We cannot have positive assurance that this plan will be successful, but we expect that it will be.

Now, specifically with respect to your question. You asked specifically what plans we have made if these plans do not carry out.

Mr. CANNON. Now, I realize that conditions have materially changed since the last war. When we first took up the question of food at the beginning of this war, we were told by those in charge that it was much simpler than it was in the first war. They say that, in the first war, they had to deal with, I forget whether they said it was 400 or 4,000, one of the two, individual people or processers, whereas at the beginning of this war they only had to deal with eight people. In other words, the food distribution business had been consolidated into the great chains and great corporations, so that by dealing with eight people at the beginning of this war you would get the same results as by dealing with 400 or 4,000 at the beginning of the last war. I suppose the same thing would be true at the close of the war when you begin to dispose of surpluses, and instead of having to dispose of them to a great number of processers, you will have a very limited number of consolidated groups.

Mr. BRENNER. You mean the distribution organizations?
Mr. CANNON. Yes.

Mr. BRENNER. In the first place the purchasing situation change does not apply to us. I have no knowledge of any organization to which that does apply. Speaking for the War Food Administration. and its operations with the food industry, we have had to deal with hundreds of processors. I do not know the exact number, but cer tainly with hundreds of processors in all parts of the trade. That is, on the purchasing end. We anticipate no different situation when we resell it.

Our present experience has indicated that we deal with every section of the trade, small and large, and it has meant that we are dealing with hundreds of people, processors, and distributors. It is true that they are better organized into associations then they were, and it is easier to reach them than it was after the last war, but our dealings are with individuals. Of course, we reach individuals through trade associations. However, our negotiations are with individuals. We deal directly with individuals, and they number in the

hundreds.

Mr. CANNON. Do you always demand the O. P. A. price? You

never sell at a discount?

Mr. BRENNER. At times we have sold at discounts when the product does not conform to or is not A-1 merchandise, but usually every product is sold at the O. P. A. ceiling price.

Mr. CANNON. If there is no question about the quality you never take less than the O. P. A. price?

Mr. BRENNER. Our basis is the O. P. A. ceiling price. From that we allow the processor, depending on the product, the normal trade discount for his sales expense, because he sells at the O. P. A. ceiling price, and he cannot sell for more than that, and we have to allow him his costs of operation.

Also we allow him, in some instances, his actual cost, to which he must certify, of reconditioning the product. If the product has to be relabeled because the product changes its condition, we allow him for that cost. We try to put him on the same basis as though he were selling his own merchandise.

Mr. CANNON. To what extent is there danger of demoralizing the market by offering large amounts of foodstuffs on the market immediately following the war? Will not that interfere with the regular processors and regular producers and regular retailers by glutting the market?

Mr. BRENNER. Yes, sir; the fear is a real one, Mr. Chairman.
Mr. CANNON. How do you expect to meet that situation?

Mr. BRENNER. Of course, it is difficult to say when the end of the war is going to be, but with respect to the quantities we are discussing here today, if this were the total quantity that would be available during this coming year, there would not be any question of that. It might be necessary at certain times to temporarily delay the sale of our products in order to integrate them with the entire market, but we do not anticipate any difficulty with the items indicated here.

Mr. CANNON. Of course, ordinarily, foodstuffs ought to be sold as soon as possible, I suppose?

Mr. BRENNER. Yes, sir; that is correct; although during past years the practice of selling seasonable items has changed. On nonperishable products, and semiperishable products, in most instances, the producers have gotten pretty much into the habit of selling on a 12-month basis. In other words, many producers normally hold a product out rather than attempt to sell it just as it comes in.

Mr. CANNON. Processing has been improved to the extent that it does not deteriorate as rapidly as formerly?

Mr. BRENNER. Yes, sir; that is generally true.

Mr. CANNON. You have given us your set-up, and you have given us your plan of work.

Mr. BRENNER. Now, may I just make one other comment, Mr. Chairman?

Mr. CANNON. Yes.

Mr. BRENNER. Mr. Pittman has discussed the procedure with respect to sales after he gets the product, that is, after he is given the product to sell in the commercial trade. There is one step previous to that that you should know about, Mr. Chairman.

When Government agencies are prepared to give us a product surplus to their needs or declare a product to be surplus, before making it available for sale to the civilian trade all Government agencies who are interested in major food purchases coordinate through a committee. Before a product is sold on the market, it has to be offered to other Government agencies. Let us take as an instance, if the War Department has checked and certified a number of units to be surplus, before we actually turn that over for sale to the civilian trade we first determine that there is no other Government agency which can use that product. If they say it is not needed, then it is offered to the civilian trade.

Mr. GARMAN. And that is in accordance with the act.
Mr. BRENNER. Yes.

COSTS OF OPERATION DURING FISCAL YEAR 1946

Mr. CANNON. Summing up the whole set-up, what will it cost you to operate in the fiscal year 1946?

Mr. GARMAN. It is difficult to tell how much food will be declared surplus to us that we will have to dispose of.

Mr. CANNON. Proceeding on the assumption that you will have $10,800,000 worth of food to dispose of what would be your cost of operating for the fiscal year?

Mr. GARMAN. Our estimate on that basis is $2,019,800.

Mr. CANNON. $2,019,800?

Mr. GARMAN. Yes, sir.

Mr. CANNON. How much of that would be for personnel?

Mr. GARMAN. $885,800 for administrative expenses, but that figure includes personnel and other administrative expenses.

Mr. CANNON. Give us exclusively the cost of personnel.

Mr. GARMAN. It is $686,800 for personnel. Of course, if we had to set up a special organization to do the job, it would cost much more than that. We would only be able to handle it for that amount of money because we are able to integrate it with our other work.

Mr. CANNON. What would you do with this $1,363,000?

Mr. GARMAN. That is the difference between the personnel figure and the other.

Mr. CANNON. Yes; subtracting this $656,800 from the $2,019,800. Mr. GARMAN. The big bulk of that difference would be in this nonadministrative expense item, and that is made up mainly of transportation, which we estimated at $501,000; warehousing and handling, which we estimated at $257,500; repackaging and stenciling, which we estimate at $175,000; reprocessing and milling, which we estimated at $21,600; inspection, which we estimated at $20,500; segregation, and verification of commodities, which we estimated at $83,700; brokerage fees which we estimated at $58,300; and miscellaneous expenses amounting to $16,200.

I have rounded off the above figures. They total $1,134,000.

The remainder of the difference that you ask about would be under administrative expenses, such as travel and communications, and that type of thing.

Mr. CANNON. You have tabulated this in making your estimate? Mr. GARMAN. Yes, sir; we have a full set of green sheets and the justification for our estimate is built up as carefully as we know how to build it. We would be very happy to leave that with the committee. It is in two parts, one part totaling $1,996,000 for the Commodity Credit Corporation part, the disposal of food, and a small item totaling $23,800 for the Office of the Solicitor in connection with the legal activities on this problem.

Mr. CANNON. If, by any chance the amount of food turned over to you for disposal was in excess of $10,800,000, then there would be a corresponding increase here, would there?

Mr. GARMAN. Yes, sir; not exactly in proportion to the increase because this would give us a basic organization integrated with our other organization, but there would be an increase if the quantities were larger.

Mr. CANNON. And, by the same rule if the quantities were smaller, there would be a corresponding decrease?

Mr. GARMAN. Yes, sir. We would not use any more than we needed to do this job.

BASIS OF ESTIMATE

(See p. 1297)

Mr. CANNON. How did you arrive at this estimate? What is the basis of your calculation in figuring that it would take $2,019,800? Mr. GARMAN. There were several different factors that went into the consideration, Mr. Chairman. First of all, we had to make an estimate of the quantity of food that would be declared surplus. Then based on that quantity, we had to ask our different units and divisions of the organization to estimate what it would take to do that work in addition to what they had been doing.

Now, it runs pretty much through the organization. For example, we will have to maintain separate inventories, separate accounts, separate sales records, separate shipping and storage transactions. We have to be prepared to make contact with these variuos groups that are entitled to priorities under the act, and then, since most of this disposal, or, much of it, at least, will be in small lots, the cost of handling and the number of contracts and settlements and claims will be considerable.

Then, of course, there is the necessity which Mr. Brenner referred to of developing outlets for certain commodities that have not been previously used in this country, such as dehydrated foods. So, the costs are spread pretty much throughout the organization.

for

On arriving at the estimate for the nonadministrative item, storing, transporting, and handling, our experience during the war period has been largely with handling commodities in car lots, in procuring them for Government supply programs and disposing of them to those programs.

This operation is an entirely different operation, but we tried to use that experience as far as we could in arriving at this nonadministrative expense estimate.

Our average cost for these nonadministrative items in programs that we have handled during the war have run around 61⁄2 percent of the value of the commodities. This estimate, on account of the smaller quantities, and the other difficulties that we have mentioned, runs about 10% percent for the nonadministrative expenses. We do not know whether that is high or low. It could be either, but it is the best estimate that we were able to make on the basis of the information we had.

Mr. LUDLOW. I do not see how in the world you could think up an estimate that would be anything at all more than mere guesswork. As to the amount of food that you have to dispose of, $10,800,000 worth, you do not know where the food is coming from, and you cannot know in what quantities it is coming, and you cannot even approximate your knowledge of the quantities, and you do not know its probable condition as to deterioration. How did you make up the estimate?

Mr. MEEKER. We agree with everything you have said, Mr. Ludlow, and this estimate is not represented to be anything more than the best job we could do with the information at hand.

Mr. LUDLOW. You have a job to do, there is no question about that, and so you are doing the best you can, making the best estimate you can, and you are doing it really without any landmarks to go by.

Mr. MEEKER. Yes, sir; that is absolutely correct. The quantities might be materially greater or materially less. Much, of course, depends on the course of the Pacific war.

Mr. LUDLOW. Did you have any tangible factors to go by? That is to say, did you estimate that you would receive a certain amount of food left over from the Army and a certain amount left over from the Navy, or did you have any basic factors of that kind to go by? Mr. MEEKER. We got the best estimates we could from the owning agencies.

Mr. LUDLOW. You did get an estimate in each instance?

Mr. MEEKER. Yes, sir; we did ask them for estimates, but we did not get very satisfactory estimates.

Mr. LUDLOW. And for the same reason that you have been speaking of they could not give you accurate estimates?

Mr. MEEKER. I presume they could not give accurate figures.

Mr. GARMAN. There are some things they had to base an estimate on; for example, if they have had in storage for some time stocks of commodities that might go out of condition, they could estimate those.

Mr. LUDLOW. What are the main categories of food that you expect to dispose of?

Mr. W. H. PITTMAN. All processed fruits and vegetables, beans and peas-

Mr. LUDLOW. A great deal of canned stuff?

Mr. W. H. PITTMAN. A very considerable quantity of canned stuff. a great quantity of canned stuff.

Mr. GARMAN. And dairy and poultry products.

Mr. W. H. PITTMAN. Yes; dairy and poultry products, and fats. oils, and meats.

Mr. LUDLOW. What protective measures are you taking to save private dealers from disaster by your infiltration of this food into the market channels?

Mr. BRENNER. We are working very closely with the various commodity groups, that is, with the industrial groups. We have made it a practice to consult with them very often, in discussions with them of the commodities that we expect to sell as soon as they are ready for sale, and as soon as we know what they are. We have attempted to integrate our operations with theirs as to time, location, and quantity of the products, and that sort of thing.

Mr. LUDLOW. The gentleman over there spoke about the condition of food as to maturity. When eggs begin to get a little mature, what do you do to salvage them? Is there a way of processing them into powdered eggs, or something of that kind?

Mr. BRENNER. Are you thinking in terms of eggs which were bought in the shell?

Mr. LUDLOW. I am thinking about your problem of disposing of eggs.

Mr. BRENNER. We put eggs in cold storage in the shell. Some were broken and frozen and in some instances were converted to powdered eggs. We did all three things.