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that given 1, 2, or 3 years, that we will cut production down whatever is necessary in order to balance production against consumption.

Therefore, in summing up I would say, first, that we should not be alarmed that we are growing more pounds per acre, that that is a very desirable proposition.

Second, that we certainly are not in favor of doing away with the support program and putting it to a sliding scale, that I think that poundage instead of acreage control is not feasible. And last, I say to you and the members of your distinguished committee that the farmers here, the tobacco farmers, have always done what has been necessary to bring consumption and production in line and that if you leave us alone and leave us our control of acreage and our 90 percent of parity that we will do the rest, we will find the remedy and we will continue to operate this tobacco program without any cost to the taxpayers as has been the case since its institution in 1933.

Thank you, sir.

The CHAIRMAN. Thank you very much, Mr. Lanier.

I can say that I doubt any change will be made as to tobacco with respect to the support price because when the sliding scale was adopted for others tobacco was excluded. Tobacco stands in a good way.

Mr. LANIER. We hope so.

Mr. COOLEY. What is your view with regard to a minimum acreage allotment?

Mr. LANIER. You mean to say that anybody who has an acreage of a certain amount or less should not be cut?

Mr. COOLEY. That is right.

Mr. LANIER. I think it is a very dangerous proposition. It came near wrecking the burley and it would do the same thing in my judgment to flue-cured because you have in this area, Mr. Chairman, wegrow most of the tobacco by a tenancy system and those tenants, not the farmer, the man who owns the farm, but those tenants are the ones that would bear the burden of this thing. If they cut down the acreage of a farm, if a man has 50 acres and he takes the cut, but he has 10 tenants of 5 acres each, they are going to get the cut but the man who maybe has 5 acres of his own, he doesn't get a cut. To me it doesn't work out at all. The only way, as I see it, is to give it an across-theboard cut.

Feed everybody out of the same spoon and I think it will meet with the general approval of the people who grow tobacco.

The CHAIRMAN. Any further questions?

Thank you, sir.

Mr. LANIER. Thank you.

The CHAIRMAN. Mr. Meredith. Give us your name in full and youroccupation.

STATEMENT OF W. LEE MEREDITH, TRINITY, N. C.

Mr. MEREDITH. I am W. Lee Meredith; I am from Randolph County near Old Trinity. I am a dairy farmer exclusively.

I thought about this thing last night and I thought I had a pretty good speech down here, but I didn't get in first and we have been reminded constantly not to repeat, so I don't know whether I am going: to have much to say or not.

64440-56-pt. 6—20

The CHAIRMAN. If you can take the views that have been expressed and broaden out and show how those methods will work, that is what we really want because a lot of the witnesses offer suggestions. We would like to know how to carry out those suggestions, how they can be made to work.

It may be that you will give us that little spark necessary to find the way. So proceed, sir.

Mr. MEREDITH. First I would like to say for myself as a dairyman and the dairymen as a whole, I am sure the ones I have talked to and I have been in contact with a lot of dairymen, I am president of the North Carolina Federation of Milk Producers, and I am sure that the dairymen are really ready and willing to carry their part of the work and cost to promote whatever program you as a committee and the Congress decide is feasible.

As to parity, Mr. Lanier on tobacco mentioned 90 percent was the break-even point. Certainly I don't think the milk industry can survive and meet competitive labor on 75 percent and certainly not on flexible. Maybe flexible in the end would control production but the only way that I see it is possible for flexible supports to control production is for it to run on to such time as the farmers get into such chaotic condition until they are at the point of going broke, and a lot of them go broke and maybe that will control production, but the incentive is when your cows are not producing so much pounds per cow is to add another cow or two to try to keep your pay check coming regularly. You never look for it to come down. Certainly with the cost of production the dairymen I know can't afford for it to come down.

I am not particularly in favor of rigid supports, certainly not with out some measure of control. However, dairy industry and particularly production of milk I consider a very complex operation. It would be very difficult, I think possibly I can say very reasonably that it would be the most hard to control milk of any other commodity in

our economy.

The CHAIRMAN. Now, the milk that is produced in your area, is it sold to a market under a marketing agreement?

Mr. MEREDITH. No, sir; it is just sold on the open market. However, we do have a market of our own that we sell our milk to. We have advanced to the place where if you have a milk market for your milk you have to keep it because there is nobody else looking for that milk except occasionally seasonally in the fall of the year. Not much room for new producers. As you know, there is quite an outlay capital expense for getting ready to produce milk. It is something when you get into you can't hardly get out without going busted.

The CHAIRMAN. How much of the milk produced in your area is used in the fluid state? Would you say most of it?

Mr. MEREDITH. Most of it. There is very little manufacturing of milk in this State.

The CHAIRMAN. This committee has discovered, I believe, generally speaking, that in those areas where they either had marketing agreements or have a ready-made market they are not so much in trouble, but it is those areas where there is a great overproduction of milk which they have to convert into butter, cheese, and dry milk the trouble exists. You don't have that situation around here, sir?

Mr. MEREDITH. Not as such on the manufacturing end. However, for the last few years, particularly since about 1950, 1949 was the critical point just when the war stopped and we came back in 1950 and did a little better, for the last 2 or 3 years the overall picture has been approximately 20 percent surplus which is considerably less than half the market price of class I milk.

Of course most times we have had some year-round surplus but the major portion of the surplus comes in the flush period beginning with about April.

I don't know what the answer to it is. I know that the dairymen are ready to pay their part of whatever it takes. I think you will be asked to consider a set-aside by the milk producers whereby they might finance their own program. I would make no objection to that. I think it should be considered.

The CHAIRMAN. What do you mean by set-aside, a self-help?

Mr. MEREDITH. Subsidies on their sales. Now the dairymen of North Carolina and the Nation have just gone into it recently with ADA. Now for all purposes deducted from my milk checks, most all producers in the State have deductions of 4 cents per hundreweight for advertising purposes by the ADA and dairy councils. In most cases that is matched by the plants for advertising purposes. When our milk is selling at a good price we can afford the small deductions and we can set that up as a reserve fund.

The CHAIRMAN. That is used in order to advertise the sale of milk? Mr. MEREDITH. To offset the day when milk would be in the low ebb and producers not able to-that is just a thought.

The CHAIRMAN. The suggestion has been made along this line that to encourage the consumption of the raw milk and discourage the butter, that some law be passed if it is possible to increase the butter content of milk that is sold as fluid milk. What would you think of that proposal?

Mr. MEREDITH. I would have no objection to that provided that the requirement on that butterfat state was not too high.

The CHAIRMAN. Some have suggested 3.8 percent, others 4 percent. Would you be able to tell us what you would think is best? Mr. MEREDITH. My herd is mostly Holsteins.

The CHAIRMAN. They produce much more than average?

Mr. MEREDITH. They produce, on an average the butterfat content is about 3.6. However, in this particular area selling to a plant that would make no material difference, I don't think so far as I am concerned other than the penalty and we have that per point of butterfat now. That is worth consideration.

I think certainly this school-milk program has been a great help and should be continued permanently because it puts milk in the mouths of a lot of children who otherwise would not be able to get it at all, and it is educational in the fact that it is not only at schooltime but it grows into something that will increase consumption not only then but in years to come.

The CHAIRMAN. We have had that suggested to us often, and I don't think you need fear that we will do away with that program. On the contrary, the tendency will be to increase it, and I hope we can do that.

Mr. MEREDITH. I also want to concur in the idea of possibly the two-price system. I know our standard of living is such that our

production makes the product so high it can't compete in the open market with a lot of world production. I think that is worth considerable certainly, the two-price system.

The CHAIRMAN. Do you have anything else, sir?

Mr. MEREDITH. I think that is all. All the dairymen are asking for and would be entitled to ask for is that we see it is very essential for some program to be adopted whereby farmers of the Nation can go into the market and compete with other people of the different vocations of life in other segments of the economy.

The CHAIRMAN. You stated what we are trying to do and we hope to do it.

Any questions?

Thank

you ever so much.

(Mr. Meredith's prepared statement follows:)

SPECIAL SCHOOL MILK PROGRAM

We believe that the special school milk program is a very fine program and that it should be continued indefinitely.

The special school milk program was provided for in the Agricultural Act of 1954. We commend the Congress for its farsightedness in authorizing $50 million for last year and $50 million for the current school year for the special school milk program.

Increasing the consumption of fluid milk by schoolchildren is one of the best ways to keep this milk from piling up in Government storage. The program enables many thousands of children from low-income families to drink milk at school at very low cost. Many of these children are now developing good health habits by drinking milk at school daily. No doubt a large number of the children will be encouraging their families to drink milk at home. The program will be far-reaching in the development of a stronger and healthier Nation for the future. The outlook for the program for the 1955–56 school year is for participation by more schools and more children, with greater increases in milk consumption. We urge the Congress to authorize, on a permanent basis, the use of Commodity Credit Corporation funds for this program in an amount necessary to reach the objective set by the Congress.

SURPLUS DISPOSAL PROGRAMS

We believe that the donation of dairy products from Commodity Credit Corporation's inventory to schools, institutions, and welfare families in this country, and the disposition of these products to needy persons in foreign countries is one of the most constructive uses that can be made of these highly nutritious food products. The success of these programs in moving dairy products from Government warehouses is established by the fact that last year they were responsible for moving 40.4 percent of the butter, 32.1 percent of the cheese, and 41.1 percent of the nonfat dry-milk solids in Commodity Credit Corporation's inventory as of July 1, 1954, and purchased during the past fiscal year.

Where possible this program should be intensified in order to accelerate the disposal of Commodity Credit Corporation's stocks and thereby hasten the day when the dairy producers of this country will no longer have hanging over them the price-depressing influence of Government-owned stocks.

Along this line the dairy farmers of this county, represented through the National Milk Producers Federation, have urged the enactment of necessary legislation to permit the operation of a program designed to increase the consumption of foods, particularly dairy products, among low-income families. We urge the Congress to authorize experimental programs by the United States Department of Agriculture to determine the feasibility of some type of family milk program. It is estimated that upward of 7 million persons would be eligible for a program of this type. On the basis of an additional 1 quart of milk per week, per person, such a program could increase the consumption of fluid whole milk by upward of 700 million pounds annually.

INCREASED CONSUMPTION OF MILK BY MILITARY ESTABLISHMENTS AND
VETERANS' ADMINISTRATION

We commend the Congress for authorizing the use of Commodity Credit Corporation's funds in the interest of expanding the consumption of milk in our military establishments and in the facilities operated by the Veterans' Administration. The worth of this program is immediately recognizable. A recent report issued by the United States Department of Agriculture indicates that from November 1954 through June 1955, military establishments had increased their milk consumption by almost 100 million pints. In addition, the Army Quartermaster Corps took delivery of 79 million pounds of butter, 3 million pounds of cheese, and 7 million pounds of nonfat dry-milk solids from Commodity Credit Corporation's stocks. The Veterans' Administration increased its consumption of milk between the months of March and June 1955 by almost 1.2 million pounds. The continuation of this program is urged upon the Congress.

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 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 produce 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 of 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 proceeds, 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.

ON PRICE SUPPORTS

Dairy farmers have seen their prices drop 20 percent since 1952. A good share of this drop was caused by the reduction in price supports from 90 percent of parity to 75 percent, which was made effective April 1, 1954. In part the price decline was caused by the fact that even under the 90-percent program prices to dairy farmers were actually less than the announced support level. Each time a plea is made for higher supports for the dairy industry, we are reminded that we can have the same treatment as the basics if we will accept production controls or marketing quotas. In this situation two important facts are overlooked. In the first place, production controls on milk and dairy products would be exceeding complex and difficult to administer. In the second place, even without production controls the difficulties involved in producing milk, including the labor problem, tend to hold total production within manageable bounds. When we had 90-percent supports, the dairy surplus never exceeded 8 percent of a year's production. In 1952 and early 1953, when prices were over 100 percent of parity, we experienced a milk shortage. The real need of the dairy industry is stabilized prices at levels that will not only assure an adequate supply of high-quality milk, but a price that will give dairy farmers the purchasing power equivalent to that consistent with other segments of the national economy.

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