STATEMENT OF FRANK B. LENT, MARKETING COUNSEL, METROPOLITAN COOPERATIVE MILK PRODUCERS BARGAINING AGENCY, INC., NEW YORK, N. Y.

Mr. LENT. My name is Frank B. Lent, and I am the marketing counsel for the Metropolitan Cooperative Milk Producers Bargaining Agency, Inc., of which Mr. James A. Young is the president. Mr. Young has asked me to make a presentation on behalf of the agency. Mr. Young is here in the room, besides the other members of the executive committee and the marketing order committee of the agency. In case anybody is interested, I have done this kind of work for dairy farmers full time for the last 32 years, counseling them on economic and business aspects of their marketing problems, as well as occasionally on some of the legal aspects. I have also done this work in other milksheds.

Our agency represents 8,000 dairy farmers producing market milk for the New York-New Jersey metropolitan area. It consists of 66 cooperatives of milk producers in this milkshed, as we call it, meaning the State of New York and the northern part of the State of Pennsylvania, the western part of the State of Vermont and a few in New Jersey, Connecticut, and Massachusetts.

These producers have their prices regulated by jointly administered Federal and State marketing-order program initiated by this agency. This has been a great stabilizing influence for the last 18 years and during that time has fixed the farm prices of about $6 billion worth of milk.

However, we have great difficulty understanding the attitude of the Secretary of Agriculture of the United States in insisting that the price fixed by him under our Federal order for fluid milk for bottling should be fixed very low whenever we are producing more milk than is necessary to meet the immediate fluid demands. We believe that a fair and reasonably high price should be fixed for board of health approved milk for fluid bottling even though some extra milk temporarily at least is being produced.

If the dairymen who do not increase production object to their pool-blended price being decreased by other dairymen who do increase production and its resultant manufacture at lower prices, then the dairymen as a whole may sometime have to work out some solution, such as a lower price for such increase. But this is a matter of distribution of total order pool funds between dairymen to be worked out by them before action by the Secretary. This is not a proper subject for indirect action by the Secretary reducing the fluid price to the great financial detriment, not just to the producers who have increased production, but also to the producers who are holding their production at previous levels.

Milk is a very cheap food at consumer prices reflecting any of the 'farm levels we are talking about. Farmers are entitled to a fair return for the milk in the bottle even though some of them produce some extra milk for butter and cheese.

Furthermore, and, although we have not been talking about the national support price program, the following applies to it to a great extent. Reducing prices will not reduce production. Fixed costs because of large capital investments must be met. Some large dairymen pay out immediately 85 percent of their milk checks for such

costs and cash outlays for labor, feed, and so forth. Smaller ones who use more of their own family labor pay out in lesser percentages. However, the amount in any case is a number of dollars and is practically unalterable by the dairymen. Therefore, if prices go down he must put on more cows to make more milk to get the same required number of dollars.

This may not apply quite so much to the pricing and production of milk for manufactured commodities that the Government is purchasing. The production of farm skimmed butterfat in some instances is a sideline and some producers of uninspected whole milk for manufacture may in some cases have alternative opportunities in other agricultural pursuits. However, these opportunities for switching enterprises are few, in our opinion. This is particularly true in view of the limitations of production of other commodities. On the other hand, as a matter of fact, increased milk production on land diverted by these limitations is a serious possibility.

In any event what is the sense of reducing fair prices that the public is willing to pay for 96 or 97 percent of the total national annual production to dispose of a 3 or 4 percent excess? And how soon may these small surpluses be needed in case of war, emergency, or even to supply the tremendously increasing population? Anyway, what is all the shouting about which results in a decrease of dairy support prices when such purchases are only 7 percent of the total even though dairying is 20 percent of all agriculture?

I would like to add to the statement a short further comment. This statement has treated principally with the price of milk, for fluid bottling, and the price level on milk for manufacturing. Those are the two dispositions we are concerned with. In connection with the price level of milk for manufacturing, we have not mentioned how our marketing order provides a pricing of milk for manufacturing. We have only mentioned the Government's support program as it affects the price of milk for manufacturing our marketing order price for milk for manufacturing, which represents quite a large percentage of the milk under our marketing order. Nowhere near all of it is used as bottled milk or cream. And the price yielded, the pricing of that class is a very controversial subject. That is the reason I mention it. The price yielded by our order to the producer for milk for manufacturing weighed over the year 1955 was 2,836 dollars, that is, $2.836. The price of milk for manufacturing as published by the United States Department of Agriculture for the United States as a whole for all phases of milk manufacturing for the same period of time was $2.837-1 mill difference-1 mill higher.

I said that was for the year 1954. That is through the months through September 1955.

In the year 1954 our price similarly weighted was $2.89, and the price of milk for the whole United States was $2.856.

I think our price order is continually being studied to see if we can get any more money out of milk for manufacturing, but often and perhaps not too well thought out, there are claims that there is a big bonanza in that pricing of milk for manufacturing for the benefit of our producers.

I want to put those figures in the record to show that we are very close to the national average.

That is all I have.

The CHAIRMAN. Have you any suggestions to give to the committee as to how this problem could be better handled and to give the farmers of this area a fair price for the milk?

Mr. LENT. We think that the formula in our order under which our class 1 price is fixed has what they call a supply and demand adjustment, that is, as the supplies goes up in proportion to fluid sales, the price goes down, and vice versa.

Many farmers object to that formula on the very basis that I have stated here on their behalf, and, that is, that they think that the farmer is entitled to a fair price for milk for bottling irrespective of what he chooses to produce in excess of the amount needed for bottling. So a remedy would be to try to either eliminate or modify the effect of that factor in our formula.

The CHAIRMAN. You could do that under existing law; could you not?

Mr. LENT. Yes.

The CHAIRMAN. What is in the way of it?

Mr. LENT. It is the administrative policy of the Secretary of Agriculture, which seems to indicate very clearly-and I have discussed this with him myself that lower pricing will lower production. Many dairy economists disagree with that 100 percent and have for the last 300 years.

The CHAIRMAN. Would you suggest then that the present law be amended so as to withdraw some of the powers he now has?

Mr. LENT. No; I would not. I would like to convince him. I like the act the way it is. It is an excellent act, and the orders have done a wonderful job under it.

The CHAIRMAN. The only suggestion you have to make to this committee for a change in the administration of the law under which you are now proceeding is that it?

Mr. LENT. That is as to the marketing agreement act; yes, sir. Senator AIKEN. Mr. Lent, I notice you say that the Secretary insists on fixing the prices very low. Does he fix it below the price provided for in your marketing order?

Mr. LENT. No. I mean he insists on writing the marketing order so that this supply and demand adjustment puts the price way down when a little extra milk is produced, and when we go to him to try and get him to peg it up a little bit, he has not been amenable to such request.

Senator AIKEN. Was your marketing order approved by the dairymen of the New York milkshed?

Mr. LENT. When the formula was put in the order in 1949, effective in 1950, it was approved by a vote of the dairymen. You understand, when one of these amendments is put out in an order, the Secretary finds that the order, without the amendment, cannot be continued.

Senator AIKEN. I have heard that report, but I do not believe that any such thing would happen-that an order was turned down. I do not believe that for a minute. I do not know who tells you that. Mr. LENT. The Department people tell us that.

Senator AIKEN. I do not question but what somebody tells you that, but I do not believe that would happen if you turned down the proposed amendment. I do not believe your order would be discontinued. There would be a fight if it was, I can assure you of that.

Mr. LENT. A couple of them have been after amendments were turned down.

Senator AIKEN. The fixed price that you receive for your milk, is that a minimum price?

Mr. LENT. That is a minimum price.

Senator AIKEN. Have the producers in your organization been receiving just the minimum price the last few months?

Mr. LENT. The great bulk of them have. There have been a few premiums occasionally above the minimum price on this spotty basis, not on the milkshed basis.

Senator AIKEN. Does Borden or any of those companies pay premiums?

Mr. LENT. Sometimes they pay premiums at certain locations which are particularly conveniently located, where the milk has particular marketable qualities.

Senator AIKEN. Have they not paid substantial premiums in some cases?

Mr. LENT. I would not say that they were substantial. I think that they would average out over the whole milkshed only a very few cents, if a cent per hundredweight, that I am talking about.

Senator AIKEN. The dairymen tell me they are receiving 40 cents above the blended price. Do you think they have been fooling me? Mr. LENT. I do not know of any dairymen in the New York milkshed that are receiving any premium.

Senator AIKEN. I know that some have told me they are getting 40 cents premium.

Mr. LENT. If you are talking about trade differentials in locations

Senator AIKEN. There may be discrimination in that respect. If there is, we ought to know it. We want to know if this order is being applied equitably over the whole New York milkshed or whether this is discrimination in favor of a group here or there or somewhere else. Mr. LENT. There are small premiums of 5, 10, 15 cents paid at some spots in the milkshed, particularly those in the territory occupied by New York.

Senator AIKEN. Do I understand what you would like is when the Federal provisions of the order are approved by two-thirds of the dairymen in the milkshed, and it results in a low minimum price, you would have the Secretary set aside the order temporarily?

Mr. LENT. No, sir.

Senator AIKEN. It has been done, has it not, in the past?

Mr. LENT. Our order was set aside only once, and that was in the spring of 1939 on account of an adverse decision by the United States district judge, who held it to be illegal.

Senator AIKEN. Over the last 5 or 6 years the order has been set aside only once?

Mr. LENT. Our order has not been set aside over the last 5 or 6 years, since it was issued.

Senator AIKEN. I presume you are right. I know that in other areas some years ago the order was set aside month after month, and it resulted in new orders being written in some areas.

Mr. LENT. We only had one time when it was out of effect in the last 17 years. That was when the court held it to be illegal in the

spring of 1939 for 5 months. We have had extra premiums negotiated on an industry wide basis on the class I price in several instances.

Senator AIKEN. Last spring, as I recall, I discussed the New York situation with the Department officials. And your representatives did, too. At least, a temporary increase was obtained, was there not, of 19 cents a hundred?

Mr. LENT. The increase was 3 cents in February, 6 cents in March, 16 cents in April in the class 1-A price over and above the order prices, without setting aside the order at all, in the form of a superpool for those 3 months-3 cents the first month, 6 cents the second, and 16 cents the third month. That was done by agreement-voluntary agreement in the industry. And the order remained fixing the great bulk of the value of the milk.

Senator AIKEN. Do you find that any State laws or city ordinances prevent the milk producer of New York from getting a better price for his milk?

Mr. LENT. No, we have no complaint.

Senator AIKEN. Are the New York City ordinances all right for your dairymen? They do not favor you and favor the people who handle the milk after it leaves the farm-you would not say that; would you?

Mr. LENT. I think they are fair. Those are the sanitary_ordinances. They are about the same as the United States Public Health service regulations.

Senator AIKEN. Then you are perfectly satisfied with the New York City ordinances?

Mr. LENT. Yes.

Senator AIKEN. As they relate to the distribution of milk. And you are satisfied with the New York State laws?

very

well.

Mr. LENT. Yes. The New York State law is working out Senator AIKEN. You do not believe there should be competitionnew competition-in the distribution of milk-you know what I mean? Mr. LENT. There is a New York State law.

Senator AIKEN. Tell us what you think about it.

Mr. LENT. That limits the territory in which distributors may operate. They have to prove another milk dealer is needed in the direction in which they wish to expand.

Senator AIKEN. In other words, if one dealer has a market, the other cannot get in there?

Mr. LENT. That is right. I would not say that it applies to many markets where there is only one dealer, but where a market is adequately served the law provides that the commissioner may refuse to grant the additional license.

Senator AIKEN. That law has been in effect since 1934?

Mr. LENT. Yes, sir.

Senator AIKEN. You do not think that a little more competition in the sale of milk would result in perhaps lower prices to the consumer or the sale of more milk?

Mr. LENT. Well, it could possibly in some instances-it could result in lower prices to the consumer and in other instances it might result in the distributor pricing himself out of business and not being able to pay the producer. That is the original theory back of the law. Senator AIKEN. There would still be a minimum price, would there not, fixed under the order?