per pound for No. 1 American cheese, Plymouth, Wis., basis; 12.5 cents for roller and 14.5 cents for spray process dry skim milk, extra Midwest basis, and a comparable price for evaporated milk, f. o. b. plant basis, to be announced.

The Office of Price Administration ceiling price on cheese for American civilans will remain at the present level of 234 cents a pound, Plymouth quotation. The difference between this ceiling and the 27 cents a pound price will be made up by the Commodity Credit Corporation subsidy.

On the basis of that-and I have now reference to butter, for our people are still violently, and I think permanently, opposed to the continuation of the cheese subsidy, and the very unnecessary and expensive acts on the part of the Government-farmers began to make some plans, thinking they would have at least that much by way of price, although in relation to the going price of hogs at Chicago, a comparitive price for butter, 92 score, would have to be about 58 cents as of today.

You can imagine our consternation when, on May 7, 1943, the Office of Price Administration, through the Office of War Information, issued a formal release from which I will read only the first paragraph and ask permission to file the entire release in the record following the statement by Secretary Wickard:

In the most sweeping step yet taken to stabilize the cost of living and return living costs to the September 15, 1942, level specified in the President's hold-theline order, Price Administrator Prentiss M. Brown today announced reductions in the retail price of beef, veal, pork, lamb, mutton, coffee, and butter amounting for each item to approximately 10 percent of the present retail prices. The Price Administrator further announced that he was recommending to the Secretary of Commerce that subsidy payments be made to processors of the commodities involved to prevent the reduced prices from having an adverse effect on production.

(The matter above referred to follows:)

For immediate release,
Friday, May 7, 1943.

OFFICE OF WAR INFORMATION

OFFICE OF PRICE ADMINISTRATION

In the most sweeping step yet taken to stabilize the cost of living and return living costs to the September 15, 1942, level specified in the President's hold-theline order Price Administrator Prentiss M. Brown today announced reductions in the retail price of beef, veal, pork, lamb, mutton, coffee, and butter amounting for each item to approximately 10 percent of the present retail prices. The Price Administrator further announced that he was recommending to the Secretary of Commerce that subsidy payments be made to processors of the commodities involved to prevent the reduced prices from having an adverse effect on production. At the same time Economic Stabilization Director James F. Byrnes stated that the program had his full approval and that he was asking the Secretary of Commerce to take the necessary steps to carry it into effect.

The price reductions as the result of the ceiling changes will amount to an average of 2 cents a pound on the wholesale price of beef and veal and will reflect a retail saving to the consumer of approximately 3 cents. This will be in addition to a reduction previously announced by Office of Price Administration from levels originally specified in its new dollars-and-cents price regulations on beef. Pork prices will be cut from the present dollars-and-cents levels by about 4 cents a pound at retail. The price of butter will be cut from present levels at retail by between 4 and 5 cents a pound and the price of coffee will be reduced by about 3 cents. The price reductions will apply exclusively to rationed commodities to help insure that the full savings are reflected through to the consumer.

The price reductions will go into effect June 1 and work is already under way on the mechanics of the program. The cuts in meat prices will be further reductions below the level of meat prices to be announced May 12 and to be made effective May 17. Price Administrator Brown described the price reductions as

an integral part of his previously announced four-point program to guarantee stabilization in the cost of living. “A complete program is necessary," the Administrator stated, "if there is to be complete success under the hold-the-line order."

Among the measures which the Price Administrator outlined were:

(1) The new dollars-and-cents program which will take effect for some 50 percent of all dry groceries in some 150 communities on Monday. With meats under Nation-wide dollars-and-cents ceilings and important commodities under the community maximums in the major centers of population, enforcement of Office of Price Administration price regulations will pass in major measure to the consumer herself. Office of Price Administration will extend these dollars-andcents regulations to all larger communities for all classes of stores within the rext few weeks.

(2) The cutting back of prices which are out of line. The reduction of prices announced today means not only that prices will be stabilized but that the cost of living will remain below recent levels. Aided by tighter enforcement the price reductions announced today will go far toward returning prices to the September 15 levels.

(3) The third step is strict enforcement of all Office of Price Administration regulations, and particularly those affecting the cost of living commodities. Under the dollars-and-cents regulations the consumer now becomes a partner of the Office of Price Administration in insuring the ceiling prices are strictly observed.

(4) Simplified regulations for the seller of food products. Under Office of Price Administration's present system not only will regulations be known to seller and buyer alike but the Office of Price Administration is consolidating all important food regulations for the individual retail store into one basic measure. This regulation will provide fixed mark-ups for four classes of retailers over the cost of their merchandise and it is on these fixed mark-ups that community dollars-andcents ceilings are calculated. Retail food sellers who formerly operated under several different regulations will now have one simple, single regulation. This regulation will also be available to price panels and their assistants and to local war price and rationing boards.

The Administrator stated that "the main outlines of this regulation will follow that already discussed with representatives of the food industries modified only to conform with the Executive order. Meetings will be held with the food trade in the immediate future to discuss the form of this regulation."

Mr. HOLMAN. Even before this price roll-back or cut-back, whatever they may call it in its modern terminology, can take effect, throughout many of the dairy regions of this country commercial processors, to protect themselves, are unloading their stocks of butter on the Dairy Products Marketing Association, which is a semigovernmental controlled agency. In 2 days alone of last week 16,000,000 pounds of butter was unloaded onto Government hands, and I anticipate that before the end of this week from 20 to 35 additional million pounds will be turned over. That is because of the fact that, as matters now stand, nobody knows whether stocks on the floors or in transit will be protected.

Commercial operators already have cut the prices of butterfat back to the farmers so that they hedge on their advanced sales, and they pick up from 7 to 10 days' profit at the expense of the farmers who have to sell them the butterfat.

Here, for example, is a wire which came in to me yesterday from Mr. E. J. Ryger sent from Elkhart, Ind. He is the general manager of Midwest Producers Creameries, with headquarters in South Bend, Ind. That organization markets the butterfat in the form of butter for creameries in Michigan, Indiana, Kentucky, Tennessee. He says: Butterfat prices in our territories have been reduced 3 to 5 cents per pound in anticipation of lower butter markets.

At the end of my testimony I would like to have permission to file a supplementary letter from Mr. Ryger, giving more details, a tele

gram from Mr. R. A. Nafus, manager of one of the cooperative creameries in Charlo, Mont.; detailed technical letters from Mr. C. W. Hibbert, general manager of the Challenge Cream & Butter Association of Los Angeles. There are two letters from him, one to me and one to Mr. Ronneberg, general manager of the Dairy Products Marketing Association, which I referred to previously; all of which are technical explanations of the effect of this roll-back upon the cooperative creamery.

The CHAIRMAN. You ask that those be filed?

Mr. HOLMAN. I ask that those be filed in the record at the conclusion of my testimony.

The CHAIRMAN. Very well.

(The papers referred to appear hereafter.)

Mr. HOLMAN. Mr. Chairman, the announced intent of the Office of Price Administration to reduce the retail prices of meats and butter by 10 percent June 1 next is a foolish fumble, a costly and tragic mistake. The proposed order should be immediately revoked. Everybody knows the Federal authorities are now unprepared to administer it. Already, profiteering handlers have in many communities reduced producers' butterfat returns, thus creating for themselves a period of profit-taking in anticipation of the effective date of the proposed order. Little heed seems to have been given to the farflung effect of this action. In that and in many other regards, the Office of Price Administration reminds me of a stumbling, myopic giant rushing headlong down the path of its own destruction, trampling underfoot heedlessly the helpless people of the farms.

This great raw agency, hastily manned with the flotsam and jetsam of third-choice personnel, is unfitted and unqualified to make policies affecting production. Right now, I predict that neither it nor the responsible officials of the Reconstruction Finance Corporation realize what will be the multiform repercussions of this hasty retreat action to pacify the insatiable demands of organized labor for greater and greater real wages no matter what may be the cost to other groups of society.

I do not believe that they have worked out any definite scheme to start and administer the program; to make prompt payments to the processors whom we are told will collect the subsidies; to require such handlers to protect present producers' price levels; to protect owners of stocks in storage or in transit.

I am told that they have called a conference of a few representatives of the butter industry to meet with them toward the end of this week to begin working out a plan. Even then it will take weeks to set up the mechanics of the operation. Meantime, I ask if the intent is not revocable when handlers are protecting themselves by paying less to farmers, what justification is there for putting into effect the operation until such time as the Government can protect its citizens against losses due to its own rash and hasty action?

The O. P. A. should be reorganized and all of its functions that relate to the pricing of foods should be transferred to the War Food Administration; for in the personnel of that body alone in this Government is to be found the experience and the administrative technique essential to coordinating price policies with production needs. Our heads of Government should be brought to realize that with a prospective annual volume of $55,000,000,000 of unspendable national

of England, whose economic problems are largely in reverse of ours, income, giving subsidies in lieu of prices is a silly idea. In imitation the price subsidy came into being unneeded, unwanted, and unloved by our people who generally recognize that the subsidy idea is not indigenous to our soil. When there is plenty of money all around it is poor policy to go into bonded debt for food to be paid for in the future days of our post-war adversity.

The new price roll-back on butter will average 5 cents per pound. Under the stamp ration system each person in the United States may purchase only one-fourth of a pound per week. So the weekly per capita saving to consumers effected by this move will be only 114 cents. But the producer of butterfat, unless he be a member of a cooperative creamery, has no guaranty except to the extent that processors do compete for the raw material, that he will not have to share the greater portion of the subsidy with the commercial processors, since the subsidy payments are to be paid to the latter without any producer safeguards as yet.

On butter alone this new subsidy will cost the Treasury $90,000,000 a year plus interest on bond issues until such time as the bonds are actually paid.

This 4-cent retail subsidy on meats bought by civilians alone, will require annual bond issues of approximately $532,000,000 plus interest. In view of the fact that the present annual rate of expenditures for food is about $28,000,000,000, it is not unreasonable to expect that unless curtailed, the food-subsidy program would eventually amount to several billion dollars per year.

Particularly is this true when we consider that wage increases to coal miners and war-industry workers are likely to be followed by wage increases to persons engaged in food processing. The latter of which would, of course, necessitate still greater subsidies for those foods affected.

Historically, the prices paid for fluid milk and all dairy products going into manufacture have been based upon butter prices. Inasmuch as this roll-back program means that the Chicago butter price would be reduced 5 cents per pound, the producer prices for most dairy products would be lowered. For illustration:

Fluid-milk prices would be lowered on all markets which are tied to butter prices and, in addition, differentials paid for milk testing above the basic butterfat content would be lowered.

A great deal of sweet cream is sold on seasonal contract at definite levels above butter prices. Since the trade has been led to expect that butter prices were stabilized, it is probable that a large volume of sweet cream has been contracted at existing levels.

Condensery and other dairy-manufacturing plants buy at a basic price per hundredweight for milk testing a certain percentage of butterfat and pay differentials for test variations from this base according to the Chicago butter price. These differentials, of course, would be lowered in all instances.

Butter made and sold directly from farms would not qualify for the subsidy payment. And, Mr. Chairman, there are about 100,000,000 pounds of housewife's butter on which she depends for her pin money and many things of that kind that is included in this farm butter classification; and she is to be cut down from her little income as a result of this proposed order.

Farm milk production in 1943 is expected to be about 118 billion pounds, as compared to 119.2 billion pounds in 1942. And I personally think, Mr. Chairman, that these figures are too conservative. I doubt whether in this calendar year of 1943 we will produce, under present conditions, with the morale of our farmers being blown to pieces-whether we will produce over 115 to 116 billion pounds of milk, which is considerably less than we produced last year.

Senator AIKEN. What are the requests for production this year? How much is the Department of Agriculture requesting?

Mr. HOLMAN. The demand goal is 140,000,000,000 pounds of milk. The production goal is 122,000,000,000. Of course, we will fall far short of that. In April 1943 production was 60,000,000 pounds below that for the same month in 1942. Cash income from dairy products for the first quarter of 1943 showed a smaller percentage increase over the same period of 1912 than any of 10 major farm commodity groups. The percentage of milk cows in herds being milked on May 1, 1943, was the lowest for that month of any year since 1937. This is true notwithstanding the fact that there is a higher enumeration of cows on farms.

There figures indicate that dairy production is on a downward trend in spite of the fact that the demand exceeds the prospective supply by approximately 22,000,000,000 pounds. This downward trend can be largely attributed to unfavorable price relationships between dairy products, feed, and labor, and prices of dairy products as compared to other farm commodities.

From the above considerations it is apparent that a 10-percent rollback on butter prices will produce a general lowering of dairy prices and, even to a greater extent through the psychological effect brought about by uncertainty and apparent broken promises by Government, will greatly accentuate the shortages in the production of the vital dairy food products.

If, for any reason, producers would be required to absorb the entire 10-percent roll-back at the retail level the effect upon the producer's price would be much greater than 10 percent, as the following figures witness:

Reduction in producer's price due to a 10-percent roll-back at the retail level..........

With butter at the retail price of 55.6 cents, the normal amount of the retail price going to the producer is 40.6 cents, a reduction in the total to the producer of 13.8 percent.

On beef, with a normal retail price of 36.4 cents, the amount customarily going to the producer is 25.1 cents. That leaves a reduction to the beef producer of 14.5 percent.

Senator BUSHFIELD. Mr. Holman, my understanding is that this proposal was not intended to lower the price to the producer, but the difference was to be made up out of the Federal Treasury. Am I wrong about that?