request, the data has been furnished, and it will be filed in the record at this point.

Senator ELLENDER. Also, information has been requested as to the contents of the coloring matter that is taken out of cottonseed oil and other oils used to manufacture oleomargarine, and in response to that request the data has been furnished, and I ask that it be filed in the record at this point.

To Senate Subcommittee, Hearings on S. 1744.

GENTLEMEN: In response to your inquiry as to the effect of the bleaching process on the nutritive value of cottonseed oil and soybean oil, I submit for the record the following information:

Bleaching cottonseed oil and soybean oil removes or renders ineffective nutritive properties of chlorophyll and carotene pigments-not only their provitamin characteristics, but mineral value; also phosphatides such as lecithin and natural antioxidants. Bleaching oxidizes fat, hastening its deterioration and decreases palatability. Bleaching slightly decomposes fat to free fatty acid and glycerin. Bleaching adds metallic soaps because of reaction between fuller's earth and free fatty acid.

JUNE 7, 1944.

A. G. HOPKINS.

Senator ELLENDER. Mr. Thatcher, will you give us your name in full for the record, and your present occupation, and such other information as you may desire to give about yourself?

STATEMENT OF H. K. THATCHER, EXECUTIVE DIRECTOR, ARKANSAS AGRICULTURAL AND INDUSTRIAL COMMISSION, MEMBER, SOUTHERN COMMISSIONERS OF AGRICULTURE

Mr. THATCHER. My name is H. K. Thatcher. I am the executive director of the Arkansas Agricultural and Industrial Commission, and a member of the Southern Commissioners of Agriculture, and it is on behalf of the Southern Commissioners of Agriculture that I wish to present some information that has been compiled by the Southern Commissioners.

The Association of Southern Commissioners of Agriculture is a nonprofit membership organization comprising the Commissioners of Agri

culture of the States of Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Tennessee, Mississippi, Kentucky, Louisiana, Arkansas, Oklahoma, and Texas.

The association was formed many years ago for the express purpose of furthering and protecting the interests of all the people of the aforementioned States. For the most part, the member commissioners are elected by the people of their respective States, and as such represent the consumer, the farmer, the businessman, and, in general, each of the inhabitants of their States.

The principal occupation of the people living in the entire area encompassed by the membership of the association is agriculture, and the predominant agricultural crop is cotton. Besides those primarily engaged in the production, processing, and distribution of cotton and its byproducts, many of the remaining people are engaged in business directly dependent upon the cotton farmer.

In addition to the cotton farmer, there is the peanut farmer, the soybean farmer, and the livestock grower. Throughout the South and Southwest there are many areas devoted to the raising of peanuts and soybeans and to the livestock industry.

So we see that the entire welfare of the South is bound up with its agricultural economy.

The most valuable byproduct of the agricultural commodities raised in the South are fats and oils. This being so, the Association of Southern Commissioners of Agriculture have constantly and carefully watched the fats and oils situation in our country so as to protect the welfare of their constituent population whose whole economy is largely dependent upon a favorable market outlook. In this connection the association has, from its very inception, encouraged the increased consumption of American fats and oils.

Margarine is one of the most important consumers of American fats and oils. Millions of pounds of American fats and oils are consumed annually in the production of margarine in the United States. So important a market for one of the major products produced by the people represented by the Association of Southern Commissioners of Agriculture cannot be ignored, and it was for this reason that the association adopted as one of its principal objectives the removal of existing taxes and restrictions-whether Federal or State-imposed upor the sale of margarine.

The ingredients utilized in the manufacture of margarine are not only wholesome but are well known articles of food and are consumed in some form every day. The most important ones now used in the manufacture of this product are cottonseed oil, soybean oil, neutral lard, corn oil, oleo oil, and peanut oil-all highly refined and combined with milk and salt. In addition, practically all of the margarine sold at retail has been fortified with vitamin A under standards prescribed by the Pure Food and Drug Administration.

Consequently, a low-cost nutritious and wholesome food, utilizing the products of the American farmer, is made available to our consumers. Under these circumstances the Association of Southern Commissioners of Agriculture urges that this product be treated equally with all other wholesome food products, and that the existing discriminatory taxes and restrictions now imposed upon the sale of margarine be forthwith removed.

62295-44-- 6

Senator ELLENDER. Mr. Thatcher, do you know how long the association has taken that attitude?

Mr. THATCHER. I have been a member of the association for 6 years, and the first year I became a member of it this was under discussion, and it was then unanimous among all of the southern commissioners that this be done. At that time we even had some Southern States who had some restrictions against oelomargarine, and we have been working faithfully and consistently to get those removed, and most of them have been.

FEDERAL MARGARINE LAWS

The following are the existing license fees and per pound taxes imposed upon the sale of margarine by the Federal Government:

Another extremely serious restriction is found in the prohibition against the sale of margarine by salesmen or wholesalers directly from trucks at the retail dealer's premises. Pursuant to article 41 (a) of regulations No. 9 promulgated by the United States Treasury Department, a vendor of margarine incurs special tax liability as a wholesale or retail dealer at each place other than the registered licensed premises where margarine is sold or offered for sale. This example is set forth to illustrate the absolute unfairness of the present Federal margarine law. Margarine is not permitted, thereby, to be sold as any other legitimate article of food. As a matter of fact, the sale of margarine is more regulated by this provision than even the sale of liquor products.

PURPOSES OF THE FEDERAL MARGARINE LAW

For the record, the reasons generally attributed to the passage of the Federal margarine law have been (1) the raising of revenue; (2) the protection of the public against fraud.

Insofar as revenue is concerned, it will readily be conceded that the margarine law has failed in this respect. As a matter of fact, the amount of revenue derived by the Federal Government from the taxes on margarine, since the first tax was imposed, has been so small as to conclusively prove that at no time were these taxes ever seriously considered as revenue producers.

As to protection of the public against fraud it is admitted that at the outset there was some reason for the regulation, but this reason has long since disappeared. Once the Federal Food and Drug Act, the Meat Inspection Act, and the Federal Trade Commission Act were adopted by Congress, the fraud theretofore existing rapidly disappeared. These three acts are ample protection against any fraud today, and, in fact, afford even more protection than the margarine law.

Why, then, are these restrictions continued? It must be recognized that the real purpose behind these laws, as evidenced by the congressional debates and hearings preceding the passage of the laws, has been the "protection" of the dairy industry. The following excerpt from the United States Department of Agriculture report entitled “Barriers to Internal Trade in Farm Products," will high light this statement (p. 19):

Generally those favoring margarine legislation have been frank to say that their object is to "protect" the dairy industry.

It should be stated that we are just as much interested in the welfare of the dairy farmer and industry as we are in the welfare of the cotton farmer and industry, since those engaged in the dairy business are as much a part of our organization as are those engaged in the cotton industry. However, it is felt that no branch of agriculture should receive special favor, if it can be said that the dairy industry is actually benefited by the taxes on margarine, to the detriment of another branch of agriculture. Now let us look to see whether or not the dairy industry has actually benefited from the tax on margarine.

Margarine and butter each have, for the most part, a separate purchasing and consuming class. While it is true that some people may at some times purchase either margarine or butter, depending upon certain circumstances, such people are relatively few and this is not true of the vast majority of margarine customers.

This entire subject of so-called competition has received the attention of the United States Department of Agriculture on several different occasions. In a release of the Agricultural Adjustment Administration of March 31, 1934, entitled "Dairy Adjustment-What and Why," the following is set forth:

The Government never before has prohibited the use of any safe and noninjurious food product. Even if it should do so now, and if all consumption of oleomargarine were prohibited and persons formerly using this product turned to butter, the maximum increase in the price of butter probably would be less than 2 cents per pound. And since many oleo users might not turn to butter, the actual increase might be less than a cent a pound.

The United States Department of State has also considered this subject, in a report to the President which is reprinted in the Congressional Record, June 8, 1938, appendix. In this report it is stated:

Although studies have been made which point to the conclusion that if no margarine whatever were sold in the United States, the price of butter would probably not be increased by more than 1 or 11⁄2 cents a pound, the fact remains that the dairy industry has always regarded competition from this source as a serious threat to it and has been highly successful in securing the enactment of legislation designed to suppress such competition * * *

The truth of the matter is that the legislation, Federal and State, which has been adopted to impede the manufacture and sale of margarine is so extensive and varied that it cannot be summarized adequately in short space.

And so we see that on all counts the margarine law has failed to fulfill its purpose. It has not produced revenue; it is no longer needed to prevent fraud and it does not "protect" the dairy industry. Furthermore, even should it be conceded that it does protect the dairy industry, which concession is not made, why should the Federal Government protect one industry at the expense of another? Why should one food be taxed for the benefit of another? This is an unAmerican principle and should not be continued.

EFFECTS OF THE MARGARINE LAW

A. Farmer: In effect the margarine law says to the producers of cottonseed, soybeans, beef cattle, peanuts and other domestic products "Before your product can be marketed in the form of margarine, it must pay special Federal taxes. Further, all manufacturers, wholesalers, and retailers who handle your product must pay special license fees." On the other hand, no such special taxes are imposed upon competitive products. Naturally, the agricultural producers subject to this discrimination are placed at a competitive disadvantage and penalized, regardless of competition.

The penalty is of much greater proportions than is generally believed. In 1943, over 500,000,000 pounds of oil were used in the production of margarine. All of this oil was produced domestically.

Chief of the fats and oils ingredients is cottonseed oil, a product of the cotton farms of the South. Soybean oil, a product of our middle western and southern farms, is second in importance. At present, over 50 percent of the oil used in margarine is cottonseed oil, and nearly 40 percent is soybean oil.

Senator ELLENDER. Mr. Thatcher at that point I would like to ask you this question: Some gentleman who testified this morning suggested an amendment to the act, to provide that all margarine that was made in this country from oils and fats produced in this country should be exempted from these limitations, that is, tax, and so forth, and if any margarine is made from imported oils, that the tax should be imposed on it. What do you think of that suggestion, sir?

Mr. THATCHER. Well, personally, that would meet my idea of what should be done, and I believe it would meet the idea of all the other southern commissioners. The fact of the matter is, my own State, Arkansas, has a law which now taxes the foreign oils.

As will be hereinafter set forth, only about one-third of the food. stores in the United States handle margarine. In addition, the number of manufacturers and wholesalers is limited to those people willing to pay the special license fees required. It may be conservatively estimated that a removal or reduction of margarine taxes and licenses to a point where they would no longer limit the volume of business transacted, would at least double the quantity of margarine sold and thereby double the volume of fats and oils and milk consumed in this

manner.

Let us look at what the present margarine market means to cottonseed oil. For a great many years cottonseed oil had found its principal and practically only edible market outlet in the form of vegetable shortening and salad oil. Almost the entire output of cottonseed oil had found its way as an edible food into these products. This relatively new market (margarine) for cottonseed oil is of vital importance to the producers and processors of cottonseed because they cannot afford to depend to so great a degree on the market outlet provided alone by vegetable shortening and salad oil.

The producers and processors of cottonseed place a high value on the market for the oil provided by these products, but they cannot afford to ignore the new market opened by margarine. This market is of advantage in several ways. The price which the margraine manufacturers pay for cottonseed oil will, obviously, not be any different from that paid by manufacturers of the other products, but