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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 enco 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. 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 thanseveral 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 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 cɔndition 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 following brief is submitted jointly by the Appalachian Apple
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 1052 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 ceiling or 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
legal minimum for his apples regardless of supply or other factors which influence the market.
Furthermore, the lowest processor ceiling in the area will, in effect, determine the market. The processors with the low ceilings will of necessity sell at these ceilings. Because apple products will be on the market at the lower figure, other processors will be unable to demand the prices justified by their higher ceiling-except in case of a very short supply. The market for the processed product therefore, can be expected, under the regulations, to be established at close to the level of the lowest ceilings in the area; and the grower market can be expected to be, in effect, held at the level that these low ceiling processors can reflect under their ceilings. Yet, by definition, the fair price to both growers and consumers is parity, and under the Defense Production Act of 1950 ceilings shall not be established which will reflect a price to growers lower than the legal minimum for that product. The only relief under the OPS industry earnings standard is a procedure which will not, in practice, permit a grower to realize the legal minimum.
That would appear to mean that grower prices will be pegged at distress levels. The 1951 season started off with prices for apples for processing at an abnormally low level. That was due to an unusual combination of circumstances that led to a demoralized market. As the season advanced, prices tended to recover somewhat, but never reached the level that would have covered cost of production and at its highest remained well below parity for apples for processing. To illustrate that point, the average price paid to growers in the United States for apples for canning in 1951, according to USDA figures, was $27.70 per ton; that figure compares with the parity figure for apples for canning as of April 15, 1952, of $67.30 per ton.
As a result many growers in both belts are in a very weak financial position already as a result of these disasterously low prices. Evidence of the seriousness of the situation is the abnoramlly great removal and abandonment of apple orchards this past winter. In addition and on top of this, USDA, Bureau of Agricultural Economics figures show that in the past 12 months prices paid by farmers for wages have increased 6.5 percent, for taxes 4 percent, for fertilizer 3.3 percent, and for farm supplies 6.6 percent.
With small stocks of canned and frozen apples in canners and distributors hands, the price for apples for processing should be expected to be higher this year. It must be higher if apple growers are to recover costs and stay in business. But it would appear that it is a practical impossibility for apple prices to recover to resonable levels under these regulations.
Both orders, CPR 56 and CPR 82, discriminate against apples because of the manner in which apples for processing are procured commercially. As Mr. L. A. Putnam of the Western New York Apple Growers Association pointed out in his letter of November 17, 1951, to Mr. W. G. Carberry (copy attached), a processor who buys at a low price early in the season and sells part of his finished pack at that time--as is commercial practice---is prevented under these regulations from paying a higher price for raw product later and reflecting in his ceiling the actual cost of the raw product in the finished product left to be sold. Conversely, if he pays more early in the season than he pays later, his profit is enhanced under the regulation. The regulations are therefore, not fair and equitable by OPS's own standards. In that same letter of November 17, 1951, to Mr. Carberry, Mr. Putnam called attention to the manner in which CPR 56 discriminates against grower processors and cooperatives as compared to independent processors. The same is true of CPR 82. Supplementary regulations in no way correct that inequity.
In western New York, and to a lesser degree in the Appalachian States, freezers are a large and important outlet for apples. In New York State, for example, in 1949–50, 14,197,080 pounds were frozen; in 1950-51, 18,087,890 pounds; and in 1951-52, 8,575,404 pounds. Supplementary Regulation 2 to CPR 56 and Supplementary Regulation 5 to the same order gave some relief to canned-apple products. No such relief has been granted in the case of frozen apples which are tied to a severely depressed level of grower prices by CPR 82 and Supplementary Regulation 1 to that order. That fact was outlined to Mr. Jerry Foytik in Mr. Putnam's letter of December 12, 1951 (copy attached). Frozen apples are, therefore, being severely discriminated against under present regulations, and the inequities of the regulations can very well prevent freezers from securing supplies because the regulations prohibit them from paying as much for the same apples as canners.
Immediate action is necessary if growers are to be granted any relief before the opening market for processing apples is established. A substantial proportion of the growers normally sell at these opening prices and these growers have no
recourse if ceilings are adjusted for processors later as was done in 1951. Furthermore, the opening market has an important bearing on later prices.
Mere suspension of these ceiling regulations will not be sufficient because the regulations are not fairly and equitably designed to reflect commercial practices in the procurement and processing of canned and frozen'apple products, and do not take into account the seriously distressed position of grower prices. It is the considered belief of the apple growers of western New York and the Appalachian States of Virginia, West Virginia, Maryland, and Pennsylvania that canned and frozen apple products should be decontrolled immediately for the foregoing reasons and because
1. 1951 grower prices for apples for canning were, according to USDA figur-8, at 41 percent of parity. Also canned apple products are among the lowest priced fruits on grocers' shelves.
2. A reasonable size crop is expected over the Nation in 1952-no apparent danger of very short supplies.
3. Therefore, there appears to be no prospect of processing apple prices reaching parity this year, and there is no need for ceilings.
Should the legal minimum for apples for processing be approached at some future date, any ceiling regulation imposed should take into consideration the peculiarities of the normal commercial practices of procurement of apples for canning and freezing.
It is the further considered belief of the growers of the two areas that decontrol must be immediate to permit the normal functioning of the market without interference so as to permit growers to receive fair and equitable prices for their apples warranted by the supply and other marketing condition.
WESTERN NEW YORK APPLE GROWERS ASSOCIATION, INC.,
Rochester, N. Y., November 17, 1951. W, G. CARBERRY, Chief, Fruit and Vegetable Branch,
Food and Restaurant Division, Office of Price Stabilization. DEAR MR. CARBERRY: This letter will confirm the questions we raised in your office, Friday, November 16, with respect to apparent injury to apple growers resulting from CPR 56 and amendment 6 to that regulation covering processed apple products.
This fall (1951) prices for apples for processing opened in a demoralized market at abnormally low levels--actually representing about one-third or less of the cost of growing and picking apples. Processors purchased a substantial quantity of apples at those prices. To illustrate, one major processor in western New York agreed to pay for the best processing varieties-grower's entire crops of those varieties as picked--the following schedule of prices:
pounds Apples below 244 inches in diameter. Apples 274 to 242 inches in diameter
$0.65 Apples 242 to 234 inches in diameter.
. 90 Apples 234 to 3 inches in diameter.
1, 15 Apples 3 inches and larger
1. 40 I No payment.
He agreed to pay for the other desirable processing varieties at a lower rate. I am enclosing information showing representative schedules of prices for the western New York area at harvest time. I am also enclosing figures prepared by Cornell University from data collected on costs of producing apples. These figures are enclosed simply to indicate the degree to which the early market was demoralized.
Since then the market for apples has begun to assume a more nearly realistic level. Prices are still below cost of production, however, and well below parity which we understand to be approximately $3.50 per 100 pounds.
To show the importance of processing of apples in western New York, in 1950, for example, about 7 million of an estimated 10 million bushel crop went into canned applesauce, canned slices, baby food, frozen slices, and apple juice (not cider or vinegar). Processors buy growers' entire crops and put emphasis on the higher quality crops. Apple processing is no longer a salvage industry in western New York. Here is the first example of apparent injury to producers. Processors tell us that it is impossible for them to buy apples from growers at the pre-ent