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had to make the monthly amortization payments upon those notes or have been compelled to accept renewals thereof without payment, or in certain instances have found it necessary to pay the note and repossess the goods, believing that the particular farmer involved was no longer able to afford the article purchased.
Dairy farming is an industry that requires a large capital investment. The dairy farmer must have a farm, and farm prices are high; he must have cows and cow prices are high; he must have high-priced machinery and equipment and he also is compelled to pay high prices for outside labor.
We consider the farmers in our community to be average or better than average. By that I mean most farms in our cominunity are above average in productivity, and we feel that the rank-and-file farmer in our community is average or above average in managerial ability, yet we find that most of them owe more money today than they did a year or two ago. This applies to many of the farmers who through the years have had adequate self-provided capital.
Banks are confronted daily by farmers with the proposition that they are unable to make their monthly amortization payments on notes, chattel mortgages, and real estate mortgages previously contracted. Banks are confronted daily with the proposition of either revamping the farmer's loan, scaling down the amortization payments, or finding the farmer in default of his payments.
We find large numbers of applications of farmers for loans to pay their taxes. Large numbers are applying for loans to pay up existing feed bills. At the present time we find very few farmers applying for loans to purchase new machinery because, quite frankly, the rank and file of the farmers apparently are making the old machinery serve rather than to try to go in debt any deeper.
We see farmers' financial statements every day and those statements universally reflect a worsening condition; and at this point I would like to state that one thing I have observed that has had a serious effect upon the farmer's individual financial statement is the tremendous fall in beef prices. There was a time when a farmer who had a cow go bad for dairy purposes could sell her for a fairly substantial price on the beef market. At the present time this is not the case, and it has raised havoc with the inventory values in farm financial statements.
Throughout the years there has been a continually rising capital need on most farms, made necessary just to keep the farmer's head above water. Each farmer has had to embrace the latest developments in labor-saving and efficient methods of producing milk. If he doesn't, his cost per unit of milk produced is going to continually rise and he would soon find himself out of business. The farmer who permits his efficiency to lag or fall behind is soon engulfed by expense and finds himself out of business. So there is a continuing necessity for the dairy farmer to accumulate and add to his capital in order to keep going—in order to produce enough milk to have something left to live on.
Every time a dairy farmer makes a move to bring about greater efficiency in the operation of his farm, and every time he adjusts his farm business because of lack of sufficient income, it is almost a certainty that he will increase his production.
pay his bills.
Increased production, or overproduction, as we often refer to it, has through the years, of course, raised havoc with the dairy farmer. If milk is good for us, and it is universally so agreed, then we ought to devote more serious attention to increase the fluid consumption by our citizens. Obviously, increasing consumption would go a good ways toward eliminating overproduction.
There are those who claim that the establishment of a high class I price under the milk marketing orders causes surplus production. If I am to believe the farmers in our community who have discussed their problems with me, and if I am to believe the representatives of other banks with which we are associated, then I must say to you that I very much doubt the accuracy of any such reasoning.
From what they tell me, the increased production has been occasioned by the tremendous rise in cost of everything which the farmer purchases; his land, his buildings, his livestock, his feed, labor, machinery, equipment, his taxes, and general living expenses of his family. The increase in cost of these articles has so far outstripped the price he receives for his milk that his only chance of survival ha been to increase production to thereby increase his monthly income to
All the farmer back home knows is the amount of dollars and cents in his monthly milk check and whether or not it is big enough to pay his fixed charges and operating costs.
When he sees his monthly milk check is too small to pay his feed bill, hired labor, taxes, and his other fixed charges, what does he do? He goes about it in the only manner he can think of that is, to increase his milk volume so that the amount of his check will be increased.
Another illustration of what happens when a farmer's income is insufficient and one which the bankers notice in everyday banking operations, is this:
A farmer operating a dairy of a certain number of cows suddenly finds that he is going behind. What does he do? Frantically, he thinks he should increase his production, so he goes to a cattle dealer and buys 10 or 20 cows, paying a high price. The cattle dealer takes his note and a chattel mortgage on those cows, plus whatever other property the cattle dealer can find that may be free and clear.
Thereby there is set in motion another vicious cycle. The farmer's debt and overhead is increased. True, his milk check may be larger, at least temporarily, but not in proportion to the added cost and capital investment, and, last, but by no means least, the additional production of milk contributes to the surplus of milk in the market.
It is not my purpose to tell your honorable committee what ought to be done about the dairy problem in the Northeast; rather, it is my purpose to undertake to describe to you the plight of the dairy farmer.
The CHAIRMAN. We already know that. What we are here for is to see if you can give us your plan of solution.
Mr. KNIFFEN. My plan of solution is relatively simple. Something must be done to get the farmer more money, so that he can pay his bills and live.
The CHAIRMAN. All right. How would you do that?
Mr. KNIFFEN. I swear sir, I will have to leave that to the dairy experts. I can only tell you that at the present time, and in his present condition, he cannot exist.
It has always been provided in the essence of things that from any success, no matter what, there shall come forth something to make a greater struggle necessary; so it is today. The dairy farmer in the Northeast, by reason of any past successes which he may have enjoyed, is now faced with a situation which makes a still greater struggle necessary.
In my opinion, it is not in the public interest to exterminate the dairy farmer. On the contrary, I believe it to be in the public interest that everything possible be done to stem the crisis with which he is now confronted.
I, therefore, respectfully ask the proper governmental authorities to pay attention to the farmer's plight. I ask you to investigate the matters which I have tried in these few moments to bring to your attention.
If you wish, come out to Cobleskill, or, in fact, go to any other community similarly situated. Get in touch with the local banker. Go with him out among the farmers of the community. Get acquainted with the dairy farmers in that community, and you will find that I am right when I come here and tell you that the dairy farmer's pocketbook is flat. Then take such steps as you conceive to be necessary to assist in solving this problem and bring his income in proper focus and alinement with his cost of production.
The CHAIRMAN. I think the committee understands the problem very well. We will not take it as presumptuous of you or any other witness to tell us how to solve the problem. That is why we are here.
Mr. KNIFFEN. Let me suggest this: In reply to your question, if we could get more people to drink more milk, I think the problem would take care of itself.
The CHAIRMAN. Is that not something that would be done on the local basis?
Mr. KNIFFEN. Well, it is being done, to a certain extent, on a local basis. I am not so sure but what it could and should be done on a national basis.
Senator AIKEN. I would judge from your report that farmers were unable to buy machinery, that you think that the implement manufacturing companies that are establishing new assembly plants and new distribution centers in New York State, are probably making a mistake.
Mr. KNIFFIN. If conditions continue as they have been in the past couple of years, I definitely think they are making a mistake.
Senator AIKEN. Are you familiar with the official records on the sale of farm machinery this year?
Mr. KNIFFEN. No; I am not.
Senator AIKEN. Would you be surprised to learn that while 1954 was an all-time record year, that 1955 is running 23 percent ahead of 1954 ?
Mr. KNIFFEN. I would be surprised to find that any increase took place in machinery sold to the man who was primarily a dairyman.
Senator AIKEN. It is my understanding that there have been more stable cleaners sold this year than in all the the previous years put together, as well as other equipment. One thing that is putting the pressure on the dairyman is the fact that he is having to mechanize all at once; at the same time he has a mountain of surpluses bearing
down on the price structure. That does put him in a squeeze. There is no question about that.
Mr. KNIFFEN. Let me comment about the stable cleaner. The farmers are putting in stable cleaners because they cannot hire labor, and if they can hire labor, they have to pay so much for the employee that they cannot afford to hire it.
Senator AIKEN. That is right. Labor is getting harder to hire to do farmwork, every month, I might say. Some do not want to do it at all. They want the short weeks, which they do not get on the dairy farm.
I spoke to a gathering in central New York of several hundred implement dealers about 2 months ago who were celebrating a record year in sales. That is why I wondered whether in this particular area, your particular area, perhaps the sales were down.
Mr. KNIFFEN. I think that the sales are down in our area.
Senator AIKEN. According to the Department of Agriculture, the biggest farm expense today and the biggest percentage, 22 percent of all of the cost of agriculture, is depreciation on farm equipment and then you add about 10 or 11 percent more, for electricity and gas and oil to operate that equipment.
In other words, one-third of your total production expense today is charged against equipment and the cost of operating it. That, I submit, is what is contributing materially to the squeeze, because if you do not mechanize you do not keep up with your competitor.
Mr. KNIFFEN. I so stated in my testimony.
Senator AIKEN. Do you not think it would be a good idea for the State legislature to take note of the situation and permit a little competition in the sale of milk in New York?
Mr. KNIFFEN. It all depends upon what particular area you are talking about.
Senator AIKEN. The State of New York.
Senator AIKEN. Any municipality in the State of New York-Utica, for instance.
Mr. KNIFFEN. I believe in free trade and free competition, but I do not believe it is sensible to license more milk dealers in a small community than could possibly survive.
Senator AIKEN. You would continue to permit monopolies in the distribution of milk, then?
Mr. KNIFFEN. I would not call it a monopoly.
Mr. KNIFFEN. There may be some need for relaxation, sir. Each application in each municipality has to stand on its own two feet.
Senator AIKEN. Your present law prohibits any relaxation, as I understand it. In fact, just recently people have applied in New York, as I understand it, and have been denied licenses to sell milk retail.
Mr. KNIFFEN. I presume that is true. I also know of instances where applications have been granted.
Senator AIKEN. I am sure you will find that that law was enacted, I believe, in 1934
Mr. KNIFFEN. That is right.
Senator AIKEN (continuing). Because something had to be done at that time, I agree.
As the fellow said who was taken before the judge for throwing a brick through the plate-glass window, "It looked like the thing to do at the time”-and he did it.
I am sure of that, but it seems to me that that law has caused you a great deal of trouble during recent years, and is partly, if not primarily, responsible for the high price of milk that many New York communities, including New York City, have to pay.
Mr. KNIFFEN. That, of course, is peculiarly a problem for the State legislature.
Senator AIKEN. That is why I say I do not want anyone to get the impression I think the New York milk producer is getting a fair or decent price for his milk. He is not. I just hope you do not adopt any measures which will compound the troubles.
I do hope that you will pay as much attention to Albany as you do to Washington, because Albany is the place where you can solve more of your problems than you can in Washington.
The CHAIRMAN. Thank you.
STATEMENT OF ED SLUSARCZYK, FARM DIRECTOR, STATION WIBX,
UTICA, N. Y.
Mr. SLUSARCZYK. Mr. Chairman, I have a couple of little ideas. A lot of it is repetitious. I will try to go through it, and leave that out.
The CHAIRMAN. I find we are having a lot of repetition in the record. May I suggest that your whole statement will be put in the record, and if you give us the highlights, those points in your statement that have not yet been covered.
Mr. SLUSARCZYK. All right; I will try to be brief. I will try to use as little time as possible.
At the outset, I would like to briefly cover the first page of this testimony, and I would like to thank you and other members of the committee for allowing me to speak to you.
This testimony represents the condensation from about 450 sources, farmers and farm leaders, who have written in to our farm programs at our station after announcements that you were going to be here, and some of it is already what you have heard.
They would like to see this cost-price squeeze that we have here in New York State alleviated somehow, with some Federal action. Perhaps some State cooperation with that would aid.
The milk checks are too low. They have been going down the last few years. Farmers find the cost of production is too high in comparison with their income from milk, especially:
Over the past few years, the Federal and State hearings we have been having, at those we have been hearing many comments to the effect that there is great waste and inefficiency in the cost of distribution, and that our milk marketing laws are so written that the present mechanism penalizes the milk producer for this waste and inefficiency.