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the third quarter in 1954 “due primarily to lower prices in farm products accompanied by only a small reduction in expenses."
We would like to submit the estimated prices under the New York milk order for the months ahead. These indicate that for this month of November our blend price will be 32 cents under that of a year ago. In December the New York order blend price is estimated to be 26 cents under that of a year ago. This same downward slope continues into 1956. In May the blend price will hit a low of $3.35 for 3.5-percent milk in the 201 to 210 mile zone.
These figures demonstrate the No. 1 problem facing our dairy farmers—inadequate and low prices.
What makes the rub even worse for dairy farmers is that they have heard nothing in recent months but higher wages for steelworkers, higher wages for automobile workers, and higher wages for milk drivers in New York metropolitan area. As important consumers of products manufactured by organized labor, the dairy farmers will be forced to help pay for those wage increases out of their own depressed incomes.
The fact that the milk companies did not see fit to raise the price of milk to consumers as a result of this latest wage hike is an indication that they felt they could absorb the increased cost by paying to farmers lower prices for milk. With milk as with most farm products, increased handling costs betwee the farm and the consumer, have prevented the consumer from receiving any benefits from the farm price decline.
II. FARM GROUPS WORK TOGETHER
One of the criticisms aimed at farmers is their inability to work together. That criticism is certainly justified in this milkshed. We in the Dairymen's League have taken the initiative in bringing the dairy and farm groups of our milkshed to work for constructive programs. A year ago, right here in Utica, the dairy groups worked shoulder to shoulder in meeting the problems of declining prices. This last August our organization called a meeting of all the farm organizations of our milkshed, including representatives from the granges and farm bureaus of the States of Vermont, New York, and Pennsylvania. Representatives of these groups formed what has been called the Temporary Price Adjustment Committee. A conference was had with Secretary Benson in Washington on October to bring the picture of declining prices of dairy farmers directly to his attention. To date, no action has been taken by the USDA.
The constructive leadership provided by the recognized cooperatives has so far prevented the irresponsibles from seizing upon the present plight of dairymen as an excuse for fomenting serious trouble in this area. Make no mistake gentlemen, thousands of dairymen in our milkshed are hard up against it financially, and need leadership and help.
III. PRICING FLUID MILK ON ITS MERITS
Here in the East the formulas used in milk marketing orders are based on broad economic factors. This contrasts with milk pricing in the Midwest, the South, and the Southwest were fluid milk is priced directly in relation to the price for manufactured milk.
We believe fluid milk should be priced on its own merits in relation to what the consumer can pay. When the wage rates of all other segments of our economy are rising, there certainly is no jurisdiction for the continued decline in the price paid to the dairy farmer for his fluid milk.
Machinery is presently available to the USDA to bring higher prices to dairy farmers for fluid milk without in any way getting into the support question. The machinery we are referring to is the operation of the marketing orders under the Agricultural Marketing Agreement Act of 1937.
Not only are we dairy farmers finding ourselves being flattened out between the cost-price rollers, but so are all farmers in the United States. There is some variation in the degree of pressure, but we are getting thinner while everyone else grows fat and prosperous.
The inequitable situation in which we dairymen and other farm people in this country find ourselves is caused by the fact that our costs, which primarily consist of wages, continually spiral upward while the prices of agricultural products continually tumble downward. Either trend by itself would have
placed a heavy burden on farm people; in combination they threaten disaster in the not too distant future.
You, our elected leaders, have the primary responsibility of working with us toward correcting this situation. You will be wise to face up to that responsibility immediately. A short time ago I listened to a talk by Governor Langley, of the State of Washington, in which he described at some length the high lerel of prosperity being enjoyed by most of our citizens. Following that he said:
"A tree cannot be expected to continue to bear fruit if we allow it to rot at the roots.” I was not able to clearly deduce just what the Governor had in mind as constituting the roots of our economic tree, but he and you gentlemen also will do well to recognize our agriculture as being a sizable portion of that root system.
Many persons tell us farmers that we should solve our own problems; that we should cut down our production and develop new outlets for our products. They say then we might be able to catch a ride on the Nation's prosperity train, which, up to this time, has not only left us behind, but has bowled us over with its slipstream.
Let us look at these two pieces of advice. But first, I would again quote Governor Langley as follows: "Government should not attempt to do for the people anything that they can do better themselves." I believe any soundthinking person would agree with the Government in that statement.
With that in mind, let us look at the first of those pieces of advice to farmers that I just mentioned, namely, “cut down our production ourselves."
There are some 512 million farmers in this country. Each one is an independent operator, his own manager, free to plan his operations as he pleases. Under such a situation you can see why it is impossible for farmers, through our own efforts, to control production. If by some miracle the 542 million did agree on, and then follow, a restricted production and marketing program, we would soon find ourselves being prosecuted under some one or another of the Federal laws relative to monopolies and restraint of trade. It was not long ago that an attempt was made to prosecute a small group of farmers in this country who had agreed to restrict the volume of a certain crop that would be available for marketing, so as to raise the price to a point where it would cover the cost of production.
Since we cannot control production ourselves, you, our legislators, have attempted to do it for us, with our permission, in respect to certain so-called basic crops. Prices have been pegged by the use of a price-support program to encourage us to accept the acreage reductions. This attempt has not brought the production of those crops in line with domestic needs. Furthermore, the acres diverted from those crops have been used to produce other products that are also in excess supply.
In addition, in Government and other circles, the theory has spread that lowering agricultural prices will cause some of our farmers to give up farming, or at least reduce their production. To name it frankly, this is the : "Starve them out of business” theory. Unfortunately, as far as getting reasonably quick results is concerned, this theory disregards the fact that most of us are farmers because we like farming better than any other way of living, not because we expect to gain great financial profits from it. Our farm is our home, our kingdom. Our savings are invested in our land or in our livestock and equipment or both. We like the country as a place to raise our children, as a place to spend our old age. Most of us are not leaving until the sheriff puts us out.
Also remember that generally speaking the first reaction to lower prices is increased production. That is the only weapon the individual farmer can use to meet the problem of lower prices. He decides that he and his family must get up earlier, work later and produce more, so that when he markets it at the lower price he will have enough money to meet his fixed overhead. True it is trying to lift ourselves by our bootstraps, but what else can we do? We will agree that if prices are kept low enough for long enough period some of the less fortunately situated among us may get starved out. But meanwhile such a program will come within an inch of starving all of us. Carried to completion, such a program could well wreck our entire economy.
Let us stop here and look at another result that we can expect from such a program. A farmer has the responsibility of feeding his family, and also of feeding his land and maintaining his equipment. When there is not adequate money available for both, you know which will go hungry. We will live on the depreciation of our buildings and equipment and drain the fertility of our soil before we starve our family or quit our farms." The buildings and equip
ment can be replaced, if prices go up 'sufficiently. Risking the depletion of the fertility of our Nation's soil, however, is a serious matter.
It would be most unpleasant ever to find ourselves in an all-out war with a great population dependent in part upon imported foods, with an ocean full of enemy submarines, and with a depleted soil. We in the dairymen's league are opposed to a policy of low farm prices which will not only result in mental suffering and continuous financial worries for farm families, but may also endanger the future of our country.
We recognize that there are thousands of farm families living upon marginal or submarginal lands who would be better off in some other occupation, at least as long as industrial prosperity continues. If we set out upon a program to starve those people off their farms, however, let me predict that it will not be long before you Senators and our Congressmen will be making large appropriations of public funds for the purpose of assisting these same families stay upon their land where they will continue to produce uneeded products while they make the most frugal kind of a livelihood.
Now to look at the other piece of advice that is frequently handed us : “Develop new markets for your products."
Let us explore the avenues that might be opened to us. First, we will look at the domestic market. The human stomach will hold only so much food. Through advertising or modern merchandising we may be able to change its preferences for food, but the average citizen will still continue to eat less and less due to his more sedentary life and continual warnings that he is endangering his life expectancy by eating too much. Our only hope in this direction is to wait until there are more people. Many more people. The fact that there may be enough people in the United States 15 or 20 years from now to use all we now produce is not much consolation to the young farmer who is wondering how he is going to meet the interest and amortization payments on his indebtedness next year.
So far as developing foreign markets is concerned, the price level in this country has been pushed up so far above world price levels during the years just past that we cannot sell our surpluses on world markets and recover anywhere near our production costs.
Right there lies the major cause of our problems. Our farmers always have produced in excess of domestic requirements. Having an interest in the future welfare of our country I hope we always do. But as anyone who has had any experience in marketing well knows, when operating on a free market the lowest priced market at which the last of a given amount of goods must be sold soon sets the price for all the goods in all the markets, even though there is a very small percentage left that has to seek that lowest priced market. Therefore, we have been forced to look to our Federal Government, the only source of adequate authority, to establish artificial methods of holding up domestic price levels.
I would also mention another proven fact that seems to be entirely overlooked by those who say "reduce your output." The replacing of manpower by machinery in our industries has required huge investments of capital. Everyone agrees that our industrial plants must run at or near capacity if we are to have industrial prosperity, if the owners are to meet their fixed overhead and have profits left. Let us not forget that the same thing is true in our agricultural plant. We cannot have agricultural prosperity, nor can our consumers long enjoy low cost farm foods and fibers unless we allow our agricultural plants to run at capacity. We recognize of course that it might be desirable, if possible under present circumstances, to close some of our less efficient farm plants.
To sum it up briefly, our situation is as follows:
1. Due to the urgings of Government, together with our own earnest desire to do all we could to help win the two recent wars, we have invested our money in an agricultural plant with a productive capacity that exceeds our domestic demands.
2. Agriculture, like industry, has substituted machines for manpower. That means high capital investments and high fixed overhead. We must operate at near capacity if we are to have any chance of prosperity, and if consumers are to long enjoy low farm costs for food and fibers.
3. We are operating on a price-cost level that prohibits our selling our excess products in world markets without taking heavy losses.
4. If we allow world prices to depress our domestic prices, or if we deliberately support domestic prices at a low level in hopes of reducing our agricultural production by starving out some of our farmers, then we run the risk of wrecking
our entire economy. In the process, however, our agricultural plant will deteriorate and the fertility of our soil deplete to the extent that we may not be able to feed our future population. We would also be at a grave disadvantage should we become involved in another large-scale war.
Gentlemen, this is a serious situation that I have just outlined in those four points, and let me remind you that the farmers of this country are not responsible for any one of them. There is very little that we can do by ourselves to solve these problems, nor should anyone ever look upon them as being the problems of farmers alone. They must be faced by all the people of this country. If our people want their food produced at the lowest possible cost, then the problem of keeping our agricultural plant running at capacity becomes the problem of all citizens.
If we want the fertility of our soil maintained so we will be assured of adequate food supplies for the increased population that we expect in the future, and to meet possible emergencies, such as war, then the problem of keeping farm prices at a point where soil fertility will be maintained, is likewise everyone's problem.
If keeping our agricultural plant in shape to assure adequate food in future years for our growing population and possible wars means having surpluses in the interim that have to be marketed at a loss, then those losses are insurance premiums that should be shared by all.
If during this period we find it necessary to give away or throw away some of our excess farm products for fear of offending certain other nations if we offer those products on markets that they consider theirs, nations upon whom we are depending to help us maintain world peace, then that loss is a part of the cost of peace-peace that all our people want, and all should be willing to
So we are considering here, problems that affect the future of all our people, not just the future of dairy farmers. Therefore, everybody must expect to share the responsibility and cost of solving them.
The question is: How can we solve these problems effectively and at the lowest cost?
On behalf of the Dairymen's League Cooperative Association, Inc., I would offer some suggestions for your serious consideration. We sincerely hope that you will receive other ideas that will tie in with and augment ours.
1. There is the problem of farmers on marginal and submarginal land that will never yield a satisfactory living to a farm family except during periods of unusually high prices, but which do add to our excess production. I have pointed out that a program designed to starve those people off their farms is neither practical nor desirable. Besides we are too tenderhearted to ever carry it through to completion. Our suggestion for handling this problem is as follows:
(a) We propose that both Federal Government and State governments develop and finance programs to influence light industries to locate in areas of marginal farming lands. This will provide farm operators in those areas an alternative means of making a livelihood without having to move from their established homes. It also is consistent with the move to widen dispersal of industrial facilities.
(b) Establish trade schools in such areas, so that the sons and daughters of these farmers may be encouraged to learn a trade and qualify for good paying nonfarm jobs.
2. As supplemental assistance in the marginal land areas we approve the adoption of the soil bank plan. This should be offered only on a long-term and full-farm basis, excepting only such acreage around the homestead as would support the minimum livestock required for family use. In addition to paying the taxes and a modest rental per acre, we propose that the Government Forestry Service, reforest the land and wherever practical care for the planting until the trees come to marketable ize, whereupon the owner would either repay the Government, together with interest, and take back the land and timber, or the Government would harvest and market such timber as would return its investment and then turn the land and the remaining timber back to the owner, In this way we would not only get such land out of agricultural production, but we would be assuring a lumber supply for our future increased population. At the same time the public funds invested would eventually be returned to the tax. payers. We believe the adoption and aggressive effectuation of the above proposals would go a long way toward a satisfactory solution to the marginal farmer problem.
Perhaps the soil-bank program should also be offered on a partial as well as total farm basis in the better land areas on a short-term contract, kept in grass
that is not harvested, so that fertility will be maintained, and the land will be ready for production whenever needed. As yet we have some reservations. They are as follows:
(a) Will it lessen the efficiency of a farmer's operations?
(b) Will it require too great a force of employees for administration and policing?
(c) In case of drought in any area will there not be a great demand that the owners be allowed to harvest or pasture this land instead of marketing lighterweight livestock as would be the intent of the program? Could our legislators stand up against such pressure and if they did, wouldn't old bossy break through the fence anyway? If she did, where could we hope to find a Government employee or even a Senator who would be brave enough to attempt to drive her out?
3. We approve the adoption of a two-price plan for agricultural products, to be administered either by Government or by farmers themselves under a program similar to that presently proposed by dairymen. We believe a part of the losses resulting from sales at the export price should be assessed back against the growers, probably in proportion to the percentage of current production that has to be so marketed. We do not believe it fair to assess all such losses against the growers. Farmers are in no way responsible for the existing price level in this country that results in losses on export sales. Losses resulting from dumping of products for fear of offending friendly nations by offering it on foreign markets or imports permitted from those nations for the same reason are in the interest of preserving world peace and should be borne by all citizens.
4. Agricultural cooperatives and domestic corporations should be encouraged to develop facilities for manufacturing and merchandising agricultural products in foreign countries, and our Government should make available technical skill and low-cost financing for such purposes. Surplus products should be made available to them at prices which will be competitive in those markets.
5. Government should make more money available to its research departments in an effort to develop more practical industrial uses for agricultural products,
6. Competent men should study the effects of foreign currency devaluations upon both our agricultural and industrial export problems, and recommend actions to counteract those effects.
7. Government and agriculture, working together, should provide and use every means available to teach our people the value of good diets, to the end that our citizens will use more livestock-poultry products and thereby help relieve our serious surplus problem. Also the use of public funds to provide health-giving foods in school-lunch programs should be continued and so encourage our children to develop good eating habits that will improve the health of our future adults.
8. Continual studies should be made to determine the varying degrees of improved efficiency and resulting reduction in production costs that have come in the growing of different farm products as a result of technical and mechanical advances. The parity bases should be adjusted to reflect these changes.
9. Due to the conditions that I have described we recognize that the domestic price levels for agricultural products may have to be artificially supported for some period of time. We also recognize that during the period when our proposals, and we hope additional effective ones, are being developed, and until they have become effective, it may be necessary to continue using a flexible price for certain cereal crops that are grown quite extensively by part-time farmers in certain areas. They should be administered with a full recognition of the two following points :
(a) Low agricultural prices do not reduce production except after a long period of time; meanwhile, not only would our present national economy be in peril but there would be serious effects upon future national situations.
(b) The ultimate and early goal for agricultural prices should be 100 percent of parity. The now President of the United States has said this is the fair level for farm prices. We wholeheartedly agree with him.
We are aware of the problems encountered and have been patient, but neither the Government nor the people of this country have any right to expect us to continuously take less. We have never even heard a suggestion that anyone else should receive less than full parity.
We farmers provide the most essential service required by our citizens. We should not be treated as second-class citizens, and we will not for long tolerate such treatment.
The CHAIRMAN: Our next witness is Mr. John C. York.