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$28 million a year beginning the second year of consolidated operations and $33 million a year beginning the sixth year. Farmer Cooperative Service recommendations covered the distribution of marketing proceeds, financing, and organization, This study cost Farmer Cooperative Service $32,000.
Planning Facilities for Large Country Grain_Elevators in Ohio. This study recommended type, design, layout, and equipment for efficient large country elevators handling wet corn and other grain, ranging from 500,000 to 2,000,000 bushels. Farmer Cooperative Service estimates the co-ops can save $280,000 a year by adoptilt. these recommendations. The study cost Farmer Cooperative Service $12,000.
Alternative Operating Policies for a Florida Sugar Cooperative. The cooperative faced reduced volune this season because of a decrease in proportionate acreace shares. It had to decide whether to continue operating its own mill, sell out, or combine with another mill. The study indicated its best alternative was to continue operations and take specific steps to improve grinding and harvesting of cane. The cooperative has adopted this recommendation. It will mean $100,000 additional income for members at a cost to Farmer Cooperative Service of $3,000.
Fruit and vegetable Marketing Cooperative in Kentucky. Farmer Cooperative Service met with producers, helped them organize, helped the co-op get a $100,000 office of Economic Opportunity grant and a $199,500 Farmers Home Administration loan, and trained the co-op's directors. The first year each of the co-op's 400 low-income members increased his gross return an average of $1,250.
Current and Ideal Roles of State Cooperative Councils. At the request of the National Conference of State Cooperative Councils, Farmer Cooperative Service reviewed policies and programs of 29 state councils and compared them with the policies and objectives stated in their charters and by-laws and with present and future needs of selected cooperatives.
Helping cooperatives_Overseas. Farmer Cooperative Service personnel are aiding cooperative development in Brazil, Paraguay, and Columbia by strengthening public and private institutions responsible for such progress. They help establish training programs, plan research, revise cooperative statutes, organize co-op councils, select potential leaders for special co-op training in the United States, and generally advise co-op and government officials. In addition, Farmer Cooperative Service prepared 160 training programs for 500 overseas observers who came to the United States to study cooperatives.
Mr. WHITTEN. We have with us Mr. Eric Thor, Administrator, and his associates.
We will be glad for the record to show a brief biographical sketch. (The sketch follows:)
BIOGRAPHICAL SKETCH OF ERIC THOR
Eric Thor is the Administrator of the Farmer Cooperative Service. He was born in Wisner, Nebr. in 1916 where he attended elementary and secondary schools. He earned a B.S. degree from the University of Nebraska in 1940 ; an M.S. degree from the University of Florida in 1949; and a Ph.D. degree from the University of California in 1956. Dr. Thor's major area of study was agricultural economics. He spent 4 years at the U.S. Military Academy, West Point, N.Y. as a special student and member of the academic faculty. He was associate professor at the University of Florida at Gainesville from 1947 to 1956 and served 3 years as manager of facilities planning and engineering for Corning Glass Co., Corning, N.Y. From 1959 to January 1970 he was employed as an economist with the Agricultural Extension Service, University of California, Berkeley, Calif. He has served as research consultant to the U.S. Department of Agriculture; research consultant to the U.S. Department of Labor; member of the National Task Force on Agricultural Labor and Mechanization ; member of the Agricultural Committee of the California Chamber of Commerce; member of a Research Advisory Committee, Harvard Graduate School of Business; and economic consultant for A.I.D. Morocco, Africa.
Mr. WHITTEN. Please include sketches for others before the committee if they have not appeared before.
I notice that you have a general statement and we will be glad to have you proceed in your own way.
Mr. Thor. Mr. Chairman and members of the subcommittee, I appreciate the opportunity to meet with you to discuss appropriations for the Farmer Cooperative Service for the fiscal year 1971 as well as to review briefly the work of our agency.
Our budget estimate for the fiscal year 1971 is $1,666,000. This compares with $1,631,000 for the fiscal year 1970—an increase of $35,000. With this increase, we propose a pilot project to study new possibilities of cooperative marketing of fruits and vegetables. We will follow this with similar studies for livestock and livestock products.
Consumers are purchasing larger and larger quantities of nearly ready-to-serve foods. These products which are marketed mostly by non-farmer-owned firms include what is commonly referred to as built in maid-service. The result is that farmers in 1969 received only 27 cents of each dollar consumers spent for fruits and vegetables.
If single product marketing cooperatives could join together and develop their own integrated marketing system it is highly probable that the proportion of the consumer's dollar that farmers receive would increase. In addition, a farmer-owned integrated cooperative market system should provide increased competition for the fruits and vegetables at the farm level. Then the non-farmer-owned corporations buying fruits and vegetables would have to pay the farmers' prices about equal to what the farmers who belong to the integrated marketing cooperative would receive. If they did not, farmers selling to the non-farmer-owned corporation would tend to join the cooperative.
We, therefore, propose to examine the opportunities for farmers to provide additional processing and marketing services for selected fruits and vegetables through their cooperatives. We think this would:
Assure cooperative members of a market for the products they grow.
Develop new and expanded market outlets for the cooperative members products.
Reduce processing, marketing, and distribution costs.
Make it possible for farmers to continue to make their own decisions regarding what and how much they should produce.
In order to determine if an integrated marketing system of this type is feasible, we propose to study (1) the technical aspects of processing nearly ready-to-serve foods, (2) the methods by which single product cooperatives can join together, and (3) the methods for coordinating distribution, transportation, and warehousing.
If our pilot study shows that this approach is feasible, we will then project the resources needed in terms of volume, facilities, financing, personnel, and operating practices for successful farmer cooperative ventures.
COORDINATION OF RESEARCH, SERVICE, AND EDUCATION ACTIVITIES
Since coming to the Farmer Cooperative Service, I have been impressed by the effective way in which the agency coordinates research, advisory service and educational assistance to farmer cooperatives. Let me give you three illustrations:
1. Assistance to Dairy ('ooperatives.-In pages 146 and 147 of our explanatory notes we reported that Farmer Cooperative Service has made a study to evaluate the advantages and disadvantages to be gained with the consolidation of 21 cooperatives serving 48,000 dairymen in 20 Midwestern States. The result of the study showed that if these cooperatives did join together, their members would be able to increase their total annual gross returns by approximately $28,000,000 through improved marketing and reduced costs.
In addition to providing the 21 cooperatives with this information, the results of the study also will be helpful to other dairy cooperatives who are interested in considering advantages and disadvantages of joining together to improve marketing and reduce costs.
2. Potentials for Improving the Efficiency of Cotton Ginning.–We completed recently a study of cotton gins in Oklahoma. This study shows that cotton gins in Oklahoma could reduce ginning costs from $5 to $20 per bale depending upon present costs by consolidating gin operations, and converting from the present system to a centralized ginning method and using modern management techniques. Centralized ginning provides a means for more easily blending cotton to meet market specification in regard to uniform grades and costs are reduced because the gin can operate more months per year and can handle larger volumes.
The basic data from this study can also be used to help cooperative gins in other cotton producing areas in exploring the feasibility of consolidating and changing to the centralized ginning method.
3. Assistance to Tomato Growers in Southwest Virginia.—In cooperation with the local agricultural extension service, the Department of Labor, and Farmers Home Administration, we have assisted 200 small family farmers in south west Virginia to form a new cooperative to market high quality, trellis grown tomatoes which are sold for fresh consumption. We also assisted the management of the new cooperative to prepare budgets, secure financing, and implement training programs for employees and directors.
As a result of this program the average cooperative member was able to increase his annual gross farm income in 1969 by an estimated $2,000 over 1968. For many of these farmers this was more than double that of previous years. In addition to developing a business for the farmers, the cooperative by operating a packing shed and providing a marketing service has provided employment for residents of a relatively low-income area.
COOPERATIVES FACE INCREASING COMPLEX PROBLEMS
In the decade of the 1960's farmer cooperatives marketed primarily what farmers produced without giving adequate regard to changing consumer demand. In the decade of the 1970's cooperatives are going to have to provide leadership to get farmers to produce the type of product and quality that consumers prefer and the quantity that can be marketed at prices that are profitable to the farmer, The marketing cooperatives also are going to have to play a larger role in developing new domestic and foreign markets and expanding old ones. Further, cooperatives will need to evaluate possibilities of mergers and joint ventures as ways to increase market power and reduce costs. They must explore opportunities to more effectively integrate operations. Particularly from the standpoint of developing multicommodity and multimarket systems.
The Farmer Cooperative Service faces challenging opportunities to help farm people and the rural areas to increase their incomes. We are providing research, advisory assistance, and training to help farmers and other people in rural areas improve their standard of living through cooperatives.
My colleagues and I will be happy to answer questions.
NUMBER OF EMPLOYEES
Mr. WHITTEN. Briefly for the record, how does the cooperative service operate? First, how many people do you have?
Mr. Thor. I would like to ask Dr. Abrahamsen if he could comment on that.
Mr. WHITTEN. Correct that for the record. I am talking about approximately. Mr. ABRAHAMSEN. We have 97 personnel. Mr. WHITTEN. Where are they?
Mr. ABRAHAMSEN. These are all located in Washington, D.C., with the exception of two individuals who are are financed by a trust fund in North Carolina and five who provide technical assistance to cooperatives in South America on a PASA arrangement with AID.
Mr. WHITTEN. That includes clerical as well as professional personnel?
Mr. ABRAHAMSEN. That is right. About 55 professional personnel.
TYPE OF SERVICES
Mr. WHITTEN. How do you operate? We are familiar to a degree with the program, but for the record, how do you operate ?
Mr. ABRAHAMSEN. We are what we term a mission-oriented agency. We work on the practical problems of cooperatives and in fact most of the requests that we get for work come from the cooperatives themselves to deal with the basic problems that confront them. Also, to meet their needs we look at the problems in the area where the cooperatives operate. Our technical advisory assistance involves assembling the facts and then meeting with the cooperative people and providing information for them.
Mr. WHITTEN. That is done on request!
Mr. WHITTEN. How many such requests did you have for the last fiscal year? How many for this fiscal year?
Mr. ABRAHAMSEN. I don't recall the figure for the last fiscal year but this year I would say we are working on 125 to 130 requests.
Mr. WHITTEN. You have limited yourself at this point to servicing existing cooperatives. I notice that the Administrator in his presentation refers to a gin study. From the wording it would appear that these gins are not now in a cooperative and that a study was made to see whether it would be wise for them to go into one. How does this type of situation arise?
Mr. ABRAHAMSEN. These are cooperative gins but one of the basic questions is, would it be advantageous for them to take a look at their operations and, say, engage in central ginning which would involve a bigger operation ? It would involve assembling cotton and permitting them to operate for months at a time.
Mr. WHITten. One of the things that you hear the producer and the ginner complain about is the high cost of ginning.
For example, it almost takes a fortune to buy enough trailers to keep the cotton moving so as to keep the gin running. In my area, the average rainfall is about 47 inches a year, which many people would say would be ideal. I think it would be ideal if it were evenly distributed, but what you do is get terrific rains at some unexpected times. It is usually in the January and spring period primarily but sometimes it hits you in the fall. With the fact that you can not employ labor for various reasons, these torrential rains leave the ground so wet that even if the cotton itself dries out you can not get the heavy mechanical equipment into the field. So the producer is unable to use a $30,000 cotton picker. When he can he wants to use it dav and night to get that cotton out of the fields in a period of 2 or 3 weeks. Also, the ginner is trying to get all the cotton ginned in that period of time. Many of them have tried to solve this by building large storage warehouses to hold the cotton, but there again if you are going to keep a man's cotton separated from the other fellow's cotton you almost have to have it in a trailer.
If you could have some way to regulate the flow and use of that very expensive gin and the surrounding expensive equipment and the machinery, you could reduce the cost greatly.
In this instance you are dealing with cooperative gins.
What about pooling the gins and perhaps eliminating some and stretching out the period? Is that what your purpose is?