TABLE 2.-Commercial cattle slaughter, 1951 and change from 1950

Source, U.S.D.A

HOG PRODUCTION REDUCED BY PRICE CEILINGS

According to the USDA pig crop report of last December, the number of pigs raised during the 1951 fall season was 2 percent larger than that of 1950. However, the estimates of sows farrowing by months show that a downward trend in hog production actually began early last summer. This was at the same time that cattle feeders were greatly disturbed by the OPS action with respect to cattle and beef prices. The deterioriation in the corn crop and the decline in the hog-corn price ratio (which undoubtedly has affected breeding for the 1952 spring crop) did not occur until later in the year. Furthermore, the April and July stocks of corn and other feed grains, although less than a year earlier, were still relatively large.

As table 3 shows, the substantial increases in summer farrowings were not maintained; September-November farrowings were reduced compared with a year earlier. Since the breeding season for hogs precedes time of farrowing by slightly less than 4 months, the decisions to reduce hog production actually were made during the months of May, June, and July. As of mid-May we are now beginning to feel the impact of this reduced production.

Since cattle feeding is closely associated with hog production, particularly in the Corn Belt, it is easy to understand how hog producers may have become alarmed by the attitude taken by the OPS toward cattle prices last summer. They may also have remembered the action taken by the OPS last January when pork prices were frozen at levels below the equivalent parity prices for hogs.

As a matter of fact, in the period from January, 1951, through March 1952, average prices received by farmers have equaled legal minimums during only 2 months. The Defense Production Act requires that ceiling prices for products processed from agricultural commodities be set at levels to reflect legal minimums to producers. Even when most pork products were selling at ceilings, the aggregate value of hog products did not warrant live hog prices as high as the legal minimums. This situation undoubtedly is a factor in the apparent decision of farmers to raise fewer hogs for the 1952 spring crop. The USDA estimated last December that the 1952 spring pig crop will be 9 percent smaller than in 1951, and many observers now believe that the decrease may be even much greater.

TABLE 3.-Sows farrowed and hog-corn price ratio at breeding time, 1950 and 1951 fall seasons

CEILINGS AND ROLL-BACKS REDUCED CATTLE FEEDING OPERATIONS

Probably the most direct effect of the price controls upon meat production during 1951 was that experienced in the case of cattle feeding. As already mentioned, cattle feeders were greatly alarmed by the threats of price roll-backs issued by the OPS on April 30. As a result of this announcement, many cattle feeders greatly reduced their feeding operations.

This is borne out by the USDA figures on cattle feeding in the three States of Iowa, Illinois, and Nebraska for the April-June and July-September periods. As will be noted from table 4 below, the number of cattle on feed in these three States as of April 1, 1951, was slightly above that of a year earlier. But on July 1, the number was 9 percent smaller. What happened, of course, was that producers reduced their feeding operation as rapidly as possible during the AprilJune period. Many loads of cattle were sold at relatively unfinished weights while purchases of feeder cattle were sharply curtailed (minus 19 percent). This naturally reduced the supply of grain-fed cattle during the subsequent quarter (July-September). Marketings of fed cattle in these 3 months were 19 percent less than a year earlier.

With the elimination of the threat of further price roll-backs on July 31, cattle feeders replenished their feed lots during the past fall. In the meantime, however, substantial harm was done to the meat industry-cattle feeders, meat packers, and consumers alike.

TABLE 4. Cattle feeding operations, Iowa, Illinois, and Nebraska-Specified periods, 1950-51

NOTE. These 3 States normally account for about 40 percent of the United States total number of cattle finished in feed lots.

MEAT PRODUCTION REDUCED SHARPLY IN 1951

The amount of meat available for domestic consumption in 1951 was sharply curtailed as a result of the OPS regulations and accompanying uncertainties affecting livestock producers and feeders. Striking evidence of this fact is the estimates of meat production and consumption for 1951, as calculated by economists of the United States Department of Agriculture at the beginning and at the close of the year.

Starting in the fall of 1950 and for several months in 1951, there was every indication that the past year would see a substantial increase in the production and consumption of meat compared with the previous 3 years. The Government forecasts, which were substantially the same as those made by other industry observers, were for a total meat production in 1951 of about 23.4 billion pounds. up nearly 6 percent from that of a year earlier. A production of this size would have permitted a domestic consumption of about 148 pounds per person, 3 to 4 pounds more than that of the preceding 3 years.

As the year progressed, however, it became apparent that this favorable outlook would not materialize. The Government estimates of meat production and consumption were lowered successively, as shown in the accompanying chart. The official estimates (still preliminary) now stand at 22 billion pounds for production and 138 pounds per person for consumption. This is the smallest per capita consumption since 1939.

It may be noted that the original estimates of meat production and consumption failed to materialize chiefly because of the cut-back in cattle marketings. Reduced feeding operations (already mentioned), plus an unwillingness of producers to market cattle under existing conditions, were responsible for cattle slaughter falling short of the volume which normally could have been expected in 1951.

TABLE 5.-Estimates of meat production and consumption, 1950 and 1951

4 The USDA National Food Situation.

Derived from published per capita consumption estimates as shown.

MEAT PRODUCTION HITS THE TOBOGGAN IN 1951

Official Government Estimates for 1951

Had to be Revised Downward 1.4 Billion Pounds

Billion USDA Estimates of Total Meat Production in 1951 Billion
Pounds

Pounds

L

10/50 2/51

Date of Government Estimates

5/51 6/51 8/51 10/s1 11/51 12/51 2/52

Source: The USDA Livestock & Meat Situation, National Food Situation.

OPS UNABLE TO CONTROL LIVE CATTLE PRICES

The most clear-cut evidence of ceiling-price violations are to be found in the case of live cattle. As has been mentioned, ceiling prices for cattle and beef were announced by the OPS in late April. After some postponement, the live-cattle ceilings became effective on June 4. The purpose of this order (CPR 23) was to roll back cattle prices to the early January level. However, this was more easily said than done.

As already noted, cattle marketings were sharply curtailed during the 4 months June-September, and the strong competition for the reduced supply of cattle drove prices for most grades well above the compliance levels permitted by the OPS. This situation worked an extreme hardship on packers who chose not to violate the live-cattle ceilings, since all they could do was to sit by and see the livestock siphoned off by slaughterers who were finding it profitable to ignore the regulations, or who were in a position to profit from the inequities inherent in such regulations.

Table 6 shows the disparity between compliance prices and actual prices for 1 day, September 4, 1951. Actually, until very recently, there has been a consistent record of overcompliance prices paid for all kinds and grades of cattle.

TABLE 6.-Live cattle prices (per hundredweight), Chicago versus OPS compliance prices Sept. 4, 1951

OPS REGULATIONS VIOLATED WITH IMPUNITY

While some effort apparently was made by the OPS to crack down on price violators during the early fall of last year, the situation described above did not improve until cattle marketings increased seasonally later in the year.

The OPS reported that 1,849 violations of meat-price orders were uncovered in its enforcement drive which was carried on last September. However, only 89 of these cases have warranted injunctions and just 2 have warranted criminal charges. Thus, because of the ease with which regulations can be evaded, it is doubtful if these efforts were any more than nominally successful.

One way in which ceiling prices on meat are easily evaded is the tie-in sale. For example, in this device the evader sells 2 carloads of scarce product at the ceilings, provided the buyer takes a carload of slow-moving product at more than the market price. Tie-in sales are difficult to detect and more difficult to prove, yet they provide a tremendous advantage over the packers who observe the regulation, as regular, established packers must do.

Other violations of price regulations which are almost impossible to police in the meat business include upgrading, short weighing, and false billing.

REASONS WHY MEAT PRICE CONTROLS CANNOT BE ENFORCED

While most people are honest and obey the law, the number of meat transactions which take place (and the potential violations) are so great that it is physically impossible for the Government to recruit and train an enforcement staff capable of policing price regulations in this field.

According to careful estimates, the are more than 11 million livestock transactions annually, about 431 million wholesale meat transactions and nearly 18 billion retail transactions.

If only 5 percent of these transactions were in violation of price regulations, the number of violations would be staggering. With as many as 95 percent of the people refusing to buy or sell in the black market, there would still be well over a half million illegal livestock transactions, about 211⁄2 million illegal wholesale meat transactions, and nearly 900 million illegal retail meat transactions. The 1,849 cases of evasion uncovered by the OPS last fall, after an intensive enforcement campaign, illustrates the impossibility of actually enforcing these regulations.

PRICE RELATIONSHIPS BETWEEN MEAT PRODUCTS ARE CONSTANTLY CHANGING

Another reason why price controls on livestock and meat are so extremely difficult to enforce is that the fixing of ceilings in itself defies the normal economic functioning of prices in this industry.

In the accompanying chart, prices of several representative cuts of meat have been plotted for the year 1950. It will be noted that these prices fluctuate