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CONTROLS ARE UN WORK ABLE IN THE POULTRY AND EGG INDUSTRY Poultry and eggs are produced in every rural community throughout the country under varying conditions, with myriads of grades and widely different types of production units and operations. It is impossible to conceive of a control system on poultry and eggs that would not throw production and marketing completely out of gear, or one that could be effectively enforced.
Ceiling-price differentials would only develop a price strait-jacket. They could never duplicate the flexible system of geographic supply and demand pricing needed to move produce where and when needed. For example, at times the Midwest has a surplus supply of poultry to ship east. At other times— and there is no regular seasonal pattern—the East has a surplus to ship to the Midwest. At times northern poultry will move south, while at other times the flow is reversed.
Unless these distribution patterns are left unhampered, surpluses will pile up in one section while other areas suffer deficits, and black markets result.
A SPECIFIO EXAMPLE OF UNWORKABLE, DISCRIMINATORY CONTROLS Poultry occupies a most unique and conspicuous position in the Defense Production Act of 1950 (64 Stat. 798). A special section relates to Govern. ment poultry purchases. No other food is accorded such significant treatment. Ostensibly section 2110 was included in the act to make certain that producers of chickens and turkeys would receive a so-called estimated price from processors of chickens and turkeys for Government contracts—the estimated price presumably to be the ceiling price at the time bids were made for such contracts. The act appears to require processors who pay producers of chickens and turkeys less than the so-called contract estimated prices, to make comparable adjustment in the delivery price of the processed product to the Government.
If this provision is retained and if ceilings are imposed, the net effect would be to discourage poultry processors from bidding on Government contracts, and thus tend to limit the amount of poultry available to the armed services.
Why? Because this feature requires a processor to estimate the purchase price of poultry he anticipates buying to fill a prospective contract. He would have to figure out which locations he can and cannot use as procurement centers. Then he would have to anticipate limiting himself to suppliers who keep accurate records by farmers and on prices paid to farmers. Finally, if awarded the contract, he would have to marshal all persons involved-from the farmer, the assembler, the poultry station buyer or the shipper-to keep individual price records by bird or bird lot on prices paid to farmers. Then the processor would have to keep such poultry segregated from all other poultry so the two would not become mixed in the processing or canning process.
Labor is just not available to processors to carry on such a limitless identification and record-keeping task. And of course, practical economies make the task impossible. The average processor, therefore, would find it highly undesirable to bid on Government contracts.
Why poultry should be singled out from all other agricultural commodities for such treatment is puzzling. Since poultry markets are broadly published on a daily basis, since poultry prices respond promptly to supply and demand, and since inviations to bid on Government contracts are widely circulatedthe Government is adequately protected without this discriminatory provision.
CONTROLS LEAD INEVITABLY TO BLACK MARKETS Controls are notorious spawning grounds for black markets. Wide-spread and flourishing black markets in poultry in World War II disrupted supplies, diverted poultry from established, sanitary processing plants to undercover, hole-in-the-wall slaughtering operations.
If applied to poultry and eggs, the controls proposed in title 4, Public Law 774, and further amended in S. 1397, will inevitably bring about the return of unsavory, illegitimate market operations.
The immensely productive poultry and egg industry—the result of private resourcefulness-plays too vital a part in our national food picture to permit it to be handcuffed to controls.
The interests of the armed services, producers, consumers, and general public can best be served without the imposition of price controls of any kind.
SUPPLEMENTAL STATEMENT OF THE INSTITUTE OF AMERICAN POULTRY INDUSTRIES
The principal point which we presented in our testimony before the committee on Thursday, May 24, 1951, was the tremendous productive capacity and efficiency which has already been achieved by the poultry and egg industry, and which is presently available and is actually doing a most effective job in combating inflation.
This job is being done so well that the forces of inflation do not even hold a beachhead in this industry. Broiler placement (principal source of poultry meat) in the 6 weeks preceding May 15, 1951, were up 91 percent over the corresponding period of 1948 and prices were down 17 percent below the corresponding period of 1948. As of April 15, 1951, the day of the last parity calculation at the time of the presentation of our testimony, chickens were selling at 93 percent of parity, and eggs at 94 percent.
It is the position of the Institute of American Poultry Industries that production, and only production, can have any real effect on prices. Production (and we believe this fact to be of the utmost importance) is the only way to assure consumers with needed quantities of poultry and eggs at reasonable prices. The poultry and egg industry has now, at present, the productive capacity to meet all foreseeable needs at reasonable prices.
We contend that a fair and objective appraisal of the job being done by this industry will necessarily compel the conclusion that price control authority over this industry, is not neccessary. In fact, a continuation of the authority to impose price control over this industry threatens to reverse the production and distribution efficiency attained by this industry, to the detriment of American consumers and our national economy.
By way of summarizing our position, we wish to present and reemphasize certain facts which bear upon our contention that price control authority over the poultry and egg industry is unnecessary and unwise.
Price-control authority should not be extended over the poultry and egg industry, or over any industry for that matter, unless there is a showing of absolute necessity for such authority.
This point of view is shared by Charles E. Wilson, Director of Defense Mobilization. The following testimony given by Mr. Wilson before the Banking and Currency committee of the House on May 8, 1951, clearly shows that it is his position that controls should not be imposed unless their need is established beyond any reasonable doubt.
At page 97 of the transcript of the testimony presented by Mr. Wilson on May 8, 1951, before the Committee on Banking and Currency of the House, the following appears:
“Mr. COLE. The question I am leading up to is this, Mr. Wilson: I came here during World War II and voted and voted for price control and rent control, because I believed, as you have said, that in certain times of extreme emergencies, we must do those things which are necessary to carry out the war effort.
“I was here following World War II. I sat upon this committee and listened to the testimony of people who were not interested in that particular philosophy of Government, in my judgment. They were interested solely in maintaining controls for controls' sake. Now I became rather disillusioned, frankly, in my attitude toward controls and I have felt that it was my job and my responsibility and my duty to see to it that no control, so far as I am concerned, shall be given over to the people and the economy of this country, unless it was proved beyond, I would say, a reasonable doubt that they are necessary. Do you agree with that philosophy?
"Mr. Wilson. I go along with it 100 percent." (Emphasis supplied. ]
The extension of price control authority over our industry with respect to which no need has been shown, can have nothing but an adverse effect upon our whole economy and upon consumers particularly. The adverse and detrimental effect of the unneeded control authority is also recognized by the Director of Defense Mobilization. In his testimony before the House Committee at page 27 of the transcript, he stated :
“In considering this important measure, I urge that the committee keep in mind these fundamental concepts.
"We must be alert to the dangers inherent in the mobilization program, the dangers to small business, to our competitive free economy, to the enterprise
and initiative of our citizens. We must make sure that the mobilization effort in which we are engaged strengthens our free economy and our way of life.
"Our industrial system is vast and complex. To enable us to devise the remedy suitable to each particular problem, our authority must be broad and flexible. We do not want to use a shotgun where a rifle will do. But if a broadside is needed it should be available. Otherwise our efforts may in fact weaken our economy and interfere with our defense effort."
To use the "shotgun” approach and extend price-control authority over the poultry and egg industry in the absence of a showing of real necessity for such action, will in fact weaken instead of strengthen the industry and interfere rather than promote our defense effort.
The principle reason which has been advanced for the extension and continuation for price control authority generally, is that productive capacity is not now sufficient to take care of the civilian economy and at the same time supply defense requirements, and that price-control authority is therefore necessary on a short-time or temporary basis until increased productive capacity is achieved.
This is the basis advanced by both Charles E. Wilson, Director of Defense Mobilization, and Eric Johnston, Economic Stabilization Administrator, for their request for a continuation of price control authority.
The following are excerpts from their testimony presented to the Banking and Currency Committee of the House :
Page 382 of the transcript (May 11, 1951 testimony of Eric Johnston);
"The CHAIRMAN. Mr. Johnston, I think it has been demonstrated that people in the United States very unwillingly submit to controls or restraints unless they feel they are imperative. You feel that at the present time they realize the perils that confront them?
“Mr. JOHNSTON. I think, Mr. Chairman, they recognize the perils. I think no one likes controls for themselves. They want it for the other fellow. I think there is an inherent dislike of controls, as I have an inherent dislike of controls, but I think when you explain to the people of the country the necessity of controls on a rather short-time basis—and Mr. Chairman, I think we can get rid of controls within a couple of years, and I can tell you why I think we can get rid of them if you wish me to go into the details with you.
"We will have about 30 percent more electric power production, so forth and so on down the line, and I think that when we have increased production sufficiently, we can remove controls, because there will be enough being produced to satisfy the civilian economy, and, at the same time, take care of the needs for mobilization providing, of course, we do not have an all-out war in the process." [Underscoring supplied]
Testimony of Charles E. Wilson, May 8, 1951, page 4, transcript, House Banking and Currency Committee:
"With an extension of that act until June 30, 1953, and with the continuing cooperation of all of our people, I believe that within 2 years we will be able to achieve economic strength sufficient to maintain military production at high levels and at the same time resume the normal expansion of our supplies of civilian goods. We can then take another look at the powers granted by the Defense Production Act and see which may still be needed and which can be dispensed with.” [Underscoring supplied]
"Mr. WOLCOTT. Do you think that controls are a deterrent, a hindrance to expansion, especially agricultural and probably industrial production? That has been our experience in the past.
"How may we overcome that?
"Mr. WILSON. I think you take the curse off controls—and I regard them as a curse-if you maintain them only for the period that they are essential to the security of the Nation; and my own guess is that if we operate these controls during the period when we are in throes of expanding our defense production and expanding our plant capacity for that purpose, which is really a two-pronged job, each of considerable magnitude, why they will come within a couple of years when those objectives have been achieved—I think we will have an ability to remove the controls and give the economy much freer play than it has
and I think utilize without too great difficulty the expanded productive capacity that we provided in these 2 years of comparative hardship, only comparative." [Underscoring suppied.]
"I appreciate the fact that you have to have some kind of controls, but at the same time you must be very careful, because the main thing is production.
“Mr. WILSON. That is right, that is right."
"I can't see at that time (1953) any reason, regardless of what the world situation is, that we should shackle the economy with controls to the extent that it seems necessary to do at this time.
"That is my hope and my belief.”
all the things that are being done to guarantee an increased production by some time in 1952 and 1953. That is going to continue for just about another year. Then we will have the benefit of the increased vol. ume, and at that time (1952-53), it seems to me, we can begin to bring civilian production up and eliminate, I hope, these controls."
The testimony of both Mr. Wilson and Mr. Johnston is in clear recognition of the fact that production and productive capacity are the real keys, to the question of whether price control authority is necessary. They indicate that when productive capacity has been expanded 15 to 30 percent by 1952-53, price control authority probably will be unnecessary in the absence of an all-out war. The position that price control authority is necessary because production or productive capacity is not now sufficient to meet both civilian and military needs is not valid with respect to the poultry and egg industry.
The testimony presented by Dr. Cliff D. Carpenter, speaking to this committee for the Institute of American Poultry Industries brought into sharp focus the great increase in productive capacity that has already been achieved by the poultry and egg industry. Moreover, its ability to further expand is almost unlimited. The productive capacity in this industry has already reached and exceeded the goal set by the Defense Mobilization Administrator and the Economic Stabilization Administrator for industries generally. The goal set for other industries calls for an increased productive capacity ranging from 15 to 30 percent by 1953, with the expectation that if this goal is met, price control authority can be dispensed with. Having already met or exceeded this production goal, price control authority should not be continued with respect to the poultry and egg industry.
The fact that the poultry and egg industry has the productive capacity and efficiency to make controls unnecessary, is further demonstrated by the determinations made by the Department of Agriculture in connection with the 1951 production goals or guides.
In the official 1951 Production Guides issued by the Department of Agriculture, it is stated :
"Egg supplies are expected to meet all foreseeable needs during the year (1951) at reasonable prices to consumers.
“The production of poultry meat is flexible, in that almost 50 percent of the total supply comes from commercial broiler producing areas. The remaining poultry meat supply comes from farm-raised chickens, including hens culled from laying flocks. The total quantity of poultry meat from these two sources will be sufficient to meet all foreseeable needs if farmers continue to cull their flocks, and to produce broilers at about the same rate as in the past year."
(Broiler production is currently running at the rate of 20 percent above the goal announced by the Department of Agriculture.)
Prices of poultry and eggs today are below parity and are down below the prices which prevailed in January 1951. Workers today are able to buy more poultry and eggs with less hours of labor. (See charts presented with original testimony.)
These facts clearly demonstrate the high and efficient production and distribution capacity which has been achieved and the lack of any need for price control authority with respect to this industry.
Left free, the poultry and egg industry is confident of its ability to continue what it has already demonstrated it has the ability to do—to be the most efficient supplier of protein foods for the Nation—to supply all the poultry and eggs required by civilians and by the Armed Forces at prices so reasonable that chicken is now a common lunch-box item.
Price control authority over this industry threatens to reduce production, increase costs of operation, and reduce efficiency in distribution to the detriment of the interests of consumers and of our Nation.
For the deadening and depressing effect of price control upon production, and the interferences and dislocations in distribution brought about as a result of price controls, we need only to look to our recent experiences under OPA. Since OPA, poultry and egg production have increased sharply while prices have decreased. A return to controls undoubtedly will reverse this picture.
A broad grant of authority by Congress to a single individual to impose price controls over an industry when there has been no adequate showing of necessity for such authority, necessarily has grave repercussions. First, it creates fear in the minds of the people against whom such power is likely to be used. It creates risks of the kind that no businessman can anticipate or against which no one may insure or protect himself.
The best evidence that such fears are not wholly unfounded and that the risks are real, is shown by the manner in which the powers granted last year have been exercised.
The entire poultry and egg industry beyond the producer level is now subject to a very highly complicated price-control order which few, if any, in the industry can comprehend. The technical assistance required to understand and apply this regulation, and the keeping of the necessary records making the innumerable calculations and computations, and the filing of the various reports, greatly increase the operating costs of the industry and make it almost impossible for small operators to operate under them. The poultry and egg industry is being subjected to price control orders of this nature, notwithstanding the fact that the Defense Poduction Act of 1950 expressly provides that:
“No ceiling shall be established or maintained for any agricultural commodity below the highest of the following prices : (The act then established a statutory minimum.) No ceilings shall be established or maintained hereunder for any commodity processed or manufactured in whole or substantial part from any agricultural commodity below a price which will reflect to producers of such agricultural commodity a price for such agricultural commodity equal to the highest price therefor specified in this subsection.
It is our belief that it was the clear intent of Congress that no price controls would be imposed at any level with respect to any agricultural commodity until the price of such commodity reached the minimum level specified in the act. Nevertheless, the Price Stabilization Administrator has created a "device" called a "pass through" by which he has directly imposed price control on the entire poultry and egg industry beyond the producer, and indirectly subjected the producer of poultry to a form of price control even though the prices of poultry and eggs have at all times been below the parity level.
In utilizing this highly questionable technique, the Price Administrator employed it across the board, without regard to the effect of such action upon the poultry and egg industry and without regard to the great production and distribution record which has been established by the industry or to the fact that poultry and eggs have been moving at all times to consumers at prices below the minimum specified in the act and low in relation to the cost of other food and nonfood items.
Furthermore, one needs but to look around to see that the Price Administrator has subjected the entire meat slaughtering industry to a licensing system which gives him the power of life and death over every person engaged in that industry, even though nowhere in the Defense Production Act was he given any such power. Although such a power was exercised under OPA, the statute specifically gave the Administrator at that time the authority to impose a licensing system. The best evidence of the doubtful authority for the existence of any such power at the present time is that the Price Administrator is now requesting Congress in the proposed amendment to grant him the authority to require licenses. The power of life and death over one's business through a licensing system is one of the greatest powers that can be given. Its ability to destroy is as great or greater than the power to tax. Such a power in the hands of one man, without any checks or balances, tends to chill and freeze any desire to increase or expand production or distribution facilities.
Other examples could be given, but the foregoing are illustrative of the consequences which might flow from the grant of price control authority.