"It proved completely disastrous. Farmers were compelled to hold their hogs until their corn supplies were eaten and the hogs grew to such large size that they went beyond the bracket of prices by weight at which the Government was supposed to support the market.

"With their corn supplies gone, farmers were compelled not only to dump the hogs they had on hand when conditions finally eased and the packers could take them, but they also dumped their brood sows. The result was the most drastic cut in the pig crop between 1943 and 1944 ever in the history of the American Nation. It was cut 35 million head.

"Up to 1943, the normal slaughter of calves in this country was a little under 10 million head. But in 1944, with the cut of the pig crop, packers were unable to get pork with which to supply the trade, so they turned to the slaughter of calves. As you can see in that table I, the slaughter jumped from 9,940,000 head in 1943 to 14,242,000 head in 1944 according to official figures."

(6) The OPS approach to the numbers of livestock available for slaughter can only be hypothetical. There is nothing in the regulation to prohibit the OPS from making a slight error and place livestock quotas below what can be expected to be marketed in any certain month. When there are 100 head of livestock available for slaughter and the quota says that only 80 can be killed, a new slaughterer must be found for the additional 20 animals. During the short period that the slaughter quota system was in effect during June and July, it was a period of light marketings and we had no way of knowing what would happen to the system under heavier marketings which could be expected during the fall and winter months.

In conclusion, our experience in the past with cure-alls of this type has been that they have only intensified the problems of livestock marketing.

Practically all of the 1951 crop of western feeder lambs has now either been shipped to feedlots or is under contract for delivery in the next 30 days.

At the present time the lamb industry is still operating under the temporary freeze order of last January 25 with its attendant evils of ununiform individual packer ceilings.

Production of sheep, lambs, and wool has been increasing substantially for the past 2 years and we sincerely hope that no law is written or that no regulation is issued which will interfere with the desire of sheepmen to increase production of meat and fibre which are so vital to our national security effort. Therefore, we respectfully urge the Congress to refrain from reinstating slaughter quotas.

The CHAIRMAN. Mr. Shaw, of the Safeway Stores. Mr. Shaw, will you come up?

STATEMENT OF SETH SHAW, SAFEWAY STORES, INC.

The CHAIRMAN. If there is no objection, Mr. Shaw's statement will be made part of the official record.

Mr. Shaw, will you high light what you believe you desire the Senators to know from whatever part of this statement you wish? Mr. SHAW. My name is Seth Shaw. I am employed by and appear in behalf of Safeway Stores, Inc.

We operate approximately 2,000 stores in 23 States and the District of Columbia. In addition, we operate a number of specialized meat warehouses and two packing plants. These two slaughter plants supply less than 7 percent of our total supply.

The CHAIRMAN. Where are your slaughter plants?

Mr. SHAW. We have one at Los Angeles, Calif., and one at south San Francisco, Calif.

Mr. Chairman, I have prepared a brief summary of my statement and, if that is all right, I will read that summary.

The CHAIRMAN. We want you to do exactly what you wish.

I merely suggested that sometimes you can emphasize the parts you are interested in. Sometimes the Senators do not get a chance to read the entire record but they can read that part.

You will proceed in your own way.

Mr. SHAW. Our appearance is against Senate bill 1928, which would establish livestock-slaughter quotas. Our objections can be considered under three categories.

First, there is nothing in the record, or in our experience in procuring meat supplies, that provides any evidence that slaughter quotas will either control black markets or result in a better distribution of meat supplies.

In my written statement, I showed the extent to which our meat supply was diverted away from us during 1943 when Meat Restriction Order 1, issued by OPA, and a succeeding order, FDO 27, issued by the War Food Administration, were in effect.

In the appendix to that statement, I explained that, while those orders did not limit the number of head or the poundage live weight that a slaughterer could deliver or could slaughter, those orders limited the amount of meat that a packer could deliver based on his 1941 deliveries. So, they did limit livestock slaughter.

Also presented in my written statement is evidence that during the period of cattle-slaughter quotas under OPS similar situations developed which again made it difficult to obtain supplies.

We maintain that the basic reason for this difficulty is faulty price. regulations, coupled with faulty administration.

We cannot subscribe to the principle of correcting bad regulations with additional controls which further saddles an industry with more records, more compliance, and more expense.

Our second reason for objecting to Senate bill 1928 is that we do not like the punitive feature of slaughter quotas as established by OPS. The agency, as you know, under Distribution Order 1, had authority to asses penalties against a packer's quota.

We object to such procedure because a penalty against a packer, charged against his quota, punishes every retailer or other depending on that packer for a supply. Once a retailer has an established source of supply, it is extremely difficult to turn to others for a product that is in tight supply.

Our third reason for opposing Senate bill 1928 is that we do not wish to see quota limitations placed on legitimate slaughterers who are making every effort to supply their trade with meat according to historical trade practices.

My written statement gives examples of practices developing which are created by price regulations. Such practices are the reason legitimate packers are at a buying disadvantage and why retailers are further squeezed if they have to purchase a supply via those routes.

And one of the few examples that I gave in my statement was that many slaughterers are now offering their supplies to the trade through wholesalers. In order to buy that supply, you have to pay, or I should say that the orders provide the wholesaler with an additional $2.25 a hundredweight for the services that a wholesaler renders.

Now, I am not contending that that is too much for the wholesaler who puts the meat through his place of business, takes possession of the product, breaks the carcass, delivers the wholesale cuts, does whatever processing is necessary. I don't say that that is too much. But when the retailer and others have to buy a supply through a wholesaler where the wholesaler does not take possession of the meat

and does not put it through his place of business, where we have to pay an extra $2.25 a hundredweight to get the supply

The CHAIRMAN. You pass that on to the consumer; do you not? Mr. SHAW. Well, we don't have an opportunity, Senator, in that we are under ceiling prices at the retail level.

That is a case where our supply is costing us more, but our retail ceilings are fixed; so, we have no opportunity to pass it on.

The CHAIRMAN. As I understand, you are making money off it with the $2.25 under the ceilings.

Mr. SHAW. We are not making any money on the beef, and this is beef that is involved here. As a matter of fact, we're not making money off our meat operations, our total meat operations, even though we buy it without paying this $2.25.

The CHAIRMAN. Wholesale.

Mr. SHAW. Yes.

Now, the reason that I brought those facts in is the fact that, when we have suppliers who are willing to quote us according to historical practices, then we don't want to be hampered with any quota.

The CHAIRMAN. From what I understand, there are so many wholesalers buying the meat you cannot buy direct, can you?

Mr. SHAW. Well, no; we can't. And, as a matter of fact, we are forced to buy some of our supply via that route.

The CHAIRMAN. If you put quotas on, that would not change this condition; would it?

Mr. SHAW. The only change that quotas would make there would be that it would limit those individuals to 100 percent or whatever that percentage may be.

The CHAIRMAN. But they would still get the mark-up, whatever it might be?

Mr. SHAW. They would.

The CHAIRMAN. I read your statement. That is why I asked those questions.

Mr. SHAW. Yes.

Senator SCHOEPPEL. I would like to ask a question, Mr. Chairman. The CHAIRMAN. Go ahead.

Senator SCHOEPPEL. Where you are required or maybe forced in some of your many, many enterprises all over this country to go to a wholesaler who gets $2.25, or you are required to pay $2.25 a hundred pounds additional, and where that wholesaler does nothing but you get your order filled straight from the packer's plant to your establishment, is a practice that should not be permitted. That is an administrative procedure that should be checked into and remedied. Is that not the case?

Mr. SHAW. The wholesaler in that case is rendering a broker's service. He is merely taking an order and placing an order for you. Senator SCHOEPPEL. Frequently, have you had previous connections with some of the same packing plants so you would not have to pay that?

Mr. SHAW. Yes; we have.

Senator SCHOEPPEL. Yes.

Mr. SHAW. We have bought from them direct and we are now forced, in order to get or try to get our requirements-we're not getting our full requirements, but in an attempt to, we are buying some of this supply through wholesalers and paying this extra $2.25.

Now, a broker is only permitted to charge an extra 17.5 cents a hundred, because he places an order for you. The wholesaler is given $2.25 because he renders additional services.

But in this specific instance he is only rendering a broker's service and charging a full wholesaler's addition.

Now, the reason for bringing this up is the fact that we have many suppliers who are furnishing us a supply direct from their packing plants, and we do not wish to see those packers hampered or limited by quota restrictions.

The CHAIRMAN. You are talking about your company?

Mr. SHAW. Yes.

The CHAIRMAN. That would be applicable to other companies? Mr. SHAW. I am sure that it is; yes.

The CHAIRMAN. I mean other big corporations like yours. They would be up against the same thing. Customers who have been supplying them would be subjected to the same thing that you speak of that you are subjected to by the wholesaler?

Mr. SHAW. I am sure that is correct.

Is the answer to limit those who resort to these unhistorical practices to 100 percent of their 1950 kill and by such limitation order saddle every packer following historical patterns to all of the inequities in the price regulations? Our answer is in the negative.

In closing, let me answer the question regarding quotas giving OPS an enforcement tool for controlling black markets.

We say that those who will falsify price records will falsify quota records.

Let me quote from an official USDA publication:

OPA tended to resist increases in quota bases

now, this is back in OPA days

OPA tended to resist increases in quota bases and to resist grants of quotas to new slaughterers. The program offered no solution for local meat shortages or for shortages of meat to wholesalers, institutions, and nonslaughtering processors.

Nonslaughtering processors and wholesalers of meat were not getting their customary share of meat under restriction order 1. Many of their sources of supply were not getting their share of slaughter animals. Small killers, against whom enforcement was ineffective, increased their operations. Nonslaughtering meat processors and wholesalers appealed to the Government to amend the order providing for allocation of meat by slaughterers to nonslaughtering processors and wholesalers. Government regulation was becoming unpopular.

This was in 1943.

Slaughterers, wholesalers, retailers, and consumers in shortage areas were petitioning the Government for relief.

The slaughter-control program was one of the most difficult to administer of all the wartime food programs. During the 1943 fiscal year, 794 investigations were made for alleged or apparent violations of USDA food orders. Of the total, 277, or more than a third, related to FDO No. 27

which was their meat restriction order.

OPA conducted more than 11,000 investigations and filed 1,026 civil and criminal suits against 1,361 defendants for violation of meat restriction order 1 which was in operation for a period of 6 months.

Now, I put that in because of the contention that it is difficult to violate a livestock slaughter quota.

Senator SCHOEPPEL. You are reading, Mr. Shaw, are you not, from a report that was made by the Department of Agriculture, summarizing their experiences from 1942 to 1946. Am I correct in that?

Mr. SHAW. That is correct. And I have attached that as an appendix to my written testimony.

The CHAIRMAN. I saw that in your testimony.

Any further questions?

Senator SCHOEPPEL. Let me ask you this, Mr. Shaw:

trol?

According to this control situation, why is meat so difficult to conYou are a part of a great organization that is in every section of this United States, and I do not know of a man who is better qualified to express a judgment or give us an opinion on this thing. I would like to have you say something about that, if you have anything to offer.

Mr. SHAW. Well, if we have to have controls, I still think we are foolish to try to work controls on perishable products. On those commodities that we buy and sell in the same form-take a can of peas, for instance. We buy it; we pay so much; we have a ceiling. price on it. We put it on the shelf. If it will not move at the ceiling price, we can let it set, or we can decide sooner or later to reduce the price to sell it, but at least it is not perishable. It can stay there until we can get the ceiling price out of it.

In the case of perishables, you either sell them or you smell them. That is, you have to get them sold before they spoil.

The CHAIRMAN. We went all through that with perishable foods. last time.

Mr. SHAW. Yes.

The CHAIRMAN. On perishable fruits and vegetables.

Mr. SHAW. We have exactly the same situation on meat as we have on fruits and vegetables.

And another thing is that on meats, we don't sell them in the form in which we buy them. Neither does the packer. The packer buys. an animal. He sells the hide, the heart, the liver, tongue, brains, offals, and he sells the carcass. Now, supply and demand varies for every one of those products. They are up and they are down, so he is not selling the product in the same form that he buys it. When we buy a carcass, that carcass is not all retail cuts. A 600pound carcass will yield about 480 to 490 pounds of retail cuts, and those cuts vary in desirability and we have to price them according to that desirability. Consumer demand is such a changeable thing that one day or one week customers are willing to pay this kind of a price for that kind of a cut, and then next week it falls off. We are constantly, in a free economy, having to juggle those prices in order to keep those cuts moving in the same proportion as they occur in the carcass. And that is the big problem.

That is why, under any one set of controls, and controls at the retail level where week after week and month after month we have T-bone steaks at the same price and chuck roasts at the same price and shank at the same price, flank, and what not, you just can't make the thing work.

Now, I don't know whether that answers your question, Senator. Senator SCHOEPPEL. That certainly does, and I do not know of a better-qualified individual than you, representing this type of an organization that daily comes in contact with millions of customers. If your experience of this is not some enlightment for us when we are asked to change or alter or give authority to alter a law or permit this or that to be done, I do not know who we can really turn to. That

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