who would help them decide the policy before they made the sale. But the price policy has been for the most part prior to the ceilings. The ceilings on farmers' stocks of peanuts is a comparatively recent thing. In the future it is my thought with ceilings that we might. have to have a fixed price and possibly if the situation became tight enough, allocations, and in that case it would be a fixed price. Mr. CRAWFORD. On the peanuts now moving do you have a ceiling price? Mr. HUTSON. There is a ceiling price fixed by the Office of Price Administration. Mr. CRAWFORD. Now, when the sheller purchases from the cooperative or the Commodity Credit Corporation does that sheller pay that ceiling price? Mr. HUTSON. It is my understanding that he does. Mr. CRAWFORD. You are not sure about it? Mr. HUTSON. Well, I have not followed the transactions but I would not know why he wouldn't. Mr. CRAWFORD. The reason I inquire that way is that I want to make very sure about the answers to these questions. My next question was if he pays the ceiling price does he pay the ceiling price for the nuts regardless of quality or do you have ceiling prices on varying qualities of nuts and on nuts grown in different sections and geographical locations? Mr. HUTSON. I am not familiar with the details of that ceiling regulation. I seem to remember that the ceiling on some of the better grades of nuts is the same as it is, for example, on the No. 2 nut. Mr. CRAWFORD. I think that is exactly what you will find and therein I believe you will find we are doing some things that we ought not to do because I know there isn't anybody in the Commodity Credit Corporation or in the cooperatives that wants to hinder the industry or drive anybody out of business that is established because those are the very fellows who have made this industry what it is. Now, according to the report I get from the field some of these industrial elements are being destroyed and it is due directly to the method in which it is being handled. That is the reason I brought this up so as to give you a chance to make a public statement to put in the record, of course, showing how the present_crop is being disposed of and what elements if any are being injured and whether or not they are being protected. And then also state your policy, if it is in order to do so, as to how you propose to handle the forthcoming crop which is the crop now planted and growing, because these fellows are very much interested, and I think it is only fair to tell them. Mr. HUTSON. So far as I can go today, Mr. Crawford, would be this: In connection with the present ceiling regulations on peanuts I will ask that a review be made of these regulations prior to the beginning of the next marketing season. With respect to the handling of the peanuts I want to take any steps that I can to assure as large a proportion of the peanut crop being handled through the trade as possible. That will involve some contracts between the Commodity Credit Corporation and the people in the trade handling peanuts and it will be a matter of negotiation. Mr. CRAWFORD. Would you go further to say "through the hand of established trade"? Mr. HUTSON. Yes, sir. Mr. CRAWFORD. And those with the historical background? Mr. HUTSON. Yes, sir. Mr. KUNKEL. When you have these trade associations gather up the peanut crop do they buy it for your account? Mr. HUTSON. During the past year the so-called quota nuts were handled for the most part by the trade making purchases without regard to any Government agency except that the certification that these were quota nuts. The purchases of the so-called excess peanuts, the peanuts that were grown primarily for oil, were made by the cooperatives on an agency arrangement. I think that stems directly from the Secretary of Agriculture. Mr. KUNKEL. Now, one more question. How do you get control, as I understood your statement, you do get control at some stage. Just how and at what stage do you get control of quota nuts? Or perhaps I misunderstood your statement. Mr. HUTSON. Unless they were delivered to the cooperative I do not believe that we would have control of the quota nuts except to give the farmers, as was the case in the 1942 crop, an allotment indicating the quantity that he can sell of quota nuts. Mr. KUNKEL. If you do not get control of quota nuts how can you possibly allocate to others in the trade? Mr. HUTSON. I see what you are talking about. Let us turn to 1943. There are no allocations in 1942 except the sale of the so-called excess peanuts for edible uses. Mr. KUNKEL. How are you going to get control of the quota nuts in 1943? Mr. HUTSON. Now, we will take up 1943. In connection with the 1943 crop it is proposed that the various trade agencies would handle the crop under a contractual or agency arrangement with the Commodity Credit Corporation. We have outstanding a commitment for about $140 a ton for peanuts. For oil peanuts they will bring about $80 a ton. If you limit the quantity that is going into the edible trade enough they would top the ceiling price. If you threw all of those peanuts into the edible trade obviously the market would drop below the $140 a ton. In the past when you had excess peanuts go for oil they would drop to near the oil price. But we do not want that quantity of peanuts to go into the edible trades. Our need for oil is so great and these peanuts were grown for oil and after we have taken care of the normal quantity that goes into the edible trade we want the remainder of them for oil. So you would have a price system under that arrangement under which part of your peanuts for the edible trade would sell at ceiling prices and the remainder of the peanuts would sell at oil prices and the range would be from $85 to $170 a ton, according to prospective prices for oil mills for the coming term. One of them is about twice as high as the other. The sheller or crusher would purchase all of these peanuts at this $140 basis. He would under the terms of the contract sell the portion that went into the edible trade at the ceiling price of around $170 and the portion that we allocate to him for oil at the $85 price and balance one of the items against the other. Mr. KUNKEL. Is that essentially what you are doing during 1943? You have quota and nonquota peanuts just about the same? Mr. HUTSON. That is correct. Mr. FORD. May I make an observation? This bill when it was originally presented to me was very simple. It merely was a request for sufficient funds to carry out a congressional mandate, to support prices of such commodities as the Secretary of Agriculture decided were not being produced in sufficient quantities and which he was instructed by Congress to support as to price. Now we find that two other factors are injected. One, the labor and wage rates, and the other, the ceiling prices by the Office of Price Administration. Now, it seems to me before the committee can get a valid and clear picture about this situation that somebody representing the wage angle and somebody from the Office of Price Administration ought to come in here to give us some information of what they expect to do, because I for the life of me would not know how to vote on this bill today. Mr. CRAWFORD. I think you are right, Mr. Ford. I had another question on this peanut situation which I think will support your position. My next question is this, Mr. Hutson. In setting the price ceiling on peanuts are you familiar with the elements which the Office of Price Administration took in that formula? That is, what did they allow in that price which they say the sheller must place on the peanuts which he sells? It is the sheller that announces that or quotes the ceiling price, is it not? Mr. HUTSON. That is correct. Mr. CRAWFORD. Now, the Office of Price Administration says to the sheller that the ceiling price shall be "X," we will say. What cost elements does the Office of Price Administration include in that, do you know? Mr. HUTSON. I do not. Mr. CRAWFORD. It is probably an answer we will have to get from them. I might ask this question then, do you know whether or not they permit the sheller to include in his ceiling prices a brokerage fee? Mr. HUTSON. I do not know. I have been advised by people from the peanut trade as well as those on the outside, but I have not made an all-inclusive survey, that the margin allowed was sufficient for the service rendered. Mr. CRAWFORD. If the margin allowed includes this service fee and thereby giving the sheller the privilege of collecting it from the trade to which he sells, and if the sheller, as I understand, does not permit those nuts to flow through the regular channel, he is through the permission of the Office of Price Administration and the general approval gypping part of the legitimate and historically established trade out of his service fee which the Office of Price Administration permitted to be thrown into the formula when they set the ceiling price. Mr. HUTSON. I think you are raising a very broad question there, Mr. Crawford. Mr. CRAWFORD. Well, this is a broad question. It involves the economic life of certain elements in the trade which is being destroved because the sheller does not carry out the formula as set by the Office of Price Administration. I want to find out what they are going to do about it. That is what is happening. Mr. HUTSON. I will be glad to look into that. (The statement is as follows:) As reported to this office by the Office of Price Administration, the calculated spread between the ceiling prices on U. S. No. 1 farmer's stock, Spanish and Runner type peanuts, and the ceiling prices for these types of shelled peanuts is $25 per ton, which includes cleaning, shelling, handling, and selling costs or brokers' fees. The spread for the Virginia type peanuts is $30 per ton. The CHAIRMAN. The committee will now take a recess to 3 p. m. this afternoon. AFTER RECESS The committee met at 3 p. m., Hon. Henry B. Steagall (chairman) presiding. The CHAIRMAN. We will have Mr. John Brandt, the president of the National Cooperative Milk Producers Association, and we will be glad to have you discuss this bill. STATEMENT OF JOHN BRANDT, PRESIDENT OF THE NATIONAL COOPERATIVE MILK PRODUCERS ASSOCIATION, AND PRESIDENT OF LAND O'LAKES CREAMERIES, INC., MINNEAPOLIS, MINN. Mr. BRANDT. Mr. Chairman and gentlemen, in discussing the pending bill and the subsidy program which will naturally be involved, I would like to make this statement, that I believe that the public should have a full understanding of what subsidies mean. If the public has a full understanding of what subsidies mean and they are willing to go ahead and have them imposed or paid, then they are at least going into it with their eyes open. If the general public does not understand what subsidies mean they are going to go on the assumption that it is anti-inflationary, that it is a benefit to consumers and a benefit to farmers, that it is a benefit to almost everybody. I would like to divide my statement into three groups today: First, I would like to take the matter of subsidies. Are subsidies intended as a help to the consumer, to increase his purchasing power? Are subsidies to be paid as a means of thwarting inflation? If that is the case they are absolutely ineffective and in fact they are in reverse gear. If subsidies are to be paid to increase production and as a benefit to farmers, I can say emphatically that at least as one representing a lot of farmers, both locally and nationally, and all farmers that I come in contact with in the cooperative movement, are very much opposed to a subsidy program, and on the principle that it is inflationary, that it will not increase production, and that it will be a hazard and a detriment to the income of agriculture. I want to take first the subsidy so far as consumers are concerned, and the effect on consumers. Most of us they would have believe that subsidies will cut down the cost of living, and certainly there cannot any of us say that it would not cut down the cost of living because after all any decrease in the cost of living is still a reduction in the cost of living; but if we were to make the statement that the cost of living will be reduced anywhere near to the extent of the percentage of subsidy on the products that it applies to, then it is a misstatement and cannot be defended. Let me just bring this little illustration to you: To begin with, supposing that we roll back the price of butter 5 cents a pound, and that is in the works at the present time, and supposing that we roll back the price of meat, which is definitely scheduled to take place on June 1, and some of us expected that it was to take place today: Just how much is that going to affect the average cost of living? The average consumer by a mandate of the Government itself, and by the rationing order, can only purchase 12 pounds of butter a year. If you roll back the price of butter 5 cents, 5 times 12 is 60 and you would save that consumer 60 cents a year on his cost of living, so far as his butter is concerned. Now, a saving of 60 cents a year in the price of butter is often spent on the way home when the same fellow that saved it on the price of butter would stop in and take one good drink and down his gullet goes the whole saving for the whole year, so from that standpoint there is not so much saving. Let us take the savings so far as meat is concerned. There is a proposal of a 4-cent roll-back on the price of meat, and if we were supposing that that was entirely passed to the consumer, the 4-cent roll-back and this 5-cent roll-back on butter, and that is assuming that it is all passed to the consumer, the amount of meat that they are permitted to purchase today, plus the amount of butter that they are permitted to purchase, would mean a saving to the consumer in the whole year's time of $6.13, even if all meat consumed were bought at retail. But, after all, it is not all passed back to the consumer. Let us take, for instance, the subsidy on butter as it might affect the production of ice cream. Ice cream, especially this year, will contain a considerable amount of butter as a means of supplying the fat milk solids. If you think that the roll-back of 5 cents a pound on butter is going to help you any, in the ice cream you eat, you go and buy some ice cream and see what it is going to do, either now or in the future, and see what happened to the price of your ice cream when by order we cut down the amount of fat content in the ice cream which never changed the price of ice cream one particle, and in fact it went up in price rather than down. Then let us take the question of meat. Not all of us are eating at home. Many people eat in other places. I ate meat on the train last night coming down here. I had a steak and I guess possibly my eyesight was not good, something was the matter, at least when I got my bill I paid $2.50 for the steak and when I commenced to measure that in terms of what that would mean if we had a roll-back of 4 cents a pound on the beef that was originally priced, I said to myself, "I do not believe that it is going to make any difference whatsoever in the price of this meat that I have eaten." I could name innumerable circumstances where we are being befuddled in the belief that if we roll back the price that the farmer receives for his products, that we can roll back the cost of living to the |