The cost of such a plan would be a burden on cooperatives, and since it would thereby hinder them from doing some other work which would be more valuable to the farmers, we think that such a plan amounts to discrimination against cooperatives.

We have reason to believe that the enemies of cooperatives, who only wish to put our associations out of business as effective competitors with private business, would like to adjust Government agricultural policies with regard to cooperatives in such manners as would discriminate against them.

We feel that this position of our opponents indicates that cooperatives, besides their direct benefits to farmers through increased services, higher incomes, and lower costs, have other values to agriculture. The competition that they bring to farmers markets exerts a worthwhile influence on farm incomes. Without this competition, farmers would be in serious trouble.

In passing, we would also like to point out that besides being in a position to help solve some of our farm problems cooperatives also have a great advantage to the consumer since the cooperatives, by providing competition in fields where competition is often limited, are able to help reduce costs of food supplies to city

consumers.

However, we feel that Government activity with regard to cooperatives is not limited to taxes but rather includes such broad fields as technical assistance to electrification programs and credit programs, and includes the educational and research work done by cooperative services divisions in the United States Department of Agriculture. We stand solidly behind the work of the rural electric administration and the farm loan administration because we feel that this work has helped make our farms more profitable.

We believe that such work as can be done through the Government to promote the sale and consumption of farm products, both here and in foreign countries, would be a help to cooperatives and would constitute a big step toward the solution of any farm problems.

In conclusion, we feel that cooperatives can take a large share of the credit for the favorable position of the American farmer in the world today, and in general we feel that the problems facing agriculture in New England can best be solved by voluntary cooperative action, with the proper climate of encouragement from the United States Government.

We believe that the effective operation of our free competitive economy depends on the equality of bargaining power between economic groups. The large size of business corporations and labor organizations place farmers at a disadvantage in the marketplace. We believe farmer-owned and operated cooperatives individually or in federations should be clearly exempted from the restrictions of antitrust laws so that they can function effectively in behalf of our agriculture. Mr. SMITH. First, we would like to say that we support the program and policies of the present Secretary of Agriculture and believe that his views will benefit agriculture.

We think it would be tragic for farmers to lose the services of Ezra Benson and we feel that Congress would be well advised to follow his recommendations.

That was a very specific suggestion which the committee included in its statement.

We have another suggestion or group of suggestions which we feel would also benefit agriculture having to do with cooperatives.

By way of specific recommendations in the field of cooperatives aimed at solving surplus problems, we feel that the Government ought to develop such programs as would encourage the growth of cooperatives. We feel that they can help to move surpluses to the benefit of the farmers.

Some of the things which we think Congress could do to protect the strength of cooperatives to solve farm problems are these:

1. We do not think that the cooperatives should be taxed on the refunds that go to patrons as the result of products marketed or purchased by those patrons through cooperatives, and we feel that cooperatives are justified in taking an offensive position to defend their position relative to these taxes. We take that position because money

returned to the cooperative patron as a refund does not belong to the cooperative since it represents rather a saving in the farmer's sales or purchases. Cooperatives rightfully object to paying taxes on money that is not returned to its members.

We also do not favor any plan requiring cooperative associations to withhold income taxes for its members from patronage refunds before returning them. We understand, Mr. Chairman, that such funds either have been advanced or may be presented in the future, and we do not favor such plans, because we think the cost would be a burden on cooperatives and thereby hinder them from doing other worthwhile services for farmers. We feel that this position will help farmers to solve some of their financial problems and help surpluses to be moved to the advantage of the consumer through lower prices, at the same time helping farmers to get their justified portion of the consumer's dollar.

In conclusion, we would like to have you know that we believe that the effective operation of our free competitive economy depends on the equality of bargaining power between economic groups.

We think that cooperatives play an important part in providing the competition that is necessary to move farm products, and we feel that the large size of business organizations and labor organizations often place the farmers at a disadvantage in the market places.

Therefore, we believe that farmer-owned and operated cooperatives, either individually or in groups, should be clearly exempt from restrictions of antitrust laws so that they can function effectively in behalf of agriculture and help farmers to increase their income.

That, Mr. Chairman, in brief is the statement which is included in these four pages.

The CHAIRMAN. Are there any questions? Your statement will be made a part of the record.

Senator HOLLAND. That last point that you made with reference to the exemption from the antitrust laws, do you mean that the exemptions already in the books should be increased.

Mr. SMITH. I do not think so, sir.

Senator HOLLAND. You understand, of course, our rather far-reaching exemptions.

Mr. SMITH. Already in effect.

Senator HOLLAND. You simply mean that you do not want those diminished?

Mr. SMITH. That is right. We do not feel that cooperatives are engaging in practices that restrict trade simply by being cooperatives. Senator HOLLAND. You know, of course, that the banks of cooperatives are set up specifically to aid the cooperative marketing movement. Do you have any suggestion for the enlargement of the field of activity for those banks, or is their financing adequate, insofar as your observation has gone?

Mr. SMITH. Insofar as my observation goes, limited of course to the cooperatives, I think they are adequate, except that we understand that programs are underway for the Government to be rather the banks for cooperatives and the banks to be farmer-owned.

Senator HOLLAND. Of course, all three members of the committee who are here not only know about that, but had an active part in the passage of the law this last session.

Senator AIKEN. May I interrupt there, Senator Holland, to say that Senator Holland was chairman of the subcommittee that carried that legislation through to a successful completion. The cooperatives of the country and the farmers who patronize the farm credit agencies owe a considerable debt to Senator Holland and his associates-although the entire committee was cooperative, as I recall it. Senator Holland was spearheading the movement.

Mr. SMITH. I followed that in the reports that I have read from Congress, and I know that is true. We appreciate the help that Senator Holland and the other two members have given us on this bill. Senator HOLLAND. You know all three of the members who are here were equally impressed with the need for taking that step. You were in accord with that step?

Mr. SMITH. Yes, sir.

Senator HOLLAND. The third thing that I want to ask you about is this; You said something about the tax problem as refunds to members are now being taxed when in the hands of the cooperative. Is that your understanding? My understanding is that the refund if seasonably made does not require the payment of any tax by the cooperative and is simply added to the income of the receiving member, as it should be.

Mr. SMITH. That is my understanding, too, Senator Holland. We wanted to include that statement in this testimony so that you members of the committee would know our feeling on it. We think that should be continued.

Senator HOLLAND. Then much of your statement is the ounce of prevention. You would rather stop any diminution of the rights of cooperatives in advance rather than to have to fight after adverse action is taken?

Mr. SMITH. There have been several times when we have had fights over the issue, and we felt that we should have you know that we feel we were justified.

Senator HOLLAND. I cannot begin to say how pleased I am to find how greatly you are using both the cooperative machinery allowed by law, both State and Federal-and the marketing agreement also allowed, and apparently are so ready to rely upon those tools in this area, rather than to ask for unsound handouts from the Federal Government.

Mr. SMITH. We would like to have the cooperatives, the farmers, solve their problems through cooperatives whenever possible instead of turning to the Government.

The CHAIRMAN. That may be the solution to the problem in the long run.

Mr. SMITH. That is what we think.
The CHAIRMAN. Thank you again.

Mr. SMITH. Thank you.

The CHAIRMAN. Our next witness is Mr. Harry Varney, Jr. Will you give us your full name for the record and your occupation?

STATEMENT OF HARRY VARNEY, JR., CHARLOTTE, VT.

Mr. VARNEY. Mr. Chairman and members: My name is Harry Varney, and I operate a 35-cow dairy farm in Charlotte, Vt.

The CHAIRMAN. Have you anything to add to what has been said, Mr. Varney?

returned to the cooperative patron as a refund does not belong to the cooperative since it represents rather a saving in the farmer's sales or purchases. Cooperatives rightfully object to paying taxes on money that is not returned to its members.

We also do not favor any plan requiring cooperative associations to withhold income taxes for its members from patronage refunds before returning them. We understand, Mr. Chairman, that such funds either have been advanced or may be presented in the future, and we do not favor such plans, because we think the cost would be a burden on cooperatives and thereby hinder them from doing other worthwhile services for farmers. We feel that this position will help farmers to solve some of their financial problems and help surpluses to be moved to the advantage of the consumer through lower prices, at the same time helping farmers to get their justified portion of the consumer's dollar.

In conclusion, we would like to have you know that we believe that the effective operation of our free competitive economy depends on the equality of bargaining power between economic groups.

We think that cooperatives play an important part in providing the competition that is necessary to move farm products, and we feel that the large size of business organizations and labor organizations often place the farmers at a disadvantage in the market places.

Therefore, we believe that farmer-owned and operated cooperatives, either individually or in groups, should be clearly exempt from restrictions of antitrust laws so that they can function effectively in behalf of agriculture and help farmers to increase their income.

That, Mr. Chairman, in brief is the statement which is included in these four pages.

The CHAIRMAN. Are there any questions? Your statement will be made a part of the record.

Senator HOLLAND. That last point that you made with reference to the exemption from the antitrust laws, do you mean that the exemptions already in the books should be increased.

Mr. SMITH. I do not think so, sir.

Senator HOLLAND. You understand, of course, our rather far-reaching exemptions.

Mr. SMITH. Already in effect.

Senator HOLLAND. You simply mean that you do not want those diminished?

Mr. SMITH. That is right. We do not feel that cooperatives are engaging in practices that restrict trade simply by being cooperatives. Senator HOLLAND. You know, of course, that the banks of cooperatives are set up specifically to aid the cooperative marketing movement. Do you have any suggestion for the enlargement of the field of activity for those banks, or is their financing adequate, insofar as your observation has gone?

Mr. SMITH. Insofar as my observation goes, limited of course to the cooperatives, I think they are adequate, except that we understand that programs are underway for the Government to be rather the banks for cooperatives and the banks to be farmer-owned.

Senator HOLLAND. Of course, all three members of the committee who are here not only know about that, but had an active part in the passage of the law this last session.

Senator AIKEN. May I interrupt there, Senator Holland, to say that Senator Holland was chairman of the subcommittee that carried that legislation through to a successful completion. The cooperatives of the country and the farmers who patronize the farm credit agencies owe a considerable debt to Senator Holland and his associates-although the entire committee was cooperative, as I recall it. Senator Holland was spearheading the movement.

Mr. SMITH. I followed that in the reports that I have read from Congress, and I know that is true. We appreciate the help that Senator Holland and the other two members have given us on this bill. Senator HOLLAND. You know all three of the members who are here were equally impressed with the need for taking that step. You were in accord with that step?

Mr. SMITH. Yes, sir.

Senator HOLLAND. The third thing that I want to ask you about is this; You said something about the tax problem as refunds to members are now being taxed when in the hands of the cooperative. Is that your understanding? My understanding is that the refund if seasonably made does not require the payment of any tax by the cooperative and is simply added to the income of the receiving member, as it should be.

Mr. SMITH. That is my understanding, too, Senator Holland. We wanted to include that statement in this testimony so that you members of the committee would know our feeling on it. We think that should be continued.

Senator HOLLAND. Then much of your statement is the ounce of prevention. You would rather stop any diminution of the rights of cooperatives in advance rather than to have to fight after adverse action is taken?

Mr. SMITH. There have been several times when we have had fights over the issue, and we felt that we should have you know that we feel we were justified.

Senator HOLLAND. I cannot begin to say how pleased I am to find how greatly you are using both the cooperative machinery allowed by law, both State and Federal-and the marketing agreement also allowed, and apparently are so ready to rely upon those tools in this area, rather than to ask for unsound handouts from the Federal Government.

Mr. SMITH. We would like to have the cooperatives, the farmers, solve their problems through cooperatives whenever possible instead of turning to the Government.

The CHAIRMAN. That may be the solution to the problem in the long run.

Mr. SMITH. That is what we think.
The CHAIRMAN. Thank you again.

Mr. SMITH. Thank you.

The CHAIRMAN. Our next witness is Mr. Harry Varney, Jr. Will you give us your full name for the record and your occupation?

STATEMENT OF HARRY VARNEY, JR., CHARLOTTE, VT.

Mr. VARNEY. Mr. Chairman and members: My name is Harry Varney, and I operate a 35-cow dairy farm in Charlotte, Vt.

The CHAIRMAN. Have you anything to add to what has been said, Mr. Varney?