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SLAUGHTER QUOTAS

FDNESDAY, SEPTEMBER 19, 1951

UNITED STATES SENATE,

SPECIAL SUBCOMMITTEE OF THE

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The subcommittee met, pursuant to recess, at 10 a. m., in room 301, Senate Office Building, Senator Burnet R. Maybank (chairman) presiding.

Present: Senators Maybank, Moody, and Schoeppel.

The CHAIRMAN. The meeting will come to order.

Yesterday there was some testimony here about Utility animals. Mr. McSweeney, I have asked you to get some things for me. Mr. MCSWEENEY. Yes, sir.

The CHAIRMAN. Will you give them to the clerk to put in the record?

Mr. MCSWEENEY. Yes, sir.

The CHAIRMAN. You are not supposed to be a witness or make any statements, but it would be quite all right for you to simply say what

it is.

Mr. MCSWEENEY. Chairman Maybank yesterday authorized me to supply information to refute the statement made by Judge Montague that we were in violation on the utility rate on cattle, and that we had just the day before issued a regulation which covered this entirely, predicating it upon the findings we got from the Department of Agriculture.

We have taken 633,000-plus pounds of beef and tried to define from that number of pounds what portion were heifers, steers, and cows, and we found that over 66 percent of them were cows. We predicated our findings on that basis; that $1.65 would be a sufficient rise to take care of them.

We now are presenting our regulations, which we ask to be inserted in the record at this point, which cover this question entirely.

If any more is found in connection with Mr. Montague's testimony, we ask permission to insert it later.

(The regulations referred to follow:)

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TITLE 32A-NATIONAL DEFENSE, APPENDIX

CHAPTER III-OFFICE OF PRICE STABILIZATION, ECONOMIC STABILIZATION AGENCY

[Ceiling Price Regulation 23, Amdt. 3]

CPR 23-LIVE CATTLE

CHANGE IN ADDITIONS IN MAXIMUM CALCULATED PRICE FORMULA

Pursuant to the Defense Production Act of 1950, as amended, Executive Order 10161 (15 F. R. 6105), and Economic Stabilization Agency General Order 2 (16 F. R. 738) this Amendment 3 to Ceiling Price Regulation 23 is hereby issued.

STATEMENT OF CONSIDERATION

In the formula provided in Ceiling Price Regulation 23 for computing the slaughterer's maximum calculated prices on OPS Public Form 14, an addition is allowed which represents the approximate average difference between the value of the by-products and the expense of buying cattle, killing, chilling the carcasses, preparing by-products, selling, administration, overhead and profit. Recently there has been a substantial decline in the selling price of hides and fats. Accordingly, this amendment changes the by-product factor addition which the slaughterer uses in computing his maximum calculated prices for cattle, in order to more accurately reflect the decreased value of by-products.

Amendment 6 to Ceiling Price Regulation 24, Ceiling Prices of Beef Sold at Wholesale, also issued today, provides, among other things, for an increase in the price of beef at wholesale. The reasons for this increase are contained in the Statement of Considerations accompanying that amendment.

The effect of this amendment is to continue the present compliance prices for all grades of cattle, except utility grade, the compliance price of which is increased in accordance with the recent amendment to the Defense Production Act. That amendment forbids the maintenance of ceiling prices on live cattle below 90 percent of the price received by grade by producers on May 19, 1951, as determined by the Secretary of Agriculture. The higher price for utility grade and the prices for other grades of cattle provided for in this amendment conform to this new legal minimum.

In certain cases these changes will effect a change in a slaughterer's maximum calculated prices. In those instances, the slaughterer must file a revised OPS Public Form 14 pursuant to Section 8 (b), Ceiling Price Regulation 23, as amended. In formulating this amendment the Director of Price Stabilization has consulted with industry representatives and has given full consideration to their recommendations. In his judgment, the provisions of this amendment are generally fair and equitable and are necessary to effectuate the purposes of Title IV of the Defense Production Act of 1950, as amended.

So far as practicable the Director of Price Stabilization gave due consideration to the national effort to achieve maximum production in furtherance of the Defense Production Act of 1950, as amended, to prices prevailing during the period from May 24, 1950 to June 24, 1950, inclusive, and to relevant factors of general applicability.

AMENDATORY PROVISIONS

Ceiling Price Regulation 23 is amended as follows:

The table set forth in Appendix A, V, Item 6 (6) is deleted and the following table is substituted therefor:

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(Sec. 704, 64 Stat. 816, as amended; 50 U. S. C. App. Sup. 2154)

This amendment shall be effective on September 19, 1951.

Effective date.

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TITLE 32A-NATIONAL DEFENSE, APPENDIX

CHAPTER III-OFFICE OF PRICE STABILIZATION, ECONOMIC STABILIZATION

AGENCY

[Ceiling Price Regulation 24, Amdt. 6]

CPR 24-CEILING PRICES OF BEEF SOLD AT WHOLESALE

REVISED CEILING PRICES OF BEEF SOLD AT WHOLESALE

Pursuant to the Defense Production Act of 1950, as amended, Executive Order 10161 (15 F. R. 6105), Economic Stabilization Agency General Order 2 (16 F. R. 738), Delegation of Authority by the Secretary of Agriculture to the Economic Stabilization Agency with respect to the Allocation of Meat (16 F. R. 1272) and Economic Stabilization Agency General Order 5 (16 F. R. 1273) this Amendment 6 to Ceiling Price Regulation 24 is hereby issued.

STATEMENT OF CONSIDERATIONS

The accompanying amendment to CPR 24 makes several major changes as well as certain modifications of a minor nature.

(1) The designation of military processing beef specifications, which formerly referred only to JAN-B-617, the specification for meat derived from the entire carcass, is broadened to include JAN-B-723, the specification covering utility beef derived from rounds, chucks, loins and ribs.

(2) CPR 24 did not provide a local delivery addition for boneless processing beef sold to the armed forces. As a result, sellers refused to deliver this beef in their own trucks, often delaying delivery and inconveniencing the government. This amendment corrects this situation by permitting the seller to charge the addition for local delivery he performs.

(3) In several instances sellers have circumvented the provisions of the regulation by making sales of carcasses or wholesale cuts to their customers and buying back a portion of the carcass at a substantial discount below the ceiling price for that portion of the carcass. For example, in many cases, sellers sold a hindquarter at ceiling price and then repurchased the loin from the buyer at a discount ranging up to $15.00 per cwt. below the ceiling price for the loin. This type of practice had the effect of increasing the price of the round by approximately $15.00 per cwt. This amendment prohibits this type of evasive practice by requiring a seller to pay the full ceiling price in the event that he wishes to repurchase from his customer any part of a beef carcass or cut.

(4) In many cases sellers have circumvented the provisions of the regulation by selling ground beef products at prices greatly in excess of the ceiling prices or ground beef. Some sellers added condiments to ground beef, while others added cereal, eggs or other ingredients. In order to prevent the continuation of these practices, this amendment prohibits the sale of all fresh ground meat containing beef except those ground meat items which are produced in accordance with the specifications of CPR 24.

(5) CPR 24 provides graduated mark-ups for different classes of sellers and permits different prices for various classes of buyers. It also prohibits the sales of certain beef items to certain classes of buyers. As an aid to enforcement, the sales invoice should contain the class of buyer and class of seller involved in each transaction. Accordingly, this amendment requires the seller to specifically indicate on the invoice the category in which the seller falls as well as the class of buyer. Certain abbreviations have been provided to facilitate the designation of these various classes of buyers and sellers.

(6) Similarly, as an additional enforcement device, this amendment requires shippers who sell on an f. o. b. plant basis and prepay the freight which they bill the buyer to include the amount of these freight charges on their invoices as a separate item.

(7) There has been a very substantial decline in the market for hides and fats. The current ceiling prices for each grade of dressed beef are based on live cattle compliance prices provided for in Ceiling Price Regulation 23 after making allowance for the value of the hide and fat by-products. If packers are to be given generally fair and equitable ceiling prices, as is required by law, it is necessary to make up for these reductions in their selling prices of hides and fats by reducing the live cattle compliance prices which they may pay or by increasing the ceiling prices of dressed beef which they sell.

The former alternative is now impractical. Congress has eliminated the authority to impose slaughter quotas. As a result, packers are presently encountering serious difficulties in purchasing live cattle within the cattle compliance prices. Indeed, it has been necessary to modify the compliance prices of CPR 23 for a temporary period to alleviate this situation. To lower these prices below present levels would make it more difficult, if not impossible, for legitimate packers to obtain cattle. The only practical alternative is to raise dressed beef prices by an amount sufficient to offset the decline in hides and fats prices. This amendment therefore increases all beef prices by that amount.

(8) In extending the Defense Production Act, Congress provided that "no ceiling shall be established or maintained for any agricultural commodity below 90 percentum of the price received (by grade) by producers on May 19, 1951, as determined by the Secretary of Agriculture". The Secretary has determined the price of each grade of cattle on May 19. The prices currently provided by Ceiling Price Regulation 23 are above the 90 percent minimum for each grade except utility. The 90 percent minimum for utility grade cattle requires a substantial increase in the compliance price provided by Ceiling Price Regulation 23 and, to maintain fair and equitable margins for slaughterers of utility cattle, a substantial increase in the ceiling prices of utility grade beef. This amendment provides for the required increases in the ceiling prices of utility grade beef. In addition, this amendment provides for separate prices on those utility boneless beef items which were formerly priced at one level with the same items of cutter and canner grades. The greatly increased spread between utility beef and cutter and canner beef required by the recent statutory amendments makes it impossible to continue to price the boneless beef of the three grades identically.

(9) After extensive study of the price differentials between the primal cuts and consultation with industry representatives, it has been determined to revise, and this amendment therefore modifies, these price differentials to reflect more accurately the relative value of each cut.

(10) CPR 24 did not provide a price for untrimmed loins but instead followed the recommendation of the Beef Industry Advisory Committee and provided ceiling prices for two separate cuts, the short loin and the sirloin, which together

comprise the trimmed loin. In many cases retailers have been unable to obtain the ceiling prices established for certain types of cuts derived from the short loin and therefore their realized margins have been reduced. They have therefore requested that the price of the short loin be reduced. However, hotel and restaurant suppliers have been able to obtain better prices for the cuts derived from the short loin and have requested that there be a substantial differential between the ceiling prices for the short loin and the sirloin. In order to give effect to the desires of both these segments of the meat industry, this amendment removes the short loin and sirloin from the primal cut schedule and adds them to the fabricated cut schedules, and provides a ceiling price for untrimmed loins. This will enable retailers to buy a full loin at a price which will enable them to realize more adequate margins and will meet the requirements of the hotel and restaurant suppliers.

(11) Originally packers and packer branch houses were permitted to sell fabricated cuts to hotel supply houses and combination distributors. Many hotel supply houses and combination distributors found that their source of supply of carcasses and wholesale cuts had been completely eliminated and, therefore, they urged that the regulations be amended to prohibit packers and packer branch houses from selling them fabricated cuts. This change was incorporated into the regulation by Amendment 3 to CPR 24. The hotel supply house and combination distributors Industry Advisory Committee has recently requested a change in the regulation to permit packers and packer branch houses to sell to hotel supply houses and combination distributors fabricated cuts derived from utility grade beef. Accordingly, this amendment incorporates this change into the regulation. Moreover, this amendment provides a fourth schedule of ceiling prices for fabricated beef cuts sold by designated sellers to designated buyers. This schedule, which is the lowest priced schedule of the four, reflects customarily low markups on these sales and is based on a re-examination of customary markups of fabricated cuts.

(12) Current ceiling prices for boneless beef cuts and boneless processing beef are on a uniform basis by areas, with increases being provided at 50 cent intervals in the zone differential allowance. For example, all sellers in areas where the zone differential was between 0 and 49 cents per cwt. had the same ceiling price for these items despite the fact that there were different ceiling prices for the carcass beef and wholesale cuts they processed in these areas, depending on the applicable zone differentials. This amendment provides for ceiling prices for boneless cuts and boneless processing beef on a formula basis so that in every instance the price of the boneless beef will be related to the price of the carcass beef from which the boneless beef was derived. In this way a seller's ceiling prices will accurately reflect his costs.

(13) Re-examination of the nonslaughtering producers' addition on sales of boneless beef cuts and boneless processing beef has disclosed that the $2.00 per cwt. addition is excessive and that $1.50 per cwt. is adequate to cover their additional expenses. Accordingly, this amendment reduces that addition to

$1.50 per cwt.

(14) Sufficient information is now available to determine a ceiling price for skirt steak. This amendment therefore defines, and provides a ceiling price for, skirt steak.

(15) This amendment defines, and provides a ceiling price for, lean ground beef in casings, in accordance with the request of several meat processors.

(16) The use of 4-way military beef effects substantial economies in transportation and handling costs by the elimination of fat and bone from the finished product. Many governmental agencies and institutions have requested authorization for the purchase of this type of meat. Accordingly, this amendment authorizes governmental agencies and institutions to purchase 4-way military style beef and sets up additional prices for commercial and utility grades of this beef. As a safeguard for the governmental agencies who intend to procure 4-way beef this amendment provides for the inspection of the processing operations by official U. S. D. A. graders and for certification by these graders that the meat has been prepared in accordance with specifications.

(17) This amendment authorizes an addition of 50 cents per cwt. for sales of primal cuts to defense procurement agencies to cover the costs of the special trimming required by these buyers.

Most

(18) Most of the better grades of cattle are produced in the Midwest. of these cattle are slaughtered in the Midwest and some of the beef is shipped to the east coast. In some cases, however, the live animals are shipped to the Northeast and slaughtered locally. A special zone 4A addition was provided to cover the cost of tissue shrink in transporting these animals to the Northeast. In this area the bulk of the animals are slaughtered kosher and for that reason the 83762-51-pt. 4- 41

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