During the current fiscal year, with funds provided in the Supplemental Appropriation Act, 1958, plans and other operating arrangements are going forward with the goal of providing inspection service under the act beginning about May 1, 1958, to plants which apply and qualify for such inspection. A period of transition is essential to meet the statutory deadline. The item included in the proposed budget would permit full implementation of the planned timetable for covering all eligible plants by January 1, 1959.

STRENGTHENED ENFORCEMENT OF THE GRAIN STANDARDS ACT

The 1959 budget includes an increase of $40,000 for work directed toward carrying out the provisions of Public Law 861 approved August 1, 1956. This amendment to the Grain Standards Act provides authority to investigate and penalize all persons who engage in certain malpractices in the grain trading process. The authority which formerly applied to licensees now encompasses grain handlers and samplers. This legislation imposes added responsibilities on the Department to detect violations of the Grain Standards Act and its regulations by grain handlers and grain samplers, to document evidence, and to determine appropriate action.

The proposed increase would permit employment of a small welltrained enforcement staff to work closely with grain inspection supervisors to carry out these activities.

MORE EFFECTIVE ADMINISTRATION OF PACKERS AND STOCKYARDS ACT

An increase of $225,000 is requested for the Packers and Stockyards Act. In recent years efforts have been directed at improving the administration of the Packers and Stockyards Act to reduce, insofar as possible, inequities between livestock marketing areas. The purposes of this act are to aid and protect livestock producers in order that they may secure the full, true market value of their livestock and to Assure accurate weights, full bond protection of sales proceeds, adequate marketing facilities and services at reasonable rates, and protection against unfair, deceptive, discriminatory, and monopolistic practices at public markets or by meatpackers in commerce. The budget includes a proposed increase to expand this effort.

Part of the additional funds would be used for strengthening the supervision of packer trade practices. The balance of the increase would be used to further extend the program of posting and supervising additional eligible stockyards, including attention to trade practices at such markets. This would bring the total number of posted yards to about 75 percent of the yards currently estimated to be eligible for posting. The plans also provide for improving supervision over public livestock markets to assure producers the protection intended by the act.

OTHER NEEDS AND RESPONSIBILITIES

We plan to continue the remaining activities carried on under the marketing services appropriation through appropriated funds at approximately the same general level of operation existing during the current fiscal year.

Although no appropriation increases are proposed, certain of these marketing services are expanding and will continue to expand through revenue from fees and charges for services performed or through cooperative financing arrangements with the States. To illustrate this growth, under the inspection and grading program, about $15.8 million were collected in 1956, whereas in 1958 it is estimated that about $19.3 million will be collected from these fee services. Similarly the overall market news program is expected to show some growth through adjustment in financing patterns with the States and an increasing interest on the part of States toward expanding market news services at the local level.

Similarly, some growth is expected in school lunch and special milk programs even though these are projected without change in level of Federal appropriation. The school lunch program continues to expand in line with the policy of increased reliance on funds from sources within the States. The budget proposes a 2-year extension in the current level of authorization for the special milk program. This will permit program continuation and some expansion within the level of authorization.

The Agricultural Marketing Service also serves as the agency of the Department for administration of most of the programs financed from section 32 funds. The amounts required for administration of marketing agreements and orders, the plentiful foods program and surplus removal operating expenses are projected at the same level as for the current fiscal year. It must, however, be recognized that the level of these costs may vary somewhat with departmental determinations relative to specific commodity programs and distribution activities which must be geared to current appraisal of economic conditions. In conclusion, the Agricultural Marketing Service is the focal point in the Department of Agriculture for carrying out important services covering domestic marketing and distribution of agricultural commodities. Its programs are directly and vitally oriented toward helping to secure wider markets and more effective and efficient means of using our abundant farm products. The proposed budget will permit the continuation of these important activities during 1959.

We very much appreciate this opportunity to discuss the proposed budget with you and report on the work of the Agricultural Marketing Service. The Administrator and members of his staff are here and we will be glad to provide any additional information you may desire.

Mr. WHITTEN. Do you have a general statement, Mr. Wells?
Mr. WELLS. I do not have one, Mr. Chairman.

The statement that Mr. Paarlberg has made, plus the pages that you have inserted in the record I think provide an adequate outline of the work in the Agricultural Marketing Service.

I would call your attention to the fact that with three exceptions, the request for funds this year is practically the same as last year. Those three are the increase of $5,390,000 for poultry inspection, of $225,000 for increased enforcement for the Packers and Stockyards Act, and the $40,000 increase for grain standards work. There is also a small item of $12,100 which is a decrease or transfer to General Services Administration for rent which they will take over during this fiscal year.

PRICE SPREAD BETWEEN FARMER AND CONSUMER

Mr. WHITTEN. Before we come to these three items, there are 2 or 3 items I would like to ask you about.

As we pointed out last year in our reports, the reduction in price supports has resulted in a reduction in prices paid and, instead of reducing production last year, it looks like production increased.

Further the record of the Department, according to the understanding of this committee last year, shows that, as the price to farmers decreased and as farm income dropped, the income of those between the farmer and consumer increased.

In other words, the reduction in farm income was not reflected in reduction in cost of food to the consumer. Instead it was absorbed by that group between the farmer and the consumer.

For several years we have had money set up separately for a study of where the consumer's food dollar goes, and we just wondered what developments you have had or what further information you have. Mr. WELLS. Mr. Chairman, last year, we answered a somewhat similar question. We prepared for insertion a statement in some detail reporting what had been done.

We have with us Mr. DeLoach, the person immediately in charge of this work. If you desire we would be glad to have him come in. He is prepared to talk to you at some length as to the types of things we are doing.

RESULTS OF PRICE SPREAD STUDIES

Mr. WHITTEN. We would be glad to have him tell us what you are doing. I would also like to have some results, some conclusions and some figures.

It has been 2 or 3 years that this separate fund has been available to you. We ought to be getting some answers.

Mr. WELLS. This is, I think, the third year.

Now I think we have the answers, Mr. Chairman, but the answers are a record of what is happening and why it is happening. Mr. WHITTEN. Well, let's get the best answers you have.

Mr. WELLS. If you are talking about the answer to what has happened

Mr. WHITTEN. It is quite apparent what has happened. Farm income is down.

Mr. WELLS. Correct.

Mr. WHITTEN. Consumer prices are the same or higher.

Mr. WELLS. That is correct.

Mr. WHITTEN. The group between the farmer and consumer is getting the amount that farm income is down.

Now that has happened.

and who got the money.

Now we want to know why it happened

You have had 211⁄2 years. Let's see what you have come up with. Mr. WELLS. This is Mr. DeLoach, who is head of our Market Organization and Costs Branch. I think the answer is it has gone various places, Mr. Chairman, and I think we know fairly well where it has

gone.

Mr. WHITTEN. You might tell us how you spent your money and then we want to know what you came up with after you spent it.

Mr. DELOACH. I see. We will be glad to do that.

I think last year we submitted to you a brief report of what we did in the way of work to meet the committee's wishes in this field of marketing margins and costs.

With your permission, I should like to make a brief statement regarding what we think are important points in this area and our explanation of some of the reasons why costs are what they are, margins are what they are, and if you see fit to permit me to introduce into the record the results of some of the studies that we have carried on that have previously been reported to you as being underway. Mr. WHITTEN. Mr. DeLoach, that is all fine.

I was educated in the school where a fellow gives answers first and then qualifies it second, instead of starting to make excuses for it in advance.

So I believe it would be well for you to tell us what you have found as to where the increases have gone. The middlemen are getting 60 percent of the food dollar, whereas 6 or 8 years ago they were getting only 50 percent.

About 6 or 8 years ago, the farmer was getting 50 percent and now he is getting 40 percent.

Now I first want to know where that extra amount is going. And I would like it listed. Then after you give us that information, we would be glad to have any explanation that you might wish, as to the bargaining rights of labor unions, orders of the Department, and other factors.

You can give us all the information you want to but let's have the facts first.

Mr. DELOACH. Well, it is a rather simple explanation in one respect, Mr. Chairman.

Mr. WHITTEN. You are talking about explanation still and I want some figures first.

Mr. DELOACH. Fifty percent or more is going to labor that is used in the marketing and processing of agricultural commodities.

Now we have had a 6 percent rise in marketing bill over the past year and that has been in the main a result of a reduction in the prices that went to farmers for their products.

In other words, you are having marketing agencies take a greater share of the consumer's dollar and that share is a result of paying more in the form of wages, more for materials, more in taxes, and more in profits than we have had before but substantially the larger part of it is an increase in labor costs.

COMPARISON AND DISTRIBUTION OF "MARKET BASKET" COST

Mr. WELLS. Mr. Chairman, I can give you the specific figures. Mr. WHITTEN. Yes, let's get the figures first. Then we can find out what has happened.

Mr. WELLS. Our statisticians have worked on the basis of a "market basket" which is what an average family of three purchased in 1947-49.

In 1947-49 the cost at retail of the average annual purchase of this food market basket was $940.

Of that $940, $466 went to the farmer.

Using the average purchase pattern for 1952 for an average American family, the foods produced on American farms and sold at retailthat is, this excludes coffee, bananas, and other imported foods-cost $940 annually in 1947-49. Of that amount $466 or just less than 50 percent went to the farmer, and $474, or just slightly more than 50 percent, was the margin or the cost of moving the food from the farm into the retail market.

In 1957, the same food basket cost for the year as a whole was $1,007. Of that $1,007, $400 went to the farmer, just less than 40 percent, and $607, or just more than 60 percent, was represented by marketing margins.

Or said in other words, Mr. Chairman, since 1947-49, the farm value has decreased $66 and the marketing margin, which Mr. DeLoach has been discussing, has increased $133, or said another way, the marketing margin has increased twice what the farm value decreased, 66 versus 133.

Are those the kind of figures you are looking for?

Mr. WHITTEN. That is it. I want the figures and then we can

Mr. PAARLBERG. May I also point out that in 1957 the farm value of the food in the market basket was greater than was the case in 1956. That was true not only for the year as a whole but true of each quarter within the year.

Mr. WHITTEN. It was of more value but it was worth less money? Mr. WELLS. No, it brought more dollars.

Mr. WHITTEN. How is that?

Mr. PAARLBERG. It brought more dollars.

Mr. WELLS. The farmer got more dollars; yes.

Mr. WHITTEN. But you would not say his net position was improved. In that same year he was buying on the consumer level all the things he used.

So his net was not up. With all the inflation we have had, figured in terms of the inflated dollars, he got less income.

Mr. WELLS. But this is the first time since 1951 he got more dollars. Mr. WHITTEN. How much of that was soil-bank payments?

Mr. WELLS. This is the value of the food. Soil bank is not included. In other words, the calculations are based on actual dollars and cents market prices.

Mr. WHITTEN. Now you are talking about the market basket.

Mr. WELLS. Yes. This excludes soil bank, it excludes the imported foods. This excludes clothing, tobacco, and imported foods. This is domestic food.

Mr. WHITTEN. Now we are getting down to brass tacks. If he rented a considerable part of his land, under the theory under which the acreage is sponsored, he would have fewer baskets to sell, would he not?

Mr. WELLS. Correct, which is offset by his soil-bank payment.
Mr. WHITTEN. That is right.

So to that extent he got money from the soil bank. But he had fewer baskets to sell so in effect the soil bank had to take up some of the slack in what he would have made, is that right?

Mr. PAARLBERG. I think this is generally true. That was the reasoning behind the acreage reserve program.

Mr. WHITTEN. Now these dollars you are referring to, have they been weighted?