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5. That because of such conditions, peculiar to these perishable commodities, there are uncontrollable fluctuations, both in supply and price, which make the problem of controlling maximum prices by Government order far more difficult, disruptive of established patterns of distribution, and inequitable than with more staple commodities; and
6. That because of the speed with which these commodities must be handled, and the nature of the services which competition and experience have proved necessary, it is virtually impossible, as a practical administrative matter, for anyone to write a price-control order that will not disturb the pattern of distribution and will be equitable throughout the industry. (The order on potatoes was issued on January 5. It was revised extensively, amended eight times, and is still far from equitable in all respects, even if everyone understood and obeyed it. MPR Mp. 426 issued by the Office of Price Administration during the last war, and which applied to most fresh fruits and vegetables, had 192 amendments.)
Most of the vegetable crops are planted and ready for harvest in a period of 90 to 120 days, with some requiring even less time. They must be marketed when ready; competition is keen and active; prices are controlled by supply and demand, and they must be sold for what they will bring when offered for sale. Price crises are of short duration.
The wholesale distributive industry consists largely of small businesses with more than 25,000 firms presently licensed by the Secretary of Agriculture to handle these commodities in interstate commerce. That figure alone will give the committee a clear indication of the problem of enforcement.
No one of these commodities represents a substantial part of our total food consumption. Potatoes—the largest item-represent about 6 percent. Consumers, therefore, have a wide range of selection in this group as well as from competing foods.
Should some fruit or vegetable experience a rapid increase in price for a short period because of a short crop in some producing area, its influence upon the cost of living would be negligible and short-lived. If cabbage or tomatoes, for example, should become high in price in the middle of the winter, the situation would correct itself in a matter of 60 or 90 days. Such situations are inherent in the supply of such perishables, and are not of such national concern as to require throwing into gear the vast and complicated machinery of price control by the Federal Government.
The vagaries of production and marketing hazards are illustrated by recent market fluctuations on Western head lettuce. Last December, Arizona head lettuce, because of cold weather in California, averaged about $11.03 wholesale for crates of 4 dozen heads in New York City, as shown by United States Department of Agriculture reports. According to the New York City Department of Markets, that meant an average of 33 cents a head at retail in New York City. It also meant, according to the United States Department of Agriculture, about $7.15 a crate loaded on cars in Arizona. Those were high prices.
But by early February, or within 60 days, California lettuce again became available in heavy supply, and the price dropped to an average of $2.17 a crate in Arizona, $4.29 in New York City, and lettuce was selling there at retail for 16 cents a head, or about half of the December
price. Prices recovered somewhat during March, but on April 15 were again reported as averaging only 91 percent of parity.
Due to weather conditions, the popular varieties of baking potatoes produced in the Western States were short in the better grades, resulting in higher prices than during more normal years. But the 1951 potato crop of 325.7 million bushels was considered adequate. In this situation, the Office of Price Stabilization issued a price-control order on potatoes early in January which has produced untold confusion and loss to the industry.
It should be remembered that last year the Government bought about 100 million bushels of potatoes to support the price at 60 percent of parity; and even then prices received for the 1950 crop averaged only 50 percent of parity, lower than in any year since 1928 when the average was 48 percent of parity.
During most of the period since 1947 potatoes were among the cheapest foods consumers could buy. Despite the unusual conditions in some producing areas this year, it is doubtful that prices to producers will average parity ($1.73 a bushel) when all figures are compiled for the crop. The preliminary season average to farmers was estimated by the United States Department of Agriculture at $1.53 a bushel. Much of the 1951 crop sold for low prices, as low as one-third of parity in Maine, the largest potato producing State.
Hope springs eternal in the breasts of producers and distributors of these perishable crops. If producers have a bad year, they hope to recoup the next year; if a distributor takes a loss on a car today, he hopes to recoup tomorrow. Under price control, when prices temporarily reach the ceiling, these incentives are removed; those who obey the law take the losses without the opportunity to take a profit when that chance comes.
In this kind of business, the opportunities for black markets during temporary periods of short supply are too numerous to tabulate. The opportunities for tie-in sales and other forms of evasion are obvious to anyone. The result is that the chiseler grows fat at the expense of the reputable grower and distributor. Established firms are put out of business in the bypassing scramble for margins along the channel of distribution.
Quality-improvement programs for grading and standardization are impaired. The investigative and prosecutive forces of the Government cannot possibly handle such situations. Such disruption and confusion, both as to production and distribution, is not justified in an important food industry, except possibly in times of extreme national emergency which do not exist today.
Illustrative of the results of price control is the following statement published by the Simplot Produce Co., Burley, Idaho, under date of March 8, 1952: To brokers, receivers, and jobbers of Idaho potatoes everywhere in the United States:
Gentlemen: On the date of notice of the intended ceiling on Iadho potatoes, January 4, having anticipated a ceiling, we did not own over 10 cars that were unsold. Consequently the date of the ceiling, January 19, it was necessary for us to start buying at the legal ceiling to originate any supplies.
To show you what luck we have had in buying anything at or under the legal ceiling, from January 19 through March 1, our shipments have been 216 carloads, and with about 14 cars to ship this week, that will give us a total of 230 cars and we are through for the season. Where did these 230 cars go? To our brokers and jobbers in some 40 markets in the United States, with no tie-ins, no extra
quarters on the invoices and no joint account deals of any kind. We tried to allocate these 230 cars in direct proportion to our normal volume to each receiver.
During this period of January 19 to the end of the season, under normal operating conditions, with no OPS control, we will ship about 800 cars. Let's say this year on account of somewhat short crop, we would have shipped 600 cars. This leaves us short 370 cars. Why?
Simply because our ability to buy potatoes at legal ceiling at any of our six warehouses has been negligible ever since the date of the crder, and has steadily diminished until today it is impossible for us to buy either lump, pack-out, or field run at a price which will stay within the legal limits of the OPS order.
This is the reason that not only ourselves but many other good, reputable shippers (who have tried to comply with the order) find themselves with no supplies, and that is the reason that many reputable receivers and jobbers, who have depended on these dealers for their supplies, find themselves with no Idaho potatoes.
The potatoes were here, as witnessed by shipments of more than 5,000 cars during February, and they will ship about 5,000 to 6,000 cars in March and Apri). Where they go nobody knows.
We never thought it could happen to us, but we have been put out of business with a consequent lay-off of 85 men in our 6 warehouses.
Being good Americans, we prefer to stay honest and go out of business for the balance of this season in preference to being unable to live with our families, our neighbors and our conscience.
Thanks for having been patient with us. July 10 will see us back with our usual volume of blue ribbons from Idaho and Washington State.
The same trade paper dated March 1 carried a news item as follows:
The firm of J. M. McCauley & Son, specjalizing for many years in repacking and distributing Idahc potatoes, this week announced suspension of operations in Idaho potatoes due to inability to obtain supplies except at black market prices, in violation of OPS ceilings.
The newspaper stated that, the announcement was made by Frank McCauley who says it mears laying off the repacking force of 45 people at the big Brooklyn (New York) plant.
I shall not take the time of the committee further to enumerate the inequities and problems of price control on fresh fruits and vegetables. Despite all the arguments that may be advanced on general grounds, and that no part of the economy should go free, the realistic conclusion is that price control on these perishable commoidities is impractical and unnecessary under present conditions. The game is not worth the candle.
Now if the committee feels that our recommendation that fresh fruits and vegetables be exempted from the Defense Production Act, and we most certainly hope it will not reach that conclusion—then I have offered three amendments for your consideration.
To review them, briefly, they are this:
First, that the Congress require that the Director of Price Stabilization shall not issue a price order on any fresh fruits or vegetables, unless he has made a finding based upon the best information he can obtain, that prices to producer for that commodity will average parity for that crop.
Growers have to make that determination when they make their plantings, as to whether they are likely to achieve a price equal to parity or not.
Second, then, that the Director of Price Stabilization shall not establish or lower any price ceilings for any fresh fruit or vegetable without giving 15 days notice in advance of planting time and in case of perennial crops, 30 days notice in advance of marketing season.
I might say on that one particularly, that it would give producers and shippers of annual crops notice, in advance of planting, of the maximum prices they could expect to receive; it would prevent price roll-backs during the marketing season, such as were experienced in the potato order this year, and that particular requirement was included in the Emergency Price Control Act of 1942 as amended, June 30, 1944.
Then the third amendment is that in establishing maximum prices for fresh fruits and vegetables, appropriate allowances shall be made for price variations arising from differences in grade, quality, condition, size, variety, and similar factors affecting prices, and normal price variations within season.
The purpose of that is to permit producers to average not less than the minimum price specified in the law. Prices of these perishable commodities are subject to wide variations as I have pointed out, and not all of a crop under conditions of tight supply can be sold at parity or at the minimum established by the law.
Now in closing, Mr. Chairman, I just want to make the observation that despite all the arguments that you may receive and that may be advanced on general grounds that no part of the economy should go free, the realistic conclusion is that price control on these perishable commodities is impractical and unnecessary under present conditions. Practically, the gain is simply not worth the candle.
Mr. BROWN. Are you through?
The CLERK. Mr. W. D. Davis, representing the New York Board of Trade.
STATEMENT OF W, D, DAVIS, THE NEW YORK BOARD OF TRADE Mr. Davis. Mr. Chairman, members of the committee, my name is William D. Davis. I am vice president of D. C. Andrews & Co., Inc., of New York, and elsewhere throughout the country.
I am representing here, as their authorized representative, and as a member of the international section of the New York Board of Trade.
It is true that we have, all of us, a pocketbook interest in foreign trade, but apart from that, we have a greater interest, as members of the New York Board of Trade, in the prosperity of our country and of our State and of our city.
The reason why I am here before you today, is not only to express our views as being opposed to any bill or amendment that provides for any form of quotas, but because by an experience of over 30 years, and by my fellow members' experience, we are able to judge how feeling is abroad about these matters, and upon that basis only do I venture to appear before you and express opinions which the nature of our business enables us properly to obtain.
We are, as I said, opposed to any bill with quotas. More specifically, we are against those sections of the so-called Ramsay bill, H. R. 6843, and the so-called Hunter bill, H. R. 7432, and we are in favor of the Spence bill, H. R. 6546, as regarding quotas.
I have no prepared statement. If there are any questions, I hope I will be interrupted and asked them.
What I have to say will take considerably less than 10 minutes of direct speaking.
I have cut down what I wish to say deliberately as I know time is running out.
We have looked at this question as to what will happen if quotas are imposed. How will they affect the citizens of this country, and how will they affect the citizens of foreign countries?
I am going to deal with those points, shortly. However, at this time I want to say that we are unable to see any advantage to our country in further restricting goods that may be in short supply here.
It is most unfortunate, and we have every sympathy with manufacturers, who, due to the war effort, are unable to provide the same quantity or quality of goods that they did beforehand. To prevent such goods being imported, and their fellow citizens using those goods, it seems to us, perhaps without proper knowledge of the facts, a dog-in-the-manger attitude.
We do not believe that this question of limitation, by quota, of imports from abroad, is a question that is germane to defense. We are opposed, in the international section of the New York Board of Trade, to any quotas.
Among the reasons we have for our opposition are three which I am now going to mention.
We believe that a lot of false arguments have been brought up on the question of tariffs and quotas.
We next believe that the business life of this country is going to be more hurt than helped by quotas as a whole.
And above all, and lastly, we think that, if this law goes into effect, we will all be hurt here because our friends abroad will consider that this is a rank discrimination. We will be hurt in our fight against communism. It will be a black mark on the name of capitalism.
Going briefly but quickly into the three reasons that I have, tariffs, of course, as we all know, prevent unfair competition. We believe in tariffs to prevent unfair competition. We do not believe in quotas. The quotas are there to restrict and prevent the importation, in part or whole, of foreign goods.
The exporters of this country have to export abroad, sell in a foreign country, where they have every possible difficulty put in their way. They have restrictions, they have quotas, they have tariffs. They are yet able to export in a commercial fashion.
Are these export brethren more capable than the manufacturers here, who have to come and ask for quotas? Has the spirit of initiative, and our own native genius, deserted our producers and manufacturers here, that they require those Government aids that none of their export brothers have abroad?
I mentioned that I felt we should be more hurt than helped by quotas. There are a lot of small industries, small men, who are not hurt-except perhaps at election time. For some of these men, I try to think that I am talking. They are the lightermen, the truckmen, the stevedores, the forwarders, the customs brokers, the export agents, the import agents-all these people are going to be hurt by reduction of imports. They are going to be hurt, as they will be hurt, by the reduction of exports, when there is retaliation abroad.