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question is one of readjustment of the New York milkshed marketing agreement as to fluid milk prices, is that your understanding ?

Mr. YORK. As I said with you, that is true. There are some areas within the New York order, without changing the Marketing Agreement Act, that could result in improving the New York class 1 price. However, I would like to qualify that in saying that the New York class 1 price has not been unduly low and the question lies, in our judgment, largely in the value of milk being used for manufacturing purposes under the New York order.

Senator HOLLAND. Then there seems to be, as I would interpret your statement and that of Mr. Benham, a rather great difference between his point of view, speaking for the Dairymen's League Cooperative Association, which he says represents 24,000 dairy farmers in the States of New York, New Jersey, Pennsylvania, Vermont, Massachusetts, and Connecticut, and your position for your organization, which you say has a membership of 10,000 dairy farmers in New York, Pennsylvania, and Vermont. Why the difference in the approach?

Mr. York. Well, Senator Holland, we are strictly a bargaining type of cooperative. We do not own processing plants or country receiving plants. Our ambition is to use every method we can to improve the level of prices of farmers selling milk in the market place. I am not trying to say that is not necessarily the ambition of the other organization that you were referring to, but we have found that one of the problems within the New York order is the level of the manufactured milk price, being low as it is. For example, the New York class 3 price, manufactured price, has been this fall as much as 30 cents below the manufactured price in the adjoining Boston market. Because this manufactured price is so low under the New York order, it has had the tendency of sucking into this market, into the New York market, additional surpluses. We have had plants that have never been in the New York pool that are engaged strictly in manufacturing milk, but because of the low class 3 price, the pooling provisions, these plants have come into the New York pool, so handlers could purchase their supplies cheaper.

We think the class 3 price is too low. There has been a difference of opinion on this between our organization and the Dairymen's League at hearings in the past, a very drastic difference. More recently, I would say that the Case committee recommendations, of which Dr. Everett Case of Colgate University was chairman, came out with seven specific recommendations for improving the New York order. The seventh one, of course, was for a separate Federal order for northern New Jersey.

One of those recommendations of the Case committee was to increase the class 3 price. We think the class 3 price is important. We think it is too low.

Senator HOLLAND. You understand it is quite confusing to Members of Congress, many of whom are from other States, to find two apparently representative organizations in this same area taking different positions on this question. It does not help us to decide upon a unified program, to find that rather real controversy between your two organizations.

Mr. YORK. I certainly appreciate that very much. I might say that the place that we have left for bargaining prices for milk to

producers today is in the hearing room. And at these meetings like you have here today.

It is too bad there is a difference of opinion on these matters, but we think that the New York class 3 price certainly should not be lower than, for example, the prices paid to producers at the midwestern condensery prices. They are below. They have been below. In 1948 they were above. We think that is a very important problem within the present New York Federal order that should be remedied.

The CHAIRMAN. Thank you, Mr. York.
Mr. YORK. Thank you.
The CHAIRMAN. We will next hear from Dr. Shaul.

STATEMENT OF KENNETH A. SHAUL, PRESIDENT, SCHOHARIE

COUNTY COOPERATIVE DAIRIES, INC., COBLESKILL, N. Y., AND PRESIDENT, MUTUAL FEDERATION OF INDEPENDENT COOPERATIVES, INC.

Mr. SHAUL. Mr. Chairman and gentlemen of the committee, my name is Kenneth A. Shaul, of Cobleskill, N. Y. I am now and have been a dairy farmer in the New York milkshed for more than 40 years.

The CHAIRMAN. You have heard a good deal of the testimony up to now on this dairy question. I wonder if you have anything new to add. Would you mind filing your statement and giving us the highlights, giving us from it anything that may be in addition to that which has already been stated ?

Mr. SHAUL. With your permission, I would rather read it. I think it is somewhat different.

The CHAIRMAN. Proceed.

Mr. SHAUL. At the present time I am president of the Schoharie County Cooperative Dairies, Inc., of Cobleskill, N. Y., and president of the Mutual Federation of Independent Cooperatives, Inc., of Syracuse, N. Y.

The issues before this hearing have to do with the level and mechanics of price supports and production controls for the so-called basic and perishable commodities, including milk and milk products. Price depressing surpluses of cotton, tobacco, wheat, feed grains, and milk have accumulated in this country because of the

(a) Pressure for increased production during World War II and the Korean War.

(6) Improved methods of production applied by farmers.

(c) The price support and related programs of our National Government.

(d) Failure of production control methods applied to date to really reduce production to market demands.

(e) For some commodities, lower prices to producers because of the increased supply has not resulted in lower prices to consumers and increased demand.

(f) Lower support levels and lower prices for milk in the New York milkshed have contributed to an increased supply rather than reduced supply of milk.

64440_56-pt. 7-14

(9) The loss, risk, and uncertainty facing farmers who consider moving into nonfarm employment.

Solution of the problems facing all our farmers are of tremendous importance to dairymen in the New York milkshed.

For example, it is my belief that the present flexible price support and production control programs will take a long time, if successful at all, to reduce surplus commodity supplies to a reasonable level with demand. Likewise, a return to a high rigid support level with the kind of production controls we have had would not reduce surplus commodity supplies to a reasonable level with demand. Either program would be most disastrous to our welfare as dairymen in this section.

A free market for cotton, wheat and feed grains with its lower prices would soon result in rapid increases of supplies and lower prices for livestock and livestock products, including milk.

At this time our analysis of the proposed land-rental plan indicates that this program:

(a) Will distribute Federal tax money to producers of the basic crops involved in direct ratio to the production on each farm.

(6) Will not reduce production of the basic commodities and probably not of nonbasic commodities.

It is not and cannot be a production control program. It could be a threat to the dairyman if crop production on the rented land moves into milk and if the program proves difficult to administer. Dairymen of the northeast would receive very little land-rental money as they produce few acres of basic crops.

Because of our increase in population and the help of the Federal Government, the dairy industry is cutting down on its surplus supplies of recent years.

We could make further progress in solving our supply and price problems if national agricultural policy is improved so that dairy farmers receive:

(a) Adequate protection against support levels on wheat and feed grains at rates higher than on milk and milk products.

(6) Adequate protection against extensive transfer of land, labor and capital on midwestern and southern farms from the production of cotton, wheat, feed grains and livestock to milk production.

(c) 'Increased authority to control producer and milk plant participation in federally regulated milk markets.

(d) Increased appropriations to the Dairy Branch of the Agricultural Marketing Service so that more adequately and timely aid can be given to our Federal milk market order program.

(e) Amendment of the provisions of the Agricultural Agreement Act of 1937 and the rules of procedure promulgated thereunder, pertaining to milk orders so that the procedure for the amendment of milk orders, of which there are now 63 in the United States and increasing monthly, may be made more readily and consequently more timely, than under the present procedure.

The CHAIRMAN. Mr. Shaul, have you any suggestions to make to change the law in relation to milk-order programs that we have?

Mr. SHAUL. Well, the one suggestion is that under milk-order procedure for amendment could be acted upon more quickly. That would seem preferable.

The CHAIRMAN. That is the only suggestion you have in that regard? Mr. Shaul. That is one suggestion.

The CHAIRMAN. Could that be done administratively? Would we have to amend the act so as to accomplish what you suggest ?

Mr. SHAUL. I do not believe you would have to.

The CHAIRMAN. This cross compliance you speak of, is to prevent cotton acreage and wheat acreage from being used to stimulate production in commodities that are already in trouble, and is one that will have to receive our attention. We have heard testimony on it at every meeting and we hope that we will be able to work out some formula to prevent that.

Mr. SHAUL. I hope you will.

The CHAIRMAN. Are there any further questions? If not, we thank you very much.

Mr. SHAUL. Thank you.

The CHAIRMAN. Our next witness is Mr. Kniffen. Give us your full name for the record.

STATEMENT OF MILO R. KNIFFEN, PRESIDENT, FIRST NATIONAL

BANK, COBLESKILL, N. Y. Mr. KNIFFEN. My name is Milo R. Kniffen. I live at Cobleskill, Scoharie County, N. Y. I am president of the First National Bank at Cobleskill. I am here today to testify before this regional meeting of the United States Senate Committee on Agriculture through the eyes of a banker, regarding which I know of the everyday present situation of the dairy farmers serving the New York metropolitan milk marketing area, who live within the bank's sphere of activity.

A few preliminary remarks should be made. I have been connected with the active operation of this bank since 1931 when I was elected a director and I have been its president since 1944. It is that span of years that my banking experience covers.

I say this because my experience regarding the operation of dairy farms and the production of milk covers a greater period. I was born and brought up on a large dairy farm and have been connected in one way or another with the industry during my entire life and am still substantially involved in the operation of a dairy farm, not as a hobby, but as a serious business.

The country banker stands in a very confidential and personal position with the average dairy farmer. This is especially true during periods of economic stress such as we presently experience. The farmer goes to the banker not only for money but to tell his troubles and to seek advice.

In what I have to say to you in the course of this testimony, I want it thoroughly understood that I am not divulging any confidences. What I intend to say to you is true of the farmers in our community and further than that, appears to be true of the farmers throughout the milkshed generally. I say this because our bank is a member of several associations, associations made up of other country banks in other upstate communities, and in talking with bankers from those other communities, I discover that our situation is fairly typical.

All of you know the chaotic situation of the milk industry in the northeast prior to the date of the promulgation of order No. 27 and official order No. 126.

I don't believe I need to take any of your time to point out to you the precise condition of the industry prior to the promulgation of the orders. Not only did the dairy farmers but also the feed dealers, the machinery dealers, the bankers and the merchants doing business in the production area servicing the metropolitan milk marketing area look upon order No. 27 and official order No. 126 as a muchneeded and long-overdue aid to the dairy farmers, and they all, or substantially all, welcomed its promulgation.

I can say to you that prior to the promulgation of these orders in 1938, any bankers, feed dealer, machinery dealer or merchant actively dealing with the dairy farmers were compelled to approach each deal having in mind the maxim "caveat vendítor" (let the seller beware) in all dealings. This situation stemmed from the existence of the deplorable financial condition in which the dairy farmer then found himself.

My home is in the central part of New York State. Ours is a community that is very heavily dependent upon the dairy cow and the dairy farmer. As a bank, we are conscious of the problems of the dairy farmer and a great bulk of the bank's business is transacted directly with the dairy farmer. What I tell you about the dairy farmer's conditions is not hearsay. I listen to his plight every day of the week and our bank does not remain aloof from the dairy farmer; on the contrary, it tries to help him. You can smell the odor of the cow stable any day, not only in our bank lobby, but also in the executive offices. I believe our area is fairly typical and respresentative of the entire New York milkshed, and I can say to you that bankers generally doing business in rural dairying communities are concerned and worried about the situation of the dairy farmer.

I do not want to be presumptious and try to tell you how to handle the matter, but I can tell you that in order for the dairy farmer to pay his bills, support his family, pay his hired help, his taxes, et cetera, he needs substantially more money for his product than he now receives.

Unquestionably, the dairy farmers in the Northeast are currently caught in an economic squeeze. The relationship between the prices of what they have to buy and the prices of what they have to sell is unfavorable. The milk returns of dairy farmers are simply inadequate to pay feed cost, labor cost and operating overhead of the dairy farmer.

The bank also does business with the grocer, the drygoods merchant, the farm machinery dealer and the feed dealer and we know from the facts which those people give us that the dairy farmer is in a bad way.

In the course of dealing with these various merchants, every rural bank finances large quantities of so-called indirect paper. I refer to notes given by the farmer to the merchant, or machinery dealer, or feed dealer, representing a portion of the cost of certain goods, and then endorsed by the merchant or dealer and discounted at the bank to obtain cash to do business.

In recent months the payment by farmers upon this type of credit has been slow. In many instances the dealers themselves have either

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