By focusing supply and demand factors at a central point futures prices, in the absence of manipulation, are competitively determined and widely disseminated. Pronounced price fluctuations generated by an inelastic demand, coupled with the perishable nature of the commodity, have characterized the potato market both before and since 1952 when futures trading in potatoes first reached a significant volume. The inherently volatile character of potato prices increases the need for hedging protection. And in recent years there has been more general acceptance and wider use of the potato futures market by shippers and others concerned with the production, financing, and marketing of potatoes. The protection afforded through the hedging facilities of the futures market should be reflected in a reduction in marketing costs and risks.

We recognize that the wide fluctuations in potato prices attract a type of speculation, the control of which presents problems beyond those found in the case of less perishable and more readily storable commodities. We are of the opinion, however, that the benefits from futures trading in potatoes outweigh the imperfections, which are present in varying degrees in all markets.

The Bureau of the Budget advises that it has no objection to the submission of this report.

Sincerely yours,

E. T. BENSON, Secretary.

Mr. HAGEN. Mr. McIntire is presently listed as the first witness. Do you want to appear now, or are you deferring to Mr. Hamer Budge, who is present?

Mr. CLIFFORD MCINTIRE. Mr. Chairman, I would be very happy to defer to Mr. Budge as the schedule perhaps requires that he be somewhere else for his committee work or other important matters. If he would like to testify at this time, I would be happy to follow.

STATEMENT OF HON. HAMER BUDGE, A REPRESENTATIVE IN CONGRESS FROM THE SECOND DISTRICT OF THE STATE OF IDAHO

Mr. BUDGE. I appreciate that very much, Mr. McIntire. I happen to be on the Defense Subcommittee of the Committee on Appropriations, and this is quite a busy time for us right now.

I certainly would like to subscribe to the remarks of the gentleman from New York, Mr. Anfuso, that this matter should not be prejudged. I think it is the function of a committee of the Congress to render these matters, and the committee in its wisdom, after conducting full and complete hearings, is certainly better qualified to reach a conclusion than are the individual Members of Congress, such as myself.

I would, however, like to bring to the attention of the committee that in our potato producing State of Idaho this year we have had a new experience which we do not quite understand and which we certainly would hate to bear as a permanent thing.

Very recently Robert L. Reichert, the Idaho Agriculture Commissioner, stated that, and I quote:

Wide fluctuations in potato futures trading has run the price of spuds up or down as much as $2.35 per hundredweight in a week's time

and

is posing a threat to the Idaho potato industry.

I would call the committee's attention to that figure of $2.35 per hundredweight fluctuation in 1 week's time. Now that would normally be as much as the grower would receive for the product in a normal year. And here it is fluctuating more than the entire value which he would receive in a week's time.

Commissioner Reichert further said that the potato industry is having the same trouble due to the futures trading on the mercantile exchange as was experienced in the past by the growers of onions-also in my State of Idaho. He said that the Idaho Department of Agriculture feels it is time to inform and also remind the growers, shippers, brokers, jobbers, and ultimate consumers of Idaho potatoes of the speculation problem.

At a meeting of the Idaho Potato Producers Association, following Mr. Reichert's statement, the association went on record supporting him and stating the New York Mercantile Exchange future potato board is detrimental to the best interests of the potato growers, shippers, receivers, and the consumers of the United States, including the State of Idaho, and should be eliminated. The group concluded that the Government's stocks-on-hand figures have indicated all season that supplies of potatoes nationally were, and are not, now in surplus with normal requirements. The association said it feels that if the normal laws of supply and demand had been permitted to govern in its natural course, without the influence of the extreme ups and downs in potato prices as reflected on the future potato board, that

No doubt present demand would be much improved with higher prices.

Mr. Chairman, I would like permission to place in the record at this point a statement of the Idaho Potato Producers Association in support of the bill H. R. 10282, and also a telegram addressed to me under date of April 26, 1958, by Mr. Edd Moore, representing the Idaho Growers and Shippers Association.

Mr. HAGEN. Is there any objection?

Mr. ANFUSO. No objection.

Mr. HAGEN. It is so ordered. That will be included in the record at this point.

Mr. BUDGE. Thank you, Mr. Chairman.

(The documents referred to are as follows:)

STATEMENT OF THE IDAHO POTATO PRODUCERS ASSOCIATION, INC.

The Idaho Potato Producers Association, Inc., is a nonprofit organization, incorporated under the laws of the State of Idaho. It was formed to effect an orderly and efficient organization of all persons in the State of Idaho engaged in the production of potatoes, to promote the welfare of all persons engaged in the growing of potatoes, and to represent the potato producers of Idaho in all matters affecting the potato industry.

We are in favor of and support H. R. 10282, a bill to amend the Commodity Exchange Act to prohibit trading in potato futures in commodity exchanges. We favor the free operation of the economic forces of supply and demand in determining price, without the influence of futures trading.

The Idaho potato production area is located a great distance from most major consuming markets. This results in high marketing costs, and requires that we sell in fresh form only our better grades or qualities. In order to maintain high-quality standards, we have imposed regulations upon ourselves through means of the marketing agreement and order, which provides authority to establish and enforce minimum standards of grade, size, maturity, and cleanliness. Idaho potato growers tax themselves to advertise and promote greater consumer acceptance and wider distribution of potatoes. This tax is 2 cents per hundredweight, and provides an annual fund approximating $360,000 to advertise and promote Idaho potatoes. These efforts are directed toward obtaining maximum economic returns to growers. We feel this aim can only be accomplished in a market free from outside influence.

The recent continual price drop on Maine futures traded on the New York Mercantile Exchange has had a depressing effect on all potatoes moving in fresh market channels. This lack of confidence by the buying trade has caused a re

luctance to buy ahead. The trade only buys immediate requirements when prices are continually going down. Even though Idaho potatoes are not traded on the New York Mercantile Exchange, as the price of futures declines, so does the cash price, and these depressed low prices are not realistic in relation to the total supply of potatoes at the present time. Prices established through board trading on Maine potatoes enter into the competitive price the trade is willing to pay for Idaho potatoes.

The up and down fluctuations in the futures board have been detrimental to growers, handlers, processors, and receivers. They have likewise been detrimental to consumers because orderly marketing and orderly pricing have been impossible. Unlike storable comomdities, potatoes are perishable and must be consumed within a reasonably short time. They play an important part in the American diet, and account for the greatest consumption of any of the vegetables, so essential for good health. Producers must have a reasonable profit in the production of this important food product, or their efforts will be diverted to the production of other crops.

Idaho russet potatoes will find their own price level in a free and open market, based upon supply and quality factors. We respectfully request favorable consideration on H. R. 10282 to eliminate futures trading in potatoes, so that the economic forces of supply and demand may operate without interference, in determining market prices.

Hon. HAMER BUDGE,

IDAHO FALLS, IDAHO, April 26, 1958.

At recent meeting Idaho Growers & Shippers Association, following resolutions and conclusions adopted, went on record that the New York Mercantile Exchange future potato board is detrimental to best interests of the potato growers, shippers, receivers, and consumers of United States including Idaho and should be eliminated. The group concluded that the Government's stocks-on-hand figure has indicated all season that supplies of potatoes nationally were not in surplus with normal requirements. It was felt that if the normal law of supply and demand had been permitted to govern in its natural course without the influence of extreme ups and downs in potato prices as reflected on the future potato board that no doubt present demand would be much improved with higher prices. We will appreciate your support to eliminate perishible potatoes from all future boards.

EDD MOORE,

Idaho Growers Shippers Association.

Mr. BUDGE. I very much appreciate the opportunity to appear before you this morning, and I would like to emphasize that in an industry as large as the potato industry in the State of Idaho, where we normally ship somewhere between 40,000 and 50,000 cars of potatoes, this is a very serious and a vital thing, and I wish the committee the best of luck in its attempt to solve it for the benefit of American agriculture.

it.

Thank you.

Mr. HAGEN. Are there any questions of Congressman Budge? Mr. ANFUSO. I have no questions.

Mr. HAGEN. Thank you.

Mr. McIntire, if you would be our next witness we would appreciate

Mr. CLIFFORD MCINTIRE. I thank you.

STATEMENT OF HON. CLIFFORD G. McINTIRE, A REPRESENTATIVE IN CONGRESS FROM THE THIRD DISTRICT OF THE STATE OF MAINE

Mr. CLIFFORD MCINTIRE. Mr. Chairman and members of the committee, I have quite an extended statement here which I would appreciate being incorporated in the record, and in view of the fact that

there are a number of witnesses from outside of Washington, and in order that they may have full opportunity to be heard today, I would only like to speak to this statement as a supplemental.

Mr. HAGEN. Do you have copies of your statement?

Mr. CLIFFOR. MCINTIRE. I have this one.

Mr. HAGEN. Just the one copy?

Mr. CLIFFORD MCINTIRE. Well, I have other copies which are coming.

Mr. ANFUSO. Can we get a copy later?

Mr. CLIFFORD MCINTIRE. Yes, sir.

The point which should be kept in mind in relation to the effort of H. R. 10282 is that this is directed toward the elimination of futures trading on the single commodity of potatoes. Now we have all dealt in this committee with the matter of futures trading on onions. I would point out also for the committee's information that while there is the basis that is, there is the authority, so to speak-for futures trading of potatoes in Chicago, a contract which deals entirely with Idaho potatoes, there is no trading in the Idaho contract. The only trading which is done is on the New York Mercantile Exchange, and it involves a Maine contract.

Now, the reason why that is a Maine contract is that there can be only potatoes which are deliverable out of Maine eligible for participation in this contract. In other words, as far as the commodity itself is concerned in its physical position, the exchange can deal only in potatoes which have originated in their shipment within the State of Maine.

However, while this intensifies perhaps the feeling for the concern. of Maine producers because this exchange is dealing in their specific commodity, I would point out, as Congressman Budge of Idaho has pointed out, that the activities of the exchange and the influence they have on pricing from day to day is not restricted strictly to Maine potatoes but is reflected across the country in the price which growers receive in producing areas outside of Maine. New York is a very major market, and at every moment the price in New York is important in the price structure of the commodity. And so whatever New York prices are in relation to potatoes from Maine, that price is reflected in the price received by New York growers, by Pennsylvania growers, by Idaho, California, and the new crop coming in in relation to the late crop. So this trading mechanism has a tremendous impact instantly and continuously on the price structure of the potato that the potato producers receive across the country.

We are dealing here not in any sense as an attack upon the principle of futures trading. We are not in any sense quarreling with the futures trading of any other commodity. We are saying that while other commodities by virtue of their marketing mechanisms may lend themselves to futures trading this commodity-and we have also said the same with onions-by virtue of its perishable nature, by virtue of the fact that it must be moved to market from producing areas within a rather fixed time, or it goes out of condition, in view of the fact that by virtue of its perishable nature, it is subject to all of the changes in weather, wherever they are being harvested, or wherever they are being grown-that these factors permit a certain amount of market activity that is not at all characteristic of those commod

ities like grains or cotton or other commodities which can be put into storage and carried over from year to year.

There is the other factor, that while there is a portion of this commodity used in processing, that there is not as much need for a futures market in connection with forward pricing as with grains, in connection with feeds and flour and things of that sort.

I would like to speak a moment to the point raised by Congressman Anfuso. I would like to remind the committee that the committee's interest in futures trading in onions and potatoes did not originate with the calling of this hearing. This committee's interest in the trading of these two commodities was officially initiated on October 27, 1955, when Chairman Cooley appointed a subcommittee on futures trading in perishable commodities. Now this special subcommittee held hearings in Presque Isle, Maine, on December 6 and 7, 1955; in Chicago on March 24, 1956; and in Washington on May 16, 17, 18, and 22, in 1956. It issued a report on September 24, 1956. I am sure that this committee realizes the activity which has been carried on, in relation to onion futures.

I would point out that the background of hearings in relation to onion futures trading were hearings on both potatoes and onions. I would point out that the bill which we are considering this morning was introduced in January, and certainly on the basis of my experience, serving nearly 7 years on the committee, there is nothing precipitous about calling a hearing on the bill introduced in January in the hearings called the last of April.

I am sure that we have seen before this committee the occasion when a bill has been introduced and called up within a week for hearing. So to call this bill up for a hearing in the last part of April, when it was introduced in January does not in my opinion result in any precipitous action on the part of this committee.

Mr. Chairman, I have numerous letters received from Maine and other places. They are generally very short letters but they express the position of growers and shippers on this bill. I ask unanimous consent that they be made a part of the record subsequent to my testi

mony.

Mr. HAGEN. If there is no objection, we will include the letters, plus Mr. McIntire's statement, at the conclusion of his testimony.

There being no objection, it is so ordered.

Mr. CLIFFORD MCINTIRE. Mr. Chairman, I have certain telegrams here which are very brief, ranging from Maine to North Carolina. Mr. HAGEN. The same request in the same order with respect to the telegrams.

The clerk of the committee says Mr. Cooley has received a stack of telegrams, and many of them perhaps from the same people, so we will not duplicate the inclusions.

Mr. CLIFFORD MCINTIRE. That is very satisfactory.

Mr. Chairman, I have a certain limited amount, in quantity, but certain clippings from trade papers which I would appreciate being made a part of the record at this point.

Mr. HAGEN. The same order.

Mr. CLIFFORD MCINTIRE. Mr. Chairman, there are others here who have testimony in detail, and I would appreciate, as I have indicated, having my statement made a part of the record, and I would be very happy to answer questions if such are requested.