The Eastern Shore of Virginia Produce Exchange, Part I

The operations of the Eastern Shore of Virginia Produce Exchange during the first quarter of the present century were a prime factor in the economy of Accomack and Northampton counties, and locally, with the exception of the rail and water transportation systems, probably the most important of the period. This grower cooperative came into existence as a result of a crisis in Eastern Shore agricultural marketing, and during the fifty-five years of its existence it returned to the farmers of the Shore probably more than a quarter of a billion dollars.

This writer has long thought that the role the Exchange played in the promotion of the prosperity and well being of the people of the Eastern Shore of Virginia was of too great a consequence to be no more than a memory of those who had a part in or profited by its activities, or who were contemporaries of same, and that some written record should be made of what it did, with mention of some of its personnel. It is regretted that someone with a long and intimate knowledge of its history from active participation or observation, from its very early days to its dissolution in 1955, has not found it feasible to prepare this work.

With the assistance of a few who held official or other position with the Exchange for considerable periods, this writer will undertake to tell about its origin and activities as he heard of or recalls them. He remembers when it was being organized, something of its very early years, and he worked in its general offices at Onley (as an assistant to the Secretary-Treasurer, giving special attention to credits, collections and adjustments) from April to November in the years 1917 through 1921. Thereafter, until 1952, he was on the Shore for several weeks each summer and usually stopped by the Exchange office to chat with old friends and possibly "talk shop."

Perhaps it would be appropriate to mention the Eastern Shore's agricultural background previous to the organization of the Exchange.

According to the U. S. census of 1860 (1859 production), corn and oats then were the money crop of the Shore. In 1859 Accomack and Northampton produced slightly more than a
million bushels of corn, about six hundred thousand bushels of oats, approximately three hundred thousand bushels of sweet potatoes (equivalent to about 500 cars of 200 barrels each) and just over sixty thousand bushels of Irish potatoes. Except such as were consumed locally, almost all these crops were sent to market in sailing vessels, chiefly to Baltimore, New York and Philadelphia, though occasionally some to Norfolk, Richmond, Washington, Boston and other cities. In a few instances, schooners going to the West Indies for fruits and other commodities, would take a partial load of grain.

There had been only a few steamboats plying between Baltimore and the Eastern Shore before the War of Secession. Soon after its end, from time to time more were added, and by the 1880's nearly every eight-foot deep Bayside creek between Cherrystone and the Pocomoke river (as far up same as Snow Hill) was being provided with passenger and freight service to and from the "Monumental City," by the Eastern Shore Steamboat Company for the most part. The Old Dominion Line, which operated ships between Norfolk and New York, had a mall steamer feeder line between Norfolk and Cherrystone -- and possibly to other Northampton points -- as late as about 1885. In the early 1880's there was for at least one summer a steamer from Wachapreague and Chincoteague that went either to New York or to Lewes, Delaware, for a New York connection.

In 1884 the New York, Philadelphia & Norfolk Railroad (now absorbed in the Pennsylvania Railroad System) ran a line through the center of Accomack and Northampton as far as the then new town of Cape Charles City -- the extension to Kiptopeke was not until 1912 -- and with its connections afforded faster and more convenient transportation, especially from the "High Woods" and the Seaside, to the markets in Philadelphia, New York and Boston.

Besides the steamboat and railroad services, considerable quantities of truck crops continued to be sent to the markets in sail boats, even into the late 1890's.

With these transportation advantages, year after year more acres were planted in sweet and Irish potatoes -- some to strawberries, onions and cabbage -- and fewer to grains. Corn was becoming a second crop in the land that had grown Irish potatoes the same year, and, benefiting by the fertilizer in the ground, unconsumed by the tubers, was yielding more per acre than land planted only to corn on which little or no fertilizer had been used.

The 1900 census (1899 production) shows that on the Virginia Eastern Shore nearly two and three-quarter million bushels of sweet potatoes were produced (more than eight times as many as in 1859), slightly more than one and a quarter-million bushels of Irish potatoes (21 times as many as in 1859), and about one million bushels of corn, approximately the same as in 1959. In 1899 fewer than seventeen thousand bushels of oats were produced. Accomack's 1899 production of sweet potatoes was about four times that of Northampton's, and Northampton's Irish potato crop double that of Accomack's. (It is this writer's recollection that in the 1890's sweet potatoes were grown in Accomack without much commercial fertilizer. The soil was enriched chiefly by the use of compost, stable and hog pen manure, woods mold, pine shatyers, rye and scarlet clover plowed in the ground some time before setting out the sprouts, then almost all done by hand).

While in the 1890's farm labor cost was extremely low by present-day standards -- about fifty cents a day and three meals, occasionally lodging too, though the purchasing power of the dollar probably was four or five times greater than now and the potato yield usually satisfactory, many, many farmers were doing no more than eking out an existence. So the greatly increased production was adding little to the prosperity of the Eastern Shore. It was not infrequent that the returns to the grower from a shipment of considerable size amounted only to a few dollars, occasionally so little that the remittance was in postage stamps.

Markets often glutted, now and then unscrupulous commission merchants and occasionally a dishonest farmer (who had placed culls or "potato strings" in the bottom of a barrel supposed to contain only primes) had brought chaos to the farmers of the

The growers' difficulties in the 1890's were chiefly the result of lack of orderly marketing, distribution confined to too few areas, and no standard and dependable quality.

Baltimore in 1899 was still the market for almost all produce grown on the Bayside north of Nassawadox Creek. Most of that grown in other parts of Accomack and Northampton and transported by railroad went to New York. In each case probably as much as ninety-five percent on consignment. Commission houses in Baltimore and New York had local representatives at numerous shipping points to solicit consignments; their compensation, with few exceptions was a straight five cents a package. (This writer remembers that at Harborton among the Baltimore firms represented were J. H. Seward & Company, George T. Ames, and I. P. Justis, the last two former Virginia Eastern Shoreman).

In the relatively few instances where potatoes were purchased from the growers at the shipping point -- more often at Cape Charles, to which most farmers between Hungars and Old Plantations creeks sent their potatoes by small sail boats -- local brokers competed with one another for the business and the one who quoted the prospective purchaser in the city the lowest price, got the order. Thereby the price to the growers constantly was being depressed, to their great disadvantage.

Such were the conditions that for some years had and then existed among the Shore's growers when the late William L. Elzey, a progressive farmer living along the Seaside road between Exmore and Nassawadox, called, by published notice in the "Peninsula Enterprise", a "meeting of the land owners and potato growers of the Eastern Shore of Virginia at Keller, on Saturday, September 9th (1899) at 12 o'clock, to consider the condition of the potato market and try to do something to better it."

A few days thereafter another meeting of farmers (attended also by a few professional men) was held at Onley. After considerable discussion of the problems of marketing, a committee was appointed to continue the discussions and to formulate a plan that would, in their judgment, improve the condition of the growers. The mem-
bers were Albert J. McMath, Benjamin T. Gunter, William B. Pitts, Levin James Hyslup, L. Thomas LeCato, Dr. John H. Ayres, G. Walter Mapp and Thomas B. Quinby of Accomack, and John H. Roberts, William L. Elzey, John T. Wilkins, Jr. and William E. Thomas of Northampton. Mr. LeCato was the only member of the committee who had any marketing experience; at one time he had been connected with a Baltimore commission firm. The plan of operation devised by the committee -- it was signed by every member thereof -- was approved and accepted by the growers in mass meeting on September 30, 1899. (Years later another member of that committee told this writer that more of the ideas of Mr. Quinby went into the plan evolved than of any other person).

With the possible exception of what is now the Sunkist Growers (earlier California Fruit Growers Exchange), the Eastern Shore of Virginia Produce Exchange was the pioneer farmers cooperative marketing organization in the nation, and its plan of operation became a model for later cooperative marketing organizations in the United States. It was probably during the first decade of its existence that it was "written up" in the Saturday Evening Post.

The Legislature of Virginia, by an act approved January 20, 1900, chartered the Exchange. The incorporators were Benjamin T. Gunter, John E. Nottingham, Thomas B. Quinby, L. Thomas LeCato, Dr. John W. Bowdoin, Dr. John H. Ayres, Albert J. McMath, Thomas B. James, Levin James Hyslup, Hezekiah A. Wescott, William L. Elzey, John H. Roberts, William B. Pitts, G. Walter Mapp, John T. Wilkins, Jr., and William E. Thomas.

The authorized capital stock was $50,000, divided into shares having a par value of $5 each.

The charter granted authority for the "buying and selling of produce, the selling of produce as agent of the producer, the consignment of produce as agent of the producer, inspecting all produce it may handle, owning and operating storage warehouses and packing houses for produce, and generally all other lawful things custom-
arily connected with the trade known as the produce business."

The first officers were Benjamin T. Gunter, president; John E, Nottingham, vice president; Thomas B. Quinby, secretary; William A. Burton, general manager and treasurer; L. Thomas LeCato, general inspector. Mr. Burton, a native of the Locustville community, had been connected with a New York commission house. Mr. Quinby remained as secretary until September, 1900, when he resigned. Then the offices of secretary and treasurer were combined and Mr. Albert J. McMath chosen to fill same. The tasks and problems that the officers and directors of the Exchange faced at the beginning were, in a field in which they were blazing a trail, of monumental proportions. These they met with vigor and intelligence. Among those at the local level were the selling of stock to provide funds with which to operate, the convincing of more growers that it would be to their financial advantage to market their produce through the Exchange, and to offset the opposition of the local brokers and solicitors and consignment commission merchants in some cities to this cooperative marketing effort. To effect these objectives, during the Fall and Winter of 1899-1900 these officers and other members addressed mass meetings of farmers in almost every Virginia Eastern Shore community. At railroad stations and steamboat wharves agents and inspectors had to be provided to receive and inspect the produce and turn over to the growers the returns when received from the general office.

To broaden distribution the Exchange arranged for selling agents in many cities and eventually sold produce from the Atlantic to the Pacific, in Canada and in Cuba; Irish and sweet potatoes east of the Mississippi; Irish potatoes in Canada and Cuba and sweets here and there west of the great river. During the seasons, the Exchange had its own salaried employees (Eastern Shore residents) in Boston, Providence, Buffalo, Cleveland, Montreal, Toronto, Detroit, Chicago, Cincinnati, Scranton-Wilkes Barre and elsewhere, for solicitation, inspections, etc.

The Exchange started out with the purpose of standardizing the contents of and the size of the containers. It stressed that the growers could not expect fair prices for their produce if they failed to pack a saleable and honest package.

The Exchange adopted a trade mark, "Red Star Brand," which it registered in the U. S. Patent Office, and only potatoes of superior quality could be marketed under that emblem. (The standard the Exchange set up to qualify for "Red Star Brand" eventually was adopted by the U. S. Department of Agriculture for U. S. No. 1 Irish potatoes). For Irish potatoes the emblem was stenciled on burlap barrel covers, and for sweets, on cotton covers. If not quite good enough for "Red Star Brand," but better than culls, a plain cover was used. In later years, when grading machinery was introduced for Irish potatoes, good culls were marked under the grade of "Gearwheels," stenciled in green on burlap covers.

To prevent as far as possible undersized or defective potatoes going out as "Red Stars", the Exchange's inspector at each loading point dumped one or more barrels from each load brought from the farm. (During the first 25 or 30 years of the Exchange's existence almost all potatoes were taken to the shipping points in horse carts carrying five or six barrels, or in double-horse drays with a capacity of ten barrels or more. Then there were only dirt roads, and very few farm trucks until the 1930's). The inspectors were provided with measuring equipment, and for Irish potatoes it was a small perforated metal board; potatoes small enough to pass through that hole could not qualify for "Red Star Brand."

When the Exchange began operating -- and for as far back as any one then remembered -- there was no standard sized barrel; potatoes were shipped in barrels of varying size, from those holding two bushels to sugar barrels. (During the 1890's, at Bayside wharves, the steamboat company supplied barrels to the shippers, receiving an empty for each loaded one brought to the wharf to be shipped. On southbound trips during the potato season often there were so many empties of various sizes that even
the hurricane deck of the steamers were filled). The efforts of the Exchange officials had much to do with getting through Congress an act standardizing the size of barrels to be used in shipping potatoes. The standard barrel filled with Irish potatoes weighed 185 pounds, filled with sweets, 160 pounds. These were used exclusively for potatoes handled by the Exchange until "about 1935, when Irish potatoes were first shipped in 100-lb. burlap sacks," we are informed by Mr. W. J. Vaughan of the Eastern Shore Shippers Traffic Association. Mr. Vaughan continues: "for a few years thereafter they were shipped in barrels . . . as well as in 100-lb. sacks. The percentage in sacks grew very rapidly and by 1940 or 1941 they were shipped 100 percent in 100-lb. sacks. . . . Today we are shipping about 70 percent in 100-lb. burlaps, 15 percent in 50-lb. burlaps, and 15 percent in 10-lb. paper sacks. About the same time that Irish potatoes were changed from barrels to sacks, sweet potatoes were changed from barrels to the 50-lb. bushel baskets, and we are shipping sweets today in 50-lb. baskets."

Every effort was used to protect the members from the hazards of transportation, credits and declining markets, and to get to him as quickly as possible the proceeds from the sale of his produce was a constant aim. All "Red Star Brand" potatoes were sold f. o. b. shipping point, as were other grades wherever practicable, otherwise the latter were consigned by the Exchange.

Before the beginning of each shipping season there was made up by the staff of the Secretary-Treasure for the Sales Department a shipping list, showing the conditions under which each person or firm listed therein could be sold. This was based on the Exchange's own experience with those who had been customers in other years and/or their financial and moral ratings as shown in the Blue Book of Produce Dealers and Dun's and Bradstreet's, as well as of others who were members of "the trade." The Exchange sold on open account to those whose financial and moral ratings justified same. There were others whose moral reputation was good but whose resources were too limited to risk a car lot shipment except on draft with bill of lading attached. And others whose general rating made it safe to sell only on bank
guarantee.

As a rule invoices went out the next day after shipment (except when shipments started rolling on Saturdays), but where the produce was sold on open account, remittance was not expected to be made until the potatoes had arrived. (When invoices were made, carbon copies were filed with a "tickler" was placed to indicate when check should be received. If remittance failed to arrive on time, the purchaser was contacted promptly.

In view of the Exchange's wide distribution, it would have been impossible to pay the growers with reasonable dispatch if it had waited until the money was in hand for every barrel loaded on a given day. To get to the farmers the returns from their produce more promptly, the Exchange made short term loans from the Farmers & Merchants National Bank of Onley and the First National Bank of Onancock during the Irish potato season for most of the years in the first thirty years of its existence. These notes were always paid at maturity, without renewal. In 1920, when Irish potatoes sold at abnormally high prices, these loans exceeded a million dollars, borrowed with collateral. (After the bank holiday of 1933 closed for long periods the national banks on the Eastern Shore, the Exchange borrowed money for these purposes from the Baltimore Bank for Cooperatives, set up by the U. S. Agricultural Dept., assigning accounts receivable as collateral).

On a July Monday morning in 1920 checks amounting to more than one million dollars were received by the Exchange for potatoes, and on Tuesday morning these funds were in the hands of the local agents for distribution to the farmers. This writer remembers that on that Monday there was a check for more than $100,000 from Charles Keely Company of Pittsburgh, always a heavy buyer of "Red Star Brand" potatoes. There were many times when it was impossible to sell the entire loadings of the day on that particular day, and even when that was done, the prices at which sold were not always identical, due usually to declining markets. Therefore, the only way to be fair to every grower was to pool the receipts for all potatoes (of the same grade) loaded the same day, regardless of when shipped or the difference in prices.

This writer is now uncertain as to what compensation the Exchange received from the growers for marketing their produce. His impression is that it was on a percentage basis, with a minimum of twenty cents and a maximum of fifty cents per barrel, during the summers he worked for the Exchange.

As heretofore stated, the authorized maximum capital stock of the Exchange was $50,000, the par value of each share being $5. In the beginning capital was so urgently needed that not only farmers but business and professional men and others were encouraged to purchase and some took as many as 100 shares.

In 1901 the Exchange had such a profitable season that a dividend -- its first -- of 150 percent was declared on the outstanding stock. (We do not know how much of the stock had then been sold). A new share was given for each share outstanding and $2.50 in cash. In addition those who attended the annual meeting, held in the Courthouse at Accomac late in the fall of that year, received a ticket for dinner at Doughty's Hotel, worth fifty cents. (This writer then was doing stenographic work around the Courthouse, attended this meeting, helping Mr. Ashton G. Southall, the Exchange's bookkeeper, who had formerly been principal of Pungoteague Academy, distribute the dinner tickets). This dividend resulted in the Exchange stock being sought for investment.

Just how long most of the earnings went into dividends, we have been unable to ascertain; probably no later than 1910 or 1911, about which time there were some major changes in the by-laws. Thereafter the dividends were limited to ten percent. The profits from any year's operations, after paying the dividend, were divided equally, one-half to surplus and one-half distributed as a patronage dividend to growers on the basis of the number of packages they had marketed through the Exchange. During the life of the Exchange the patronage dividend amounted to about $450,000.

Another change in the by-laws was that no new stock could be sold to any but an Eastern Shore farmer, and only one share. Tenants could be issued shipping permits, which enabled them to market their produce through the Exchange and to share in the patronage dividends. The Exchange would buy the stock of any one discontinuing farming. When the Exchange was dissolved in 1955 all outstanding shares were redeemed, we are informed.

Another by-law change had to do with the number of directors, each division to have one director --a division usually was a shipping point, occasionally two if small and nearby. In the 1930's or later, after steamboat service between Baltimore and the Eastern Shore had been discontinued, and perhaps for other reasons, the number of directors was reduced to seven, one from each of the magisterial districts of Accomack and Northampton, the Islands district excepted.

In the early years of the Exchange local agents and inspectors were elected by the stockholders who lived in the area of the particular division. This permitted "politics" to enter into these selections and there were occasions when stockholders living in one division would have their shares transferred to another division to help some friend to be chosen. Some times those thus selected were not the choice of the majority of the farmers they would serve, resulting in dissatisfaction. So another by-law change was that while the members of the Exchange in the given division could by vote recommend the agent and inspector, they were to be appointed by the management, subject to the approval of the Exchange's board of directors. The directors continued to be chosen by the shareholders living in the particular division -- until the number was reduced to seven.

The Sales Department of the Exchange used every available facility to keep in close touch with the loadings at the various shipping points and its representative and "the trade" in distant cities. In its very early days it leased from the N. Y., P. & N. Railroad Company a special wire (strung on its telegraph poles) for telephone service between New Church and Cape Charles, with "out ins" at each of its railroad shipping points. The telephone company provided additional facilities to make more prompt the service between the general office and the steamboat wharves, and during this writer's employment by the exchange there were, he now thinks, one or more direct wires between the Exchange general office and Salisbury, to connect with trunk lines to northern cities. The Exchange had its own switchboard, with operators on duty from early morning until about nine o'clock p.m.

Both the Western Union and Postal telegraph companies had direct wires into the Exchange office, with operators handling only Exchange business. When the late Powell
Wescott was with the Exchange -- he resigned in 1917 to volunteer for service in World War I -- he devised a telegraph code that had a code word for almost every imaginable sentence that might be needed in telegrams having reference to orders, sales, complaints, inspections, allowances, adjustments, credits, remittances and transportation and provided a method to coin into one word a car number of any length. At that time and for many years later every numeral in an uncoded telegram counted as one word. This code was printed and copyrighted by the Exchange. Its distribution to and its use by "the trade" saved the Exchange and its customers, many thousands of dollars each year.

The Exchange was granted by the N. Y. P. & N. the privilege of erecting on its right of way at the various shipping points small offices for its agents and where needed, grading sheds.

It can be said without hesitancy that the Exchange did everything within its power to obtain for the growers a profit on their production, to accommodate them and to protect their interests. Regardless of how good was the reputation of a purchaser, nor how good a customer it was, no allowance was made for alleged inferior stock or decay until the potatoes had been inspected by one of the Exchange's employees or by a Government or other disinterested inspector, and so confirmed. The Exchange however, endeavored always to be fair to "the trade" and made adjustments whenever justified.

The Exchange maintained its own traffic department, not only to ascertain and check freight rates and to deal with local railroad and steamboat companies about transportation facilities but to represent it before rate-making bodies, transportation associations, etc.

In the 1920's the Exchange organized a subsidiary, called the Exchange Supply Company, through which its members were enabled to purchase fertilizer, seed potatoes, containers and other crop needs. Some years thereafter the Exchange acquired one or more storage houses for the convenience of its members, who wished to store seed potatoes or to hold potatoes for later marketing -- after the harvesting season had ended.