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Mr. CHUDOFF. I don't know. Ask Mr. Williams. Mr. WILLIAMS. No. Mr. HILLELSON. I have been in the grocery business, and I would like to know your answer on that.

Mr. WILLIAMS. I don't know what your profit is on that.

Mr. HILLELSON. I can assure you a grocer doesn't make 7 cents a quart. He seldom makes more than 2 cents.

Mr. CASTLE. May I complete the answer to your question, sir?

To go back, we will get to the low price of the commissaries from Mr. Jackson, but I want to speak about some of the other conditions of these bids.

Remember, they are for a 3-month period, and a minimum quantity, and they are delivered wholesale. That makes a whale of a difference.

Volume is everything in our business. We can have a very low unit profit and, furthermore, in some agricultural areas, where, during the surplus season, when they have a surplus over and above the class I milk, the producers are very happy to sell to a dealer at a lower price, if he can do it, if he can pay them that by law, so he can make a low bid on a military outlet.

We are not objecting to that at all, in the sense of the position of the Army in it. The Army is getting milk at the lowest price, and that is what they ought to do. They shouldn't be concerned and worried about how much it hurts somebody outside, until they start to sell milk to unauthorized civilians. That is what we are griping about.

Mr. CHUDOFF. Isn't that blame to be placed on whoever is running the commissary and post exchange?

As a matter of fact, isn't there a ruling you can only sell to military personnel?

Mr. CASTLE. Yes, sir.
Mr. CHUDOFF. Or civilian employees of the military?
Mr. CASTLE. You are absolutely right.

Mr. CHUDOFF. It is a matter of policing; it isn't a matter of the industry?

Mr. CASTLE. Yes, sir; you are right.

We have made complaints to the Inspector General of the Army and, in three cases, the reply was:

We investigated and the commanding officer says that no unauthorized' personnel are getting milk.

We know they are.

Mr. CHUDOFF. I know during the war I could buy a pack of cigarettes on the ship for 6 cents, whereas if I went out and bought them in the store I had to pay 22 or 23 cents, and nobody complained.

Mr. CASTLE. No, but you were authorized personnel.
Mr. CHUDOFF. That is right.
Mr. CASTLE. You had a right to do it.

Mr. CHUDOFF. Then it is not the Government's fault that somebody is not playing the game according to the rules in these post exchanges and commissaries, and that is a matter of military punishment for somebody who violates the regulation.

Mr. Castle. You are right; but it is under the supervision of the Armed Forces.

Mr. CHUDOFF. So, that takes us back to the original premise that, your argument has nothing to do with the bill in question?

Mr. CASTLE. Well, I really said that in my opening statement. We indorsed the bill in general, and then we said we favored the method of procurement by the Army, and our objection was that milk reaches unauthorized persons, which is indirect; but then I read this letter from a very eminent man in California, which gives a specific example where the Armed Forces are going into the business of processing milk, and we certainly object to that. They can't process milk as economically as private industry.

Mr. Fountain. Ăs I understand it, your industry certainly has no objection to the operations of commissaries and the sale by commissaries to authorized personnel?

Mr. CASTLE. No, sir; not in the least.
Mr. FOUNTAIN. Or to PX exchanges?
Mr. CASTLE. No, sir.
Mr. HILLELSON. Mr. Chairman.
Mr. OSMERS. Mr. Hillelson.
Mr. HILLELSON. Can I ask Mr. Castle a question?

What would you do to prevent that violation? What would you suggest to prevent it?

Mr. Castle. I would suggest families living off the post have a card saying they have 3 children; they ought to have 3 times 7, 21 quarts of milk for the children; pa and ma should get 6 quarts, That is 12-33 quarts of milk, and they can't buy any more.

Mr. HILLELSON. Is that a practical measure?

Mr. CASTLE. I think it would be, because they carry the cards; they have to have an identification card, or should have, in every commissary.

Mr. HILLELSON. That is true. I am only interested in this to find out what we can do to prevent the violations; but, actually, you can't buy 33 quarts of milk, or 21 quarts of milk, at one time.

Mr. CASTLE. No; but per week, I say.

Mr. HILLELSON. 'I appreciate that." In other words, you would have a greater amount of redtape?

Mr. CASTLE. Yes; you would have to have a punchcard.
Mr. HILLELSON. With the commissary itself?
Mr. CASTLE. Yes.
Mr. HilLELSON. Is that what your thought is?

Mr. CASTLE. Of course, I think a good commanding officer cou stop it overnight.

I am not saying there are not a lot of good commanding officers, I am amazed they can't stop it.

Mr. HILLELSON. Of course, and milk is only one item.
Mr. Castle. Yes; that is right.

Mr. OSMERS. I might say, Mr. Castle, in the possible event you didn't know about it, the Harden subcommittee conducted rather extensive hearings on the commissary, itself, as a competitive activity.

Mr. CASTLE. Yes, sir.

Mr. OSMERS. And, really, I feel that Mr. Chudoff has probably put his finger on the point that we are dealing here, in connection with your recent testimony there, with problems of policing,

Mr. CASTLE. Yes, I think that is right, sir.

Mr. Osmers. You will always have that difficulty. As long as the Government is running its grocery store, you are going to have unauthorized personnel at least trying to purchase these articles at less,

Mr. CASTLE. Yes.

Mr. OSMERS. I know it seemed to me in some of these highly competitive food markets, like Washington, D. C., for example, that maybe we ought to curtail the commissary activities.

When I proposed that some time ago, I was bitterly criticized as trying to take away fringe benefits from service personnel.

Now, I don't want to take away fringe benefits. I think it would be better to put in in the serviceman's pay envelope and let the normal business be conducted.

Now, if you get some isolated post, either in a remote part of this country or overseas, obviously, as a service to the personnel and their families, a commissary operation has to be conducted.

Did you want to proceed, Mr. Jackson, with your statement?

STATEMENT OF JAMES E. JACKSON, EXECUTIVE DIRECTOR,

GEORGIA DAIRY ASSOCIATION

Mr. JACKSON. Thank you, sir.

My name is James E. Jackson. I am the executive director of the Georgia Dairy Association, which is an organization that represents all phases of the dairy industry in Georgia.

I have a prepared statement, which is filed already with the committee, and I won't undertake to read this entire statement. What I would like to do would be to comment on some of the things that we find in Georgia.

We find specific instances in Georgia around the military camps, where the sales of milk in commissaries increases beyond any reasonable proportion to the personnel that are situated on the base.

We find also that we lose sales in ordinary courses through grocery stores and on our milk routes, around these camps.

I have shown in the statement this type of operation has resulted in a financial loss. Of course, that is a loss based on the sales that would have accrued to the industry, merely from the military personnel itself.

I am not taking the position and the industry in Georgia does not take the position that we don't approve of the operation of these facilities for the military personnel.

We object very strenuously to the fact that some military personnel will go into a post and buy 2 and 3 cases of milk at a time and take that milk out.

Now, no one soldier and his family is going to drink 3 or 4 cases of milk in a day.

Mr. OSMERS. How about beer?

Mr. Jackson. Well, they wouldn't drink that much beer in a day. If they did, they wouldn't be back on the post the next morning.

So, if they could drink that much, we would think it was fine; but we know that is not right. We know it is not possible. We know they don't do it.

It is the milk that gets into the hands of unauthorized people, and if milk gets into the hands of unauthorized people we take the position that many other things get into the hands of unauthorized people.

Now, it has been mentioned that that is a policing proposition.

Every time we make a complaint to a post commander we get the same old canned report, that-

I have made an investigation and I do not find that there is any violation of the regulations.

Probably he wouldn't, but--
Mr. HILLELSON. Mr. Chairman, can I interrupt?
Mr. Jackson. We find out there is.
Mr. HILLELSON. Mr. Jackson.
Mr. OSMERS. Mr. Hillelson.

Mr. HILLELSON. Do you have specific cases where you find violations when you make these complaints?

Mr. JACKSON. Our plants report sales just of that nature, that they have spied on the commissary, themselves, and I use that word advisedly.

Mr. HILLELSON. By names; people by names?

Mr. Jackson. They don't know the names of the personnel that buys it; no; because they are not acquainted with the personnel, but they see them buy it and take it out and put it in their cars and take it off the post. That is the way they get the information.

If we try to go into the installation and specifically complain, then and there, to get it, they would clam up on us just like a clam, and we wouldn't get any information at all. They would give you no names, or anything else.

That is what we are up against.

Mr. HILLELSON. I would assume, if you could see people taking that off the base or post, or whatever it is, that you would also perhaps check their license numbers, so you could have a name.

Mr. Jackson. They may have. I won't say they have not, but they have not reported that to me.

Mr. HILLELSON. I think that would be conclusive, if you could furnish names and dates.

Mr. Jackson. Well, that would be the thing to do; but we don't want to take the position of being a spy.

Mr. HILLELSON. You are going to have to take a stronger position if you want to change it.

Mr. Jackson. We may have to. We may have to set up a spy system within the industry. I hope we don't have to, because I think they ought to get out of the business to the extent that they serve only military personnel. We can't object to that.

Now, there is another feature that was brought up by the gentleman, I believe, from Pennsylvania, that I would like to answer, if I may, because I am afraid he is going to ask me the question anyway. I might just as well answer it now.

We find this in Georgia: Of course, we are a State that operates under a milk-control law, like the State of Pennsylvania does. Not only that--but we are an infant in one respect in the dairy business. We are not a dairy State. We are a cotton, peanut and tobacco State, and the dairy industry stands-

Mr. Chunoff. How about peaches?
I always hear about the Georgia peaches.
Mr. JACKSON. Well

, now, we have two kinds. Which kind do you have reference to?

Mr. CHUDOFF. Both kinds.
Mr. JACKSON. Both kinds.
We have a beautiful selection of both.

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South Carolina contends we have more of the meaty kind. We contend we have more of the fleshy kind. We believe in both very strenuously, but we don't claim peaches are one of our major crops.

The dairy industry is about in sixth place in our total agricultural economy in Georgia. So, we are the struggling orphan of the agricultural industry.

Our milk that is produced is produced almost entirely for bottle use, as we call it-in other words, sold in the bottle. We have not gotten along far enough to get into the manufactured grade milk, but this is what we find: In other States, where we are competing with the bidding from other States, and most of the milk in our Army posts now comes from out of the State of Georgia—it dosen't come from within Georgia at all—we have to pay our producers a fixed price. We can't pay them less by the law. In other States, where there is no law, some in a Federal milk marketing area, but nevertheless in a Federal milk marketing area where the milk does not go into an authorized State agency, that still can be sold on a competitive price, at any price. Then they pay the farmer-and I can't figure out any way on earth, when you pay 14 cents a quart for milk on the doorstep, or in the commissary, where the farmer can possibly get over $2.52

Mr. CASTLE. A hundred.

Mr. JACKSON. A hundredweight out of the milk. He can't do it. It just isn't in the book, and that is on a 50-50 basis.

Mr. CHUDOFF. How can he stay in business then?

Mr. Jackson. He can't on that basis because, of course, he is selling part of his milk on the fluid market in his home area. This is surplus milk.

Now, you say, “How do they handle the surplus milk situation, or how do they fill Government orders, when the surplus season is over?'

Well, they do it by this method: Every other State in the Union, except Georgia, and maybe we ought not to be proud of this, but I am, does not permit reconstitution of milk, that is, milk being made from milk powders and sold as fluid milk for human consumption. They can sell their local needs with reconstituted or partly reconstituted milk and sell the Army or the military personnel the fluid milk still, and it still comes out of the farmer's hide. It is bound to, because in the end he is the man who takes less money over the year for his milk.

We, in Georgia, try to cooperate with our farmer as much as we can. Mr: OSMERS. Are there any other questions?

Mr. JACKSON. That is beside the question, but it does, I hope, answer that question.

Mr. OSMERS. Are there any other questions of Mr. Jackson?
Mr. FOUNTAIN. Yes.
Mr. OSMERS. Mr. Fountain.

Mr. FOUNTAIN. I would like to ask you this question: Speaking in terms of the amount of milk which is sold to unauthorized persons, let us assume for purposes of illustration that a hundred quart bottles a day are sold by the commissaries. What percentage of that 100 bottles, would you say, based upon your investigations, would go to unauthorized persons?

Mr. JACKSON. I would say 10 percent at least, and one illustration I have used here we just can't figure out. In one Army post, from

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