Senator NORRIS. Since you have been interrupted, I want to ask you a question or two. Do you think the elimination of direct buying would have a tendency to put out of business these smaller packing plants? Mr. CARNES. You mean through Senator NORRIS (interposing). Like Hormel & Co.? Mr. CARNES. This bill would not, as I interpret it. Senator NORRIS. Those who are for this bill are not attempting in any way to do that, are they? Mr. CARNES. No, sir; they are not. I had one other illustration I wanted to give you. This is no. 4. Albert Bieneman is a farmer and producer of livestock residing in Brown County, Minn. On March 23, 1933, he had 60 hogs ready for market. He shipped 30 of these hogs to the South St. Paul market, and he himself transported the other 30 to the Cudahy packing plant at Newport, Minn. He did not inform anyone at either South St. Paul or the Cudahy plant of the split in the consignment. The 30 animals shipped to South St. Paul were substantially the same in weight and grade as those shipped to the Cudahy plant. The animals were sold on the same day. The prices paid at South St. Paul and the Cudahy plant were substantially the same for the medium-weight butcher hogs. The price at South St. Paul on the morning of this day for light lights (hogs weighing between 120 and 140 pounds) was $3.75 per hundredweight. Cudahy & Co. offered Bieneman for his light lights $2.85 per hundredweight. He refused to sell at this price, and demanded that this weight of hogs be returned to him. Cudahy & Co. did so, and late in the day he took these animals to the South St. Paul market, where they were sold for $3.50 per hundredweight. The reason for the difference in the price at South St. Paul on this weight of animals was that when Bieneman's animals reached the market from the Cudahy plant it was so late in the day that all outside orders had been filled. Now it shows that the interior packers will place a very attractive price on the desirable hogs or the hogs that they want. They were paying right up to the public market. In South St. Paul that day we sold the medium weight butchers at $3.85, and the Cudahy, at $3.80, but on the lower grades we bought them at $3.45 and they bid $2.85. He brought them across the river and they brought him 60 cents a hundred more. I have another statement here. George A. Hormel & Co. of Austin, Minn., purchases practically all of its hogs direct. Its purchases are made in southern Minnesota and northern Iowa. It issues each day what it calls a daily market report, but which in fact is a card upon which are listed the prices which the company will pay for hogs on the day the card is dated. Each card specifically states that the prices quoted are "for choice hogs. Hogs not graded choice will be priced according to quality.' ." The prices f.o.b. Austin. A number of these daily market or price reports issued by the Hormel Co. have come into my hands, and in order to give you an idea of the difference in the prices paid by the Hormel Co. and the prices paid on the same day at the public market at South St. Paul and Chicago, I have tabulated the Hormel market reports and the South St. Paul and Chicago prices for 17 days in the years 1933 and 1934. I have simply selected at random from market reports covering many more than 17 days, the days which are shown on the comparative statement hereto attached, marked "Exhibit 4." I want to show you that on one day here, August 30, on choice light hogs, Hormel & Co. were paying $3 a hundred and at South St. Paul we were paying from $3.25 to $3.85. In Chicago, they were paying $3.50 to $4.25. The freight on dressed meat and live hogs from Chicago to Austin and South St. Paul is practically the same. I could list other days, but I won't take the time to read them to you at this time. Senator BANKHEAD. Let me ask you a question. I notice in section 312 of the bill, practices that are denounced as unlawful-subdivision (h), on page 8-it provides that those unlawful practices: shall not apply to cooperative associations. What is the reason for exempting anybody from an evil practice? Mr. CARNES. Let me see how that is worded there. I think probably our legal department, which drew this bill, could probably answer that question much better than I can. These lawyers have worked on this bill and they could answer it better than I could. Senator THOMAS. You will put the complete statement in the record? Mr. CARNES. Yes, sir. Governor KRASCHEL. May I have one statement put in the record? While I am Lieutenant Governor, I am here at the request and at the expense of the Farmers' Union of Iowa, the farmers' organization. STATEMENT OF HON. ALFRED F. BEITER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. BEITER. Mr. Chairman and members of the committee, I have a petition in my hand signed by practically all of the elected officials of the city of Buffalo, together with the numbers of the stockyard operators, and a number of business men, who heartily recommend the passage of this bill. In addition to that, I am informed this morning that the Buffalo Chamber of Commerce are forwarding a petition signed by approximately 5,000 business men, and they themselves endorse the passage of this bill. Congressman Mead, of New York, who is this morning holding hearings on the Post Office Committee, and Congressman Andrews, of New York, join with me in heartily recommending the passage of this bill, and ask that you give it favorable consideration. I will file these petitions. STATEMENT OF C. A. EWING, PRESIDENT NATIONAL LIVESTOCK MARKETING ASSOCIATION, DECATUR, ILL. Mr. EWING. The National Livestock Marketing Association is a cooperative association with 24 members, and markets from Baltimore to San Francisco and from St. Paul down to Fort Worth. Those agencies are producer owned and controlled, and approximately 300,-000 livestock producers market through these member agencies of the National. I am not going to try and go into the details that other representatives of our organization will present to you. We have here Mr. R. Q. Smith, manager of the Cincinnati house, who has prepared a statement in detail. We have Mr. Conway, the head of our research department who will be able to give you some enlightening figures on this situation. We have in our organization three types of members. We have the terminal member agencies, the terminal marketing agencies--and they do the ordinary business as conducted on the regular terminal markets. Then we have direct selling agencies, and they operate on and off the terminal markets which deliver to the packer the quality and grade of animals wanted when and where wanted. The National Order Buying Co. and the Western Marketing Association are of this type. In the Western Cattle Marketing Association the practice obtains among many of their members of selling right at their ranches direct to the buyer of their stock. It is not the idea that we are opposed or espousing any changes in these operations other than that at the public markets there should be a proper supervision that will protect the interests of the seller better than they are now. In addition to that we have state marketing associations, where stock is collected at certain points and delivered either direct or to the terminal markets. We believe, gentlemen, that it will be of interest to you to know that most of the member agencies of the National were organized just at the time of the passage of the Capper-Volstead Act, the intent of which was to enable farmers to market their products more efficiently and more effectively. That has been the tenor of thought that has run through all the agricultural legislation that has been passed since that time-the Agricultural Marketing Act, the Agricultural Adjustment Act, and other similar measures. It has been the concern, the purpose and the intent to see that a better safeguard was thrown around the marketing of the farm products. About the time the Capper-Volstead law was passed, direct marketing was an inconsequential factor in the livestock marketing program. Possibly 5 percent of the stock was going direct at that time, but with the development of roads and trucks, the picture began to change very rapidly, and what its effect has been, I think will be disclosed by the fact that of all agricultural products, there has been no greater spread develop between the price the producer received and the price the consumer paid than in livestock, so that the livestock commodity today is getting a less percentage of parity than almost any other commodity. The average agricultural index is from 10 to 15 percent higher. The livestock dollar is hardly half, the hog dollar hardly more than a third of its pre-war parity, which is ruinously low. We can recognize that other factors have come into this picture, but it is the belief of most of our members-and that is from the close experience over the country in the field of livestock marketing—that this growth of direct selling, conducted as it has been in the past, is very largely responsible for breaking down market price structures. The same reasons, gentlemen, that impelled this body at a previous time to recognize the importance of throwing safeguards around your terminal markets, apply with equal force and by the same process of logic to the operations that are conducted without such supervision today. What is the significance of that? We have seen this direct selling grow from approximately 5 percent up to as high as, it was told you here this morning, 70 percent; from a thousand to 1,400 percent increase of this method of operation and selling livestock in the period of a decade and a half. In spite of the fact that with all of the effort that we can bring cooperatively to sustain and maintain a fair price for the product on these terminal markets, our efforts so far have been in vain in stemming the tide of the breaking down of market price structures through this uncontrolled, unregulated operation of direct selling. The operations on the Chicago market-but before I touch that, let me say what the significance of that is in dollars and cents taken as a whole. Your average pig or hog crop runs from some 42 to 65 million hogs a year. If we were getting today the same share of the dollar the consumer is paying today for the products of these livestock, we would be getting some $7 or $8 or $9 more per hog, a little matter of some 3 or 4 hundred million dollars on hogs alone. I have heard it stated down here in some of these hearings that if you impose these regulations of supervised weighing and grading, it would be an expensive process for the producer, that it might cost from 5 to 10 or 15 millions of dollars to give the kind of safeguarding supervision that the situation demands. I want to tell you that it couldn't be easy to find a better investment for the producer, if it will bring back anything like his parity of the consumer's dollar that he formerly got. Mr. FRAZIER. Do you mind if I ask you a question there? Mr. EWING. No. Senator FRAZIER. Do you think this bill would help materially? Mr. EWING. I think it will help materially, and I will tell you why. I live at Decatur, Ill. That is my home. This direct selling was going on there, and we found the prices very much below the prevailing classes of stock at that time. With the idea of helping the situation, we put a branch of the Illinois Livestock Marketing Association in the field and in operation at that point. The result of observing the effect of that thing was this: Those prices, because of that cooperative effort, insisted on getting to the best market for the producer, raised materially the price that prevailed there, while if you went out of the zone of influence, Senator, of the producer organization, you found that those prices were even lower than they had been before. Now, then, it is not my intention to take much of your time. I do wish to tell you that we represent a very great percentage of these producers, that we see this thing increasing not only in hogs but in sheep and in cattle and in calves, and we know that when it has reached two fifths and more of the volume of stock, when we see a great basic market like Chicago drop down from approximately 10,000,000 hogs a year to about 4,000,000 a year, you can understand there is a reason why the men who want to buy hogs go somewhere else. If you take a price-determining market like Chicago, the effect of which is to take away the competition, and they buy hogs in the country, depressing the central market price, which gradually depresses all of them. Thank you. Senator FRAZIER. You stated if the farmer got his comparative portion of the price the consumer paid for the hogs, that he would get about $9 a hog more than he is getting at the present time? Mr. EWING. That is a variable factor; it will vary somewhere from $7 to $9. Our research representative of our research department can give you that more exactly than I can. Senator FRAZIER. I think you are correct, absolutely, but this bill of course won't hope to give the farmer this $7 to $9 more for his hogs. Mr. EWING. This bill could, and in my opinion should, throw such security around the operations that are now unprotected, that it would have the same effect of raising the market price structure and maintaining it as it did in the little operation that I cited at Decatur, Ill., my home. While it may not go back to your parity price structure, which I wish it could do, it certainly can have a stimulating and sustaining effect on maintaining market price levels. May I bring out this further thought? Mr. Ashby was referred to here this morning, and in looking over and examining charts that he had prepared, showing the wide and unreasonable and unwarranted disparity of prices within a region where there was no proper supervision or grading or the protection that we are talking about in this bill, it very plainly indicated that it was desirable. Chicago is rightly considered a basic hog market. All markets are guided by the level of prices in Chicago, and in turn practically all direct sales are made with the terminal market price as a base. Big packers at Chicago secure more and more of their hogs direct. The directs which they receive permit them to stay out of the competition, and the directs to killers away from the Chicago market causes a decided decrease in urgent demand for hogs at Chicago, thus resulting in more control over prices by the Chicago killers, and thus influencing downward all price levels. By receiving directs, packers can stay out of the buying competition indefinitely. For instance, during May of 1933, two of the big packers bought around 8,500 hogs each at the Chicago market, but one of them received 138,000 hogs direct and the other a like number. Look at that disparity, buying away from the home market where they are located. There is certainly a reason, gentlemen. Unfortunately, there is no way of registering the demand as represented by the direct purchases and direct prices never exert an uplifting influence on terminal prices. Direct prices are based on terminal prices. Direct prices do, however, exert a bearish influence on terminal prices, because all packers attempt to meet the low cost figures of the relatively cheap loads bought at the country stations. Another interesting thing is that one of these big packers bought 119,000 hogs on the Chicago market during the period January 1 to August 5, 1933, and while they purchased many times that number direct for Chicago kill, and more than that number at some of their smaller markets, it just simply shows how rapidly this method is growing and how greatly it is undermining the market price structures. Thank you, gentlemen. The CHAIRMAN. The next witness is Mr. D. M. Hildebrand. |