coal trade bulletin - Clpdigital.org

THE COAL TRADE BULLETIN. 43
THE SELLING PRICE OF COAL*
By K. A. Colter, Secretary-Treasurer of the CI. Blake Coal Co., Cincinnati, ( Ihi
In discussing "The Selling Price of Coal," I presume
you are more especially interested in the
relation the selling price bears to the cost of pioduction
and how and by whom the selling pi ice
is made.
Wonderful progress has been made in all lines
of industry in the way of ascertaining definite
and accurate costs of production. In the mining
field this has frequently resulted in the reduction
of costs, but in most cases an increase will appear
on account of more scientific methods of mining
and safe-guarding of life and property used
in production and handling.
In many instances where this scientific analysis
of cost indicates an increase, that increase is
probably more imaginary than real for the reason
that coal has been actually costing what the
analysis showed, but the producer has been laboring
under the misapprehension that he was putting
his coal on board cars for much less. Therefore,
when he awakens to the fact that the margin
between actual cost and selling price has been
greatly overestimated, he immediately wants more
money for his product.
Answering the query "What should be the relation
of selling price to cost," I should say the
selling price should be the cost of production plus
a reasonable charge for the money invested and
risk involved and the cost of selling.
Assuming, of course, that the producer has an
average plant, his cost is upon an equality with
his neighbors ancl competitors in his own field,
his money is no better and worth no more, his
risk is equal but not greater, then, the proper
returns upon his investment are easily established.
The cost of selling depends upon the method.
It is not within my province to discuss this question,
although allusion may be made to it later.
This phase of the subject is worthy of the same
careful research that has been given to the cost
of production, and might well be more definitely
known.
In discussing the selling price, we have described
"how it should be made," and we should now consider
"by whom it should be made."
The responsibility for the low returns in the
past cannot be shifted entirely to the shoulders
of the selling agent, whether he be producer, as
well, or merely an independent person; for ignorance
of cost on the part of the producer has often
misled the selling agent into ruinous prices.
But, we see improvement in this direction by
the closer relations between the producer and the
*Paper read before the West Virginia Coal Mining Institute,
December, 1913.
seller. There was a time not so long ago when
it was only necessary to learn at what price a
certain grade of coal was being put into a certain
market and the price was met or cut, as the
case might be, the freight deducted and the balance
accepted as the price of the coal. In some
instances, however, the process was reversed. The
delivery price was made to meet competition but
the operator was paid the least he would take
and the railroad took the balance for the freight.
This condition having been corrected, there
sprung up another—the seller who dealt only with
tonnage, whose only thought was to move enormous
quantities and whose interests lay solely in
the commissions.
This can only be remedied by co-operation between
the producer and the sales agent whereby
Loth are brought to see that their interests are
mutual and interdependent. The two branches,
producing and selling, are distinct and one requires
quite as much business acumen and integrity
as the other, but they can be harmonized
without prejudice to the consumer.
Thus far we have discussed the selling price cf
coal upon the basis of fixed production costs and
have not taken into consideration contingencies,
such as demand, abnormal market conditions,
terms of delivery and payment, all of which affect
the selling price.
Not long ago a shipper remarked, "there is no
such thing as a market price. It is simply what
you can get." This is true in a large measure,
but if one is imbued with a know ledge of what the
commodity costs, how it is prepared and under
what conditions it is produced, one is more likely
to get more for it.
The fact that a gas coal from another field is
being sold in a certain market at what would be
a low price for my gas coal does not necessarily
warrant me in meeting that rate, but should spur
me into finding another market in which my c-oal
will bring a satisfactory price.
The present knowledge of accurate costs on the
part of the producers was not attained in a single
day, but required nearly a decade and many conferences.
This has, in some measure, been reflected
in a more sensible selling price, but it will
lequire considerable work on the part of both producer
and distributor to educate the buying and
consuming public to a readjustment of prices
which is inevitable.
The innovations and reforms in mining coal
were accomplished in the face of opposition from
those whose cherished ideas and pet theories were