1889 salt bust preceded boom

Sunday, September 27, 1987

Ye are the salt of the earth, but if the salt have lost its savor, wherewith shall he be salted? It is thenceforth good for nothing, but to be cast out, and to be trodden under foot of men.

- Matthew 5:13

In 1889, the salt of Hutchinson lost its savor.

Commercially speaking, that is.

At the rate new salt companies formed in Reno County in 1888, at the height of prosperity, there wouldn't have been anything but salt plants here by the turn of the century.

But in 1889, the building rush was brought up short by the end of the Kansas real estate boom. The bust hit unprepared, blissfully optimistic Hutchinson like a ton of salt blocks.

Emerson Carey, who at that time owned a coal and building materials business, remembered how "it was just as if a bubble had been pricked. Prosperity vanished into thin air."

"For four or five years, people had been buying and selling land with no reference at all to its real value," Carey said. A pair of lots that were sold in 1888 for $4,000, for example, were worth only $125 by 1895.

When banks couldn't collect their loans, they began to fail, and suddenly, even those who had stayed away from land speculation found themselves unable to get their money.

The effect on salt manufacturers was devastating.

The Wyoming Salt Co. and Diamond Salt Co. plants were sold at sheriff's sale for back taxes in 1892. The Crystal and New York plants were bought by new owners in 1891; the Riverside, Pennsylvania, Queen City and McFarland plants in 1890.

Other manufacturers hung on, but only two new plants were built in the next 10 years: a 250-barrel operation called the Union Ice & Salt Co., which produced mostly ice, and the Barton Salt Co. plant in 1892.

The failed salt plants were sold for substantially less than it had cost to build them, and a new breed of salt maker appeared in Hutchinson: the experienced businessmen who could snatch up two or three plants at a time at fire-sale prices.

There are indications that Chicago salt merchant Joy Morton started investing in Kansas salt as early as 1893, but in 1900, he took over half the plants in the city at once by buying the consolidated Hutchinson-Kansas Salt Co.

The Hutchinson-Kansas Salt Co. was the child of the original Hutchinson Salt & Manufacturing Co., but that company had done a little bit of growing over 10 years.

Three formerly independent producers had been bought out during the lean years by New York businessman Jay Gould: the Pennsylvania, Queen City and McFarland plants. Gould merged those plants into Hutchinson Salt & Manufacturing in 1891, which in the meantime had bought the Crystal plant and another plant in Nickerson.

When the Kansas Salt Co. merged with Hutchinson Salt & Manufacturing, it added another three plants to the total. After Joy Morton took over, he began at once to buy up still more small manufacturers or rent their full yearly output.

Morton had his start in the salt business in the Michigan fields that were, at that time, major exporters of salt to the Missouri River packing houses.

Another businessman who bought into salt at the turn of the century was Emerson Carey, who had by that time recovered from the real-estate bust and built a successful business in ice, coal and building materials.

Carey organized his salt company in April 1901, and claimed later he was met with a market-glutting price war by the Morton plants, aimed at forcing him out, that dropped the local market price to 55 cents a barrel from $1.55.

Carey had profitable ice and coal businesses going, however, and was able to take his lumps in the salt industry and wait until competitors got tired of giving their salt away.

There is no way to check Carey's story about the price squeeze, but there is certainly reason to think that the salt companies of Hutchinson wouldn't have appreciated another competitor.

After the real-estate bust, the first crop of inefficient salt companies had been replaced by a more or less competent set of businessmen. Production had increased and technology had improved, outstripping the demand for salt in the West. Although the plants were still profitable, prices were going uncomfortably low.

Scuttlebutt had it that the salt manufacturers made a few attempts to fix

prices by agreeing to cut back production all around, but the companies

routinely reneged on their agreements and the deals collapsed.

Since Hutchinson was producing more salt than local markets could use, the next step for manufacturers was to try to expand in the market by supplying Missouri River packing houses. At that point, those houses were supplied mostly by the Michigan salt fields, who were also touchy about increased competition.

One of the salt companies had a hidden ace, however.

Salt operations were a gold mine for Western railroad companies. Heavy, bulky salt shipments were a good source of revenue for the carriers, as were the shipments of coal needed to run evaporation-pan fires. Salt plants burned coal at a ferocious rate: It took a ton to produce just 16 barrels of salt, and the railroads charged $2 per ton to supply it.

Railroads prized the salt companies' business, therefore. in the years before 1900, they often granted rebates to encourage big shipments.

The Interstate Commerce Commission had outlawed rebate deals as an unfair trade practice around the turn of the century, but Joy Morton's Hutchinson-Kansas Salt Co. came up with a variation on the theme that temporarily managed both to make its salt a strong player in the Missouri market and shut out all other Hutchinson companies.

In 1902, Morton formed the Hutchinson & Arkansas River Railroad Co. with

Morton himself as its president. The entire holdings of the "railroad"

consisted of about 4,000 feet of switching track near a Morton salt plant; it

owned no cars or locomotives.

A Morton representative named Joseph Tracy then approached three large railroad companies and asked them not for rebates, but for something that was technically legal: a division of freight rates. It was customary in those days for railroads to split their fees with other lines whose tracks they used.

Tracy asked for a 25 percent cut of all tariffs paid on bulk salt that traveled the 4,000 feet of Hutchinson & Arkansas River line on its way to Missouri. The division, he said, would help induce Morton to ship his salt to Kansas City. The railroads agreed to cooperate.

Now, since it cost about as much to ship bulk salt from Hutchinson to Kansas City as it did to produce it in the first place (about $2 a ton), an effective 25 percent rebate on rail rates was not small change.

Morton, with nine salt plants in the city, began to make money hand over fist. Thanks to the freight rate division going to his "railroad," he was able to clip 50 cents per ton off of his price.

The effect on the other companies was instantaneous. Before the division

went into effect, the Carey Salt Co. sold 3 million pounds of salt in Kansas

City in six months; after the division, it sold under 500,000 pounds in the

next five. Hutchinson's independent producers had been virtually shut out of

the Missouri market.

An informal complaint _ doubtless made by one of the independents _ to the Interstate Commerce Commission soon put the tiny but profitable Hutchinson & Arkansas River line out of business, however.

Hearings on the salt tariff question were conducted in Hutchinson and Chicago, where Joy Morton and the railroad companies argued that the Hutchinson & Arkansas was entirely separate from the Hutchinson-Kansas Salt Co. Not a penny of about $15,000 in freight divisions had been paid to the salt company, Morton testified.

Under cross-examination by Judge Charles A. Prouty, however, Morton admitted that profits from the salt company had gone "into my right-hand pocket, and the money earned by the division of freight rates went into my left-hand pocket."

"Then, Mr. Morton," Prouty replied with a smile, "I suppose you follow the scriptural injunction of not allowing your right hand to know what your left hand is doing."

An appreciative article in that day's Hutchinson News described Prouty as

"a four-horse team all by himself."

After Morton's admission, the commerce commission quickly held that the Hutchinson & Arkansas River Railroad was a dodge around tariff rebate laws.

"Every other manufacturer at Hutchinson has been obliged to withdraw from the bulk salt business upon the Missouri River," read the commission report on the case. "If what has been done is lawful ... the Hutchinson-Kansas Salt Co. could shut down every other salt mill in the state of Kansas ... We think it is plainly illegal."

With that decision by the commerce commission, which kept competition straightforward and relatively fair between companies, a once-turbulent local industry began to civilize itself.