The CHAIRMAN. Have you any suggestions to give to the committee as to how this problem could be better handled and to give the farmers of this area a fair price for the milk?

Mr. LENT. We think that the formula in our order under which our class 1 price is fixed has what they call a supply and demand adjustment, that is, as the supplies goes up in proportion to fluid sales, the price goes down, and vice versa.

Many farmers object to that formula on the very basis that I have stated here on their behalf, and, that is, that they think that the farmer is entitled to a fair price for milk for bottling irrespective of what he chooses to produce in excess of the amount needed for bottling. So a remedy would be to try to either eliminate or modify the effect. of that factor in our formula.

The CHAIRMAN. You could do that under existing law; could you not?

Mr. LENT. Yes.

The CHAIRMAN. What is in the way of it?

Mr. LENT. It is the administrative policy of the Secretary of Agriculture, which seems to indicate very clearly-and I have discussed this with him myself that lower pricing will lower production. Many dairy economists disagree with that 100 percent and have for the last 300 years.

The CHAIRMAN. Would you suggest then that the present law be amended so as to withdraw some of the powers he now has?

Mr. LENT. No; I would not. I would like to convince him. I like the act the way it is. It is an excellent act, and the orders have done a wonderful job under it.

The CHAIRMAN. The only suggestion you have to make to this committee for a change in the administration of the law under which you are now proceeding is that it?

Mr. LENT. That is as to the marketing agreement act; yes, sir. Senator AIKEN. Mr. Lent, I notice you say that the Secretary insists on fixing the prices very low. Does he fix it below the price provided for in your marketing order?

Mr. LENT. No. I mean he insists on writing the marketing order so that this supply and demand adjustment puts the price way down when a little extra milk is produced, and when we go to him to try and get him to peg it up a little bit, he has not been amenable to such request.

Senator AIKEN. Was your marketing order approved by the dairymen of the New York milkshed?

Mr. LENT. When the formula was put in the order in 1949, effective in 1950, it was approved by a vote of the dairymen. You understand, when one of these amendments is put out in an order, the Secretary finds that the order, without the amendment, cannot be continued.

Senator AIKEN. I have heard that report, but I do not believe that any such thing would happen-that an order was turned down. I do not believe that for a minute. I do not know who tells you that. Mr. LENT. The Department people tell us that.

Senator AIKEN. I do not question but what somebody tells you that, but I do not believe that would happen if you turned down the proposed amendment. I do not believe your order would be discontinued. There would be a fight if it was, I can assure you of that.

Mr. LENT. A couple of them have been after amendments were turned down.

Senator AIKEN. The fixed price that you receive for your milk, is that a minimum price?

Mr. LENT. That is a minimum price.

Senator AIKEN. Have the producers in your organization been receiving just the minimum price the last few months?

Mr. LENT. The great bulk of them have. There have been a few premiums occasionally above the minimum price on this spotty basis, not on the milkshed basis.

Senator AIKEN. Does Borden or any of those companies pay premiums?

Mr. LENT. Sometimes they pay premiums at certain locations which are particularly conveniently located, where the milk has particular marketable qualities.

Senator AIKEN. Have they not paid substantial premiums in some cases?

Mr. LENT. I would not say that they were substantial. I think that they would average out over the whole milkshed only a very few cents, if a cent per hundredweight, that I am talking about.

Senator AIKEN. The dairymen tell me they are receiving 40 cents above the blended price. Do you think they have been fooling me? Mr. LENT. I do not know of any dairymen in the New York milkshed that are receiving any premium.

Senator AIKEN. I know that some have told me they are getting 40 cents premium.

Mr. LENT. If you are talking about trade differentials in locations

Senator AIKEN. There may be discrimination in that respect. If there is, we ought to know it. We want to know if this order is being applied equitably over the whole New York milkshed or whether this is discrimination in favor of a group here or there or somewhere else.

Mr. LENT. There are small premiums of 5, 10, 15 cents paid at some spots in the milkshed, particularly those in the territory occupied by New York.

Senator AIKEN. Do I understand what you would like is when the Federal provisions of the order are approved by two-thirds of the dairymen in the milkshed, and it results in a low minimum price, you would have the Secretary set aside the order temporarily?

Mr. LENT. No, sir.

Senator AIKEN. It has been done, has it not, in the past?

Mr. LENT. Our order was set aside only once, and that was in the spring of 1939 on account of an adverse decision by the United States district judge, who held it to be illegal.

Senator AIKEN. Over the last 5 or 6 years the order has been set aside only once?

Mr. LENT. Our order has not been set aside over the last 5 or 6 years, since it was issued.

Senator AIKEN. I presume you are right. I know that in other areas some years ago the order was set aside month after month, and it resulted in new orders being written in some areas.

Mr. LENT. We only had one time when it was out of effect in the last 17 years. That was when the court held it to be illegal in the

spring of 1939 for 5 months. We have had extra premiums negotiated on an industry wide basis on the class I price in several instances.

Senator AIKEN. Last spring, as I recall, I discussed the New York situation with the Department officials. And your representatives did, too. At least, a temporary increase was obtained, was there not, of 19 cents a hundred?

Mr. LENT. The increase was 3 cents in February, 6 cents in March, 16 cents in April in the class 1-A price over and above the order prices, without setting aside the order at all, in the form of a superpool for those 3 months-3 cents the first month, 6 cents the second, and 16 cents the third month. That was done by agreement-voluntary agreement in the industry. And the order remained fixing the great bulk of the value of the milk.

Senator AIKEN. Do you find that any State laws or city ordinances prevent the milk producer of New York from getting a better price for his milk?

Mr. LENT. No, we have no complaint.

Senator AIKEN. Are the New York City ordinances all right for your dairymen? They do not favor you and favor the people who handle the milk after it leaves the farm-you would not say that; would you?

Mr. LENT. I think they are fair. Those are the sanitary ordinances. They are about the same as the United States Public Health service regulations.

Senator AIKEN. Then you are perfectly satisfied with the New York City ordinances?

Mr. LENT. Yes.

Senator AIKEN. As they relate to the distribution of milk. And you are satisfied with the New York State laws?

Mr. LENT. Yes. The New York State law is working out very well. Senator AIKEN. You do not believe there should be competitionnew competition-in the distribution of milk-you know what I mean! Mr. LENT. There is a New York State law.

Senator AIKEN. Tell us what you think about it.

Mr. LENT. That limits the territory in which distributors may operate. They have to prove another milk dealer is needed in the direction in which they wish to expand.

Senator AIKEN. In other words, if one dealer has a market, the other cannot get in there?

Mr. LENT. That is right. I would not say that it applies to many markets where there is only one dealer, but where a market is adequately served the law provides that the commissioner may refuse to grant the additional license.

Senator AIKEN. That law has been in effect since 1934?

Mr. LENT. Yes, sir.

Senator AIKEN. You do not think that a little more competition in the sale of milk would result in perhaps lower prices to the consumer or the sale of more milk?

Mr. LENT. Well, it could possibly in some instances-it could result in lower prices to the consumer and in other instances it might result in the distributor pricing himself out of business and not being able to pay the producer. That is the original theory back of the law.

Senator AIKEN. There would still be a minimum price, would there not, fixed under the order?

Mr. LENT. Not on this milk that you are talking about. You are talking of distribution in upstate communities, where 1-dealer, or the 2-dealer proposition arises.

Senator AIKEN. You are speaking of the small towns where the Federal order does not exist-that have no Federal order?

Mr. LENT. That is right. And in those communities where there is no regulation of prices which the law was originally designed to put the dealers on a firm financial basis by stopping too much cutthroat competition by having too many dealers.

Senator AIKEN. The dealers in those small towns and cities are not going on relief; are they?

Mr. LENT. I am not defending the law. I am just trying to explain

it to you.

Senator AIKEN. They are not going on relief over the mountainsI know that-that is all.

Mr. LENT. I had no instructions from my group on that law. Senator HOLLAND. Mr. Lent, what was the date again on which the supply and demand adjustment for milk for fluid bottling went into the New York milkshed agreement?

Mr. LENT. I think it was August 1, 1950, if my recollection is correct. I have not any notes with me on that point.

Senator HOLLAND. That was prior to the occupancy of the present Secretary of Agriculture?

Mr. LENT. Yes, sir.

Senator HOLLAND. Is there any different administration of that provision under the present occupant than that which was present under the former occupant?

Mr. LENT. No. I think we appealed to the previous occupant to give us a pegged price above the formula price at one time, and he turned us down. And the same thing has happened under the present occupant.

Senator HOLLAND. Then the question is solely one of whether or not the policy that has been followed by all of the Secretaries of Agriculture since this provision went into the agreement is a sound policy or not that is really the question; is it not?

Mr. LENT. Yes, it is more a question of degree than of black and white.

Senator HOLLAND. I talked last night to one of the best informed men in this milkshed, I think, and he told me that the trouble here was that the milkshed of New York City was somewhat of a dumping ground for all of the excess milk of the adjoining milksheds in the northeastern part of the Nation, and that that was a principal difficulty that you sustained. Would you agree with that statement?

Mr. LENT. I agree with that 100 percent. I am very sorry I did not mention it before myself in discussing the effect of the supply and demand adjustment on the class 1 price. One of the reasons that supply and demand adjustment in class 1-A formula reduces the price too much is the fact that ostensibly our supply is really not only our supply but also the reserve supply from surrounding markets, and that makes it affect the formula in a downward way, because the formula reduces the price when the supply is great in accordance as compared with the demand, and when we are carrying adjoining market supplies, necessarily the formula has to operate mathematically and takes in that supply as if it were solely our supply when it really is not.

Senator HOLLAND. From what milkshed do these excess supplies move to the New York milkshed to further complicate your situation? Mr. LENT. The milkshed is a very indefinite thing. It is interlocking and has interrelationship and is interspersed the edges are all overlapping. You cannot pin it down like that.

There comes a place where on the borders between milksheds plants and producers go from the other milksheds into this milkshed. That is, if you want to call them sheds. The farms do not move. They are still right in the same place. And the plants do not move. They just change their affiliation from a pooling standpoint.

Senator HOLLAND. In order to make this point clear in the record, would you state what are the milksheds that are complicating your particular picture by transferring their excess supplies to your milkshed?

Mr. LENT. New Jersey is No. 1; northern New Jersey particularly; Philadelphia is No. 2; and Boston is No. 3.

Senator HOLLAND. Is the correction of that wholly a practical matter or could it be corrected by changes in the marketing agreement? Mr. LENT. I just came from a 5-day meeting of the Secretary of Agriculture, held in Newark, in which we are trying to correct the No. 1 that I enumerated.

That is one of the worst things about the way our supply-and-demand formula works now, is the fact that it is thrown out of kilter by these adjoining supplies that we soak up the reserves.

Senator HOLLAND. The next question is this: Yesterday in a hearing, as you know, in Montpelier, we heard the dairy interests of all of New England, I would say, and while they were not all in accord, it seemed that those who were serving the Boston milkshed were all in accord, that their agreement was functioning well. They did not want it disturbed, they seemed very happy about the situation.

We also heard witnesses say that remaining in that milkshed seemed to make a difference of about 60 cents a hundred pounds of milk as compared with their diverting their milk to New York milkshed— is that correct or not?

Mr. LENT. In December the estimated difference is 77 cents. It is too low.

Senator HOLLAND. Perhaps they were speaking in average figures. Mr. LENT. I do not think it will average as high as 60 on a 12

month basis.

Senator AIKEN. May I interrupt there? There is a slight difference in the butterfat content of the milk sold.

Mr. LENT. The 77 cents is after all adjustments.

Senator AIKEN. It is adjusted to what?

Mr. LENT. Equal distance from the market, and equal butterfat

content.

Senator AIKEN. Which butterfat content do you adjust it to?
Mr. LENT. I cannot tell you.

Senator AIKEN. 3.95?

Mr. LENT. You can do it either way. You can adjust to Boston $3.70 or $3.05-whichever way it was done-it was done in a manner most fair by our statisticians. That might make a difference of the 70-cent figure of 5 or 6 cents, but that is all, depending on which way you did it.