pipeline milkers and in place cleaning, and they are accepting them only on an experimental basis.

We believe that any support program for the dairy industry should be based on an economic type formula that takes into consideration such factors as labor, feed, and equipment costs rather than the old parity formulas.

Today it requires $100,000 of producer capital to produce enough milk for the average milk route. Yet the route man without any investment will make more in 1 week than the producer will make in a month.

We do not favor a support program which piles up huge surpluses in warehouses and storage facilities. These surpluses remain à constant threat to the dairy market, and the benefits are too indirect to do the farmer much good. Under this type of program there is too much incentive for the plant operators to rob the consumer of all excess butterfat and sell it to the Federal Government, thereby reducing the quality of the fluid milk sold and resulting in lowered consumption.

The school-milk program has been of inestimable value in reducing surpluses, but the greatest benefit of this program lies in the development of a consciousness among school children of their need for milk especially in areas where underconsumption of milk has been a public-health problem for many years. The dividends in better health and sound teeth and bones will be realized for years to come.

Over a period of years the Bureau of Animal Industry has carried on a Bangs disease elimination program as limited funds would allow. In the beginning, much of the work was on an experimental basis. Now practical plans which have been proven successful are being promulgated by the Department, and Bangs disease can and should be eliminated. Any disease elimination program should be treated as you would put out a fire. Unless the last spark is extinguished, your efforts will be continuing and costly. Any Bangs disease elimination program should be financed and pursued to the extent that the last spark is extinguished in beef and dairy cattle alike.

Many of our farmers are already on a recommended program. They will need little help. Many others will not do much about it until forced to do so, and they will remain a constant threat to the community until they are brought into the program.

Under the present laws regulating the taxing of farm cooperatives, only that part of the net earnings not distributed are taxable. Savings paid back to the farmer are taxable as they affect his net income, any attempt to increase the taxes of farm cooperatives will only result in further reducing his income.

I believe that within the last 2 years, the dairy farmers of the Nation have amply demonstrated their willingness and ability to assume their share of the responsibility for disposing of surpluses through their cooperative efforts to increase the consumption of all dairy products. However, they are not miracle men, and their financial resources are at a very low ebb.

If other segments of our economy are to continue to receive supports from the Federal Government, they too must be supported, or they will surely fail.

Thank you.

The CHAIRMAN. In what milkshed do you live in Arkansas?

Mr. MILLER. Central Arkansas, near Little Rock.

The CHAIRMAN. You say you are not satisfied with the present

Marketing Agreement Act?

Mr. MILLER. You refer to the Federal marketing orders?

The CHAIRMAN. Yes.

Mr. MILLER. We are not satisfied with the pricing provisions.

The CHAIRMAN. Why is that?

Mr. MILLER. They don't provide a margin of profit.

The CHAIRMAN. That is the first time I have heard anybody testify in that way. We have received much testimony during these hearings to the effect that, as I recall, the law with respect to marketing agreements should remain as at present.

What specific changes would you suggest that would bring about what you want?

Mr. MILLER. We want pricing provisions revised to provide parity that is realistic. Under the present formulas I don't think dairy farmers could make money at a hundred percent of parity.

The CHAIRMAN. You want principally a revision of the parity formula?

Mr. MILLER. Yes, sir.

The CHAIRMAN. Thank you.

Senator YOUNG. Have you ever looked into the possibility of using a base period from 1947 to 1949 the same as industry and labor use for their price index?

Mr. MILLER. I haven't.

Senator YOUNG. I wish you would. I think you will find the business of parity would come out a whole lot better than using the 10-year moving base.

Mr. MILLER. I would like to say this: I think we have to look back a good many years to appreciate the difficulties that the dairy farmer is facing in that ceiling prices during World War II are responsible for much of our difficulties. We were subsidized until the end of the war and when price ceilings were taken off the pressure was off the market and the price of milk never got as high as it would have gone otherwise, and we are still suffering from that situation. The CHAIRMAN. Thank you, sir.

Mr. Davis, please, Give your name and occupation, please.

STATEMENT OF C. P. DAVIS, DIRECTOR, MID-SOUTH MILK
PRODUCERS ASSOCIATION, WHITEHAVEN, TENN.

Mr. DAVIS. C. P. Davis, Mid-South Milk Producers Association. I live on my farm in DeSoto County in Mississippi. I farm about 500 acres and do general farming. I have approximately 400 acres in pasture, 50 acres in corn and silage, 50 acres in cotton.

I have a milking herd of 150 cows and have shipped grade A milk to the Memphis market for 40 years. I have been a member of the Mid-South Milk Producers Association of Memphis, Tenn., since 1943 and have served in the capacity of director since that time. I also served as president of the board of directors of the Mid-South Milk Producers Association for 3 years. The board of directors has authorized me at their regular board meeting of October 24 to speak for the association and the approximately 600 members.

In my farming operation I naturally have to resort to a considerable amount of hired labor and expensive farm equipment. Inasmuch as my entire income comes from the farm, I am aware of the decrease in agricultural prices. According to the United States Department of Agriculture agricultural marketing service bulletin the Farm Income Situation, released October 31, 1955, for the first quarter of 1955, farm income was down about 5 percent less than the second-quarter rate and 10 percent below the rate in the third quarter in 1954.

My labor costs, machinery parts, and my living costs are higher, yet my income has been drastically reduced.

Most of my income is from the sale of grade A fluid milk on the Memphis market and our milk prices were reduced 40 cents per hundredweight as of May 1, 1954, as the result of the reduction in support prices of dairy products April 1, 1954. With the volume of milk that I am shipping my income was reduced approximately $264 per month. The dairy farmer in the Memphis market feels that the decrease in farm income in not warranted with all of our costs up, and that certain legislative measures could be enacted to afford greater protection to our farm prices. I wish to concur in the statement being presented by Mr. Milton Nolley of Collierville, Tenn.

The marketing agreement and order program currently authorized by the Agricultural Marketing Agreement Act of 1937, as amended, was developed to correct the demoralized conditions of fluid milk markets which followed the economic collapse in 1929. The operations of the Federal milk marketing orders have been satisfactory to producers supplying the markets using the program, and the market stability created by the Federal orders has had a healthy influence throughout the dairy industry.

We oppose any change in the Agricultural Marketing Agreement Act. Any change in the legisation could have a far-reaching effect on producers and on the whole dairy economy. No legislation is perfect, and no administration of a program is perfect. By the same token, the many criticisms which are from time to time aimed at the Federal order program should not be presumed to be valid without detailed investigation of the facts and of the consequences which might result from change.

In the National Milk Producers Federation we have been aware of the criticisms of the Federal order program. We have been working diligently in an effort to appraise each criticism. Any suggestions that we might have to improve the Federal order program at the present time can be implemented within the frame-work of the present legislation. We are aware of the fact that all producers do not benefit to the same degree from the Federal order program. We feel very strongly, however, that we should work toward improving the position of those producers who do not receive the benefits from the Federal order program rather than to tear down a good program in order that all producers might be at the same disadvantage or suffer equally.

Federal milk-marketing orders are highly technical and complicated and they are of tremendous economic importance. The milk business is highly technical and complicated. On April 28, 1955, the National Milk Producers Federation presented an educational background statement on Federal orders before the House Agriculture Dairy Subcommittee. We feel that this statement should be included

in the record of this committee and that it would be helpful in creating a better understanding of the problems of marketing milk.

In conclusion, let me reiterate our position. Let's protect and preserve the Agricultural Marketing Agreement Act in its present form, and let's direct our efforts to improve the position of all dairy farmers rather than tear down a program that has proved its worth conclusively over a great number of years.

On administrative procedure, proposals have been advanced from time to time over the past several years for changes in administrative procedure. The general trend of the proposals has been toward more judicial and formal types of procedure. Proposals for extensive changes in administrative procedure are currently being advanced by the Hoover Commission and its task force.

Under these proposals administrative proceedings would be made to conform quite closely to the formal procedure of United States district courts. The same type of procedure, with minor exceptions, would apply to all the various types of agency actions. These proposals overlook several important points.

Substantial progress has been made in moving away from the technical, formal, and rigid requirements of the early law and in developing procedures which are less formal and more efficient. Further development should continue in this direction and not toward a return to formality.

A fixed procedure should not be prescribed for all agency actions, because such actions vary widely in their nature and purpose. Some are business transactions comparable to the actions of a corporation. Others, in effect, are an extension of the legislative process under standards prescribed by Congress. Judicial procedures are inappropriate for such nonjudicial actions.

This is particularly true with respect to Federal milk-marketing orders. They are basically legislative in character, and the application to them of judicial procedures would cause harmful delays and tend to break down the whole order program. Farmers should be encouraged to participate directly in marketing order hearings, and the hearings should not be made so technical as to require them to appear through attorneys. Furthermore, the procedures presently being used have been sustained by court decisions. Any substantial change in the procedure would result in a new series of legal attacks on the orders.

The foregoing comments are in line with the position of the National Milk Producers Federation. We are members of that organization and have participated with other dairy farmers from other parts of the country in discussing these problems and in developing these policies.

On taxation of cooperatives: By acting together through cooperative associations farmers are able to do for themselves many things which they could not do acting alone. For example, they can build and operate a dairy plant and thus process at cost the milk produced on their farms. Since the purpose of such associations is to operate at cost, they do not have income. Any savings on hand at the end of the year over the amount retained for estimated costs are refunded to the farmers.

The cooperative is not a middleman placed between the farmer and his market. In effect, it is the farmer himself carrying his marketing

operation one step further and selling his product in processed form rather than in raw form.

Cooperatives provide a yardstick for measuring, processing and distributing costs and serve an important purpose in keeping the charges and profits of other processors and distributors in line.

There are basically four kinds of competitive enterprises, the individually owned business, the partnership, the cooperative, and the ordinary profit-type corporation. All are taxed once on their savings or earnings except the corporation. Its profits are taxed twice. Competition would not be equalized by extending the double tax to cooperatives. It could be equalized by extending the double tax all the way down the line to the cooperative, the partnership, and the individual, or by removing it from the ordinary corporation. The latter is the better approach.

A withholding tax on cooperative refunds would be impractical and unfair. The burden of withholding from great numbers of small accounts would make the tax impractical. Since patronage refunds are not net profit to the farmer, but are a part of his gross sales process, it would be unfair to withhold in such cases unless withholding were applied to all gross sales of commodities.

The foregoing comments are in line with the position of the National Milk Producers Federation. We are members of that organization and have participated with other dairy farmers from other parts of the country in discussing these problems and in developing these policies.

Thank you.

The CHAIRMAN. Thank you, sir.

Next is the representative of the Dairy Farmers Cooperative, Mr. F. A. Yarborough.

You may proceed, sir.

STATEMENT OF F. A. YARBOROUGH, DAIRY FARMERS COOPERATIVE ASSOCIATION, KENTWOOD, LA., ALSO REPRESENTING THE LOUISIANA AND MISSISSIPPI MILK PRODUCERS ASSOCIATIONS Mr. YARBOROUGH. Mr. Chairman and honorable members of the committee, I am making this statement in behalf of both the Louisiana and Mississippi Milk Producers Association at Franklinton, La., and Dairy Farmers Cooperative Association in Kentwood, La.

The CHAIRMAN. Your name is F. A. Yarborough?

Mr. YARBOROUGH. Yes, sir. I am a dairy farmer from Kentwood. The CHAIRMAN. Do you have a herd of your own?

Mr. YARBOROUGH. I am a dairy farmer.

The CHAIRMAN. Proceed.

Mr. YARBOROUGH. This statement was prepared in conjunction with Mr. Sam Smith, who is also a dairy farmer, and manager of the Louisiana-Mississippi Milk Producers Association.

The CHAIRMAN. Do you wish to put the whole statement in the record and highlight it, or have you something new to add to the problem?

Mr. YARBOROUGH. I believe that most of the material we have here, Senator, there will be some questions raised on it and we would like to present it in full to the committee.

The CHAIRMAN. Proceed, sir.