FEDERAL INSPECTION OF SHELLED SPANISH AND RUNNER PEANUTS

At the request of the Southeastern Peanut Association, the Federal Food Products Inspection Service has been made available to the peanut industry for shelled Spanish and Runners. Inspections can be obtained at Atlanta, Boston, Buffalo, Chicago, Cincinnati, Cleveland, Columbus, Detroit, Indianapolis, Kansas City, Los Angeles, Memphis, Milwaukee, Minneapolis, New York, Norfolk, Omaha, Philadelphia, Pittsburgh, Portland, Oreg., St. Louis, San Francisco,

FIG. 16.-Shelled Spanish-U. S. No. 1 (upper) and U. S. No. 2 (lower). (Reduced one-third)

and Washington, where the local inspectors of the fruit and vegetable service of the United States Department of Agriculture are equipped with peanut screens and scales, and at any point near one of these markets to the extent permitted by the time of the nearest inspector. Federal inspectors at other points can collect samples, but must forward them for inspection to the nearest office equipped with

screens.

Upon request 14 from any interested party, including the shipper, the transportation company, or the receiver, a trained Government inspector will visit the car of peanuts in question before it has been unloaded. Samples are taken from enough different bags to enable him to get a number of pounds fairly representative of all the peanuts in the car. This composite sample is screened with hand screens, and a certificate prepared from the result, stating in detail the percentages of split or broken kernels, small shriveled peanuts, un

FIG. 17.-Shelled Runners-U. S. No. 1 (upper) and U. S. No. 2 (lower). (Reduced one-third)

shelled, damaged or moldy peanuts, and foreign material, and whether the lot comes within the provisions of the United States grade specifications. A moderate fee is charged for this service. These Federal inspection certificates are accepted in all United States courts as prima facie evidence of the condition of the goods, and by their means many disputes may be settled out of court which might otherwise require costly arbitration or lawsuits.

14 In most cities the Federal inspector will be found in the telephone book listed under "U. S. Depart ment of Agriculture-Fruit and Vegetable Inspection" or "Food Products Inspection."

Inspections are occasionally requested on shelled Virginia-type peanuts. As no Federal grades have been formulated for Virginias, the certificates covering inspections on them are largely restricted to a description of size, maturity, appearance, and percentages of stock damaged by mold or weevil injury, of split and broken kernels, unshelled peanuts, and foreign material.

SETTLEMENT OF DISPUTES

IN VIRGINIA-NORTH CAROLINA SECTION

When a dispute arises concerning the quality of Virginia-type peanuts, the usual method of settlement is to refer it to an arbitration committee. The National Peanut Cleaners and Shellers Association formerly provided in its rules that in the event of disagreement between buyer and seller in regard to the quality of peanuts delivered on contract, on the request of either party samples should be drawn in the presence of representatives of the buyer and the seller and forwarded to the secretary of the association. The secretary was to transmit the samples promptly to the adjustment committee, consisting of three members, who were to determine whether or not they conformed to the standard of the association. The decision of the arbitration, or adjustment committee, was final and binding on both buyer and seller. If the committee decided that the peanuts were below standard in quality, at the request of either party it might determine what allowance per pound should be made.15

In a decree entered June 15, 1925, however, the Federal court at Norfolk enjoined the National Shellers and Cleaners Association from settling disputes in this way. The adjustment and arbitration of disputes of any character between sellers and purchasers, it stated, should be handled by reference to a board of arbitration consisting of three members, empowered to promulgate rules of procedure and to render final awards. One arbitrator was to be selected by the seller, one by the purchaser, and the third, or umpire, was to be chosen by the other two. The decision of a majority of the arbitrators was to be binding upon both buyer and seller. Arbitration, however, was to be optional with the purchaser.16

IN SOUTHEASTERN SECTION

Spanish peanuts from the Southeast were formerly arbitrated at the receiving rather than at the shipping end, through an arbitration committee in each of the principal markets consisting of three members and three alternates, all selected from men in that market familiar with peanuts. The rules of the Southeastern Peanut Association, adopted August 1, 1923, however, changed this in favor of one arbitration committee of five members, appointed by the president, to meet at Atlanta, Ga., if needed, to decide questions arising in regard to filling contracts, disputed weights, and the like. Questions relating to grade are referred to the United States food products inspector at the receiving point, whose sampling and grading decisions are binding upon both buyer and seller. At points where no inspector is available, samples are drawn by representatives of both buyer and seller, and

#Paraphrased from National Peanut Cleaners and Shellers Association. Conditions of purchase and sale effective December 13, 1921]. 8 pp. Suffolk, Va. 1922.

Paraphrased from United States of America, petitioner v. the National Peanut Cleaners and Shellers Association et al. U. S. District court, Eastern District of Virginia, final decree (entered June 15, 1925). 12 pp. 1925. (In Equity, No. 109.)

may be referred to the arbitration committee in Atlanta but are usually sent to the nearest Federal inspector for decision as to grade. No. 1 shelled Spanish peanuts shipped by members of the Southeastern Peanut Association not coming up to contract quality are still considered of good delivery and not rejectable if containing not over double the percentages of splits, shrivels, foreign material, damaged, moldy, and unshelled nuts and other varieties allowed in the grades. But it is agreed that the contract price shall be reduced for each 1 per cent, and proportionately for each fraction of 1 per cent in excess of the grades stipulated as follows: One-half per cent for each excess 1 per cent in splits; 14 per cent for each excess 1 per cent in foreign material; 2 per cent for each excess 1 per cent in other varieties; 34 per cent for each excess 1 per cent in shrivels. Unshelled, damaged, and moldy nuts between 3/4 per cent and 1 per cent are subject to a deduction in price at the rate of 3 per cent of the contract terms for each 1 per cent in excess. For any moldy, damaged, or unshelled nuts above 1 per cent, however, the contract price is reduced at the rate of 7 per cent for each 1 per cent excess. Good delivery of noticeably discolored peanuts is given as 2 per cent, of which 2 per cent may be badly discolored. Noticeably discolored peanuts above 14 per cent, however, are penalized at the rate of 1 per cent of the contract price for each 1 per cent in excess. Any excess badly discolored peanuts are subject to a reduction of 2 per cent of the contract price for each 1 per cent of excess. The association rules also provide penalties for shipments of No. 2 Spanish and shelled Runners which do not come up to grade specifications.

Should the whole or any portion of a shipment of shelled peanuts not equal in quality the contract grade within the variations allowed, it may be rejected by the buyer within 48 hours after delivery. The seller may replace a rejected shipment within the contract period, or if that has expired, within five working days after telegraphic notice of rejection. If the seller fails to declare his intention to replace the rejected shipment within 48 hours, the buyer may cancel the contract, or buy, for the account of the original sheller, stock equivalent to the rejected quantity through a broker member of the association between 24 and 48 hours after the seller has been.wired of this intention.17

Not unnaturally, the shipper often formerly felt that when city brokers or receivers served on the arbitration boards of the association it was difficult to have an entirely impartial committee; and unpleasantness has at times arisen on this score. The availability of an impartial inspection by Government representatives, when disputes arise over the grades of shelled Spanish peanuts arriving in the market, has already had a wholesome effect on the peanut industry.

METHODS OF DISPOSING OF SHELLED AND CLEANED PEANUTS

Peanuts are usually sold by southern cleaners and shellers in one of three ways: (1) Direct to the purchaser, usually by wire; (2) through a broker at the shipping point or at the city market, both often being employed in one sale; or, more rarely, (3) by a traveling representative of the shipper. Occasionally large city brokers make trips through the peanut belts of the South, and place orders in person for their clients.

17 Paraphrased from Southeastern Peanut Association. Rules Southeastern peanut association [effective September 1, 1925]. Atlanta, Ga. 1925.

Possibly half the peanut sales in larger city markets are made through brokers who represent the cleaners and shellers. These representatives may carry the accounts of one or more large cleaners or shellers, and supply wholesale confectioners, bakery-supply houses, peanut-butter manufacturers, salters, and wholesale grocers, as well as jobbers. The purchases may be made direct from the cleaner or sheller in the South, or through a broker in one of the more important shipping centers, who often represents a considerable number of plants.

There is no uniformity in the method of purchase. One broker, two, or none, may figure in the sale. In some cities brokers handle the bulk of the transactions; in others, the large buyers prefer to purchase directly from the southern cleaner or sheller without dealing through a middleman. An occasional large shipper in the South deals only with the purchaser direct, claiming in this way to curtail expenses. The brokerage charge of 2 per cent may be split between the brokerage firms in the South and at the receiving market if both are involved in a transaction. This fee is paid by the offering broker's principal rather than by the receiver. Thus the prices which are quoted to the latter are strictly net.

Formerly the sale of peanuts was largely confined to car-lot quantities. A car lot of shelled Spanish or Runner peanuts usually weighs about 30,000 pounds, a car lot of shelled Virginias about 28,000 pounds, and a car lot of peanuts in the shell about 25,000 pounds. Increased competition and the tendency of many firms to buy on a "hand-to-mouth" basis, has caused practically all shippers and brokers, especially in the Virginia-North Carolina section and the Southwest, to accept orders in smaller lots. In Virginia and North Carolina, although the bulk of the peanut business continues to be handled in car lots, small-lot shipments are numerous and constitute a much greater proportion of the total movement than in the past. Shipments from most towns in the Southeastern States are still almost entirely confined to car-lot quantities. Frequently a city broker sells several less-than-car-lot orders for one firm to be shipped in what is known as a "pool car." As car-lot freight rates are always cheaper than less-car-lot rates, a saving in freight charges is thus effected.

During the spring of 1922 a number of cars of cleaned Virginias were sold at auction in New York City. Most of the purchases were made by retailers who ordinarily buy from the large receivers. The experiment aroused some ill feeling, both among the regular receivers in New York and among many Virginia shippers, and no further sales of peanuts by auction have been made.

PEANUTS IN CITY STORAGES

Peanuts in the shell can be stored for a considerable period of time in the dealers' storerooms or in ordinary dry-storage warehouses, without danger of deterioration or apparent loss of quality, except that the skin adheres more tightly and the color grows darker. Accordingly, peanuts in the shell are generally stored in common storages. 18

"Experiments are now under way by the Department of Agriculture to determine the storage life of different varieties of peanuts at various temperatures in cold and common storages