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Board last summer, plus the really remarkable ability of the country to produce goods, as the really significant factors in this situation.
We should like it understood that the meat industry is as interested as everyone else in preventing run-away inflation and the accompanying devaluation of the dollar of this country. We feel strongly, however, that a program of direct price controls which merely hamstring our economy and interfere with its ability to produce-is not the way in which to deal with this problem.
The recent suspension of regulation W, thus permitting the purchase of many items of substantial cost with no down payment, also raises the question as to whether price controls are needed. Regulation W was an anti-inflation measure which exercised control over one of the fundamental factors tending to push prices upward. It seems inconsistent to abandon measures of this kind while retaining direct price controls, which merely attempt to put a lid on prices without curing the cause of the price increases.
REGULATIONS NOT FAIR AND EQUITABLE The Defense Production Act requires that ceilings on products processed from agricultural commodities, including livestock provide fair and equitable margins for processing. This provision is similar to the McKellar amendment to the Stabilization Act of World War II. OPA adopted an "over-all industry profit" test under which a ceiling price was considered fair and equitable if the industry as a whole, and in the judgment of OPA, was earning normal profits.
Under this "test," many meat packing companies suffered severe financial losses without being able to obtain relief. This situation not only threatened the financial stability of the meat packing industry but was an important factor in the development of black markets. Passage of the Barkley-Bates amendment gave recognition to the fact that for ceiling prices to be fair and equitable they would have to provide for a reasonable margin of profit on the processing of each species of livestock considered separately.
If OPA is sincere in its statement that price controls are needed, then it should give heed to the experience of its predecessor and accept the necessity for treating each segment of the meat packing industry equitably. In so doing, it would be taking a practical step toward preventing the development of black markets. Unfair treatment of an industry creates a situation which is ready made for crooks and racketeers to step in.
We urge that Congress recognize the need for preserving the meat supply system and for checking black markets by giving serious consideration to an amendment similar to that which was found to be necessary under OPA. The text of the Barkley-Bates amendment read as follows: “Provided further, That on and after the date of the enactment of this proviso, no maximum prices shall be established or maintained on products resulting from the processing of cattle and calves, lambs and sheep, and hogs, the processing of each species being separately considered, which taken together, do not allow for a reasonable margin of profit to the processing industry as a group on each such species.”
If, as OPS contends, price controls are necessary, then an amendment similar to this is also necessary, to preserve the integrity of the meat industry and to prevent black markets.
One of the witnesses who recently appeared before this committee said that pressure for decontrol of prices is coming from those who wish to be in a position to raise prices without violating the law. Such a charge is without foundation, since most meat prices have been below ceiling levels for several months. It also ignores the damage done to the Nation's meat supply, which has tended to cause higher, rather than lower meat prices. Probably the most enthusiastic advocates of price controls are those operators who hope to profit illegally by the artificially created scarcities which result from price controls.
CONCLUSIONS In conclusion, we should like to reemphasize our position that the public generally has derived no real good from the price control program on meat for these reasons:
1. Meat prices have been below ceilings much of the time. Price controls can take no credit for this.
2. When meat prices were bumping the ceilings during the past year (which incidentally was due largely to the OPS induced reduction in cattle marketings) black markets developed immediately.
3. Price controls have seriously disrupted the economical distribution of meat in this country and have interfered with the normal processing and merchandising of meat, even when prices have been below ceilings.
4. Those who observed the ceilings have been penalized, while those who did not, have enjoyed a premium for their dishonesty.
5. The total meat supply in 1951 was substantially lower than it would have been if there had been no controls. Hence, meat prices have actually been higher (even though they are below ceilings) than they otherwise would have been.
Furthermore, we feel that the consuming public will not benefit from price controls on meats in the future, because:
1. There is ample evidence that price regulations are incapable of holding mest prices below any administratively determined level.
2. If it were possible to fix prices for meat below the free market, supply-anddemand price, distribution of meat throughout the country and among individual consumers could only be accomplished with a system of rationing, such as was used during World War II. We strongly doubt the consuming public would support such a program, to say nothing of supplying the civilian manpower that would be necessary for its administration.
3. With the cattle population at an all-time high level (88 million head on January 1), and hog production still large (although now tending downward), the potential supply of meat is still large providing production is not discouraged further by continuation of price control regulations.
4. With the population of this country increasing at a rate of 274 million people per year, every effort should be made to encourage, not discourage, meat production. It would be unfortunate if we were to pursue a course which does not take into account our rapidly expanding population.
5. The use of direct price controls seem to us only to confuse the real issue involved and, therefore, dilute our efforts to control inflation. We think it is unfortunate that the public should be led to expect any real effective control over prices by the so-called direct-control method.
STATEMENT OF AMERICAN NATIONAL CATTLEMEN'S ASSOCIATION, DENVER, Colo.
The American National Cattlemen's Association has its headquarters at Denver, Colo. Its membership is composed largely of range cattle growers in the States west of the Missouri River and of pasture cattle operators in the Southern States of Georgia, Florida, Alabama, Louisiana, and Mississippi. We have also quite a number of members who are cattle feeders in the irrigated valleys of the West and a scattered membership throughout the Corn Belt and the Eastern States.
OFFICIAL RESOLUTION Our association held its fifty-fifth annual convention at Fort Worth, Tex., on January 7, 8, and 9, 1952. The following resolution was adopted relative to price controls:
"Price controls “Whereas consumers have spent over the years approximately 6 percent of their income for meat and today are using no more than that much of their earnings for the purchase of meat; and
"Whereas, the OPS has attempted to upset this historical relationship by imposing controls on marketing and selling of meat and livestock products, particularly singling out the cattle industry for price roll-backs and making sittle similar attempt to control wages; and
“Whereas, such controls on beef have not benefited the consumer but have instead only interfered with the orderly production and marketing of the product, as controls did under OPA, when lowered production, black marketing, and widesspread disrespect for an unworkable law forced abandonment of controls; and
“Whereas nevertheless the cattle industry is in prime condition to furnish, if not hampered by controls, more meat to the consumer than ever before in its history and today carries record inventories of beef animals; therefore be it
“Resolved, That, in the interest of the consuming public and the livestock and meat industry, the American National Cattlemen's Association expresses unalterable opposition to the continuation of the unworkable price controls on meat."
In support of the above resolution we call attention to the following facts, all of which indicate that it is neither practical nor equitable to continue price controls beyond the expiration of the present law on June 30, 1952.
INCREASED PRODUCTION SOLVING THE PROBLEM We have urged from the beginning that price controls on livestock and meat were impractical and unworkable and that the real solution to the problem is increased production. This has been obtained in the livestock and meat industry despite shortages of labor and materials. It is true that production of meat last year did not come up to the advance estimates made by the Department of Agriculture, but this was almost entirely due to the chaos created in the industry by the program of Administrator DiSalle of OPS. When he announced that he was rolling beef prices back 10 percent on May 20, 1951, and that two further rollbacks of 472 percent each would be made on August 1 and October 1, immediately there was a rush to market and thousands of cattle were marketed at considerably lighter weights than would have been the case without these announcements. It was Mr. DiSalle's plan to lower meat prices simply because it is the major item on the American diet and this one industry was singled out to be penalized as a vote-getting measure.
The ironic part of the whole business is the fact that actually Mr. DiSalle did not save the consumer one thin dime on meat prices. Instead prices were advanced on May 14, 6 days before the 10 percent reduction was made; the two projected reductions to be made later in the summer and fall were canceled, and the net result was that OPS cost both consumer and producer a great deal of money and in the process reduced the available supply of meat.
CATTLE NUMBERS The increase in total cattle numbers last year of approximately 4,000,000 head (the increase was largely in beef cattle), bringing the total number up to more than 88,000,000, the highest ever recorded in this country, gives assurance of an ample beef supply in the period just ahead. It is almost certain, barring some great disaster in the remainder of 1952, that there will be a substantial increase in cattle numbers again this year.
Cattle on feed April 1 in the 11 Corn Belt States showed 3 percent or approximately 80,000 head more than on the same date a year ago. The percentage of she stuff in the federally inspected slaughter is running very light, indicating that there is no liquidation of breeding herds underway.
PACKER SLAUGHTER QUOTAS It is now encouraging to note that since the packer slaughter quotas were discontinued on July 31, 1951, and since the failure to reimpose them which was made late in the session last fall, there has been a turn for the better. It is now believed that cattle slaughter will exceed that of last year by some 3 million head, putting it back to approximately the basis of the 1950 slaughter. It may even go higher than that and the beef supply, of course, will be increased accordingly.
SHORTAGES DISAPPEARING Numerous recent announcements have been made of the easing of controls in the construction industry and in the manufacture of automobiles and other commodities chiefly affected earlier by the shortage of metals. Actually at the moment there appears to be more necessity for making work through the medium of easing controls as mentioned above than there is of controlling prices. Increased production takes better care of the latter matter than anything Government agencies possibly can do.
DECLINE IN WHOLESALE COMMODITY PRICES Wholesale commodity prices took a sharp rise immediately following the outbreak of the Korean war and reached a peak in February March 1951. Since then they have eased off gradually but steadily. This drop in wholesale commodity prices was also reflected in the index for the total cost of living. The drop in total cost of living between January and March 1952 was slightly less than 2 percent, but the drop in the cost of food, included in that figure, was more than 5 percent.
INCONGRUOUS SITUATION IN PORK It is interesting to note that while representatives of various departments of the Government have appeared before your committee and demanded the continuation of price controls, an incongruous situation has developed relative to
pork. It seems strange to have an insistent demand for the continuation of ceilings at the very time that another department of the Government is buying pork in substantial quantities to prevent the market going below the 90 percent of parity to which all basic commodities are entitled to price support. It would appear that the administration is riding in both directions at the same time so far as pork is concerned.
PRICE CONTROLS ON A NUISANCE BASIS We want to call attention to a situation in North Dakota where the administration of OPS has degenerated to a strictly nuisance basis. There is only one central livestock market in that State, located at West Fargo, which is a posted market under the superivsion of the Packers and Stockyards Administration. Last August the Packers and Stockyards Administration approved an increase in the fee for brand inspection at that point from 12 cents to 15 cents per head. There are quite a number of smaller auction markets throughout the State, some of which are large enough and eligible to being posted by the Packers and Stockyards Administration, but they have not been posted because of the lack of funds to service additional posted markets. They remain, therefore, under the supervison of a State brand commission and this commission has granted the same increase from 12 cents to 15 cents per head. The OPS in that State has brought suit against the North Dakota Stockmen's Association, which is in charge of the brand inspection work at all markets in the State, and also against the State brand commission citing it for the increase of 3 cents per head without the permission of OPS.
It seems ridiculous that the OPS, representing the Federal Government, should permit the increase made by another agency of the Federal Government but at the same time attempt to take jurisdiction and deny the increase being made by a State agency on markets not presumed to be operating in interstate commerce under the jurisdiction of the Packers and Stockyards Act.
There is ho possible way in which this 3 cents increase in charges could be passed on to the consumer. It must be paid by the shippers who do not fix the price of their own commodity but who must of necessity accept the market price, whatever it may be.
SECTION 104 At the annual convention in January the American National Cattlemen's Association also adopted the following resolution:
“Whereas section 104 of the Defense Production Act of 1951 is designed to protect the domestic production of dairy products and fats and oils against damaging imports; therefore be it
"Resolved, That we urge retention of this provision if the control legislation is extended."
The need for the protection afforded by section 104 is quite obvious when it is considered that tallow prices have declined from about 17 cents a year ago to less than 6 cents now. We do not believe the interests of the producers of one commodity should be sacrificed to stimulate foreign trade for the producers of some other commodity. We believe American industry should be protected from damage due to imports.
SUSPENSION OF CONTROLS A good deal of publicity has been given to the fact that OPS has not decontrolled but temporarily suspended from control certain items. Included among these are cattle hides and kip skins. It is commonly assumed that this is a major step toward decontrol but the facts appear to show otherwise. In the first place, when price controls were first established on hides the power to control both exports and domestic allocations was likewise invoked.' Through the unwise and inequitable working of this policy, hides were allowed to pile up in this country and the market became demoralized. The next step was to lower the ceiling down to approximately the new level of prices. Now, it is stated in the suspension order that price controls on hides will remain in suspension unless the price gets back to 80 percent of the lowered ceilings when controls again would to into force. Of what possible advantage is suspension of ceilings under these conditions?
In the case of beef, temporary suspension would not work at all. In order to maintain ceilings on the different grades of beef, it is necessary that all beef sold shall be graded. The present grading staff of some 600 men is conceded to be
the most efficient that has ever functioned in that capacity, but this staff cannot be disbanded and put back in business every few weeks without possible fluctuations of the beef market. The only satisfactory solution of the beef price control business is to decontrol and everything points to the wisdom and necessity of doing that very thing.
LACK OF WAGE CONTROL
Title IV of the Defense Production Act covers stabilization of prices and wages. In view of the fact that wage controls seem to have been practically abandoned in recent weeks, with the Wage Stabilization Board and the President himself using their efforts to push wages up, it is only fair that the attempt at price stabilization should likewise be abandoned. The 26-cent award to the steel unions made by the Wage Stabilization Board with the backing of the President was far beyond the fondest dreams of the steel union itself. It is mere pretense to try to say that this 26-cent advance comes within the pattern of the stabilization policy of the Government.
It should not be forgotten that an election is in the offing and the country just simply will not stand for misinterpretation and abuse of the Defense Production Act in this fashion. If Congress will not correct the inequities being promulgated by OPS and the Wage Stabilization Board, then it will be up to the voters to do the job.
PRICES DOWN--COSTS UP
The attached tables, marked "Exhibit A” and “Exhibit B," show the prices of retail and wholesale cuts of meat and of live animals at Chicago by months since June 1951. You will note that the price of beef cattle, Choice grade, as shown by exhibit A has stayed fairly constant, that there has been a sharp decline in the price of lamb at retail and likewise in pork at retail. Exhibit B shows the retail and wholesale prices of meat and prices of live animals at Chicago by months starting with June 1951 to date. This table again shows that the Choice grades of steers have declined only slightly from the ceiling prices put into effect last spring, but that when you get to the lower grades, particularly Utility steers and Commercial, Utility, and Cutter and Canner Cows, the drop is much greater. This table also reflects the sharp drop in the prices of barrows and gilts and in the price of Choice and Prime lambs.
At the same time that these declines have been registered in live animals and dressed meat prices, there has been a steady increase in the price of practically every single item of farm and ranch service and expense, with the administration itself helping to push wage costs up. The cost of producing meat and other foods may be higher this year than ever, perhaps 5 or 6 percent higher, says the Department of Agriculture. Wages may climb another 5 to 10 percent; fees are expected to stay high; real-estate taxes may be up 3 to 4 percent; machinery, buildings, and fences are expected to stay where they are; fertilizer may go up 4 to 5 percent.
CONCLUSION Everything we have mentioned and many other factors which could be mentioned indicate that the need, if there ever was need, for price controls on live animals and meats has disappeared and that in view of the action being taken on wages with the administration's blessing, fair play demands that the same treatment be accorded our industry as is being given to labor.
Under these circumstances, we urge that titles IV and V of the Defense Production Act, as amended, be not renewed if there is extension of any part of the act on June 30, 1952.