Mr. JONES of Missouri. Thank you for your statement.
Mr. BOWMAN. Thank you very much.

Mr. JONES of Missouri. We will next hear from a representative of the National Brewers Association, Mr. Hester, their Washington counsel. I think you have others accompanying you, Mr. Coors and Mr. Rowe. You are appearing together, I understand.

STATEMENT OF CLINTON M. HESTER, WASHINGTON COUNSEL, UNITED STATES BREWERS ASSOCIATION; ACCOMPANIED BY WILLIAM K. COORS, PRESIDENT, ADOLF COORS CO., GOLDEN, COLO.; JAMES F. ROWE, JOSEPH SCHLITZ BREWING CO.; AND JACK C. WELISCH, RICE BROKER, SAN FRANCISCO, CALIF.

Mr. HESTER. Mr. Chairman and members of the subcommittee, sitting with me at the table is Mr. John Welisch, also of San Francisco, one of the largest rice brokers in the country and an authority on the subject of rice. We should like to thank you for permitting the representatives of these three members of the United States Brewers Association to present their objections to title III of H.R. 7097.

My name is Clinton M. Hester. I have been Washington counsel for the United States Brewers Association for the past 25 years. My offices are in the Shoreham Building. This is the oldest trade association in continuous operation in the United States having been founded in 1862. Its members produce 85 percent of the malt beverages manufactured in the United States.

Three members of the United States Brewers Association are testifying in opposition to title III of H.R. 7097. While each witness is testifying for his own company, the views each expresses are the views of the United States Brewers Association.

The United States Brewers Association believes that its members should have a freedom of choice of the ingredients which they use in brewing. It is the consensus of both the users and suppliers of brewers' rice that title III will result in a prohibitive cost of the grades of rice that have been economically suitable for brewing purposes. Consequently, the United States Brewers Association is opposed to the enactment of title III and urges that it be eliminated from the bill.

Yesterday, you heard testimony from Mr. Richard Bender, vice president, Anheuser-Busch, Inc., St. Louis, Mo. Today, following me you will hear Mr. William Coors, president, Adolph Coors Co., Golden, Colo., and Mr. James Rowe, director of purchasing, Joseph Schlitz Brewing Co., Milwaukee, Wis.

We should like to thank you for permitting the representatives of these three members of the United States Brewers Association to present their objections to title III of H.R. 7097.

Mr. JONES of Missouri. Thank you. We will now hear from Mr. Coors.

STATEMENT OF WILLIAM K. COORS, PRESIDENT, ADOLPH COORS CO., GOLDEN, COLO.

Mr. COORS. Mr. Chairman and members of the subcommittee, I anı William K. Coors, president of the Adolph Coors Co., of Golden, Colo., a brewer. My company purchases annually 3 percent of the total

domestic rice consumption in the United States at a cost in 1965 of $3,500,000. I am here to present testimony to the effect that title III of the farm bill, as it is presently proposed, will effectively and finally eliminate my company as a user of rice and by so doing will injure its competitive position and jeopardize our very membership in the American free enterprise system.

My company occupies an unusual position in the brewing industry. We find ourselves located in the middle of a population desert. We have 500 miles of virtual desert to the north, east, south, and west of us. Our marketing situation is such that only 10 percent of our output is sold in what would be called the local market. Over 50 percent of our production must be sold a minimum of 1,000 rail-miles away, usually in the very backyard of our competition. To accomplish this, by necessity, we must produce a beer of unusually high quality.

For the committee's edification, I would now like to explain briefly the brewing process. The two essential ingredients in any beer today are barley and an additional source of neutral cereal starch. The process involves, first, the enzymatic digestion of barley and other cereal starch into sugar and, second, the enzymatic conversion of this sugar into alcohol. The first step involves the enzyme system which controls the natural germination process of barley; the final step involves the enzymatic system which controls the respiration process of the micro-organism, yeast. The usual ratio of barley to other cereal starch is about 70 to 30. As with any other product, no beer can be better than the raw material used in its manufacture. Thus, the major concern of my company as it has grown throughout the past 30 years since its rebirth in 1933, has been with the development of raw materials of unexcelled quality. For example, we have over the years developed our own exclusive variety of brewing barley. This is grown for us on the high irrigated plateaus of Colorado under contract to some 1,200 farmers. The annual crop is 3,600,000 bushels for which we pay from $1.70 to $2 per bushel depending upon quality, a $7 million annual crop. We germinate or malt this barley ourselves and find ourselves completely dependent upon it to maintain our quality.

Similarly, we have found ourselves to be committed qualitywise to the use of rice as our other source of cereal starch. The alternative, of course, is corn. In recognition of the premium quality of rice over corn, we pay an average price of $5.50 per hundredweight for rice in face of a present corn cost of about $3.50. This is a premium cost to us of $1,200,000 annually. We do this not because we hold any particular loyalty to the rice industry or prejudice to the corn industry, but because in our particular situation we have been unable to brew a beer with corn with sufficient quality to maintain our marketing position. The Adolph Coors Co. has grown steadily from a humble start. in 1873 when the annual capacity was a few thousand barrels of beer. Today, despite a limited marketing area including only 11 of the 48 States and selling to less than 15 percent of this country's population. we rank ninth in our industry with annual sales in 1965 predicted at 3.700,000 barrels. We hold that our remarkable success is entirely due to the consistent excellence of our product and that this excellence is dependent upon the continued use of rice as a cereal adjunct.

Now comes title III of the farm bill. According to information given us by our suppliers, we find that the annual premium we now

ay for the privilege of using rice would increase from $1,200,000 to n absolute minimum of $3,700,000 under title III. Also, our suppliers ell us that title III would have the effect of forcing a major portion of hose rice grades now available to us for brewing purposes to disapDear into food rice. Should we continue to use rice rather than corn the ctual premium cost to us would be closer to $5 million per year. I an state frankly and succinctly that we just cannot afford it. We do ot feel that we can be competitive qualitywise by using corn in our eer; we know we cannot be competitive pricewise with title III rice osts. The enactment of title III as part of the farm bill presents to s a predicament to which we see no solution.

I hold that we are a company of substance representing a total capital nvestment in Golden, Colo., of $80 million. We employ over 1,000 eople, produce annual sales of $130 million and we contribute annually 45 million to the tax coffers of Federal, State, and local government. hold that we should have a right to the free choice of materials at rices which enable us to maintain our business in a strong and fair ompetitive position. Title III of the farm bill as presently proposed mphatically denies us this right.

I would now like to take issue with the testimony of the U.S. Department of Agriculture to the effect that the domestic consumpion of rice in this country is so inelastic that the drastic increase in onsumer prices which will result from the enactment of title III vill not affect the domestic consumption. I present myself as a conumer of 63 million pounds of rice annually, 3 percent of total lomestic consumption, who will be unable to buy rice under title III. Jnder title III rice would cost me a minimum of $9.50 per hundredveight as against $5.50 today, an increase of 70 percent. Thus, the ice industry would be short $6 million that I would not be paying on 3 million pounds of rice that I cannot afford to buy. As I see it, this 3 million pounds of rice would have to go into export at some $3 per undredweight, for a net loss of revenue to the rice industry of $6.50 er hundredweight, or $4 million. These figures are, of course, aproximate.

Should all brewers using rice react as I will have to react, and I am ure that they will, the net loss to the rice industry will be 300 million ounds of rice at $6 or so per hundredweight, or $18 million, from he loss of the brewers' business alone. This money would have to be nade up by the Government or by a corresponding increase in the rice of the certificates for that portion of it that still can be marketed lomestically.

Finally, I would like to point out to the committee the irony of a roposed law (in this case title II of the farm bill) which would leny American-grown rice to American brewers, yet grant a subsidy or export to other countries which use rice as a brewing material. cite Japan as a glowing example. Rice exports to Japan for the 964 crop-year will be some 400 million pounds. I present that the ise of rice by Japanese brewers of sake and beer exceeds this amount. In the view of this testimony it is my earnest request of the comnittee that title III be eliminated from the farm bill, H.R. 7097, and xisting legislation pertaining to the rice industry be continued.

Mr. JONES of Missouri. Thank you, Mr. Coors. Let us now hear rom Mr. Rowe. And then we will question you on your statements, gentlemen.

STATEMENT OF JAMES ROWE, DIRECTOR OF PURCHASING, JOSEPE SCHLITZ BREWING CO., MILWAUKEE, WIS.

Mr. Rowe. Mr. Chairman and members of the subcommittee, m name is James Rowe. I am director of purchasing for the Joseph Schlitz Brewing Co. I am appearing in behalf of my company to state how title III of the administration farm bill will affect the use of rice as a brewing adjunct.

The Joseph Schlitz Brewing Co. is and has been a user of rie as a brewing adjunct for many years. As such we contribute a substantial share to the 13.6 percent that brewers use of the domestic consumption of rice. The brewers' share of the domestic consump tion of rice is second only to the share individuals purchase for food in the United States and Puerto Rico. Title III is proposing that this domestic consumption underwrite costs of the entire rice progra including Public Law 480 and food for peace.

Title III, according to the administration, is expected to reduce Government expenditures for rice by $50 million in the 1966 cropyear. This is to be achieved by transferring to the domestic consumer a sum equally as large or larger. There is reason to question the wisdom of this move for its saves the American public in general. nothing, merely a transfer. If the money to be realized from the title III program is applied equitably to all domestic users, it is cer tain to substantially reduce the use of brewers' rice. At present prices brewers' rice is in a sensitive area where substitution is attractive.

In addition to being a substantial user of rice we are also a su stantial user of corn grits. We depend on a combination of the twe as an adjunct in our process. Our brewing department has conclusively proven they can achieve the fine quality of Schlitz beer with a substitute for rice. In our multiplant operation the matter of economics is a factor in the determination of the quality of rice and corn we use. The fact we blend is an indication of the vulnerability of demand for brewers' rice to cost. A reduction in use or a complete elimination of rice for brewing will be the result of a price advance in brewers' rice.

Using $50 million as the amount domestic users of rice will have to pay in higher costs due to title III, the brewers' share will be in excess of $6.5 million. On this basis there is no doubt that breweries' requirements for rice would all but disappear. This would immediately reduce domestic consumption of rice by over 13 per cent leaving a much smaller base to cover the cost of the program.

Consumption of 300 million pounds of brewers' rice annually reresents an approximate revenue of $13,500,000 for the U.S. rice idustry. Title III enactment would result in a loss of this market and its revenue to the rice industry.

It is ironic at a time when the administration shows such at intent interest in reasonable increases in labor costs and no increase in the selling price of some items that the Department of Agriculture sponsors a program that will increase the selling price of rice products by 30 percent to over 100 percent.

Gentlemen, the Joseph Schlitz Brewing Co. proposes title III b eliminated from H.R. 7097.

Thank you for giving consideration to our recommendations.

Mr. JONES of Missouri. Thank you, Mr. Rowe. Does the other gentleman have a statement?

Mr. HESTER. He is here in case you have some questions.

Mr. JONES of Missouri. The question I have is this, I am a little confused. Do I understand that the brewers buy only brewers' rice which I understand is a kind of a byproduct of the milling of rice? Does that byproduct supply the complete needs of the brewing industry, or do you have to go out and buy additional rice?

Mr. COORS. Mr. Chairman, there are, of course, three byproducts in the milling of rice. These are called second, head, screenings, and brewers, depending on, I think, the harvesting conditions of the rice or the drying conditions of the rice, how badly the rice breaks up in milling. These are available to us from varying sources of supply.

We never can completely supply our requirements with brewers and screening. We always have to supplement with some second heads and many years we actually have to buy heads rice.

Mr. JONES of Missouri. In other words, if the brewers did not use this product as was brought out here yesterday that it would probably go into feed which would be still a lower price. And in my own mind I wonder if you would be compelled to pay the higher prices that each of you have indicated the case would be with the competition entering into this, as Mr. Rowe said-they are not dependent upon rice and they could use corn and would probably go to corn, that that would have an effect upon the supply and demands for rice. Are you satisfied in your own mind-I am sure that you are because you have it in the statement that this price is going to go up that much? That is the question in my mind.

Mr. COORS. Let me say this, Mr. Chairman, that the supply of straight brewers grade is, probably, less than 25 percent of the requirements of the brewing industry and unless these other grades of rice which the brewers use, the screenings and the second heads are perfectly satisfactory for domestic consumption and for food consumption. A certain percentage of them do, as we are told, get into this food consumption.

Mr. JONES. of Missouri. But it is at a lower price than the full grain rice?

Mr. COORS. No, sir; it is my understanding that it is not. For example, I know that one of our suppliers in their package rice use 4 percent second heads. This is their maximum limit of second heads. They have told us that title III might possibly force them to go as high as 15 percent second heads in their food grade. There is nothing wrong with this rice. It is simply broken. It is not whole kernels. It is certainly palatable and very edible.

Mr. WELISCH. My name is Jack Welisch. I am from San Francisco. I should like to add to Mr. Coors' comments. Actually, the price of the second heads is such that it is customarily priced as a separate fraction of the rice milling-priced at a lower level than the whole grain.

What Mr. Coors might mean in his comment, I think, is that the mixture of second heads with whole grains becomes at a block price for the mixture.