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system would be unworkable to warehousemen and ultimately increase the total storage bill to taxpayers.

My own feeling is that it would be unworkable for a lot more people than just warehousemen. The banking system's handling of warehouse receipts is based on uniformity. The flexibility of the price support loan program for farmers is based on uniformity, so that the farmer may take advantage of every possible convenient location in getting his loan, which in turn is uniform, regardless of his costs. The administration of State warehouse laws, bonds, and licensing is based on uniformity in the public interest, as I explained earlier.

No matter what is done with rates, some warehouses are going to have different costs than others in any given season. Over a period of years because of crop failures, shifting emphasis from one crop to another, and perhaps from such developments as the St. Lawrence Seaway, these differences should tend to level off. But the main point I have tried to make, Mr. Chairman, is that in no case is the Government buying "dead" storage. By virtue of its contract, in addition to service it is buying a negotiable warehouse receipt, and this has a real dollar value in the marketplace, and this dollar value is the same whether it is issued by a warehouseman with a flat bin or a concrete silo or a steel tank or a wooden crib annex.

We say that in its extremely arbitrary action in ordering a 19-percent cut in rates the Government moved too far and too fast, and on cost information which was incorrect. Only a year ago these same Government people were urging the industry in the upper Midwest to provide more storage. Let me give you a couple of excerpts from the USDA minutes of the Minneapolis area advisory committee for grain at a meeting in the office of Mr. James A. Cole, ČSS commodity director, Minneapolis, February 25, 1959, to illustrate typically what the trade has faced, and I quote: * * * Mr. Cole said the purpose of the meeting was to discuss and clarify

* the storage problem in the five-State area covered by the Minneapolis commodity office. He introduced Mr. R. A. Hanson (CSS, Washington) and called upon him to lead the discussion on the national storage situation and anticipated program outlets including need for new construction ***. Two years ago the grain trade was able to absorb 250 million bushels without the Government buying bins. Last year the trade absorbed 425 million bushels, again without the Government buying bins. This year the problem is bigger than at any time in the past and is especially acute in this Minneapolis area.

During those years the solution to the problem was left to the judgment of the warehousemen. Again, it looks like the industry has taken hold and Washington will not have to buy bins this year. At least in other areas this is largely the case. * * * Mr. Hanson said that the purpose of this meeting was to discuss the problem in this area where considerable shortage of storage space exists. *** The subject of attrition and more storage space was brought up. Mr. Farrington (a warehouseman) commented that there is always a substantial movement out of this market; in addition, he said there is also some plan for construction but he did not know how much. Mr. Cole asked, "Why isn't the trade building more now? Are you afraid something will happen and you won't be able to fill it? There was never a greater need for it than now.” The reply was that the principal deterrent to new construction was the high cost of building. * * *

Close quote from USDA minutes.

In the year 1959 the industry increased storage capacity in Minnesota, North and South Carolina, and Montana by some 70 million new bushels of commercial warehouse space, in direct response to Government urging.

* * *

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The very next spring the Government cuts a fifth off the storage earnings under the Government contract.

As Mr. Marvin McLain told the Whitten committee on March 9, 1960, before "negotiations" with the trade on the rates:

*** there will be a substantial reduction in rates. And on March 21:

we think we are justified in offering this kind of a rate because we are on the other side of the table now and we hope we have the support of this committee in carrying out this reduction.

And another quote from Mr. McLain, telling the Whitten committee about a rate cut that was yet to be revealed to the trade's negotiators:

If this had been undertaken a year or two ago, in my judgment we could well have been in a serious situation as far as storing commodities which under the statute we have to take care of.

All of which brings me, Mr. Chairman, to a few words about my third area of testimony, the political predicament of the grain trade.

If I don't accomplish anything else in my appearance here, I would like to have the committee, and through you the consumers and farmers of America, get the perspective as I see it of what I have termed the political predicament of my industry.

Of course I do not mean “political” in any partisan sense-I mean the relationships between the individuals who are engaged in our largest industry, agriculture, and the Government to which we grant police power over our actions.

I know that your committee is just as concerned for justice in this relationship as I am, and I know that the reporters who have been telling this grain storage story to the American people are just as concerned for it as I am.

Perhaps I lack the eloquence of “Mr. Smith Goes to Washington" in dealing with this subject. And I am quite aware of such editorials as the one entitled “With a Dry Eye,” weeping crocodile tears for the plight of the grain warehousemen, which Congressman Santangelo of New York City introduced into the Whitten committee record. But there are some things which ought to be said in our attempt to get at the heart of this whole problem.

Already in my testimony I hope I have made it clear how firmly each and every local grain elevator operation is captured and bound to the Government's grain programs. I have a simple chart (chart XII) which illustrates this clearly.

I will ask you to please turn to that chart.
(The document referred to appears in the appendix at p. 543.)

Mr. LAYBOURN. As you will see, this chart shows graphically the response of our industry to the demands of Government for a completely uneconomic mass of storage construction. Only Government policy, which can be changed unilaterally at any time, keeps the upper section of this chart, representing Government-owned grain facilities, from absorbing any or all of such further expansion rather than employing facilities of taxpaying businesses.

But I have put another line on this chart—the wheat crop in each of the years. This is a pretty fair measure of the true economic need for a storage and handling industry in this country plus some reason

able allowance for crop carryover. I believe that this indicates where the wareshouse industry, through competition, would have found its capacity level to handle the crops as they came along. Generally speaking, everything above such level is there on the basis of Government farm policy.

We all understand how this has come about, but what I am talking about is the predicament of a citizen who is trying to operate a competitive business in this context. He is way past the point where his decisions on how much risk to take, how much capital to borrow, how much space to build and where can be based on any estimate of commercial need in service to consumers and producers. He is at the point where the major factor in his own decisions is his estimate of what the Government is going to do. He is standing on a rug, to which is attached a rope. At the other end of the rope is Government- -a policy group of administrators managing a $1412 billion corporation, the Congress in deep controversy over how much more money to give that corporation, and an American public showing great concern over agricultural policy.

We are talking about the predicament of each and all of the enterprises which in a competitive marketing situation supply a service. As Government usurps these functions, these people such as the commission man or the broker or the merchant are left to die on the vine. From time to time the Government looks at one of these people and asks, “Why should we pay for this service when we can perform it with our own people?" But in reality, if we cling to the thought that we are not out to eliminate the competitive marketing structure, such a service is worth something for just being there when needed. And it certainly cannot exist and survive on just a few crumbs which fall from the Government table.

In this situation, Mr. Chairman, a number of concepts have come to the fore. One is that grain storage ought to cost less because commodities are supported at lower prices. In a business you have to charge all of the overhead burden against it. You have to charge it back against the operation, if you are going to have any kind of a cost factor.

But this disregards the hard facts of life that grain warehouses like all other businesses are paying more every year for the wages of workers in grain storage jobs, and that these workers spend just as much time taking care of a $2 bushel of wheat as they would a $4 bushel. This more than offsets any savings in insurance and other factors.

Another concept is that the Government can do this job a lot cheaper, and hence it ought to. But, in figuring this all out, how much of the overhead burden of the thousands of administrative employees of the Government who get into this act, in one way or another, is charged against the operation ?

In the House a week ago today, the following interchange took place:

Mr. AVERY. I think the gentleman was on the floor when I had a colloquy with the gentleman from New York [Mr. Santangelo] in respect to the storage matter. After I had concluded my remarks, I think the record was left in this position: That the Department of Agriculture had advised at least some Members of the House that Government-owned storage was costing only about 6 cents a bushel. I would like to propound a question to the gentleman from Mississippi [Mr. Whitten] : Has the Department of Agriculture ever furnished the committee that figure?

Mr. WHITTEN. I do not have any such information. They may have supplied it to some individual. I have not had any such statement that I know of. I do not mean to be all-inclusive, because there are about 8,000 employees in the Department, * * so what somebody may have told somebody else I do not know.

This must be a misprint, Mr. Chairman. I believe there are some 80,000 employees in the USDA.

Mr. AVERY. Did I understand the gentleman to say that committee itself had made some study of the cost of this storage?

Mr. WHITTEN. We have made about three investigations through the years.
Mr. AVERY. I mean recently.
Mr. WHITTEN. We had one this year.
Mr. AVERY. What did that reveal as to the cost of Government storage?

Mr. WHITTEN. Again I am sorry that I cannot give the gentleman that information right offhand. If you leave it for 2 years it costs one amount. If you turn it over it costs another amount. So there is no set figure, but it did show that in some instances it would be much mode economical, in my opinion.

That interchange shows two things. One is that you simply can't judge what a storage cost really is, on the basis of 1 year's situation.

The other is that the whole case for assuming a saving to the Government, in using Government-owned bins and Government-employed labor, is based on somebody's opinion, and very little more.

We hope the Senate will not agree with the House, that such opinion is sufficient basis for Congress ordering preference for Government-owned storage as a matter of public policy.

The way an arbitrary Government decision was reached on storage and handling rates has been based on what one might call the “economics of the moment.” Just today, this week, this year, without thought as to what the grain elevator and its marketing channels may have contributed to the farm program up to this moment, or the extent to which they are needed tomorrow.

I suggest that we ought to have these cost studies. Dr. Sharp made that comment, and so did Dr. Solstad.

And on March 8 there was a colloquy between Mr. Palmby and Mr. Whitten as follows:

Mr. PALMBY. It is not a starting point and let me tell you why it is not. The 5.1 is an actual storage cost figure from our fiscal records to keep the grain in the bin for a year. In addition to this, we have to empty and fill that bin. whether it is kept there for 1, 2, or 4 years, on the average I think 3 years has been fairly typical, it means that the cost of emptying and filling of that bin must be added to the 5.1 cents. The reason it must be added on is this: that from the bin most of this grain does not go directly to market. It must still go through a commercial house to be loaded into a boxcar. So if it costs 742 cents a bushel, the average cost of emptying and filling bins—it varies by States—but if we keep it there 3 years we must divide it by 3, so we put another 242 cents onto the 5.1-cent figure because this is in addition to before it gets into commercial

Mr. WHITTEN. Is that based on experience ?
Mr. PALMBY. Yes, sir.
Mr. WHITTEN. That would then leave you 712 cents ?

Mr. PALMbY. Or if left there only a year the whole 712-cent figure must be added on.

Mr. WHITTEN. This is the average?
Mr. PALMBY. Yes, sir.

Mr. WHITTEN. Basing it on your own experience it would be 742 cents as against 16 cents. You would multiply the vacant Government storage by 842 cents, the difference it costs?

Mr. PalMBY. This is just part of the picture. Going on further than this, we have always looked on it as supplementary or dead storage, whereas that which is in commercial storage is live storage, and it is impossible to arrive at a saving figure because we are comparing dead storage to live storage. This CCC-owned bin proposition is a good way to supplement live storage. We admit this. It has worked out well. But to say it is a saving is not accurate because we are comparing live to dead storage.

Mr. WHITTEN. Mr. Palmby, you still talk me around and around and around. I would like for you to put in the record the additional cost which Commodity Credit Corporation is out by reason of not having its storage filled, but carrying on contracts with private commercial warehouses. Could you do this?

Mr. PALMBY. No; there is one other reason. A good share of this storage is out of location as Mr. Berger stated.

The idea that warehousemen should store grain for less because of the lower value of the commodity. That philosophy is like saying to our industry and to the trucklines, the railroad, incidental labor, specialized labor, the telephone company, the power company, every one of whom serves the farmers and handles his produce, “Your income ought to be related to the percentage of parity the Congress chooses to set for farm price supports."

Now that is somewhat ridiculous, I submit, but perhaps we do actually have people here who sincerely believe in Government contracting everything. Out on the plains we call it socialism and sometimes we use stronger language.

The interchange I just read shows that you cannot judge what a storage cost really is. What I have shown here supports the idea that any cost study must be for more than 1 year.

The grain industry is in the position of the Congressman whose constituent says, “Yes, but what have you done for me lately?

In most farm communities the country elevator is the largest local taxpayer. If its business is to be handled by CCC through a bin site 5 miles out from town on a country road, where is the community going to come out? Where is the elevator going to turn for a deficiency appropriation?

This recent rate decision, Mr. Chairman, is just an episode, a symptom of the primary hazard of our trade. The Government is completely dominant, which I will illustrate with one final table, exhibit F.

(The document referred to will be found in the appendix at p. 544.) Mr. LAYBOURN. This is very, very important.

This shows that about 112 percent of the grain warehouse facilities under the uniform grain storage agreement, by number—164 elevators—represent some 28 percent of the total space under the agreement. It would be entirely within the power of Government to cut all rates to the potential earning level of such plants.

If this would be an injustice to the some 10,500 other elevators across the country that together represent the other 72 percent of the space, then the Government must exhibit some concern for these smaller operations, for the communities in which they are locally important, and for the farmers and consumers who benefit through their use.

I realize, Mr. Chairman, that many of your questions in this inquiry have been directed along exactly this line. Our association is completely openminded as to exploring different approaches, while at the same time dealing with the realities of the pattern of this industry as I have sketched it in my testimony.

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