purposes, completely unregulated. The minimum cost of the raw milk is set by a Federal order issued by the Secretary of Agriculture, and since the so-called price freeze order of January 1951 these costs have been steadily going upward.

Although it might appear that wages and salaries are subject to stabilization, our practical experience in Chicago has indicated otherwise. In May of 1951 the milk drivers went on strike for a 5-day workweek with 6 days' pay, plus a $5 a week increase. This amounted to an increase in costs of well over 20 percent. At the time the Wage Stabilization Board was generally thought to be operating on a 10-percent allowable increase in hourly earnings formula; however, the Stabilization Agency charged with keeping costs down approved this strike settlement without any delay and we were saddled with this 20-percent-plus-cost increase in our distribution costs, which was, from a dollars-and-cents viewpoint, the highest increase our milk-wagon drivers had ever received in their history.

In many respects, our situation last year paralleled the situation in the steel industry at the present time, in which one arm of the stabilization authority of the Government granted an inflationary increase to labor while the price-regulating agency refused to give recognition to the cost increases due to the wage settlement.

When we first described our situation to the Office of Price Stabilization officials in Washington they shook their heads and stated that they couldn't understand how the Wage Stabilization Board could ever contend that a 20-percent increase in hourly earnings could be considered not inflationary.

When this inflationary wage increase was granted, we immediately reported our situation to OPS and they told us that there was nothing they could do about it because they had no procedures formulated as yet which would allow price adjustments in our industry based on increased labor costs, and it was not until 3 months later that a procedural regulation, authorizing us to petition for a price increase based on these increased labor costs, was issued. In that regulation recognition of cost increases was given only to increases in raw product costs, increases in direct labor costs, and increases in cases, cans, and container prices.

I refer to SR 63, which was issued by the Office of Price Stabilization. on September 24, 1951. Under this regulation, no consideration was permitted of cost increases in such items as fuel, light and power, ordinary repairs and maintenance, licenses, real estate and personal property taxes, transportation, and other important cost factors which Congress had recognized through the Herlong and Capehart amendments, and all of this despite the fact that, in my opinion, these amendments had required OPS to give recognition to all cost increases. I have never been able to understand why my industry, the fluid milk industry, was subjected to this type of discrimination when OPS regulations governing other industries seem to follow the expressed intent of Congress and give to those industries at least some recognition for all of the cost increases which they are required to pay. My own accounts have informed me that these costs which I have been required to absorb, by the cost absorption theories of OPS as put into practice in SR 63, amount to about one-half cent per quart and, at meetings which I have attended, accountants for other milk dealers in the Chicago area have stated publicly that my own figures

are typical of the milk industry in Chicago and that this cost absorption is the same for all companies.

It is interesting to me to note that on my production of approximately 15,000 units per day, an increase of one-half cent would amount to approximately $75 per day, or $2,250 per month, a total of $27,000 per year. Accordingly, if it had not been for the discriminatory aspects of SR 63, my profits should be approximately $39,000 per year which, based upon my actual sales of $1 million, would have preserved for me my normal profit margin of 4 cents per dollar of sales.

Because we were desperate, the milk dealers in Chicago, notwithstanding the discriminatory aspects of SR 63, filed a petition in the Regional Office of Price Stabilization in Chicago, requesting such relief as SR 63 seemed to make available to us.

According to my own figures and according to the figures of most of the milk dealers in the area, it appeared that even under the terms of SR 63, as written, we were entitled to an increase of 1 cent per quart in our ceiling prices. The Office of Price Stabilization required the filing of certified statements to support the petition and, despite the fact that the large majority of dealers' figures showed that they were entitled to the 1-cent increase which I have mentioned, this was denied to us and the allowed increases was arbitrarily reduced to one-half cent simply because one of the large national organizations which happens to do business in Chicago would, in the words of a high official of OPS, have received a windfall.

When we confronted these same high OPS officials with the discriminatory action of OPS in granting only a half-cent adjustment that explanation was given to me and a group of small dealers operating in the Chicago area. The officials of that company absolutely denied that they would receive any such windfall and insisted to OPS officials in my presence that their own operation was so unprofitable that, based upon their figures alone, the Chicago market was entitled to an increase in its ceiling prices of 1 cent per quart, and it now appears that their position was probably correct, since I have since seen their published statement for the year 1951 and their margin of profit was slightly less than one half of my own, so that there has been no rhyme or reason to the attitude which OPS has taken in regulating milk prices in Chicago.

Clearly, OPS, in Chicago, has set fluid milk prices so as to regulate profits of large corporations. Since small milk dealers do not have the advantages of diversified business, high volume efficiency and other sources of income available to these large corporations, the inevitable result of such use of price stabilization powers will be to drive out of the fluid milk business the small dealer such as myself. While local OPS officials listened with some sympathy to our complaints, they persisted in their position that no more relief was available to us under OPS regulations as now written, and that our only avenue for relief was by amendment of those regulations to permit consideration of cost increases which we must now absorb.

We have besieged the Washington office of the Office of Price Stabilization for recognition of these unallowed costs; we have requested explanations as to why the Herlong amendment and the Capehart amendment were not applicable to the fluid milk industry; we have never received any explanation of or answers to these inquiries.

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Accordingly, it is my opinion that the only relief which we can expect to get or even hope for must come from Congress and I am here to ask you, gentlemen, by proper and appropriate amendment to the Defense Production Act, to make it clear to the Office of Price Stabilization that it is the intention of Congress to have the principles of the Capehart and Herlong amendments apply to the fluid milk industry, and that all cost increases imposed upon the fluid milk industry with the approval of any arm of the stablization program may be fully reflected in the ceiling prices of that industry.

Now, I would like to take a few minutes to back up some of Mr. Merrill's statements which, being from Chicago, and the middle of the United States, it seems like we are very much in the same position out on the west coast as they are.

I started in business in 1936 with practically no assets. We are serving about 5,000 customers at the present time and have some 45 people on our payroll.

Our concern does approximately a million dollars worth of business per year gross at the present time.

Previous to 1951, we grossed about 4 percent.

After price control went in, in 1951, it knocked our gross to about 1 percent. We showed approximately $12,000 of profit last year, and being individual ownership, with no salary drawn for myself, we cannot exist under those circumstances.

Now we have an investment of about $240,000 at the present time, and $240,000 in bonds would net almost-well, a little more than half of the profit that our business has shown.

Personally, I think, bearing out the things that Mr. Merrill has said, we in the dairy business have been discriminated against a little bit because of the fact that we will not be able to exist unless we get at least another half-cent increase, which would bring our profits back up to between 3 and 4 percent.

Now, I was very closely connected with the committee of the Chicago dealers when we were fighting OPS last October and November. Our particular territory went into a 5-day week the 1st of October, probably adding some $1,500 to our payroll-these are not exact figures-and we fought for a 1-cent increase in the price of milk, and were granted a half-cent increase instead of the cent that we thought we were deserving of, and we weren't granted that halfcent until November 16, which also showed a very great loss for the previous month and a half, which let us go more into the red for that particular year.

Now might say that there was one statement made in Washington, D. C., in my presence, that a 1-cent increase could not be granted because it would be a windfall for the large dairy concern.

I am

I am not particularly interested in any large dairy concerns. only interested in making a profit as far as my own business is concerned and unless we do get some kind of relief, I don't know what gentlemen like Mr. Merrill and myself are going to do in the future. When this 1 cent was withheld from us, and only a half-cent granted to us, is that price stabilization or is that profit control? Time is limited, and that is all I have to say.

Mr. BROWN. Does any member desire to interrogate the witness? (No response.)

Mr. BROWN. If not, you may be excused. We are glad to have you.

Mr. CASTLE. May I file a statement for Mr. Verton Rockafellow, of Camden, N. J.? He is here and would like to testify, but apparently you have not the time to hear him.

Mr. BROWN. His statement may be filed in the record. (The information is as follows:)

STATEMENT OF VERTON ROCKAFELLOW, CAMDEN, N. J.

I am Verton Rockafellow, of Camden, N. J. I am connected with Parks Dairy, Camden, N. J., and I have spent most of my adult life in the milk business. Our business has grown considerably since its inception in 1926. However, we are still a small local enterprise. Although our investment is small compared with many concerns, it is still both large and important to us.

For some time after the Korean outbreak we enjoyed a moderate return on our sales volume. From approximately the middle of 1951, however, the situation has become progressively worse. In 1950 we made 2.2 percent profit on sales after taxes. In 1951 we made 0.7 percent profit after taxes on sales. So far this year we are making on the same basis less than one-third as much as we did in the same period in 1951.

In January 1952, as part of the Philadelphia, Pa.-south Jersey industry, we negotiated a new labor contract. The dealers in south Jersey in February petitioned for an SR 63 ceiling price with the hope of obtaining a one-half-cent increase in resale prices in our area, which would about equal the wage increase. No decision has been received yet, but we understand the petition is going to be denied. We entered into that labor contract confident that OPS would give us favorable consideration. However, as I said before, we understand the petition will be denied.

There are two parts of the control program which are hard on small-business

men.

First, the wage and salary controls are most difficult for a small operator to understand and apply. The records we are required to keep are burdensome, and we are often uneasy for fear of an unintentional violation.

Secondly, the price controls are not only unfair, but also their application is too slow. Only part of our cost increases are considered. The milk industry has long been forced to function at peak efficiency, and we operate on one of the lowest profit margins of any major industry. I would like to add here that my company is reasonably efficient, and I think the figures of most of my competitors are about like mine.

Further, in south Jersey we are having great industrial expansion by an influx of heavy industry with an increase in population. The restrictions of controls on small dealers deter small dealers from expanding, while the larger dealers with broader operations and greater capital are not hindered to the same degree.

I would like to impress upon you, gentlemen, that milk is a perishable product. At one time a milk dealer may lose heavily on sales of a burdensome excess that he is committed to his producers to accept. At another time he might have to augment his regular supply with expensive purchases from outside sources. Therefore, the flexibility of pricing is most essential. Resale prices as fixed by the milk dealer must result from the exrecise of good judgment and a consideration of a great many factors, mixed perhaps with a little bit of luck or intuition. I favor decontrol. Speaking as a milk dealer, if we had decontrol tomorrow, I would raise the price of my milk a half cent a quart. This would be the first general increase in our prices since October 15, 1950. Any disproportionate price increase on the part of any dealer in a given area would result in the loss of a large number of his customers to competitive dealers. In short then, gentlemen, price control in an industry as competitive as the milk business borders on the ridiculous. Small business has been the backbone of our country, and I do think that you gentlemen should take action to prevent the elimination of the small-business man from our presen: American system.

Mr. BROWN. Call the next witness, Mr. Clerk.

The CLERK. Mr. Henry P. Taylor, representing the National Canners Association.

STATEMENT OF HENRY P. TAYLOR, NATIONAL CANNERS ASSOCIATION

Mr. TAYLOR. My name is Henry P. Taylor. I am president of Taylor & Caldwell, Inc., vegetable canners, of Walkerton, Va., and a past president of the National Canners Association.

The National Canners Association is a voluntary trade association comprising approximately 1,000 canners who collectively pack approximately 57 percent of the Nation's production of canned vegetables, fruits, fish, meat, and other canned foods. The canning plants of its members are located in all but a few of the 48 States and in Alaska and Hawaii. The dimensions of the indstry and the scope of its operations are perhaps best indicated by the fact that during 1951 the industry packed over 640,000,000 cases of canned foods of all types.

The association has requested this opportunity to appear before the House Committee on Banking and Currency for the purpose of expressing its views on the need and justification for price controls on canned foods under conditions currently prevailing in the canning industry and on the impact of price controls when economic conditions do not justify their use.

It is the firm conviction of the canning industry that the facts and figures expressed in this statement lead inevitably to the conclusion that price controls on canned foods are unnecessary, that they are currently serving no useful purpose i respect to the anti-inflation program, that prospects for the indefinite future provide no justification for their continued existence, and that the canning industry is being asked to submit to the burdens and rsetraints of a controlled price structure without reason or purpose. If it further appears that congressional action is necessary to limit the use of the price-control authority to the purposes for which it was created, then it would seem that action by this committee is indicated.

The position of the canning industry on the application of price controls to canned foods has been expressed in a resolution adopted by the membership of the association at its annual convention in January 1952. This resolution reads as follows:

Our economic system and national strength are based on the tenet that abundant goods can best be produced and sold at fair prices in a free economy. Only where unavoidable restraints upon production cause shortages in supply can there be temporary justification for the artificial, burdensome, and inevitably inequitable and complicated system of Government price controls. The canning industry is convinced that the Office of Price Stabilization should immediately promulgate regulations providing for the suspension of price control on any product in ample supply where the prevailing price is exerting no inflationary pressure. Most canned foods are in this position. Standards for suspension of control should be specifically clear, direct, and automatically operative. Their effective use must be based on economic facts rather than upon administrative predilection so as to permit appropriate congressional review and any necessary legislative revision.

We are now at almost the midpoint of the year 1952. To date the Office of Price Stabilization has taken decontrol or price-suspension action only in respect to a very limited number of commodities. The long-awaited standards for suspension of price control have as yet. appeared only in preliminary form for use in areas of the economy where dollars-and-cents ceilings are in effect.