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This $40 profit per head compares very favorably with the average profit of $22.91 for the past 10 years. As table VI shows, only in 3 of the past 10 years has the $40 profit been exceeded, and only in 1950, when inflation caused more than a 20 percent rise in cattle prices in 6 months, was this profit greatly exceeded.

TABLE VI.-Feeder profits per steer
Year:
Profit Year-Continued

Proft
1940-41.
$8. 57 1945–46.

$12. 53 1941-42. 18. 24 1946–47.

43. 27 1942-43. 14. 52 1947-48

42. 83 1943-44. 8. 66 1948-49.

8. 83 1944-45. 14. 58 1949 50.

68. 54 10-year average, $22.91.

Source: Table 12 of Secretary of Agriculture's statement, dated May 17, 1951, to the House Agriculture Committee.

Since it is clear that feeders will make liberal profits under the October ceilings, it is clear that they will have a sufficient incentive to continue the production of well-finished cattle.

The second question is whether, when prices are rolled back, losses to feeders on their present inventory of cattle will be so substantial as to make a roll-back unfair. This question was carefully considered prior to the issuance of the regulations. In fact the desire to protect the feeder against inventory losses was the sole reason why the roll-backs were delayed. The delay gave the feeder a chance to dispose of his cattle at higher prices and the final roll-back was timed to coincide with the period when the number of cattle in feed lots is normally at a relatively low level.

Under the present program feeders will not incur over-all inventory losses though some losses will be sustained on cattle purchased since January. There are two major groups of feeders, the farmer feeder and the commercial feeder. The farmer feeder usually purchases cattle in the fall and sells during the next spring or summer. To the extent that he followed this normal practice he is not adversely affected by the roll-back, because he did not purchase his

cattle at the recent high prices but at the lower prices that prevailed last fall. The commercial feeder usually purchases the year round but tends to concentrate his purchases in the fall when prices are normally most favorable. His losses on the relatively small number purchased since January should be more than offset by his profits on his large fall purchases.

The table below shows the effect of the roll-back orders on farmer feeders:

TabLE VII.-Profit on feeding a 700-pound steer bought in the fall of 1950 for sale

the following spring

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1 Source: Table 11 of statement by Secretary of Agriculture, dated May 17, 1951, before House Agricultural Committee, costs per hundredweight were multiplied by 7.

Source: Table 12 of same statement. This is based on April 1951 prices, which were higher than previous prices and thus overstates costs.

3 Columns 1 and 2. 4 Source: Table 11 of statement, dated May 17, 1951, by Secretary of Agriculture to House Agriculture Committee indicates March 1951 price of Choice steers at Chicago was $36.67 per hundredweight.

s Source: Table 11 of same statement indicates April 1951 price of Choice steers at Chicago was $36.93 per hundredweight.

6 May-July ceiling prices for Choice are $34.20 per hundredweight.

These profits of $58.64 per head are substantial when it is recalled that the average profit for the past 10 years was $22.91 per head and that only once in the past 10 years has a $59 profit been exceeded.

Although the commercial feeder may suffer some losses on cattle purchased at recent high prices, he will, on the average of his purchases from August 1950 through April 1951, net a substantial profit of $49 per head. This profit, again, is substantial as compared to historical profits. The profit realized by commercial feeders is shown in the following table: TABLE VIII.-Profit of commercial feeders purchasing steers between August 1950

and April 1951

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Source: Table 11 of Secretary of Agriculture's statement, dated May 17, 1951, to the House Agriculture Committee gives the prices per bundredweight of stocker and feeder steers. These prices were multiplied by 7 to arrive at the price for 700-pound steers.

* These costs include feed (45 bushels of corn, 4 tons of alfalfa hay, and 150 pounds of soybean meal per head), transportation and marketing expenses, pasture, labor, overhead and death loss, less credits from manure and gain on hogs following steers. In computing costs, it was assumed that cattle purchased in 1950 were fed at 1950 prices and that cattle purchased in 1951 were fed at April 1951 prices. Source: Table 12 of Secretary of Agriculture's statement, referred to above. Costs prior to 1951 were modified to reflect 1950 corn prices. * Column 1 plus 2.

• March and April selling prices obtained from table 11 of Secretary of Agriculture's statement, referred to above; may through November prices are OPS ceiling approximate prices, effective in May, August, and October, 1951.

. Column 4 times 1044. 6 Column 5 minus 3. ? Averages were weighted in accordance with table IX; i. e., August 1950 purchases were weighted at 9.3 percent, September 1950 purchases at 16.6 percent, etc.

Critics of the OPS program have ignored the high average profit of $49 and have stressed the losses sustained by feeders purchasing cattle in February, March, and April of this year. The fact is that of the cattle going into feed lots from August to April, relatively few are purchased for feeding during February, March, and April. This is indicated by the following table: Table IX.-Number of stocker and feeder cattle shipped from 5 major markets 1

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Source Table 14 of the Secretary of Agriculture's statement, dated May 17, 1951, to the House Agriculture Committee.

The few purchasers who bought after January, and only after January, did so notwithstanding the warning in the General Ceiling Price Regulation, issued January 26, 1951, that “Tailored livestock ceilings will be issued as soon as practicable.” As the Secretary of Agriculture said to the House Agriculture Committee on May 17, 1951, “Feeders who bid up prices after the date of the order (GCPR) obviously assumed the risk of subsequent developments.”

III. THE OPS PROGRAM IS FAIR TO THE BEEF INDUSTRY

There have been relatively few complaints of the theoretical fairness of the beef regulations, Ceiling Price Regulations 23, 24, 25, and 26, to the beef industry. Indeed, the Washington Post reported on May 16, 1951, that the attorney representing the National Association of Meat Processors and Wholesalers "complimented OPS for ‘regulations under which we can live.' "

Such criticism of the OPS regulations as the Congress has received from the beef industry has centered around these two major questions:

1. Will OPS orders curtail production of beef cattle?

2. Will OPS orders be workable and enforceable; i. e., will they drive meat into the black market?

Save for those members of the beef industry who are opposed to price controls under all circumstances, it appears that the other members of the industrypackers, wholesalers, retailers, and other distributors—would have no serious complaints concerning the OPŚ regulations if they do not curtail beef-cattle production and if they are workable and enforceable; that is, if under the OPS regulations they will receive an adequate supply of beef at or below the ceiling prices established for their sources of supply. Both of these points are discussed at length in this memorandum.

IV. THE OPS PROGRAM IS FAIR TO THE CONSUMER

Under the OPS program, there are three sets of ceiling prices. The first set, the May level, is designed to restore prices to the January level and relieve the squeeze on the beef industry caused by the post-January rise in cattle prices. This reduction in the price of live cattle will have little or no effect on the average beef prices at consumer levels. The reductions in live-cattle prices of approximately 442 percent in August and 442 percent in October will be reflected in reductions in the prices at retail stores. The last reduction will reduce retail beef ceiling prices about 9 percent and restore them close to the levels of May-June 1950. As has previously been pointed out, the roll-backs were timed to minimize inventory losses of feeders. Table X illustrates the effect of the OPS program on retail beef prices:

TABLE X.Retail beef prices in New York City under price control

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1 Source: Bureau of Labor Statistics. These prices were the prices under the general ceiling price regu. lation.

2 OPS ceiling prices, weighted as follows: Groups 1 and 2 stores; 40 percent; groups 3B and 4B stores, 20 percent.

3 Approximate OPS ceiling prices, weighted as in note 2.
• Approximate OPS ceiling prices, weighted as in note 3.
NOTE.-In each case prices of Choice grade, the grade bought in BLS surveys, were used.

V. THE OPS PROGRAM IS ENFORCEABLE

A major criticism of the program is that beef will not be sold in regular channels at ceiling prices but will be sold in the black market at higher prices and, therefore, that the entire beef program is meaningless.

The OPS has the advantage of OPA experience in dealing with the black market. Thus we should be able to do a more effective job. The black market was pri

marily caused by lack of slaughter control and by poor distribution of meat. The OPS program to deal with these problems is as follows:

First. Slaughter registration.-OPS issued its slaughter registration and quota regulation, Distribution Regulation No. 1, in February. This early issuance date was determined upon in order to keep black marketers from entering the slaughter field. OPA did not effectively register slaughterers until 1945. By that time, some black marketers had entered the slaughtering business, and it was difficult in most instances to prevent their registration. By starting early, OPS can limit distribution to legitimate slaughterers and keep beef distribution in their hands. The slaughter-control program by setting quotas each month based on last year's slaughter, effectively apportions the total available supply fairly among all slaughterers. Thus, if in a given month, estimates indicate that hog slaughter will be 110 percent and the cattle slaughter will be 95 percent of the 1950 slaughter, each slaughterer's quota for that month is established at 110 percent of his 1950 hog slaughter and at 95 percent of his 1950 cattle slaughter.

Second. Allocation.-In Distribution Regulation No. 2, OPS provided for record keeping which might serve as the basis for meat allocation when and if meat shortages should develop. If necessary, OPS can allocate meat to areas, to assure fair supplies to each area through legitimate dealers, or can allocate meat to distributors to assure a fair supply to each distributor. By allocating, if necessary, OPS can keep meat in legitimate channels and make it unnecessary for legitimate businessmen to go into a black market to get supplies.

Third. Prices adequately cover transportation costs.-The OPS beef regulations more adequately reflect transportation costs than did the OPA regulations, thereby making it equally profitable to sell meat in all parts of the country. Since all areas of the country will thus have access to an adequate supply of beef, it will not be profitable to set up area black markets.

Fourth. OPS beef regulations do not squeeze legitimate businesses.-OPS regulations provide more liberal dollar margins for slaughterers and wholesalers than OPA allowed. These wider margins have but little effect on what the consumer pays, but make it profitable for businessmen to comply with the program.

While OPS should do a better job in dealing with the black market than OPA, the extent of the black market under OPA has been very much exaggerated. Those who have expressed concern about the black market have primarily pointed to experience in the middle of 1946 when price controls were crumbling. They have ignored the fact that during most of OPA, meat black markets were not a serious problem.

A study made by OPA covered the monthly purchases during 1944 and 1945 by 21 packing companies covering over 100 plants and about 58 percent of the total volume of federally inspected slaughter. The total cost of their cattle was, on the average, the maximum cost permitted by the cattle regulations, and exceeded the maximum permissible cost in relatively few cases. This is shown in the following table:

TABLE XI.—Total_cost' as a percentage of maximum permissible cost for 21 packing companies by accounting periods, January to December

1944 and 1945

(Percent)

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