Mr. POAGE. Mr. Rogers, let it be remembered that the only thing that is before this committee at this time that can possibly affect the little businessman is this margarine bill, and not the O. P. A. regulations. They are not before this committee at this time. The one thing that this committee can do and the only thing that it can do to help or hurt the little businessman right at this moment, is the action that it takes on repealing these taxes and regulations against the sale of a purer food product.

Mr. PHILLIPS. Where is the former bill?

Mr. WICKERSHAM. Mr. Chairman.

Mr. PACE. Mr. Wickersham.

Mr. WICKERSHAM. As compared with the number of creameries, in Oklahoma, how many margarine plants are there?

Mr. ROGERS. We do not have any margarine plants.

Mr. WICKERSHAM. We do not have any, and we have hundreds of creameries, cream plants, cheese plants, and casein plants.

Mr. ROGERS. That is right; all over the State.

Mr. McCORD. Will the increase in point values on margarine from 4 to 6 hurt, or is that going to hurt the sale of margarine any? Mr. ROGERS. Well, I do not know; I really do not know.

Mr. McCORD. The gentleman will have to qualify his statement as to what the O. P. A. might do that would affect it.

Mr. ROGERS. I do not know whether that will hurt or not. I was thinking about that this morning, and I would not want to say right

now.

I have a little statement here that I would be glad to file for the record, if you do not mind.

Mr. PACE. Without objection, it will be entered in the record. (The statement referred to is as follows:)

BRIEF URGING PASSAGE OF H. R. 2400

(By Watson Rogers, president, National Grocers Secretaries Association and secretary-manager, Oklahoma Retail Grocers Association)

The present margarine laws, which require tremendous expense in reporting, plus heavy license fees, place an unjust overhead expense on the wholesalers and that increase must be passed on through the retailers to the ultimate consumers. Oleomargarine has proved itself as a legitimate, healthful food. The retail food dealer wonders why he is required to pay a tax on this one innocent product out of the many such products he must carry. It is certainly unjust that the retail dealer, the greatest distributor of dairy products, should be singled out and made to pay a tax just to handle a competitive product.

To the grocers oleomargarine and butter are just the products of two different types of farmers. To them the special license fees and taxes on oleomargarine are just as unreasonable as if you would put a special tax on corn meal under the disguise of helping wheat farmers.

In 1931 the Oklahoma State Legislature passed a State law placing a tax of 10 cents a pound on oleomargarine and requiring special license fees for the wholesalers and retailers. This year the Oklahoma State Legislature realized that a mistake had been made and repealed all State restrictions on oleomargarine.

Less than 5 percent of the retail food dealers in Oklahoma were handling margarine before the State law was repealed. Now about 50 percent of the retail food dealers are handling it. If it were not for the Federal license fees, almost every food store in the State would carry oleomargarine.

The small retailers and the consumers in the lower income brackets are the ones being penalized by the present Federal law. The $6 annual license fee for the retailer sounds small, yet it is the net profit on about $300 worth of

business. It is comparatively nothing for the super markets and the large retailers to pay, but the small retailer feels that the profit margins are so small that he would not be justified in handling the item.

Some of the small stores are continuing to handle oleomargarine although they feel it is not profitable because they realize some of their customers would be deprived of a spread for their bread if they did not, as the incomes of these customers would not permit their purchasing butter. In many rural communities, a majority of the consumers have their own cows and make their own butter, yet the rest of the people in that community are deprived of a wholesome spread because the retail grocers feel the limited demand for margarine would not justify the Federal license.

About one-half of the retail food dealers in the United States have sales of less than $10,000 a year. About one-third of the retail stores do less than $5,000 a year. These are the stores that are being handicapped by the $6 tax for handling oleomargarine. It prevents their handling this product and competing effectively with the large stores, the supermarkets and large chain units, few of which fail to qualify as oleomargarine dealers.

Wholesalers of oleomargarine are finding it increasingly difficult under present conditions to operate under margarine restrictions. The burden of reporting their sales, as the law now requires, is becoming doubly hard during these days of manpower shortages and rationing and price regulations.

From health authorities and nutrition experts we learn there is no need for restrictions on the sales of oleomargarine as far as the public health is concerned and therefore should not be classed with narcotics, distilled spirits, wines, and other items commonly placed under special taxes and special Federal control.

The present tax is serving no benefit to the welfare of the public health and undoubtedly is proving to be a detriment as some consumers cannot afford butter, yet in a lot of instances the tax denies them the privilege of purchasing this wholesome product.

. Therefore, for the protection of the consumers as well as the small retailers, we respectfully urge the passage of H. R. 2400.

Mr. PACE. We have three more witnesses. We have 1 hour. With the consent of the committee, I am going to confine the witnesses' statements, including interrogations, to 20 minutes.

Mr. Moloney, we will be glad to hear from you.

STATEMENT OF JOHN F. MOLONEY, REPRESENTING THE NATIONAL COTTONSEED PRODUCTS ASSOCIATION, MEMPHIS, TENN.

Mr. MOLONEY. Mr. Chairman.

Mr. PACE. Mr. Moloney, you understand that your statement and interrogations would be confined to 20 minutes.

Mr. MOLONEY. Yes, sir. I will not take that much time.

Mr. PACE. Will you identify yourself for the record and proceed. Mr. MOLONEY. My name is John F. Moloney, and my residence is Memphis, Tenn. I am employed by the National Cottonseed Products Association, which organization I am representing here today.

The National Cottonseed Products Association is a trade association representing the cottonseed crushing industry of the United States. It has as members 366 out of the 416 cottonseed-crushing mills in this country. Our membership also includes 56 refiners of cottonseed oil, 31 brokers, and 13 dealers in cottonseed products, and 26 chemists. At the present time the total value of the industry's products is approximately $275,000,000 annually.

Our direct interest in this legislation lies in the fact that, in recent years, cottonseed oil has been the most important raw material used in the production of margarine. Last year (1942), refined cottonseed oil used in margarine amounted to 166,000,000 pounds or about 48 percent of all fats and oils so used. Stated another way, the margarine industry provided a market for approximately 13 percent

of the total production of refined cottonseed oil. Members of this committee have had sufficient experience in the past with the problems of agricultural surpluses to recognize that a market or lack of market for 13 percent of the production of any staple commodity means the difference between a profitable or unprofitable price for the entire production of that commodity. Perhaps the best way to illustrate theimportance of margarine to the cottonseed-crushing industry and to. the producer of cottonseed is to outline briefly the major factors that determine the price of cottonseed oil and of cottonseed.

Cottonseed oil is predominantly a food product, over 90 percent of which enters the production of such standard foods as vegetable shortening, margarine, cooking and salad oils, salad dressing, mayonnaise, and similar products. Its most important single market is shortening which generally takes about 60 percent of all cotton oil produced. To be used in shortening cottonseed oil must compete, on the basis of price and quality, with soybean oil, peanut oil, and such other oils as may be suitable and available for shortening manufacture. Shortening, in turn, must compete in the consumer market with lard. The prices of these various edible fats and oils-that is, cottonseed oil, peanut oil, soybean oil, and lard-are closely interdependent and, assuming for the moment that consumer income is constant, the price level of the entire group depends upon the supply available and the extent of the markets that are open to them.

As sellers of cottonseed oil, we know that the larger the number of buyers there are in the market at any given time, the better are our chances of receiving a good price for oil. The fact that the margarine industry is now taking about 13 percent of our production of oil means that we are receiving a better price than we would if this industry were not in the market. Other conditions remaining the same, the more of our cottonseed oil the margarine industry can use the higher will be the price of the oil. This higher price applies not just to the quantity of oil purchased by the margarine industry but to the entire production of cottonseed oil, regardless of how it may be used.

From the viewpoint of the cotton producer, the price of cottonseed oil is highly important for it determines, to a large degree, the price which he receives for cottonseed. The cottonseed crushing mills obtain from cottonseed four products-namely, oil cake or meal, hulls, and linters. The mills base their buying price for cottonseed upon the total value of these four products, with allowance for costs of operation and for profit. Oil generally accounts for 50 to 55 percent of the value of all four cottonseed products and the price of oil is therefore the major factor determining the price which the producer received for seed. As previously shown, the price of cottonseed oil depends upon the markets that are open to it. The quantity of cottonseed oil that the crushing mills are able to sell to the margarine industry is, therefore, an important factor in determining the price which those mills can pay to the farmer for cottonseed.

We are not suggesting that the passage of this legislation would at present increase the income of either the cotton producers or the cottonseed-crushing mills. All of the various fats and oils are at present under price ceilings so that, barring changes in such ceilings, their prices cannot increase. A possible exception is lard, some of which, it is reported, has recently been sold at less than the ceiling

price. We wish, however, to call the committee's attention to the drastic change that has taken place in the entire fats and oils situation in the United States during the past few years, and to the implications of that change upon post-war farm income.

The principal domestic edible facts and oils produced in this country that are within a comparable price range are cottonseed oil, peanut oil, soybean oil, and lard. Production of these four commodities in the 5 years prior to the war averaged 2.8 billion pounds annually. By 1942, production of the same four commodities had risen to 4.1 billion pounds, an increase of nearly 50 percent. Production is running at an even higher rate this year. At present, a substantial quantity of these fats and oils is moving out of the country under lend-lease. It is reasonable to assume that this movement will cease after the war. While production will probably also decline to some extent, it is likely to remain considerably above pre-war levels. Markets will have to be made available for approximately 20 to 25 percent of this post-war production or we shall return to the days of 4-cent cottonseed oil and 6-cent lard. Removing the barriers to the sale of margarine will be a long step in the direction of providing such markets.

It is not practicable to measure statistically the extent to which the removal of margarine trade barriers would open up an additional outlet for our edible fats and oils. We have never, in modern times, had a free market for margarine in this country. If we look at the experience of the countries in northern Europe, we get some idea of the possible size of the margarine market in terms of edible fats and oils. Pre-war per capita consumption of margarine was 9 pounds in the United Kingdom, 18 pounds in Germany, and 46 pounds in Denmark, probably the leading dairy country in the world, in proportion to its size. In contrast, consumption in this country with our many restrictions is about 3 pounds per person. With the removal of present restrictions, consumption could reasonably be expected to increase to the British level and this would provide an additional market outlet for three hundred to four hundred million pounds of edible fats and oils annually. Such a market would go far toward avoiding the depressed prices that are otherwise inevitable in the post-war period.

Now, actually, so far as what oil is used, we would like to see cottonseed oil used; but if peanut oil or soybean oil is used, it simply means moving these oils, which are largely interchangeable, into a market, and it will help the price level of every one of them, whether it is lard, cottonseed oil, peanut or soybean oil.

A number of the other witnesses have covered the other material that I was going to offer, and I see no reason to present it, Mr. Chair

man.

That is all I have unless you have some questions.

Mr. ANDRESEN. Is all cottonseed oil bleached?

Mr. PACE. Mr. Andresen.

Mr. ANDRESEN. Is all cottonseed oil bleached?

Mr. MALONEY. No, sir. Your salad oil is. Well, some of your salad oil is partially bleached. Some is not bleached.

Mr. ANDRESEN. What is the natural oil color of cottonseel oil unbleached.

Mr. MOLONEY. It is you might call it a cross between a dark brown and a red.

Mr. ANDRESEN. Something like light lubricating oil?

Mr. MOLONEY. No; it is not that dark as it comes from the crusher. It all depends, that all depends or depends largely on batch of seed, where the seed came from; climatic conditions. I have seen crude cottonseed oil which ranged all of the way from about the color of your wall there to the color of your woodwork, depending on, as I say, the area producing it and the climatic conditions, and the way it had been handled before it was crushed.

Mr. ANDRESEN. Cottonseed oil is used for the manufacture of oleomargarine, is it not?

Mr. MOLONEY. That is correct.

Mr. ANDRESEN. Your primary interest is to keep the market for cottonseed oil?

Mr. MOLONEY. For cottonseed oil and all other oils, too. We are all in the same boat.

Mr. ANDRESEN. I see you are now. As a matter of fact, you have heard testimony given here that more soybean oil is being used for margarine than cottonseed oil at the present time.

Mr. MOLONEY. I do not believe that was the testimony. I might explain that by saying that during about 3 months of this year the use of soybean oil was greater than that of cottonseed oil; but for the year as a whole, cottonseed is still the most important oil used. Mr. ANDRESEN. But the oils are interchangeable?

Mr. MOLONEY. Not completely. You can make a margarine or a shortening from either 100-percent cottonseed oil or 100-percent soybean oil, or 100-percent peanut oil; and some of them are made that way. There are-and I am not a chemist-but there are certain technical differences, the manufacturers and refiners tell us, between the oils; but they can, for practical purposes, be interchanged.

Mr. ANDRESEN. And the margarine manufacturers naturally buy the cheapest oil that they can use that will give their product the nutritive value and appearances, texture, that they want it to have. Mr. MOLONEY. Yes; when you put in all of those qualifications that is true.

Mr. ANDRESEN. That is all, Mr. Chairman.

Mr. PACE. Any further questions? We thank you very much, Mr. Moloney.

Mr. MOLONEY. Thank you.

Mr. PACE. Mr. Davidson, we will be glad to hear from you at this time.

Mr. Moloney, you may put the balance of your statement in the record, if you would like.

Mr. MOLONEY. That is not necessary, sir.

Mr. PACE. All right; thank you.

Mr. MOLONEY. Thank you.

STATEMENT OF GLENN M. DAVIDSON, DIRECTOR OF RESEARCH, DURKEE FAMOUS FOODS, CLEVELAND, OHIO

Mr. PACE. Mr. Davidson, will you identify yourself and proceed. The committee will be glad to hear you.