each market, the necessary study for adequate determination of the content of a suitable marketing agreement and order.

COOPERATION WITH STATE MILK-REGULATORY BODIES

Many States have found their efforts to regulate competition in milk markets within their borders hampered by the influx of milk from beyond the State's jurisdiction as to prices paid to producers. Only one State has attempted to regulate the price of milk bought in the State, irrespective of its ultimate destination. The principle of such regulation has not yet been tested in the courts. The Agricultural Adjustment Act authorizes the Secretary of Agriculture to cooperate with the several States in developing uniform programs and to issue orders complementary to orders of the States regulating the handling of milk. States have been assisted on their programs in general and particularly in developing their orders in such a way as to facilitate the issuance of an order by the Secretary complementary to the State order.

PROBLEMS COMPLICATED BY UNCERTAIN LEGAL STATUS OF ORDERS

The problems of rendering the assistance desired by the milk industry and the several States have been much complicated during 1936 by the uncertainty of the status of the Agricultural Adjustment Act resulting from the Hoosac-Mills decision of the Supreme Court, and the outcome of subsequent litigation with respect to milk orders.

Two decisions handed down in Federal district courts during the year vitally affected the development of the milk program. In the first case, known as the Buttrick case, which arose under the order regulating the handling of milk in the Boston marketing area, the Government sought to enjoin certain handlers from violating the order. The court dismissed the bill for want of jurisdiction, and held that the issuance of such an order was but one of the means provided in the Agricultural Adjustment Act for effectuating a purpose declared by the United States Supreme Court to be beyond the constitutional power of the Federal Government. As a result the Government was forced to suspend the Boston order.

The second case in 1936 arose under a similar order applicable to the District of Columbia. In this case certain producers sought to restrain the Secretary from enforcing the order. Here the court adopted the view taken by the Massachusetts court in the Buttrick case and in addition condemned the order as an unwarranted interference with the right of producers and distributors to contract for the sale or purchase of milk, and as containing features which "control, or at least, attempt to control the production of milk." Appeals have been filed in these cases.

EVAPORATED MILK AND DRY SKIM MILK MARKETING PROGRAMS

The first marketing agreement for evaporated milk went into effect. on September 9, 1933, after a series of conferences with processors on means to improve the unfavorable situation in the industry which had resulted from an expanding output, accumulating stocks, and depressed, unstable farm prices of milk delivered at condenseries. It was replaced on May 31, 1935, by the present agreement and license. Manufacturers of the major part of the evaporated milk output signed

the new agreement and requested a supplementary license applicable to the whole evaporated milk industry. Such a license, containing provisions similar to those of the agreement, was issued by the Secretary of Agriculture.

The new agreement and license provide for the filing of each manufacturer's selling prices with the Secretary and with the managing agent; for uniform discounts, allowances, and other fair trade practices; for minimum prices to farmers of milk delivered to condenseries; and for producers' and manufacturers' committees to deal with problems relative to the operation of the agreement. The filed lists of selling prices include the terms of sale for each size, quantity, and brand of evaporated milk by sales areas. They may be changed by filing new or amended lists. The minimum prices to producers are based on butter and cheese prices.

The agreement and license have continued to exert a steadying influence on wholesale prices of an expanding output of evaporated nilk and have tended to keep prices of milk delivered at condenseries at least relatively as high as prices of milk used for other purposes. Prices paid to farmers for milk at condenseries in 1936 averaged $1.56 per hundred pounds, 16 percent above the 1935 average and 75 percent above the average for the first half of 1933 before the first agreement was adopted.

The present marketing agreement for dry skim milk went into effect on September 16, 1933. It was requested by manufacturers because of the unsettled conditions accompanying undesirable trade practices, declining prices to manufacturers, and resulting low farm prices. Practically the entire dry skim milk industry is operating under the agreement.

The agreement provides for filing, with the Secretary and with the managing agent, of manufacturers' selling prices by grades, brands, quantities, and sales areas; for manufacturers' monthly reports to the managing agent on production, sales, and stocks; for uniform discounts and allowances and adherence to other fair trade practices.

The agreement has brought about much improvement of marketing conditions in the industry and has been a contributing factor to the upward trend in prices. Manufacturers' wholesale prices of dry skim milk in 1936 averaged 8.28 cents per pound, 40 percent above the 1935 average and double the average for the first half of 1933 before the agreement was adopted.

CHAPTER 4

SURPLUS-REMOVAL OPERATIONS

SALIENT FACTS ABOUT SURPLUS-REMOVAL OPERATIONS 1. Total cost of farm commodities acquired by Commodities Purchase Section in 1936.

2. Expenditures under 1935 cotton-price-adjustment payment plan

3. Expenditures in 1936 for removal of price-depressing surpluses of dairy products..

4. Expenditures in eradication of cattle diseases in 1936 (approximately) – – –

$13, 328, 835. 53

39, 545, 331. 51

24, 541, 818. 86

36, 699, 426. 00

In recent years it has been demonstrated that for certain agricultural industries, market-expansion and surplus-removal programs are the most practical means of supplementing the efforts of producers and their marketing organizations to prevent excess supplies of farm products from leading to farm-price collapses, waste of supplies, and eventually to unemployment in the cities.

Congress has recognized the desirability of enabling consumers who lack purchasing power to use some of these excess supplies, and on three occasions in 1932 and 1933 authorized the Federal Farm Board to make available to the Red Cross, for relief distribution, some of the wheat and cotton which the Board had accumulated in the program for supporting farm prices of these commodities.

In continuation of this policy and in order to utilize surpluses of farm products and yet dispose of them in such a manner that disastrous farm-price reductions would be avoided, agricultural legislation enacted since March 1933 has vested in the Secretary of Agriculture powers for bringing about "the expansion of markets and removal of surplus agricultural products." In amendments to the Agricultural Adjustment Act, approved in August 1935, these powers of the Secretary were more specifically enumerated.

During 1936 three types of surplus-removal programs have been in effect: (1) Those for encouraging increased domestic and export demand for farm products; (2) those for diverting such commodities into new, or byproduct, or low-value uses; (3) those for diverting such products from normal trade channels by purchasing them for relief distribution. Programs of the last-named type were coordinated in 1936, as in 1934, with certain drought-relief and flood-relief activities.

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I. PROGRAMS FOR ENCOURAGING INCREASED DEMANDS FOR FARM PRODUCTS

1935 COTTON PRICE-ADJUSTMENT PAYMENT PLAN

The most important surplus-diversion program for encouraging increased domestic and export demand was the 1935 cotton priceadjustment plan put into effect in August 1935 and later modified somewhat as a result of the Hoosac Mills decision of the Supreme Court. This program provided for paying to cotton producers the difference between 12 cents and the average price of cotton, if lower than 12 cents, prevailing at the 10 designated spot-cotton markets on the day on which the producers sold their cotton. Such payments were limited to not more than 2 cents per pound and applied only to cotton growth in 1935.

The program was inaugurated after the 12-cent cotton loan was discontinued. The 12-cent loan had resulted in certain difficulties, some of which were reflected in a decline in the movement of American cotton into regular trade channels. Immediately upon the inauguration of the cotton price-adjustment payment plan, domestic consumption of cotton rose, the increase amounting to 14 percent for the last 5 months of 1935 as compared with the same period in 1934. Cotton exports also increased about 44 percent for the same period. For the full cotton-marketing year ended July 31, 1936, domestic consumption increased by about 18 percent and exports by 24 percent as compared with the preceding year's figures.

The cotton price-adjustment plan was in effect from August 22, 1935, to August 15, 1936, after which date no more applications for payment were accepted. Cotton price-adjustment payments in 1936 to about 1,200,000 producers, in connection with the sale of about 7,500,000 bales of cotton from the 1935 crop, are shown by States in table 5. Administrative expenses in connection with this program have totaled about $3,000,000.

TABLE 5.-Payments in 1936, by States, under the 1935 cotton price-adjustment plan

Funds for financing the 1935 cotton price-adjustment payment plan were obtained from the customs receipts under the provisions of section 32 of the amendments to the Agricultural Adjustment Act approved in August 1935. This section appropriated money from the customs receipts, to make payments in connection with encouraging greater demands and new outlets for agricultural commodities.

Other programs in effect in 1936, that were designed to encourage the exportation of agricultural commodities under the provisions of