULIV^V/l auv yCLl CJ yti,uuic the principal administration planks in the congressional propaganda of the only Southern president the Democratic party has elected since the 'War Between the States. Re-entering public life, he came to the state ifsislature as the senator from Marlboro? principally to urge a solution whiA He Had worK^a oui 10 re:ieve ine coitcn growers of the South and to plaea thean in position to demand of the se System; j or* and drniirfhl v ? *>? SS> ^ of Operation Briefly Sketch e Leased and the Insurance i Efforts of Senator McLau ct and the Commissioner item? The Cotton Prob'snator McLaurin. world which they served a fair return + Via loKnr /\f tVioii" dud tVio I 1V1 1U WVi s/i. WlAVii MUU 1>UV j product of their soil. For years past he has been a close student of the economic as well as the 1 political needs of the south, and he j had evolved the plan of state ware-1 house systems for the various Southern ' states, which could be conducted in- j dependently by the respective states, j but which could accomplish larger and j nninkpr an<i surer results hv on-rvr&pr ation. He had advocated this system at the great cotton growers' convention in New Orleans several years ago, and in South Carolina he had succeeded in having a law passed, but JOHN L. McLAURIN. STATE which had been declared unconstitutional by the court, with the opinion of the court, however, that the underlying principle involved was not violative either of the spirit or the letter of the constitution. The Act Passed. With this long preparation and with \ this close study, made possible by I ability combined with opportunties I which comparatively few men have had' presented to them, he came to the; extra session of the general assembly j of 1914, and began the right for the ! state warehouse act which was passed ; and was approved by Governor Blease ! on October 30 of that year. The act created the state system for ' which he had labored; it gave the state ; warehouse commissioner ample lati- j tude for the inauguration of a system : correct in principle and beautiful in j practice; but it provided only fifteen! thousand dollars for the establishment' of a system to give relief in the handling of a crop upon which the pros perity or tne state is Dasea, upon which its business life depends, and the value of which annually runs way up into the millions of dollars. : Immediately upon the approval of the act the general assembly electee Senator McLaurin state warehouse commissioner on the first ballot without his being a candidate for the position, and he was face to face with the problem of establishing a great i system upon this tifteen thousand dollars appropriation, more than twelve thousand' dollars of which was converted back into the state treasury at1 the end of the year by Comptroller j General Jones, leaving the commis-1 sioner without a dol'ar from the first | of January until the first of March of this year, when an appropriation ofj fifteen thousand dollars for the year j 1915 became available. Warehouses could not be erected, j and they could not be leased at any j substantial rental. In the list of the appropriation, the thought of a compress became as fantastic as the wildest dream of one in troubled sle?p whose mind has been severely over- i taxed. Today, however, there are about one! .lundred and fifty warehouses in the , + TT* i V? A r? n nrorr?Afr<J ha AO _ 1 stint? system, wim <a.n ftss1 co?> pacity of from two to three hundred j thousand bales; an immense quantity! of cotton is being handled this s-eason, j md the system continues to grow so | rapidly as to be a continual source of wonder and surprise even t.o those who hoped large things for it. How was it /i-nnp? Tt ir simnle in th? telline:? far simpler than in the evolution of the general plan, the intricate details, and the defensive battle against Interests which have been preying upon the growers of cotton. Here it is: The System in Operation. ' iTto state leases a warehouse at aj tiattiinq 1 rental?nnp /Irvl 1-ftr npr vftar. I Manager, weigher and grader for that warehouse are appointed by the commissioner upon the recommendation of t the owner or those interested in the j house. These officials give bond to the I state. Generally the three positions are combined in one person, ^hich centers the responsibility and saves expense. The state furnishei to th? yariou? houses, which are denominated by ; numbers, from one on up, uniform blanks, tag;, report blanks, etc. Each day that cotton is taken in or delivered, the manager makes report of the transactions to the office of the commissioner, where a record is kept of each bale of cotton on storage with its marks, weight and grade, and to whom receipt has been issued for it. The state charges the local warehouses three cents per bale per month, which is more than off-set in the following manner: The state receipt has proved its superiority as a collateral in the money . centers of the country. Each receipt is signed by the manager of the local warehouse- and by the state warehouse commissioner, and bears the seal of the state. It carries absolute title to the cotton, thus removing the cloud of possible liens and mortgages, and it guarantees the weights and grades in favor of the purchaser or the | pledgee. It also certifies that the cotton is insured to its full market value. In establishing the character of the receipt, Senator McLaurin went to Washington and to New York, and presented it personally to the federal reserve board and to the New York bankers. He first saw Mr. Harding of the federal reserve board, who characterized the system as "a model of its kind," saying that in his opinion it was "in advance of anything that has been attempted in other Southern states." and who last February, in an HHH ^ y"Y' :'*: -: KS?Sa&? /,%?!"'* ,* - I Ifc ?? ilBraMml '7. |. .j . y WAREHOUSE COMMISSIONER. address to the American Bankers' institute, said that out of the agitation a-hiVVi -o:a had last fall "the onlv thing worth while was the excellent warehouse system in this state." High endorsement, surely. He then went to New York, where money was secured on the state receipt at a low rate of interest, in the fac? of a condition ; pre.alent in the South at that hme j under which it was hardly possible to j borrow money on any kind of security j at even the highest rates of interest. There are private and corporateowned warehouses whose receipts command juH^as low interest rates, and are regarded with just as much ravor, wnere me warenouses are known; but their receipts are dependent upon local financial institutions. They may and do circulate abroad in the marts of trade, but, after all, their standing depends upon the favor with which they are looked on by the banks at home who know personally the standing and the credit of the men behind them. The purpose of the state receipt, which has been accomplished, is to give the owner of a bale of cotton, no matter how poor that owner f nVl y\y? +Vl o f Ilia v utr, jum a> mu^ii uicuit vu mai j bale as->could be obtained by the most influential man in his community?to make the bale of cotton, and not the | holder thereof, the basis of the credit, , and to establish that credit, as a matter of right, and not of favor, anywhere in the business world. The state receipt is now passing current in all the money markets as freely as stocks and bonds of the most widely 1 1- - ~ T J i*. AllOWIl Ulg UUSmCSb tnilCi pi IOCS, auu II has been the foremost factor in giving the people of South Carolina and of the South six per cent money on their cotton. The Insurance. Hhe state secures for its warehouses the most advantageous insurance yet obtained in the history of the fire insurance industry. When the state system was inaugurated, country warehouses were paying $3.50 per year, on a short-term cancellation basis?that is, it was necessary to take out policies for six months or a year on the total amount of cotton stored to pay a premium in advance at the race of $3.50 per hundred dollars per year, and if the cotton was sold before the expiration of the policies, the return premium was figured on the short term basis, which made it higher than i the annual $3.50 per hundred premium. The state system immediately began a fight for cheaper in-surance, upon a more equitable basis. It has succeeded in reducing this $3.50 country rate to $1.58, placing it on the same basis ! as smtill towns where there is no wa- i ter protection, and it has reduced greatly the rate on other risks. And ' there is no more short-term cancolla- j tion. It is on a pro rata cancellation basis, and the insurance on the cotton ' actually on hand each day is paid for i at the market value of the cotton that day. For instance, there is a state ware- j "house at Pomaria, in Newberry county. J There is another at Little Mountain, and one at Prosperity. The Prosperity house came into the system a short time after it wa? inaugurated, before the ''blanket automatic" policies were secured. It secured the cheaper rate of insurance, but there is no use to \ ' ^ ? ? place it under the automatic policies 1 until its present policies expire. The j Pomaria and Little Mountain ware- j nouses eacn deposit witn tne ttate warehouse commissioner a sum which , is credited to their insurance account, j Let us take the Pomaria house as an j example. An estimate is made of tne I prouaoie business for several months : .11 aavance. The Pomaria house deposits a sufficient sum with the commissioner to carry its insurance premiums for several months. Each day uie amount of cotton it has on hand is recorded in the office of the commissioner, and its value is figured on | ..he market price of the cotton that day. At the end of the month a cheek ! for the Pomaria house is given to the | insurance companies, covering the i premium earned each day by the act- j ual amount of cotton on hand that day, at the market price that da>. if i Pomaria has ICO bales of cotton today,! and cotton is worth sixty do.lars, it pays today on $6,000 worth of cotton, if it has only fifty bales tomorrow, and cotton is worth only fifty dollars a bale tomorrow, it pays tomorrow on; only $2,500 worth of cotton. The in-! surance automatically attaches to the cotton as soon as it is placed in the warehouse. Of course there has been a bitter, fight by certain insurance interests' against the system, because it has cut j on a portion of the rich harvest they : nave been reaping at the expense of the producers of cotton. They ha?e: attacked the system, and particularly j its insurance, at every possible point.! The system has grown in the face of' this fight because it is inherently right' in principle, and because it has been J honestly and conscientiously administered by the commissioner and his as-! -ociates. This insurance is placed in ' V)i<rh-plpcc sm.r) rpnutahlp rrvrrmflnip<s I licensed to do business in South .'Carolina, and operating under the lav^ of chis state. Only one loss has been sustained since the system began operation, twenty bales of cotton in tbs state system having been destroyed by fire at Claremont, in Sumter county, several days ago. 'This loss was promptly taken up for adjustment by the companies, the basis of settlement being . the market price of cotton the day of j the fire, each bale destroyed being fig- j ured at its actual market value that day, the weight and grade of each individual bale standing for itself. The state insurance commissioner, in a letter to a banker at Sumter, says of the companies carrying the insurance on this cotton: The System Commended. "I have no hesitation in saying that the companies issuing these policies and the others in which Mr. "White tells mp hp is niacins: insurance are anions the very best companies licensed in i this state. In my opinion no one need have any fear as to the reliability of! the companies or the security of their j insurance under the policies issued by j the campanies named to me by iMr.: White." (Mr. White is deputy state warehouse commissioner.) Of course cotton is grown to sell, J*% ? ? f ] The Sou 1!T | m I Are Mani Products < We S I Pho and not to warehouse, and the ware- ' housing of cotton is only a means to an end. Under the amendment of 1915, the commissioner is authorized to make tales direct, but the war raging j in hurope and on the Seas lias inter- i fered so far with this spneie of tae ' commissioner's activities authorized unJer the act. As is stated by Commissioner Mc- ' Laurin in the interview below a state , warehouse system is only a good be- ! ginning in a system of rural credits \ which must come if this nation is to be sa.ed from commercial upheaval.' These movements progress slowly, but ; human progress is sure, and the pronnHor t'nn /living nlon m net V, UOOiVii , Li 11VIV. A tuv UHlUt ^AUU, UW*. go forward, even though to finite; minds, in periods of upheaval such as 1 the present, it sometimes seems that the order has been reversed. The state warehouse system in South Carolina portends the coming or tne cotton growers into their own. President Wilson has expressed his "genuine interest" in the work of Senator MCLaunn; secretary 01 me Treasury jVicAdoo has congratulated him upon the result of his efforts, and leading bankers of the United States have unhesitatingly commended the system and the receipt. Other states may be slow in following, but the movement is growing, and the principle is bound to be adopted. The heritage of which Grady spoke, when adequate means of marketing and financing this great crop are secured, and the cotton grow er of the South gets a just return for his labor will be a heritage indeed? this heritage that is "ours and our children's forever and forever?and no princelier talent ever came from His Omnipotent hands to mortal stewardship." Senator McLaurin's assistants in his office in Columbia are Mr. Jas. G L. J White of Chester, deputy commis- I sioner: Mr Jamec Al Drake of Ben- ! netts'.ille, in?pector; Mr. Jno. K. Au;I of Newberry, secretary, and Mr. J. i Harold White of the insurance depart ment of the office. In speaking of the principles and general scope and aims of the state | system, Senator McLaurin, when asked for a statement for the anniversary | edition of The Herald and News, said: ! Senator McLaurin's Views. "For the second time in the history j nf tho S+atPd prvttnn i V * Wfc* V *./ ^ A VV/Vi WVWj VVWV 'Al *- U<?-/ /V w W , a political as well as an economic is-! sue of paramount importance. The j fundamental cause of the War Between j the States in the sixties was the fact j that public sentiment outside of the ; South was in favor of the abolition of I slavery, and the election >f Abraham j Lincoln wag the expression of thatJ sentiment. Opinion in the South was; almost unanimous that the monopoly, which we enjoyed in the production of j cotton could not be maintained with- 1 out slave labor. Therefore, secession i was a perfectly natural consequence. "With the breaking out of hostili- [ ties in Europe, cotton at once became : a national question. Every thoughtful man in the South was convinced that it was the duty of both state and national government to take radical, / .1 SI .. itftern totton iWBERRY Mil . ff. FLOYD, Manages lfacturers of Co md High Grade i olicit Your Patroi naQ* Cifrv OftirAC 118 I1VO* VIIJ V1I1VVO; X . Mill Office, 81 dtt'.on in sustaining the pricj cf ooz10 A Ui.it i: the export demand revived, i go further lhan that; I believe ihat it is the- duty o: the go.ernment i .a ncimai times, by legislation, to . . ?hi i re. t'n a r\f r-r\tti\r> on/? txr\ v.*i ^ jL/i .V- ^ VA VUlrtV/U UU^ V44 ? c.o.e uie prouuce. s to get the benefit of the operations of the law of supply and demand, i mean supply and aemand for money as well as for cotton. if he South has reached the point where thr aveiage production of cotton is about fifteen million bales, which, with the by-products from cotton ;eed, is worth about one billion dollars. A little more than one-third of this cotton is consumed in the United States, and the balance is exported. The price of the product>consumed at home is fixed by the price of that which is exported. "Out of our two and one-half to three billion bushels of corn only about seventeen per cent ever leaves the farm; the balance of it is consumed at home. No crop on earth, creates such vast international commerce as cotton, and for that reason it hfld hp-romp tn a lar^A AY+pnt medium of exchange between this country and the balance of the world, taking the place of gold in the settlement of international trade balances. Cotton is In a class by itself, and possesses more of the attributes of tegal tender currency than anything pro- J duced by human labor. It isi the corner stone of international finance, ran not hp comnar^ri to wtiAat. corn, meat, or anything of that sort. It is distinctly an export crop, and properly baled and warehoused, it is imperishable and always convertible into gold at a moment's notice. "I believe that the state warehouse idea is- the beginning of a movement which will revolutionize the marketing of our cotton crop and inaugurate a prosperity on the South which will be lasting because founded upon cor- , rect business principles. It will pav* t the way to a system of rural credits based upon land which will unlock vast capital now lying idl-e and almost useless. If the product of our land, cotton, can be transformed into a fluii asset, why can't the same thing b<? done for land, the basis of all wealth? Our state warehouse receipts are negotiable instruments which are now passing current in the money centers just like bonds and stocks. Of course tt'A VlO TT#% TV* O Kllf ? nc lie*, T c maut uut a uaiu u^guiuiu^^ and need further legislation both state | and national. "The great lee son which this worldwide war is to teach," is that our civilization has reached the point of complex social and commercial life without political machinery to give it expression. The purely selfish appropriation of the comforts and bless- I ings of material life for the use of 1 favors r.laoAPfi is thp rrw?k linnn whtoh I these nations have founded. If the ] United States would be spared the so- J cial, political and industrial upheaval that Europfe will see at the close of this war our best thought should be how to use our land and its product. (Continued to Page 30.) irtjfii a.*i r. i" UU to. J tton Seed II Fertilizers 11 iiage! II I OA v J