per bushel or less than half of the price prevailing that month in the previous year. A slight improvement in prices was noted during May and June as fresh market supplies were cleaned up.

Contract cancellations under this program amounted to 100 cars in 13 States and were due principally to the condition of the fruit failing to meet the maturity requirements of the program. Due to the wide geographic distribution of the apples for which contracts were canceled, the poor condition of the fruit, lateness in the season and generally depressed market prices, it would be difficult to ascribe any measurable effect on the consumer market to the released apples.

CANNED RED TART PITTED CHERRIES, 1952

The 1952 crop of sour cherries was estimated on June 1, at 152,000 tons and, if it had been realized, would have been the third largest of record. In addition, canners' carrying stocks of red cherries on July 1, 1952, had been exceeded only by those in 1938. During July, f.o.b. cannery quotations ranged $2-$2.10 per dozen No. 2 cans and, although no prices are available at that date for No. 10 size cans, they had ranged $10.50-$10.75 in June.

On July 24, 1952, the Department purchased 163,380 cases of red cherriespacked in 24 No. 2 cans and 306,375 cases packed in No. 10's. As the result of heavy wind and rain damage to the sour cherry crop in the important Eastern States in late July, the estimated 1962 production was reduced to 105,850 tons on August 1. Due to the reduction in the size of the crop, contracts were canceled in mid-August for 148,570 cases of 24 No. 2's and 253,455 cases of 6 No. 10's.

In August and September f.o.b. cannery price quotations had declined to $1.80-$1.90 per dozen No. 2's and $9.50-$9.75 per dozen No. 10's, due principally to the pressure of heavy canners' stocks. After the full effect of the storm damage to the crop could be evaluated in terms of the prospective total pack, f.o.b. quotations rose each month from October through December reaching $2.15-$2.25 per dozen No. 2's and $11-$11.25 per dozen No. 10's. Had delivery been required of the total amount purchased it would appear that an even greater price rise would have occurred. The quantities canceled represented 6 and 23 percent of the season pack in No. 2's and No. 10's, respectively.

FRESH WINTER PEAR PROGRAM, 1953-54 SEASON

Prices for winter pears sold on the 10 auction markets trended downward during the forepart of the 1953-54 season. Prices during the first 2 weeks of the season in September averaged $4.65 and $4.33 per box but declined rather steadily to a low point for the season of $3.39 per box near mid-December. On December 24, 1953, a press release was issued by USDA announcing an offer to purchase winter pears. By the week ended January 1, 1954, a slight improvement in the market brought the weekly average to $3.88. Contracts were awarded for the purchase of a total of 181 cars on January 11 and January 22, 1954. The market continued to rise generally and by the end of the delivery period in late March reached $4.86 per box.

A total of 15 cars were canceled from the contracts awarding 181 cars. Of the quantity canceled, 9 cars failed to meet the condition requirements of the program, 3 cars were exported, and 3 cars sold in commercial channels. Since only 12 cars were available for the commercial market, it would appear that this quantity could have only a negligible effect on the price level.

TURKEY PURCHASE PROGRAM, 1956

The 1956 turkey crop was record large, totaling 76.8 million head or 17 percent larger than a year earlier and 13 percent larger than the previous record crop in 1954. Prior to the initiation of purchases by the Department, late in September 1956, producer prices had declined to the lowest level since early in the 1940's. The U.S. average farm price of turkeys in mid-September was, for example, 26.7 cents per pound or 14 percent below a year earlier and 17 percent below the 5-year average.

Historically there is a reasonably good relationship between net returns to turkey producers in 1 year and the size of the turkey crop the following year. Years of profitable production are generally followed by larger crops which net producers smaller returns. They then respond by cutting the following year's crop. It was the intent of the 1956 purchase program "*** to limit the extent of the decline in the 1956 turkey feed-price ratio such that the

1957 turkey crop (would) be reduced only to the extent necessary to result in reasonable 1957 price levels."

On September 7, 1956, the Acting Secretary of Agriculture approved a resolution passed (Sept. 6, 1956) by the CCC Board of Directors, recommending to the Secretary that he authorize a program under which not to exceed $25 million in section 32 funds, would be utilized to purchase turkeys for immediate distribution to nonprofit school lunch programs and eligible institutions. The resolution stated further that the Poultry Division, Agricultural Marketing Service, was to prepare and submit to the Secretary for his approval, a docket containing the economic data and other information with respect to such a program. The subject docket was prepared and was signed by the Acting Secretary on September 13, 1956. On September 7, 1956, the Department announced, through a press release, that turkeys would be purchased "*** in order to stabilize producer prices during the heavy marketing season for this year's record turkey crop." On September 13 a press release announced the details of the program and requested offers.

Offers were to be for fresh frozen young turkeys, ready-to-cook, in carlot quantities and which had been slaughtered after the date of award of a contract. The turkeys were to be inspected for wholesomeness and graded for quality by the USDA. First offers were invited to be received not later than 3 p.m. on Tuesday, September 25, and every Tuesday thereafter, until further notice. A total of 50 firms offered 8,222,000 pounds on September 25, the first offer date, but only 360,000 pounds from 5 firms were purchased. Purchases were made weekly thereafter through a final purchase on November 23, 1956. At the end of the program, a total of 27,114,000 pounds had been purchased at a total commodity cost of $10.4 million.

Producer prices for turkeys on the date of the initial purchase ranged from 23 to 25 cents for toms and 26 to 28 cents for hens in the major production areas. Subsequent to the initial purchase, and prior to the last purchase date on November 23, producer prices for toms held within a range of 24 to 26 cents and hens within a range of 26 to 28 cents. Purchases were primarily toms.

Between November 23, the date of the last purchase, and November 27, when offers were again invited but no purchases made, producer prices showed a sharp tendency to advance and both offer prices and quantities offered reflected this tightning of the market.

Live producer prices, for toms, for example, increased one-half to 3 cents per pound during the 1-week period and ready-to-cook wholesale prices advanced 2 cents per pound. The sharp advance in prices was unforeseen and resulted from an excellent Thanksgiving movement. Whereas on November 20, 690,000 pounds had been offered by seven bidders a week later; i.e., on November 27, only 60,000 pounds were offered by one bidder.

Between November 20 and mid-December, producer prices for toms increased from 2 to 4 cents per pound. They then eased off slightly in some areas prior to the end of the year. Producer prices for toms in the three major producing areas immediately before, during, and after, the period of purchase, were as follows:

Date

Producer prices for toms-1956

[In cents per pound]

As a result of the sharp advance in live prices late in November, the Department received a number of requests to cancel out its remaining undelivered contracts. On the basis of these requests, and in light of the facts, a memorandum dated December 3, 1956, was prepared by the Administrator of AMS for the Administrator of CSS, which read as follows:

"The Department of Agriculture has awarded contracts to vendors for the delivery of 2,082,000 pounds of turkeys during the week of December 3 and 360,000 pounds during the week of December 10. Following the Thanksgiving period the price for live turkeys of the class that would be delivered under these contracts has increased 3 to 4 cents. The products are to be donated to school lunch and institutions but are not needed in these outlets particularly in view of the fact that substantial quantities of other protein foods, that is, hamburger, pork, eggs, etc., are being made available to these outlets. The purpose of the program, that of stabilizing producer prices during the major marketing season has been accomplished and in view of the increased prices it is apparent that the surplus no longer exists. On November 29 the Department announced that the turkey purchase program was suspended.

"For these reasons we suggest that vendors who are obligated to deliver turkeys during the aforementioned periods be notified that they may have the option of canceling their contracts if they with to do so. We have determined that this action would be in the best interest to the Government in the light of recent price developments."

The memorandum was acknowledged by a written note thereon indicating approval by the Acting Director of CSS.

On the basis of this agreement the Department issued a press release on December 4 announcing that the 18 companies awarded contracts on November 16 and November 23 for delivery during the weeks beginning December 3 and December 10 respectively, could, at their option, cancel all or part of such contracts in not less than carlot quantities.

A total of 2,442,000 pounds of turkey were purchased by the Department on the subject dates. Of the 2,442,000 pounds open to cancellation 1,448,000 pounds were canceled and 994,000 pounds were delivered. The details are indicated in the table below:

Turkeys purchased by the Department on Nov. 16 and Nov. 23, 1956, and volume delivered and not delivered

Of the subject contractors, only Norbest Turkey Growers Association is, to our knowledge, a cooperative. The others are independent processors and grower-processors.

The release of 1,448,000 pounds of turkey purchased by the Department with section 32 funds "*** in order to stabilize producer prices * * *," was expected to and did dampen the rapid rise in live and wholesale prices.

Without this dampening effect prices would have risen even higher with a corresponding increase in Christmas retail prices and cut in consumption. Christmas follows Thanksgiving in the sale and consumption of turkeys.

Wholesale prices declined from the peak stimulated by the Christmas demand and ended the year only slightly higher than in late November just prior to the sharp upturn.

CANNED GRAPEFRUIT SECTIONS PROGRAM, 1957-58

Due to the small volume of grapefruit sections packed in No. 2 size cans, no commercial market price for this size had been established since the 1955-56 season. Contracts were awarded for 117,000 cases of grapefruit sections packed in the consumer size of 24 No. 2 cans per case and cancelled for 40,636 cases. A total of only 94,974 cases of 24/2's were packed during the 1957-58 season in Florida. Requirement of complete delivery under the contracts would, therefore, have removed the entire supply of this can size from the consumer market. Remaining supplies of 24/2's were insufficient to establish a f.o.b. price. Immediately prior to the December 12-13, 1957, freeze, f.o.b. cannery quotations for grapefruit sections packed in cases of 12 No. 3 cylinder cans ranged $4.60-4.75. The following week the price rose to $4.90 per case and remained at this level for the balance of the season. Since the pack in this can size is primarily for institutional use, consumers would be affected indirectly. The quantity of 12 No. 3 cylinder cancelled, 89,863 cases, represented 18 percent of the total pack in that size. Delivery would have further reduced the quantity available for the commercial market and could have resulted in a further advance in the f.o.b. price.

FRESH WINTER PEAR PROGRAM, 1962

Following the Department's announcement on December 27, 1962, of an offer to buy fresh winter pears, both shipping point and auction prices advanced. F.o.b. prices at Yakima, Washington, for U.S. No. 1 Anjous, size 135 and larger, were generally at a level of $3.75-$4.00 per box. By mid-January prices strengthened to $4.00 per box with occasionally higher quotations and continued firm until February 25, at which time the current level of $4.00-$4.25 was established. Fancy grade for the same variety and size moved up from the midJanuary level of $3.25-$3.35 per box to the present quotation of $3.40–$3.50. On the 8-auction markets the prices exhibited considerable strengthening, advancing 5 consecutive weeks from a seasonal low of $3.89 per box during the week ended December 21, 1962, to $5.48 the week ended January 25, 1963. During February prices declined to a range of $4.42-$4.95 per box but were well above the low point in mid-December.

The Crop Reporting Board estimated the value of the 1962 Pacific coast winter pear crop (pears other than Bartletts) at $12.8 million. The Department's expenditure of approximately $1.2 million represents about 9 percent of the value of production.

The cancellation of such small quantities of pears which had been contracted to the Department had virtually no effect on consumer prices.

COST OF TRANSACTION

Mr. WHITTEN. Were those cases of inability of the producer to have it available or a case of the market going up and him wishing to recover back what he had sold in order to make a profit? If I understand your testimony at this point, you contracted for actual juice in existence and you were not contracting to take the surplus of a future crop, or a future production which weather might affect. You were dealing with an existing surplus which already was there and you made a firm contract, binding the Government, and if the price had dropped 50 percent, you would have had to pay, wouldn't you? Mr. SMITH. Yes.

Mr. WHITTEN. And since it went the other way, you released it, without any compensation at all to the Government?

Mr. SMITH. That is right.

Mr. WHITTEN. What about the cost of handling this transaction? That wasn't paid by the people involved, is that right?

Mr. SMITH. It wouldn't be.

Mr. WHITTEN. No, we are talking about something that happened. Mr. SMITH. I say the costs were not defrayed. That was the purpose of my answer, sir.

Mr. WHITTEN. Do you recall what other examples you have of this kind of situation?

CONTRACTS TO PURCHASE TURKEYS

Mr. LENNARTSON. I can recall one on turkeys, Mr. Chairman, where we bought substantial quantities of turkeys for donation to the school lunch program, specifically as a section 32 surplus removal operation, and as the season approached the Christmas holidays, I want to point out we had bought substantial quantities for the school lunch program, the market being very firm so essentially no surplus continued to exist.

These contracts were for future delivery, just as the citrus contracts were and the determination or the policy was, and has been, that the section 32 funds are for use in removing surplus as they exist and if the surplus disappears, the question would be as to whether we could continue expending those funds for a nonexistent surplus. I think this underlaid very strongly the considerations with respect to the citrus.

Mr. WHITTEN. Mr. Lennartson, supply the same detailed information on the turkey transaction we have asked for on this citrus matter. Both may be all right. I don't know there is anything wrong with it at all. I do know the Congress should be aware of it, if we have this type of policy. If that has been the common policy, if the law permits that, I would suggest those who deal with the subject ought to give a little thought as to whether this ought not to be a two-way street. Personally I doubt the law contemplates what the Department did here, if in fact the law permits it.

Now if you contract for a surplus, and it is a flat outright obligation of the Government, it would raise some question whether it is good policy for this type of thing to happen. It may be it is within the law. If so, at least the record ought to show what the facts are. I am trying to get information in the record on what the facts are. Again, I want the full details on the turkey deal. Let us see if it is on all-fours with this case. Give us names, dates, copies of instruments, and so forth.

(The material referred to was supplied to the committee of which a portion is included in the insert on pp. 1527-1530.)

POTENTIAL EFFECTS ON CONSUMER

Mr. LENNARTSON. Certainly the Department would be in this position-had we continued to buy turkeys at that time when the market was moving up rapidly-we would be subjected to criticism of bidding against the consumer for the product, in the event the surplus had disappeared. And this underlaid the consideration with respect to the citrus. I think the Department could have been severely criticized had they taken this quantity and essentially been taking the commodity and bidding against the consumer. It could very well have pushed the price up.