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In one instance that I recall the value took into consideration the condition of the commodity, its location, and the other things of that kind.

Mr. CANNON. As well as its original cost to the Government?

Mr. GARMAN. Yes, sir. It was more of an appraised value, you might say in that case.

Mr. CANNON. And it might be considerably less than the Government paid for it?

Mr. GARMAN. Yes, sir, in that case.
Mr. CANNON. It could not be more?

Mr. GARMAN. No, not likely, unless there had been a big increase in market price.

ADDITIONAL PERSONNEL REQUIRED
Mr. CANNON. You say you have to have additional personnel?
Mr. GARMAN. Yes, sir.
Mr. CANNON. About how many?

Mr. GARMAN. The estimate we have calls for 263 man-years, at a cost, including personnel and other administrative expenses, of $885,800. That is illustrated, Mr. Chairman, on the third bar that you have on the sheet there, the bottom half being the administrative cost of $885,800, and the top half being the nonadministrative cost, including warehousing, repacking, stenciling, inspection, transportation and handling, a total of $1,134,000.

Mr. CANNON. How will your personnel be distributed as to Washington, field offices, and offices abroad?

Mr. GARMAN. They would be distributed between our field offices and Washington. One hundred and thirty-three of them would be here in Washington, and the remainder, or 130, would be in the field.

METHOD OF DISPOSING OF SURPLUS FOOD

Mr. Cannon. Now, what is your plan of operation? Food is turned over to you. I take it for granted that it will be announced to you that it is stored in some warehouse or storage plant or other depot. Now, what will be your method of procedure from that point on?

Mr. GARMAN. Mr. Chairman, if it is agreeable with you, Mr. Brenner, Deputy Director of Supply, and Mr. W. H. Pittman, Chief of the Sales Branch of the Office of Supply, can tell you the operations better than I can.

Mr. Cannon. Will you give us some information on that, Mr. Pittman?

Mr. W. H. PITTMAN. I am talking now solely about food, and this food, of course, is to be used primarily for food uses. So, the first thing is, to get a very careful inspection of it to determine its fitness for food use. We realize that much of this surplus has achieved a measure of maturity and requires very careful inspection for that

Mr. CANNON. You expect then, to have some loss, is that what you mean to tell us?

Mr. W. H. PITTMAN. Oh, yes; there will be segregation and sorting made, sorting the fit from the unfit before we can sell it as food.

Mr. CANNON. Such food as is unsaleable will be inventoried, but will be charged off?

reason.

Mr. CANNON. What effort have you made to secure an estimate of the amount? What steps have you taken, rather, in order to secure an estimate as to the approximate amount?

Mr. MEEKER. The problem has been discussed with the military and they, apparently, have considerable difficulty in determining the amounts that will be declared surplus. It depends on what their requirements are in Europe, and depends in part, upon the amount of food that is in storage here and in the pipe lines when VJ-day comes.

Mr. CANNON. On a rough estimate, then, you would say that you would have approximately what amount? What is the best estimate you could make as to the approximate amount in each category?

Mr. MEEKER. We have estimated $10,800,000 of food being declared surplus for the fiscal year 1946.

Nr. Cannon. That is over-all, or is that divided up as to various lines, and so forth?

Mr. MEEKER. That is food.
Mr. CANNON. That is for food, then?
Mr. MEEKER. Yes, sir.

Mr. CANNON. What part of that, if any, is your own, and what part will be transferred to you from other agencies?

Mr. MEEKER. That is our estimate of the quantity of food that will be declared surplus by other Government agencies, the Army, the Navy, the Maritime Commission, and other agencies that will have food that will be surplus to their needs during this period.

Mr. Cannon. Now, just how do you expect to handle it, what is your plan of organization, and what field offices will you have and what personnel?

Mr. MEEKER. I will ask Mr. Garman to explain that, Mr. Chairman, if I may.

Mr. Cannon. Yes, Mr. Garman.

Mr. GARMAN. What we have planned, Mr. Chairman, is to integrate this disposal work with our other work in connection with the handling of food.

Mr. CANNON. You expect, then, to have no additional personnel: you will utilize the personnel you have?

Mr. GARMAN. No, sir; it will require additional personnel to do the disposal job. Our estimate, I think, is probably best illustrated by this chart. I have copies of it here that I could hand to the committee, if you wish, Mr. Chairman.

Mr. CANNON. Yes.

Mr. GARMAN. This first bar on this chart represents the $10,800,000 worth of food that Mr. Vseeker indicated, as near as we can estimate would be the amount we would have to dispose of during the fiscal year 1946.

The second bar represents the estimated proceeds that would be received from the sales of that food, $9,180,000.

The third bar represents the estimate which we made to the Surplus Property Board as to what it would take to do the job.

Mr. Cannon. The first item, Mr. Garman, the $10,800,000, is that the cost price, the price paid by the Government, or is that the amount you estimate to be the market price at the time of disposall

Mr. GARMAN. I hat would be the declared value at the time it would be turned over to us, which, in most instances, would be the cost but in others it may be an estimate value approximating cost.

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In one instance that I recall the value took into consideration the condition of the commodity, its location, and the other things of that kind.

Mr. CANNON. As well as its original cost to the Government?

Mr. GARMAN. Yes, sir. It was more of an appraised value, you might say in that case.

Mr. CANNON. And it might be considerably less than the Government paid for it?

Mr. Garman. Yes, sir, in that case.
Mr. CANNON. It could not be more?

Mr. GARMAN. No, not likely, unless there had been a big increase in market price.

ADDITIONAL PERSONNEL REQUIRED
Mr. CANNON. You say you have to have additional personnel?
Mr. GARMAN. Yes, sir.
Mr. CANNON. About how many?

Mr. GARMAN. The estimate we have calls for 263 man-years, at a cost, including personnel and other administrative expenses, of $885,800. That is illustrated, Mr. Chairman, on the third bar that you have on the sheet there, the bottom half being the administrative eost of $885,800, and the top half being the nonadministrative cost, including warehousing, repacking, stenciling, inspection, transportation and handling, a total of $1,134,000.

Mr. CANNON. How will your personnel be distributed as to Washington, field offices, and offices abroad?

Mr. GARMAN. They would be distributed between our field offices and Washington. One hundred and thirty-three of them would be here in Washington, and the remainder, or 130, would be in the field.

METHOD OF DISPOSING OF SURPLUS FOOD

Mr. Cannon. Now, what is your plan of operation? Food is turned over to you.

I take it for granted that it will be announced to you that it is stored in some warehouse or storage plant or other depot. Now, what will be your method of procedure from that point on?

Mr. GARMAN. Mr. Chairman, if it is agreeable with you, Mr. Brenner, Deputy Director of Supply, and Mr. W. H. Pittman, Chief of the Sales Branch of the Office of Supply, can tell you the operations better than I can.

Mr. Cannon. Will you give us some information on that, Mr. Pittman?

Mr. W. H. PITTMAN. I am talking now solely about food, and this food, of course, is to be used primarily for food uses. So, the first thing is, to get a very careful inspection of it to determine its fitness for food use. We realize that much of this surplus has achieved a measure of maturity and requires very careful inspection for that reason.

Mr. CANNON. You expect then, to have some loss, is that what you mean to tell us?

Mr. W. H. PITTMAN. Oh, yes; there will be segregation and sorting made, sorting the fit from the unfit before we can sell it as food.

Mr. Cannon. Such food as is unsaleable will be inventoried, but will be charged off?

Mr. W. H. PITTMAN. No, it will probably be disposed of for feed purposes, or for manufacturing purposes.

It has uses other than food uses, but it cannot be channeled into food channels.

When the commodity then has been inspected and proved to be fit for food it will, of course, go through the channels contemplated by the Surplus Property Act, and there will be a series of priority and preference buyers to whom it will be offered, and any remaining quantity will then be sold into commercial or civilian food channels.

Mr. ČANNON. Now, right there is the crux of the matter. You say the remainder will be sold. How will you proceed to sell it?

Mr. W. H. PITTMAN. I do not think we can say right now, that is, that we know the answer as to how all of it will be finally disposed of.

I can, however, outline the manner in which we have been proceeding, and until something proves more effective, we probably will proceed along that line.

We offer the commodity at the present time, whenever it is reasonably practicable first to the processor, the processor who has supplied it to the Government.

We offer it to him now at, of course, the 0. P. A. ceiling price.
Mr. CANNON. Did you say 0. P. A. prices?

Mr. W. H. PITTMAN. Yes. It then follows his normal distributive channels in the way it would have gone if we had never acquired it. That, at the present time works out very well. Whether it will work well in a period of long supply is a matter to be seen.

If it is not taken by the original processor, the one who manufactured or packed the product, we next offer it to his competitor processors, processors who pack or produce the same kind of commodity, again at a price which, at the present time, would be the 0. P. A. ceiling price in most instances, simply because of the scarcity of the commodity.

After that stage it is offered to the wholesale distributors, again at a price, at their 0. P. A. ceiling price. That in the main is the way most food commodities are now being sold, having passed through one or more of those stages.

We do have, however, occasionally items which are off condition, and are not fit for over-the-counter sale. The price is not determined by any ceiling price or any established prices, and in those instances we offer it on a bid procedure to the people who can make use of it, either for industrial uses or feed or other nonfood uses. That is generally the manner in which we now proceed, Mr. Chairman.

Mr. CANNON. After the last war the Government opened retail outlets in all of the larger cities and sold a wide variety of food products in the open market to the consumer. In case the processor, or the wholesaler, or the jobber declines to take a product at the O. P. A. price, would you follow some such plan as that after this war?

Mr. W. H. Pittman. I do not think it has yet been contemplated that stores will be establisbed, set up by the Government for sale to consumers.

Mr. CANNON. Such as after the last war?

Mr. W. H. PITTMAN. No, sir; I do not think that has been contemplated.

Mr. CANNON. Of course you have studied the experience in the disposal of surplus products after the last war. Did you find opening the retail stores a disadvantage, and why have you decided not to follow that plan at this time?

Mr. W. H. PITTMAN. I think the history of the period following the last war indicates that that was not a very successful method of disposition. Moreover it is complicated at the present time, considerably complicated by the fact that many of the commodities that are sold are under what is known as a price-support program, and the indiscriminate sale of them might defeat the very purposes of this price-support program. The price will have to be maintained at the proper level in order to prevent our having to go out and buy the same commodity to support the price that we are depressing by sales made at improper prices.

Mr. CANNON. Now, if you offer goods for sale, and there are no takers of them, and the middleman refuses to buy, they are left on your hands, and I take it for granted that is the reason they were sold at retail after the last war, because they were left on their hands and they had no alternative other than to permit them to deteriorate or to sell indirectly to the consumer. As a matter of fact, do you know whether that was the situation which warranted the opening of stores in the larger cities after the last war?

Mr. W. H. PITTMAN. I do not know the reason. That was not the only method of sale tried. That was one method. Another one was selling them through post offices. I do not know the reason for the use of those methods, whether it was a failure of all other methods, or whether that was the first one that came to mind.

Mr. CANNON. What will be your alternative in the event that your middleman refuses to buy and leaves them on your hands?

Mr. W. H. P:TTMAN. I would like to ask Mr. Brenner to answer that.

Mr. CANNON. Yes.

Mr. BRENNER. Not specifically answering your question first, but my remembrance of the studies that were made of the history of the sales in the last war indicated that there was no particular plan made for disposal of surpluses until after the problem was acute, and then that there were a number of incidents leading to sales by retail and sales of the individual items through post offices.

This time for at least a year and a half, and, perhaps, longer, we have attempted to develop a procedure for making sales. We have attempted to educate not only ourselves, but also the people with whom we expect to deal.

We have actually discussed methods with the trade, both the distributive trade and the processors, I think, of almost every type of food that we could think of that we might get into. We have asked their assistance, cooperation, and suggestions. It was following these conferences that we set a sales policy modified since as required by the passage of the Surplus Property Act. That policy is that our sales assure the greatest return to the Government, with the least disturbance to normal trade.

We have the assurances of the trade that they will cooperate with us in making disposition, even to the extent of having to cut back their own production in order to integrate these sales, because they realize a surplus, whether it be on our hands or in the hands of industry, is still a surplus. We have made it quite clear that food surpluses must be sold; cannot be given away, destroyed, or thrown away.

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