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THE DAIRY INDUSTRY OF NORTH CAROLINA ? Nature of business

On the production side, our commercial dairy industry is primarily in the fluidmilk field. In 1954, grade A sales in all outlets accounted for 93 percent of total inilk sales, and Grade A sales to plants accounted for 81 percent of whole milk sales to plants.

Over 100 dairy firms process and distribute fluid milk and dairy products in our State, and the fluidmilk field also dominates this phase of our industry. However, the ice-cream business is of major importance, and our State now ranks 14th among the States in the production and distribution or ice cream and other frozen milk products. In addition to some limited manufacturing facilities in some fluid plants, we have only 1 evaporating plant, 1 cheese plant, 1 dry-milk plant, and 7 butter churns, and a relatively small volume of cheese, butter, condensed and powder are manufactured. Volume of production and sales

In 1954, milk cows on our farms numbered 377,000. Average annual production per cow was 4,520 pounds, and total production amounted to 1.7 billion pounds. A total of 950 million pounds, representing 56 percent of total production, was marketed. Of the milk marketed, 820 million pounds was sold as whole milk to plants.

Cash receipts from all milk amounted to $55.5 million in 1954; the value of milk and butter used in farm homes was $42.2 million, and the farm value of milk produced amounted to $99.7 million.

Our grade A producers numbered about 5,180 throughout 1954. These producers sold 665.2 million pounds of milk. Of this volume, 571.2 million pounds or 86 percent of the total, was utilized as fluid milk and cream.

The grade A class I price was $6.25 per hundred throughout the State for most of the year. The blend price (4 percent basis) ranged from $5.30 to $6.12 and averaged about $5.73 for the year. Some areas of the State had a higher blend price and some a lower price.

Cash receipts of grade A milk sold to plants, f. o. b. plants, in 1954 was approximately $38,500,000. Thus, grade A milk sales to plants accounted for about 70 percent of all cash farm income from milk in our State. Trends in the industry

Records for the past 30 years indicate that the number of cows milked on North Carolina farms has increased and decreased in 4-to 6-year cycles. The all-time high was 384,000 in 1944. From 1949 through 1953, the number increased from 342,000 to 380,000. The number decreased slightly in 1954 to 377,000, and apparently the number is still decreasing. The number in 1954 was 13 percent greater than in 1940, but only 1 percent higher than in 1945.

Annual production per cow has increased very uniformly since 1940 from 3,930 to 4,520 pounds in 1954a 15 percent increase. Production per cow is much greater on our grade A farms and was about 6,500 pounds per cow in 1954.

Due to the increase in production per cow, tetal production of milk does not show the same cyclical changes as cow numbers. Each year since 1948, our farmers have set a new State record for total milk production. Production at 1.7 billion pounds in 1954 was 15 percent higher than in 1948 and 30 percent higher than in 1940. Even so, the increase in production has barely kept pace with the population increase.

In contrast to the moderate increase in cow numbers and total production, there has been a tremendous increase in the production and sale of grade A milk. Local grade A receipts at plants in selected years were as follows: Volume

Volume (million unds)

(m lion pounds ) 1942 147.01952

522. 8 1947 216.1 | 1953

612. 6 19.50 427. 0 | 1954

665. 2 1951

485.4

1 Source of the statistical data in this section: North Carolina Agricultural Statistics and North Carolina Dairy Report, annual issue, published by North Carolina Department of Agriculture, cooperating with U. S. Department of Agriculture.

Thus, the volume of 665.2 million pounds of grade A milk in 1954 was over 50 percent higher than in 1950. It was 3 times greater than in 1947 and 4.5 times the volume in 1942. The volume in 1955 is expected to be 3 to 5 percent higher than last year.

An increase in the number of grade A producers accompanied the increase in volume. A peak in the number of producers was reached in the fall of 1954 at slightly over 5,200. Since that time the number has dropped to about 5,000. Today we have 3 times the number of producers as in 1947 and about 1.5 times the number in 1950.

The large increase in grade A producers reflects. primarily, a shift from manufacturing type production to grade A. In addition, the big increase in grade A volume sold to plants was possible because a higher percent of the production is now being marketed, producer-distributors have decreased in number, and production per cow has increased.

The volume of fluid milk and cream saies to consumers has likewise increased at a very rapid pace. Total fluid sales amounted to about 308 million pounds in 1947, and increased to 578.5 million pounds in 1954-an 87 percent increase. Through July of this year, sales were up about 10 percent as compared to the same period a year ago.

North Carolina has found it necessary to import milk for fluid use every year since World War II days, and some milk was imported in each month from 1946 through 1952. From 1953 to date, milk was imported in all but a few months. In 1948, 79 million pounds were imported; the volume dropped to 15 million pounds in 1953. but increased slightly in 1954. The volume of imports during the current year is expected to be substantially greater than last year. In recent years, we have seen a trend toward fewer and larger milk distributors, but our distributors are apparently doing a better job in making milk available to our people.

COMMENTS ON OUTSIDE OPINIONS OF OUR INDUSTRY

The opinion seems to prevail in some sections of the country that our grade A dairymen are free from problems. It is said that our prices are abnormally high and profits excessive, and that this condition is made possible by excluding milk from other areas by health regulations and other barriers.

With regard to our prices, we have had a relatively high class I price for several years, but all milk is not sold as class I. Currently, we have 6 classes of milk and until recently we had 7 classes, some of which bear a relatively low price. In comparison, most areas of our country have only 2 or 3 classes.

Despite our several classes and low prices for some classes, our blend price to producers has also been relatively high for several years. However, the records show that North Carolina dairymen have yet to produce our full fluid milk needs, as attested by the fact that we have and are importing milk.

Also, with some exceptions, the North Carolina class I price over a period of years has been below the price that out-of-State milk of equal quality could be delivered to our plants. This condition is true today.

It is a bit difficult to comprehend the contention regarding barriers when North Carolina has needed and continues to need outside milk. To be sure, our officials have insisted that our consumers have high quality supplies, and we are certainly in accord with the quality standards and their enforcement,

With regard to the profits of our dairymen, we know of no one who has gotten rich and retired. We do know of some who are making a good living: some dairymen are about breaking even; and some are losing money. During the past year, we have had a net loss of over 100 grade A producers, so other farmers are not rushing to get into the business.

PROBLEMS OF OUR INDUSTRY

In June 1954, the dairy marketing committee of North Carolnia State College issued a report entitled, “Joint Consideration of the Dairy Industry in North Carolina.” The dairy committee summarized the major problems of the dairy industry in North Carolina as follows:

1. Low per capita use of milk and dairy products in North Carolina. 2. Need for improved flavor of milk and some dairy products.

3. Increased competition from other dairy areas for our milk and dairy product markets because of surplus national supplies.

4. High cost area for production and distribution.

5. Low volume and inadequate facilities for handling manufactured milk.

6. Wide price differences to grade A producers within and between markets.

7. Lack of confidence on the part of many producers and many distributors in the market, the marketing system, and marketing regulations.

8. Need for more coordinated planning and action among producers, distributors, and Government agency employees on a long-range program for

the dairy industry. Since the report was given, we have made some progress, but the problems enumerated still exist to a very great degree.

STATEMENT ON SPECIFIED ISSUES

This portion of our testimony deals with some of the questions of national concern, most of which directly affect our dairymen. Special school milk program

We commend the Congress for authorizing the special school milk program, under which $50 million was available last year and another $50 million for the current year. The program has certainly been a success in our State, and many schools and hundreds of schoolchildren are now getting milk at school for the first time. We understand that the program has been equally successful throughout the country.

The per capita consumption of milk in this State is far below nutritional standards and below the national average. This is especially true among our urban and rural nonfarm population where the per capita use of fuid milk is about two-thirds the national average.

The special school milk program is helping us to correct this deficiency. We urge the Congress to authorize, on a permanent or continuing basis, the use of Commodity Credit Corporation funds for this program in such amounts as deemed necessary by the Congress. Surplus disposal program

We are certainly in accord with the program of donating Commodity Credit Corporation stocks of dairy products to schools, institutions, and welfare families in this country. Likewise, we believe that the disposition of these stocks to needy families in foreign countries is a most constructive use of these food products. Of the dairy products moved from Government storage last year, 40 percent of the butter, 32 percent of the cheese, and 41 percent of the nonfat dry milk solids were moved through these channels.

This program should be used in every logical way to speed up the disposition of Government-held stocks, and thereby help remove the price-depressing influence of surpius dairy products.

With regard to surplus disposal, dairy farmers throughout the country, represented through the National Milk Producrs Federation, of which our association is a part, have urged that a program be set up to increase food consumption, especially dairy products, among low-income famiiles. Such a program has possibilities of increasing milk consumption a great deal and would be very beneficial to dairymen and consumers alike. We urge that the United States Department of Agriculture be authorized to determine, on an experimental basis, the feasibility of some type of family milk program. Increased use of milk by military bases and Veterans' Administration

Since we have several military bases and veterans' establishments in our immediate area, we know firsthand the benefits of the stepped up use of milk by these institutions as a result of the authorization to use Commodity Credit Corporation funds for this purpose.

We commend Congress for making the funds available for this use, and the continuation of the program is urged upon the Congress. Accelerated brucellosis program

North Carolina is proud of the fact that we were the first State to be accredited as having less than one-half per cent brucellosis. Of course, this does not mean that we are absolutely free of the disease; it still raises its ugly head and results in losses to farmers and endangers our consumers.

Reports of the Agricultural Research Service indicate good results under the accelerated brucellosis eradication program authorized by the Congress. We urge that this program be continued until such time as the threat of this disease is eliminated.

Price supports

As indicated earlier in this statement, the dairy industry of North Carolina is primarily in the fluid milk field, and a relatively small volume of butter, cheese, and nonfat dry milk solids is manufactured in this State. However, the support program for dairy products has some effect on our industry.

From 1952 through 1954, the average price received by North Carolina farmers for manufacturing type milk declined about 25 percent, and most of the decline in the price for fluid milk and the price for all milk was a result of the sharp drop in manufacturing milk prices. Some of the price drop was a result of lowering supports from 90 percent of parity to 75 percent, which was effective April 1, 1954.

The leaders of our organization have not discussed the support program very extensively with our members, and to the best of our knowledge it has not been discussed to any length with the manufacturing producers in the State. But, since our farmers are acquainted with the support program on other commodities, it is our opinion that our dairymen would express a desire for dairy supports at 90 percent of parity.

The question of higher dairy supports, however, always brings up the question of production controls or marketing quotas, and we are not in position to say what the reaction of our dairymen would be to price supports and controls when they realized the significance of production controls on the dairy industry of North Carolina. As pointed out previously, the total volume of milk produced in this State is relatively small. Production per cow and the number of cows per farm are low, and in order to gain efficiency, our dairymen must milk more cows and produce more milk per cow. Therefore, we do not believe that our dairymen would favor a control program which would, in all probability, prevent or hinder progress in the efficient production of milk in our State.

If production controls on milk and dairy products could be made to work at all, such a program would certainly be very complex and difficult to administer. We do not believe a control program is necessary, and we believe that the support level should be increased somewhat.

Higher dairy supports, in our opinion, can be justified for at least two reasons. First, even without production controls, the dairy surplus has been kept within reasonable bounds and never exceeded 8 percent of a year's production even with 90-percent supports. Second, we believe that higher dairy supports are needed in order to achieve a proper balance between the dairy industry and all of agriculture. Research and education

Because of the many problems of production and marketing of milk and dairy products which confront us, our dairymen are solidly behind programs of research and education.

Our industry set up a foundation a few years ago to help support the dairy industry department at North Carolina State College. A great deal of progress has been made, but much is yet to be done. Therefore, we urge that the exist. ing Federal programs in support of agricultural research and education be continued and expanded.

The CHAIRMAN. Mr. Keller, please.

STATEMENT OF PAUL KELLER, CLAYTON, N. C. Mr. KELLER. I am Paul Keller, Clayton, N. C. I am a cottonseed crusher and ginner. I am treasurer of the North Carolina Cotton Promotion Committee, btu the report which I am about to give is not an official report of that committee. However, I do intend to make certain definite recommendations which I have not heard made today.

The CHAIRMAN. That is what we are looking for. Please do not repeat any suggestions made. If you agree with it, just say so because we have quite a few more witnesses to hear from,

Mr. KELLER. I would like to outline first the objectives that I am trying to reach with this program.

As agricultural surpluses mount in this country it becomes evident that commodities with different usages and competititon require

different methods of support, and should no longer be categorized merely as basic, nonbasic, and unsupported commodities.

Our support program has functioned satisfactorily over the past 2 decades but we cannot deny that what would have been unwieldy surpluses were absorbed once by the unusual demands of a war economy and again by a combination of sharp acreage restrictions, bad weather, and the Korean action. We can only hope that no such disaster will come along to rescue us again. There remains, then, the alternative of developing a program which will solve the basic problems.

THE PROBLEM

1. High level American price supports are establishing a price umbrella which invites rapid expansion of foreign cotton production.

2. High cotton prices encourage increased production and utilization of competitive fibers and nonfibrous materials.

3. Declining domestic acreage leads to increases in per-acre production, which, though desirable from the standpoint of economical production, defeats the purpose of acreage curtailment.

4. Declining acreages reduce to uneconomic size the allotments of small family farms, which are precisely the ones most in need of help.

5. Growing Government holdings lead to governmental price cutting for overseas sales, which intensifies foreign textile competition against domestic mills, thereby jeopardizing one of our largest employers of labor.

6. The continual threat of unusual methods of surplus disposal is as disruptive to the market as the actual disposal. Users are afraid to carry normal working inventories,

The objective: A satisfactory support program for cotton should be geared to the world competitive situation with regard to fibers. It should allow sufficient acreage to permit the economical use of mechanized production practices where these are feasible. It should afford price assurance to the small farmer so that he will have a substantial measure of protection while adapting his methods and program to current needs. It should provide for a method of handling the present surplus in a preplanned manner, so that the great uncertainty now unsettling the markets can be eliminated. It must be handled at a cost which the taxpayers will be willing to accept over a period of years.

The statistical basis for this program comes from certain figures furnished by Cotton Division of the Commodity Stabilization Service.

The Cotton Division, Commodity Stabilization Service, United States Department of Agriculture, has prepared a table for the year 1953 showing the number of farms which produce cotton in each State, subdivided according to acreages planted to cotton. These divisions are from 0.1 to 4.9 acres, from 5 to 14.9, from 15 to 29.9, 30 to 49.9, 50 to 99.9, 100 to 499.9, and 500 up. In each group I have taken the average acreage, multiplied by the average yield per acre in 1953, by States, to determine the approximate part of the 1953 cotton crop which was grown on farms within the various size groupings. This method should produce fairly accurate results in the smaller acreage groupings, with a greater margin of error in the groupings over 100 acres. There is no way of estimating average cotton acreage of the 3,640 farms which planted over 500 acres to cotton in 1953.

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