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serves a useful purpose. The tariff today is 24 cents a pound on hops costing less than 50 cents a pound and 12 cents for hops selling at more than 50 cents a pound. This tends to discourage the importation of cheap foreign hops but some are doubtless sold to brewers for propaganda purposes. Many American still feel that anything with a foreign label must be superior to the homegrown product.

PRESSURE TO PRODUCE MORE HOPS

The American hop industry is passing through a very difficult period of adjustment, the outgrowth of wartime expansion, followed recently by corrective curtailment of production. Before World War II, the area devoted to hops in this country was around 31,000 acres. By the end of the war, the area had increased about one third, to 41,000 acres in the crop year 1946-47. This rapid expansion was partly the result of increasing export demand originating in countries that had previously obtained most of their supplies from European sources. It was also the result of optimistic overestimates on the part of domestic brewers with regard to their future requirements. Fear expressed by many brewers that the hop growers would not be able to meet their increasing need, led to the planting of much additional acreage, financed in part by hop dealers. Some of the brewers were so alarmed over the prospect of a possible shortage during the war that they purchased and operated hop yards of their own to the extent of about 750 acres. Most of these brewers, however, finally decided that it was cheaper to buy hops than to grow them and they have gradually been disposing of their hop farm holdings.

Pressure to produce more hops, plus consequent higher prices, also encouraged more intensive operation of existing acreages through the heavier utilization of fertilizers, the installation of irrigation in localities that had not previously been able to afford such desirable but expensive facilities, the use of costly spraying, harvesting, grading equipment, etc.

DECREASING USE OF HOPS BY BREWERS

Hop growers built up their productive capacity, at the urgent request of the brewers, in order to meet their anticipated future requirements, only to find that the brewers were steadily decreasing their total usage of hops by reducing the amount used in their brews. During the year after the repeal of prohibition, an average of about three fourths of a pound of hops was used to make a 31gallon barrel of beer. Since that time, the hopping ratio has been reduced almost year after year, reaching an average of less than four-tenths of a pound by 1953. The latest figure is about thirty-seven one hundredths of a pound of hops to a barrel of beer. This is the result of an effort on the part of most domestic brewers to produce a mild and mellow beer designed to appeal to the generation that was brought up during the prohibition era on miscellaneous soft drinks. The effect of this policy upon the consumption of hops may be appreciated when you consider the fact that 36,608,000 pounds of hops were used to produce 58,458,000 barrels of beer in the 1936-37 season, whereas a closely similar amount produced about 90 million barrels of beer during the 1953-54 season. Each reduction of one one-hundredth of a pound of hops in the average amount used per barrel of beer, means a decrease of 2,500 200-pound bales in the demand for hops. If hops were still utilized to the extent that they were in 1934, it would requires 85,000 more bales (17 million more pounds) to produce 90 million 31gallon barrels of beer.

PUBLIC INTEREST NOT AT STAKE

Public interest is not involved in the supply and consequent price of hops. The cost of the hops used in a barrel of beer at last year's average farm price is about 19 cents or about one-tenth of a cent per 12-ounce bottle. This is doubtless less than the cost of the beer-bottle cap.

MEETING THE BREWERS' NEEDS

American hop growers have done everything in their power fully to meet the needs of the brewers from the standpoint of quantity and quality of domestic hops. Consider, for instance, the matter of seedless hops. Originally and for many decades all American-grown hops were seeded, that is, they contained seeds. Sometimes as high as 20 percent of the weight of the hops consisted of seeds which contributed practically nothing in the way of desirable flavor to the beer.

European hops, on the other hand, contained practically no seeds. This situation was responsible for a decided preference on the part of many brewers for European hops, even at prices decidedly higher than those prevailing in this country. Starting back in about 1935, domestic growers made a determined effort to switch their production over to the seedless type of hops by eliminating the male vines in many communities. This transition was gradual, but fortunately by the outbreak of World War II American hop growers were producing a sufficient quantity of seedless hops to meet the requirements of those brewers in North and South America who prefrred to use this type of hops. By 1955 about 90 percent of the crop was seedless.

Complaints on the part of brewers relative to the high leaf and stem content of most American hops, as compared with those produced in Europe, resulted in the development of increasingly efficient hop picking and cleaning devices that now operate so effectively that the stem and leaf content has been reduced from an average of 10.7 percent in 1945 to a little less than 2 percent in 1955. It is probably safe to say that American hops are the cleanest hops produced anywhere in the world.

PLENTY OF AMERICAN HOPS

The war not only stimulated the production of clean hops and seedless hops, but also demonstrated that American hop growers could produce enough hops to take care of the full requirements of domestic brewers with sufficient left over to meet export demands in many parts of the world. The combined efforts on the part of American hop growers resulted in production increases from an average of about 40 million pounds for 5 years 1939-43 to 50 million pounds average for the next 5 years, 1944-1948, and a big jump to 63 million pounds in 1952.

TOO MANY HOPS LEAD TO TROUBLE

The increase in production during the critical years of the war was a source of relief to many brewers but soon after the end of the war it became a source of much apprehension on the part of hop growers, many of whom recalled very vividly the gradual accumulation of unsalable surplus hops during the late 1930's and the painful remedy finally adopted, when about 100,000 bales of these hops were purchased from producers, dealers, and lending agencies at a miserable 32 cents a pound, for diversion into other than brewery utilization. Older growers recalled also that the 3 or 4 millions of dollars in production costs sacrificed in order to accomplish this diversion, still left enough surplus hops to act as such a depressing factor on the market that the Commodity Credit Corporation was finally prevailed upon to put a floor under an additional 20,000 bales of unsold hops, in the form of a nonrecourse loan at prices high enough to support at least the cost of production level.

SURPLUS CONTROL MEASURES

Facing a reptition of the 1938 situation, leading hop growers, in 1948, reached the conclusion that the best available means of avoiding the accumulation of another tremendous quantity of unsalable hops would be through the utilization of a surplus control program, involving a Federal marketing agreement, in spite of its objectionable features. Such a program was put into effect in 1949. It provided a procedure whereby the Hop Control Board, with the approval of the Secretary of Agriculture, determined how many hops would be required from each new crop as it matured to meet prospective consumptive demands, domestic and export. This portion of each crop was designated the "salable quantity" and each grower was entitled to sell only his pro rata share of this amount. Under this program, nearly 12 million pounds, or about 23 percent of the crop, were held off the market for the crop year 1949-50; 8 million pounds, or about 14 percent, in 1950-51; 15 million pounds, or about 26 percent, for 1951-52 and 22 million pounds, or about 35 percent, in 1952-53. Most of these hops were unharvested but some were baled in anticipation of the eventual termination of the marketing agreement, when they could presumably be disposed of at some price.

HOP MARKETING AGREEMENT TENDED TO INCREASE PRODUCTION

While the marketing agreement was effective as far as it went, it was unsatisfactory from the standpoint of many growers because it tended to stimulate production to offset the curtailment, to build up an unsalable, price-depressing surplus, and to encourage the importation of European hops which, unfortunately,

were not subject to control under the marketing agreement. The presence of surplus hops in the hands of the growers was a constant source of temptation to dispose of them by hook or crook and lack of prompt enforcement of the control features, following occasional violations, also contributed to grower dissatisfaction. The program was finally voted out of existence by a majority of the growers in the fall of 1952. This action became effective in connection with the 1953 crop.

FOREIGN COMPETITORS HAVE EFFECTIVE PRODUCTION CONTROLS

Growers in foreign countries enjoy the benefits of production controls denied our domestic hop growers. England, in particular, has had its "hops marketing scheme" since about 1920. This very effective plan limits the amount of hops that can be sold to the quantity required to meet consumptive demands on the part of the brewers who agree to purchase their seasonal needs at a definite price that is calculated to return to producers the cost of production, plus a reasonable profit. West Germany has a tight production control in that the acreage that may be grown each year is officially authorized and is based upon prospective demands. Czechoslovakia has nationalized its hop industry.

HOPS POSSESS A VERY LIMITED OUTLET

Hops are unique from a marketing standpoint in that they possess practically only 1 utilization, 1 outlet. About 99 percent of the hops produced and sold in this country are used in the brewing of beer. They are essential for this purpose and have been so considered for 500 years or more. They have no other important use. Because of this limited utilization, hops are supersensitive to supply and demand factors. When there is any indication of possible shortage, the brewers are inclined to buy more than they need from domestic or foreign sources, as a matter of self-protection and almost regardless of price. Under surplus conditions, brewers frequently purchase only minimum requirements and sometimes delay making purchases in anticipation of lower prices. policies, of course, tend to produce a weak market situation and consequent lower prices.

HUNDREDS OF GROWERS FORCED OUT OF BUSINESS

Such

It is essential, therefore, to maintain a well stabilized supply situation, enough to meet brewery requirements but insufficient to appear as a surplus above consumptive needs. The important tariff is not essentially a source of governmental income but is designed to serve as a means of protecting our domestic producers against oppressive competition. That they are in need of protection is indicated by the fact that, within the past 2 years, between two and three hundred American hop growers have been forced out of the hop business, temporarily or permanently. Most of these growers have suffered very heavy losses. Hop growing is a longtime business. The vines frequently live for 50 years or more. Under normal conditions, the investment in land suitable for hop growing, plus essential, up-todate equipment, run as high as $2,000 per acre. It is therefore not easy to switch from hop growing to some other crop without heavy losses. The 16,000 acres that have been forced out of business and the curtailment of production on the part of many other growers, involve losses to the owners running into millions of dollars. It is a case of the survival of the fittest. Four or five hundred growers are forced out of business to protect the interests of the four hundred who remain. Over a thousand growers were engaged in producing hops in 1944. By 1951, the number had dropped to about 865 and by 1955 to 408, many of whom did not produce a full crop that season because of low price prospects. The shrinkage in the number of producers is particularly striking in some localities. In Oregon, for example, there were over 500 hop growers in 1944 and only about 94 active growers in 1955. In the coastal area of California, the shrinkage is from a normal of around 65 growers to about 3 during the present year. This has been due not only to the market situation but to a sharp reduction in yields and consequent low incomes, resulting from infestations of downy mildew, which has been particularly severe in parts of Oregon and California. The resulting curtailment of production aided growers in some localities at the expense of growers in lessfavored areas.

There is no means whereby losses due to production adjustment may be spread over the entire industry, but there should be some assurance that these sacrifices shall not be nullified by a tariff rate that would have the effect of protecting foreign producers at the expense of American hop producers.

HOP PRICES MUCH BELOW PARITY

Hop parity price, the purchasing power objective established by the Congress, has been between 65 and 70 cents a pound for the past 2 or 3 years. It was 62.6 cents on September 15, 1955. A few growers who held long-term contracts when the marketing agreement was terminated were fortunate enough to receive close to this price. The average farm price actually received by hop growers reflects the supply situation confronting the industry. In the 1947 season, supply and demand were well balanced, and growers received an average of 68.4 cents a pound. The following year the growers began to feel the effects of an accumulating surplus and average prices dropped to 55.4 cents. Then, after the marketing agreement went into effect, prices for the salable quantity rose to an average of 57 cents in 1949; 62.4 cents in 1950; 68.3 cents in 1951. The discontinuation of the marketing agreement after the 1952 season, resulted in a decline to 60.2 cents in 1952 and a sharp drop to 35 cents in 1954. Prices will doubtless be still lower this year because many long-term contracts have run out and current prices for 1955 crop hops are around 35 cents, or about 50 percent of parity. The importation of 4 or 5 million pounds of foreign hops per year is partly responsible for this situation because it adds just that much more to a supply that is already more than sufficient to meet brewing needs.

EUROPEAN PRODUCTION TREND UPWARD

The production of hops in Europe is apparently a very profitable industry under present conditions, as is indicated by the production trend, particularly in West Germany, which produced 31,439,400 pounds in 1954. This volume, only 4 million pounds less than the short crop produced in the United States during 1955, has made its presence felt all over the world. It is only the existence of a 24-cent tariff that has checked an avalanche of low-priced hops from being dumped into this country. Any reduction in the tariff, whether it is based upon the present fixed rate or an ad valorem duty would be certain to encourage further importations and further reductions in the level of prices in this country.

RELATIONSHIP BETWEEN CARRYOVER AND PRICES

The effect upon prices of increases in the available supply of hops under surplus conditions has been determined statistically. In a study made by Dr. Sidney Hoos and J. N. Boles, of the University of California, it was determined that the size of the carryover of hops from one season to the next bears a direct relationship to the price of hops during the succeeding season. The formula that was developed by these economists is that "a change of 1 million pounds of hops on hand on September 1, considered by itself, is, one the average, accompanied by a change in the opposite direction of about 1 cent a pound in the United States seasonal average farm price of hops of all marketed grades." Interpreted in terms of imports, this means that the 5 or 6 million pounds of imports now indicated for the present season, on top of abundant domestic supplies, will reduce the average price of all unsold hops to the extent of 7 or 8 cents per pound. This formula affords a reasonably accurate means of determining the extent of losses suffered by American hopgrowers as the result of a tariff situation that permits the importation of millions of pounds of foreign hops per year, dumped on top of excessive supplies of domestically produced hops. Under these conditions, American hopgrowers are naturally apprehensive of any tariff policy that permits such importations, not to mention a possible reduction in the limited protection that now exists.

HOPGROWERS UNITED IN OPPOSITION TO TARIFF REDUCTIONS

This recital of the trials and tribulations of the hopgrowers is presented in some detail to emphasize the adjustment difficulties already confronting this small industry and the basis for their opposition to any decrease in the import tariff which could only have the effect of encouraging further importations and corresponding increases in adjustment problems on top of those already unsolved. As indicated, American hopgrowers are opposed to any reduction in the present tariff and particularly that portion dealing with hops costing less than 50 cents per pound. To the best of our knowledge, the hopgrowers of the United States are united in opposition to any reduction in the import tariff on hops at least until the domestic supply situation is more closely in line with prospective demand.

Most hopgrowers feel that importations of foreign hops into this country should be on a quota basis with a total amount limited to the minimum needs of the brewers. In the absence of a quota restriction, a fixed tariff at a rate designed to limit or eliminate low-price imports seems to be the most practical substitute. The present tariff has the desirable tendency to reduce low-price imports or dumping because of the application of the full tariff rate on hops selling for less than 50 cents a pound. This enables brewers who feel that they require some European hops for blending purposes to do so at a price that is in line with the normal value of similar hops in this country. Respectfully submitted.

UNITED HOP GROWERS OF CALIFORNIA, INC., By EDWARD T. ROONEY, Jr.

STATEMENT FILED BY ALVIN DYER, CALIFORNIA STATE GRANGE, YUBA CITY, CALIF.

NO FURTHER CUTS IN RICEGROWING

Whereas the Secretary of Agriculture has the authority to declare acreage controls on either of several of the major crops in the event there is a heavy carryover in Government storage the prevous year, and nationally we did have a rice surplus and heavy carryover in 1954, for this reason acreage controls were instituted in the ricegrowing regions during 1955, reducing acreages approximately 25 percent from the previous years, and another reduction of 15 percent seems in store again for 1956.

This surplus was not the kind of rice that is grown in California. As far as we can determine California does not have a heavy carryover in Government storage, and the rice grown in this State is practically all sold, and if we continue to limit acreage in California, we stand to lose the big new market in Japan that we have been trying to develop.

It is not acreage reduction that we need.

Therefore, we recommend to this committee that there be no further acreage cuts to ricegrowers in this State of California until such time that it may be proven that all the rice grown in this State cannot be sold, or until it begins to pile up in Government storage.

We recommend a vigorous, well-planned program of development of potential foreign markets, and a practical method of meeting competitive world prices in the sale of our surplus products abroad.

STATEMENT FILED BY W. J. KUHRT, CHIEF, DIVISION OF MARKETING, CALIFORNIA STATE DEPARTMENT OF AGRICULTURE, SACRAMENTO, CALIF.

Producers and handlers of 24 agricultural commodities produced in California are participating in 28 self-help marketing programs under California State laws at the present time. These programs directly affect 36,000 producers and over 3,000 handlers of farm products. The farm value of the commodities operating under these marketing programs during the 1954 season was $370 million, computed at the producer level. A total of nearly $8 million was raised by producers and handlers for the purpose of defraying the costs of operation of these marketing programs. Of this amount, more than three-fourths of the funds were expended for market expansion activities, the remainder being used for administration, and to defray the costs of inspection and certification of the products handled.

These State self-help marketing programs in California are carried out pursuant to the provisions of two principal marketing laws, the Agricultural Producers Marketing Act, which became effective in 1933, and the California Marketing Act, which became effective in 1937. The Producers Marketing Act authorizes programs applicable to producers only, but the California Marketing Act, under which practically all present programs operate, authorizes programs applicable to producers or handlers, or to both producers and handlers. The purposes of these two acts, although different in certain details, are essentially the same in that each act is designed to foster orderly and efficient marketing, to authorize plans for expanding markets, to control surpluses, and to bring about more adequate returns to agricultural producers. Thus these State marketing programs are similar in purpose to the Federal marketing agreements.

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