ceilings will work a hardship on slaughterers and distributors of meat, even to the extent of forcing them to take a severe monetary loss.

The experience which we had with the OPA should be proof enough to convince anyone that we cannot regiment the entire meat industry from producer to consumer without creating a situation of chaos in the distribution of the many grades of meat.

I don't believe that it would be possible to obtain the men to equitably grade the meat or to enforce the many price ceilings in an industry as large as the livestock industry which operates in every section of the United States, thus including in the problem the many differentials in wages, transportation costs, eating habits, climatic conditions, and sources of supplies.

I feel that the motive which led to the order on beef prices was dictated by a misconception as to the effect of meat prices on the cost of living. The general public has been led to believe that the present price of beef is out of line with ability to buy. The changes of income levels have not been considered in analyzing the problem of beef prices. (The year 1948 was not influenced by war or depressive conditions.)

In 1948 the average price for prime cattle on the Chicago market was $35.24 per hundredweight, and the average hourly wage in all industry was $1.35.

During the month of April 1951 the average price for prime cattle at Chicago was approximately $40.25, and the average hourly wage in all industry was $1.56. The percentage increase in the price of prime cattle and the hourly wage since 1948 has been almost exactly the same-15 percent.

In the case of the Nation as a whole, our national income increased from $223.5 billion in 1948 to a level of $263 billion in the first quarter of 1951. This represents an increase of 17 percent or in almost direct proportion to the increase in beef prices.

Secretary Brannan, on April 24, 1951, in testimony before the House Agricultural Committee, pointed out that, on a real basis of the buying power of an hour of labor, our cost of living was less in 1951 than before World War II.

The record clearly indicates that the public, through its demand and ability to pay, has been responsible for the current price of beef.

As a result of the demand for meat and the advance in prices on cattle at the primary markets, the price of feeder cattle has advanced $9.62 per hundredweight from March 1950 to March 1951. Feeder cattle are the factories which translate grains and other feeds into meat. The roll-back in beef prices will discourage feeding operations and cause stop loss liquidation. But, of greater importance, it will stop the replacement cattle from going into the feed lots to produce our future supply of meat.

The committee and Congress recognized the fact that the agricultural industry produces approximately 70 percent of all our raw materials. Therefore, they decided that if we were to obtain the needed expansion in farm production to meet the defense efforts the industry was entitled to parity as a minimum price for its products, or in other words, a price comparable with the price paid for the production of other goods used in our economy.

In our present situation it will be impossible to expand our farm production as rapidly as our increase in national income. We definitely cannot expand our farm production if we permit the Office of Price Stabilization to roll back prices and destroy the confidence of the farmer as to the price he will receive.

If the Defense Production Act is to be extended, I will do my best to insist on fair treatment for all groups interested in the price of meat. Lwill have as my primary objective uninterrupted production of meat and removal of any regulation which tends to interfere with the equitable operation of our system of distribution.

MEMORANDUM IN REPLY TO QUESTIONS ON CEILING PRICE REGULATIONS ON LIVE CATTLE AND BEEF

Among the contentions which have been advanced in criticism of the Office of Price Stabilization roll-back of prices for beef cattle are the following:

1. The increases in prices are justified because of the increase in national income since the end of 1949.

2. The cost of feeder stock and of beef has increased to an extent which may wipe out the feeders' margin. This will result in the curtailment of meat supplies.

3. Black-market operations will be encouraged.

4. Since incomes are higher, it would be better to permit the public to pay more for beef than to run the risk of reducing the future supply of beef. The following comments may be made with respect to these four points: 1. The increase in the cost of meat generally and of beef particularly has been out of all proportion to the increase in consumers' spendable income During the fourth quarter of 1949, spendable income was at the annual rate of $187 billion. For the first quarter of 1951, spendable income was at the rate of $216 billion. The increase was therefore less than 16 percent. During the same period, the average retail price of beef and veal advanced about 25 percent, or from 247 percent to 308 percent of the 1935-39 average.

The price increase for beef and veal has been out of all proportion, also, to the increases for other consumer goods. For example, during the 12 months ended March 15, 1951, while beef and veal prices rose 26 percent, all meats (including beef and veal) rose 21 percent; all foods rose 15 percent; apparel 10 percent, and the general consumers' price index less than 10 percent.

At present prices, therefore, the purchase of beef preempts a considerably larger share of the consumers' dollar than before Korea, probably well in excess of the "historic ratio." This inevitably reduces the amount available for buying other consumer goods, and for purchasing savings bonds. There seems no compelling reason entitling the livestock industry to such specially favored treatment.

2 Production

The regulation will tend to the achievement of maximum production.

We can assume that a condition for maximum cattle production exists when cattle prices are favorable in relation to costs of production.

All the reductions planned for live-cattle ceilings will leave cattle prices at 120 to 125 percent of parity. Feed prices are below parity and it is anticipated that they will not rise above parity. Thus it would appear that the situation is conducive to cattle production. Furthermore, both the price of milk and the price of hogs are below parity, indicating that the ceiling regulation provides an incentive to cattle feeding. Even when feed, milk, and hog prices reach parity, it is obvious that cattle prices will have the advantage.

After all the reductions in the regulation become effective September 30, cattle ceilings will be 7 percent above prices of last June.

Experience during OPA indicates that ceilings do not prevent a high level of production and consumption. Cattle numbers in the United States reached the all-time high in 1945. Also, the record hog production occurred during ОРА. The second-highest production of beef in the Nation's history was in 1945, the last full year of the OPA. (See table below.)

Also, the regulation can have the tendency to remove some of the uncertainty of rapidly rising prices such as we have had in recent months. With stability in the market, we can encourage many small feeders, who have not had the capital to incur the risks involved in these abnormally high prices, to undertake cattle-feeding operations.

The Department of Agriculture reported an increase of 4 percent of the number of cattle on feed in the 11 Corn-Belt States on April 1, 1951, compared to April 1, 1950. It is true, however, that the current production of beef is substantially below the level of last year, presumably because of anticipation that price controls may be discontinued or that ceiling prices may be raised in the near future. The relatively small number of cattle being sold for slaughter at the present time is not in normal relationship to the numbers of cattle on farms. It is our belief that farmers will deliver these cattle to market in a more normal pattern as soon as they are convinced that the price-control program will be continued in approximately its present form.

It has been suggested that the roll-back of prices will cause a glut in the markets as feed lots are emptied to avoid having to accept the lower prices after the date of the roll-back. This is not likely to be a substantial problem because the roll-back in October will come at a time when it is not abnormal for prices of live cattle to decline substantially and at which time the numbers of cattle in feed lots normally are at their lowest point. The roll-back in August may cause some feeders to sell their cattle somewhat sooner than they had planned, so that there might be a decline in prices of cattle prior to August 1 as a result of this possible increase in marketings. Again it should be recognized that the amount of the roll-back is only $1.50 per hundredweight and that prices of live cattle could decline by this amount without any serious gluts in the markets. Such a decline

would prevent further marketings of cattle to avoid the roll-back because the roll-back would not cause any further decline in prices. All of this is borne out by preliminary data in regard to receipts of cattle on the 12 principal markets during the week ended May 11, which indicate that the total receipts at these markets are 139,100 compared to a total of 186,000 in the previous week and 168,600 in the corresponding week of 1950.

There is some possibility that some cattle will be slaughtered at lighter weights than would be the case if there were no roll-backs. On the other hand, it appears that this is not likely to be a major factor in beef production, and it seems clear that cattle prices at 120 percent to 125 percent of parity should be adequate to encourage continuation of the recent increases in numbers of cattle on farms and ranches as well as continued increases in the finished weight of cattle sold for slaughter, considering the entire year of 1951 and future years.

The ceiling-price regulations are in compliance with the requirement that reflected values of farm products must not be below the level of May 24 to June 24, 1950, or parity, whichever is lower.

Cattle prices have shown a sharp upward trend since last June, although they were already near a record-high level when the Korean conflict began. The increase in average prices per hundredweight at Chicago for choice steers, the most important source of beef at retail, is shown by the following table:

June 22, 1950.

Jan. 26, 1951.

Apr. 13, 1951.

$29.85

34.93

36.81

Nationally, average prices paid to farmers for beef cattle on June 15, 1950, were 137 percent of parity, which is an index of farmers' cost rates. Prices have advanced relative to parity as well as in dollars and cents since that time, as follows:

During the week of June 24, 1950, the weekly average price of prime cattle at Chicago as reported by the United States Department of Agriculture was $31.42 per hundredweight, compared with $10.88 in week of April 21, 1951. Thus, the prices of prime-grade steers had increased 30 percent from June 1950. Choicegrade steers were up 26 percent since the pre-Korean period.

Beef is an important cost-of-living item. About 44.1 percent of the consumers' meat diet in 1949 (excluding poultry) consisted of beef. Thus, if the cost of living is to be controlled, effective measures must be taken to stabilize beef prices. A major step in stabilizing beef prices is to control prices paid for live cattle. Abnormally high food prices lead to higher costs in defense industries. Beef is an important item in the diet of industrial workers.

(See p. 6 of the Defense Production Act of 1950, secs. 401-402.)

The following are some of the purposes designed to promote the national defense:

(a) To prevent inflation and preserve the value of the national currency. (b) To stabilize the cost of living and the costs of production.

(c) To protect consumers, wage earners, investors, and persons with relatively fixed or limited incomes from undue impairment of their living standards.

(d) To protect the national economy against future loss of needed purchasing power by the present dissipation of individual savings.

(e) To prevent a future collapse of values.

In order to carry out these objectives of the act, a ceiling may be established when price of material has risen or threatens to rise unreasonably above price prevailing during the period from May 24, 1950, to June 24, 1950, or when such price increase will materially affect the cost of living or the national defense.

The information given above shows that the price of beef cattle had risen in this way and threatened to continue to rise.

The price freeze of January 26, 1951, placed a lid on beef prices at all levels except for live cattle.

3. Black market

Profiting from the experience obtained in World War II, the Office of Price Stabilization has set up a distribution program designed to channel the available livestock to slaughterers and to maintain a normal flow of meat from slaughterers to those who sell or serve meat to ultimate consumers. This distribution plan has the effect of spreading the cattle supply among established and registered slaughterers and of assuring wholesalers and retailers that they can depend upon a normal distribution of beef, thus eliminating most of the basis for the black market.

In order to make it possible for cattle feeders to adjust their operations, the Director of Price Stabilization announced at the time of the January price freeze that ceilings on livestock prices would be issued later. Also, in the price ceilings which were announced on April 28 the reductions in live-cattle prices are made in three different steps so that time will be allowed for cattle feeders to govern their transactions accordingly..

4. As already pointed out, despite the increase in spendable income in the hands of consumers, they cannot purchase beef at present excessive prices without cutting into other essential expenditures and into savings. Moreover, there are large groups of consumers whose income has remained static or increased much less than the average, and for whom the high price represents a particular hardship. The suggestion that inflation can be cured by permitting prices to rise is, of course, directly contrary to the basic objectives of the stabilization program. Operators of other commodities would ask-quite properly-for treatment equally favorable with that accorded the livestock growers. Higher prices of beef would also raise living costs and lead to a justifiable demand for higher wages, giving renewed impetus to the entire vicious spiral of higher costs and higher prices. The net result would be the economic disruption and social chaos which are the inevitable accompaniments of inflation.

We are confronted with a clear choice. We must either control prices all across the board or abandon any pretense of control. We should be derelict of our responsibilities if we yielded to the clamor of any group that desires to retain an inflationary level of prices or if we submitted to blackmail in the form of threats to withhold supplies or channel them into black markets.

MAY 14, 1951.

Average cost of cattle bought by slaughterers, pounds of beef produced, and number of cattle on farms in United States, by years, 1940–50

1 Cattle not kept for milk on farms Jan. 1.

Source: Livestock Market News, U. S. Department of Agriculture.

Senator DIRKSEN. Your answer prompts one thought.

What is the total number of people in your agency at the present time?

Mr. DISALLE. The total number at this time, I would say, is in the neighborhood of 6,000.

Senator DIRKSEN. And how many have you asked for in the 1952 budget?

Mr. DISALLE. I think there is a request for 35,000.

Senator DIRKSEN. Plus 6,000.

Mr. DISALLE. No; including the 6,000.

Senator DIRKSEN. Do you propose to use volunteers also?

Mr. DISALLE. In the rationing program the OPA found volunteers helpful. They had somewhere in the neighborhood of 200,000 volunteers, in addition to 60,000 paid workers. We have no plans at this time for the use of volunteer committees, with the exception of the mayor's committee which is now operating in quite a few communities. Whether we go to the local board type of organization or not is something that has not been determined.

The CHAIRMAN. You have not requested them? There is no law that gives you that power?

Mr. DISALLE. Power to do what?

The CHAIRMAN. Set up rationing and local boards.

Mr. DISALLE. No; the rationing authority is under the President, and that has not been delegated to anyone that I know of, but as far as local board supplementing the program

The CHAIRMAN. But it is in the law, the President has the right to delegate it. He has not delegated it. It is in this law. Suppose this committee eliminated that part. You say it is not going to be necessary. Would there be objection on your part?

Mr. DISALLE. I think that it is one of the stand-by tools that the program ought to have. I certainly am not looking forward to any type of rationing.

In answer to your question as to whether the Congress could not just fail to pass the rationing amendment, I would like to point out that while the Administration does not foresee that it will at any particular time have to resort to rationing, still if the need does arise and I have to come and ask power to ration from Congress; that might start a stampede of hoarding. It is wiser to have it in the law; if the necessity arises it can be imposed suddenly to prevent hoarding. The CHAIRMAN. I want the record to show, you certainly do not see in the near future with the situation as it is today the necessity for rationing, but you believe it should be left in the law as a standby?

Mr. DISALLE. I think the President ought to have the authority. Finishing Senator Dirksen's question on the local board set-up, we now are studying the different types of organization, whether for the smaller community, a local board with a clerk would do the job or whether a mobile unit operating under the closest district office would do the job or whether we could have more district officers and smaller district offices. Those are alternatives that we are studying, but no decision has been made.

Senator DIRKSEN. Have you considered representations made by some retail association that small stores doing a gross annual business of $50,000 or less should be exempted on the ground that, first, they would be subject to price control; secondly, competition from large stores would almost compel them to keep their prices in line; and, third, it would diminish the field force that would be necessary, and finally would save them a tremendous amount of work. As you know, there is frightful protest now from those stores with a lot of

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