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The CHAIRMAN. Well, you have a parity price on your products, have you not? I mean you have a support price?
Mr. PAUL. Yes.
The CHAIRMAN. To what extent has the importation of fats and oils affected the price of domestic products? I have got a great many dairymen in my district, and I do not want to destroy the prosperity of their industry. I would like to know the facts. What effect does that have upon the domestic price of milk?
Mr. Paul. If I understood your question correctly, it has not had any effect, because there has been a virtual embargo for the last few years.
The CHAIRMAN. What effect has the embargo had upon the stabilizing of the price of the domestic production? In other words, what effect has the embargo had on your industry?
Mr. PAUL. It has helped us maintain our prices.
The CHAIRMAN. What are the exporting countries of milk and butterfat?
Mr. Paul. Denmark, Australia, and the Netherlands are perhaps the main exporting countries--New Zealand, Sweden.
The CHAIRMAN. What percentage of the domestic consumption have they exported to this country?
Mr. Paul. They have not exported any because it is being embargoed.
The CHAIRMAN. Well, before the embargo. What percentage did they export before the embargo went on?
Mr. Paul. That would be very small, because the tariff has protected us on that.
The CHAIRMAN. What tariff have you on butterfat?
Mr. Paul. The normal tariff is 14 cents per pound, but the first 60 million pounds of butter that would come into this country under the trade agreements act would come in at 7 cents a pound.
The CHAIRMAN. Is that a sufficient protection to stabilize your industry?
Mr. Paul. It is not at the time because of devalued foreign currencies, which have rendered it ineffectual, and also the low price at which they can produce the product in those countries.
The CHAIRMAN. How long has the embargo on fats and oils been in effect?
Mr. Paul. Ever since the war.
The CHAIRMAN. There has been an embargo on fats and oils ever since the war?
Mr. Paul. That is my understanding. There has been an embargo on butter. When I speak of fats and oils, I am only speaking for butter.
The CHAIRMAN. And you say no butter has been imported into this country since the war?
Mr. PAUL. Practically none.
The CHAIRMAN. What was the importation before that, percentagewise?
Mr. Paul. It was very, very small. Even if it were 1 to 5 percent, however, that might be a fair figure. But I would like to point this out: that it is not the percentage of butter that is imported into this country in relation to our total production that is important, it is the
timing-when that butter is permitted to be dumped or imported into this country
If it were dumped into this country at a time when our production is high and our prices are low, it would have a devastating effect of setting the price for our whole domestic supply.
So it is not the small percentage that would be imported into this country that is important, it is the relationship as to the time and conditions prevailing in this country when it comes in. If we bave no control over that, we are sunk.
The CHAIRMAN. Well, have we the capacity to furnish our entire domestic needs by our own producers?
Mr. Paul. We have been doing that for a great many years now, but we will not have that power if we deplete our cow herds and decrease our production by depending on a foreign source of supply for those needs, .
The CHAIRMAN. It was not the foreign competition that caused the reduction in the herds, was it? It was due to other factors.
Mr. Paul. That would further aggravate, though, a situation that already exists in this country.
The CHAIRMAN. What is the present status of the dairy industry? Are they now making a fair return on their investments?
Mr. PAUL. I would say that under present conditions, even though their products are not being sold at parity, they are able to get along.
However, their costs of production are very high, feed is high, processing costs are high, transportation costs are high, so that the margin that is left to the farmer is a rather small percentage of what they received for their product.
The CHAIRMAN. What is the price they are obtaining with reference to parity?
Mr. Paul. Well, the support price is guaranteed at 90 percent of parity at the present time. I believe that is 67% cents per pound in the case of butter. The actual market price is a little bit higher than the support price, now, so the support price is not operative. In other words, butter is in short supply enough at the present time so that it is not necessary for the Government to step in and purchase it--and we want to keep it that way. We do not want the Government in our private business.
The CHAIRMAN. How long would it take the dairy industry to be in a position to increase their production, if domestic needs demand it?
Mr. Paul. If the price is right, farmers will go out and even milk some of their stock cows in order to get adequate production. All you have to do is dangle a fair price in front of them, and they will produce the product for you.
The CHAIRMAN. Well if you take off all controls over dairy products what effect would that have on the price? Do you think the price would go to abnormally high levels, and thus make it hard for the consumer?
Mr. Paul. No, I do not think it would, because farmers are intelligent people. As I said here before, they switch back and forth. If they produce too much of one commodity, like milk, and the price becomes depressed, they are going to adjust that themselves, and they themselves can adjust it better than some Government agency can tell them to adjust it.
The CHAIRMAN. I agree with Dr. Talle that milk products are the most essential of all probably, for the human race. It is about the first thing they get when they arrive and they continue to drink it until they depart, and it is certainly very essential. Nobody can dispute that.
Mr. COLE. We want to hurry along, so I am only going to ask one or two questions, Mr. Chairman.
In connection with the decrease of the dairy-cow.population, there has been also, simultaneously, an increase in the population of the United States, of course.
Mr. Paul. That is right.
Mr. COLE. That, as I understand, is about 20 million in the same time?
Mr. PAUL. That is about right. As I understand it we are increasing our population at the rate of about 2 million people net increase per year.
Mr. COLE. Do you have any judgment as to how many dairy cows we should have to meet the needs of such an increased population?
Mr. Paul. I believe it is estimated that to meet the increased population needs of about some 20 million people, it would require about some 20 to 30 billion pounds of production of milk.
If I am wrong in that, I think one of the witnesses who follows me can correct it.
Mr. COLE. You may correct it if you like, but I have a figure of 15 million additional cows needed. Does that sound reasonable; 15 million additional cows?
Mr. Paul. With roughly 6,000 pounds of production per cow, you could figure it out.
Mr. REED. Of course, in connection with the question as to what we need, Mr. Cole, I think about the best thing we could do would be to just project the maintenance of the current over-all per capita consumption of dairy products in this country, against a population growth of 274 million a year and I would be glad to do that and furnish it to you, Mr. Cole.
Mr. Cole. Fine; will you furnish it to the committee?
Mr. REED. There is no question but what the dairy herds, to maintain the per capita consumption we need, must shortly start to increase, because we are running up against a reasonable limit of increased production per cow.
Mr. COLE. I know. Using one incident does not attempt to show statistically the situation of the dairy industry in the country, but I know a friend of mine in Montgomery County, Md., who has a dairy farm, and who is closing his dairy farm and going into beef, tells me there are 18 dairy farms closing in Montgomery County right now, which is an important milkshed for Washington.
One other thing. I had a letter from home advising me to vote against section 104, with this statement:
That we must, of course, in order to keep our exports at a high level, admit imports. That is No. 1.
No. 2, that the dairy industry is exporting, and therefore should permit imports to come into the country.
No. 3, that in order to maintain sound economic structure in foreign nations friendly to us, and to freedom, that we must permit them to export the products which they produce.
I wrote back that I agreed with all three of those generalities, and I do. It is important that we do those things. But I.pointed out that in doing so we must have some realistic approach to it, and mentioned the devaluation problem which we have discussed.
There is one other thing I want to ask you, in that connection: Is it not true that these countries which you have mentioned as exporting your product, that they have certain restrictions upon imports from the United States-not necessarily dairy products, but they certainly have import restrictions, do they not, upon products from the United States? In other words, they are not free trade countries, are they?
Mr. Paul. Well, I think that is true. Now for instance, in the case of Denmark, they have a managed economy. It is a socialistic state. They bave, through law and regulations, determined the size of the farms in their country.
They have, through the same means, kept their people on the farms, whereas in this country, we have operated on the laissez-faire principle of letting the farmer go to the city, or into any other job where he thought he could do the best for himself.
There, by their managed economy, they have kept their people on the farms, they have made it impossible to reduce the number of their farms, and through this system of management they have contributed to their own trouble by these farm surpluses.
Mr. Cole. But the point I am getting at is, that they are also looking after their individual interests in their own countries by certain embargoes or trade restrictions, in order to restrict or prevent the importation of all sorts of commodities from the United States; is that not true?
Mr. Paul. That is right. They make churns over there and we make churns in this country, and I do not imagine that many of our churns in this country find their way to Denmark.
Mr. Cole. The point I am making is that section 104 gives a certain latitude, on the part of the Secretary of Agriculture, to make his regulations according to a realistic situation, as it arises.
We have the right, in this country, in view of all of the enlightened foreign policy, to protect our own people, just as Denmark has the right, in view of an enlightened foreign policy, to protect her people. It is a matter of adjustment between the two countries.
Mr. PAUL. That is right.
Mr. COLE. That is all we are asking for here, all this section 104 asks, that there be an enlightened bargaining and determination of respective needs.
Mr. Paul. That is right. We have tried to point out here very clearly and conclusively that section 104 is flexible.
Mr. COLE. Yes.
Mr. Paul. And that the Secretary of Agriculture has full discretion in implementing it.
Mr. Cole. That is all, thank you.
Mr. REED. I can give you those in terms of values of all dairy products exported.
To go back to the prewar year of 1940, our total exports were 16,920,000 dollars.
Wartime exports, primarily under lend-lease, reached a peak of $261 million in 1944.
I want to reiterate that those were lend-lease shipments and in no sense of the word commercial exports.
And in 1951, our exports had declined to $116 million, of which some significant amount represented government-to-government sales on our part at reduced prices of commodities from Commodity Credit Corporation stocks.
The CHAIRMAN. There were no imports during the embargo years; particularly?
Mr. REED. With respect to butter, there have been no imports during the embargo years.
The CHAIRMAN. Well now, before the embargo was put into effect, what were the exports with reference to imports? Take a year before the embargo was put into effect.
Mr. REED. Well, during the war we had no commercial trading in butter if my memory serves me correctly.
So the figure we should probably refer to, covering exports of all dairy products, was $16,920,000, and in the same year, 1940, we imported $9,082,000, of which most would have been cheese. We imported very, very little butter.
The CHAIRMAN. You do not want to lose your foreign market under normal conditions, do you?
Mr. REED. I think it would be a fair statement to say, Mr. Chairman, that we certainly hope to keep foreign markets where the trading in the commodity approaches what we commonly think of as commercial trading, but I think we would also go along to say that we do not wish to have foreign-trade figures quoted to us as indicating a commercial trade, when in effect they are government-to-government trading programs.
In other words, this whole business of free trade cannot be placed at the present time in its proper setting.
We show in our statement that the Australian Government, and the New Zealand Government, and the Government of Denmark, sell a large portion of their supplies to the United Kingdom at prices ranging from 36.3 cents to 39.3 cents per pound. That is not commercial trade. That is government-to-government contracts.
They want to sell the same butter in this country, at around 60 cents per pound laid down in New York.
I myself find it extraordinarily difficult to understand why the price would be so variable, on the same commodity, exported to different countries, if there were anything even closely approaching freetrade conditions, from the commercial point of view.
The CHAIRMAN. Mr. Deane.
Mr. DollingER. Mr. Paul, you testified that controls reduce production. Is that correct?