The production of potatoes fluctuates very much from year to year. So there may be temporary situations in which there is an oversupply and in which prices will tend to go up at farm and retail levels; and then we have situations where we have had oversupply and prices have gone down.

Mr. COOLEY. It isn't feasible to export large quantities of perishable commodities, is it?

Mr. OGREN. No; not unless they can be processed.

Mr. COOLEY. You could not export potatoes, or similar produce?
Mr. OGREN. No; generally not.

Mr. COOLEY. Well, you could export apples or a similar commodity, could you not?

Mr. OGREN. Some are exported.

Mr. COOLEY. By and large the surplus that we produce of perishable vegetables must be consumed in the American market, isn't that true?

Mr. OGREN. Yes.

Mr. COOLEY. You are actually going to have to increase the consumption of these perishable commodities here in our own market, is that not correct?

Mr. OGREN. Yes; in some cases we have been able to expand the market by using some of these perishable commodities in processed form.

Mr. COOLEY. Tomatoes in themselves are perishable.

Low-income families cannot eat much bread if it costs them 26 cents a loaf. We must find some way to get the food into the mouths of hungry Americans.

Mr. OGREN. I think one example is where we have been able to market a perishable product like oranges in the form of frozen concentrated fruit juice. We have been able to save enough in the transportation of that perishable product so that the prices

Mr. COOLEY. Citrus fruits are not in trouble at the moment, are they? Due to research and improvement in the marketing of citrus fruits and byproducts, such as you say, concentrated and frozen fruit juices and things like that.

Mr. OGREN. Yes.

Mr. COOLEY. I still do not see what justification there is for a little orange like we had this morning costing the consumer 8 cents in New York. There are times that there is such an abundance they do not even harvest them.

I am not too much concerned about citrus fruits because I believe the producers of citrus fruits are in right good shape but these other producers of perishable commodities, they are at the mercy of the merchants' market; it seems to me that does fluctuate widely. Even right here in the city of New York there are such situations in retail prices.

Mr. OGREN. Yes. I might add a point on the retail prices. We have found in some of our studies there are wide variations in retail prices of the same product from store to store, but one product may be higher in one store and another product may be higher in another

store.

Retailers are looking at the overall operations. And if their produce department margin needs to be 25 cents, say, to cover their costs, the margins may be higher on one commodity and lower on another and this may vary from store to store. That may explain some of the variations illustrated here this morning.

Mr. McINTIRE. May I ask a question at this point? Will you turn to page 7 with reference to your table here. Cabbage, 50-pound bag. "Shipping point"; is that an f. o. b. figure?

Mr. McINTIRE. That is 71 cents, "wholesale 92 cents" and "retail $2.76."

Is there some relationship in this type of situation, in which I make this observation that the more perishable the commodity, the greater fluctuation there is at shipping point and at wholesale, but the retail price has a tendency to stay up there?

Mr. OGREN. It is quite flexible and

Mr. McINTIRE. For all practical purposes, and of course western New York cabbage is a very perishable commodity.

Mr. OGREN. Yes.

Mr. McINTIRE. That price to the grower of 71 cents could probably be a dollar and a half and the price at retail would not go up very much. I make this observation. If I am not right-you are more familiar with the statistics than I am-if that grower could get one dollar and a half for that cabbage, a 50-pound bag of cabbage, the price at retail would be less-well, it would be in the neighborhood of $2.90. Mr. OGREN. I think the price may be around $3 or more. Mr. McINTIRE. Maybe around $3.

Mr. OGREN. The percentage rise at retail will be less.

Mr. McINTIRE. In other words, the more perishable the commodity the less there is of a pass-through to the consumer on the difference in price at shipping point.

Mr. OGREN. Well, it will partly depend on how far this product is being shipped and what the costs are that are involved.

Mr. McÎNTIRE. It might, except that that is not a controlling factor.

For instance, in our potato deal we can be selling potatoes for 50 cents for 165 pounds, or we can be selling for $3.25 per that amount and it will make about 2 cents a pound difference at retail.

Mr. OGREN. Yes.

Mr. McINTIRE. What is the reason for that situation? Why don't these prices as reflected in your table here of 71 cents per 50-pound sack-the cabbage is perishable, yes, but potatoes are not nearly as perishable as the cabbage, but still that same situation exists there in a substantial degree. I paid 72 cents a pound for potatoes in Washington, when the growers were getting $2 to $2.50 in Maine, and when the grower is getting 50 to 75 cents I am still paying 41⁄2 and 5 and 6 cents a pound.

Mr. OGREN. Well, going back to cabbage, this may illustrate somewhat what you have in mind. In 1956 the United States yearly average retail price of cabbage was 7.9 cents a pound and the farmers received 1.8 cents which left a total margin of 6.1. That was a relatively low price for cabbage.

Going back to 1952, we had a retail price of 9.4 cents; and the farm value was 3.7 and the margin was a little bit less.

Last year we had a price at the farm that was about 50 percent below 1952, and the price at retail was 12 cents or less than 20 percent below. We have about the same margin. In other words, prices were moving up and down, but the impact of the relatively stable margins means that farm prices jump around a lot more than do the retail prices.

Mr. McINTIRE. If either basis is used, then you have a soft market. Every individual in a position in the distributive system has to widen his margin a little bit to protect for a soft market situation. While if you have a firm market situation every time he buys, if he is reasonably sure he will get his money out and a little more, he will work on narrower margins than he will if he thinks every time he buys for future delivery he may not get that money out and may take a loss.

In other words, if you have a little short supply in perishables is the distributive system willing to take a narrower margin than when there is a long supply? And do not they widen their margins in a long supply because of a softening tendency?

Mr. OGREN. We have some indication of that. Some of our studies have brought that out.

Mr. McINTIRE. It is the accumulation of these slightly wider margins to protect a soft-price situation which results in this sticking at the retail price in relation to the farmer's price. Is that a fair analysis of it?

Mr. OGREN. Yes; I would say so.

Mr. ANFUSO. Mr. DeLoach, would you like to add anything to what Mr. Ogren has said?

Mr. DELOACH. I would like to make a couple of observations, Mr. Congressman.

We must recognize that our marketing system has only one basic job to do, and that is to move products from the farm to the consumer. And, generally speaking, our marketing system is doing a very good job, if we compare it to other marketing systems of which we have

an awareness.

We have been studying this marketing system and attempting to measure the cost of distribution of farm products with the idea of learning something about the comparative efficiencies of processing and distributing farm products.

We are finding that the costs of marketing are going up, and in the process of attempting to explain why marketing costs are going up we have settled down on three distinct points.

One is that the price level, generally, is rising. A second is that we are gradually adding more and more marketing services along with the food products we are selling. And, third, we are just changing our ways of living and evaluating products we buy.

I think our general statistics that we have published over a period of years will indicate a great deal of comparability in trends between the price of food products and the price of other commodities generally-the price of labor, the price of transportation, and so on down the line. They are all following the same trend.

Percentagewise, too, they are going up about the same rate.

We have special commodity groups that frequently run into very distressing conditions as a result of imbalance of supply and demand.

When those conditions arise, the producers of such commodities frequently are out of business.

And in a similar way to a small retailer or small wholesaler who cannot meet his costs as the result of the selling-price situation he faces.

In our studies of marketing costs we are finding that volume is one of the most important factors we have to take under consideration when there are differences in the cost of marketing like or similar commodities. When a retailer can distribute a large volume of product, that is an important cost consideration. It is equally important to wholesalers and to processors.

We have chosen to study each of these factors affecting marketing costs and the extent to which it is possible to improve the manner in which the various services are performed and to learn whether we can reduce prices or improve services.

Mr. COOLEY. First, I want to thank you and your associate for your appearance before the committee and giving this testimony in the presence of these interested parties who have met with the committee today. I should like to ask you 1 or 2 questions which I think are pertinent to the observations you have just made.

Have you had an opportunity to visit the Washington Street Market since you have been here?

Mr. DELOACH. Yes, I have visited it.

Mr. COOLEY. Do you not agree that it is a disgrace to our distribution system in that we should tolerate a marketing facility such as the Washington Street Market?

Mr. DELOACH. I would say it appears to be a very ineffective system.

Mr. COOLEY. You know it is ineffective. It is similar to those of 100 years ago. We have been shown pictures of the same market taken over 100 years ago, back in the horse-and-buggy days, before the modern transportation facilities we have now.

I believe this, that if we could prevail upon the officials of the city of New York to visit that marketing area and study it, as we have studied it, they would actually do something about it.

Some of the things that you have mentioned have been very timely and well stated. I wish that these housewives who were here this morning could be here this afternoon.

The housewife is buying today a lot of built-in service when she buys at one of these modern marketing grocery stores, is that true? Mr. DELOACH. Yes.

Mr. COOLEY. Of course, we have the procedure and method of those who are operating our distribution system and which have within them transportation costs and production costs over which they have no control, and all of the other items of cost which go into the commodities before being purchased by the housewife, and some of these things we cannot do anything about.

Do you not agree we can do something about the marketing facilities at the terminal markets?

Mr. DELOACH. I think Mr. Crow will speak better on that. But I think you are right on the basis of what I have seen, I have not studied it.

On the basis of just casual observations over time I would agree with you thoroughly.

Mr. COOLEY. Mr. McIntire pointed out a moment ago that any merchant who is handling a highly perishable commodity in a rather fluctuating market, naturally, will want a wider margin of profit than one who is operating in a market where he knows that he has a reasonable chance to make a profit on a smaller margin.

I think one thing that this committee might be able to accomplish, that is, to bring about an improvement in our distribution system, is by bringing about an improvement in our terminal market facilities. Mr. DELOACH. It would be highly desirable.

Mr. COOLEY. That is all.

Mr. ANFUSO. Thank you, Mr. DeLoach and Mr. Ogren.

Mr. Fisher, would you come up? We would like to ask you a few questions, please.

Mr. Fisher, your full name?

STATEMENT OF MAX FISHER, ASSOCIATED FOOD STORES,
NEW YORK, N. Y.

Mr. FISHER. Max Fisher.

Mr. ANFUSO. What is your business, Mr. Fisher?

Mr. FISHER. I am with the Associated Food Stores, produce department.

Mr. ANFUSO. You have been here this morning, and have heard the testimony of other witnesses and you were good enough to accompany the committee last evening to the produce market.

Do you have any observations that you would care to make with reference to that produce market?

Mr. FISHER. Where do you start? I think I told you last night, Congressman, that there was such an additional cost put on stuff that came into the New York market unnecessarily; that it was almost close to $250,000 a day which I do not know whether we can save the whole $250,000, but we could save a good part of that by eliminating unnecessary expenses.

Mr. ANFUSO. Would you mind explaining that additional cost?

Mr. FISHER. Well, the setup of the New York market is not comparable to other markets. In fact, we used to have quite a bit of business from outlying areas that came to this market, the New York market, which we have lost, because the New York market if they bought a car of lettuce, we will say, in California at $3 f. o. b., the same as another outlying market, we had additional charges on each and every package because of our physical setup, that we had to get more for each package than outlying areas.

Mr. ANFUSO. What was the result?

Mr. FISHER. The result, of course, was put onto the consumers.
Mr. ANFUSO. And, also, the loss of business to the market?

Mr. FISHER. That is right. Mr. Cooley said this morning-he was corrected, but he was not far wrong-he mentioned that New York enjoyed at least a 20-percent business of the perishable productsalmost 20 percent that was shipped from the West, from the South, but we are down below the 10 percent-like that gentleman saidI do not know his name-he said, he is probably right, it is probably high at 10.

Mr. ANFUSO. What is your recommendation, Mr. Fisher?