Mr. TAYLOR. Thank you very much, Mr. Chairman, and gentlemen. The CHAIRMAN. The clerk will call the next witness. The CLERK. Mr. F. B. Wise, secretary-treasurer of the National Renderers Association. STATEMENT OF F. B. WISE, SECRETARY-TREASURER, NATIONAL RENDERERS ASSOCIATION The CHAIRMAN. Have you a written statement? Mr. WISE. Yes; I have a two-and-a-half-page statement, which I will be glad to furnish for the record. I also have a supplemental statement to that which I would similarly like to offer for the record. The CHAIRMAN. Very well, you may do so and it will be considered. Mr. WISE. Thank you. (The statement referred to is as follows:) STATEMENT OF F. B. WISE, SECRETARY-TREASURER, NATIONAL RENDERERS ASSOCIATION, BEFORE HOUSE BANKING AND CURRENCY COMMITTEE CONSIDERING DEFENSE PRODUCTION LEGISLATION Mr. My name is F. B. Wise; I am secretary-treasurer of the National Renderers Association, an organization of approximately 275 domestic producers of inedible animal fats with national headquarters at 1424 K Street NW., Washington, D. C. We had not originally intended to ask the committee for time to make an oral statement at these hearings; however, a public announcement made by Price Administrator Ellis Arnall the day before yesterday has made it absolutely necessary that we bring certain facts to the attention of the committee. Arnall's announcement canceled the price ceiling roll-backs on crude soybean oil, crude cottonseed oil, crude corn oil and lard which he had previously promulgated on April 28 at the same time that he suspended the effective price ceilings on all of these products. We assert that this roll-back cancellation by Mr. Arnall is unfair and discriminatory and that it clearly sets one segment of domestic producers off against another segment of domestic producers, all within the same general class or category. Briefly, the background of the situation is this. Members of the industry which this association represents are domestic producers of inedible tallow and greases which are processed directly from oil and fat-bearing animal byproducts. The Office of Price Stabilization has imposed two successive price-ceiling roll-backs upon inedible tallow and grease and when the second roll-back was under consideration by OPS last November, 7 out of 14 members of the so-called OPS Industry Advisory Committee for these products resigned en masse in protest to what they termed a "cut and dried" proceeding which, according to industry members present, involved endorsement of the proposed roll-back to the level already determined by OPS and without sincere consultation with representatives of industry as contemplated by Congress in the Defense Production Act. Announcement by OPS in January of this year of the second roll-back to levels initially proposed by OPS at the November 1951 Industry Advisory Committee meeting provoked a further storm of industry protest and thereafter the industry, through this association, presented its case some weeks ago, at the Senate Banking and Currency Committee public hearings on defense production legislation. Our principal point of objection in testimony before the Senate committee was to the effect that the inedible tallow and greases produced by the members of this industry have historically been recognized as moving in the same general price pattern as other domestically produced fats and oils such as lard, soybean oil, etc.; if you will refer to the chart shown as the final page of the attached statement, you will see what we believe is adequate confirmation of this. We contended that this fact should entitle tallow and grease ceiling prices to be fairly related to the ceiling prices of the other domestically produced fats and oils but were not on the basis of the then current OPS ceiling levels although former OPA ceiling prices for all of these products had seemed to be on a fairly related basis. Now when Mr. Arnall announced his suspension and roll-back action with respect to lard, crude corn oil, crude soybean oil, and crude cottonseed oil on April 28, we considered that this at least put us in a more favorable over-all ceiling price relationship with the other principal domestically produced fats and oils. But Mr. Arnall's Monday announcement again relegates our industry into the position of being directly discriminated against. We feel that the domestic production of approximately 2 billion pounds annually of inedible tallow and grease compares favorably in size and importance to the domestic economy with the annual domestic production of 2.5 billion pounds of lard, 2.5 billion pounds of soybean oil, 1.5 million pounds of cottonseed oil, and 250 million pounds of corn oil and that the domestic inedible animal fat rendering industry deserves just as fair consideration and treatment by the Office of Price Stabilization as other segments of the domestic fats and oils economy. We therefore respectfully ask this committee to instruct Mr. Arnall to cancel the second roll-back action with respect to inedible tallow and grease in order that these products may be placed on a fair and equitable price-ceiling basis in relation to the other principal domestically produced fats and oils. I also request that the attached statement be printed in the committee record as a part of our presentation. STATEMENT OF THE VIEWS OF THE NATIONAL RENDERERS ASSOCIATION WITH RESPECT TO DEFENSE PRODUCTION CONTROLS This statement is submitted in behalf of the National Renderers Association-an organization composed of approximately 275 member companies which are largely single, independently operated establishments primarily engaged in the production of inedible tallow and grease which is extracted from fat-bearing materials obtained from literally thousands of farms, ranches, feed lots, meatpacking establishments, wholesale slaughterhouses, retail meat shops, and chain stores, hotels, restaurants, Government and State institutions and agencies. Members of the association also produce animal proteins, commonly known in the trade as meat scraps or tankage, and some plants also accumulate hides and skins in connection with their operations. Inedible tallow and grease are principally used in the manufacture of soap; meat scrap and tankage are extensively used in poultry and hog feeds; and the many uses of leather goods are well known to everyone. Member plants of the association will be found in all States of the United States except two. Due to the perishable nature of the material, the operations of the industry are in most cases very closely supervised and regulated by city, county, or State health authorities and it is now a general practice that members of the industry be bonded or otherwise licensed to assure diligent performance of this special type of assignment. As a matter of fact, in the areas where plants of this industry are already in operation it generally follows that the local health requirements prohibit removal of such materials by general refuse disposal procedures. Moreover, were it not for the existence of these plants, local units of government would have to provide for collection and disposal of such materials at great additional expense to their taxpayers. We urge continuance of the fats and oils import-control authority as set forth in section 104 of the Defense Production Act of 1951, for the following reasons: 1. Definity-Domestic producers of fats and oils are entitled to a strong, specific, positive provision of law such as section 104 which enables the placing of all necessary limitations upon imports of competing fats and oils, especially in view of current price conditions in these markets. We are unwilling to leave too much discretion in the hands of the Secretary of Agriculture for fear he will fail to act just as in 1948-49 the Secretary of Commerce delayed removing export controls on fats and oils (although he had full authority to do so) with the result that remendous domestic stocks of these materials accumulated in this country causing prices to decline precipituously and inflicting substantial losses on all segments of the domestic fats and oils-producing industry; it finally took literally a mandate of a congressional committee to cause the Secretary to remove the controls. And this unnecessary incident is undoubtedly well remembered by Congress certainly it has not been forgotten by domestic producers. In other words, on the basis of our experience with Government in the past, we believe in preventive provision rather than remedial redress. 2. Interchangeability.—All fats and oils have a high degree of interchangeability which means they can either be substituted directly one for another or by additional processing at reasonable cost can be made acceptably similar to another oil or fat. It is well recognized that imports of any directly competitive article increase the available supply of the commodity and, in times of domestic surplus and forecasted large production such as is presently the case in fats and oils, this inevitably results in a decline in prices either because the abundance of supplies causes buyers to offer less and sellers to accept less or because the imported article is offered at a lower price which domestic sellers eventually have to meet. To a lesser extent, there is a similar result when a semidirectly competitive article is imported but the effect is particularly accentuated in the case of fats and oils because of the principle of interchangeability. For example, it can be shown that imports of soybean oil—a good, edible commodity-not only compete directly with, displace, and tend to drive down the price of domestically produced soybean oil and cottonseed oi! but also have an influence on the price and supply of such inedible fats and oils as tallow and fish oils because when soybean oil becomes plentiful in supply and cheap in price, it replaces fish oil in the paint and varnish trade which of course is an inedible use. The fish oil so displaced then becomes a possibility for use in the soap kettle where it would displace the inedible tallow and grease produced by the members of this association. This chain of reaction should be cause for alarm among all domestic producers of such fats and oils as butter, lard, corn, soybeans, flax, peanuts, fish oil, and cottonseed and it explains why we feel that adequate protection should be always at hand. Certainly it is of great concern to the members of this association because neither they nor the Government have any control whatsoever over the fat-bearing materials which will result from the production of livestock in this country and which must be collected and processed promptly in order to avoid a health and sanitation problem of the first magnitude. 3. Equality. We have no agricultural programs of any kind for our products and the modest legislative protection we were able to secure some years ago in the form of tariffs and excise taxes on imports has been slowly whittled away by our adversaries both in Government and out so that now we have almost nothing left. According to a recent comprehensive report by the Tariff Commission (October 1951), the average ad valorem equivalent of all tariffs and excise taxes on all imports for consumption (free and dutiable), has been reduced from an average of 10.6 percent before any trade agreements to only 5.4 percent on August 1, 1951, a decrease of 49 percent. This is after eliminating the influence of price changes due to currency devaluation, and other influences. In the case of dutiable commodities alone (which includes most fats and oils) the reduction has been from an average of 27.7 to 12.5 percent-a decrease of 55 percent. With such a reduction in tariffs and/or excise taxes on imports other forms of protection to domestic industry, such as import control, seem to us to be imperative. At a time when the newly developed synthetic chemical and petroleum detergents are taking over an increasing share of the cleansing-material market which has historically up to this time required and consumed great quantities of domestically produced inedible animal fats, we need the continuance of such protection as we have-not a reduction of it. Careful study of the International Trade News Bulletin now issued monthly on behalf of the Contracting Parties to the General Agreement on Tariffs and Trade, Palais des Nations, Geneva, Switzerland, discloses the fact that in general, where foreign countries have reduced tariffs in order to get other concessions from the United States under the trade-agreements program and have made up Treasury deficits from grants, gifts, counterpart funds, excise, and other forms of taxes, etc., they have also developed a general program of import licenses, quotas, and exchange control as a protection to their home market. It is our view that section 104 of the pending act is in complete harmony with the procedure of foreign countries and properly carries out the mandate of section 8 of article I of our Constitution which provides that "Congress shall regulate trade with foreign countries." It is certainly germain in this act, which regulates the domestic economy, to take note of the possible damage from excessive imports. Congress has expressed its desire to protect domestic industry from injury or the threat of injury from imports of competitive materials in the escape provisions of the recently passed Trade Agreements Extension Act. We believe section 104 is in harmony with and in the nature of a supplement to that provision. II. THE TALLOW PRICE CEILING SITUATION Inasmuch as we wish to discuss at some length the tallow ceiling price roll-back order issued by the Office of Price Stabilization on January 8 of this year, it would be beneficial we believe to set down a chronological summary of the related developments preceding the issuance of this order. The summary is as follows: January 26, 1951: OPS issues general freeze order establishing individual ceiling prices at the highest level at which sales were made during the period December 18, 1950, to January 25, 1951. Most producers of tallow and grease had individual ceilings of from 18 to 18.5 cents per pound; lard ceiling price under this order is approximately 18.5 cents per pound. Hide and skin prices frozen at highest sellers price during November 1950 in OPS CPR 2. February 1951: Specific dollars and cents ceilings established by OPS for cottonseed oil (23%1⁄2 cents per pound, crude valley basis), soybean oil (201⁄2 cents per pound, crude f. o. b. Decatur basis), and corn cil (242 cents per pound, crude, midwestern mill basis). Tallow and Grease Industry Advisory Committee appointed and called to Washington for consultation on February 28. Hide Industry Advisory Committee appointed and called to Washington. March 1951: Uniform ceiling prices for all grades of tallow and grease announced by OPS March 8, effective March 12, established on basis 15 cents per pound Fancy grade. This represented a roll-back of 3-3.5 cents per pound from GCPR ceiling price of most producers. Industry and members of Tallow and Grease Advisory Committee objected to the action but filed no formal protest believing this to be their contribution toward Government price stabilization efforts. Oil Industry Advisory Committee appointed, met, and uniform ceiling price for this product set by OPS order in neighborhood of 16 to 17 cents per pound. Uniform dollars and cents ceilings generally at November 1950 levels established on hides and skins. Fish August 1951: OPS approves increase in ceiling price for beef and unofficially let it be known that hide and tallow ceiling prices would have to be rolled back further to compensate for beef price ceiling increase. Requisite number members both Hide and Tallow Industry Committees wired Price Administrator DiSalle requesting to be consulted before such action is taken; they were informed that no such rollbacks were being considered at that time. November 1951: Hide Industry Advisory Committee called to OPS headquarters at Washington, asked to approve rollback; voted unanimously against such action. Tallow and Grease Industry Advisory Committee called to OPS headquarters at Washington, informed that tallow ceiling prices were to be rolled back to 10% cents per pound, Fancy basis. Seven out of 9 members of the committee attending this meeting resigned en masse later in the day; the official membership of the committee was 14 at this time. Resigning members asserted they did not propose to come to Washington at their expense to rubber-stamp Government actions which they said were apparently dictated by political expediency; all objected to the fact that the matters which they were supposed to consult with OPS on had been decided by the Government in advance and they said they were given no real opportunity to state their views regarding the proposed rollback. Price Administrator DiSalle appeared before Joint Senate-House Committee on Defense Production to give periodic reports concerning progress of price control operations. Was questioned extensively by Senator Capehart about the tallow roll-back plan and about the mass resignation of members of the Tallow and Grease Committee; Senator Maybank introduced into the record approximately 160 telegrams received in protest to the tallow rollback plan. December 1951: Price Administrator DiSalle submitted lengthy memorandum to Joint Senate-House Committee on Defense Production setting forth policy OPS would follow in rolling back ceiling prices; used tallow as an example and described how the new rollback level had been arrived at; also told the committee that tallow had no cost of production. The latter statement provoked a storm of protest from the independent tallow-producing industry. Recently Economic Stabilization Administrator Roger L. Putnam has admitted that his agency recognizes that tallow does have a cost of production. OPS issues order rolling back ceiling prices approximately 5 cents per pound on cattle hides and about 18 percent on calfskins. January 1952: Tallow roll-back order issued January 8, effective January 14. Ceiling prices for all grades tallow and greases set at rate of 10%1⁄2 cents per pound, Fancy basis. It is our earnest conviction that the order issued January 8 by the Office of Price Stabilization rolling back the ceiling prices of all grades of inedible tallow and grease to a level of 101⁄2 cents per pound, Fancy basis, is discriminatory and unfair for the following reasons: (a) Inedible tallow and grease prices move in the same general price pattern as other domestically produced fats and oils; see the attached chart for confirmation of this. Therefore, price ceilings for inedible tallow and greases if established by any Government agency should be fairly related to price ceilings for such fats and oils. (b) Inedible tallow and grease ceiling prices as set by the order of January 8 are not fairly related to present ceiling prices for other domestically produced fats and oils, nor as compared with the relationship between these commodities as recognized in the OPA ceilings of World War II, shown in the following tabulation: (c) Inedible tallow and greases are the only items in the historically related fats and oils group which have been subjected to two successive price ceiling roll-backs; this is outright discrimination. Since the initial price freeze level of January 1951, the total roll-back in the case of tallow and greases has amounted to 8 cents per pound, or approximately 45 percent of the initial GCPR ceiling price. (d) To the extent that the Office of Price Stabilization used the pre-Korea price of tallow as a base period in arriving at the 101⁄2 cents per pound level established under the order of January 8, we assert that there is no legal grounds for such basis because the Defense Production Act specifically prohibits the use of any abnormal periods in the determination of ceiling prices. The attached price chart clearly indicates that the pre-Korea price of tallow not only was abnormally low-in fact, the lowest it had been for the period 1941-51, but also was substantially lower than that of any other related domestically produced fat or oil. We consider that the most equitable and expeditious way to remedy this situation would be to immediately and completely remove all of these items from any form of price limitation, and of course we include a recommendation that the other products of the industry-namely, hides, skins, and meat proteinsbe accorded similar treatment. However, if it be not the intention of Congress to consent to the withdrawal of such authority, then we shall insist that the extension legislation be phrased in such form as to preclude the price agency from singling out a lone fat or oil item such as ours and subjecting it to drastic pricing action without imposing similar treatment upon all other items in the same general commodity classification. This could be done, we believe, by including a short phrase at the appropriate place in the pricing provisions to read somewhat as follows: "Provided, That no ceiling price shall be established or maintained on any domestically produced fat or oil which does not reflect a fair price relationship to other customarily related fats and oils." As we understand, due to the parity guaranty provisions of the pricing act the OPS probably cannot lower the ceilings much, if any, on the principal domestically produced fats and oils such as those to which frequent reference has been made in this statement-other than tallow and greases. If this is so, the members of this association feel their products are entitled to similar treatment and we therefore make the request that tallow and greases be included under the parity guaranty sections of the pricing legislation. Perhaps this could be taken care of by designating tallow and greases as agricultural commodities; we especially need a clarification of this point because we are being increasingly confronted with situations in Government whereby our products are claimed to be agricultural commodities when it comes to placing them under certain types of controls but when we need and seek relief we are informed that nothing can be done because our products are not defined as an agricultural commodity. Respectfully submitted. NATIONAL RENDERERS ASSOCIATION, Consulting Economist. |