Mr. LA ROE. I would agree with that, but during the last 6 months their pockets have been full of money and the prices have been way below ceilings, which proves my point that the law of supply and demand must have made those prices.

The CHAIRMAN. Suppose you take those ceilings off. What do you think would be the result then?

Mr. LA ROE. I think

The CHAIRMAN. Do you not think there would be a tendency for prices to rise?

Mr. LA ROE. On those items only where we can get it, but the law of supply and demand today is saying we cannot get it on the bulk of the meat.

The CHAIRMAN. Well, is the price of beef below ceiling now?

Mr. LA ROE. Oh, yes. The price of most kinds of beef is below the ceiling today, as shown by this table that I just put in the record. Mr. BARRETT. May I ask another question, Mr. Chairman. The CHAIRMAN. Mr. Barrett.

Mr. BARRETT. Why do you not raise the prices to the ceiling to overcome the loss on hides and tallow?

Mr. LA ROE. We would love to do it but the law of supply and demand is just as inexorable a law as price control. The reason why we do not raise those items is because the people will not pay-the housewife will not pay any more, and there is your real control on meat prices.

Mr. McDONOUGH. Mr. Chairman.

The CHAIRMAN. Mr. McDonough.

Mr. MCDONOUGH. In other words, since you cannot, because of the supply and demand, raise your prices to the ceiling, which would give you a better profit than you are now getting, as I get it, your further complaint is that you are subject to Government regulations, to making out all these reports, your overhead costs of meeting the various demands of OPS and changing regulations. Is that part of your argument?

Mr. LA ROE. I would not say that is the main part, sir. That is a minor part. If you will look at the bottom of page 5 of my statement, I explain that there are some cuts on which we could get more money if price control were removed, but that on the great bulk of the animal we are getting less than the ceiling prices.

In other words, sir, to be fair with you-and I want to be as fair as I can-we would raise the prices on some fancy steaks and some things where we can get them, especially from the hind quarter of the beef. Yes, we would raise the prices. If we do not, we are bankrupt, because today we are losing money heavily.

Mr. MCDONOUGH. Well, the reduction in the price of the general run of meat cuts on the retail counter is not the result of OPS; is it? Mr. LA ROE. No, sir, it is the result of the law of supply and demand. Mr. MCDONOUGH. And that law of supply and demand would apply whether OPS was in effect or not?

Mr. LA ROE. Oh, yes, quite so.

Mr. McDONOUGH. And because of OPS there are certain cuts, and certain regulations, certain types of meat, that have to be cut in such a manner that you cannot give the public the variety of cuts that you could give otherwise?

Mr. LA ROE. That is right, or stating it in a slightly different way, in normal times, when we are losing money on some items, we have the elasticity to shift on other items which will stand a little more.

Today, that advantage is taken away from us because, although we are losing money on many cuts of beef, OPS says "Don't charge any more for the ones you can charge more on because we will not let you."

What are we going to do? Lose money on everything?

Mr. MCDONOUGH. Now, if there were slaughter controls which are not included in this bill, would the supply be more abundant now? Mr. LAROE. Slaughter controls would tend to have a wet-blanket effect on production. That is my opinion. Our industry is divided on that. I believe our board has officially taken a position against the quotas, but the industry is divided. Some think that quotas would be a good thing and others think they would not be.

Judge Montague here this morning was emphatic in saying that they would be bad. I do not know enough about it personally to take a position.

Mr. MCDONOUGH. Isn't it generally admitted that if there were slaughter controls that would be a limited amount of meat on the market and consequently a higher price for the meat that is available? Mr. LA ROE. I believe that would be the tendency. I think any kind of Government control tends toward discouraging production. The CHAIRMAN. Well, if there are no further questions, you may stand aside, Mr. La Roe. We are glad to have your views.

Call the next witness.

The CLERK. Arthur L. Owen, representing the National Live Stock Producers Association.

The CHAIRMAN. Mr. Owen.

Mr. OWEN. Mr. Chairman, we have submitted a rather long statement to be included in the record. With your permission I should like to read this statement to you.

The CHAIRMAN. Very well, you may proceed.

STATEMENT OF ARTHUR L. OWEN, NATIONAL LIVE STOCK PRODUCERS ASSOCIATION

Mr. OWEN. My name is Arthur L. Owen. I am representing the National Live Stock Producers Association, an organization composed of 21 cooperative livestock marketing agencies, each of which is owned and controlled by farmers and ranchers. Our 21 member agencies each year market livestock for over 500,000 individual livestock producers, on 69 different markets located in the principal livestock producing and feeding areas of the United States.

Our board of directors is composed of 30 outstanding livestock producers. Each one of these directors has been elected by the farmers and ranchers in his area to represent them in determining the policies of the National Live Stock Producers Association.

This board of directors, by a unanimous vote, has directed us to oppose price and wage controls, and at the same time to support those measures which will actually lend stability to our economy during this period of building our national defenses.

We oppose price and wage controls on principle. Even if such controls were administered in the most judicious and equitable manner, they still would not prevent inflation. Prices can be stabilized only by balancing the supply of money and the supply of goods. But these controls are not being administered equitably between the various segments of our economy. From the outset, it has been evident that the far-reaching powers delegated to the President under title IV of the Defense Production Act of 1950 were being used to improve the economic status of certain groups at the expense of other groups.

In giving the President the authority to control prices and wages, it was clearly the intent of Congress that this authority be used to prevent rises in both prices and wages. Yet this authority has been used to hold down prices while encouraging wage increases for members of organized labor groups.

Our industry was one of the first to feel the effects of this policy of encouraging wage increases while freezing or rolling back the prices of commodities purchased with these increased wages. In May 1951 while wage increases were being generally allowed, cattle and beef prices were rolled back approximately 10 percent. Two further roll-backs of about 5 percent each in cattle and beef prices, which had been announced by OPS, were prevented only when they were specifically prohibited by Congress.

We have now reached the point where the executive branch, through the Wage Stabilization Board, is attempting to force industry not only to grant the increased wages demanded by labor unions but is attempting to force industry to accede to the demands for union shops as well. In order to enforce these demands, the President has taken over the operation of the steel industry.

Not so long ago he took over the operation of the coal mines in order to give miners the increased wages they could not obtain through collective bargaining. The powers given to the President under title IV of the Defense Production Act are being used to socialize industry and to abolish the free-enterprise system in this country. How long will it be before the President decides to take over the operation of all farms in the United States in order to enforce cheap food prices to consumers?

Increased production not only is the right way but the only way to build our national defenses and maintain a high standard of living. A program of restrictions which hamper production and disrupt distribution retards our whole national defense program. Both our Armed Forces and our civilians need more, not less, meat. Price and distribution controls, however, have reduced our meat supply.

In October 1950 the Bureau of Agricultural Economics, United States Department of Agriculture, estimated that there would be 148 pounds of meat per person available for civilian consumption in 1951, 4 pounds more than the 144 pounds per person consumed in 1950. While the Defense Production Act of 1950 had been passed, we were still operating in a free economy at that time. This estimate was based on the amount of meat which should be produced considering the numbers of livestock on hand and the amount of feed available. This estimate also was based on the assumption that farmers and ranchers would be able to continue their normal livestock production programs in 1951.

By August 1951 this estimate had been revised downward to only 144 pounds per person. By October 1951 the estimate of meat consumption had been further reduced to 141 pounds per person. In the National Food Situation, released by the Department of Agriculture on February 11, 1952, meat consumption in 1951 was placed at 138 pounds per person, a reduction of 10 pounds per person from the original estimate. And, in order for us to reach the level of even 138 pounds, it was necessary for us to import a quantity of meat amounting to over 3 pounds per person, the largest meat imports in our history.

The Bureau of Agricultural Economies ordinarily does not make this large an error in their forecasts of meat consumption. We submit that price controls and slaughter quotas cost the average American consumer approximately 10 pounds of meat in 1951.

The imposition of price controls was one of the chief factors causing meat production in 1951 to fall so far below previous expectations. Despite a near-record number of cattle on farms and ranches at the beginning of the year, cattle slaughter was above that of a year earlier in only 2 months in January before the price freeze and in October. Price controls, slaughter quotas, roll-backs, and threatened further roll-backs could not have had any other effect than to slow down beef production. All of these actions by OPS have disrupted normal cattle feeding and marketing plans. In view of the uncertainty introduced by these actions of OPS, the cattle feeder was compelled to cut his feed costs by the use of more pasture, hay, and other rough feeds. This type of feeding program slows down beef production.

During this period when consumers have been wanting more and more meat, OPS appears to have adopted the philosophy that they can increase meat production by lowering prices of meat animals. In a release from OPS dated June 8, 1951, in connection with the cattle and beef ceiling-price regulations, when live cattle prices were rolled back approximately 10 percent, there are numerous statements that this program actually would increase beef production. On page 3 of this release, for example, the No. 1 point which OPS said this program would accomplish was that it "will encourage the production of cattle." These regulations have resulted in backing cattle up on farms until today we are at an all-time peak in cattle numbers but beef available for consumers has been decreased very substantially.

There is a big difference between accumulating cattle on farms and ranches and the actual production of beef for consumers. The reason why cattle numbers have been increasing at such a rapid rate while beef production has been decreasing is that the OPS price-control program has slowed down the beef-production process. Before these regulations were issued, cattle feeders could buy cattle, feed them liberally on grain and other concentrated feeds, and hope to make a profit on their operations. By this system of cattle feeding, these operators were producing a large volume of high-quality beef in a short period of time. Under OPS regulations they know that the opportunities for profit on this type of operation are extremely limited. There is only one alternative if they are going to be able to hold their money together, and that is to follow a system of feeding which will enable them to get cheap weight gains. This means more roughage over a much longer feeding period. Under this type of feeding it

takes a much larger number of cattle to produce the same amount of beef per year.

OPS controls are responsible for this slowing down in our beef production. Thousands of cattle which are coming to market now after being fed on concentrated feeds this winter are losing money for their owners. These men are going to be even more cautious before they fill their feed lots again.

Price ceilings are reducing pork production. Section 402 (d) (3) of the Defense Production Act of 1950 provides that no ceiling shall be established or maintained for any agricultural commodity below a price which will reflect parity to producers. Pork prices were frozen by IPS on January 26, 1951, at the level of prices during the period from December 19, 1950, to January 25, 1951, inclusive. This freeze continued until Ceiling Price Regulation No. 74 became effective on October 1, 1951.

This regulation established dollar-and-cent ceiling prices for pork products at wholesale. As shown in chart No. 1, during the entire period from January 1951 to the present date the average price received by farmers for hogs equaled or exceeded parity, the legal minimum price, in only 2 months, February and March 1951. During all of the other months of this period hog prices have been below the legal minimum.

During a large part of this period prices of most pork products at wholesale were at ceiling levels, and yet hog producers were not receiving parity prices for their hogs. For example, the Chicago Weekly Wholesale Meat Trade Review for October 18, 1951, released by the United States Department of Agriculture, contains the following

statement:

Supply and demand for most pork cuts were fairly well balanced and resulted in full ceiling prices throughout.

Although pork products were selling at OPS ceilings last October, the average price received by farmers for hogs that month was only $20.30 per hundredweight, $1.10 below parity for that month, which was $21.40 per hundredweight. Wholesale pork price ceilings have been maintained during the entire winter and spring marketing period when live hogs have been selling as much as $5 per hundredweight below the legal minimum set by Congress.

The maintenance of ceiling prices on pork products at a time when farmers are receiving less than parity prices for hogs clearly is contrary to the intent of Congress in providing this legal minimum at which ceiling prices could be set. Whenever any pork product is selling at OPS ceilings, this tends to limit the amount which packers can pay for live hogs and prevents hog prices from rising to parity. The statement of considerations accompanying CPR No. 74, Ceiling Prices of Pork Sold at Wholesale, contains the following state

ment:

It is anticipated, in view of the large size of the present hog population that in future months hog prices will decline substantially below current price levels. Consideration will be given to the question of whether to issue revised wholesale pork ceilings more accurately reflecting the condition in the live hog market if the anticipated decline in live hog prices occurs. These revised prices would, of course, be subject to automatic adjustment upward to the parity level to permit packers to pay parity prices when the market price of live hogs starts to climb.