STATEMENT OF GEORGE PAUL, NATIONAL CREAMERIES

ASSOCIATION

Mr. PAUL. My name is George Paul. I am from Brooklyn, Iowa. I own and operate a farm there, and am a member of the Cooperative Creamery board of directors in that small town.

I am here representing the National Creameries Association, and we appreciate this opportunity to appear before you.

The National Creameries Association has its headquarters in the New York Building, St. Paul, Minn., and its Washington, D. C., offices in the Wyatt Building, 777 Fourteenth Street NW, Washington 5, D. C. It is an organization of 952 dairy manufacturing firms, 85 percent of which are farmer-owned cooperative associations-the remainder locally owned proprietary firms. These firms have about 300,000 producer patrons. Our members' plants are located in the States of Minnesota, Wisconsin, North and South Dakota, Kansas, Nebraska, Montana, and Iowa. Our members' business is largely devoted to the manufacture and sale of butter and nonfat dry milk solids. Senator ROBERTSON. Would that include condenser plants?

Mr. PAUL. No; it does not. We are primarily our association is primarily concerned with the manufacture of butter.

The National Creameries Association is opposed to the continuation of the price-fixing powers conferred upon the President by the Defense Production Act, namely title IV, but favors the continuation of section 104 of the act, which confers upon the Secretary of Agriculture the power to control imports of dairy products, among others, under certain conditions specified in such section.

With respect to our opposition to continuation of the power to fix price ceilings on dairy products, we are in accord with the position of the Dairy Industry Committee, which is composed of the major trade associations in the dairy field, and which will appear before this committee to state the position of the industry groups affiliated with the Dairy Industry Committee. Therefore, in this statement, I will spend very little time in the price-control aspects of the matter, but will devote the greater part of this statement to our defense of our position that we desire the continuation of the powers conferred upon the Secretary of Agriculture to control the importation of dairy products. In this latter respect, we are also representing the Dairy Industry Committee.

Since we are processors of butter and nonfat dry milk solids, and most of our members' plants are owned by the farmers themselves that are members of the large number of cooperatives that are members of the National Creameries Association, we feel we can speak with knowledge and authority concerning both the position of the producer and the processor with regard to the proposed bill.

We do not appear before you asking you for special dispensation, but to express to you our beliefs as to the best methods to follow in regard to national policy for the dairy industry during this period of emergency. We believe that the soundest policies are those that will encourage the production of the largest possible volume of milk and butterfat.

We urge the Congress not to place hampering restrictions in the way of the dairy farmer and processor in utilizing to the fullest pos

sible extent the labor, materials, and equipment available for the production of milk and its products. We are opposed to any legislation that we believe will tend to restrict the production, manufacture, and marketing of milk and its products. Accordingly, we oppose continuation of the power conferred upon the President to impose price ceilings on milk and its products, because we believe that such controls hamper production and marketing. We oppose termination of the power conferred upon the Secretary of Agriculture under title I, section 104 of the act, to impose controls on the importation of dairy products, because we believe, and our colleagues in the industry believe, that lifting these controls and permitting the importation of large volumes of butter and other dairy products will drastically reduce the incomes of our producers, and this in turn will cause them to reduce production, interfere with orderly marketing and result in unnecessary expenditures under the price-support program.

This Congress should do nothing that will reduce the returns to producers for milk and butterfat, or hold the returns for such products below the level of returns from other competitive lines of agricultural production.

Our reasons for the preceding statements follow:

1. Milk production on farms is barely being maintained. Milk production is barely being maintained under present conditions, and would be seriously hampered by freezing or lowering of price levels.

The facts are as follows:

(a) Milk cow numbers are at the lowest point since 1930. As of January 1 this year, there were 23,407,000 cows and heifers 2 years old and over kept for milk on farms-a reduction of 1 percent from the preceding January and markedly lower than the peak numbers recorded in 1945 of 27,770,000 head. There does not appear to be any improvement in sight for this condition. Fairly large numbers of heifers 1 to 2 years old kept for milk have been reported the 1st of each January for the last several years, but the rate of elimination during the year has been high, so that numbers in the milking herd have shown a steady reduction since 1945.

On the other hand, the number of cattle on farms as of January 1 this year, reached an all-time record of over 88 million head. This large number, in the face of diminishing numbers of dairy cows, is accounted for entirely by the fact that beef cattle numbers are very high. For details as to numbers, see tables 1 and 2, appendix.

(b) Milk production has been fairly well maintained during the last few years at figures not much below the wartime peak, but this has been accomplished by a steady increase in production per cow, as a result of better husbandry practices. In 1950, production per cow was 5,292 pounds, as compared to 4,589 in 1939. There is a limit, however, to the extent to which increased production per cow can be made to offset declining numbers.

(c) Prices for milk and butterfat received by farmers in this country are low relative to the prices of beef cattle-the major competitor of dairy cattle for the use of farm labor and capital. Table 3 of the appendix shows that the farm price of milk sold wholesale and the farm price of butterfat was 96 and 92 percent, respectively, of parity prices, while the prices received by farmers for beef cattle were 146 percent of parity in 1951. As a matter of fact, prices of beef cattle

have been much higher relative to parity than milk and butterfat prices for the last several years. This price relationship alone explains why the dairy herd continues to decrease, while the beef cattle herd continues to increase.

I should like to give you a personal example of my own. Two months ago I sold a Holstein cow for $408. She weighed 1,785 pounds. Now, the most that cow, in my part of the country, could possibly have brought as a dairy animal, by selling it to another. farmer for his milk production purposes, would have been about $300. It is very easy to see, from that example, why a lot of dairy farmers in my part of the country are decreasing their herds, culling them out, selling them for beef production, simply because it is more profitable.

We see no signs of a reversal of this trend, hence must urge that nothing be done by this Congress to freeze these unfavorable relationships pricewise, or by permitting large-scale imports-to decrease dairy prices so that the adverse relationships now existing will be accentuated.

It is interesting to note that during the war when we had full-scale price control on the one hand, and the drive for very high dairy production on the other, prices for milk and butterfat were not only permitted to reach levels considerably above parity under the price ceilings, but in addition, the Government paid out subsidies to the individual farmers to increase their returns even more. We are most assuredly not asking for subsidies-on the contrary we opposed them during the last war and oppose them now. We do ask, however, that Government recognition of the need of, and its request for, continued heavy milk production on the farms of this country, should also recognize that this need cannot be met with dairy prices unfavorable to prices for competing agricultural commodities. We should not on the one hand be asked to maintain production, and on the other hand have road blocks thrown in our way by lowering prices through imports and by freezing prices at levels that are unfavorable to the maintenance of dairy production.

In the butter industry, we have lost a great portion of our prewar business. Per capita supplies of other dairy commodities have been kept ample by shifting milk from butter to other uses. We in the butter business are not crying wolf-it has already happened to us, and we do not want the trend accentuated.

2. World price levels are considerably below price levels in this country. Prior to the last war, there were a number of fairly important butter importing countries, of which England was the most important. Since the war, with the vast changes that have taken place in the government structure in Europe, this pattern has changed somewhat, but England is still by far the most important importer. Major exporting countries are New Zealand, Australia, Denmark, and the Netherlands. Ordinarily, the greater portion of the exportable surplus produced by these countries goes to England.

Prices for butter in this country, and as a result the prices of milk and butterfat to dairy farmers, are considerably higher than the prices prevailing in the foreign countries just mentioned, and significantly greater than the prices at which these countries could ship butter to the United States. The most recent figures which we have been able to compile indicate that butter could be laid down in this

country, all costs and duties paid, for about 60 cents per pound. Calculated as follows:

Insurance (per lb.).

Ocean freight (per lb.)

Butter prices, f. o. b., Copenhagen, as of January 3, 1952 (per lb.)

Cents

48.90

United States tariff duty_

Trucking (American ports)
Storage (month)_.

Total costs____.

In this connection, the tariff rate on the first 60 million pounds of butter that would be imported would be 7 cents per pound, as provided under the trade agreements, and thereafter the basic rate of 14 cents per pound would apply. Accordingly, after the full tariff rate applied, butter, basic current foreign prices, would be imported at about 67 cents per pound in large amounts. These prices refer to high quality butter, and are based upon the so-called free butter originating in Australia, New Zealand, and Denmark.

I would like to explain just what I mean by free butter. England has negotiated purchase contracts, on a government-to-government basis, with New Zealand, Australia, and Denmark. Such contracts name the purchase price, and presumably the volume covered. However, some of the exportable butter of these countries is left "free" of the contract, and the exporting countries are permitted to sell it wherever they desire. It is estimated that about 15 percent of the exportable surplus is "free" butter.

The price of the contract butter is quite low, both in relation to our own prices, and the prices for which the "free" butter recently has been selling in countries other than England. At present, these contract prices range from 36.3 cents per pound for Australian butter to 39.3 cents per pound for Danish butter. If this butter were available to our importers at the same prices, it could be laid down in the United States at about 46 to 48 cents per pound.

It should be obvious that butter prices in this country would be drastically reduced if large-scale imports were permitted. Of course, such importation probably would tend to cause adjustments in the contractual arrangements between England, Denmark, New Zealand, and Australia. United States domestic prices would be drastically reduced, but there would probably be serious pressures exerted to raise the contract prices if such increases could be negotiated. If this were not done, we would have the sorry spectacle of imports being made to this country at prices that would be disastrous to our own dairy farmers, although considerably higher than similar butter would bring in England. Imports in this country would therefore be used in effect to offset low prices under the contracts with England—an example of discriminatory marketing in its most outrageous form.

Even though some people may think that butter prices in this country are too high, it is to be noted that prices received by producers for milk and butterfat used in this commodity this year have not been sufficient to maintain production. Creamery butter production this year was 1,214,685,000 pounds, a decline of 12 percent from 1950. Consumption per capita of the population is estimated at 9.7 pounds in 1951, as compared to a rate of consumption of 16.9 pounds per capita in 1940.

96315-52-pt. 1—17

To permit unlimited importations of butter in the face of the situation described above would undoubtedly impair domestic production, and hence be contrary to one of the standards for instituting import control specified in section 104.

Senator ROBERTSON. I want to ask you a question there. I am very much interested in the dairy industry in Virginia, which is primarily a fluid-milk market.

They have gone in for dairy farming in a big way, and the condenser plant at Halifax is the fifth largest in the entire United States.

I was surprised to see how many cattle they are now raising in Florida. I am told that in the Southern States they cannot produce cattle. Virginia has been a big cattle State, but Florida has gone way beyond Virginia, now, in the number of cattle.

You know as a practical farmer that any grassland that will support beef cattle will also support dairy cattle. Now, the southern farmers have to sell about 40 percent of their production of cotton abroad, and to enable them to buy that cotton we have either got to give them the money or they have got ot earn their dollars. There is a lot of flimflamming talking about the dollar gap. The dollar gap is not any different in the Nation than it is with me. If I spend more than I make, I have a dollar gap, and I have either got to produce more or cut down on what I am buying to close that dollar gap. They have got to do the same thing. There is not any hocus-pocus about a dollar gap; they are just buying more than they can pay for.

Suppose we rig our tariff so no nation has the money to buy our cotton. What would those southern farmers do?-Go into milk and butter or sit idly on the farms and starve?

Mr. PAUL. If it were made unprofitable for them to continue their milk operation, they would certainly have to go into some other line. of activity.

Senator ROBERTSON. You will have to admit that all through the depression the farmers who were in the dairy business had less drop in net income than any other type of farming. That certainly was true in Virginia. They came through the depression better than any other type of farmers, and I believe it will always be that way, but I am just taking the over-all picture. I cannot sit here and legislate just for the dairy group of Virginia. I also have to consider the tobacco farmer in Virginia. My colleagues on either side of me, one from South Carolina, one from Alabama, have to consider what is going to happen to their cotton farmers. You have to give consideration to the over-all picture when you start legislation on tariffs that amount to exclusion of a given product, because when you carry that to its logical conclusion the very group that you are trying to help will run into a new type of competition that will hurt much more than the importation of, say, 3 percent of the national product.

I do not believe in giving billions of dollars a year away to nations who holler about a dollar gap.

Mr. PAUL. We are certainly not in favor of giving away our substance to foreign countries.

Senator ROBERTSON. If you are going to be international politically, will you not have to be economically international, or you will run into a hopeless conflict?