the hard way. We started before there was a market for the product and in the thirties we discontinued our operation because we were of the opinion that a market could not be developed. It was only after World War II that we resumed our attempt and our operation was commenced, as are all other potato-canning operations, on the basis that it would help us carry some of the overhead on an otherwise idle plant. We did not expect to make a profit and I am sure no one else in the industry does either. In that at least our planning has not been in error.

And I might further add, we enjoy no Government subsidy as, for example, do the potato-flour mills.

Now one of our plants is located at the foot of the famous Red River Valley which I understand is the third largest potato-producing area in the United States. We were aware of the huge mounds of potatoes that were not used because the grower had no market for them they were the small ones-the kind that could be used in canning.

We approached the grower on the same basis that we propose to can, namely, here was something that could be used to take care of overhead, it was a plus business. Our operation has increased many times since and I can say without any misgivings that we could use now all the small potatoes that are suitable for canning that are grown in North and South Dakota and Minnesota. And yet, in spite of the fact that we are short of potatoes and this area has more than it knows what to do with, we have been obliged to buy most of our potatoes from Wisconsin because we could buy what we wantedeven though we had aditional costs in freight. Now this isn't because we have not been offered potatoes from North and South Dakota and from Minnesoa. We have been offered lots of them. Pricewise we have had no trouble- -as a matter of fact, we have been offered U. S. No. 12 for less money than we pay for canning potatoes. Our trouble you see stems from the fact that the growers of this area, without consulting us at all, decided upon, and voted in, an area grading program that, among other things, puts a 2-inch minimum on potatoes that can be sold.

Actually, this results in a minimum, because of grading, of nearly 214 inches. Now we just cann't use this size potato, as our boss, the little lady in the kitchen that we cater to, just won't buy them as there are just too few potatoes in a can. So you see it isn't because we are arbitrary-it's just that we can't sell them. I know of no better example of what can happen under this proposed bill. In our opinion a much wiser merchandising policy is to sell the buyer what he wants-not what you think he might want and, as we in the canning business are on this firing line, we think, in all modesty, that we know more about what we can sell than does the grower or some Government agent who, through no fault of his own, is not acquainted with the problem.

Right after World War II, you members of the committee will recall that we had another potato program and this program, like the one before us now, likewise restricted the sale of certain types and grades of potatoes. The result was that we couldn't get potatoes for canning because actually the Government department did not understand the problem.

Like the grower, who insists upon selling us something we did not want, we were told by United States departmental officials, and even by one Member of Congress, that what we should do is buy the big ones and cut them down. Now if this thought ever occurs to any member of this committee, I beg of you to remember what our production records show-and remember I am talking now about the 2to 22-inch minimum potatoes-that if we were given these potatoes without charge, we couldn't afford to run them as it would so slow up our production that the cost would be prohibitive.

It is not that we have not tried--we have tried dicing and slicing these larger potatoes. But limited sales as the result of limited demand by the consumer keep this operation a very small one. might observe here that we were not the only potato canner that learned this the hard and expensive way.

The requirement that our label on each can show the State of origin would place such a burden upon us that undoubtedly we would be forced to abandon our operation. Labels are ordered several months ahead of delivery and they cost about 8 cents a case. Naturally we do not know from what State we are going to get potatoes. One of our raw products men is, I believe, going to Nebraska this week to see if he can locate some canning potatoes that he can use. Furthermore, the potatoes we buy in the Red River Valley come from assembling points and as the valley is located both in North Dakota and Minnesota we would be unable to tell from what State the potatoes came from. In addition, we mix potatoes in our storage at the plant.

Now, I might say, to set all people's minds at rest, most of our potatoes are canned and placed under our own label, Butter Kernel, and I want to assure you that we are our own severest critics. We are very proud of that label, and we do not put junk under it.

Gentlemen, and lady, as far as the growers of potatoes are concerned, I want you to know that I am sympathetic to their problem. I have no objection if they believe that in their own marketing of potatoes to the housewife it would help to have a standard. However, to carry this plan to an industry that purchases from them seems to be not only something new and novel, but will result in worsening their market instead of improving it.

It would be like the cattle growers voting in a law that the packers could only use the T-bone steaks from a carcass and had to throw away all the rest. I doubt if such a law would improve the cattlemen's lot. The same is true of our production if you people want to give us a road map to follow I have no objection but for heaven's sake, don't insist upon telling us the gas that we have to use.

The potato industry does have a problem, but I am inclined to believe that it is one of consumption rather than production. It is true that the consumption of bulk potatoes by the housewife in the past few years has been going down. It is likewise true that the consumption of potatoes by our industry has been going up.

In 1946 there were canned 591,411 cases of white potatoes. In 1955 there were canned nearly 6 times that amount, or 3,148,736 cases. Now that does not mean that we in the canning industry have been competing with the potato grower-it does means that we are becoming a better customer of his.

If you gentlemen, and lady, will take the time to check a large supermarket in any large city, you will find that they no longer sell po

tatoes in 100-pound lots. Indeed, if you wanted to buy a 100-pound sack, I rather suspenct it would take a little work and maneuvering on the part of management to satisfy your demand, as the sale of potatoes is geared to 5- and 10-pound lots. If you look further you will also find that many stores are now wrapping 2 or 3 potatoes in cellophane.

Checks of these stores will disclose that many shoppers for a reason-some will give you diet--but most will tell you that the members of the family are all working and as potatoes take so long to prepare they just do without them. Cooking and eating habits have changed-people are eating more prepared foods from the can. A further check will disclose that those housewives who have used canned potatoes, now serve potatoes oftener. It would seem that faced with such a picture the lot of the grower is not going to be improved by creating an artificial scarcity. Rather he should bend his efforts toward a porgram to promote the sale of potatoes.

In many respects the lot of the canner and the potato grower are similar. Both of us have been caught in a price squeeze and both have been facing constantly rising costs. The answer of the canner has been to increase his market and to likewise increase his production so he can lower his costs.

I don't know how many of this committee is aware of the fact but it is true that today, and for the past few years, such staple canned items as peas, corn, and tomatoes are selling for less money than they did in World War I or II, or the Korean conflict-in spite of the fact that our costs have all gone up. For example, in 1918 my company sold cream style corn for $4 a case. Today you can buy all you want for $2.30 a case. At the same time the price to the grower has doubled, cans have increased nearly twofold, and the hourly rate of labor has more than tripled. We have only been able to survive by becoming more efficient and increasing our production to lower fixed costs.

And I am sure, gentlemen, if there was a proposal before you to restrict or hamper or subsidize the canning industry in some way, representatives from the canning industry would be here in mass protesting such a move. Last year we had the largest pack of corn in the history of this country. Through our National-State associations, with the help of our suppliers and through the cooperation of the canners themselves we have liquidated that pack in an orderly

manner.

Certainly in order to do this we had to lower prices and take it on the chin, but we are cleaning out the warehouses. What is more corn prices have started to strengthen. I cite this as an example of industry cooperation. Five years ago less than 4 million was spent by suppliers, associations, and so forth, in promoting canned goods. This year there will be spent in excess of 17 million by these same people.

Again, gentlemen, let me emphasize that canners should be exempt from this legislation as it will only compound the troubles of the grower. Let me stress again that we have received many offers for purchasing potatoes but not the potatoes we want. This has been occasioned solely by the grower setting up a grading standard and attempting to apply it to the canner. That our relations with our

other growers are likewise healthy can best be exemplified by the attached letter that was sent to 40 percent of the farmers in our area at Ortonville that applied for sweet corn acreage this year. This occurred in spite of the fact that we had substantially increased our corn acreage.

That letter is attached, and we regret that we can't take the acreage this year.

(The letter referred to is as follows:)

BIG STONE CANNING CO. Ortonville, Minn., March 5, 1957.

DEAR SIR: Wish to inform you that our corn acreage has been filled. We thank you for your interest. We will keep your name on file and contact you next year, if we can use the acreage then.

Sincerely,

EARL HOFFBECK.

Mr. KRAUS. I understand that it is the position of the Department of Agriculture that they do not intend to enforce the provisions of this act against the canning industry. If that is correct, we humbly ask why include it in the act at all?

Frankly, our operations are planned months ahead. We must estimate our requirements for labels, tin cans and other supplies and we simply cannot afford to subject our operation to the varying whims of some outside agency.

I wish to thank you for your kind attention and to express my appreciation for having the opportunity to present the position of the National Canners Association.

Mr. GRANT. Thank you very much, sir.
Mr. Johansen, of Greeley, Colo., is next.

STATEMENT OF J. L. JOHANSEN, JR., GREELEY, COLO., CHAIRMAN
OF EASTERN COLORADO POTATO IMPROVEMENT COMMITTEE

Mr. JOHANSEN. Mr. Chairman and members of the committee, I won't spend any time, or very little time, talking about the statement which I am submitting.

My name is J. L. Johansen, Jr., and my home is in Greeley, Colo. I am appearing here representing the Eastern Colorado Potato Improvement Committee of which I am chairman. This area of Colorado markets some 7,500 cars of potatoes a year and has had experience through a State branding and grading law similar to that which you are considering on a national basis.

Our association is a member of the National Potato Council and we concur in the statement being made by that group in support of H. R. 5137 which authorizes a national potato grade and labeling act. I do not intend to make an analysis of the proposed legislation and its effect on the area which I represent; I would rather point out to you some of our ideas concerning the need for such legislation and the results that can be expected should this legislation pass the Con

gress.

The potato industry of my State and sister States has, for a number of years, been searching for new ideas which will be of benefit to both the producer and the consumer. The potato producer naturally wants to produce a crop which is going to be profitable in his operations. The producer also is realistic enough to recognize that the

acceptance of the product by the consumer and the good will of the consumer is paramount to a profitable and successful operation.

Probably the most important thing as far as consumers are concerned is the quality of the product. Certainly with the present demands of the consumer with respect to quality, it must be recognized by the producers that, if they are to keep up with and maintain a normal proportion of the national food budget, they must provide the highest quality possible under all circumstances.

The demand by the consuming public for quality food products is increasing every year as is the total amount of food consumed. Borrowing a national slogan, the potato industry must learn to "live modern." If the potato industry fails to take its place as a modern, forward-looking industry, we can expect that potatoes will be replaced in the diet by substitutes.

The proposed legislation is, in our opinion, a forward-looking approach to the dilemma faced by the industry with respect to increased quality and an improvement of the position of the potato producers.

The bill will not work a hardship on any producing area as minimum standards are sufficiently low to avoid just such a thing happening.

As I have stated previoulsy, we in Colorado have for some years been working under a State law which, in essence, provides similar features as the proposal you now have before you. Our State law provides for compulsory inspection and branding of potatoes whenever they are shipped by the first handler.

In addition our producers have also voted in both Federal and State marketing agreements. These agreements have been given approval by two-thirds of the growers voting in Colorado by referendum, the same as this bill requires.

We definitely feel that since our producers have been operating under these regulations that benefits have been received by the producer, pricewise, and by the consumer in quality of product.

Frankly, Mr. Chairman, the facts point to the present critical situation continuing unless something is done to place potato growers on an equitable competitive basis with one another, and to improve generally the quality of the product to the consumer. We feel that the proposed legislation does offer, and will effectuate, necessary improvements that will accrue to the benefit of both the producer and the consumer.

This proposal makes it possible for the potato producers to help themselves, since, in the final analysis, it is only enabling legislation, and providing for the producer to make his own choice as to whether the potato industry will continue down the uncertain path it is now on, or attempt to improve the now critical situation for which it seems destined.

We respectfully urge this committee and the Congress to enact H. R. 5137. It does provide the potato industry a strong base to begin building the industry back to its natural place in the diet of the Amreican consumer.

In addition to this testimony, I would like to say that we endorse the recommendation of the Department of Agriculture in adding to section III, subparagraph B, the wording, "within the area of production," as applying to potatoes used by processors.