It was stated here that the object is to equalize the price of butter and margarine. Well, this shows conclusively that it can not be done through a tariff on coconut oil. I would like permission to insert this chart and the one showing the price difference between butter and oleomargarine for the past 10 years, which will show that the facts shown on chart No. 1 hold good over a period of many years. The CHAIRMAN. If there is no objection, it will be inserted in the record. (The charts referred to, marked "Charts Nos. 1 and 2," are as follows:) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 3940 Portion of Tariff A protection not B10 Lot Maximum theoretical increase in Cost of Approximately 53/100 lbs. of Coconut CHART-AS OF DEC.1,1931 Showing actual differences in price between Prices of butter and oleomargarine for the 10-year period from 1921 to 1930 BUTTER ་ OLEOMARGARINE AVERAGE PRICE DIFFERENCE OVER TEN YEAR PERIOD 21.9c. PER LB. 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 Mr. CRAIG. Now, that you see that the tariff can not put oleomargarine on a competing basis with butter from the standpoint of price, assume that coconut oil can be completely removed from the picture. What will be the situation then? According to the report of the Secretary of the Treasury, in the fiscal year ending June, 1931, the consumption of coconut oil in margarine in the United States amounted to 156,000,000 pounds, not 600,000,000 or 700,000,000 pounds, as one would be led to believe from the erroneous statements made by some of the agitators for Philippine independence. The total imports of coconut oil as such and in the form of copra expressed in terms of oil in this period amounted to 677,000,000 pounds, of which the Philippines supplied 77 per cent. On that point, we take usually between 75 per cent and 80 per cent of the Philippine Islands production of coconut oil and copra, but it is also necessary for us to import approximately 50 per cent of our copra requirements from other copra-producing countries. The manufacturers of margarine, therefore, in this period, used only about 23 per cent of the total imports of coconut oil instead of 100 per cent, as stated by the would-be benefactors of the American dairy men. If the manufacturers decided to cease making coconut oil margarine, which is very unlikely, no matter how high the duty on coconut oil, they would need only to find other ingredients to replace this 156,000,000 pounds of coconut oil, and not the total imports, as they have no interest in the balance of the coconut oil importations. Coconut oil, when used in the manufacture of margarine, only serves to make it possible for the consumer of margarine to select for his table a product which is made from 100 per cent vegetable fats and oils as the fat or oil base. If any move were made, which resulted in a substantial increase in the price of coconut oil, it would merely mean that the consumer might have to pay more for this kind of margarine, or, if he were unwilling to do so, he would purchase other types of oleomargarine which are composed of mixtures of animal and vegetable products, or entirely of animal oils and fats. Since in the 1930-31 fiscal year, the United States manufacturers of margaine used 156,000,000 pounds of coconut oil, it is of interest to see the other raw materials available over and above what actually were used and which would have been used, had coconut oil been unobtainable. Suppose consumers forgot their taste for coconut oil margarine, which they will not, duty or no duty, the manufacturers would merely have to increase their use of these other raw materials. For this purpose they have available, according to the census figures of 1929, exclusive of 4,200,000,000 pounds of hog lard and butter, the following domestic products: Cottonseed oil, 1,584,000,000 pounds; peanut oil, 16,000,000 pounds; corn oil, 133,000,000 pounds; neutral lard, 43,000,000 pounds; edible tallow, 43,000,000 pounds; oleo stearine, 59,000,000 pounds; and oleo oil, 122,000,000 pounds, which makes a grand total of 2,000,000,000 pounds of domestic fats and oils available if needed for oleomargarine manufacture. These fats and oils are all prime first-class margarine ingredients, none of them subject to duty, none of them going into products which sell at as high a price as margarine; hence, the margarine maker would have first call. Of course, he is using a small fraction of this domestic supply, having consumed in the fiscal year ending June, 1931, approximately 75,000,000 pounds, which leaves available 1,925,000,000 pounds, or about 96 per cent of the total still available for the use of the margarine manufacturer. Why, then, should he be concerned if he is shut off from the Philippines and their coconut oil, granting that it could be done, which it can not be, duty or no duty? Out of the 6,200,000,000 pounds of edible oils and fats produced in the United States in 1929, there were exported 1,000,000,000 pounds, from which it can be seen that, even if the margarine maker used domestic oils and fats in sufficient volume to displace the entire 156,000,000 pounds of coconut oil, it would still leave an exportable surplus of around 850,000,000 pounds of edible oils and fats. With such a huge exportable surplus, it would be very rash indeed to surmise that the duty on coconut oil would in any way increase the general price level of these domestic oils and fats, particularly since the price of hog lard, the most heavily exported item, controls the balance of the edible group outside of butter, its price being that of the world price level, which is not affected in any way by any American tariffs. Now, with regard to the packing house by-product oils and fats, oleo oil, oleo stearine, and neutral lard, all of which are produced in large exportable surplus, it is not likely that the increase in price necessary to keep them out of the export market and to hold them in the United States, if required here for the manufacture of oleomargarine, would be sufficiently large to warrant any expectation that such increased price would be reflected in the minutest degree in the price paid by the packers for the farmers' beef cattle. Since it is extremely doubtful that the packer would feel that he could afford to pay any more for beef cattle on the hoof because of the increased price on the few pounds of oleo oil, etc., obtained from a beef steer, no benefit can be seen as accruing to the livestock farmer from the liberation of the Philippines. At this point I might say that the yield of tallow, from the average 1,000-pound steer, is only about 6 or 7 pounds. If you increase that price even 2 or 3 cents a pound, you would only add to the value of the steer about 18 cents. Certainly any venturesome individual who sets forth to raise the price level of all domestic oils and fats must recognize that in attempting to do it by tinkering with the price of 156,000,000 pounds of margarine ingredients represented by coconut oil, he has at his disposal a very weak crowbar. The mass of the remaining margarine ingredients is too great to be moved by any such tinkering with 156,000,000 pounds of oil-and-fat base of the kind of margarine which would be affected by Philippine independence and tariff duties against Philippine coconut oil, which the passage of the Hare Bill would involve. The domestic vegetable oils are used in margarine only in combination with higher melting point fats and oils. Their properties are such that in their virgin condition they can not be used because they 106240-32-26 are liquid at ordinary temperatures. In other words, margarine made from them, when taken out of the refrigerator, would melt immediately. If you attempt to change these oils by hydrogenation, you raise the melting point considerably above body temperature, forming a hard fat which would be completely unpalatable as a spread for bread. It would stick to the roof of your mouth. Now, in making purely vegetable or nut margarine, as it is more commonly called, it is the usual practice in order to produce the unctuous texture necessary and to counteract the tendency of coconut oil to become grainy and hard at low temperatures, to add a soft nut oil such as peanut oil, and a stiffening oil, usually hydrogenated coconut or peanut oil. The percentage of soft vegetable oil added must be kept to a minimum and usually does not exceed from 5 to 10 per cent. The stiffening, or hydrogenated portion, normally varies from 10 to 15 per cent. Actually, this stiffening oil is the only portion of the coconut oil which could be replaced by a domestic oil. Assuming, therefore, that 10 per cent of the coconut oil would be replaced by a hydrogenated vegetable oil-assuming that the manufacture of vegetable margarine will be permitted-the amount involved in the change would have a value not exceeding $100,000. What a puny influence this insignificant amount would have in raising the price level of the domestic fats and oils, or in affecting in any way the value of our domestic butter production estimated by the Department of Agriculture to be approximately 2,100,000,000 pounds. Competition between butter and margarine can not be changed by a tariff on Philippine coconut oil. Granted, that it would be possible to take away from the margarine manufacturers the only suitable vegetable oil adapted to their uses, they would not go out of business, as many of them have already stated, but would merely turn to making an animal-base margarine. I have talked to the presidents of several of the larger companies within the past several weeks, and they all confirm that general statement, that they are not going out of business if we take away coconut oil; they will merely turn to the production of animal-fat margarine, containing only a small proportion of vegetable oils from which it can be seen that the American growers of oleaginous materials would not be benefited one iota through the increased consumption of their byproducts in the field of table fats. Butter would still have the same competition it now has from margarine. No one can conscientiously claim that any reasonable rate of tariff taxation could be imposed upon vegetable oil used for making margarine that would destroy the attractive saving to the consumer who chooses to use margarine instead of butter. No practical duty on coconut oil could have the effect of so increasing the price as to make margarine and butter competitive on a price basis. If you further increase the price on cigarettes, you will not make people smoke cigars instead, from the standpoint of price, and the same thing applies here. The amount of price difference resulting from a tariff is not sufficient to change the use of the product. In the field of cooking fats and oils, the most fertile fields for those who seek to foster misinformation in respect to Philippine coconut oil is in the cottonseed-oil industry. It is impossible to see wherein they have a legitimate basis for such propaganda, since coconut oil can not be used for the same purpose for which the great mass of our domestic oil and fat production is used, as cooking oils and fats, and salad oils. From the census report for 1929 it is seen that 85 per cent of cottonseed oil, the chief vegetable oil produced in the United States, finds its use in the manufacture of vegetable shortenings or lard substitutes, salad oils, and other cooking compounds. A meager 2 per cent goes into margarine when it is used in combination with certain animal fats in making animal-fat oleomargarine, 1 per cent into miscellaneous industries, and 12 per cent into the soap kettle, It should be borne in mind, however, that that portion which goes to soap making consists solely of the so-called foots or the refuse from refining oil to make it edible, and at times a small amount of off-grade or damaged oil which is unfit for edible usage. I have here some samples of the different vegetable oils from which you will see the foots. Here is one marked "Cottonseed fatty acid." This is the refuse or "foots" from refining cottonseed oil for edible purposes. These "foots" go into the soap kettle. The price of these "foots" is charged against the original oil, and the grower of cottonseed does not benefit any from the price obtained for the "foots," the present price being about one-half cent per pound. Here is a sample of crude corn oil. This is a sample of corn oil fatty acid or "foots," which is the refuse from refining it to make it edible. This is a sample of edible corn oil, produced after the various albuminous materials, fatty acid, and so forth have been removed from the crude oil. This is a sample of the edible cottonseed oil. You see, gentlemen, that these oils of American agriculture are all liquid, whereas the coconut oil is solid, having the appearance of tallow, although its melting point is below body temperature and tallow is above. Now, we have heard so much about the subject of interchangeability that I want to pay particular attention to this phase of the subject and endeavor to explain it in terms that will be understandable, although it involves quite a good deal of chemistry. The chemical characteristics of the American-produced vegetable oils of edible grade-cottonseed, peanut, corn, and soybean oils, make them of much greater value for use in the field of cooking oils and fats, and salad oils, a field in which coconut oil is entirely unfitted for use, for the same reason, they are unfitted for use in the fields in which coconut oil is of greatest value, namely Mr. UNDERHILL. Right there, Mr. Craig. Something was said here at the last hearing with reference to the prospective increase or the possibilities of a tremendous increase in soybean cultivation, provided that the field were opened to them to a greater extent. According to your testimony, that oil can not be used? Mr. CRAIG. I will cover that subject in very complete detail when I come to the competition of soybean oil, which I will treat under the subject of drying oils in the paint and varnish industry. A |