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if there is a surplus we feel that the Government should shoulder the responsibility for that production stimulated or increased as a result of those acres made idle or diverted to other crops under control programs.
Gentlemen, that, very briefly-and I am certain very inadequatelycovers the proposed bill.
Mr. ANDRESEN. Let me ask you one question about the authority of the Board. Would the Board have the authority to establish standards of quality on milk and dairy products?
Mr. WALTZ. Only the standards of quality on the manufactured dairy products that they themselves might purchase for storage or disposal purposes. They would have no authority at all to establish any standards on milk. The standards on these manufactured dairy products that they would purchase are already established in various different ways. Congress has established a standard for butter, also I believe for nonfat dry milk solids-I am not certain. But in any event there are governmental standards already established on all of the products that this Board would have the authority to buy. They would have no authority at all to establish any standards as they might prevail on the movement of milk itself.
Mr. TALLE. Mr. Chairman?
Mr. ANDRESEN. Mr. Talle.
Mr. TALLE. Tuberculosis is very severe in Switzerland. What steps are taken to protect the health of the American people in case of imports from that country?
Mr. WALTZ. As dairy farmers we have felt many, many times that there is a possibility that under the present methods of inspecting imported products coming from foreign countries that the health standards are not equal to those imposed upon ourselves.
Mr. ANDRESEN. Mr. O'Hara?
Mr. O'HARA. What do you have in mind, or what could the Board fix as the tax upon the individual producer? The reason I ask that is that it would have to be a subject which was carefully worked out. Is that not true?
Mr. WALTZ. Yes, sir.
Mr. O'HARA. It would have to be fair and not discriminatory.
Mr. O'HARA. What do you have in mind, supposing a farmer produces X gallons of milk and sells it. What do you have in mind as to the amount that he would pay in the way of a tax or fee?
Mr. WALTZ. I think, Congressman O'Hara, that is covered in this table that I am next going to refer to, and if I might defer the answer, if you do not find it in here I shall be glad to go into it further. Mr. ANDRESEN. Mr. Berry?
Mr. BERRY. Actually this would be establishing a precedent.
Mr. BERRY. This program would be establishing something of a precedent in the field of imports, would it not?
Mr. WALTZ. I believe so.
Mr. BERRY. In other words, it would be the equivalent of forcing the Government to buy all imported dairy products, would it not? Mr. WALTZ. No, sir; not unless there was a surplus of dairy products in this country. There would be no purchase from the Stabilization Board by the Government as it related to either imports or
diverted acres, unless we had a normal national surplus of products in this country ourselves. It would eliminate all of the criticism directed toward previous programs that I think were raised largely by the State Department concerning the importation of products from friendly foreign countries. The program would not differ essentially from the present Government support program which obligates the CCC to buy up any quantity of dairy imports that has the effect of pushing market prices below the support level.
Mr. BERRY. If Congress would establish such a program on milk do you not think the wool boys would be in for some such program, too?
Mr. WALTZ. If they are willing to submit themselves to an assessment against their own production to carry their own surpluses, maybe so. I do not know enough about wool to be able to discuss it with you.
Mr. ANDRESEN. Do you not think that while we might take care of foreign criticism on imports, if the Government should buy an equivalent amount here, that there would be criticism from the American taxpayers?
Mr. WALTZ. It would be entirely within the Government's power to restrict imports if they felt that the American taxpayer should not be asked to buy the equivalent surpluses created by those imports. All they would have to do would be to restrict the imports and they have the power, as I understand it.
Mr. ANDRESEN. They have certain powers. We have gone through that fight on dairy products for 2 or 3 years, and we have reached what I believe is quite a satisfactory solution. We might run into considerable difficulty if they would permit unlimited imports of dairy products with surpluses being produced in the United States.
Mr. WALTZ. That is correct. So I would assume that the Government at that time would anticipate what imports should be brought in, and I would expect if they let them come in on an unrestricted basis that the American taxpayer might complain about it.
Mr. ANDRESEN. I want to ask you another question before you go into your tables. Do you have any proposals where the Stabilization Board would take over existing surpluses of milk powder and butter and cheese?
Mr. WALTZ. It is a requirement within this proposed act that we are submitting for consideration that the Stabilization Board shall undertake the job of selling those products for the Commodity Credit Corporation if the Commodity Credit Corporation so desires them to do so. Either their presently existing stocks or any stocks that they might purchase as a result of an offset to imports or an offset to diverted acres, but that the Government shall not sell those inventories back into commercial channels of trade in this country.
Mr. ANDRESEN. If you dumped them back into commercial channels of trade you would probably create more activity for the Stabilization Board to try to stabilize dairy products at the minimum level. Mr. WALTZ. That is right. It would be hopeless. You could not make enough assessment against milk to offset it. So in all fairness to dairy farmers those products will not come back into domestic channels of trade. They can go, as they do now, to institutions on a gift basis, to school lunch, to Armed Forces or to foreign countries within the discretion of the administration.
Mr. ANDRESEN. That has not worked out very well as far as the Armed Forces are concerned because about 7 months ago the Army agreed to take over 50 million pounds of high grade butter and in this period of time, about 8 months, they have only used 15 million pounds.
Mr. WALTZ. They were using, according to reports we had, possibly too much of some competitive product.
Mr. ANDRESEN. Maybe some of those fellows are stockholders in some of the companies that make the competitive product.
Mr. BYRNES. Mr. Chairman, while we are still on this import problem.
Mr. ANDRESEN. Mr. Byrnes?
Mr. BYRNES. What the Commodity Credit Corporation would do in the matter of taking over some purchases would be dependent upon imports as related to a surplus existing in the country. In determining that surplus do you determine that by commodity, by dairy product, or do you look at the overall dairy picture?
Mr. WALTZ. The measuring stick on the surplus would be whether or not the Stabilization Board had any inventory.
Mr. BYRNES. Of the individual item being imported?
Mr. WALTZ. No; any inventory. We only ask Commodity Credit Corporation purchase the equivalent; it is utterly impossible to offset by items.
Mr. BYRNES. Do you do your calculating on a production year? Mr. WALTZ. That is right.
Mr. BYRNES. Starting April 1 to March 31. During that year you could have, could you not, a shortage of some individual dairy product in this country?
Mr. WALTZ. Right.
Mr. BYRNES. It is unlikely but for purposes of discussion let us say that you might have a shortage of cheese, and cheese sales were certainly above your minimum price established. But the Government permitted also the importation of some cheese during that period. Yet if your overall dairy picture showed a surplus of milk and dairy products you would require the Commodity Credit Corporation to purchase from you, let us say, some butter which was in excess? Mr. WALTZ. To the equivalent of the imports
Mr. BYRNES. Imports of cheese?
Mr. WALTZ. Of all products. Or to the limit of that Board's inventory of accumulated products.
Mr. BYRNES. But you make no attempt to relate this to individual dairy products?
Mr. WALTZ. No, sir. Milk equivalent in hundredweights of milk, which is an easy one to calculate. Take your imports in hundredweights of milk and the requirement would be that Commodity Credit would purchase back in whatever products the Board had in inventory, that equivalent in per hundredweights of milk.
Mr. BYRNES. Under this you might have the Government imposing an embargo on cheese, let us say, when at least during this temporary period of the 1 production year you could have a slight shortage of cheese in this country.
Mr. WALTZ. That is right. But if a shortage of cheese occurs, and if the price of cheese or any other individual product advances higher than that of the general level of dairy products, as you know,
the production of that particular item is stimulated very, very quickly and it is not long until there is an adequate supply. It is not a dangerous situation such as a total shortage.
Mr. ANDRESEN. On these accumulated stocks in the hands of the Government you would propose to distribute these surplus commodities in the same manner as now provided by law. I think that you mentioned substitutes that have come in. Do you not think that the price element enters into it so that you might recapture some of that lost market in this country if it involved the question of price?
Mr. WALTZ. Yes, sir; and there is also in there something which I overlooked mentioning, and I am sorry that I passed so many of these important things in the bill, this Board would have the power to participate in merchandising and sales programs with industry in the United States, whether it be in the form of advertising, promotion, or reduced prices. So if we had a completely unmanageable situation as far as inventories were concerned those products could be made available to the American public at some blended price lower than the stabilization price.
Mr. ANDRESEN. That would drop the whole price level on all dairy products?
Mr. WALTZ. Not necessarily, because if you were maintaining a support level of purchase, and you had one item such, to use an illustration, as butter, you could make butter as an item available back to the trade for distribution on a blended lower price until your inventories were decreased, without affecting the price structure of all dairy products throughout the country.
Mr. ANDRESEN. I understand that you have developed a scheme for your particular organization to increase the consumption of butter. Are you at liberty to tell us what that is, and what success you have had with it?
Mr. WALTZ. Yes, sir. I am under no restraint from discussing that with you. With your permission I would rather wait until I get through with the self-help than to mix up the two programs.
Mr. ANDRESEN. All right. We would like to hear that.
Mr. DAVIS. In connection with setting up this stabilization fund is it your conception that the price, what you referred to as a minimum price, is going to be set and that is to be the minimum price for the year, or is that to vary as the Board may meet and decide to vary it from time to time?
Mr. WALTZ. It is proposed that it shall be for 1 year to establish confidence in the minds of both the dairy producer himself and also the handler of dairy products to encourage him to carry his own inventories rather than depend on the Government as they do now, or depend on this Stabilization Board to carry the national inventory. Excepting in case of an emergency, the Board is given the power and privilege to change that support level during the year, after it is once announced.
Mr. DAVIS. The trend of agricultural policy with respect to other products has been such that it appears it is going to force or make it wise for a number of other producers to get into the dairy-production field. What is to prevent, once you set up a fee and you set up a stabilized price, a group of new producers moving into the dairy
field, for instance, and they, because of their increased production, being the ones who take all the benefits out of the funds that other previous producers have built up?
Mr. WALTZ. Nothing. We do not make any effort in this bill to control production. I believe you were in here when I explained the question of the Government taking over the increased production from these diverted acres. We do not propose that anybody shall go out and tell the farmer that he can milk only so many cows a dav. Mr. DAVIS. I can appreciate that. But here we are setting up wheat acreages and corn acreages and things of that kind. The result is that they turn the land to grass, and that makes cheap feed for dairy production. Here you have had for a year dairy producers feeding their money into this stabilization fund. Other agricultural policies during that time cause a lot of other new producers to get into the dairy-production field. That so depresses the price of dairy products that then money has to start coming out of this stabilization fund. The old producer who put all the money in stands on the same basis then as the new people who are forced into dairy production, as a result of other agricultural policies of the Government.
Mr. WALTZ. It would seem that that would be the case, but on very close examination I believe you will find that this bill adequately protects, let us call the regular dairy farmer, to distinguish between the man who is regularly in the dairy business and that man who may come in and produce excessive quantities as a result of the diverted acres. The pure mechanism of moving that excess production back into the hands of Commodity Credit Corporation at overall Government expense prevents the hardship that you speak of from developing on the shoulders of the regular dairy farmer. Sure, he pays his percentage of the cost as an overall and regular taxpayer, but he is not asked to bear the burden of the whole thing, and it does not destroy the basic price or the floor price that has been established because those products produced from that milk have a home where they can go at a predetermined price which will maintain the floor price.
Mr. DAVIS. But the people who through the stabilization fee have built up the fund are at the mercy of someone who may come into the dairy-production field who has made no contribution to the fund whatsoever.
Mr. WALTZ. It is not anticipated that this fund shall be built up into any huge amount. The assessment each year shall apply for only that which is required during that year. You cannot come out exactly, of course. So the new producer will be paying his share of that stabilization fee as well. He is not riding on the coattails of a previous fund built up by regular dairy farmers.
Mr. ANDRESEN. Is it not a fact that it takes from 6 to 15 years to build up the dairy herd to get that new increased production?
Mr. WALTZ. Starting in with a calf you do not get any milk for 3 years.
Mr. ANDRESEN. But to build up a real producing dairy herd it takes years of time and effort and we have lost 4 million head of milk cows while the population has increased 30 million. It would be assumed that with proper handling, I would think that the population increase would take care of the increased milk production. Mr. WALTZ. Plus one other factor, Congressman. If this man immediately went into milk production he would have to buy cows.