Senator SYMINGTON. The counsel for the committee tells me that we had four, two private and two cooperatives.

Mr. HENDRICKSON. Only three warehousemen, actually.

Mr. SCHMIDT. We had four warehouses.

Mr. HENDRICKSON. I realize that there was a fourth.

Senator SYMINGTON. Let the record show that in saying that I had not read the list of those people who negotiated these matters. However, I have the fullest confidence in the counsel for the committee, who at great cost of money and time to him has taken on this job. Senator YOUNG of North Dakota. Who were they?

Senator SYMINGTON. Let me put in the record at this point the four cases in question, if there is no objection from the committee.

Mr. HENDRICKSON. May I inquire offhand who was the fourth? I am not sure.

Mr. SCHMIDT. Newhall Grain Co. from Iowa. In addition there was Archer Cooperative, Dudden Elevator, and Equity Union Co-op. Mr. HENDRICKSON. Newhall was not represented by its manager or any executive.

Mr. SCHMIDT. It was represented by Dr. Phillips of Iowa State, who conducted the study.

Mr. HENDRICKSON. That is right.

Senator SYMINGTON. What is right, were there four or three?

Mr. HENDRICKSON. I say that there were three warehousemen. Dr. Phillips is not a warehouseman.

Mr. SCHMIDT. He presented the Newhall Grain Co. case, which is part of the record presented in lieu of

Senator YOUNG of North Dakota. I think that the

Mr. HENDRICKSON. I said three warehousemen. I did not say four cases, because I think

Senator SYMINGTON. Let us get it correct. Counsel thought that there were four, and you thought there were three?

Mr. HENDRICKSON. That is right. There were three warehousemen. Four warehouses, if you consider the Newhall case. I agree on that. May I proceed?

Senator SYMINGTON. Yes.

Mr. HENDRICKSON. The farmers who own and control these 2,800 grain marketing cooperatives are deeply concerned with both the terms and conditions and the rates of the uniform grain storage agreement. They have observed that three warehousemen (I have referred to this before) were brought in to testify before you and that two of them were managers of farmer-owned cooperatives, salaried men, working for farmers-in effect, agents for farmers.

"COUNTRY" OR LOCAL GRAIN COOPERATIVES

About 2,770 of these farm cooperatives provide primary markets for grain and oilseed producers. These are generally referred to as country elevators. The structures they own and control are monuments to neighborly self-help efforts by producers to meet the pricecost squeeze that is smothering many elements of American agriculture currently. They are found in nearly every rural trade area where wheat, corn, barley, oats, rye, flaxseed, grain sorghums, and soybeans crops basic to our Nation's agriculture-are grown and

sold. A few blood enemies of cooperatives seek to drive a wedge between farmers and their cooperatives, and I am confident that you and other members of this subcommittee would not be a party to such an effort as your records clearly prove otherwise.

FEDERATED OR REGIONAL COOPERATIVES

Long ago these local grain cooperatives, which first began 104 years ago, found that they needed vigorous representation-a strong sales voice at the terminal markets. At first, and for many years, they were treated there as clodhoppers, interlopers, and outcasts. But with passage of the Commodity Exchange Act of 1936, under which they could no longer be denied trading privileges at grain exchanges, and backed loyally by their farmer-members, they built nearly 30 of these federated or regional cooperatives. These function at Chicago, Minneapolis, St. Louis, Kansas City, Omaha, and all lesser terminal market centers throughout the Nation.

HAVE NARROWED MARKETING MARGINS

The basic function of grain cooperatives at both primary and terminal market levels is to market grain to the best advantage for their producer-patrons and to render related storage, handling, and merchandising services at cost by refunding any earnings above cost, including any earnings on business done with CCC.

Increasingly, farmers prefer to store grain in their co-op warehouses rather than in their own granaries because grains are perishable and quality is thus better protected at less cost and less individual risk in modern cooperative facilities. Grain in interstate commerce must meet increasingly stiffer standards of quality.

And if I may, I agree with Mr. Gregg, whom I have known for a great many years, with respect to the Food and Drug Administration hazard which is a very serious one, indeed.

Thus, cooperatives have brought into grain marketing a force that has improved service and narrowed marketing margins to the advantage of both producers and consumers. I do not belong to the school which castigates its competitors, and I know that most grain firms seek to perform services honestly and well for farmers and CCC. It is a very high grade industry, where a man's word is his best bond.

Nineteen of these regional associations, subsequently joined by three more, in 1958 joined together to give their farmers a voice in world markets in competition with the big international firms. They formed, financed, and staffed Producers Export Co. of New York City, which seeks to expand quality grain and oilseed markets abroad and which has sold for export in a single day as much as 84,000 tons of grain and oilseed.

Why have farmers and the cooperatives they own and control an interest in the UGSA?

Why didn't these cooperatives content themselves with simply merchandising grain, while supplying honest weights and grades to their members?

Why don't farmers obey the advice once given them when they protested something at a public meeting: "Go home and slop your hogs."

CHIEF REASONS FOR EXPANDING STORAGE

We will examine one area, grain facilities.

The basic reason that these farmers through their cooperatives have expanded storage space has been to provide their farmer-members needed facilities so they could house and thereby qualify their grain for price supports as authorized and directed to be made by Congress.

To house grain under loan, supplying a warehouse receipt acceptable as collateral for a CCC loan, it has been necessary since 1940 for a warehouse to sign the uniform grain storage agreement. With rare exceptions, co-ops sign this agreement; in fact, most have no real choice in the matter if they are to serve their farmer-members and assist in their goal of orderly marketing which was also a goal of Congress in making loans available in the first place.

If the loan is not redeemed and a great many are redeemed each year-CCC then has the right to leave the grain in the warehouse. Then, if the warehouse is full, as has often happened, the co-op warehouse is unable to receive, house, and market the new crop.

This situation has occurred thousands of times, especially since 1949; and cooperatives, heeding the will of the majority of their members-usually by unanimous vote of the members have then expanded their facilities further. Result: Today, more than a third of the Nation's commercial grain warehouse space is owned and controlled by producers, and many of them are still heavily in debt for this expansion undertaken in good faith.

The local co-op associations of farmers also often demanded expansion of regional or terminal storage facilities to provide a means of reconcentrating loan grain, a safe refuge for the overflow from country houses of grain under loan. The search for storage space was desperate in some years past.

This major expansion has been undertaken entirely in the framework of a long-range goal on the part of producers to develop for themselves the most efficient marketing system possible operating at cost. They heard periodic appeals for storage space expansion from both the Brannan and Benson administrations of the Department of Agriculture, and they were repeatedly given assurances that Government-owned bins would not be given preference over these facilities. They relied on that firm policy, which policy is now more dim and unclear than it has been for at least 10 years.

Remember, please, that there are elements which have long favored Government operation of the grain business. As cooperatives, we oppose that 100 percent.

Senator SYMINGTON. I would like to ask a couple of questions for my own information. Do you feel that the assurances given you for use of Government-owned bins have been lived up to by the Depart

ment or have not been?

Mr. HENDRICKSON. I would say that up until recently, they have been lived up to reasonably well, in both the Brannan and Benson administrations.

Senator SYMINGTON. They could not have been lived up to "until recently" in the Brannan administration.

Mr. HENDRICKSON. I said, beginning with the Brannan administration-the Brannan and Benson administrations-the understandings that were reached and the rules that were established at that time, were lived up to quite well. I would say, however, recently we find this policy has grown very, very dim and uncertain.

Senator SYMINGTON. All I am trying to do is to get information, Mr. HENDRICKSON. Yes, sir.

Senator SYMINGTON. On this situation.

Mr. HENDRICKSON. Yes, sir.

Senator SYMINGTON. When you said "until recently"—until when? Mr. HENDRICKSON. Well, I would say the development has come since, oh, perhaps, the last 5, 6 months, up until that time, I think the policy was reasonably clear and followed reasonably well.

Senator SYMINGTON. And the last 5 or 6 months, what has been the switch that has not conformed to that?

Mr. HENDRICKSON. Well, there have been a lot of changes. And there is at present. I have seen a new ruling this morning. But I do not consider it to be an official copy at this time. It is policy, enunciated by the Chicago regional office which stated specifically with respect to grain taken over under the loan program this year, that the policy would be to fill the bins to the brim first before the grain was available for commercial warehouses.

Senator SYMINGTON. To fill the Government bins?

Mr. HENDRICKSON. That is right, that is right.

Senator SYMINGTON. What was the date on that, did you say? Mr. HENDRICKSON. I do not-I cannot give you the date. I only saw a draft of it this morning. But I do not want to state that as a fact, because the copy I saw was a photostatic copy and was not an official one. The date was the early part of this week.

(Statement subsequently presented for the record by Mr. Hendrickson :)

The ruling has been modified since the earlier version. The new instruction, Circular Letter No. 695, issued by the Chicago regional office of the Commodity Stabilization Service, under date of April 27, 1960, states in part:

"1. Reconcentration out of bins.-We do not expect to move corn out of bins to make room for takeover this fall."

Senator YOUNG of North Dakota. How long has the present grain storage agreement been in effect?

Mr. HENDRICKSON. The present one was negotiated in 1956 and has been in effect since that time. It will expire as of June 30.

Senator YOUNG of North Dakota. Was the rate increased in 1957? Mr. HENDRICKSON. I developed that further in the paper-in 1956 the rate was increased, we think, as we analyzed it, roughly, 5 percent in the case of short-time storage and reduced approximately 5 percent for storage of a year or in excess of a year. That is the evaluation we gave it.

Senator YOUNG of North Dakota. In spite of this grain storage agreement, is it not a fact that there has been a constant shortage space in the spring wheat area, until the last year?

Mr. HENDRICKSON. That is my impression, sir.

Senator YOUNG of North Dakota. How do you account for the fact that the grain dealers have not increased their storage more?

Mr. HENDRICKSON. I think there are several reasons for that. One of them is the fact that spring wheat is in the high construction cost area very definitely. With the schedule of rates in effect, and taking into account that you cannot be sure that the policy will continue in effect for more than a very few years-that means nobody can see beyond a few years-I think the feeling was that this would be an unwise investment on the part of a great many. You will find what it costs from actual bid data of certain elevators, that we call the country-type, built in North Dakota, Minnesota, and South Dakota, in the last few years, later in my statement. You will notice from that some annexes were built in the magnitude of 60 to 70 cents a bushel, but when it came to storage, a complete house of a size that was practical, the cost was $1.50 and $1.25 per bushel or so. When it comes to a terminal at Duluth or Superior, you have to keep in mind that they are situated on the lake shore. A terrific piling cost builds up with respect to any construction there. I think there has been hesitation for the reasons of high cost.

Senator YOUNG of North Dakota. While we are on this subject, would you care to comment on the testimony, if you heard it, the co-op elevator at Lincoln, Nebr., I believe it was. Their testimony was that their storage costs, the costs of construction per bushel, was 30 some cents per bushel.

Mr. HENDRICKSON. It was quite low, yes. I have some comments with respect to that. That was the case where the testimony was brought out to the effect that the so-called cost of accounting figure of profit to cost was 167.18 percent, I believe. I have a number of comments on that.

In the first place, it was for 1 year.

In the second place, I, personally, believe that some very subjective allocation of costs as between merchandising and warehousing were made there which tended greatly to increase allocation of costs to the merchandising operation and underallocation to the storage segment.

That particular enterprise has a very interesting history. And if you are interested, Senator Young, if I am permitted to do so, I would like to give you a little of the history of it.

Senator YOUNG of North Dakota. I would like to have it, because it may be typical of many other grain operators.

Mr. HENDRICKSON. It just happens that this was the case where on January 12, Robert Puelz, the general manager, testified here he was on here for 12 minutes-it was a very short appearance.

Senator SYMINGTON. If you will yield, Senator. He was given all of the time that he wanted, was he not?

Mr. HENDRICKSON. I believe the impression-I was here, Mr. Chairman-and the impression that I have from him is that he felt that he was not given an opportunity, but we will say that you adjourned the session at 1 o'clock and 1 o'clock was there.

Senator SYMINGTON. There never has been anybody before any committee I have had anything to do with, who was not given full opportunity to testify.

Mr. HENDRICKSON. That is my impression of it. However, I know his feeling.

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