milk dealers. Here is one from a milk dealer in Pennsylvania written to his Congressman. He says:

On February 8, Mr. Benjamin F. Castle, executive director of the Milk Industry Foundation, mailed a letter to you in which he stated how seriously hurt the milk dealers are in many parts of the country.

I happen to be one of them who had higher operating costs in 1951 than I ever experienced before, resulting in a profit of less than 1 percent in our sales dollar. I operate as an individual, and it is impossible to continue to live personally and continue to operate on such a small profit. We should have between 3 percent and 4 percent on above-mentioned basis.

The OPS theory of cost absorption does not work with such small profits. Presently OPS is expecting the industry as a whole to absorb increases in our operating expenses. Labor, containers, and repair costs have increased to the extent that insufficient profit is left.

Here is another one from a leading milk executive who quite recently became president of one of the largest milk companies in the country. He is noted for his operating efficiency and for his ability to analyze costs, and I may say that he has been operating in a highly competitive market. This is what he has to say to his Congressman about cost absorption:

Certainly the theory of asking the fluid milk distribution industry to absorb increases in items which represent about 40 percent of our operating costs is an unreasonable one. This is particularly true when the industry has a very narrow margin of profit, in fact less than 3 percent of the selling price and in this area even much less than that. These delays alone amount to considerable cost absorption and can be well exemplified by two examples which I would like to relate to you involving our company.

In the first instance, in this market the Office of Price Stabilization has failed to act to allow us to adjust our cream prices and this has now continued for nearly 2 months with the result that we will have no relief in this connection. One branch of the Federal Government, namely the Department of Agriculture, establishes our prices which we must pay to producers. For the past 2 months our cream prices in this market have been increasing but the Office of Price Stabilization has not yet acted allowing us to pass on these increased costs to our customers. In the case of our own company, this item alone during this 2 months' period has cost us about $70,000.

The second example is in the case of northern New Jersey. Here we were confronted with a tremendous labor increase on the 25th day of October of 1951 and in spite of our immediately filing for price relief as allowed under SR 63, we yet have (February 21, 1952) no price adjustment allowed us by the Office of Price Stabilization. In other words, delays upon delays have occurred so that we have been forced to absorb this labor increase ever since the 25th day of October 1951 in spite of numerous conferences, the submission of profit and loss figures and considerable other data. No relief has yet been granted even though almost a 4-month period has elapsed. This item has cost us a considerable loss amounting to over $175,000.

These two examples are cited to show how these delays "squeeze” the industry. Here is another letter written to his Senator by a milk dealer in Oklahoma. He says:

I just want to say briefly as possible, that this information that Mr. Castle has given you is correct in every respect and that this principle or policy that is being promulgated by OPS of cost absorption by the dairy industry is so destructive that in all of my experience in this industry in the past 25 years, I have never seen the people in our industry so discouraged as they are at this time. Over all the State of Oklahoma today, there is a very definite trend of the smaller plants toward closing up and discontinuing operations. This is, of course, because the dairy business has always been on a very narrow margin of profit based on volume and turn-over and when you affect that margin in any manner whatsoever, the immediate results are a loss to the dealer or processor.

One-fourth to one-half cent per quart may not seem very much to you but to the dairy industry it means the difference sometimes between losing money and making enough money to pay bills and expenses.

The profit per unit of sale and profit per dollar of sale are, and always have been, very small due to the number of competing dealers in every market and the highly competitive character of the business, and profits have depended on volume and rapid turn-over. There has been no appreciable increase in volume of sales since Korea resulting from the defense effort. The sales volume has remained almost constant, the increases over 1950 being less than 2 percent. So an increase in cost per unit cannot be offset by an increase in volume. It can only have the effect of decreasing profits.

Parenthetically, I ask here, did the Congress have an intent to decrease profits of small-business men? Personally, I do not think so I believe that the so-called standard issued by Mr. Eric Johnston was contrary to the spirit of the Defense Production Act. Operating costs have risen since June 1950 gradually, continuously, and inexorably and our industry must be able to adjust prices to compensate for these increased costs.

I have referred to the small profit per dollar of sales generally earned in the fluid-milk industry and I show you a chart which illustrates profit per dollar of sales for typical markets for typical years on the basis of various Federal and State Government reports and reports of State experiment stations. The most recent survey in 1949 of 313 dealers in 42 States as developed by the bureau of business research, Indiana University, shows an average net profit of 2.1 cents per dollar of sales after taxes. Again, I say, in my opinion it is ridiculous to talk about cost absorption for an industry like ours.

(The survey chart above referred to appears on the following page.) I would now like to emphasize the splendid performance which fluid milk has made relatively with respect to the cost-of-living index. As of March 15, 1952, the Bureau of Labor Statistics retail index showed that since 1945, the last full year of OPA controls, all foods had risen 63.6 percent, whereas milk had risen only 55.1 percent. During this same period, Bureau of Agricultural Economics figures reveal that the prices we have paid farmers have increased 67.5 percent. Thus, the industry is now absorbing approximately 1 cent per quart by not passing this amount of its paying prices on to the consumer. We maintain that this is a substantial, and in some situations, an unwarranted, unfair, and inequitable contribution to the fight to control inflation.

We appear before you here today to emphasize as strongly as we can on the basis of our experience with Office of Price Stabilization, our sincere belief that those concerned with the administration of the Defense Production Act as written by the Congress are not administering it in the spirit with which it was enacted. In other words "fair and equitable margins" are not recognized for our industry and we are being squeezed by a policy of cost absorption. We believe that when SR 63 was being drafted in OPS that there was a feeling of confidence on the part of his economic advisers that Mr. DiSalle would be successful in his efforts to defeat the so-called Capehart and Herlong amendments. In our opinion, these amendments which were adopted by the Congress showed that it was the intent that all costs would be allowed. The Capehart amendment was inapplicable to our industry because one company cannot raise its prices in an area without losing all its business. OPS also construed the Capehart

amendment to apply only to manufacturers. On May 5 the Emergency Court of Appeals ruled that it applies to retailers as well.

Here is a comment by a milk dealer operating in Texas as contained in a letter which he wrote to his Senator. He said in part:

The United States milk dealers are up in arms over the manner in which the OPS has messed up our industry. We operate, as you well know, on a very, very narrow margin of profit. Their theory to recognize our ability to absorb high costs simply does not work.

Since last September we have been attempting to get something out of the regional office that would provide our industry with a reasonable basis. When I say reasonable I mean the margins of profit which have been ours over a long period of years. We have wasted 51⁄2 months, and yet, have no relief. The amount of relief that we need is only one-half cent per quart, but this runs into tremendous amounts of money for those in our business. * * Frankly, Here is a partial quotation from a milk dealer in Montana who wrote to his Senator February 13:

in my opinion the whole OPS ought to be kicked out the window.

The OPS theory of cost absorption is certainly hard for us to swallow. We have always prided ourselves on the fact that milk of the finest quality is available to our consumers at a price considerably lower than surrounding areas and Jess than the national average.

As the cost of caps, bottles, fuel, et cetera has risen we have tried to make a more economical operation so we could continue to sell a quart of milk for 19 cents. As an example we now deliver milk to each customer three times a week rather than every other day.

However we now have come to a point when our capacity to absorb higher costs has disappeared.

The OPS says that any increase of retail price must all be given to the farmers. We appreciate that the farmers can use all that is given to them but if the OPS would allow us a normal or average mark-up on even this small increase maybe we would have a normal operating profit. We do not expect to be in a position that 50 percent of our profits will go as taxes but we would like to remain in a solvent condition so we can continue to pay some income tax.

Some months ago the milk dealers in Bozeman applied to the OPS for a price increase. After long months of waiting they were erroneously informed that it had been granted. They immediately raised the price but were then informed that the price increase had not been granted. Immediately they lowered the price to the original ceiling price. They were above the ceiling price through error for 1 day and I understand the OPS has threatened to fine them for the

violation.

Here is a letter from a small dealer in Ohio addressed to his Senator:

We operate about a medium-size plant owned by and myself and have always been very proud of our efficient, close margin operations which enabled us to pay a fair price to the farmer, charge the consumer a low price (lower than any other commodity), pay our help a livable wage, pay all other bills and have just a little left over. Now OPS regulations tend to squeeze us for this small margin and we just can't operate that way. We must have at least a small profit to stay in business and need your help to help us.

Here is a comment from a North Carolina dealer with respect to OPS, extracted from a letter to his Congressman:

We have found not only that SR 63 cannot be applied to an industry of our type, but that it is practically impossible to get any reliable advice from or about OPS. Frankly their red tape and general vagueness has us in a position where we don't know what action we can safely take even under allowed adjustments for direct labor and containers.

The dairy industry of North Carolina badly needs some specific relief, set forth and administered in a clear cut manner, which will allow us a sufficient margin to cover cost increases which we cannot absorb.

Here is another comment from a dealer in Gadsden, Ala., written to my office. March 15. He says:

Our compnay, along with its competitors, have petitioned the Birmingham Office of Price Stabilization to grant a raise of 1 cent per quart in this market to place the plants and the farmers on an equal basis with other similar markets in this State that operate under the Alabama State Milk Control Board. This petition has been grinding through the red tape now for about 4 months and we don't even have a thing as to what the final decision will be.

Gentlemen, my conclusion, which is concurred in by all of my associates on the board of directors of the Milk Industry Foundation, is that the OPS cannot be relied upon to administer the Defense Production Act so that milk handlers receive fair and equitable ceilings and have prompt and over-all recognition of their unavoidable increases in costs. I have referred repeatedly to the costs which are required to be absorbed by our industry and I have no doubt that you are wondering what they amount to in actual unit costs. Here is a table received from an operator in Cranston, R. I. It is taken from a letter which he wrote to his Congressman, and presumably, his Senator. He says:

In the following schedule the first column shows the unit cost when only plant wages, delivery wages, and containers are considered while the second column shows the unit cost when all operating costs are considered.

Bear in mind, OPS only allows direct wages and container costs.

OPS will allow price relief based on wages and container costs, but, from these figures, you can see this is not sufficient. All other costs must be considered also. I am here therefore to propose eight amendments which I sincerely hope you will adopt, perhaps not in toto but in substance. I say in substance because the amendments are somewhat similar in nature. They were drawn with the idea that the wisdom and experience of this committee would result in the enactment of specific directions to the Office of Price Stabilization which would result in fair and equitable ceilings for the food handlers of the United States.

We recognize that Congress is reluctant to write administrative regulations but we believe a precedent was established when the Capehart amendment and the Herlong amendment were incorporated in the present law.

We believe that these amendments showed a lack of confidence in OPS which is more than justified by the experience which we have had. In conclusion let me say that we made a thoroughgoing, factual, and unrebuttable presentation to the Office of Price Stabilization, De