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are on the decrease. We have low production per cow. We have few. cows per farm. We have few markets particularly for manufactured milk, which presents a grave problem for the dairy industry in this State.

Our grade A prices have been high-that is, for fluid milk-compared with other areas. They have been down some in the last year or two, cash receipts have been up because the volume of grade A milk increased. Whereas we have made most growth in overall production of all milk, there has been a tremendous increase in fluid milk production and sales in this State, last year the volume was 50 percent higher than 5 years ago, 3 times higher than it was in 1947.

The CHAIRMAN. If I am to judge from what you are stating there your industry seems to be in a pretty good position. Mr. McDoWELL. Yes, sir; on the whole.

The CHAIRMAN. Have you any suggestions to make except to give to the committee your healthy condition? Mr. McDoWELL. We have.

The CHAIRMAN. Any suggestions for legislation? That is what we are here for.

Mr. McDoWELL. Yes, sir; I believe that the time is justified to try to show what the condition is and the differences that are in our State.

There is one comment that with regard to some outside opinions about our industry here in the State, that we read and that we hear a great deal about, and I have some testimony and I won't go over it all, with regard to it. There seems to be an opinion that we are free of problems here in this State and our prices are high and that profits are excessive and that milk is excluded from other areas. That is not . true because we have imported milk every year since World War II days, almost every month.

The CHAIRMAN. Are there any restrictions at all to the importation of milk to the State ?

Mr. McDoWELL. If it is to be used for fluid use it must meet certain health standards.

The CHAIRMAN. Yes. You can keep it out by providing that those standards be met. Mr. McDoWELL. We haven't because we need it.

The CHAIRMAN. You better not tell that to Wisconsin and Minnesota.

Mr. McDoWELL. That is why we have it in this testimony to show in the record we have imported milk. The record also shows, sir, that over the past several years our prices have not been as high as they appear to be and with some exceptions our prices for milk for fluid use have not been as high as the price for Wisconsin milk laid down in North Carolina.

I have enumerated for the record some of our problems which are somewhat peculiar to this State. One in particular is low per capita consumption of milk. So far as urban and rural nonfarm people making up about two-thirds of our population consumption of fluid milk is about two-thirds of the national average, and that is a serious problem. This problem of providing markets for manufactured milk.

Now for our statement on some specific issues, some have already been mentioned, the special school-milk program, that has been a tremendous help here to us and certainly we ask that it be continued.

The surplus disposal programs we think are important. Our

schools and our institutions and welfare families and of course the disposal to foreign countries, I believe, I am correct in stating roughly that all the products bought by Commodity Credit have been disposed of through those channels. We think there is a possibility of broadening the scope of surplus disposal to low-income families, but we think that needs further study.

We have several military bases in our area and we know what the stepped-up use of milk to the military and veterans' institutions has meant to our markets and we know that is true throughout the country.

We know that the accelerated brucellosis program has helped remove diseased cows and reduced cow population and that will help to relieve the surplus.

With regard to price supports, as I said earlier, very little dairy products have ever gone into storage from North Carolina so the pricesupport program affects us only indirectly.

Since our work and our problems have been in another direction, our organization has never discussed the support program with our dairy farmers. However, they are acquainted with these other programs of other commodities and I think that if a poll was taken they would be in support of at least 90 percent of parity.

So far as we know, no one has ever discussed the program with the manufacturing producers to any length because they are scattered and small. When you talk about higher support on dairy, the question of crop control or control of milk production always comes up. We think that our farmers, at least on the first thought of it, would support controlled production of milk, but we also are of the opinion that after they understood all of the applications and understood that we here in this State and in the Southeast would probably have a base established on somewhat lower level than we have now, our farmers would probably be in opposition to it. They would certainly be in opposition to it if they believed that under such program they couldn't increase their cows or would endanger the program by increasing production per cow. But that is simply what we think that the opinion of the dairymen is on it.

We think that somewhat higher supports are needed for milk, of course it is expressed in purchase price of commodities. We think that it can be justified on 2 reasons or 2 accounts. First is even without production controls the amount of surplus has never been out of the bounds of reason, it never exceeded 8 percent of total year's supply. That was the highest even with 90 percent support.

The CHAIRMAN. You mean nationwide ? Mr. McDoWELL. Yes, sir; so far as this State is concerned it is very, very little.

Another reason is that we think that higher supports on dairy is needed to keep the dairy in line with the rest of agriculture. We know that is somewhat of a debatable question but we know that you can get a lot of testimony on that.

One other point, and that is on research and education. Our dairymen, and Senator Scott was a part of it, helped set up a reserve program in this State through a dairy foundation to expand the research and service program of our natural industry department at State college. That has meant a great deal and I think that shows how much our farmers are in support of education and research. So the continued support of all of the Federal programs and perhaps expansion in research and in education, consumer education in particular, we think would be of some benefit.

There has been a lot of testimony today with regard to the soilbank of soil-fertility program. I would like to call it to the attention of the committee, that that program so far as the livestock farmer is concerned, and so far as the dairymen, might bring on some problems because if the land is to be conserved it would have to have a cover crop, probably a forage crop, and you might have the same thing we have with diversified acres because it would be a tremendous problem to try to police the use of that land.

As you know, Senator, the National Milk Producers Federation, of which we are a part, have proposed a self-help program, so-called.

The CHAIRMAN. I am glad you said so-called, because it isn't selfhelp.

Mr. McDOWELL. We have never discussed that with our farmers because our problems as I said a while ago have not been in surplus commodities of butter and cheese and powder. We don't know how they would react to it. I have my personal, I think I know how they would react since we are fluid-milk producers, we would react

The CHAIRMAN. In the negative.
Mr. McDoWELL. Yes; like other fluid-milk producers.

The CHAIRMAN. Not only that, but this so-called self-help program envisioned by some of the dairy people provides for the creation of a board with legislative power to control the distribution of every drop of milk produced in the country and in addition to that this board would expect your Government and my Government to make available to them without security a half billion dollars. Now, if that is self-help, I don't know what is self-help. Mr. McDoWELL. I am not offering testimony on it. The CHAIRMAN. Thank you very much. Mr. McDoWELL. Thank you, sir. (Mr. McDowell's prepared statement follows:)

The Carolina Milk Producers Association Cooperative, Inc., is a bargaining association of about 1,400 grade A milk producers. Our office is located in Greensboro, N. C., and our members are located throughout the Piedmont or central section of the State. We have a few members in Virginia and a few in South Carolina who ship to North Carolina markets.

We know that you have already held several hearings throughout the country, and without question, you have heard testimony regarding the problems of dairy farmers in the major milk-producing areas. However, we would like to tell you something about the dairy industry in our State, and present our views, which may differ from those of other areas, on some issues, and we certainly appreciate this opportunity of presenting testimony to this committee.

Believing that a description of the dairy industry of our State would be worthwhile, the first part of our statement is devoted to that purpose. Data is given relative to the nature, size, and trends of the dairy industry. Some of our problems are pointed up. Moreover, in describing our industry and presenting our problems, we hope to correct some of the mistaken opinions and ideas which have been expressed in some quarters regarding the dairy industry of our State and of the Southeast in general.

The second portion of our statement deals with some of the questions of national interest, particularly those questions which have a direct bearing on our industry.

THE DAIRY INDUSTRY OF NORTH CAROLINA Nature of business

On the production side, our commercial dairy industry is primarily in the fluidmilk field. In 1954, grade A sales in all outlets accounted for 93 percent of total milk sales, and Grade A sales to plants accounted for. 81 percent of whole milk sales to plants.

Over 100 dairy firms process and distribute fluid milk and dairy products in our State, and the fluidmilk field also dominates this phase of our industry. However, the ice-cream business is of major importance, and our State now ranks 14th among the States in the production and distribution or ice cream and other frozen milk products. In addition to some limited manufacturing facilities in some fluid plants, we have only 1 evaporating plant, 1 cheese plant, 1 dry-milk plant, and 7 butter churns, and a relatively small volume of cheese, butter, condensed and powder are manufactured. Volume of production and sales

In 1954, milk cows on our farms numbered 377,000. Average annual production per cow was 4,520 pounds, and total production amounted to 1.7 billion pounds. A total of 950 million pounds, representing 56 percent of total production, was marketed. Of the milk marketed, 820 million pounds was sold as whole milk to plants.

Cash receipts from all milk amounted to $55.5 million in 1954; the value of milk and butter used in farm homes was $42.2 million, and the farm value of milk produced amounted to $99.7 million.

Our grade A producers numbered about 5,180 throughout 1954. These producers sold 665.2 million pounds of milk. Of this volume, 571.2 million pounds or 86 percent of the total, was utilized as fluid milk and cream.

The grade A class I price was $6.25 per hundred throughout the State for most of the year. The blend price (4 percent basis) ranged from $5.30 to $6.12 and averaged about $5.73 for the year. Some areas of the State had a higher blend price and some a lower price.

Cash receipts of grade A milk sold to plants, f. o. b. plants, in 1954 was approximately $38,500,000. Thus, grade A milk sales to plants accounted for about 70 percent of all cash farm income from milk in our State. Trends in the industry

Records for the past 30 years indicate that the number of cows milked on North Carolina farms has increased and decreased in 4-to 6-year cycles. The all-time high was 384,000 in 1944. From 1949 through 1953, the number increased from 342,000 to 380,000. The number decreased slightly in 1954 to 377,000, and apparently the number is still decreasing. The number in 1954 was 13 percent greater than in 1940, but only 1 percent higher than in 1945.

Annual production per cow has increased very uniformly since 1940 from 3,930 to 4,520 pounds in 1954a 15 percent increase. Production per cow is much greater on our grade A farms and was about 6,500 pounds per cow in 1954.

Due to the increase in production per cow, total production of milk does not show the same cyclical changes as cow numbers. Each year since 1948, our farmers have set a new State record for total milk production. Production at 1.7 billion pounds in 1954 was 15 percent higher than in 1948 and 30 percent higher than in 1940. Even so, the increase in production has barely kept pace with the population increase.

In contrast to the moderate increase in Cow numbers and total production, there has been a tremendous increase in the production and sale of grade A milk. Local grade A receipts at plants in selected years were as follows: Volume

Volume (million pounds)

(million pounds) 1942

---------- 147.0 1952 1947 ------ 216.1 | 1953

612.6 1950 ---- 427. 0 | 1954 ..

--- 665. 2 1951

522. 8 Thus, the volume of 665.2 million pounds of grade A milk in 1954 was over 50 percent higher than in 1950. It was 3 times greater than in 1947 and 4.5 times the volume in 1942. The volume in 1955 is expected to be 3 to 5 percent higher than last year.

485.4

1 Source of the statistical data in this section : North Carolina Agricultural Statistics and North Carolina Dairy Report, annual issue, published by North Carolina Department of Agriculture, cooperating with U. S. Department of Agriculture.

An increase in the number of grade A producers accompanied the increase in volume. A peak in the number of producers was reached in the fall of 1954 at slightly over 5,200. Since that time the number has dropped to about 5,000. Today we have 3 times the number of producers as in 1947 and about 1.5 times the number in 1950.

The large increase in grade A producers reflects. primarily, a shift from manufacturing type production to grade A. In addition, the big increase in grade A volume sold to plants was possible because a higher percent of the production is now being marketed, producer-distributors have decreased in number, and production per cow has increased.

The volume of fluid milk and cream saies to consumers has likewise increased at a very rapid pace. Total fluid sales amounted to about 308 million pounds in 1947, and increased to 578.5 million pounds in 1954an 87 percent increase. Through July of this year, sales were up about 10 percent as compared to the same period a year ago.

North Carolina has found it necessary to import milk for fluid use every year since World War II days, and some milk was imported in each month from 1946 through 1952. From 1953 to date, milk was imported in all but a few months. In 1948, 79 million pounds were imported; the volume dropped to 15 million pounds in 1953. but increased slightly in 1954. The volume of imports during the current year is expected to be substantially greater than last year. In recent years, we have seen a trend toward fewer and larger milk distributors, but our distributors are apparently doing a better job in making milk avail. able to our people.

COMMENTS ON OUTSIDE OPINIONS OF OUR INDUSTRY

The opinion seems to prevail in some sections of the country that our grade A dairymen are free from problems. It is said that our prices are abnormally high and profits excessive, and that this condition is made possible by excluding milk from other areas by health regulations and other barriers.

With regard to our prices, we have had a relatively high class I price for several years, but all milk is not sold as class I. Currently, we have 6 classes of milk and until recently we had 7 classes, some of which bear a relatively low price. In comparison, most areas of our country have only 2 or 3 classes.

Despite our several classes and low prices for some classes, our blend price to producers has also been relatively high for several years. However, the recor:Is show that North Carolina dairynien have yet to produce our full fluid milk needs, as attested by the fact that we have and are importing milk.

Also, with some exceptions, the North Carolina class I price over a period of years has been below the price that out-of-State milk of equal quality could be delivered to our plants. This condition is true today.

It is a bit difficult to comprehend the contention regarding barriers when North Carolina has needed and continues to need outside milk. To be sure, our officials have insisted that our consumers have high quality supplies, and we are certainly in accord with the quality standards and their enforcement.

With regard to the profits of our dairymen, we know of no one who has gotten rich and retired. We do know of some who are making a good living ; some dairymen are about breaking even; and some are losing money. During the past year, we have had a net loss of over 100 grade A producers, so other farmers are not rushing to get into the business.

PROBLEMS OF OUR INDUSTRY In June 1954, the dairy marketing committee of North Carolnia State College issued a report entitled, “Joint Consideration of the Dairy Industry in North Carolina.” The dairy committee summarized the major problems of the dairy industry in North Carolina as follows:

1. Low per capita use of milk and dairy products in North Carolina. 2. Need for improved flavor of milk and some dairy products.

3. Increased competition from other dairy areas for our milk and dairy product markets because of surplus national supplies.

4. High cost area for production and distribution.

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