matter with our people and Mr. Roberts and Mr. Hyde of the Hearing Examiners' Office and with the General Counsel's Office. We are trying to draft a regulation which will require that certain procedures be followed and that a certificate or sworn statement be introduced in the opening of the hearing along with the Federal Register notice, which is the official notice under the Administrative Procedure Act. Mr. WHITTEN. May I say that I am speaking of a subject that has been before us for years.

TIMING OF HEARINGS AND CONCLUSIONS

There is one question here that occurs to me, and that concerns the question of a rather lengthy delay in reaching some decision or conclusion.

I do not know enough about it in any particular case to say that delays by the Department are out of order. Sometimes these questions are so close that it takes a considerable length of time to determine whether it is good or bad to carry them out. But certainly there should be some data or some time within which a decision should be made, and certainly the hearings themselves should close within a reasonable time.

Mr. WELLS. Mr. Chairman, I would say that ordinarily, I think the hearings are closed rather expeditiously. There are times and places where we are dealing with extremely difficult problems, and delays are highly significant and necessary.

Also once the hearing is concluded, there is a period of some 15 or 30 days for filing briefs. These then go to our Dairy Division for analysis. This analytical work and the time spent thereon, are just as important as the other time. It may be that there are times when the delays within the Dairy Division are longer than they should be. Mr. WHITTEN. Proceed.

Mr. WELLS. When we were speaking of this a few moments ago, before the off-the-record discussion, I referred to the time and the work in the Agricultural Marketing Service and in the Dairy Division. Perhaps the Administrator of the Agricultural Marketing Service is as much to blame as the Dairy Division for what might have been unreasonable delays. We have been and are very hesitant to expand our staffs except when we feel we must do it.

The number of milk markets has increased however to the point where I think we must strengthen our Dairy Division staff to efficently handle the workload.

When we come to a conclusion in AMS as to what we will recomment on a specific order, our recommendation goes to the Secretary's Office for review. A recommended decision must be published in the Federal Register and we must give interested parties a chance to comment on the contemplated decision.

All of this takes time, but there are a considerable number of delays that are necessary if you are going to follow the course that we generally recognize as necessary.

Mr. WHITTEN. You will note that we certainly used very general language in talking about these points. But I think these points should have attention.

Mr. WELLS. There are some cases, as I say, where the delays are justifiable and necessary. In other cases it may be due to a shortage of personnel.

BLOCK VOTING OF COOPERATIVES

The block voting of cooperatives is the first big question raised by the report; and the second is the procedure for enlarging existing milkmarketing areas. These are both matters of law. They are both matters which have been testified to by many different groups. They have been tested in many different ways on many different occasions in the past.

I would first of all say that we are necessarily trying to administer the law as it is now written. If and until such time as changes are made, we must continue that way.

Mr. WHITTEN. Does the law authorize a cooperative to vote for all its members even though 49.9 percent of them are there present and shouting their objections to it?

Mr. WELLS. It is my understanding that the law provides that the Secretary of Agriculture shall accept the vote of a cooperative.

Mr. WHITTEN. I wonder if we might have in the record at this point a copy of that provision and such other provisions that might be appropriate.

Mr. WELLS. We will be very glad to introduce those. I think it has been tested in all the courts.

(The information requested follows:)

Section 608c (12) of the Agricultural Marketing Agreement Act of 1937 is: “(12) Approval of cooperative association as approval of producers. Whenever, pursuant to the provisions of this section, the Secretary is required to determine the approval or disapproval of producers with respect to the issuance of any order, or any term or condition thereof, or the termination thereof, the Secretary shall consider the approval or disapproval by any cooperative association of producers, bona fide engaged in marketing the commodity or product thereof covered by such order, or in rendering services for or advancing the interests of the producers of such commodity, as the approval or disapproval of the producers who are members of, stockholders in, or under contract with, such cooperative association of producers."

PROPOSAL OF THE GOLDEN GUERNSEY ASSOCIATION

Mr. WHITTEN. I have had numerous people from the Golden Guernsey Association come to me to arrange appointments with Mr. Lennartson and others within the Department.

I have had 2 or 3 visits by these groups. They have talked to me about what it is they seek. They say that the Department could put into operation what they desire, but that the Department is a little slow to move into that field, and that it looks like it would take legislation.

You folks are familiar with the requests of the Golden Guernsey Association, and I would like for you briefly to discuss with the committee what their complaint is, what their request is, what the situation may be, what the outlook is, and what could be done, if anything. Mr. WELLS. Will you discuss this, Mr. Forest?

Mr. FOREST. Yes, sir.

I have met with the Golden Guernsey people, and they are supported in their request by the Jersey people both the Jersey and the Guernsey breed being what we call high-test milk.

I think that it is a complicated, complex story. We have spent many hours with them, and if at some time later, we could submit a written statement, along the points which I now make, I think we could make their position clear.

21494-58-pt. 3-10

Mr. WHITTEN. I wish you would. I would like for you to submit a written statement. I have their petition here which I would like to have incorporated in the record.

(The above-mentioned documents follow :)

COMMENTS ON PROPOSAL OF GOLDEN GUERNSEY, INC., FOR EXEMPTION FROM POOLING UNDER FEDERAL MILK ORDERS

The proposal to exempt milk delivered by producers under the designation "Golden Guernsey" from pooling provisions of Federal milk orders raises first the question of why pooling is important. Uniform minimum prices to farmers which are accomplished through the pooling systems are essential to orderly marketing by farmers.

The need for pooling arises from the variety of uses for milk, the different returns which the various uses yield, and the fact that the quantity which may be marketed in the highest value use, tends to be limited by a relatively inelastic demand. Without some regulation of marketing, all farmers whose milk is eligible for the highest priced use, compete for that outlet by offering their milk at any price which they may obtain which is above the lowest priced alternative. This competition for the highest priced use market tends to drive that price to a level too low to induce the production of a continuous supply of milk sufficient for the market needs.

Under the pooling plans of payment, farmers share equally in the high and low priced uses of milk, according to the manner in which all milk purchased by the handler is used. In the case of a marketwide pool, all farmers supplying milk to a market share equally in the uses of milk by all handlers in the market and receive uniform prices for deliveries (subject to certain differentials specified in the act). Because all producers receive uniform prices irrespective of the use made of each producer's milk, the incentive for individual farmers to offer milk at cut prices is eliminated. Milk is channeled to fluid sales to the extent of such outlets at the fluid price, and the remainder is manufactured and paid for at a lower price.

The pooling arrangements provided in Federal orders have important market and price stabilizing influences. They make it feasible for milk handlers to accept the offerings of producers at all times. In a marketwide pool handlers may accept the milk of producers without reducing the individual handler's pay price in relation to the rest of the market. This makes it feasible for the handler to accept and market all of the deliveries of producers. In a similar way, under individual handler pooling, the regulated handler pays his producers a blended price for all of their deliveries. Thus, he does not have to choose among producers as to who will receive a higher price and who a lower price. The handler can thus receive all of the milk of his producers at an equal price. This reduces the impetus of each producer to gain a preferred position with the handler. It consequently helps to stabilize the marketing and pricing of the milk. For these reasons, the pooling arrangements provide essential elements for the orderly marketing of milk in regulated areas.

To exempt the milk of certain producers entirely from pooling (as we understand the Golden Guernsey people propose) would permit those producers to have first call on the highest priced use of milk. But if the mandatory exemptions were made, thereby setting up a preferential market for Golden Guernsey producers, the entire pooling and pricing provisions would prove vulnerable to the pressure for greater shares of the higher-valued uses. This is so because other dairymen seeing the preferential market guaranteed to Golden Guernsey producers, would seek similar consideration by attempting to set up special standards for their product.

The quantity of milk marketed as Golden Guernsey today is only a small fraction of the total sold for fluid use and, it is argued that a special exemption for this class of producers would not materially affect prices received by other producers immediately. To the extent that any advantage did accrue to Golden Guernsey producers, however, the sales of Golden Guernsey and other milk meeting special standards would be increased in response to such incentive, and the eventual effect of the exemption would probably be many times greater than any immediate result.

Despite the fact that it is inappropriate to provide the special pooling arrangements for special milk, there need be no penalty to the producers of such special ilk. The prices specified in the Federal orders are minimums only. Producers

can negotiate for higher prices to account for special circumstances, such as any additional quality factors which may inhere in special milk. These additional premiums would not be pooled but to the extent such special milk can command a premium in the market, that premium may be paid directly to the producers of special milk. Federal orders, therefore, in this way can adequately accommodate the problems set forth with reference to special milk, but Federal orders cannot accommodate these same problems by granting special milks a larger share in the equalization scheme, thus requiring the remaining producers to carry a larger share of the surplus.

It should be stressed that only the values of milk at the minimum class prices are pooled. The total value of a milk payment pool is calculated by applying minimum prices, established according to use, to each hundredweight of milk sold. The resultant blend price paid individual producers is also a minimum, thus only the values attributable to milk of normal quality are included in the pooling computations.

On the other hand, there is no legal bar to paying and, many producers in fact receive, in addition to the minimum blend price, an additional payment, which reflects some additional value of the milk delivered by the individual producer. The additional payment may be for a variety of reasons, such as maintaining the standards of milk production prescribed by the Golden Guernsey Cattle Association. A customary premium for milk sold under the trade name Golden Guernsey amounts to about 46 cents per 100 pounds. Premiums of this kind are not subject to pooling, but rather are paid to the individual farmers who earn them. Thus, where any special quality attributes support a special premium, that premium is paid directly to those who produce the special milk. Mr. WHITTEN. I would like for you to orally discuss the matter now and cover any points pro and con.

Mr. FOREST. Thank you, sir.

The problem that the Golden Guernsey people find themselves confronted with is that they have put most of their milk into class I use or bottled use.

When a milk order is instituted in an area, particularly with marketwide utilization, they feel that because they have made strong efforts to put all of their milk into bottles and have adopted a program of advertising and promoting the use of fluid milk, that they should not carry the same percentage of surplus as the average producer in that market. They feel that if they are successful in putting all of their milk into class I use, then all of that use should accrue to them. They feel that they should not be equalized in the market with the other producers on the basis of overall surplus for all uses.

The other producers in the market, of course, feel that efforts toward equalization should be directed equally toward all producers in the market, that all producers in the market should bear the same percentage of surplus if there is to be true equalization. If at any time that the Golden Guernsey handler, as we call them, or dealer induces a customer to shift from regular milk to Golden Guernsey, there would be a loss of sale for the regular producer and if there is equalization, he ought to continue to share in that sale.

Mr. WHITTEN. It is true, is it not, that the Jersey milk and the Guernsey milk in the dairy trade is admitted to be a high-quality milk as compared with most of the milk from other breeds?

Mr. FOREST. Yes; and actually the Golden Guernsey people do get a premium for their milk, and that premium which is paid for the Golden Guernsey milk accrues to the Golden Guernsey producer.

For example, if a Golden Guernsey dealer can sell milk for 3 cents a quart higher than the rest of the milk, then that 3 cents a quart goes to the Golden Guernsey man.

That is not equalized. We equalized only at the minimum price, and any premium which the Golden Guernsey man can get for his milk accrues to him.

Mr. WHITTEN. The point was made to me that present procedures might lend themselves to more and more surpluses, that if you followed the request of the Golden Guernsey group, it would result in the consumption of more fluid milk with less milk going into this secondary use.

Do you see any merit in that contention?

Mr. FOREST. I have not seen the basis of that argument.

Mr. WHITTEN. I will submit that petition to you, and I would like to have your responses.

Further, I would like to know if this petition was made to you, whether it was within your discretion to bring about these changes, or whether it was something that would require a change in the law. Mr. FOREST. I think that in my own personal view, Mr. Chairman, certainly in order to treat producers uniformly as is required in the present law, we could not give such preference to the Golden Guernsey or other such milks.

Mr. WHITTEN. If they were to have less of their milk put in the grade 2 class, would that mean that more of the other producer's milk would be in grade 2 class?

Mr. FOREST. Yes, sir.

Mr. WHITTEN. Do I understand that that would result in less income to the other group?

Mr. FOREST. Yes, sir.

Mr. WHITTEN. I guess it follows that the other group is opposed to this.

Mr. FOREST. Very much so.

Mr. WHITTEN. After all, there are two sides to it.

Mr. FOREST. I might add, sir, if, for this particular premium over and above other milk, they wanted a special provision that we could require the handler to pay that premium, and then that premium be paid only to Golden Guernsey, I think that we could provide for this in the order. However I do not believe they want that.

They just want a larger share out of the pool with reference to the Golden Guernsey producer.

REPORT ON SECTION 32 PROGRAM

Mr. WHITTEN. I might call attention to the investigator's report on section 32 funds. I asked for that study because it appeared to me that many times the Department moved altogether too slowly in the use of section 32 funds, as I told Dr. Paarlberg the other day.

It is my belief that with funds available from section 32, the early announcement that the Government would step in and maintain the price has stabilized the price. Yet in recent years you have been too slow to take that first step. As a result we had this investigation made.