Mr. HARRISON. It is a violation, a definite violation.

Mr. FUGATE. I don't see how they can maintain that position, knowing this fact.

Mr. HARRISON. Well, you know the story of the lawyer who said, "They can't put you in jail."

Mr. MULTER. What does the agency say as to why the ceiling price is less than parity.

Mr. HARRISON. I wish you would tell me. I have got a file. I wrote them a letter and asked how they did it and they wrote back and said, "We put ceilings on."

Well, I knew that. Then I wrote and asked them the same question. The ceiling, you understand, is on the processors. They are allowed to put a ceiling on the processor. But the ceiling they put on the processor must be such as to reflect to the grower (a) parity and (b) the price received in the base price level.

So I wrote them again and I called their attention to the law, and they come back and said, "We haven't put any ceiling on the grower. We put it on the processor.'

Mr. FUGATE. I think there is a difference right there.

Mr. HARRISON. I haven't been able to get a satisfactory answer. Mr. FUGATE. I think they put a ceiling on the margin of profit that the processor is getting, not on the profit, but the margin of profit. Mr. HARRISON. No, they put a ceiling on his price.

Mr. FUGATE. I know, but to reflect a certain margin.

Mr. PUTNAM. I think I can answer that. In 1951, that is, in effect, what they did. So far as apples were concerned, because of the nature of the way that the apple business has historically been operated, it wasn't a proper ceiling, but that is in effect what they did. The market was at a depressed level at that time.

A processor took the raw product, cost paid; every raw product, cost paid, added his permitted spread under that ceiling order. There was a slight adjustment in the ceiling, on the 9th of April, very recently.

Then that ceiling was frozen at the dollar-and-cent level. That frozen ceiling had figured into the raw product cost which represents 41 percent of parity. That is the reason. And there is, under the OPS industry earnings standard, theoretically, an opportunity, for

recourse.

In the practical operation of the business there is absolutely no opportunity and no recourse for a grower to ever have any adjustment on price, because it cannot be possible to even consider it until after the grower price has been established.

Mr. BETTS. Well, if OPS is violating the law, can't you go to court and ask for a mandatory injunction?

Mr. FUGATE. Actually they are not violating the law.

Mr. MULTER. The Emergency Court of Appeals is set up to review their action if contrary to the law as we laid it down.

Mr. MCDONOUGH. As I get it, you have no problem if you sell your fruit raw.

Mr. PUTNAM. That is right.

Mr. MCDONOUGH. But because of the frozen prices established by OPA on processed fruit, the grower can't sell to the processor at a profit?

Mr. PUTNAM. That is it, exactly.

Mr. MCDONOUGH. He is selling at a loss.

Mr. PUTNAM. Right.

Mr. MCDONOUGH. So that the only way you can make a profit in your business is to sell all of your fruit raw in bushel baskets or over the counter, however you sell them, and that would curtail production to the retailer because the consuming public wouldn't get any canned fruit.

Mr. PUTNAM. That is right. In our own area about two-thirds to three-quarters of our production, for the past several years, has been going to processors. It is our biggest market. It is also true in the Appalachian area.

Mr. MCDONOUGH. In other words, the public would suffer if they want processed fruit, and you would be justified in saying, "We can't sell to the processor because we can't sell at a loss and stay in business.' Mr. PUTNAM. No question about it. We can't stay in business and sell under these conditions.

Mr. MCDONOUGH. That is a complaint that the public ought to register against OPS because it is curtailing procudtion and denying the public a commodity that they are entitled to have at a reasonable price.

Mr. HARRISON. And it is working that way.

Mr. MCDONOUGH. I can see it.

Mr. PUTNAM. Last year they had an enormous carry-over, the processors, from the previous season, and that, of course, reflected in the depressed market to the grower.

Mr. HARRISON. And, Mr. Chairman, apart from all that, to just sum it up I don't understand this, I am not in the industry myselfbut what I would like to say is I just don't see the sense of a ceiling in a depressed industry.

Mr. MULTER. But then the industry has no complaint. If they cannot get the ceiling price and they are selling all of their product under-ceiling price, and prospering, what difference does it make?

Mr. HARRISON. They cannot get it because of the practical application of the ceiling. That is one thing. But the second thing. Why do you have ceilings in a depressed industry? Maybe the industry would not be any better off. I think they would, and I think these gentlemen may be convinced that the ceilings are the reason for their difficulty. But if it is not the reason for their difficulties, if your theory is right, then what on earth is the sense of ceilings on a product that will not bring ceiling prices?

Mr. PUTNAM. There are a couple of other points. In the first place, of course, last year, with a depressed level, products in the processing industry in many cases are sold for future shipment. That was true last year. Those products which were sold at very low levels, $1.05, $1.10 per ton, had been delivered through the season. They have influenced the market.

To go back a step further, the crop was not as large last year as it was assumed it was going to be. Then the second thing is this.

Mr. BROWN. You gentlemen can file statements, if you wish. Mr. PUTNAM. With your permission, Mr. Chairman, I have a brief that I would like to present.

Mr. BROWN. Very well.

Mr. HARRISON. I just want the committee to understand, in the technical language that he can give and that I cannot, that the impo

sition of these ceilings is the cause of the difficultis these growers are having.

Now, the processor will not complain, of course, because this guarantees to him his profit under circumstances under which he can squeeze the grower. It is the grower alone, and the public who suffers as a result of what I regard

Mr. BROWN. Does the gentleman with you desire to say anything? Mr. HARRISON. This is Mr. Moore, Mr. Chairman, president of the National Apple Growers Association.

Mr. MOORE. There is one thing that might be of interest, Mr. Chairman. If you go back 2 years, to the crop prior to the crop that was harvested last fall, at that time we had what looked like the possibility of getting into a good-sized war. Processors were eno iraged to put up a large pack of processed apples, and did that. They put up an amount such that their carry-over was probably 30 percent of what they packed. Now that moved them into last fall, when they started buying apples, then, to process.

Last fall, they bought a small amount, and they bought them at very depressed prices. Those apples were put in the cans and a ceiling has been placed on those apples.

Now, as you move through the winter, and with those ceilings on the apples, in the cans, from a practical standpoint, it has no real effect on the growers for the reason that the processors were not buying any apples throughout this winter, were simply selling the cans that they had on hand.

Now, if you move on into the next apple picking time that we are headed for, and those ceilings remain, the processors can say, truthfully, to the growers, that "we cannot pay you more than the prices paid last fall," but the prices they paid last fall, throughout the Appalachian area, on a 54 percent of their crop, in those States, goes to processors. If they paid twice as much, on an average, as they paid last fall, the growers would only break even, on that part of the apples going to the processors.

Mr. MULTER. But the processors are not telling you the truth, then. They are just squeezing you. Because under the law, if they have got to pay you more for the apples, they can get more. That is the Capehart amendment, and as a matter of fact in the Safeway case, it goes down right from the processor to the retailer.

Mr. MOORE. No, OPS will tell us this: "We will think these things over, and take them up and consider them." But the time element is such that if you move up close to the time when an apple has to come off the tree, and this ceiling is on there, at anywhere near these figures, the processors will say to the growers, "We realize your plight, we realize that you have taken out thousands of apple trees, and hundreds of thousands more will go out, but there is nothing we can do on it because our hands are tied, and they are tied because of the ceilings." That may be truthful or it may not be. They might be able, if they did as an industry, go in before OPS, get something done, but they have got fights among themselves, within their industry.

Mr. MCDONOUGH. Do you mean that the processor will say to the grower, "We can't afford to pay you any more per ton on apples because the OPS has put a ceiling on our processed goods so that we cannot afford to sell at the price that you want"?

Mr. MOORE. That is right.

Mr. MCDONOUGH. That means that the only place you can sell your product at a profit is in the raw state, and you say 54 percent of your production goes into processing?

Mr. MOORE. That is right, and you cannot switch that 54 percent over to fresh market.

Mr. MULTER. That is precisely what happens when you are in a free market when a processor says "I cannot pay you more than X dollars.'

Mr. MOORE. Some of it.

Mr. MULTER. You either sell to them or to the fresh market?
Mr. MOORE. That is right.

Mr. MULTER. The point I make is the fact there are ceilings is not your difficulty. It happens to be an excuse that the processor is using. If he did not have that he would simply say "I cannot afford to pay you the price you should get," and you have the choice of bargaining with him, selling for less money or not selling.

Mr. MOORE. The ceiling is a depressing factor. It may not take it all the way, but it is a depressing factor.

Mr. FUGATE. I think it is a strong argument they use.

Mr. MOORE. It is a strong argument and it is an effective weapon because they are in a strong buying position, with a few processors buying millions of bushels and they do, they buy more than several of them buy considerably more than a million bushels, and that million bushels would be grown by hundreds of growers and they are in a buying position that is entirely different from the sellers. Mr. MULTER. That position remains whether there is a ceiling or control or not. They are still in that terrifically strong buying position, because of their quantity buying.

Mr. COLE. But Mr. Multer, there is competition.

Mr. MULTER. There is competition all the time.
Mr. COLE. Not when there are ceilings.

Mr. MULTER. There must be competition, particularly price competition, if you are not selling your product at ceiling.

Mr. MCDONOUGH. This is Government intervention in free competition.

Mr. COLE. He don't believe your Capehart amendment would help any, because the increased cost to the processor has been eliminated now. The time has passed for aid under Capehart.

Mr. MOORE. I would like to point out just one thing, if I might, from the consumer's standpoint. I am a grower, but from the consumer's standpoint, this ought to be considered in connection with these apples. It takes 12 to 15 years to bring in an apple orchard. The apple trees are decreasing in the United States, and the apple production decreasing in the United States, and has for some 20 or 30 years or more, with the population of the United States increasing, and with those in the industry, and the general public, having an earning power greater than ever before.

The industry is in a very, very serious plight, and if I understand the law correctly, that ceilings are being set on a product that is not reflecting parity, and in my own belief, it has not helped the consumer, as of this year. At the present time, ceilings are slightly more than the product is bringing, the canned product, they are slightly more than the average, but if that carries all around, after this depressed condition that I spoke of last fall, plus this big pack that was put up

the year before, with the Korean war effect and the belief that we would be in a large war and speculation on the part of the canner, in the long run the consumer is going to be hurt. Immediately the producer is going to be hurt.

Mr. HARRISON. Thank you, Mr. Chairman. Mr. Miller.

Mr. MILLER. I have one remark that might help clarify the thing. Our interest in this whole remark now is for the coming year. What is past is past. We have taken our losses, and squared matters with the local people as best we could. The ceilings are already set up for this year. They cannot go much higher than they are now, as things work out. If ceilings stay on, we are threatened with something like the ceilings we have got now, which won't give us return of cost of production.

Mr. BROWN. If you have any statements you want to file, you may do so.

Mr. HARRISON. I would like to file a statement.

(The statement referred to is as follows:)

PETITION FOR RECONSIDERATION OF APPLE CEILING REGULATIONS

The following brief is submitted jointly by the Appalachian Apple Service representing approximately 1,800 apple growers in the States of Virginia, West Virginia, Maryland, and Pennsylvania, and the Western New York Apple Growers Association, Inc., representing approximately 1,200 apple growers in the western New York fruit belt. Normally 85 percent of all apple products processed in the United States are canned and frozen in these two major apple-producing regions.

Apple growers of the western New York and Appalachian apple-producing belts face serious injury as a result of ceiling price regulations presently in effect on canned and frozen apple products.

This injury will be particularly serious if these orders continue in effect because approximately one-half of all apples grown in the Appalachian States of Virginia, West Virginia, Maryland, and Pennsylvania, and two-thirds to three-fourths of all the apples grown in the western New York belt are normally sold to canners and freezers. In the two belts a large proportion of the better growers sell their entire crops of varieties particularly adapted for processing-or in many cases their entire crops of all varieties-to canners and freezers. Apple processing is no longer a salvage industry only in these two major apple-producing belts, and processors are the largest single outlet for apple growers.

It is our understanding that the ceiling of each apple canner for 1952 has been fixed at the figure calculated on his 1951 pack under CPR 56 as amended, and adjusted on April 9, 1952, under Supplementary Regulation 5. It is our understanding that the ceiling of each apple freezer for 1952 is fixed at the figure calculated on his 1951 pack under CPR 82 and/or Supplementary Regulation 1 to that order. We understand that under the present regulations, a canner or freezer is therefore prohibited from reflecting in his ceiling a higher raw product cost for the 1952 crop, except as provided by the OPS industry earnings standard.

It is our understanding that under the OPS industry earnings standard, ceilings on canned and frozen apple products may be appealed on the basis of reduced or inadequate earnings as compared to the base period if costs increase sufficiently, It is also our understanding that raw product cost will be treated, in such cases, in exactly the same manner as any other cost. It is our understanding that in the case of such appeal, a profit study, which may take a considerable time, is required in order to determine if the appeal justifies a revision in the ceiling. It can be assumed, therefore, that under that proceedure the grower price will need to be established before such an appeal can be made. Therefore, a processor must commit himself to a higher price, and the grower market will need to be established before the processor has assurance of being able to recover increased raw product costs under the ceilings as written. That will, in practice, prohibit the grower price from rising above the raw product figure in the present ceilingor last year's depressed level-and will, in effect, fix grower prices for apples for processing at 1951 levels and eliminate the possibility of a grower realizing the