Fourth. The President is empowered to act unilaterally where negotiations for agreement fail or where damage would occur during such negotiations. It may properly be assumed that the President would employ this power only within the scope of our international agreements. It is worthy of notice that article XIII of the Geneva Agreement on Tariffs and Trade authorizes under certain circumstances the unilateral imposition of import restrictions. As the committee knows, this agreement has been in effect provisionally since January 1, 1948.

Fifth. The amendment would provide for appropriate revocation, suspension, or modification of restriction imposed and would continue in effect the limitations on such restrictions now provided in section 22. We believe that in order to serve its full purpose, section 22 must be streamlined from the point of view of administration and made effective without the required existence of an agricultural program, as I have suggested in this statement.

In conclusion I should like to thank the committee for hearing my views as a representative of the Northwest deciduous fruit industry. Our industry is hopeful that this committee and the Congress will understand our current critical problems and respond to our need for temporary, limited support assurance and assurance against threatened crippling imports.

The industry is convinced that, should the Congress adopt the amendment to S. 2318 proposed by Senator Magnuson, these measures would go far toward alleviating the current problems of the industry. Thank you, gentlemen.

The CHAIRMAN. You have made one of the most interesting reports that we have received.

Mr. TAYLOR. Thank you, Senator Capper. I appreciate that very

much.

It is a large field.

The CHAIRMAN. It certainly is.

Mr. TAYLOR. I am sorry my statement was as long as it was, but I think you understand that we are very much concerned about this situation. I want to assure you of this, that if at any time the committee has any questions or we can be of any assistance in the agricultural programs, we are willing to come back.

You know how to get in touch with us and we want to do everything we can and do our part.

The CHAIRMAN. We will now adjourn until tomorrow at 10 o'clock. (Whereupon, at 12 o'clock noon, the committee adjourned, to reconvene at 10 o'clock, Wednesday, April 21, 1948.)

AGRICULTURAL ACT OF 1948

WEDNESDAY, APRIL 21, 1948

UNITED STATES SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C.

The committee met pursuant to adjournment at 10 a. m., in room 324, Senate Office Building, Senator Arthur Capper (chairman) presiding.

Present: Senators Capper (chairman), Aiken, Bushfield, and Thye. Senator AIKEN. (presiding). The committee will come to order. Senator Capper is busy with another committee meeting right now, so we will proceed with the witnesses that are scheduled to be heard on S. 2318.

The first witness is William Fette, Jr., vice president, Schnutter Candy Co., and chairman of the peanut committee, National Confectioners' Association, Chicago, Ill.

STATEMENT OF WILLIAM FETTE, JR., VICE PRESIDENT, SCHUTTER CANDY CO., AND CHAIRMAN, PEANUT COMMITTEE, NATIONAL CONFECTIONERS' ASSOCIATION, CHICAGO, ILL.

Mr. FETTE. I am William Fette, Jr., of the Schutter Candy Co., of Chicago, Ill. In my initial remarks of this morning, I am speaking as chairman of the peanut committee of the National Confectioners' Association, a trade association organized in 1884 and representing candy manufacturers producing approximately 80 percent of the production of the industry.

In an effort to be helpful to your committee, to the public, to the growers, to the shellers, and to the candy industry and other end users, we will also submit a rather lengthy, but detailed, factual statement. This statement, in addition to technical facts, contains numerous comments on S. 2318 as it now stands and offers various recommendations.

Many of the technical points involved require more study and deliberation than can be given through an oral presentation, and for this reason I will attempt to briefly summarize the numerous comments and recommendations.

Comments:

(a) The stated purposes of the bill included in the "declaration of policy" are unattainable under the provisions of the bill.

(b) Discrimination (created by "basic" and "other crop" policies) should be avoided, not fostered by Congress.

(c) The new "parity formula" does not remedy existing defects as applied to peanuts.

(d) Grant of power authorized is excessive and fails to include desirable safeguards.

(e) The marketing and quota provisions are not sound or consistent with the avowed objectives to insure abundant production.

(f) Provisions regarding sale by the Commodity Credit Corporation are unsound and unfair.

(g) The establishment of different classifications for peanuts as "edible peanuts" or as "peanuts" for oil, is unjustifiable.

Recommendations:

(a) Even if it is desirable to create legal distinction of agricultural crops, which we doubt, there is no justification for including peanuts as a "basic crop."

(b) No distinction should be made between "peanut for oil” and "edible peanuts."

(c) The period of 1935–39 should be used as a base period for the computation of any parity or support program established for peanuts.

I would now like to give you in plain simple terms a little more detailed explanation of these comments and recommendations gained from my own experience as an executive of my company. It so happens that many manufacturers in the candy industry do not use peanuts in large quantities and for this reason I am now speaking as a representative of my own company rather than for the confectionery industry.

During recent years we have all heard the term "basic commodity" many, many times; yet, no one has really been able to define to my own satisfaction as to what constitutes a basic commodity. The 1938 Agricultural Act listed cotton, corn, wheat, tobacco, and rice as basic; the 1942 Stabilization Act added peanuts as basic; S. 2318 now adds wool as another basic item.

It is difficult to find an answer as to why peanut producers should ever have been afforded a support price of 90 percent of parity, whereas producers of other foods, such as potatoes, chickens, eggs, beans, peas, and soybeans were afforded a much lower support price. Surely any of the items just mentioned are as important to as many consumers or as many producers as are peanuts.

According to newspaper reports, the House Agricultural Committee has within the past few days indicated approval of an extension of the present farm support prices until June 30, 1950. This means, of course, a continuation of the present 90-percent support level on the commodities listed as "basic." These same newspaper reports bring to light another interesting item; at one point during the deliberations of the committee, peanuts were eliminated as a basic commodity-the vote was 12 to 9. Later, the committee again decided that peanuts should still be considered as basic.

Again, according to newspaper reports, it was stated that the dispute as to what product should or should not be basic came about as a result. of the effort to remove the tax on oleomargarine. Does this mean that the end users of peanuts are in the middle and that the justice of our claim is to be traded up and down the river between pressure groups?

Gentlemen, peanuts never were a so-called basic commodity. Even Franklin D. Roosevelt expressed an opinion to this effect, as did at least more than one official of the Department of Agriculture. Furthermore, until such time as a truly official definitive explanation is given as to what constitutes a basic commodity, we can only conclude

that it refers to an item entitled to preferential treatment and sometimes brought about as a result of political logrolling.

Let us now look at the continued discriminatory provision of S. 2318, a provision whereby peanuts may be resold by the Commodity Credit Corporation at the market or bid price when crushed for oil and at a set price shows the support level when sold for edible use. What great wrong has been committed by the end users to bring about a continuation of such an unfair practice?

As far as the use of peanuts in candy is concerned, it produces a delicious energy-building food; a food that was greatly desired and demanded by the armed forces during World War II. This same peanut candy helped to create millions of friends in liberated countries. If you doubt this statement, please remember the remark of one of the world's greatest and best-known correspondents, Ernie Pyle, who said:

The only thing that most soldiers and I have against candy is that we don't get enough of it.

Yet, under S. 2318 the end user of peanuts must pay a price above the support level so as to help pay for this subsidy that is created for the grower, or oil producer, even though the vast majority of the oil produced eventually finds its way into some kind of food.

There certainly appears to be no sound economic reason as to why peanuts produced in the United States should ever be considered as an oil-producing crop; the cost is prohibitive. Based on 1947 support prices, the cost of producing a pound of oil from peanuts was 29 cents, whereas a pound of oil produced from soybeans was only 19 cents, from cottonseed 17 cents, and from copra only 14 cents. Again, the small amount of oil actually produced from peanuts in the United States was almost infinitesimal when compared with United States production as a whole. It can therefore not be considered as of great emergency value.

We now come to the recommended change in the base period for the computation of parity as applied to peanuts. S. 2318 is supposed to bring about a modernization of parity; let us analyze this supposition.

Under the act of July 9, 1942, the base parity price for peanuts was set at 4.8 cents per pound. If we are to use the 10-year moving average-1938-47-the comparable base price under this provision is 3.78 cents per pound. We find, however, that this price cannot be used; S. 2318 provides if the parity figure under the moving average is lower, then we must revert to the former base. S. 2318 is therefore modernized only if the price moves upward.

Next, it has been our contention that the Commodity Credit Corporation has been operating without legal authority when making outright purchases of any portion of a peanut crop; also, that it has acted without legal authority when accepting discriminatory prices on sales for crushing.

Under the Steagall amendment, Commodity Credit Corporation was empowered to loan, not purchase, and peanuts were then nonbasic.

Under the 1942 Stabilization Act peanuts were made basic, but we fail to find any provision for the actual purchase of any crop or portion of a crop; neither do we find any provision under this 1942 act

which granted authority to resell peanuts for crushing at discriminatory prices.

When endeavoring to find relief for our industry, we discussed this matter with the Department of Agriculture and, in an attempt to be helpful, presented a copy of an opinion from our counsel. That was 5 weeks ago and we still have not received an answer. We do find, however, S. 2318 now legalizes both of these unauthorized and illegal administrative practices.

A continuation of the present base price is also unfair to manufacturers of certain types of candy containing large amounts of peanuts. Up to 1941, peanuts were competitive with other candy ingredients. The support price on the 1948 peanut crop will be approximately 250 percent above the early 1941 price; on other ingredients with which peanuts were formerly competitive, the increase is less than 70 percent. Translated into a box of 24 bars of candy with an average weight of 12 ounces per bar, this means an increased cost of approximately 8 cents per box or about 14 percent over bars with which we were formerly competitive.

I would like to illustrate what we mean by bars which were formerly competitive. On the chart that is attached you will notice glucose, milk, sugar, and eggs. Those are the types of ingredients that make up the center of this type of bar. The peanut bar is made up as follows:

There is approximately the same amount of chocolate in this bar as there is in that bar. The peanuts in this bar replace the soft center ingredients on this bar. In 1941 we were fairly competitive with those items. Today, the cost of the peanuts entering in here has increased approximately, or will have increased approximately, 250 percent, whereas the ingredients entering into this bar have increased only 70 percent.

That is the reason for our statement that it is decidedly unfair to the user of large amounts of peanuts.

We believe the inclusion of peanuts as a basic item and the definite establishment of a base parity price of 4.8 percent per pound under the 1942 Price Control Act was unfair and unwarranted, could not or cannot now be justified, and quickly passed under political pressure and without affording an opportunity for hearings. As a corrective measure we seriously urge the definite removal of peanuts as a basic commodity. If you insist, however, in retaining peanuts as a basic commodity, then we urge the base period be changed from 1909–14 to 1935–39—as a period that is postdepression and prewar, a period that has already been selected for other commodities, and a period during which the consumption was on a more normal basis.

Senator AIKEN. During those years the price of peanuts then went up-never went up above 4 cents a pound on the average.

Mr. FETTE. Yes; the price of peanuts was as high as 6 cents a pound. Senator AIKEN. The figures of the United States Department of Agriculture show the prices run from 3.28 to 3.92 cents.

Mr. FETTE. I am sorry; that is the price to the farmers.

Senator AIKEN. It is the price to the farmers that we are considering.

Mr. FETTE. All right; the price to the farmer in 1935 was 3.14 to tops of 3.72.

Senator AIKEN. That is right.