PERCENTAGE PRICE INCREASES AS OF APRIL 1, 1948, OVER JANUARY 1, 1941:

maximum price such as that established under OPA, 14 cents a pound, is the highest price we could possibly afford to pay, and even that price may not start the trend toward an increase in consumption in edible channels.

Senator AIKEN. Under the bill which we propose, the support price on peanuts last fall would have been 7.4 cents per pound. Do you consider that the support price of peanuts today is the reason that you are having to pay 1612 cents a pound?

Mr. FETTE. Yes, sir. It is true that the price on oil has to some extent affected the price on peanuts and is at the moment affecting the price on peanuts.

Senator AIKEN. There is no loan on peanuts made above 10 cents today, or approximately 10 cents?

Mr. FETTE. Not on farmers' stock.

Senator AIKEN. Does the price increase rapidly from the time the peanuts leave the farm until you finally get them?

Mr. FETTE. Based on your parity established as of July 15 of $220 per ton and the price to the farmer of approximately 10 cents per pound, the minimum price, or practically the minimum price, at which peanuts were sold from the 1947 crop was 1414 cents.

Senator AIKEN. Five-cent spread between the farmer and the user. Mr. FETTE. I would say about 6-cent spread at the present time. Senator AIKEN. In other words, the spread amounts to almost twothirds as much as the farmer gets for his peanuts. He gets $220; that is 11 cents.

Mr. FETTE. He has a support price of 10 cents.

Senator AIKEN. He has a support price of 10 cents.
Mr. FETTE. That is right, and our price is 1614 cents.
Senator AIKEN. That is a little over 6 cents spread.
Mr. FETTE. That is right.

Senator AIKEN. Or 60 percent increase.

Mr. FETTE. That is right. Of course, the recovery is only in the neighborhood of 70 to 72 percent.

Senator AIKEN. Yes. That is all. Thank you.

Mr. FETTE. Thank you, Mr. Chairman and members of the committee.

The CHAIRMAN. The next witness is Mr. William H. Fischer, divisional manager of the Jewett & Sherman Co., of Milwaukee, Wis., and president of the Peanut Butter Manufacturers' Association.

STATEMENT OF WILLIAM H.

FISCHER, DIVISION MANAGER,

JEWETT & SHERMAN CO., AND PRESIDENT, PEANUT BUTTER
MANUFACTURERS' ASSOCIATION, MILWAUKEE, WIS.

The CHAIRMAN. Where are your headquarters, Mr. Fischer?
Mr. FISCHER. Milwaukee, Wis.

The CHAIRMAN. How much of a membership do you have?

Mr. FISCHER. We have in poundage approximately 70 percent of the total industry as membership.

Senator AIKEN. How many members do you

have?

Mr. FISCHER. Sixty-seven, but among those members we include the greater percent of the poundage of the total because there are a great number of smaller manufacturers.

The CHAIRMAN. Your organization has been in existence a good many years?

Mr. FISCHER. This is the twelfth year.

The CHAIRMAN. Has it grown in membership?

Mr. FISCHER. I believe we have acquired 8 members in the last 3 months.

The CHAIRMAN. We will be glad to hear from you.

Mr. FISCHER. Thank you, sir.

Mr. Chairman, gentlemen, my name is William H. Fischer. I am divisional manager of the Jewett & Sherman Co. of Milwaukee, Wis., manufacturers of peanut butter. I am also president of the Peanut

Butter Manufacturers' Association, and I speak both for my own company and for the peanut butter industry as represented by the association.

My company is considered one of the largest buyers of peanuts for peanut butter, operating plants not only in Milwaukee, but also in Albany, Ga.; Brooklyn, N. Y.; Cleveland, Ohio; Houston, Tex.; and Kansas City, Mo.

The extent of these operations gives us a rather national view of peanuts and peanut butter. You will note that the plants at Albany, Ga., and Houston, Tex., are located right in two of the major peanut producing areas.

The CHAIRMAN. What is the extent of peanut production in those particular sections of the country?

Mr. FISCHER. There are 47 counties in Georgia that produce the main portion of the peanut crop and there are a considerable quantity of peanuts produced in the Texas area and the Virginia and Caro

lina area.

In round figures, and based on normal times, the peanut butter industry uses over 50 percent of all the shelled edible peanuts produced. Other uses, as in confections and salted peanuts, account for the balance. Under ordinary conditions, the peanuts which are unfit for use by these industries are culled for peanut oil.

This morning we received a Bureau of Agricultural Economics report indicating that a preliminary usage on peanut butter for March shows that the peanut industry used 62.8 percent of the total usage during March.

Senator AIKEN. How does the production of peanut butter compare with last year or the last few years?

Mr. FISCHER. It is off probably about 40 percent. That is a rough figure because we have not been able to get definite production figures from manufacturers, but we can estimate it.

Senator AIKEN. Off 40 percent from a year ago?

Mr. FISCHER. Yes, off 40 percent in 1947 over 1946.

Senator BUSHFIELD. How do you account for that decline?

Mr. FISCHER. Primarily because of price. Peanut butter has been considered a so-called poor man's spread, something that was cheaper than other bread spreads and it has gone up to a point where it is now more expensive.

Senator AIKEN. What part of the peanut butter produced is sold for family use and what part of it for candy manufacturing? We have had the testimony of the candy manufacturers that they have to meet the competition using the lower-cost ingredients which right now are sugar and milk, that is, there has been less increase in the cost of sugar and milk.

Has the falling off in the use of peanut butter been in its use for candy or family use?

Mr. FISCHER. Actually, only from 14 to 19 percent of peanut butter produced goes into candy. In other words, somewhere between 87 and 82 percent goes into consumption as peanut butter by the individual.

The CHAIRMAN. Is the peanut butter industry growing according to your reports?

Mr. FISCHER. No, the peanut butter industry has been declining in the last 2 years.

The CHAIRMAN. It has?

Mr. FISCHER. It is estimated that the production has fallen from 340,000,000 pounds in 1946 to 260,000,000 pounds in 1947.

The CHAIRMAN. How do you account for that?

Mr. FISCHER. Principally because of price, the rise in price due, of course, to the increase in all costs but the terrificly high price we are paying for peanuts has been the largest factor affecting the consumer's increased cost.

The statement has just been made that 161⁄2 cents is being paid for peanuts. That happens to cover only one type of peanut. Sixteen and three-quarter cents, I believe, would be considered more the average price today on No. 1 Government stock, Spanish shell peanuts, and you possibly might be able to get some cheaper peanuts at 1614 cents, but I do not know where.

The CHAIRMAN. You are going to tell us how we can help the peanut industry?

Mr. FISCHER. I am going to try to tell you.

On the basis of agricultural statistics covering the crop years 1938 through 1949, which are the latest available, of the total peanuts picked and threshed, about 15 percent remain on the farm for various farm uses, such as cattle and hog feeding, and seed. About 18 percent go for crushing into oil, and the balance, or 67 percent, go to the socalled edible trade.

From this it can be readily be seen that the peanut industry, from farm to factory is built upon the edible use of peanuts in peanut butter, candy, and salted peanuts.

It is not our purpose at this time to venture any opinion on title I of S. 2318 dealing with reorganization except insofar as it relates to the establishing of a national agricultural council. This council, to us, seemingly is granted too much authority without redress. Nor do we wish to consider title II which deals with soil conservation and domestic allotments. We feel that these two titles establish necessary mechanics for administration of the proposed bill; and that such mechanics can be easily altered to provide for any basic changes which may be considered and made under title III.

Primarily, we are here for the purpose of outlining the peanut-butter industry's attitude toward the amendments to the Agricultural Adjustment Act of 1938. We would like to discuss the following problems and make our suggestions as to how they may be solved.

First, peanuts should be removed from the list of basic commodities. I have searched for a definition of "basic" and all I have been able to find is that it means something "substantial," something "fundamental." How can the peanut crop fall into such a category? Peanuts were included in the list of basic commodities by the Stabilization Act of 1942, approved October 2, 1942.

Since then all end-users have been laboring with and under a support program which has ruined the economy of the peanut-butter industry. Complete collapse was presented only by the war boom. An error that is correctable should be corrected.

That it was an error to place peanuts on the basic-commodity list is evidenced by the fact that they occupy a minor position in the national farm economy. Georgia, the largest peanut-producing State, only obtains about 15 percent of its gross cash farm income from peanuts. Alabama gathers about 10 percent, Virginia and North Carolina about 5 percent, and all other peanut-producing States, including

Texas, Oklahoma, Arkansas, Tennessee, Florida, and South Carolina, each obtain less than 2 percent of cash farm income from peanuts. We ask you, "Are peanuts truly a 'basic'; a 'substantial'; a fundamental' commodity?"

Second, the base-price period for peanuts, 1909-14, is unrealistic. Whoever heard of peanuts in 1909? Sure, they were sold at circuses and baseball games. They were almost synonymous with pink lemonade, but that is about as far as it went. Fact of the matter is that the farm value of peanuts in 1909 was under $15,000,000. Today, that is, in 1947, the peanut crop was valued at $227,415,000. An increase in value of over 1,500 percent.

The CHAIRMAN. How much did you say the increase was?
Mr. FISCHER. Increased value of over 1,500 percent.

At that time peanuts were not an everyday food, they were something special, something novel. The limited production eliminated competition. Can such a period rightfully be used for a commodity which is now sold nationally, and is used in almost every household in the country?

As an alternative, we are offered, by S. 2318, a base period which uses the preceding 10 years, for the establishment of a parity factor. This period is only usable when the resulting figure is higher than the old 1909-14 figure. The introduction of this method of calculating parity is one of the angles known as modernization. Our opinion is that such a phase of modernization should rightfully be called anticipation. As far as peanuts are concerned, it does nothing to correct present parity regulations. It continues a price of peanuts which has become a price ceiling rather than a price floor. I am willing to wager that not a single pound of peanuts moving into usual channels was purchased during the 1947 crop season at 1 cent over the 90-percent of parity guaranteed figure. What is parity then? Floor or ceiling? Therefore, we make the following suggestion-Parity should be figured on the period of 1935 through 1939 for these reasons:

1. The period as outlined is the most modern so-called normal period, postdepression and prewar.

2. Because of the facts mentioned above this period has previously been used by Government agencies for the computations of other indexes, including excess-profits tax.

3. Historically, periods other than the 1909-14 period have been and are being used for parity on other commodities, such as tobacco and potatoes.

4. All necessary figures for parity computations for this period are available to the economists of the Department of Agriculture.

In S. 2318, section 302, paragraph (c) (1) (p. 40, lines 1 and 2) we see a continuation of the discrimination between users of peanuts, which was first set up by Public Law 30, section 2, approved April 12, 1945. Here again we note that peanuts used for oil may be sold at a lower figure than peanuts for edible uses. Why the difference? Conservatively speaking, 95 percent of the peanut oil, which is made, eventually goes into edible channels.

Is salad dressing edible? Is vegetable shortening edible? Is peanut oil, which is sold as such for cooking, edible? All of these products are foods, made in accordance with Food and Drug Administration rules and regulations. Consumers use them as foods. How can any