Mr. LENT. Not on this milk that you are talking about. You are talking of distribution in upstate communities, where 1-dealer, or the 2-dealer proposition arises.

Senator AIKEN. You are speaking of the small towns where the Federal order does not exist-that have no Federal order?

Mr. LENT. That is right. And in those communities where there is no regulation of prices which the law was originally designed to put the dealers on a firm financial basis by stopping too much cutthroat competition by having too many dealers.

Senator AIKEN. The dealers in those small towns and cities are not. going on relief; are they?

Mr. LENT. I am not defending the law. I am just trying to explain

it to you.

Senator AIKEN. They are not going on relief over the mountainsI know that—that is all.

Mr. LENT. I had no instructions from my group on that law. Senator HOLLAND. Mr. Lent, what was the date again on which the supply and demand adjustment for milk for fluid bottling went into the New York milkshed agreement?

Mr. LENT. I think it was August 1, 1950, if my recollection is correct. I have not any notes with me on that point.

Senator HOLLAND. That was prior to the occupancy of the present Secretary of Agriculture?

Mr. LENT. Yes, sir.

Senator HOLLAND. Is there any different administration of that provision under the present occupant than that which was present under the former occupant?

Mr. LENT. No. I think we appealed to the previous occupant to give us a pegged price above the formula price at one time, and he turned us down. And the same thing has happened under the present occupant.

Senator HOLLAND. Then the question is solely one of whether or not the policy that has been followed by all of the Secretaries of Agriculture since this provision went into the agreement is a sound policy or not-that is really the question; is it not?

Mr. LENT. Yes, it is more a question of degree than of black and white.

Senator HOLLAND. I talked last night to one of the best informed men in this milkshed, I think, and he told me that the trouble here was that the milkshed of New York City was somewhat of a dumping ground for all of the excess milk of the adjoining milksheds in the northeastern part of the Nation, and that that was a principal difficulty that you sustained. Would you agree with that statement?

Mr. LENT. I agree with that 100 percent. I am very sorry I did not mention it before myself in discussing the effect of the supply and demand adjustment on the class 1 price. One of the reasons that supply and demand adjustment in class 1-A formula reduces the price too much is the fact that ostensibly our supply is really not only our supply but also the reserve supply from surrounding markets, and that makes it affect the formula in a downward way, because the formula reduces the price when the supply is great in accordance as compared with the demand, and when we are carrying adjoining market supplies, necessarily the formula has to operate mathematically and takes in that supply as if it were solely our supply when it really is not.

Senator HOLLAND. From what milkshed do these excess supplies move to the New York milkshed to further complicate your situation? Mr. LENT. The milkshed is a very indefinite thing. It is interlocking and has interrelationship and is interspersed the edges are all overlapping. You cannot pin it down like that.

There comes a place where on the borders between milksheds plants and producers go from the other milksheds into this milkshed. That is, if you want to call them sheds. The farms do not move. They are still right in the same place. And the plants do not move. They. just change their affiliation from a pooling standpoint.

Senator HOLLAND. In order to make this point clear in the record, would you state what are the milksheds that are complicating your particular picture by transferring their excess supplies to your milkshed?

Mr. LENT. New Jersey is No. 1; northern New Jersey particularly; Philadelphia is No. 2; and Boston is No. 3.

Senator HOLLAND. Is the correction of that wholly a practical matter or could it be corrected by changes in the marketing agreement? Mr. LENT. I just came from a 5-day meeting of the Secretary of Agriculture, held in Newark, in which we are trying to correct the No. 1 that I enumerated.

That is one of the worst things about the way our supply-and-demand formula works now, is the fact that it is thrown out of kilter by these adjoining supplies that we soak up the reserves.

Senator HOLLAND. The next question is this: Yesterday in a hearing, as you know, in Montpelier, we heard the dairy interests of all of New England, I would say, and while they were not all in accord, it seemed that those who were serving the Boston milkshed were all in accord, that their agreement was functioning well. They did not want it disturbed, they seemed very happy about the situation.

We also heard witnesses say that remaining in that milkshed seemed to make a difference of about 60 cents a hundred pounds of milk as compared with their diverting their milk to New York milkshedis that correct or not?

Mr. LENT. In December the estimated difference is 77 cents. It is too low.

Senator HOLLAND. Perhaps they were speaking in average figures. Mr. LENT. I do not think it will average as high as 60 on a 12month basis.

Senator AIKEN. May I interrupt there? There is a slight difference in the butterfat content of the milk sold.

Mr. LENT. The 77 cents is after all adjustments.

Senator AIKEN. It is adjusted to what?

Mr. LENT. Equal distance from the market, and equal butterfat

content.

Senator AIKEN. Which butterfat content do you adjust it to?
Mr. LENT. I cannot tell you.

Senator AIKEN. 3.95?

Mr. LENT. You can do it either way. You can adjust to Boston $3.70 or $3.05—whichever way it was done it was done in a manner most fair by our statisticians. That might make a difference of the 70-cent figure of 5 or 6 cents, but that is all, depending on which way you did it.

Senator HOLLAND. Let us ask a searching question or two. The same Federal authority that approves the Boston milkshed agreement approves the New York milkshed agreement; does it not?

Mr. LENT. Yes, sir.

Senator HOLLAND. Could it be that the milk producers in the area who supply the Boston milkshed have been more aggressive or more effective in fighting for their own interests than has been the case in this milkshed?

Mr. LENT. Well, if I said "Yes" to that, I would not have any job. Senator HOLLAND. I have noticed that good lawyers always are able to temper their answers so that they do not say yes or no, but say maybe. How do you comment on my question?

Mr. LENT. I think we have both done the best we could to get the most money we could, but this change of supplies from one shed to another is something that is not entirely within our control. In some instances it is by the election of the proprietor handlers of the supplies which have changed from one milkshed to another, and in others it is the result of inescapable economic pressures.

It is very hard to get a plant under the Boston order, according to the regulations, written in the order and the way industry operated in Boston it would be hard to get plants under the Boston order, in other words, if we could get some of our surplus under the Boston order, we could get the prices more nearly in line. That is a little hard to do, by election of people in the industry, health departments, provisions of the order, and various other things.

Senator HOLLAND. Is it possible that the representatives of the consumer interests and of the distributor interests in the New York area have been less willing to be fair to the producer than is the case in the Boston area?

Mr. LENT. You have got a lot of interests in there. I am trying to think of each one of them. You put three of them in.

Senator HOLLAND. Let me simplify the question. Is it not true that before the marketing agreement and orders become effective that the representatives of the consuming public and the representatives of the distributing agencies are all given a fair chance to be heard and that customarily they are heard quite at length in the proceedings that come before the issues of the agreement?

Mr. LENT. Yes.

Senator HOLLAND. For the approval or disapproval of the producer? Mr. LENT. Yes, sir; everybody has a fair hearing.

Senator HOLLAND. What I have heard, and I would like you to comment on it, is that the consumer interests and the distributor interests in the New York milkshed have been much more fair and much more drastic in their attitude toward the producer interests than is the case in the Boston milkshed. I would like for you to comment on that, if you care to do so.

Mr. LENT. I would say that we had more consumer opposition. I have observed hearings both in Boston and in New York. We have had more consumer opposition in New York than we have in Boston. I do not see any difference in the attitude of the distributors.. Senator HOLLAND. The fact of the matter is that this whole question of the content of your marketing agreement is one that proposes, first, in the adjustment of interest between your consumers, your distributors, and your producers, and in the second instance requires

such elements of fairness as in the opinion of the Secretary of Agriculture causes him to approve it and allow it to become operative.

Mr. LENT. I think that is a fair summary. If I might add just one comment that I think that the basic economic philosophy of the Secretaries of Agriculture, if you want me to take in both of them, is that reducing price reduces production is absolutely untenable, and we hope we will argue them out of it some day.

Senator HOLLAND. I think that you have made a very interesting statement. One more thing. I notice that the figures that you gave on the milk from this milkshed which come under the head of that which is manufactured, were in each instance, that is for the year 1954 and for the first 9 months of 1955, substantially the same as the national average. As I got it, you said for the first 9 months of 1955 the price was $2.836 as against what figure for the national average?

Mr. LENT. $2.837.

Senator HOLLAND. The national average was 1 mill higher?

Mr. LENT. Yes.

Senator HOLLAND. Whereas for 1954 the figures $2,856 for the national average?

Mr. LENT. That is for the national average.

Senator HOLLAND. Yes; and $2.89 for your milkshed, meaning that you were a little above?

Mr. LENT. That is right.

Senator HOLLAND. Is it your feeling that your producers are entitled to more for their milk that goes into manufactured products than are other producers in the Nation?

Mr. LENT. Oh, no, I was not making any point like that at all. Senator HOLLAND. In other words, you are satisfied with that part of your operation?

Mr. LENT. We are examining it continually to see if we can get any more than the dealers out of that milk for manufacturing without pricing the milk out of competitive international and national markets. We do not want to do that, naturally. And I might say to add a couple more figures that in the year 1953, for which I have the entire 12 months, our price was 3.183, and the national average was 3.155.

Senator HOLLAND. In other words, your figure was better than the national average?

Mr. LENT. Yes. The reason I threw that in here is because there is a kind of a slogan in our milkshed that "Never mind the class 1 price," that is, the price for fluid bottling "Let's price the rest of the milk that is manufactured and the producers will get a fair return that way." And I would rather like to take every opportunity where I have a public audience to try to show the fallacy of that position.

We are trying at all times to study ways of pricing up the price of milk for manufacturing to the highest possible dollar we can get without taking the milk out of the market, but the prices in accordance with the comparison I just gave do not indicate offhand there is any very big bonanza lurking in the class 3 price.

I would like to say also, because this testimony is a public record, I have to put a footnote on that price I gave for our class 3 milk. We have two prices in class 3: one for butter and cheese-that is the lower price and a higher one for all other manufactured products.

The price I gave is the weighted average of the uses under our order at both of those prices. So that it is the real average price for class 3 milk. It is not the order price for class 3, nor is it the price for butter and cheese, which is 14 cents lower, but is the weighted average in accordance with the way the milk was used.

Senator HOLLAND. Your point now is that you think your people give too much emphasis to the price on the milk that goes to manufacturing and too little to the price that they get for milk that is bottled to be sold as fluid milk?

Mr. LENT. No, I do not think my people do. I think the other people do.

Senator HOLLAND. I can see that your people are well advised, I thank you.

The CHAIRMAN. I would like to ask just one question. Is it a fact or not that the producers of milk in the Boston area are getting from 50 to 60 cents more for their milk than the producers in this area and that the consumers of that milk in the Boston area, with a higher price, are getting the milk cheaper than in the New York area here with the producers getting less?

Mr. LENT. I cannot answer "yes" or "no" to that, Senator.

The CHAIRMAN. I heard that yesterday, when we were in Montpelier: That the Boston consumer was paying a little less than is being paid in the New York area, whereas the producers of the product were getting more in the Boston area than those in the New York area. Is that true or not?

Mr. LENT. I said that I could not answer the question "yes" or "no." If you care to have me make a comment on it, I think it might be somewhat enlightening.

The CHAIRMAN. The next question I was going to ask, and I might as well ask both together. Is the cost of distribution here higher than the cost otherwise?

Mr. LENT. I think my comments to a certain extent would be pertinent to both of your questions. In answer to them, when you are comparing retail prices, prices to consumers in various areas, and the cost of distribution in various areas, you have to bear in mind the fact that the milk business has two methods of getting milk to the consumers. One of them is delivered to the doorstep, and the other is to have the consumer pick it up at the store.

In the New York metropolitan area, I think up to 75 percent, pretty nearly 80 percent of the milk that is consumed in the home is picked up at the store. That is a very low price and a very efficient distribution that takes the milk to those stores.

As the store distribution increases, the retail distribution is apt to get less efficient because of lack of volume.

So if you start saying, because the New York consumer pays 26 or 27 cents a bottle for milk delivered on the doorstep, whereas the Boston consumer pays only 25 or 26 cents for milk delivered on the doorstep, you may be comparing things which are not too much alike. And you may not be getting at the bulk of your trade. In New York particularly you would not be, because so much of it is wholesale, as we call it, meaning distributed through the stores.

I do not know the prices in Boston, nor the costs of distribution. there.

I have some knowledge of the costs of the efficiency of distribution on milk delivered by milk dealers to stores in New York City, because