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Senator THOMAS of Oklahoma. Will you give your name, occupation, and place of residence, Mr. Woods? STATEMENT OF WILLIAM WHITFIELD WOODS, PRESIDENT OF
THE INSTITUTE OF AMERICAN MEAT PACKERS Mr. Woods. My name is William Whitfield Woods. I am president of the Institute of American Meat Packers.
Senator THOMAS of Oklahoma. Will you briefly describe that organization for the record, please?
Mr. Woods. It is a trade research and educational organization of the packing industry. It is in very considerable part a technical association dealing with the technology of the industry. For example, we have a livestock department which cooperates with the agricultural colleges and with the producers' organizations in research, looking toward the influencing of the type of livestock produced-questions of that sort. We undertook work with Yale and Purdue in that direction, through that department.
Senator THOMAS of Oklahoma. With whom do you come in contact, in the main, in your work?
Mr. Woods. May I just complete that little statement about the institute, unless you would rather turn to something else?
Senator THOMAS of Oklahoma. No; I was trying to bring that out a little more fully.
Mr. WOODS. Our next department largely parallels the functioning divisions of the industry, our plants operating department. The director of that is a former packing-house superintendent, and we deal there with the operating literature of the industry, with the mechanical operations of the industry, and conduct experiments to try to cheapen costs, standardize equipment, develop improved types of equipment, and carry on mechanical experimentation such as experimentation on slaughtering methods, which we have been working on for some years now in an endeavor to improve those methods.
In addition we maintain extremely technical departments--I mean the laboratory kind of work as distinguished from the mechanical experiments. We have in charge of that department Dr. N. Lee Lewis, who was former chairman of the Department of Chemistry at Northwestern University, and there we deal with the curing processes of the industry and the formulas and the efforts to conserve the meat. We have a research laboratory out at the University of Chicago and an analytical laboratory down at 9 South Clinton Street. We also have a department of nutrition that attempts to keep abreast of the current nutritional studies regarding meats and their uses. In that department we have financed research in that field. So, too, we run through the other departments of the industry.
We come into contact very generally with packers and with those from whom we buy and with those to whom we sell.
We have about 200 members. I should guess that our membership produces from 80 to 90 percent of the commercial production. I except from that the farm slaughter and the slaughter done by the very small retailers or butchers, the general stuff that moves in the ordinary channels of trade as distinguished from stuff that sells in the very immediate vicinity and very small towns and on the farms.
Senator THOMAS of Oklahoma. I suggest now that you proceed in your own way to discuss this bill.
Mr. Woods. Well, I have noticed that the other witnesses all say they would like to make a statement, and I do not want to break any precedents, so I have got one here that is about 10 minutes long that
would like to read, if I may. It clarifies our views. [Reads:]
The Institute of American Meat Packers is fully conscious of the disastrous conditions confronting the producers of livestock. It is in cordial sympathy with the desire of the President to improve the condition of the farmer and to raise the prices which the farmer can receive for his products.
The Institute feels a sense of obligation to cooperate with the President to the utmost in the national emergency. It also owes a duty to help conserve the interests of livestock producers, meat retailers, and the great consuming public, as well as of its own processing members.
The Institute is impressed with the statement of the President in his message recommending the passage of the bill, that the procedure proposed by the bill is along a new and untrod path”.
Encouraged by that reservation of the President, the Institute feels that it would be lacking in frankness and that it would also fail to discharge its obligation to place the experience of its members at the disposal of the Congress and the country, to whom the President has presented the matter, if it did not point out some of the problems which will be met in the administration of the proposed bill, insofar as it concerns meat products.
The first point we would like to call attention to is the increased burden upon the consumer, if this tax, as is argued, can be collected from the consumer-just making that assumption.
Under the terms of the bill, the Secretary of Agriculture is authorized to levy taxes on the processing, among other commodities, of hogs, cattle, and sheep, so as to bring about a gradual increase in their prices and thus recover the relative distance between existing prices and 1909 to 1914 prices. The tax is to be paid by the processors and collected, if this were possible, by the processors from the
The total retail meat bill of the Nation for 1932 is estimated at $2,200,000,000. The total retail food bill of the Nation is estimated at $9,500,000,000. Based on total meat production for resale in the year 1932 but eliminating slaughter for home consumption--and we eliminated that on the theory that perhaps some of it would not be taxed—the application of a tax as permitted in the bill that would be necessary o increase today's prices to their pre-war parity, would mean a levy which would be equal to 5 cents a pound on dressed meat and might amount to a total tax of $760,000,000.
In addition, the bill provides for a floor tax of approximately $30,000,000 on depot stocks, making a possible grand total tax on this basis of figuring of $790,000,000. Now, if you will take the figures in the House committee's report, which show a larger maximum tax than we figured here, the amount would be very much larger indeed. I think the principal discrepancy between our figures and the House committee's figures on what the tax would be in order to raise current prices in the local markets to parity prices grows out of the fact that they were figuring from February 15 and we brought our figures to date, and we probably also tried to be conservative on it.
It will be readily seen, therefore, that the possible tax on the three meat items alone-cattle, hogs, and sheep-amounting to $790,000,000, supposes an addition of 36 percent to the consumers' retail meat bill, and 843 percent to the consumers' entire food bill. Admittedly these are maximum figures allowable under the bill, for under it the legislative decision as to the actual amount of the tax is left to the decision of the Secretary of Agriculture. In establishing this tax he will naturally want to consider the degree to which a specific tax will be collectible. He would also have due regard for the effect that uncertainty as to his possible action would have upon the industry.
The figuring of those factors is not any highly intricate process, and if the committee is interested further, when we get through with this statement it will be very easy to figure out together from the House committee's report and from the slaughter reports last year what the tax would be, approximately, if you applied those rates to that slaughter. The questions that are not pegged, of course, definitely, are what your slaughter would be, whether the bill would operate to reduce production some, and also what kind of tax would be imposed. These were maximum figures.
The second point, the impediment of competitive and untaxed foods. The primary difficulty will arise in the effort by the processor of livestock to collect the tax from the consumer. Meat is in competition with all other foods for its portion of the consumer's dollar. It competes with fish, vegetables, chickens, eggs, and other commodities, none of which are affected directly by the proposed bill. By “directly” I mean that they involve a hearing or something of that sort to get the tax to them; whereas, automatically under the present terms of the bill it is imposed on livestock. Arbitrarily to raise the prices of meats and not include all competing foods would certainly result in a decrease in the consumption of meats.
III. The necessity of prompt marketing.-Meat products are highly perishable. Once the livestock is slaughtered it must be handled under refrigeration without delay, and marketed whether there is a glut or a shortage at that particular time. Experience shows that an artificial increase in price of even a fraction of a cent can seriously obstruct the orderly marketing of meat products, resulting in the product accumulating, and then, if it is to be sold at all, being sold at a decline in price of more than a cent a pound. IV. The control of prices by the consumer.
1:—The prices received for a definite supply of meat products are determined by consumer purchasing power and the prices of other foods. In view of the fact that the meat processing industry, in the aggregate, has operated at a loss in the last 2 years, notwithstanding the fact that the volume of the business has remained relatively stable, it would appear obvious that had it been possible, meat processors would have obtained during those 2 years a higher price for their products, thus enabling themselves to operate their business at a profit. Even in the prosperous years preceding the present depression, it was not possible for the processors to obtain a profit of more than from one fourth to one sixth of a cent a pound on their products. The experience of the meat processors is so conclusively to the effect that the ultimate consumer definitely controls the price at which meat products can be sold that any effort to force the consumer to pay a price beyond that which she is willing to pay would appear to be fraught with the gravest difficulty.
V. Is there a surplus livestock production?—The bill would appear to contemplate a reduction in the output of livestock. The experience of the meat processors raises a serious question as to whether there is a present oversupply of meat products above the requirements of the people. The United States per capita consumption of meats and lard in the last 33 years, in round numbers, has run as follows:
Meat consumption per capita
Meat consumption per capita in 1932 was lower than in any year during the last decade, was lower than in the period used as a base in the bill, and was lower than in any year this century except the war years. Last year the per capita consumption was a trifle less than 145 pounds. That is our estimate. The official figures last year have not been published, but the monthly figures make it possible to come very close to the mark. As consumption was lower, of course it follows that production per capita was lower also, even more emphattically because we have had more of our former exports to eat at home.
On February 1, 1933, total stocks of meat were less than 6 pounds per capita. The aggregate of all supplies on that date was less by 131,000,000 pounds than on February 1 last year and less by 213,000,000 pounds than the 5-year average of meat stocks on February 1.
Total meat in pounds
Feb. 1, 1933
665, 047, 000 796, 632, 000 878, 786, 000 It would appear to be clear, accordingly, that no meat surplus exists. But for unemployment and reduced purchasing power, it might easily become evident that there is an actual shortage against normal requirements.
Senator WHEELER. Will you tell me whether or not you have any suggestions to correct that situation?
Mr. Woods. Yes, before you came in, Senator Wheeler, they gave me permission to run through this statement, and if I may, I will be glad to respond to that question whenever you wish me to. [Continues reading :)
VI. Can the purchasing power of the public pay the increased price?—The question also arises as to whether an abnormal increase in the price of meat products will not impose an intolerable burden upon the public. It is estimated that some 12,000,000 men are out of work. Millions of others are on part time. The funds available to relief agencies at the present time are not considered any too adequate to meet the needs. Assuming it to be possible in actual processing to differentiate meat to be used for unemployment relief or charitable purposes-or exempted by the bill from the tax—it must be borne in mind that a large proportion of the unemployed and the part-time employed are living on their savings and could obtain no relief from the effect of the tax. A violent increase in prices may accordingly impose a burden which millions of the population cannot bear. Whether other consumers will bear it—or purchase competing foods-presents a formidable problem.
Accordingly, in administering the bill the Secretary of Agriculture will no doubt give serious consideration to the question as to whether, assuming a reduction in the production of livestock, the purchasing power of the country will make possible an increase in the retail price of meat by the required amount. Industrial activity is down to 45 percent of normal. The bill contemplates such a reduction of livestock production as will increase prices to a parity with nonagricultural prices. Industrial activity, which produces the articles purchased by the farmers, is down 55 percent.
In other words, the bill purports to accomplish by some reduction in livestock production that which has already exacted a 55 percent reduction in industrial activity without increasing prices. Experience gives no ground for assurance that the proposed reduction will achieve the expected result. Though it be true that the selling price of individual farm products is only one half, or less than one half, a normal price, the volume of farm production has remained relatively steady. Industries have suffered both reduced volume and reduced prices with no compensating benefits. The percentage reduction of nonagricultural income is probably about equal to the percentage reduction of agricultural income. Any attempt to equalize or redeem the relative injury to agriculture on the one hand, and to industry on the other, resulting from the present international economic depression, cannot overlook the lesson of these facts.
VII. Factual considerations. The administration of the bill and ability to collect the tax will be further affected by certain other limitations with which the Secretary of Agriculture will of necessity be confronted. Some of these may be enumerated, as follows:
(a) Freight rates.-A large part of the food industry carries a heavy freight rate. Consider, for example, the livestock and meat business in which by far the largest production is in the Corn Belt. The largest consuming centers are on the eastern coast. The livestock producer must pay freight to the various slaughtering centers, and from there the processors must pay freight to consuming centers. Freight rates on livestock and packing-house products are currently 75 percent higher than before the war. A greatly disproportionate amount of the consumer's dollar goes for freight, which in the last analysis must constitute a net deduction from the farmer's prices. The significance of freight charges is illustrated in the case of corn. Corn has recently been selling in Chicago at 23 cents. Freight rates from western Iowa are 16 cents per bushel. Deducting 16 cents from 23 cents leaves the farmer 7 cents per bushel. I may say these are not the remedies we have in mind. We have something more affirmative than this, Senator Wheeler.
(6) Other fixed charges.—There are other costs which are relatively fixed and inflexible, such as the fixed investments of retailers, and rents. Rents paid by retailers, if the lease is a long-time one, are onerous now. Equipment which has been installed, or used for delivery, represents an investment made when prices were higher than they are now. In the early period of the decline, many of these costs continued unchanged, and it was only gradually that individual retailers reduced their costs, whether for rents, wages, salaries, or services, and by competition compelled other retails to retain less of the consumer's food dollar. Three of the large cost items in the marketing of farm products—taxes, freight, and rents—are not subject to alteration or controlled by the meat processor.
(c) The price the processor can pay for livestock depends upon his ability to market a portion of his product in foreign countries. But export trade is at present definitely limited by foreign market conditions, tariffs, quotas, etc. The prices export markets will pay are determined by local conditions.
(d) The bill can be interpreted to mean that prices of livestock are to be arbitrarily raised before there is an actual reduction in supply. I confess I am not clear on the meaning of that section of the language. But all hogs that will be marketed this year are already born or bred, and the corn is here to feed them. It takes 4 months to breed a hog and 8 months to raise it; therefore, the hog supply for the next 12 months is already fixed and nothing can be done now to change the number of head that will come to market this year.
(e) Other administrative difficulties.—The problems involved in controlling the production and marketing of some twenty-five billion pounds of livestock concern some five or six million producers. To administer the law a great army of Federal employees must be built up at tremendous expense. As most producers have no production records, a complicated question will arise as to how to determine whether in fact production can be or has been increased or decreased.
VIII. Can meat processors pay the tax?-In view of the difficulty of collecting the proposed tax from the consumer, and in the light of the other practical problems enumerated, the question arises whether the meat processors themselves will be able to pay the tax. The processor's profit, as mentioned above, is, in prosperous times, between one fourth and one sixth of a cent per pound of meat sold. During the past 2 years it has been the experience that meat processors, wholesalers, and retailers, have failed to earn a profit, and many if not most of them have as a matter of fact been operating at a loss, yet have succeeded in maintaining employment at a high rate compared with the level in other industries. In other words, the same depression which has affected the producer of livestock has borne down upon the agencies which have processed and marketed his products. Both producer and processor have appeared to be inexorably subject to the purchasing power of the ultimate consumer.
Altogether aside from the present depression, there has never been a time when the margin of profit realized by the meat business could cover the amount of the proposed tax, or even a small portion of it.
IX. Possible restrictions upon the free livestock market.--In view, accordingly, of the impossibility of the processor absorbing the proposed tax, and the unlikelihood of his being able to recover the tax from the consumer, the Secretary of Agriculture in administering the bill will be compelled to consider the possible reorganization of the entire system of marketing livestock which with both livestock producers and processors may be confronted, and the effect of such reorganization upon the producer. At the present time the meat processor is able to sell his entire output at some price. That price, as has been indicated, is, in the last analysis, determined by what the consumer is willing to pay for the product. Above that price experience shows that the total output can not be sold. The fact, however, that at some price it is possible to sell the entire output, enables the processor' to purchase for cash and to process all the livestock coming to market at any one time. The price paid for the livestock is determined by the price at which the processed meat can be sold. The automatic adjustment of prices thus effected alone makes it possible for the processors to take all the livestock offered in the open markets.
If the processor is unable to market his product at a price which will include the proposed tax, it will be necessary for him to reduce his purchases of livestock to that number which can be immediately marketed without loss. Such a restriction, which the proposed tax may impose, may destroy the facility which the producer has long enjoyed of a daily cash market for all the livestock he chooses to seil. If this unfortunate result should ensue, the surplus of livestock might have to be held back upon the farm and ultimately sold, if sold at all, at such low prices that the producer might realize less for his output as a whole than if the processing tax had never been imposed.
Conclusion.-In the experiment which is proposed, difficulties would be encountered beyond the power of the meat processor to surmount. It has been stated that if the plan does not work the farmer will be no worse off. Serious question may be raised as to the accuracy of that prophesy. If the great live