Senator ELLENDER. So that from 1952 to date, you have increased up to 2,167,000? Mr. DUDDEN. That is right. Senator ELLENDER. Now, how much of that additional storage did you build under this quick amortization? Mr. DUDDEN. In 1951 we built 300,000 bushels. Senator ELLENDER. All right. Mr. DUDDEN. In 1952, 260,000. Mr. DUDDEN. 350,000. That was upright conventional storage. Senator ELLENDER. You mean those shown in this photograph? Mr. DUDDEN. That is right. In 1954 we built 250,000 bushels. Senator ELLENDER. 1954, 250,000? Mr. DUDDEN. Temporary storage. storage. The 1954 was temporary Senator ELLENDER. Well, now, what additional inducements, if any, did you receive from the Government to construct permanent storage, upright houses that are shown in this photograph? Mr. DUDDEN. None, Senator. Senator ELLENDER. None at all except the quick amortization? Senator ELLENDER. And the rate of storage on those new facilities was the same as those that you were paid on old facilities, am I correct in that? Mr. DUDDEN. Exactly the same. Senator ELLENDER. I see. And that was fixed under the uniform storage agreement? Mr. DUDDEN. Uniform storage agreement. Senator ELLENDER. All right. Senator PROXMIRE. Could I just see if I understand now. This 100 percent profit which you say is 2 cents per bushel is not the profit that you had to pay taxes on, as I understand, because of the amortization provision. That was very, very substantially reduced. This was under the assumption that you would have to have ordinary depreciation. Mr. DUDDEN. That is right. Senator PROXMIRE. Therefore, you have already been enabled to retain at least a substantial amount to compensate you for construction of these facilities? Mr. DUDDEN. Yes. Senator SYMINGTON. On quite a little of this, then, you are amortized heavily. You won't have to take any depreciation? Mr. DUDDEN. Our amortization, I believe, has expired on nearly all of it. Senator SYMINGTON. Has there been any notification there will be revision of rate structures given you as a result of that situation? In other words, the amortization was to cover the risk. Now, you have written off your plan 100 percent. Has there been any notification of adjustment in rate? Mr. DUDDEN. None. Senator SYMINGTON. So you will, therefore, on the same basis of the figures, make a profit in the future even greater than 105 percent; is that correct? That is mathematical, isn't it? Mr. DUDDEN. Mathematically. Senator SYMINGTON. Thank you. Now, did you get any loans from any Government agency? Senator SYMINGTON. We have a list here of people who have gone in this storage business with loans from the Government totaling many millions of dollars. Actually, if you had gotten a loan from the Government to build these facilities like many of these people have, you could handle it on the basis of no investment at all on your part; could you not? You used your own money, but if you used Government money through a loan you could start getting back 100 percent of your cost without putting any of your own money in at all; could you not? Mr. DUDDEN. I assume that you are right. Senator SYMINGTON. Do you want to check that with your accountant? That is correct; is it not? Mr. DUDDEN. That is right. Senator SYMINGTON. Thank you. Senator PROXMIRE. Can I ask, in the area of Nebraska where you are, are there ample storage facilities now? Mr. DUDDEN. We are in the high competitive area, and in a space of 36 miles there is over 12 million bushels of storage. Senator PROXMIRE. So there is ample storage available and there is some excess capacity? Mr. DUDDEN. There is an excess in capacity; yes. Senator PROXMIRE. Now, how have you been successful in getting contracts? I mean how do they do this? How do they allocate? There is no bid? Mr. DUDDEN. Your customers bring you the grain, is how you can get it. It is brought to you through regular trade channels, producers. Senator PROXMIRE. Is there any concession to customers so they couldn't go to somebody else? Mr. DUDDEN. No; no concession made. Senator PROXMIRE. Is it a matter of promotion? Mr. DUDDEN. Well, we give away pencils and calendars. Senator PROXMIRE. You don't have a promotion staff, or anything of that kind? Mr. DUDDEN. No. Senator PROXMIRE. Extensive advertising, direct mail, people calling, attempting to solicit their business? Mr. DUDDEN. We do none of that. However, we give good service and take care of our customers' grain, regardless of the moisture content or the condition. Senator PROXMIRE. Well, then, with the moisture content situation, there is a kind of, at least a partial price differential to your customers; isn't that correct? Mr. DUDDEN. We are paid for drying and conditioning grain. However, we have the facilities to do it and so, therefore, we get the business. Senator PROXMIRE. I see. Senator SYMINGTON. Mr. Witness, we have a sworn affidavit here, dated January 11, 1960: I, Hugo Blumstengel, furnish the following voluntary statement to Mark C. Wempe known to me to be a representative of the U.S. Senate Agricultural Committee. This voluntary statement may be used as necessary by the committee. In May 1959, I prepared an advertisement as follows which was mailed to elevator men: "Are you passing up Uncle Sam's gravy train of storing CCC grain on which some other grain dealers are getting back their original capital on investment the first year, and returns of 50 to 75 percent the following years on their original investment.' Did you ever see that? Mr. DUDDEN. Not that particular statement, Senator. Senator SYMINGTON. Did you ever see that advertisement? Mr. DUDDEN. There are similar advertisements. Senator SYMINGTON. Do you have one? Mr. DUDDEN. No, we haven't. Senator SYMINGTON. How did you see it? You say there are; how do you know there are? Mr. DUDDEN. The sellers of steel buildings advertising over the radio and television to get buyers to buy their products make some pretty outlandish statements, Senator. Senator SYMINGTON. The affidavit continues: In addition, this advertisement referred to the fact that there was gold in them there mountains of grain and that facilities could be constructed for as low as 13 cents per bushel exclusive of foundation costs. This circular was subsequently withdrawn at the request of the manufacturer before the mailing was completed. That is the end of the affidavit sworn to January 11, 1960. Well, if you could construct it at 13 cents a bushel and you were getting 17 cents a bushel, you would be in pretty good shape, wouldn't you? Mr. DUDDEN. If you didn't have to fill and empty it and condition it, you would. Senator SYMINGTON. Without objection, this affidavit will be made a part of the record. (The affidavit referred to will be found in the files of the subcommittee.) Senator SYMINGTON. Senator Young. Senator YOUNG of North Dakota. What percentage of your capacity is represented by Government storage? What percentage of the grain you have in storage now is Government-stored grain? Mr. DUDDEN. During the GAO survey, it was 67 percent filled. Senator YOUNG of North Dakota. Who determines where this Government grain can be stored, whether in your elevator or one of these other elevator facilities in your area? Who determines that? Mr. DUDDEN. The farmer is allowed to deliver the grain to the elevator of his choice. Senator YOUNG of North Dakota. Also your regional ASC office determines in a large measure where most of this grain goes, doesn't it? 58385-60- 4 Mr. DUDDEN. The ASC ultimately tells people where to haul it, but they have their choice of where they would like to have it delivered. In our instance, in our area, that is the way it is handled. Senator YOUNG of North Dakota. How many miles do the farmers haul to your elevator? Mr. DUDDEN. We have competitors 22 miles north of Venango, 38 miles southeast, and, of course 7 miles west and 7 miles east. So you can get an idea of our territory. Senator YOUNG of North Dakota. How does a regional or State ASC committee determine where the grain is to be stored? Do they contact you? Mr. DUDDEN. They use the first facilities they can get it to. Senator YOUNG of North Dakota. What if there is a competitor right next to you? Do they divide it evenly? Mr. DUDDEN. If he is a customer of your competitor, the competitor gets the business. If he is your customer, you get the business. Senator YOUNG of North Dakota. Mr. Chairman, this is something I think we should go into because there is some preference shown. I am not familiar with all the details of it, but some elevators are able to get grain when others can't. Senator SYMINGTON. Mr. Dudden, would you care to comment further on that? Mr. DUDDEN. Our town is geographically located near the Colorado State line and we draw grain from four counties, a point to and from Colorado and to and from Nebraska. The ASC office mails out a card prior to takeover date of wheat or other grain, and the farmer writes on the card the elevator of his choice to deliver this grain to, and then the elevator will receive from the ASC office the delivery notices. Senator SYMINGTON. Mr. Counsel, will you look into this further and discuss it with Senator Young at his convenience? Senator YOUNG of North Dakota. I would also like to find out whether the ASC always abide by the farmers' wishes in this matter. Mr. DUDDEN. Senator Young, I might go further on that, that our customers converse with us in regard to delivering grain and I think if they told them to haul it to the wrong elevator that they would be corrected. Senator YOUNG of North Dakota. You have a representative who is out contacting farmers, soliciting their storage business. Mr. DUDDEN. They do their business in our small town and loaf, so to speak, in our elevator. So we know what they are doing. Senator YOUNG of North Dakota. There wouldn't be anything wrong if they did-I think you are wrong on the other matter if the Government determined how much grain went to this elevator and how much to that elevator when they had equal storage capacity and facilities and everything very much alike. Mr. SCHMIDT. May I say to the committee that we are going to have witnesses from the Department of Agriculture here tomorrow. I think that they can explain the matter to us. Mr. Dudden, I have no further questions. Do any members of the committee have further questions? Senator ELLENDER. No. Senator SYMINGTON. Senator Young? Senator SYMINGTON. Senator Proxmire? Senator PROXMIRE. NO. Senator SYMINGTON. Mr. Dudden, I want to compliment you. You have been a very frank and forthright witness, and let me emphasize that there is no criticism of any action of yours in any way on the part of the committee. In fact, I think if I was out of the Senate the first thing I would do would be to go into the grain business. Counsel, you have one more witness, have you not, and then we will meet this afternoon. Will you call your next witness. Mr. SCHMIDT. Mr. Puelz, will you step forward to be sworn, please. Mr. PUELZ. Mr. Chairman, may I have my accountant sit with me? Senator SYMINGTON. Yes. TESTIMONY OF ROBERT A. PUELZ, MANAGER, EQUITY UNION GRAIN CO., LINCOLN, NEBR.; ACCOMPANIED BY HOWARD D. OLSON, ACCOUNTANT Senator SYMINGTON. Will you raise your right hand, please. Do you swear that the testimony you will give to the subcommittee of the Senate Agriculture and Forestry Committee will be the truth, the whole truth, and nothing but the truth, so help you God? Mr. PUELZ. Yes. Senator SYMINGTON. Counsel will proceed. Mr. SCHMIDT. Mr. Puelz, will you give us your full name and occupation, sir? Mr. PUELZ. My name is Robert A. Puelz. I am general manager of the Equity Union Grain Co., a cooperative organization with headquarters at Lincoln, Nebr. Mr. SCHMIDT. All right, sir. What type of business structure is Equity Union? Mr. PUELZ. We have 5,225,000 bushels of concrete conventional storage and 3 million bushels of flat storage. Mr. SCHMIDT. You are a cooperative elevator? Mr. PUELZ. Yes, sir. Mr. SCHMIDT. You have furnished us with pictures of your facilities for the committee, which we will hand to them. You gave us a breakdown on conventional and flat storage. What grain do you store, Mr. Puelz? Mr. PUELZ. We store mostly wheat. It is all wheat at the present time. Mr. SCHMIDT. You are what would be classified as a terminal elevator facility? Mr. PUELZ. That is right, sir. Mr. SCHMIDT. How do you receive this grain and from where? Mr. PUELZ. The wheat comes from Nebraska, eastern Colorado, and northwest Kansas. It is shipped by the elevators into Lincoln from our customers and members and we store it for them. Senator YOUNG of North Dakota. Mr. Chairman, may I break in at this point? |