POTATO MARKETING ORDERS

TUESDAY, JUNE 10, 1969

U.S. SENATE,

SUBCOMMITTEE ON AGRICULTURAL PRODUCTION,

MARKETING, AND STABILIZATION OF PRICES

OF THE COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D.C. The subcommittee met, pursuant to notice, at 10 o'clock a.m., in room 324, Old Senate Office Building, Hon. Spessard L. Holland (chairman of the subcommittee) presiding.

Present Senators Holland, Talmadge, Jordan of North Carolina, and Curtis.

Senator HOLLAND. The subcommittee will please come to order. The subcommittee is holding hearings today on S. 2214. This bill would exempt all potatoes for processing from the Secretary of Agriculture's authority to issue marketing orders under the Agricultural Adjustment Act. Potatoes for canning or freezing are already exempt from that authority, so the effect of the bill would be to exempt potatoes for other kinds of processing, such as those used in producing potato chips, instant mashed potatoes, and other potato products which are

neither canned nor frozen.

A copy of the bill and a staff explanation of it will be inserted in the record at this point.

(The documents referred to follow :)

[S. 2214, 91st Cong., first sess.]

A BILL To amend section 608 (c) (2) of the Agricultural Marketing Agreement Act of 1937, as amended

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 608(c) (2) of the Agricultural Marketing Agreement Act of 1937, as amended, is amended as follows;

(1) In subparagraph (A) after the words "vegetables (not including vegetables, other than asparagus, for canning or freezing", insert the words “and not including potatoes for canning, freezing, or other processing"; and

(2) In subparagraph (B) after the words "fruits and vegetables for canning of freezing," insert the words "including potatoes for canning, freezing, or other processing,”.

SENATE COMMITTEE ON AGRICULTURE AND FORESTRY-STAFF EXPLANATION OF S. 2214, JUNE 7, 1969

Short Explanation: This bill exempts potatoes for processing from marketing orders. Potatoes for canning or freezing, like most fruits and vegetables for canning or freezing, are already exempt; and the bill would accord the same treatment to potatoes for other kinds of processing.

Departmental Views: Not yet received.

Suggested Amendments: (1) The section to be amended is section 8c (2) of the Agricultural Adjustment Act, as reenacted and amended by the Agricultural Marketing Agreement Act of 1937 and subsequent legislation. The title and lines 3 and 4 of the bill should be corrected accordingly.

(2) On lines 5 and 9 "subparagraph" should be stricken and "clause" should be inserted.

(3) The bill or the report should indicate what operations constitute processing.

Senator HOLLAND. I have quite a list of witnesses here, and I want to give notice that if we do not complete the list this morning we will have to let everybody else file the statement because I have other hearings this afternoon and continuously thereafter.

STATEMENT OF FLOYD F. HEDLUND, DIRECTOR, FRUIT AND VEGETABLE DIVISION, CONSUMER AND MARKETING SERVICE, U.S. DEPARTMENT OF AGRICULTURE

Senator HOLLAND. Our first witness is Mr. Hedlund who is from the Fruit and Vegetable Division, Consumer and Marketing Service, the U.S. Department of Agriculture.

Mr. HEDLUND. Mr. Chairman, and members of the committee, S. 2214 is a bill to add to the canning and freezing exemption in the Agricultural Marketing Agreement Act of 1937, as amended, potatoes for "other processing." This bill would exempt potatoes for dehydration, potato chips, starch, and flour from regulation by marketing orders under the act.

The purpose of this bill is to place potatoes for dehydration and processing into other potato products on an equal basis with potatoes for canning and freezing which are now exempt under this act. Inasmuch as potato products are in competition with each other in the market, this bill would result in uniform treatment of potatoes for processing regardless of the final use made of the product.

On the other hand, the bill would significantly reduce the effectiveness of marketing orders as a means of strengthening returns to producers, in view of the increasing quantities of potatoes going into processing uses. An alternative method of achieving equity among processors, while at the same time maintaining or strengthening the benefits of marketing orders to producers, would be to remove the existing exemptions for canning and freezing, thereby including all potatoes under the act.

The use of potatoes for food processing has been increasing sharply. Only about 14 percent of the 1956 crop potatoes used for food were processed. In 1967 about 42 percent were processed. Utilization for freezing was the most important in terms of volume in 1967, but large quantities were also used for dehydration and potato chips. Dehydrated potato processing increased sixfold during the 1956 to 1967 period, while the use of potatoes for chipping and the like more than doubled. Utilization data for the 1968 crop will not be available until September; however, trade reports indicate that the use of potatoes for processing, particularly freezing, continues to increase. Continued expansion of potato sales to food processing outlets is expected in coming years.

Federal potato marketing orders are currently in effect in many of the major potato producing areas in the United States. Five of these orders authorize the regulation of potatoes for dehydration and "other processing."

Some of the marketing order programs date back many years. In 1967, areas operating under Federal marketing orders produced approximately 156 million hundredweight of potatoes, which was more than one-half of the U.S. potato crops. It is estimated that of the 1967 potato crop, 64 million hundredweight of potatoes were used for dehydration, potato chips, shoestring potatoes, starch, and flour. Of this quantity, 32 million hundredweight were prodced in areas covered by marketing orders.

The Agricultural Marketing Agreement Act of 1937 authorizes marketing orders for specified agricultural commodities as a means of increasing returns to producers. These programs are administered locally by industry-nominated committees made up of producers and handlers of potatoes. Their activities are financed by industry-paid

assessments.

Attached are tabulations showing the U.S. production of potatoes in 1968 and utilization of the potato crop from 1956 through 1967. May I add, Mr. Chairman, that the Department report on this bill has been approved and will be here very shortly.

Thank you.

(The tables referred to above are as follows:)

POTATO PRODUCTION, BY STATES, IN 1968 AND PERCENTAGE OF U.S. TOTAL, PRODUCED IN EACH STATE

Senator HOLLAND. Well, I can see some reasons for exempting potatoes which are designed to go into starch. I think it is found in other products that deal with human consumption. The same thing would be true for potatoes for alcohol. I do not know if that is being used that way now. They used to be. I do not understand why there is any justification for exempting potatoes which are intended for human consumption such as potato chips and others mentioned by your statement, to wit, of course, do enter into the competition with potatoes used for other human consumption purposes.

What is your attitude on that?

Mr. HEDLUND. Well, Mr. Chairman, a number of food products use potatoes to manufacture potato products that are all in competition with each other. I think there is some measure of reason why they should all be on a uniform competitive basis.

Senator HOLLAND. You mean then on a competitive basis with other products or with the fresh potatoes?

Mr. HEDLUND. With other products. That is what the bill is designed to do. We have pointed out that this makes it difficult as far as regulating the fresh potato outlet as a means of increasing the returns to producers.

Senator HOLLAND. Well, the fresh potatoes to go to a plant and be turned into potato chips compete in the market where he purchases these and where dealers are selling fresh potatoes for human consumption. Does not it come under this?

Mr. HEDLUND. Well

Senator HOLLAND. What justification would there be for exempting them from control in the same way that these others would be covered? Mr. HEDLUND. Well, I believe that the background thinking here is that inasmuch as potatoes for canning and freezing are now exempt, other potato processors are desirous of being in that same position because they compete with each other. I think this is an effort to equalize

among processors.

Senator HOLLAND. Well, after all, the producers of potatoes are interested in the whole field; are they not?

Mr. HEDLUND. Yes, sir.

Senator HOLLAND. And if they get any advantage from the agreement and order it would flow from their consideration of the whole field of potatoes that are consumed by the public, would they not?

Mr. HEDLUND. Yes, sir; Mr. Chairman, and that is the reason we have suggested that a method of squalizing would be to cover all potatoes. This would result in covering all fresh potatoes as well as all processed potatoes. They would all be in the same category.

Senator HOLLAND. You mean that you feel that potatoes that would be used for production of starch or alcohol have also been covered? Mr. HEDLUND. Yes. I suppose that is the net result.

Under present conditions no potatoes are being used for alcohol, although substantial quantities are being used for potato starch.

Senator HOLLAND. There was a quantity once used for alcohol production; was there not?

Mr. HEDLUND. Yes, there was during World War II. A great many potatoes were used for alcohol during the war.

Senator HOLLAND. You state now that there is no such use?

Mr. HEDLUND. I do not know of any in the United States.

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