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and on the basis of that cost, a market has been established in New York. Now we go down on our paying price because of the temporary oversupply. We still have some of the poultry that cost us more money. The identity, some is in cold storage, some is in our warehouse, some is still alive, some is in New York. The identity of poultry is impossible to carry forward through those transactions.

Senator FREAR. That is true, but does the industry load up on his price and not low prices?

It would seem to me they would load up when prices are low rather than high.

Mr. FRANZ. The production in your State now is more or less on a fresh basis, and those chickens are sold each week. There isn't much chance to load up on fresh poultry, because it is a perishable product. When it goes very low, you do load poultry into storage, because there is a great surplus and no immediate outlet for it.

That is the more or less one crop a year that they lose money on, and there isn't a convenient outlet for it in the fresh condition, and that may go into cold storage.

Senator FREAR. If we would draw a median line through the price for 30 days in Delaware, let's say, has it not been historically true there are more pounds purchased during those 30 days below the mean than above the mean?

Mr. Franz. Yes; and there is a very good supply and demand marketing reason for that, I believe.

In our buying, in the Arkansas section, and occasionally in the Del-Mar-Va section, we find that when a market starts to drop, the grower will rush to dispose of his product before it drops some more, and that when the market tends to turn around and go up, he naturally is going to hold it until it goes a little higher, and it is a natural movement.

They try to get out as it goes down, and generally when it is at the bottom, we don't have any. In our business, we have used once or twice a toy of our childhood days which some of you may remember, called a Sandy-Andy which had a small carrier of sand which came down an incline and was automatically tripped at the bottom, and then returned to the top. As a poultryman of 20 years' experience, my inventory has quite often demonstrated, we fill up at the top and get rid of it at the bottom, and the actual fact that that is done, that it is moved out, tends to clear the surplus. It increases demand because of the low price, and starts the price on back up again.

Senator FREAR. To get back to my original question, if any amount of poultry purchased from the producer is below the mean, as I said, I think historically we can take any 30-day period with the exception of where they were consistently going down or going up, and if that be true, why can't you reduce prices the same as you increase them, as in direct proportion to the prices paid to the producer?

Mr. FRANZ. To show you how complicated that becomes, you are thinking, undoubtedly of Del-Mar-Va to New York, which’is a natural movement. The New York market, however, reflects shipments from the Midwest, from the Northwest, from Georgia, from Arkansas, and while it may be true that Delaware, because of temporary oversupply, or possibly we might even say a dearth of Army bids for export from the east coat, Delaware is in a temporary oversupply: Arkansas may at the same time be in a short position, and the general

average position of your commercial areas may not be truly indicated by any one area.

Senator FREAR. What determines an oversupply in the Del-Mar-Va area?

Mr. FRANZ. I think to a great extent the marketing custom in New York for that particular period. One of your worst oversupply, periods in the past few years has come in November and December, when actually the demand for frying chickens was at a minimum, and turkeys and the heavier food items were in heavy demand, and broiler prices dipped very sharply.

Senator FREAR. Do you find that the supply of turkeys has a great bearing on the price of broiler prices on the New York market ?

Mr. FRANZ. I think during the turkey season it has a great effect on broiler prices.

Senator FREAR. Have we not leveled the turkey season as years have gone by more than in the past? In other words, as you stated, the turkey season to be Thanksgiving and Christmas. Haven't we not gotten almost to the point where the turkey season is almost 12 months of the year? The consumption is not limited to the months of November and December now.

Mr. FRANZ. Certainly they are not limited to those months. However, the trend is in the direction you state, but they can't take the place of or compete seriously with frying chicken at the present time.

Senator FREAR. From your observation of the past record of production in the Del-Mar-Va area for the months of November and December, have they not produced as high a supply as they have in the other 10 months; doesn't that chart come down, say, going back 6 or 8 years?

Have I made myself clear?

Mr. FRANZ. That they do not produce so heavily during those fall months?

Senator FREAR. Yes.

Mr. FRANZ. They are certainly learning not to produce as heavily during those fall months.

Senator FREAR. Do the prices reflect that; can we go back over the past 5 years and take the prices, and do they reflect that change of operation on the producers' end in the New York market?

Mr. FRANZ. Because of the expansion of the broiler producing industry as a whole, even though Del-Mar-Va may cut off considerably in its production during the fall and winter months, the general expansion of broiler production all over the country is such that there is still rather an oversupply at that period of the year when heavier meats are desired—fowl, turkey, and so forth.

Senator FREAR. Can I take it from that the Del-Mar-Va Peninsula has become advanced ?

Mr. FRANZ. It is the oldest area. Arkansas is a very famous area, but small in comparison.

I would like to offer only one or two more points for the record, and particularly we hope to indicate that price control would come at an unneeded and unnecessary time, by showing that the processing plants, as demonstrated by the charts shown by Dr. Carpenter, have shown the great increase in man-hour efficiency, and in the productive capacity of the processing plants.

Within the last 2 or 3 years, gentlemen, the Production and Marketing Administration has been going all out on a sanitary program in poultry plants, and it has been quite favored by industry. We have worked on this with them. We have a 57-page regulation, which is going into effect July 1, and which, gentlemen, in many cases, has required the expenditure of from $10,000 to $75,000 per plant in modernization and efficiency.

Gentlemen, during the OPA days, my processing plants were very, very idle during a good portion of the year. It would be more than a shame to have these new plants for which priorities in some cases have been gotten, NPA authority has been gotten-we have come in with a PMA under a program of sanitation because of the tremendous growth of the size of industry, and the fact that it is a food supply, we are really coming in the fore with a sanitary program, sponsored by the United States Department of Agriculture, and it would be a shame to divert that product out of those plants into a black market because poultry can be processed on a backyard fence, or in a basement boiler.

Section 410 is the way I have it on the Defense Production Act; section 410 is the one that was referred to, I believe, which Senator Williams had some comment on, and I would like to make one or two observations with regard to that, not particularly against Senator Williams' amendment, but using the terminology

Senator BENTON. Don't you want to let Senator Frear finish his line of questioning ?

Senator FREAR. I do have more questions, but he may proceed with that.

Mr. FRANZ. Section 410—and I am using the verbage of the law in an effort to show how hard it is to regulate our industry-that section states briefly that each contract providing for the process of chickens and turkeys by any department or agency of the United States from any contractor entered into at any time when ceiling prices are in effect under this act, and so on, must contain the following clause:

The contractor represents that the contract price is based on an estimated price paid to the producer of live chickens or live turkeys to be processed hereunder. In the event and to the extent that the actual price paid to the producers of live chickens or live turkeys purchased for the performance of this contract is less than such estimated price, the contract price has been reduced by the same number of cents or fractions thereof per pound.

In your questioning of Dr. Carpenter, I think it was stated that that was intended to protect the producer of the birds. Gentlemen, the refund does not go to the producer.

Senator BRICKER. The refund goes to the Government?
Mr. Franz. To the Army; yes, sir.

Senator BRICKER. Was not that provision though in the regulations of OPA, and the Government never availed itself of it?

Mr. FRANZ. I know of no place where they occurred in OPA that if you bought at a lower price--you may have reference to a renegotiation act, or a fixed-price contract or some special fact, but my recollection of MPR 269 and all of the amendments did not cover that.

Senator BENTOx. We are going to get Senator Williams' judgment on this testimony, and are referring this testimony to him for his observation.

Mr. FRANZ. On the considered opinion of Senator Williams and the rest of you folks, the moment you lay a hand on the normal mar

keting, you are very likely to come up with something that will not work in any other area. Now, as an exact example, a contract was let just a few days ago by the Armed Forces calling for hundreds of thousands of pounds of canned turkey. Now, that turkey is to be canned by a canner of poultry. He cannot estimate what was paid to the individual producers of those turkeys. They were dressed out on the west coast to a certain extent, some in the Midwest. It is literally impossible for the contractor in such a case to comply. Some may have been bought during January or February, and we find no way that such things can be complied with on the over-all. While they may fit one particular case, when we speak of the national subject, it will react in exactly the opposite way at some other point.

Senator BRICKER. May I break in here?

I was just discussing this with Mr. Hale, and I remembered that Senator Williams had said something at the time this amendment was up to the floor. This amendment was incorporated in Food Order 19 during the last war. It was not enforced, but it was incorporated in all the regulations and orders, but the farmers were not protected. This would give the farmers the protection that the Administration during the last war said it was intended that they should have.

Now, we will check with Senator Williams on the matter.

The CHAIRMAN. I might say this, that Senator Williams and Senator Frear have talked about the situation in Delaware on several occasions in recent months. Senator Williams was suggesting, and Senator Frear, putting an amendment in the present law, and I suggested that the law was going to expire so soon that I thought if you had an amendment to one of these titles that we have a right to strike out it would not get anywhere. That might have been my fault for suggesting that, but through the long process of hearings before the House and before the Senate, I thought it should have been brought up when we brought this up.

Senator BENTON. These witnesses, Chairman Maybank, are objecting to the Williams section.

Senator BRICKER. It was put in on the floor. Senator BENTON. They want it out. The CHAIRMAN. I understand that, but I want to make it clear. Senator FREAR. Mr. Franz, is it impossible to determine the price of turkeys and chickens when estimating or giving a bid to the Government because some may come from California, some may come from Arkansas, Kansas, or Delaware?

Mr. FRANZ. Yes, sir.

Senator FREAR. If the regulation so stipulated that the cost was put in, you could not abide by the regulation, may I infer that?

Mr. Franz. No, sir; to take it just as technically as you have, the exact amendment that is in there now, the processor must estimate his price, and if he pays below that price, he must refund to the Government. I see nothing to prevent your estimating that you were going to pay 6 cents a pound. Just again trying to indicate how hard it is to accomplish a purpose of regulation.

Senator FREAR. Knowing the people who bid to the Government when poultry was 34 cents a pound, I cannot see how they would ever estimate the price at 6 cents a pound.

Mr. Franz. He certainly would not pay less than that, and if he did not pay less, he would not have any refund to make. I am only try: ing to show how hard it is to make a regulation. You say that I must bid to the Army.

Senator FREAR. Do you mean to tell me that if you put a bid in to the Army on an estimated price of 6 cents a pound, as you just stated, and the Government certainly knows the market quotations and they were between 30 and 34 cents, would they accept a bid as ridiculous as that?

Mr. FRANZ. That is an estimated price of live poultry, and you are selling them a finished product.

Senator FREAR. You could never substantiate an estimated price like that, in my opinion.

Mr. FRANZ. I was taking an example only that you would have to estimate price which you were sure you were not going to pay less than that price. I am only doing it to try to show how hard it is to cover actualities in a paragraph covering such a vast multitude of product.

Senator FREAR. I think you gentlemen are adept enough in your business to give a better estimated price than 6 cents as compared with 20 cents or 30 cents.

Mr. FRANZ. I am sorry I picked such a figure as 6 cents. I only wanted to make the point that if you used a low enough figure, you would not come under the regulation.

Senator FREAR. Then maybe the amendment does not need correction?

Mr. FRANZ. And OPA amended the poultry regulation some 28 or 29 times trying to plug up loopholes and patch them up, and make them workable, and with the best help of their advisory committees they still could not cover all of the eventualities.

For instance, we buy quite a few chickens from Delaware to bring into St. Louis, Mo. We also bring them from Georgia, Arkansas, and other areas, and when prices are propitious, we bring them from Delaware to St. Louis.

According to the last OPA regulation, and they have to start somewhere to fix prices, they used New York as a basis, and other markets with less than freight differential, absolutely eliminating any chance of our bringing Delawer chickens to St. Louis, because of the backward movement.

Senator BENTON. May I interrupt, Senator?
Senator FREAR. Yes.

Senator BENTON. I have to be excused for a radio broadcast. The chairman is here and it is a good time for me to leave. I congratulate you, Mr. Franz, on your testimony.

Before Senator Capehart left, Chairman Maybank, he, and I discussed putting in the record the answers which have been secured by our staff to questions which he raised in previous sessions, so if there is no objection, on behalf of Senator Maybank I will turn this material over for incorporation in the record.

The CHAIRMAN. There is no objection.
(The material referred to appears on p. 615.)

The CHAIRMAN. I am rather late coming in here. I have been attending a meeting of the Appropriations Committee. I understand the problems you are up against, but the problem we are up against is

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