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It is a matter of conjecture, of course, to what extent exports in 1952 and thereafter would be diverted to this country. There is one practical certainty: The support price for butter paid by the Government of the United States would be the most attractive outlet for the surpluses of the exporting nations of the world. By mutual consent, the United Kingdom and countries having long-term contracts with her could agree to divert considerable quantities of butter to this country. The gains in dollar exchange to the British Empire and to non-Empire sterling bloc countries would be considerable. Argentina, which is experiencing a sharply unfavorable trade balance, would probably divert the bulk of her butter surplus to the United States.
It does not seem at all unreasonable to conclude that about 25 percent of the world butter export surplus would be diverted to the United States in the event of repeal of the Andresen amendment. This would mean about 240 to 250 million pounds of butter. The consumption of butter in Great Britain is reduced approximately 250 million pounds since the period immediately before World War II. Since this country was, and is still, the greatest butter importing country in the world, it is logical to assume that this so-called free butter would be seeking a desirable market.
This foreign butter can be sold wholesale, duty-paid, in the United States from 48 to 60 cents per pound, taking into account present foreign exchange rates. In other words, at a time when our Federal Government maintains the domestic price level for butter and at the price of 67.75 cents per pound, foreign imports would take over a substantial portion of our domestic market. All this would be done at the expense of American producers and taxpayers.
In the 5 years preceding 1939, the world price of butter, New York basis, averaged 8 cents below domestic prices at New York. A duty of 14 cents per pound was adequate to protect the domestic dairy industry except during times of extreme shortage when some foreign butter came in over the tariff barrier.
Since World War II there have been two major developments which, in absence of legislative relief, have completely nullified the protection historically granted to the butter and dairy industry:
1. The 50 percent cut in the duty of 14 cents down to 7 cents per pound for the first 60 million pounds of foreign butter admitted per
2. The progressive devaluation of sterling bloc currency by 42 percent in terms of the United States dollar.
The effect of the latter can be illustrated by the present agreement between New Zealand and the United Kingdom. On the basis of the United Kingdom pound sterling, worth $2.80, New Zealand realizes 36/2 cents per pound f. o. b, steamer for her butter. New Zealand can, therefore, put butter down in New York for 41 cents per pound before duty and 48 cents per pound, duty paid, as compared to our domestic market at New York city of 69.75 cents per pound for 92 score butter on May 7, 1952. It must also be remembered that the butter production in New Zealand increased approximately 10 percent or 40 million pounds in 1951 as compared to the previous year.
If New Zealand was still being paid in British pounds, worth $4.86 American dollars, her butter would be worth 63 cents f. o. b. steamer, which would mean 68 cents landed in New York. If the old duty of 14 cents still applied, it would mean 82 cents duty paid butter, a
price not too far out of line with a level which would be reasonably protective to the domestic producer.
In other words, United States butter prices are not out of line. The unbalanced international payments ledger of the United Kingdom plus the arbitrary cut in the protective tariff have combined to expose the domestic butter market to the world market. Why was the protective tariff on butter cut in half when the differential between the domestic and foreign price of butter increased threefold?
The Denmark dairy situation is reviewed in Foreign Crops and Markets, volume 64, No. 17, pages 387-388, released on April 28, 1952. The following statement is made:
Free commercial export-market prices, which are considerably above the United Kingdom prices have been an important factor in the price obtained by farmers. For some months there has been a tendency for decreasing prices of butter in these markets. This means that the lowered prices in Denmark would result in greater competition for the American domestic butter market.
Is the dairy, and particularly the butter industry, being asked to take the whole load in support of certain exports for other farm products? If free trade should be encouraged, then the Sugar Act of 1948, as amended, which restricts imports of sugar to certain quotas from various countries, should be repealed. Likewise, a careful study should be made of other legislation and action taken to have it stricken from the statute books if the American agricultural economy should go on a tariff-free or free-trade basis.
Certain organizations and departments of Government that have urged repeal of section 104 point to the possible protection against burdensome imports through the enforcement of other legislation existing on the United States statute books. If the administration does not want to act in line with the authority granted in section 104, which is purely discretionary, is it reasonable to expect that they would act under existing authority in section 101 of the Defense Production Act, section 22 of the Agricultural Adjustment Act, or section 7 of the Trade Agreements Extension Act? Moreover, the procedure prescribed under the other sections would be cumbersome, probably slow in functioning, and would not serve the purpose of protecting the vital dairy and butter industry of the United States. These sections were effective in 1950 when the Commodity Credit Corporation was required to purchase 109 million pounds of domestic cheese for pricesupport purposes, while at the same time 56 million pounds of cheese was imported. Also, foreign potato growers were subsidized under the price-support program.
We would favor inserting the word, "discretionary,” in any continuing authority on this issue because there could conceivably be occasions when butter imports would be desirable. The Dairy Branch of the PMA-USDA could logically administer this authority with recommendations from a butter industry advisory committee.
A demoralized butter market would mean a ruined dairy industry because butterfat is the key to dairy prosperity. A loss of markets for domestic butterfat means the American farmer will stop producing the product he cannot sell—but what he stops producing is milk and milk shortages kick back on consumers. To permit unlimited imports at the expense of the American dairy farmer and consumers of taxpayers would actually be "colonialism in reverse."
It is our opinion that the present weak butter market, which is only one-fourth to one-half cent above support levels (May 7, 1952) and the reluctance of the industry to store butter can be blamed almost entirely on the fear that foreign butter will flood the American market when section 104 terminates on June 30. The November future market prices are about the same as last year in spite of the fact that support prices for butter are 1% cents per pound higher. The coldstorage holdings of butter on April 1 were only 6.2 million pounds as compared to 33.1 million in 1951. Estimated holdings on May 1 were 8.5 million pounds or about one-fourth of last year. Who would want to take the risk of storing butter except at values which reflect only the support-price level? In the past the domestic butter market has always been reserved for domestic producers--there never was any thought of challenging that philosophy until after World War II, when sterling-bloc currencies were devalued and tariff duties reduced, as stated heretofore.
We understand the Senate Committee on Banking and Currency has tentatively voted to repeal section 104 and substitute the language of title III of the second War Powers Act, which expired June 30, 1951. We firmly believe that this authority would not be adequate not effective in dealing with today's problem because:
1. This particular section, known as Public Law 590, provided that imports could be controlled if the President determined that such controls are essential to the acquisition or distribution of products in world short supply. It is our understanding that none of the commodities under this authority are in world short supply, and thus allocations are not required as was the case during World War II; and
2. Public Law 590 provided that imports could be controlled if essential to the early liquidation of surpluses of stock owned or controlled by the United States Government. At this time, the only stocks held by the Commodity Credit Corporation are nonfat dry milk solids, and hence no program could be inaugurated to control imports of butter, cheese, and so forth, because the Government is not holding any of these commodities under the price-support program.
In closing this statement, I would like to address the committee briefly on the subject of price controls for butter. Even though mandatory price ceilings have not been placed on butter to date, due to provisions in the Defense Production Act of 1950, as amended, we sincerely feel that the regulations imposed by OPS have curtailed production of milk and butter. Dairy cows are rapidly disappearing in this period of decreasing labor supply on the farms and relatively high prices for beef. Dairy farming requires more labor than most other farm activities. There has been the greatest decrease in cow numbers and dairy production in the Plains States because farmers have feed crops, cattle and hogs as alternative crops, and they often follow the farm practices that require the least labor, unless properly rewarded. About one-half of the approximate 4.3 million reduction in cow population suffered throughout the United States since 1945 may be traced to the West North Central States, where most of the butter in the Nation is produced.
Every utilization should be made of the production possibilities of 2% million dairy farmers in the United States. More than half of these units are family farms, milking from two to six cows, producing farm-separated cream for butter making, and they also produce
diversified farm products. This would utilize more fully the agricultural production potential, since these farms usually require no outside labor. The family-sized farm is economically the most efficient food production unit ever devised by man. It must be remembered that 40 percent of all the beef and over 60 percent of all the veal comes from dairy cattle.
During World War II the price of butter was fixed at a level which was entirely out of line with other commodity prices, and an effort was made to compensate the producer through the payment of a Government subsidy. The effect was to give the public the erroneous impression that the consumer price was a fair reflection of butter's value. When this restriction was removed, and butter prices bounded up to a more realistic level, there was widespread protest from consumers that the butter industry was profiteering. This discriminatory treatment of butter during World War II and immediately thereafter can be principally blamed for weak consumer demand and resultant surpluses acquired by the Government during the past few years.
Members of the committee, during the opening part of this hearing, have referred to the high price of butter. We would like to point out that butter should not be regarded as high priced, when compared to a fair and accurate standard of value. From statistics received from the Bureau of Labor Statistics, it can be pointed out that it required 58.6 minutes of the average hourly wage in 1926 to purchase a pound of butter; it required 36.78 minutes in the 4-year period 1935–39. At the present time, it requires slightly less than one-half hour of the average workingman's hourly wage to purchase a pound of butter.
The American Butter Institute strongly urges that price controls for butter and other dairy products be terminated on June 30, 1952. The American Butter Institute also supports the statement presented to this committee by the spokesman for the Dairy Industry Committee.
That, Mr. Chairman, concludes my statement.
The CHAIRMAN. Now the representative of the National Cheese Institute may proceed, to be followed by the representative of the blue cheese industry, and then you will be interrogated as a panel.
STATEMENT OF E. W. GAUMNITZ, EXECUTIVE SECRETARY,
NATIONAL CHEESE INSTITUTE, INC.
Mr. GAUMNITZ. Mr. Chairman, my name is E. W. Gaumnitz. This statement is submitted on behalf of the National Cheese Institute, Inc., with offices at 110 North Franklin Street, Chicago, Ill.
The National Cheese Institute is a nonprofit corporation whose members include manufacturers of cheese and process cheese and assemblers, wholesalers, and distributors of all types of cheese. Its members manufacture over 50 percent of the cheese produced in the United States and distribute between 80 and 90 percent of all cheese distributed in the United States.
The National Cheese Institute supports the renactment of section 104 of the Defense Production Act of 1950, as amended. Reenactment is urged because it seems clear that a definitive congressional expression or directive is necessary regarding the importation of various dairy products if the production of milk and milk products in the United States is to be maintained or expanded. Section 104 of the Defense Production Act of 1950, as amended, contains such an expression.
It is clear and unmistakable. The standards contained therein regarding dairy products seem reasonable.
Section 104 states that import controls for certain products, including butter, cheese, and other dairy products are necessary "for the protection of the essential security interests and economy of the United States in the existing emergency in international relations." It also provides that no imports of any such commodity or product shall be admitted to the United States until after June 30, 1952, which the Secretary of Agriculture determines would (a) impair or reduce the domestic production of any such commodity or product below present production levels or below such higher levels as the Secretary of Agriculture may deem necessary in view of domestic and international conditions, or (6) interfere with the orderly domestic storing and marketing of any such commodity or product, or (c) result in any unnecessary burden or expenditures under any Government price-support program.
The declaration seems clear and the standards provided for imports seem reasonable.
Milk production in the United States in the years 1930 to 1951 is shown in the attached table. The data show that milk production on farms in the United States reached a peak in 1945 and in 1951 had been reduced to slightly under 116 billion pounds. Apparently, milk production has just about been maintained since the early part of World War II. There is clear indication, however, that currently milk production is tending downward. On a per capita basis milk production is obviously reduced.
Production of creamery butter in the United States reached its peak in 1951, when 1,872 million pounds were produced. In 1951 production had been reduced to slightly over 1,214 million pounds.
The production of cheese has been somewhat better maintained although the production of American cheese in 1951 was lower than production in either 1949 or 1950. The production of all cheese shows a similar change. The production of cheese by varieties for the years 1931 to date is shown in the attached table.
The production of nonfat dry milk solids reached a peak in 1949, but shows a very marked reduction in 1950 and 1951.
A review of the manufactured dairy products production data shows that the total production of these products on a milk equivalent basis is declining
The United States exports of dairy products prior to World War II were quite small. Under the various relief and economic aid programs, following World War II, exports were abnormally large. Such exports were largely of a noncommercial character and there seems to be no reason to anticipate a continuation of such exports.
The United States has made grants to certain countries for one purpose or another. In the fiscal 1949 and 1950, for example, Economic Cooperation Administration grants resulted in payment for United States goods and services in an amount of $3,592,000,000 and $2,161,900,000, respectively. Commodity exports under such conditions are in no sense commercial and the volumes of the various types of goods taken are no indication of the quantities which might be exported under conditions of free trade. Under free trade it is practically certain there would be material changes in the character as well as the amounts of products exported.