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ceived and put in operation prior to the enactment of the Food and Agriculture Act of 1965.

We would further point out that only about one-half of $10 million authorized for cotton research in 1964 has been appropriated.

We ask that the committee call upon the Department of Agriculture to make a study to find out the level of expenditure that could be justified in any sales promotion program involving raw cotton.

In summary, we want to cooperate in any endeavor to expand the research facilities of the Department of Agriculture in workable ways to meet fully the need for promotion and research in cotton, and in other commodities.

We do not favor any research program, whether to supplement or supplant the effective research program of the Agricultural Research Service with a program financed by producers. As I have stated above, we do not believe a sound case can be made for research aimed at increasing cotton yields per acre.

Mr. Chairman, just let me say at this point that we are already under tremendous pressure to fund the research programs we need, not only in cotton but in some other crops, and we face a cut unless Congress restores some of the funds that have been taken out of the agricultural research program.

In our judgment it would be bad precedent for producers to begin a research program in the field of production technology leaving the impression that somehow or other we can afford to pay for the cost of research. Actually the point has been made here a number of times that all the research that is going on now of this kind is in the public interest, and we would not want to be put in the posture of having the Budget Bureau further justify cuts in the research budget of the Department, because it felt that producers were able to somehow finance a part of this effort.

As I have stated above, we do not believe a sound case can be made for research aimed at increasing cotton yields per acre, not at least until we work down some of our 16.5-million-bale carryover which is the projected carryover for August 1. Certainly we are not here to say that we don't need to continue to do some of the research needed to increase efficiency. We all believe in efficiency. But at least for the time being it seems to us that whatever funds are expended either by the Department or any other group should be directed toward increasing the use and improving the marketing techniques as far as the producers interest and increase their income is concerned.

We respectfully urge that the committee postpone action on H.R. 12322 until further comprehensive study is made of all provisions of the bill and advice is received from the Department of Agriculture as to the level of expenditure that can be justified for promotion purposes.

Mr. Jones is not here, Mr. Chairman, but I would like to say that his suggestion here in questioning an earlier witness, of changing the requirement for producer approval of this bill to a simple majority, and eliminating the provision that would enable producers who have 50 percent of the volume of production to put this program into effect, would to us seem to be a most acceptable substitute for the provision of the current bill.

Mr. Chairman, in our organization we have had at times considerable discussion of these promotional programs. We have recognized that in certain commodities these programs seem to work better than in other programs, than for other commodities, and in this connection I have here an article from Better Farming Methods, May 1964, by Mr. Edward Dailey of Purdue University. Mr. Dailey has apparently done quite a bit of research himself into the effectiveness of these product promotion programs.

He has as a part of his article a promotability audit, a series of questions to apply to various commodities to determine how effective some of these promotion programs could be. I haven't put the cotton to the test, but I think that in looking at the program, any program that might be developed under this bill, that it would be useful to have those who will be

doing this work take a look at this promotability audit to see just how effective a promotion program may be. It is a very short article. I wonder, Mr. Chairman, if you would mind if I had this inserted in the record.

The CHAIRMAN. No, without objection you may insert it in the record.

(The article referred to follows:)

[From Better Farming Methods, May 1964]

PRODUCT PROMOTION

(By Edward Dailey, Purdue University) Practically all farmers, whether they produce livestock, lemons or Limburger cheese, belong to a group organized for the purpose of promoting their product. Many make contributions to several commodity groups.

First efforts to advertise and promote by a farm group were begun before World War I by a California orange-growers cooperative which later took the name Sunkist. Advertising activities by producer-promotion groups have flourished and faded since this early beginning, growing in strength during the depression, held in check during World War II and have shown considerable growth in the number of groups promoting and in the amount spent in recent years.

Current estimates show 1,200 producer groups are now spending a total of about $100 million per year for promotion and advertising. These groups range from well-known large national organizations like the American Dairy Association with a $7 million-plus annual budget down to some county groups spending only a few hundred dollars. All have the same objective, however, to sell more at the same price or to sell the same amount at a higher price.

Even though many farm product groups now advertise in one way or another, strongly held views both in favor of and against this practice are often found. There seems to be two camps you can join. One side says simply, “How can all groups increase their sales at the same time? The collective American stomach will hold just so much food. If broiler producers succeed in getting consumers to buy and eat more poultry then we must eat less pork or beef." Or any grains made by one commodity must be at the expense of some other commodity.

Pork and beef producers who see themselves losing sales to broilers are competitive fellows and strike back with strengthened advertising programs and so do the cheese people, the potato people, the fruit and vegetable groups and others. Successive rounds of this battle vind up with each product being consumed in about the same quantity it was at first with each group paying added marketing costs and nobody really better off. This is the “limited-stomach" or "substitution" argument.

ARGUMENT FOR ADVERTISING

The opposing argument says “You may be right but some agricultural groups have had very good results with advertising so why shouldn't we? At least we'll be trying to do something to help ourselves.” This group, not being concerned with the total picture, feels the changeable consumer will allow them to increase their own sales and they look to promotion as a challenge and an opportunity. They further recognize that the chance for all competitive farm product advertising to stop suddenly is unrealistic. The attitude with these folks is also likely to be one of defense, of holding current markets.

For some farm commodities, a favorable cost-benefit ratio for advertising campaigns is a matter of revord, but for many others the record is not quite so clear.

One special Florida orange promotion, for example, is estimated to have increased gross sales by $18 million for a promotion outlay of $4 million. But in another special promotion of lamb an expenditure of $1.76 was made by lamb producers for each additional pound of lamb sold as a result. of the promotion.

Studies of demand show that the opportunity for effective use of advertising and promotion varies markedly among different products. Each demand situation as it relates to advertising and promotion must be studied separately. Advertising works wonders in some cases and fails miserably in others.

EXPAND OR DISCONTINUE?

Since the opportunities for effective promotion vary considerably, some producer-promoter groups may well afford to expand their promotion program and others might seriously raise the question of their continuation. The trick is to determine which should be expanded and which programs might be altered or shut down.

The accompanying test is designed to serve both current and potential agricultural product advertisers. For those groups with existing promotional programs it may provide the basis for revising or strengthening the program. For those considering employing promotion to expand demand it provides a structure to consider the important factors in a systematic way.

This test or audit is based on accepted principles of advertising, on experience of producer-promoter groups, and on studies of demand and market research. It outlines the conditions that govern profitable use of advertising. How you can answer the questions will give a good indication of the effectiveness of a promotion program for your product or commodity group.

This appraisal calls for an honest evaluation by all those interested in the outcome. A rating scale is used to allow differences in judgment to be registered.

You may want to see how your score compares with other commodities. Select one or two other commodities besides your own and apply the test to them. Their scores will provide a basis of comparison helpful in assessing your own opportunity.

TOTAL SCORE

A perfect score of 88 indicates an excellent opportunity for a successful advertising and promotional program. This score will rarely be registered. The lower the score the less are the chances for effective promotion.

Advertising can be an effective tool for some farm commodities and some marketing situations such as in the short run where a temporary and burdensome surplus may exist. However, as might be indicated to you by the audit, some situations are better adapted to the use of advertising and promotion than are others.

Two realistic observations present themselves. First, as our agricultural productive capacity continues to overfill market demands, advertising and promotion will continue to occupy the interests of many producer groups. Second, the practice of producer-sponsored commodity advertising will in all likelihood, continue to be debated.

The chances for making good promotion decisions can be increased by a consideration of the factors listed in the promotability audit.

The promotability audit
Legend:

8: True; not a recognized problem.
6: Not a source of difficulty but could be improved.
4: Some difficulty; needs improvement.
2: Major difficulty but some improvement possible.
0: False; a major difficulty, cannot be improved under present conditions.

Rating scale (circle the most appropriate number)

Key indicators of promotion opportunity

True

False

[blocks in formation]

1. Our product is easily distinguished from substitute products by final buyers

(can be identified either by its characteristics or by packaging). 2. There are strong emotional buying motives favoring our product (health,

protein, prestige, security, achievement, etc.). 3. Our product exhibits strong hidden qualities (dependability, purity, po

tency, etc.). 4. There is an adequate budget or means of obtaining one for a sustained, coordi

nated promotional program 5. Our production of this perishable product is highly seasonal and a promo

tional program could be use to call attention to a temporary surplus

situation 6. The benefits of a promotional program will accrue primarily to us who finance

it.

[blocks in formation]

Now use this legend for the remaining indicators:

4: True; not a recognized problem.
3: Not a source of difficulty but could be improved.
2: Some difficulty; needs improvement.
1: Major difficulty but some improvement possible.
0: False; a major difficulty, cannot be improved under present conditions.

Rating scale (circle the most appropriate number)

Key indicators of promotion opportunity

True

False

[blocks in formation]

7. The demand trend is favorable (per person consumption increasing and/or

there are an increased number of users)8. Final buyers of our product readily respond to price changes by consuming

more when prices go down and consuming less when prices go up.. 9. Our product is either a new product or an older product in a new form. 10. Our product is relatively free from known barriers to use (lack of familiarity,

preparation problems, family objections, etc.)--11. There is relative freedom from general industry problems (disease, market

ing, quality, labor problems, divergent interests among growers, etc.)

that must be solved before a promotional program can be effective 12. We can have some control over the consumer price of our product, or if not,

pricing presents no particular problem. 13. A promotional gap exists for our product that is not fully met by brand

name advertising and promotion or other means. 14. Needed cooperation and coordiation for our promotional program can be

[blocks in formation]

expected from the distributive trade.
15. Market supplies and distribution of our product is adequate.
16. Final buyers of our product can expect consistent product uniformity.

4 3 2
4 3 2
4 3 2

1 0
1 0
1 0

Mr. Johnson. Mr. Chairman, that concludes my remarks.

The CHAIRMAN. Mr. Johnson, you referred to the Department of Agriculture and the research programs now being conducted. You are aware of the fact, aren't you, that the Department of Agriculture has endorsed this bill?

Mr. Johnson. Yes, Mr. Chairman, I am aware of it.

The CHAIRMAN. The officials of the Department know what we have done in research and what we haven't done, what we have done in promotion here at home and abroad.

man.

I just asked for information concerning our promotion programs abroad. We have one in tobacco, one in cotton, one in soybeans, and in some other things. They know these figures and they have to approve all these expenditures of foreign currencies.

Now if they come up, after knowing all that they know, saying that we haven't done enough for cotton, in promotion and in research, it seems to me that should be a very good endorsement.

Now on the question of research, under our research programs through the experiment stations and extension acts and all that, we have substantially increased the per acre yield of cotton, haven't we?

Mr. JOHNSON. We have done an exceptionally good job, Mr. Chair

The CHAIRMAN. And to that extent we have tried to bring about new methods and all the new techniques, so that the farmer could harvest more per acre, and reduce his cost of production, haven't we?

Mr. Johnson. Yes, sir; but as I pointed out here in by statement, we would like to call a moratorium.

The CHAIRMAN. It looks like we have just about mastered these techniques of production, and as a result we have filled our warehouses with cotton which we can't sell. That is all.

Mr. JOHNSON. That is very true. I would like to say that I think we ought to be very careful here in terms of the kind of research which is done with any fund that might be put together under this program.

One of the things that impresses me about the Department position is that I am sure that with the cut that they have made in the budget of the Agricultural Research Service, they are delighted to have any group that will come along and say “We will pay a part of the bill."

I think this is a bad precedent, and I think we ought to look at this very carefully and keep the pressure on at the right places to see that we can keep adequate tax funds involved in this program. The CHAIRMAN. Let me make one other statement.

The manufacturers of textiles, of synthetics, pay their own way to the tune of about $200 million a year in promotion programs, and look what a woefully small amount is being spent in promoting cotton.

Mr. Johnson. Mr. Chairman, I have never been able to figure out how much it costs to produce a pound of nylon fiber, but I do know that the price is approximately four times that of a pound of cotton. Do you suppose that they are making enough profit out of this fiber that they can afford to spend this kind of money?

The CHAIRMAN. They are spending it.

Mr. JOHNSON. They must be making some money. Otherwise they couldn't be putting the

The CHAIRMAN. We have charts showing the enormous expansion.

Mr. JOHNSON. They must be making a tremendous amount of profit to be able to afford to do this.

Mr. Chairman, producers still are faced with some financial difficulty. We don't have the price of cotton to the producer at a point where he is going to be able to get wealthy growing cotton. These checkoffs, as small as they may be in this bill, have already kept a lot of producers apparently out of voluntary contribution programs.

I am confident that this is a very controversial type of legislation in the country, and for that reason I think that it ought to be stripped of

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