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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 con-siderable 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.
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.
The CHAIRMAN. Mr. Moyers, please. Give your full name and your occupation.
STATEMENT OF PRESTON MOYERS, BROADWAY, VA. Mr. MOYERS. I am Preston Moyers, a poultryman from Broadway, Va. At present I am chairman of the American Farm Bureau Federation poultry advisory committee, immediate past president and present director, Virginia State Poultry Federation, vice president of the Southeastern Poultry and Egg Association for the State of Virginia, and director of the National Turkey Federation.
Having been closely associated with producers organizations for the past several years and been in close contact with peoples of the southeast, I feel that I can very ably speak for the poultrymen in this section who are here today.
As you know, the poultry industry has repeatedly declined to ask for price supports, has preferred to take its own chances in a free economy. Although prices on many occasions have dropped below cost of production and many poultrymen have suffered heavy financial losses, we have been able to come back strong after each low-price period by promoting increased consumer demand for our product and by adjusting production of the demand.
While some producers have been forced out of the poultry price business under this system the better growers have survived and greater and greater efficiencies of production has resulted. This is particularly true of the broiler industry and almost equally true of the turkey industry.
For example, out-of-pocket costs of production of a pound of broiler meat some 10 years ago was approximately 30 cents, and required approximately 41/2 pounds of feed to produce a pound of meat. Today the more efficient producers are producing that pound of meat for 18 to 19 cents per pound and for 212 to 31/2 pounds of feed and taking on the average approximately 3 to 4 weeks less time to produce that pound of bird.
The American consumer has benefited by this competition that has produced these results and has increased her purchase of broilers, making it possible for the industry to continue growing year after year. This has occurred in spite of the fact that commercial feeds, the majority of them which are under price-support, represent 60 percent of the out-of-pocket cost of producing a pound of broiler meat. This broiler industry is an excellent example of what can be done by an agricultural commodity group when it is unfettered by Government controls, which inevitably bring accompanying price supports. The growth of this industry has been phenomenal. From 34 million birds produced in 1934 to over a billion birds produced in 1954, an increase of some 3,000 percent.
We don't believe that this growth could have been possible under a controlled economy. With this bit of information as background, I wish to reiterate the poultry industry's opposition to Government subsidies except as emergency measures, and to urge you and other members of the United States Senate to give Secretary Benson's flexible price-support program a fair trial.
Certainly the rigid 90-percent program has not proved satisfactory, but instead has resulted in ever mounting surpluses and costly Gov
ernment-purchase programs. We in the poultry industry would much prefer to see more money spent on production and marketing research which individual farmers are unable to do for themselves. Were these tools at hand to obtain better hatchability from chicken and turkey eggs, to reduce losses from death by diseases, and to do an even more efficient job of converting cereal grains into eggs, broiler and turkey meats, coupled with expanded market outlets that can be created and reached through research, we believe the prospects for healthy poultry industry in the future will be extremely good.
It is on this foundation that the poultry industry has progressed to its present level and we are confident the same approach to our problem will continue to strengthen our position in years to come.
The CHAIRMAN. Is it your view that a flexible price support on grains will give you cheaper feed? Mr. MOYERS. I think that it should ; yes, sir.
The CHAIRMAN. You don't grow feed yourself? Mr. MOYERS. No. Practically all the feed for our broilers and turkeys is a commercial feed.
The CHAIRMAN. Don't you think the grower of these feeds ought to be assured at least a profit ?
Mr. MoYERS. Yes; but by the same token the poultryman should be assured a profit; should he not?
The CHAIRMAN. Do you believe that the sliding scale, if you make it slide too low, that you might discourage production of feed and thereby cause your feed to go up? Wouldn't that be possible? Mr. MOYERS. We would get rid of our surpluses if we did that.
The CHAIRMAN. I understand that, but I am talking in the long term. We are not talking about a program to get rid of the present surpluses alone, but one that will be lasting and that will not create the condition that now faces us.
Mr. MOYERS. Personally, I feel the situation we are in that we probably could not withdraw all supports at the present time but certainly I think it is a desirable goal to work toward.
The CHAIRMAN. And you would want to attain that when demand and production are in line?
Mr. MOYERS. That is right.
The CHAIRMAN. I hope we can attain that. That is the goal. Any further questions?
Thank you, sir.
STATEMENT OF JOHN H. EAST, CHURCHVILLE, VA. Mr. East. I am John H. East. I am a livestock producer in the central part of the Shenandoah Valley of Virginia. Our production is cattle, beef cattle, wool, and lambs. As to the immediate situation as a livestock producer, I feel that insofar as the cattle business is concerned, that we cattlemen have taken the most painful of the adjustments which have been necessary from a wartime to a, shall I say, an uneasy peace economy.
So far as the lamb and wool business is concerned, it has had a remarkable degree of stability from the viewpoint of the producer's income throughout the years, at least that has been my experience. So