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cerned with the cost of the product. As a poultryman, I carry a cold storage inventory, as most operators do, and it is impossible to keep a continuous daily running cost. We have the ingoing cost, plus added storage, and it is generally stored during a time of surplus. Portions of it may be sold below cost. Other portions may be sold above, and it is, up to now, a practically free economy.

Senator FREAR. But when you take that poultry out of storage, you don't know how much it has cost you?

Mr. FRANZ. We can't tell accurately.

Senator FREAR. Tell me what difference there would be, then, in a coal dealer who has 500 tons of coal in his locker, or in his bins, and that coal cost him so much. He added 100 tons of coal that cost him $1 a ton higher than that. His average on the 600 tons, then, would be the average of that price, and he took out 500 tons at that price. Is it not possible that he has a running daily cost of every ton of coal in that bin?

Mr. Franz. I would think that he certainly could, and I would think if we could classify poultry in the same manner as we can classify coal, such could be done. But we have so many myriads of grades, sizes which are in demand, other sizes which are not in demand, and production from different months of the year, that the classification between coal and poultry is, we think, one of the points why poultry can never successfully be controlled.

In your Delaware broilers, under regulation, let us assume a ceiling existed of X-cents per pound. I won't make the mistake of using 6 cents again. You and I are not permitted to pay more than X cents per pound, and we look at this load of poultry and I will say it contained about 10 percent barebacks, and the ceiling is 4 cents per pound less. That is what I can pay you, sir, under the ceiling regulation.

You looked at the load of poultry, and you need it pretty badly. You don't see the barebacks. It is only an example of the myriad of grades and differences that make it impossible to be controlled with regard to poultry unless you want to be controlled, and you are going to go to the last letter of the regulation, but there is nothing to say that the producer will permit you to go to the last letter of the regulation if another buyer doesn't do so.

Senator FREAR. Just one further question:

You are in the St. Louis market. Have you ever heard of a poultry racket in the New York market?

Mr. FRANZ. Yes; I think it has been newspaper copy many years ago.

Senator FREAR. You think it has not been in existence recently, within the last 26 or 36 months?

Mr. FRANZ. I honestly would be unqualified to say. We do ship frozen poultry

Senator FREAR. It is perhaps an unfair question. I didn't know whether your knowledge of the New York markets, since you bought and sold there at times during the year

Mr. FRANZ. It is practically done over the long-distance telephone. I am too far away to see the actual working of the New York market.

Senator FREAR. I appreciate your testimony very much, Mr. Franz.

Mr. FRANZ. That covers our testimony, unless there are further questions.

I believe we have covered the fact that our organization does represent producers, processors, distributors, in all sections of the country, whose problems are quite different, but who unitedly feel that, with regard to our product, we do need, require, nor can we live with price controls, and their attendant problems.

It has been suggested, as I mentioned, that the poultry committee of the American Farm Bureau Federation is behind the problem, and our statement which we have presented, in addition to our own membership.

(Mr. Franz' prepared statement follows:)

STATEMENT OF CHESTER FRANZ, I'RESIDENT OF ASSOCIATED POULTRY AND EGG

INDUSTRIES

My name is Chester B. Franz, president of the Associated Poultry and Egg Industries, a long-established organization speaking as a unified voice of the following member organizations representing all phases of the poultry industry on a Nation-wide basis :

National Poultry Producers Federation
International Baby Chick Association
National Turkey Federation
Institute of American Poultry Industries
National Egg Products Association
National Poultry, Butter and Egg Association
Chicago Mercantile Exchange
Northeastern Poultry Producers' Council
Southeastern Poultry and Egg Association
North Central States Institute,

Pacific States Dairy and Poultry Association We wish to make clear at the outset that we of the poultry industry are keenly aware of the grave world situation and the dangers now confronting our economy and our Nation.

Realizing the dangers of inflation and wishing to avoid any action that might further aggravate inflationary trends and at the same time keeping in mind the best interests of producers, consumers and the possibility that the Nation may have great need for expanded production of all quality poultry products, we would like to point out to the committee that ceiling prices on poultry products would prevent the expansion of production in the industry that can most speedily supply the food products which may be required to meet the emergency.

We are therefore opposed to any extension of title IV of the Defense Production Act of 1950 and to the enactment of the Defense Production Amendments Act of 1951 as set forth in S. 1397 as they concern the poultry industry.

I. We are convinced that price control treats only the symptoms of inflation, not the basic cause which is, in fact, the relationship between the supply of money and the supply of goods. Prices set arbitrarily actually aggravate inflation by artificially stimulating demand, curtailing supply and creating maldistribution.

II. The inability of price controls to combat inflation is nowhere more clearly demonstrated than in the poultry industry. Legislative price controls on poultry products have been proved to be unworkable and unenforceable in every attempt that has been made in this country, or elsewhere, because of the widespread almost universaly nature of the producing industry, the large proportion of direct producer-consumer sales, the perishability of the product, grade variations and the small size of its marketing units.

III. Price controls poultry products are unwarranted and detrimental to consumers and the national economy. The great flexibility of the production potential of our industry is the surest guarantee of adequate supplies and reasonable prices. The industry has demonstrated that our production can shift and change quickly and dramatically. For example, during this past 8 weeks, production of commercially raised chickens has averaged 30 percent more than last year in response to uncontrolled markets for the producers. To shackle it with controls would destroy this flexibility and create chaos in the industry that supplies the Nation with one of its chief sources of protective food.

IV. From experience to date under the provisions of the Defense Production Act and our vivid distasteful recollections of conditions that existed under NRA

and OPA, coupled with our intimate knowledge of our own industry, we are forced to conclude that controls will:

1. Sharply curtail quality production.

2. Lead to capricious and inequitable price results because of unusual market. ing factors typical of the industry and varied geographical, seasonal, and perishable characteristics of the products.

3. Creat havoc among legitimate operators, as proved by experience with past regulations and force the industry into restricted operations, thus encouraging the vast expansion of black marketing.

4. Place a tremendous drain on the Nation's most scarce commodity, manpower, in the attempt to enforce unworkable regulations covering the myriads of grades, types, classes, and units of products and operations in the most widespread agricultural industry in the Nation.

5. Reduce the available supply and increase the difficulty of obtaining poultry products for the armed services, as proved by the necessity for embargo and freeze actions during the last emergency.

6. Weaken the incentive of the poultry producer to expand his production, though he has demonstrated beyond challenge that he produces meat in less time, with less feed, and with less labor than does any other meat producer.

7. Create price disadvantages to both producer and consumer through increased processing and distribution costs because of diverted volume away from legitimate channels, to say nothing of compliance expense.

8. Result in the unnecessary waste of millions of pounds of byproductsfeathers, fats, proteins, medicinals, fertilizers, etc.—through diversion of poultry products from legitimate channels where they are now salvaged and utilized to benefit the national economy.

9. Create maldistribution of supplies to population centers remote from production.

We thank the committee for this opportunity to present the views of Associated Poultry and Egg Industries.

The CHAIRMAN. Thank you for your testimony. I am sorry I wasn't here for more of it. I know you will excuse me for that.

The committee will stand in recess until 10:30 in the morning.

(Whereupon, at 4:35 p. m., the committee recessed until 10:30 a. m., of the following day.)

DEFENSE PRODUCTION ACT AMENDMENTS OF 1951

FRIDAY, MAY 25, 1951

UNITED STATES SENATE,
COMMITTEE ON BANKING AND CURRENCY,

Washington, D.O. The committee met, pursuant to recess, at 10:30 a. m., in room 301, Senate Office Building, Senator Burnet R. Maybank (chairman) presiding:

Present: Senators Maybank, Robertson, Frear, Benton, Moody, Capehart, Ives, and Schoeppel.

Î'he CHAIRMAN. The committee will please come to order.
Mr. Kline.

STATEMENT OF ALLAN B. KLINE, PRESIDENT, AMERICAN FARM

BUREAU FEDERATION

The CHAIRMAN. Mr. Kline, what do you wish to do?
Mr. KLINE. I should like to read this statement, Mr. Chairman.

Senator ROBERTSON. You cannot read it under 30 minutes. It will take you a little better than 2 minutes to a page and we have a lot of witnesses to hear. I know you are thoroughly familiar with your subject, and there are only four of us here as you can see. The full statement will be in the record, and if you could summarize it for us it would certainly save us a lot of time.

Mr. Kline. I shall be happy to do my best.
The CHAIRMAN. Suppose you highlight it as you wish.

Senator CAPEHART. I just read the statement hurriedly, and it is one of the best I have read, and we ought to listen to it.

The CHAIRMAN. We want to listen to it but, since we have had it since last night, I just wondered if he wanted to highlight it. But you can proceed in your own way, Mr. Kline.

Mr. KLINE. Thank you, Mr. Chairman.

First, let me state my very keen appreciation of the opportunity to appear this morning.

The CHAIRMAN. I have only glanced at the statement, but I heard you on the radio last night, and you did very, very well.

Senator Ives. Mr. Chairman, before Mr. Kline starts, I would rather let him have all the time he needs and cut the time of some of these other people that are not so vital.

The CHAIRMAN. Mr. Kline will certainly have all the time he needs. Mr. KLINE. Thank you, sir.

First, I want to say that we in the United States have a very great stake in the decisions made and recommendations proposed by this

committee. There is no more important area of discussion or decision than that which is before us in the war-production measure.

Also I am impressed by the extent to which the act of 1950 and the proposed amendments extend and strengthen centralization of authority.

I believe no one who studies carefully what is involved can fail to be impressed with the extent to which we take a chance on the continuation of a free government by a free people, with the extension of this sort of authority. And I know that every member of the committee is fully aware of what is involved, and that all of us will do our level best to achieve answers which make sense in the light of circumstances and which will give us the greatest possible chance of avoiding a third world war on the one hand, and keeping the American system of opportunity on the other.

The extensions of authority which impress me are those that are concerned with the ability to buy commodities, materials; to process, to store, to transport, to use subsidies to cover losses, to use subsidies to support ceiling prices which would otherwise be illegal; to not only buy commodities and things but to buy real estate, to buy facilities, to do anything with them, including their operation, if deemed wise; to use Federal agencies to set up Government corporations to enable these corporations to borrow from the Treasury on their own debentures or evidences of obligation; to license individuals and persons and with all these broad powers on a discretionary basis.

I think the point does not require argument, that these are serious considerations, and that they deserve the best that we can put into them.

In accordance with the wishes of the committee I shall attempt to save time by going through this statement, hitting the high points and stating the significance of the paragraphs without reading them.

The CHAIRMAN. Without objection, the entire statement will be made a part of the record. Please understand, Mr. Kline, it is not the intent of the committee to rush you in any way. I understood you flew up here from Mexico to be present here this morning.

Mr. KLINE. That is right.

The CHAIRMAN. I listened to you last night on the radio and I certainly enjoyed it.

Mr. KLINE. The first paragraph merely notes that we have approximately 1,450,000 farm families in good standing in 46 States and Puerto Rico.

The second one suggests that this is a time for clear thinking; that this is not a time to make decisions on the basis of prejudice or hysteria. We do not know the duration of the situation. The comment I made a moment ago that in a period like this where we are intending to spend 15 to 20 percent of gross national income, and where it is our objective to stay in a situation where we avoid a third world war and keep the American way—that in that situation one of our best defenses is without question this capacity we have to produce in the United States; the thing which I myself tied together and call the American way. This I think we must keep in mind: the fact that there are not definite terminal facilities placed on the proposition that we are joined with the major enemy and seek the earliest possible decision, and in that case, of course, would be spending 45 or

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