St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1893-07-10
COLD STORAGE
Makes Good Bank Collateral Of
Butter, Cheese and
Eggs.
On These Naturally Perishable
Articles Money Can Readily
Be Borrowed.
New York Sun.

New York Sun.
Money can be borrowed on butter,
eggs, cheese, chickens, and farm pro-
ducts of all the kinds that will keep, as
easily as on diamonds and watches. Not
only is this so. but there is a great deal
more money loaned ON ordinary farm
products than in all the pawn shops in
New York. This is business which is
growing every year, and which has now
assumed such enormous proportions
that it makes up large part of the dis
count line of several banks.
Cold storage and the development of
the storage warehouse business in New
York have made this possible. Most of
these warehouses, especially the storage
warehouses. are to the banks what the
pawnbroker'S safe is to him, only the
banks act through some one else, while
the paWnbrOker owns the warehouse
and the capital both. Until recently
it was not possible to keep long in
good condition dairy products, eggs and
many small fruits; they would spoil if
not used within few days after they
were placed Oh the market. The COWS
and the chickens do not adjust them
selves to the demand of the public,
which requires in the winter an extra
amount of butter and as many eggs as
in the summer. AS cold weather comes
on the efforts of the COWS and chickens
are largely directed to keeping them
selves warm. with the result that their
contributions to the public food supply
are diminished.
In the summers before cold storage
wareho Uses existed the farmers had to
send their milk, butter and eggs to the
market at once, SO that they would be
sold before they spoiled, with the result
that at times the shipments to the
commission merchants did not realize
enough to pay the freight. There
is minimum price below which it
would not pay the railroads to
transport, and commission dealers and
retailers to handle farm products, and
that price the consuming public must
pay for their benefit, no matter how
plentiful the supply is. So in the sum-
mer the farmers made little money, and
the New York public got only a small
part of the benefit. In the winter the
supply was so much less that, while the
public had to pay high prices. the farm
erS had not enough milk and eggs to
sell to reap much benefit.
Then came the introdu ction of cold
which is so recent that the big men in the
business are still young or middle-aged,
while the acceptance of butter and eggs
as good collateral is so recent that young
note-dealers easily recall the first paper
which came in with butter and eggs Sc
curity.
The first effect of this innovation was
to make great deal of money for the
men WHO had capital and relied on their
own judgment and the possibilities of
cold storage. They are rich men today,
tor they anticipated the future by two
or three seasons. Some of the first men
to take advantage of the cold storage
business in this manner were produce
commission dealers. In the summer,
when butter and eggs were low.
they bought up all they could
carry and pay for, and put them
into cold storage warehouses.
In January and February they unload
ed and made over 200 per cent profit.
They made their purchases direct from
the farmers who shipped to them, and
put the butter and eggs in the ware
house at once, so they came out almost
as fresh as when they went in. The
only reason they did not make more
money was that they had insufficient
capital, and the business OF borrowing
ginning. Butter and eggs were not
then regarded as good collateral.
The next year the men who had made
the big profits the year before went to
their banks and used their personal
credit 10 secure the money to carry their
purchases. More butter and eggs were
carried over to the winter season that
year than the season before. Though
the total amount of profit was larger
than that of the first year the per cent
of ii was not so high. Their purchases
stiffened the prices in the summer, and
their unloading made weaker butter
and egg market in the winter.
1t occurred to some of the storage
warehouse men that there should be
some way by which they could make
profit out of the business over their
storage charges. They found it when
they got the banks to accept storage
warehouse receipts for butter and eggs
as good collaterals for loans. When
this was accomplished, almost every
produce man took to specializing on
butter and eggs. The possibilities Of
the storage warehouse business devel-
oped to include chickens, game and
meat of all kinds. When chickens were
low, wholesale chicken men could buy
them in thousand lots and store them
until the market quotations Oh them
were higher.
The big creameries and butter fac
tories were among the first to take al
vantage of this new state of things, de-
handing higher prices for their butter
i'll the summer or storing their surplus
product until winter. The farmers then
prOfited by the facility with which the
summer surplus could be disposed of,
while the public for the first time had
good butter at low price in the winter
and cheap eggs the year round, ire
spective of the weather or the feelings
of the COWS and the hens.
Now the banks will accept storage
certificates for collateral as readily as
they would United States bonds, when
the application for loan comes to them
through men whom they know. Every
month the value of the collateral in
creases, and about the only possibility
OF loss is an earthquake or fire, and
the cold storage warehouse is regarded
as an excellent insurance risk. The
owners can protect themselves by in
Surance.
A man needs very little capital now
to go into the butter, eggs and cheese
speculation. He buys from the farm
erS and at once has the butter, eggs
and chickens sent to the cold storage
warehouse. He goes to the owner of
the warehouse and gets a loan of so per
cent of the value of his storage
certificates on payment of the
storage and the brokerage fee for
getting the loan. He gives a note for
the loan, which the warehouse men in
dOrse,a and deposit with the storage GER
tificates in their bank. With this money
the buyer can go back and buy more
butter, eggs and chickens until he has
enough stored to feed country town
for six months. The bank carries the
loans on until winter.
Then when the rural supply of but
ter, eggs and chickens begins to dimin-
ish, and the market prices increase, the
produce man gradually unloads his
holdings, making sales from samples.
AS fast as be makes a sale he gives an
order for the goods on the cold storage
warehouse man. The cold storage
warAhOusa man rpnpivac tho m0nnv oDd