THAT the packing industry suffers with the livestock producers on a falling market was never more clearly emphasized than in the year 1919. Armour and Company’s losses on dressed beef alone amounted, in the twelve months, to several million dollars; and on the sale of pork products the losses were even greater.

These losses are figured on the basis of the primary sales, which include not only the meat but the hides and all other by-products derived from the animals.

Such deficits do not mean that the Armour organization, as a whole, suffered a net loss for the year. But there is no mystery about the methods of countering these deficits. They are offset by the profit made in manufacturing by-products into merchantable commodities. Each by-product industry in the Armour organization is placed on its own responsibility. It must pay to the beef, hog, or sheep killing department the market value for its raw materials—the same price it would pay if it purchased on the outside market.

For example, the beef department buys its cattle to the best possible advantage in competition with other buyers, and sells the beef at the best price obtainable. The hides go to the tannery at prices ruling on the open market. If the Armour tannery cannot pay this price the hides go to outside buyers. To sell at less would be favoring the tannery at the expense of the beef department, or robbing Peter to pay Paul.

The same business methods are pursued with every scrap of the animal, whether used in making glue, soap, sand-paper, drugs, fertilizers, or any other commodity.

While on this basis Armour and Company sustained heavy losses in their meat departments, the by-product industries showed profits, as they usually do, because their products are not so perishable and are not so much influenced by market fluctuations.

These by-product industries are, in short, the insurance of the packers against crippling losses, and may be likened to the activities of the up-to-date livestock farmer, who diversifies his operations by feeding cattle and hogs and by keeping fowls, sheep and dairy cows, so that if he loses on cattle or hogs he may offset his losses by better prices for lambs, wool, butter, eggs, poultry, or a money crop.