Mr. GREGG. That is right.

Mr. SCHMIDT. Mr. Gregg, I notice that under the present agreement, for example, in area No. 3 for wheat, the receiving charge is 6.25 and the loadout is three-quarters of a cent. The loadout charge is consistent throughout the country at three-quarters of a cent? Mr. GREGG. Yes.

Mr. SCHMIDT. Is there any historical precedent for that?

Mr. GREGG. Back in 1947 or 1948 they had a handling charge of 6% in and two-thirds out, making 73 cent charge. If I recall correctly, Mr. Schmidt, there was a surcharge in there and this was dropped in the negotiations of 1949.

At that time we arrived at a flat figure of 7 cents, making it 61⁄44 in and three-quarters of a cent out.

Mr. SCHMIDT. Is it your experience that there is any difference on a geographical basis for a different load-out charge around the country?

Mr. GREGG. I do not operate in any other part except area No. 3. Everything I have otherwise is from hearsay, and it has been due to climatical conditions and, also, in some areas due to the fact that the volume handled is so small.

Mr. SCHMIDT. Mr. Gregg, if I can impose on you in an effort to get to all sides of this problem for the record. I pointed out to you prior to today's hearing the report of the General Accounting Office to the Congress, particularly, addressed to the chairman of the Committee on Agriculture on January 11, 1960. The General Accounting Office, in discussing premium and discounts for handling houses only, makes the statement:

We believe that when warehousemen only handle grain for CCC under UGSA, premiums should not be allowed and warehousemen should be required to pay for discounts in cash.

Have you had any experience with that particular problem in your area?

Mr. GREGG. Oh, yes, we have that trouble all of the time. Unfortunately, my experience has been that it has always been discounts. That is my personal experience. The country elevator takes in this grain. We stand in between these grades. We do not have the technical equipment at the country elevator level to come up with the type of grading that you do arrive at in the inspection departments of the different States. For that reason, we quite often find ourselves in the position that the grain may be downgraded to some extent, maybe in test weight a pound or one-half pound, which makes a difference, and for that we are required to pay the Commodity Credit Corporation in cash.

Mr. SCHMIDT. Well now, do you agree or disagree with the recommendation of the General Accounting Office to where handling only is involved whether or not the premium and discounts should be allowed?

Mr. GREGG. I disagree.

Mr. SCHMIDT. And for the reason

Mr. GREGG. Which I just stated.

Mr. SCHMIDT. Do you have any further comment on that?

Mr. GREGG. No, sir.

Mr. SCHMIDT. That is all I have, Mr. Chairman.

Senator SYMINGTON. Mr. Gregg, what do you think the handling rate should be in order to include a fair profit, based on efficiency and good handling?

Mr. GREGG. In our area I think the 7-cent rate is a fair and equitable rate. And that is why we have tried to make it. In our business I use the figure of one-quarter of 1 percent for shrink.

I will be perfectly honest, our shrink runs almost one-half of 1 percent. I have leaned backward in the figures. I did the same thing on the cost. I did not use actual reproduction cost of $1, but I used the Government figure of 50 cents. And I feel that a 7-cent rate will allow the people to stay in and they will not be making an exorbitant profit.

Senator SYMINGTON. As an ex-businessman, I am interested in page 5 of your testimony. You say that in the case of the little fellow, as you put it, he could make $400 on the basis of the 4.6-cent cost.

Mr. GREGG. Yes, sir.

Senator SYMINGTON. But would he not have some of the expenses, too, that you have added to the 4.6?

Mr. GREGG. No, sir.

Senator SYMINGTON. He would not?

Mr. GREGG. You say he does have the expenses?

Senator SYMINGTON. Yes.

Mr. GREGG. In the figure of 4.6, sir, the Government did not consider shrink, quality differences, or risk or invested capital. So those costs of 4.6, according to their own survey, are supposed to include all other expenses, with the exception of those.

Senator SYMINGTON. You do not think that is an accurate cost?
Mr. GREGG. No.

Senator SYMINGTON. What do you think that the cost figure should be?

Mr. GREGG. Sir; I have not made a survey of that. And to the best of my knowledge I cannot find one. I do not feel that I am in a position to make a statement on that.

Senator SYMINGTON. Has the Department made a survey on it? Mr. GREGG. Not to my knowledge in handling houses.

Senator SYMINGTON. Do you want to make a rough guess? You say that 2.5 addition is necessary for your costs. Would you feel that it was 1 or 112, or 2?

Mr. GREGG. You mean over and above the commodity, what the base is? I think that my figure of 2.5 cents is an accurate figure. Senator SYMINGTON. And that probably would cover them, too? Mr. GREGG. Yes; as a minimum.

Senator SYMINGTON. What I am getting at is this, instead of making $400 profit on an earning of $5,000 gross, they would lose quite a bit of money?

Mr. GREGG. Yes; they would.

Senator SYMINGTON. Do you want to correct your statement in that regard?

Mr. GREGG. If it has been misinterpreted.

Senator SYMINGTON. I think you ought to. This testimony may be sent to the Department if they are still considering it. It is entirely an administrative procedure. They are considering lowering the rates. I am impressed with the statement, but it seems to me that you imply on page 5 that there is a profit item figure there of some

where between 8 and 10 percent, or 9 percent and, actually, if they have the same type of costs that you have, they can only result in a loss. Mr. GREGG. I thank you for pointing it out to me.

Senator SYMINGTON. I am impressed with your statement.

Mr. GREGG. Thank you, sir.

Senator SYMINGTON. Mr. Counsel, will you see that the statement is sent to the Secretary of Agriculture for consideration such as he deems. fit and proper to give it?

Mr. SCHMIDT. Yes, sir.

Senator SYMINGTON. Are there any other questions?

Senator MUNDT. I would like to ask one question, if I may. You stated, Mr. Gregg, that there is a variation in rates in various sections of the country?

Mr. GREGG. Yes, sir.

Senator MUNDT. So far as the storage of wheat is concerned. I was wondering what is the basis for that variation?

Mr. GREGG. You mean the variation in the handling charge?
Senator MUNDT. Yes.

Mr. GREGG. The variation in the handling charge does vary by different areas. I cannot give them to you exactly. I know that in our part of the country that Texas and Oklahoma have a different rate than we do in Kansas, Nebraska, and Missouri.

This has in the past been said to be caused due to the climatical conditions, the possibility of insect infestation being greater.

And in the southern part of the United States where they have a differential, that that was based on the fact that their grain was delivered to them in much smaller quantities and they had more expense in the handling thereof.

Senator MUNDT. Your rate is 7 cents?

Mr. GREGG. Yes, sir.

..Senator MUNDT. What is the range of rates?

Mr. GREGG. I cannot give them to you exactly. Maybe Mr. Schmidt has it.

Mr. SCHMIDT. Would you like to have that in the record?

Senator MUNDT. Yes, if the chairman is willing, I would like to have it in the record.

Senator SYMINGTON. Without objection, they will be made a part of the record.

Handling and storage charges under new (1960 revision) Uniform Grain Storage Agreement

Handling and storage charges under present (1956 revision) Uniform Grain Storage Agreement

Mr. SCHMIDT. They vary on wheat and other grains, from a low of 5.75 to a high of 7.25. On oats at the present time it is 2.75 cents, flax 6.5, corn 3.75, barley 4.75. Those are uniform across the country. But on wheat, rice, and other grains, they have had regional variations.

Senator MUNDT. Thank you.

Mr. GREGG. Thank you.

Senator SYMINGTON. Are there any further questions? If not, we thank you again, Mr. Gregg.

Mr. GREGG. Thank you.

Senator SYMINGTON. Who is the next witness?

Mr. SCHMIDT. Mr. Roy F. Hendrickson.

Senator SYMINGTON. Will you rise and be sworn.

Do you solemnly swear that the information you will give the committee will be the truth, the whole truth and nothing but the truth, so help you God!

Mr. HENDRICKSON. I do.

Senator SYMINGTON. Do you have a prepared statement?

Mr. HENERICKSON. Yes, I think it has been distributed.

Senator SYMINGTON. Yes, I have it here. Do you want to read it? Mr. HENDRICKSON. I would like to do so.

Senator SYMINGTON. You may proceed, but before that, in accordance with the request of other witnesses, you would not object if members of the subcommittee would like to make comments or to interject questions?

Mr. HENDRICKSON. That is all right.

Senator SYMINGTON. There are a couple of points on the first page that I want to bring up. Also, it is a fairly long statement as statements go.

Mr. HENDRICKSON. There is an appendix attached to the statement. Senator SYMINGTON. I see. It is not as long as it looks.

Mr. HENDRICKSON. It is not as long as it looks.

Senator SYMINGTON. We will take the liberty of interrupting you, if we may.

TESTIMONY OF ROY F. HENDRICKSON, EXECUTIVE SECRETARY, NATIONAL FEDERATION OF GRAIN COOPERATIVES

Mr. HENDRICKSON. Mr. Chairman and members of the committee, I am Roy F. Henderickson, executive secretary of the National Federation of Grain Cooperatives, Washington, D.C. I am here in response to the invitation extended by your general counsel in your behalf.

During the first public hearing of this subcommittee on January 12, 1960, you stated, Mr. Chairman, that you did not understand farm "cooperatives" or "patronage dividends" paid by these cooperatives. Senator SYMINGTON. Mr. Counsel have you looked at the edited hearing record concerning this statement made by Mr. Henderickson? Mr. SCHMIDT. I have.

Senator SYMINGTON. Does the edited record support that statement? Mr. SCHMIDT. It does not.

Senator SYMINGTON. Have you looked at the record before it was edited—as written by the reporter?

Mr. SCHMIDT. Yes, sir, I have.

Senator SYMINGTON. Does the unedited record support that statement?

Mr. SCHMIDT. It does not.

Senator SYMINGTON. Will you proceed?

Mr. HENDRICKSON. In response to that, Mr. Chairman, this is what I heard. And because I was distinctly shocked at this I did ask for a transcript of this record and, of course, I was unable to get anything but an edited record. And it is perfectly true that it does not appear in the edited record. However, in order to establish whether my ears had deceived me, I contacted a considerable number of people who were here at this particular meeting and I have seven people who heard it as I gave it. And I rechecked with four of them yesterday.

Now, if this is incorrect I, certainly, want to stand corrected. However, this is what I heard and understood. And it is one reason I am here, because I am interested in getting an understanding of these cooperatives which are distinct institutions.

Senator SYMINGTON. Let the record show that the original unedited testimony as taken by the reporters, according to counsel of the committee, does not substantiate that statement. And I will recommend that Senator McClellan of the Government Operations Committee have the matter taken up with Ward & Paul, in whom I have the highest confidence, and to look into that. That is No. 1.

I might state that my work with cooperatives has been quite

extensive.

This matter might be of interest to you. In 1959, I was the recipient of an award from the Missouri Farmers Association, the MFA, which is a member of your organization, and one of the country's outstanding co-ops.

Will you proceed?

Mr. HENDRICKSON. Yes. I might add that, of course, it is not unusual for people not to understand cooperatives or patronage dividends, because they are fairly complex. Now proceeding with my

statement.