TABLE 9.-Percentages of total procurement authorizations,' ECA program, accounted for by specified commodities and commodity groups, total for food, feed, fertilizer, cotton, and tobacco by countries, Apr. 3, 1948, to Nov. 30, 1951

1 Denmark, Iceland, Ireland, Norway, Portugal, Sweden, Trieste, Turkey, and Yugoslavia omitted in country detail.

Source: Reports of the Division of Statistics and Reports, Mutual Security Agency, SR 6.

TABLE 10.-Percentages of total procurement authorizations,' ECA program, by commodities and commodity groups, accounted for by procurement authorizations granted specified countries, Apr. 3, 1948, through Nov. 30, 1951

1 Denmark, Iceland, Ireland, Norway, Portugal, Sweden, Trieste, Turkey, and Yugoslavia excluded in country detail.

Source: Reports of the Division of Statistics and Reports, Mutual Security Agency, SR. 6.

The CHAIRMAN. I will recognize Dr. Talle.

Mr. TALLE. Thank you, Mr. Chairman.

I am sure I speak for the committee when I say that you are welcome at this hearing, Mr. Paul. We are delighted to have you. You are testifying on a very important subject in behalf of a great industry. I would like to ask you, Mr. Paul, if the following statements represent the truth as you see it:

(1) "Milk and dairy products are universally recognized as essential in the human diet."

Mr. PAUL. Yes, that is quite true. I think about 30 percent of out total diet, in this country, is represented by dairy products in one form or another.

Mr. PATMAN. What percentage did you say?

Mr. PAUL. About 30 percent.

Mr. TALLE. (2) "The dairy industry plays a vital role in the economy of Iowa and the Nation."

Mr. PAUL. It certainly does the great Middle West, as well as other great dairy producing States like New York, Pennsylvania, and some of the New England States.

Mr. TALLE. These statements are from a resolution passed in the State of North Carolina, and I substituted Iowa for North Carolina. So they believe the same thing in North Carolina as we do in Iowa. Mr. PAUL. That is quite true. The dairy industry is the dairy industry whether in North Carolina or Iowa.

Mr. TALLE. (3) “A program of price controls for dairy foods is the poorest way in which the major food industry, with its important contributions to the health and morale of the Nation, can be prepared for a national emergency in this period of rearmament."

Mr. PAUL. That is quite true, Congressman. If we in effect export our dairy cows to these foreign countries and depend upon them for our supply of fluid milk, in any time of emergency, we would be in a very precarious and serious situation in this country.

Mr. TALLE. Another statement in this same resolution is:

The lifting of price controls from dairy foods at this time will not result in inflationary price advances, so the arguments for controls based on runaway prices are not valid.

Mr. PAUL. That is quite true, because butter has, from its peak in January, declined about 17 percent in price. It reached a high, on the New York Exchange, of about 84 cents for 92-score butter. The payment just a week ago was 69 cents a pound.

So you have that free play of supply and demand which is adequately taking care of the price situation so far as dairy products in this country are concerned.

Mr. TALLE. Another statement:

"The price control mechanism is operating to diminish production and to weaken the processing and distribution facilities of the industry."

Mr. PAUL. Yes, that is quite true, Congressman. We have seen that decrease in production due to the factors that I just mentionedthat dairy cows are being sent to slaughter and production has been steadily diminishing, due to the fact that, pricewise, dairy products have been at a disadvantage with other parts of our agricultural

economy.

Mr. TALLE. In a situation such as we have faced for a number of years, the dairy farmer culls his herd and keeps his best cows, does he not?

Mr. PAUL. That is true.

Mr. TALLE. So that the yield per cow might increase, as you pointed out in your statement?

Mr. PAUL. That is right.

Mr. TALLE. But the total production would decline because fewer cows would be milked?

Mr. PAUL. That is true. Production per cow has been going up due to better husbandry practices, but due to the decrease in cow numbers, total production has been declining.

Mr. TALLE. I found the same thing to be true in Sweden in 1949exactly the same thing-because of price control.

Mr. PAUL. That is true.

Mr. TALLE. And the other day I read from the little bulletin called Crop and Livestock News, published by the United States Department of Agriculture, with the aid of the Department of Agriculture for the State of Iowa, and in their April bulletin they say as follows:

Milk production on Iowa farms during March—

and that is 1952

is estimated at 434 million pounds. This is the lowest March production in the 20 years of record.

Mr. PAUL. That is quite true. I can give you some figures on that, too. As I have pointed out, I am an overseer and director of a large cooperative marketing organization in Mason City. We have some 130 local creameries that market their butter through that organization. Our reception of creamery butter from these local creameries has dropped about 12 percent in the last few months, and I think that is fairly indicative of the situation all over Iowa, because we cover a large section of Iowa.

Milk production has decreased and therefore butter production has decreased even further this year.

Mr. TALLE. That bears out the testimony in this bulletin.
Mr. PAUL. That is right.

Mr. TALLE. And it also bears out what the executive secretary of the Iowa Creameries Association says, with offices in Ames, Iowa, and while I referred to that statement in part the other day, I will refer to something else now:

Iowa-and I am sure the Midwest area producers-are losing faith in the dairy industry. Unless confidence is restored, the vast reservoir of milk and other dairy commodities which Iowa has supplied for our heavy population centers, will shrink to a serious low.

Mr. PAUL. That is true. And it could very well happen that milk could go to 30 cents a quart if this trend is accentuated. Also all other dairy products, in line with that.

Mr. TALLE. I am glad you brought that out because I asked a representative of the A. D. A. the other day what effect he thought the removal of section 104 would have on the price of milk, whether milk would rise or fall in price or stay as it was, and he said it would not affect the price of milk at all.

Well now, it is reasonable to conclude exactly what you have said, that the price of milk would go up.

Mr. PAUL. If you take away the supply, and if there are more dollars looking for more milk, the only thing that it can possibly do

is to go up.

Mr. COLE. You mean more dollars looking for less milk?

Mr. PAUL. That is right, more dollars for less milk.

Mr. TALLE. It is true, is it not, Mr. Paul, that it takes quite a little

time to develop a dairy herd?

Mr. PAUL. It certainly does. It takes about 3 years to bring the milk cow into production from the time the heifer is born, and to double the size of a dairy herd it takes 9 years. If you kept all of your so-called cull heifers it would take 9 years to double the size of your herd, starting from scratch.

Mr. TALLE. That is right.

Mr. PAUL. So that if these cows are sent to slaughter and virtually taken out of production, and no new heifers are being brought on, it could very soon react into a very serious situation.

Mr. TALLE. And therefore, as the secretary of the Iowa Creameries Association has said, if confidence is not restored, there will be no inducement on the part of the dairy farmer, to develop new herds,. perhaps not even retain the herd he has.

Mr. PAUL. That is true. Failure to reenact section 104 would have these obvious results. It would immediately discourage farmers from: trying in any way, shape, or form, to increase their milk production.

Mr. TALLE. There are some people who say that section 22 of the Agricultural Adjustment Act will take care of the dairy industry and that section 104 is not needed for that reason.

You commented on that in your statement. Would you like to, expand on it a bit?

Mr. PAUL. Well, under section 22, the procedure involved would be. so time consuming that it would be like locking the barn after the horsewas stolen.

The market for dairy products is so extremely sensitive that a small supply dumped on the market at any one time, when conditions are not favorable to the reception of that supply, would depress prices instantly and probably quite drastically, and by the time we got around. to invoking this section 22 or some of these other acts which I have mentioned in my statement, why, the damage would be done and dairy farmers would have started the dispersal of their herds.

Mr. TALLE. That is right. One other point: We have trade agreements with other nations, agreements of various sorts. You mentioned one way in which foreign nations get around those agreements. so that they do not operate in a bona fide manner. That is currency depreciation. Would you like to explore that a bit? Mr. PAUL. Do you mean under section 7 of the Trade Agreements: Act?

Mr. TALLE. The method employed by some nations of devaluating their own currency in order to increase their exports.

Mr. PAUL. Well, when a nation devalues its currency, it has the effect of lowering the price of the commodities that they have to export. Mr. TALLE. That is, it doesn't lower the price in the home country, but it lowers the price to us, when a commodity comes in here. Mr. PAUL. That is right. It lowers the price at which they can offer it to the importing country.

Mr. TALLE. That is right.

Mr. PAUL. In this case it would be us.

Mr. TALLE. Which would be unfair competition.

Mr. PAUL. That would certainly be unfair competition. It would render our present tariffs on butter and dairy products ineffectual, just the same as if they didn't exist, because that price would be so low that they could still bring it in here over the tariff barrier, and undersell the producers in this country and cause the Department of

Agriculture to put the support program into effect, purchase large quantities of domestically produced butter, and sell the foreign butter to our people here in this country.

Now, the taxpayer is the one who would bear the burden of that program, because the taxpayer supplies the money by which Commodity Credit Corporation would purchase this domestic butter, and the Government would also have to go to the expense of storing it.

Mr. TALLE. I am happy that you discussed the nature of our foreign exports. I do not want to take time to deal with that because there are other members on this committee that want some time, so I will conclude by asking unanimous consent, Mr. Chairman, that this resolution which I received this morning from the North Carolina Dairy Products Association, Raleigh, N. C., dated May 5, 1952, be inserted in the record.

Mr. BROWN. It may be inserted.

(The resolution referred to is as follows:)

RESOLUTION ON PRICE CONTROLS AS ADOPTED BY THE NORTH CAROLINA DAIRY PRODUCTS ASSOCIATION, INC., APRIL 25, 1952, RALEIGH, N. C.

Whereas milk and dairy products are universally recognized as essential in the human diet; and

Whereas the dairy industry plays a vital role in the economy of North Carolina and the Nation; and

Whereas a program of price controls for dairy foods is the poorest way in which the major food industry, with its important contributions to the health and morale of the Nation, can be prepared for a national emergency in this period of rearmament; and

Whereas the present supply of dairy foods in North Carolina and the Nation is sufficient for current domestic demands so that arguments for price controls based on scarcity are not valid; and

Whereas the lifting of price controls from dairy foods at this time will not result in inflationary price advances, so the arguments for controls based on runaway prices are not valid; and

Whereas the price-control mechanism is operating to diminish production and to weaken the processing and distribution facilities of the industry; and

Whereas cost absorption as forced on the processor, manufacturer, and distributor of dairy foods, both proprietary and farm cooperatives, is injuring dairy products business enterprises, particularly small businesses, and a continuation of price controls will magnify these problems: Therefore, be it

Resolved by the North Carolina Dairy Products Association, Inc., by a unanimous vote of its board of directors on this 25th day of April 1952, That it go on record as officially urging the lifting of price controls on dairy products promptly to restore incentives and to permit flexibility within all branches of the industry, so that production will be expanded and adequate industry facilities maintained to meet the ever increasing nutritive needs of the Nation; and be it further

Resolved, That the executive vice president be instructed to send a copy of this resolution to each Congressman and Senator representing the people of North Carolina

Mr. BROWN. Mr. Patman.

Mr. PATMAN. I want to ask you about nonfat dry milk solids. I notice exports last year amounted to $9,525,000. That represents about 9 percent of the total exports of dairy products.

How does that particular figure compare with previous years? Do you have any breakdown of that?

Mr. PAUL. Our Washington representative, who is an economist, Mr. Reed, is present. Mr. Reed prepared these tables and perhaps he can give you that information.

Mr. REED. What was your question again, sir?