DEFENSE PRODUCTION ACT AMENDMENTS OF 1952

THURSDAY, MAY 15, 1952

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met at 10 a. m., pursuant to adjournment, Hon. Brent Spence (chairman of the committee) presiding.

Present: Chairman Spence (presiding), Messrs. Brown, Patman, Rains, Deane, Dollinger, Burton, Hays, Wolcott, Gamble, Talle, Cole, Hull, Scott, Nicholson, Widnall, Betts, and Kilburn.

The CHAIRMAN. The committee will be in order.

We will resume hearings on the Defense Production Act.

Due to circumstances beyond which we have no control, we will have to suspend shortly. The House meets at 11 o'clock, and there will be a roll call as soon as the House meets on the adoption of the constitution for Puerto Rico, and then there will be two conference reports, so we will have to adjourn at 11 o'clock, which I regret very much.

The clerk will call the first witness.

The CLERK. The first witness is Mr. Charles Holman, of the National Milk Producers Federation.

The CHAIRMAN. Mr. Holman, it is always a pleasure to have your views.

Mr. HOLMAN. It is always a pleasure to appear before this committee, Mr. Chairman. It is one of the wisest committees and one of the most considerate to me that there is in the Congress.

Mr. Chairman, I have a statement which I will proceed to present. The CHAIRMAN. You may proceed as you desire.

Mr. HOLMAN. Thank you, sir.

STATEMENT OF CHARLES W. HOLMAN, SECRETARY,

NATIONAL MILK PRODUCERS FEDERATION

Mr. HOLMAN. I am Charles W. Holman, with offices at 1731 Eye Street, Washington, D. C. I am secretary of the National Milk Producers Federation, which is a Nation-wide organization of dairy cooperatives composed of 92 direct member associations. Affiliated with these direct members are more than 600 local and regional cooperatives nearly all of which are engaged in manufacturing some or all forms of dairy products. Our latest records show that approximately 450,000 dairy farm families are the owners of these cooperative associations. These farm families reside in every State in the Union except New Mexico and Nevada. A recent survey shows that these cooperatives market annually approximately 22 billion pounds of whole milk equivalent which is a little more than one-fifth of all the

milk and cream that leaves the farms in commerce. During the past year the wholesale dollar value of these products exceeded $1 billion. Appended to this statement is a copy of the resolution of the delegate body of our federation which at our last annual convention in November of 1951 in Dayton, Ohio, set forth the position of our organization.

The federation renewed its opposition to the principle of price controls. The federation further believes that the methods used for socalled wage stabilization and price controls are not comparable and the administrative procedure with respect to price controls inflicts unnecessary hardships upon processors and handlers seeking to obtain actual compensation for increased costs.

If, however, it is the intention of the Congress to extend the present act, we recommend that the extension be for no longer than June 30, 1953, in order to enable the new Congress to review the national and international situation as to whether all parts of this act should be continued for any period beyond that time.

Also, if the dairy industry and particularly the dairy farmers whom the federation represents are to live under this act it is absolutely essential that the Congress continue in effect the following parts of the act especially related to milk and cream and their products. These parts are:

1. Complete exemption of the Agricultural Act of 1949. This act establishes a new parity and carries a directive to the Secretary of Agriculture to support the prices of perishable and semiperishable products which include milk and cream and their products.

2. Exemption of the Agricultural Marketing Agreement Act of 1937, as amended. This act is applicable to Federal order milk markets administered by the Secretary of Agriculture and authorizes him to establish minimum prices at the producer level.

3. Retention of the Cole-Ives amendment to the Defense Production Act. This amendment authorizes the Secretary of Agriculture to determine producer ceiling prices of fluid milk and cream in nonFederal order markets.

4. Retention of the amendment to the Defense Production Act which requires that no ceiling prices for milk and cream for manufacturing purposes shall be established without approval of the Secretary of Agriculture.

5. Retention of section 104 of the Defense Production Act giving the Secretary of Agriculture the authority to establish standards for. import controls of dairy products.

În addition, the federation favors amending the Defense Production Act to require equitable treatment under OPS regulations of agricultural cooperatives with respect to handling margins.

The Federation also opposes any legislative proposal to implement price controls by the use of consumer and producer subsidies such as were employed for dairy products and meats during World War II. The Federation would further favor a legislative mandate to the Office of Defense Production for it to so control its regional offices that there will be no conflicting regulations.

At the present time a condition of chaos is developing in OPS, due to the fact that inexperienced and sometimes inefficient regional offices are set up, with the same type of inefficient and inexperienced directors, and they are making rulings in which one region conflicts with another,

and it is far worse than the conflicts that we sometimes have between one Federal district court and another in different parts of the country, which finally have to be settled by the Supreme Court.

With respect to price control, the position of our delegate body has been to remove control of producer prices of dairy products as far from OPS as might be possible. This is because of responsibilities previously vested in the Secretary of Agriculture with relation to milk and dairy product pricing.

There has consequently been developed within the Department of Agriculture a small but highly trained body of technicians familiar with normal production and pricing problems. It was believed that these matters should be exclusively under the Secretary's administrative authority. Fortunately, the Congress, in passing the Defense Production Act of 1951, incorporated all the provisions requested by us to vest minimum milk pricing authority exclusively with the Secretary of Agriculture.

I will now deal very briefly with the reasons why this committee should continue in the Defense Production Act the administration of these provisions by the Secretary of Agriculture. These provisions are concerned with:

1. The Agricultural Act of 1949. This act contains two most important provisions affecting the welfare of dairy farmers and the producers of certain types of perishable products including milk and cream. For these perishable or semiperishable products, it provides for a continuation of very reasonable support prices which can serve as a cushion in times of adversity when unmarketable surpluses have to be disposed of.

While the basic price support for these commodities does not exceed 90 percent of parity, a provision of the law allows the Secretary, after a public hearing, to increase minimum price supports to such levels above 90 percent of parity as he may feel are necessary to justify the maintenance of an adequate supply. In order to remove any conflict with OPS ceiling prices at parity, it is necessary to exempt the provisions of the Agricultural Act of 1949 from the Defense Production Act. We, therefore, urge the retention of the present exemption.

2. The Agricultural Marketing Agreement Act of 1937, as amended. Members of this committee are familiar with the fact that approximately 160,000 dairy farm families supplying 44 major and many secondary markets are served by what is known as the Federal milk marketing order system. This important law had its origin when the Agricultural Adjustment Act of 1933 was passed by the Congress. This was a time of great economic distress. During that period the price of fluid milk and cream going into urban markets was unduly depressed because of chiseling practices which created chaotic conditions with which the cooperatives could not cope. After many trials and as many errors on the part of all, this system was crystallized in the law of 1937.

Its administration has given general satisfaction. The law is so drawn that it encourages a cordial working relationship with respect to milk pricing in these milksheds between producers, industry, consumers, and the Department of Agriculture. Producers take the initial steps in securing milk orders and also the initial steps in obtaining amendments to them. In the course of these proceedings, the Department of Agriculture frequently offers its own suggestions both

in what are called the promulgation hearings and in the hearings relating to amendments. The Secretary holds public hearings and makes public his conclusions as to what is fair for a milkshed with respect to methods of arriving at producer prices and pooling returns. The producers then vote as to whether they will accept or reject the Secretary's decision. That provision of referendum acts in two ways: (1) It serves as a curb upon the administrative branch with regard to fairness of treatment, and (2) it serves as a curb upon extremists within the producer groups.

While there are many flaws and minor criticisms, the administration of the act is popular and has done a great deal for agriculture and the people. Beyond the naming of methods of determining producer prices and pooling arrangements the authority of the Secretary ends.

The Federal milk marketing order system is so imbedded into the economic structure and its workings are so satisfactory to producers and the public that the retention of this exemption now in the Defense Production Act is of vital importance.

3. The Cole-Ives amendment. This amendment was first incorporated into the Defense Production Act in 1950 and is generally considered to be one of the most important provisions of the act affecting dairy farmers.

The amendment sets up two simple congressional directives. They provide that in a non-Federal order market minimum producer ceiling prices of milk used for fluid distribution shall not be lower than the highest of two criteria: (1) parity, or (2) a price which in such market areas bears the same ratio to the average farm price of milk sold wholesale in the United States as the price for such fluid milk bore to the average farm price during the base period, as determined by the Secretary of Agriculture. It also contains another more important provision which I shall quote:

Provided, however, That whenever the Secretary of Agriculture finds that the prices so fixed are not reasonable in view of the price of feeds, the available supplies of feeds, and other economic conditions which affect market supply and demand for milk and its products in any such marketing area, he shall fix such prices as he finds will reflect such factors, insure a sufficient quantity of pure and wholesome milk, and be in the public interset, which prices when so determined shall be used as the ceiling prices to producers for fluid milk in such marketing areas

It is estimated that approximately 700,000 milk producing families may be affected by the Cole-Ives amendment when the time is ripe to make it effective. In its objective of insuring that minimum ceiling prices will not be below levels necessary to maintain production, it has some administrative advantages with respect to speed over the normal operation of the Federal milk marketing order system. It does not require a public hearing and it does not require a producer referendum. Undre its scope, the Secretary could move with great rapidity following a check of the actual conditions prevailing in a nonorder milkshed. It is extremely important that the ColeIves amendment be retained in order to assure a price balance between Federal order markets and non-Federal order markets.

The Cole-Ives amendment has been of incalculable value to every dairy farmer in the United States who produces milk in milksheds not under a Federal order. Approximately 8 out of 10 dairy farmers selling milk for fluid use do not operate under a Federal milk order. In the absence of the Cole-Ives amendment a wide gap in price ceiling

treatment would exist between dairy farmers under Federal milk orders and those not under such orders. This would result in an inequitable relationship between the two groups of dairy farmers.

Without the Cole-Ives amendment the imposition of price ceilings on dairy producers operating under a Federal milk order would be under the control of the Secretary of Agriculture, whereas dairy farmers in milksheds not under Federal orders would be subject to actions by the Office of Price Stabilization. On the basis of dollars and cents, dairy farmers, through the protection of the Cole-Ives amendment, have been benefited very materially.

Since the enactment of the Cole-Ives amendment last year the price to farmers for milk sold wholesale throughout the United States on a seasonably adjusted basis has increased 36 cents per hundredweight. On the basis of the alternative price provision of the Cole-Ives amendment these dairy farmers on the national basis were able to receive this 36 cents per hundredweight without the imposition of price ceilings. In other words, in absence of the Cole-Ives amendment these farmers could have been subjected to price ceilings at some level within the 36-cent increase.

Unquestionably the Cole-Ives amendment has affected favorably the interests of a very important segment of dairy farmers.

4. Pricing of milk for manufacturing purposes. This provision (better known as the Talle amendment) prohibits the establishment of ceiling prices for milk used for manufacturing purposes in nonFederal markets unless the Secretary of Agriculture has determined that such prices are reasonable in accordance substantially with the last provision quoted above. Also, it gives him the power to adjust minimum ceiling prices for grade, location, and season of the year. We urge that this amendment be retained.

I have described the four portions of the Defense Production Act which are concerned with the authority of the Secretary of Agriculture in his pricing of dairy products. I desire now to show that by the four powers above described the Secretary of Agriculture may coordinate and maintain in balance the prices and ceilings for milk going into all types of utilization. I wish particularly to emphasize the fact that in the Marketing Agreement Act, the Cole-Ives amendment, and the Talle manufacturing amendment the same principle can be brought to bear upon this coordination. That principle is described in the quotation from the Cole-Ives amendment.

Let us see how this would happen. If conditions should occur where ceiling-price controls for dairying would become general, the Secretary, in determining minimum ceiling prices for urban milkshed milk in excess of bottled consumption would be guided under this law by his previously determined minimum ceiling price of milk going exclusively into manufactured uses. That determination would be guiding both in relation to the Federal milk marketing order system and the non-Federal order system. It would of course be modified by territorial differentials.

I know of no other way in which a semblance of order can be pro- . duced and maintained under a far-flung network of price controls. So, in the presert law we have a closely interlocked minimum price authority given to the Secretary of Agriculture which starts with price supports of manufactured products then extends to minimum price. ceilings for milk going into manufactured uses and to the prices of