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Senator YOUNG of North Dakota. Do you handle grain on a commission basis at all?

Mr. PUELZ. Well, yes and no. All the grain that All the grain that goes to Kansas City, we sell it on consignment and the commission is 1 percent on that basis. It is a commission basis-1 percent of the cost price.

Senator YOUNG of North Dakota. You are in the commission business, aren't you?

Mr. PUELZ. Yes. We have a commission house at Kansas City, Senator.

Senator YOUNG of North Dakota. Thank you.

Senator SYMINGTON. Senator Proxmire.

Senator PROXMIRE. May I ask, this profit of 10 cents per bushel, has that been returned virtually intact to your customers, or are you provided with a very substantial reserve?

Mr. PUELZ. We return 42 cents, sir.

Senator PROXMIRE. Then you keep more than half the profit as reserve?

Mr. PUELZ. Well, of course, some of that is depreciation, the accelerated depreciation which wasn't taken into account. We also take 10 percent of our net profit for contingencies, which we think we should. We have a heavy liability with this grain stored. It is necessary we do that because if we don't do that, we might not be able to get a bond. We must have a bond to cover our risk.

Senator PROXMIRE. I am just trying to get a very quick general financial picture of your situation and the risk involved, the profit you are making.

Regardless of what should happen, as I understand it, in view of the fact that you are retaining more than half of your 167-percent profit and more than this 26-percent profit on investment, it is virtually impossible, I would assume, for you to suffer a loss as compared with what has been put into this business since 1949.

Mr. PUELZ. We are an old, established company. We have been in business every business day since 1916.

Senator PROXMIRE. Since 1949, you have had this big expansion? Mr. PUELZ. That is right.

Senator PROXMIRE. My question is, it appears that you are in a position to have paid, first, very substantial dividends, and, second, to include a reserve so that in the event of an evaporation of the storage opportunities you would still be able to be solvent and you wouldn't suffer loss of your investment?

Mr. PUELZ. We hope so, Senator. Of course, our expense is $2,000 a day, counting Sundays and holidays. It wouldn't take long to eat up our surplus.

Senator PROXMIRE. Your profits are one and a half times. If your expenses are $2,000 a day, your profits are $3,000 a day, your gross income $5,000 every day.

Mr. PUELZ. Perhaps. That is in round figures, however.

Senator SYMINGTON. You have a knowledge of the increase in your net worth between 1949 and 1959?

Mr. PUELZ. Senator, I didn't get the question.

Senator SYMINGTON. Do you furnish a balance sheet to your members showing the change in your net worth between 1949 and 1959? Mr. PUELZ. I think we had that here-no, we do not.

Senator SYMINGTON. Will you furnish that to the committee?

Mr. PUELZ. I will. You want that?

Senator SYMINGTON. Do you also have a balance sheet with earnings statement, assets, liabilities?

Mr. PUELZ. Yes. We can furnish that.

Senator SYMINGTON. Do you have those for the various years, the last 10 years?

Mr. PUELZ. And I will send it to you.

(Subcommittee Note: As of date of printing, this material had not been received by the subcommittee.)

Senator SYMINGTON. Will you do that?

Mr. PUELZ. Yes, sir.

Senator SYMINGTON. Thank you very much.

Mr. Puelz, here are several advertisements. I will read you one: Shown above are the trucks which offer a complete farm service.

Remember, we pay 12 cents a bushel for all Government grain we handlepayable 1 year after delivery.

Is that advertising appealing to the farmer?

Mr. PUELZ. I have heard about those things. I don't believe we are bothered about that in our territory so much. That will happen and there will be more of that to come, of course, when the warehousemen are short of storage.

Senator SYMINGTON. This is sort of an additional price support for the farmer?

Mr. PUELZ. Yes, in that case that is right.

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

(The advertisements referred to are as follows:)

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Senator SYMINGTON. Have you any further questions?

Senator ELLENDER. NO.

Senator PROXMIRE. NO.

Senator YoUNG of North Dakota. No.

Senator SYMINGTON. Senator Ellender says we have no objection to that additional price support.

The committee is adjourned until tomorrow, and we will have an executive hearing at 10 o'clock, followed by a public hearing.

(Thereupon, at 12:30 p.m., the subcommittee recessed, to reconvene Wednesday, January 13, 1960, following the executive hearing at 10 a.m.)

Mr. ROBERT PUELZ,

WASHINGTON, D.C., January 15, 1960.

Manager, Equity Union Grain Co., Lincoln, Nebr.

DEAR MR. PUELZ: Mr. George Kopecky informs me that at the conclusion of the Senate Special Agriculture Investigating Subcommittee hearings on January 14, 1960, that you felt you were not given an opportunity at the hearing to discuss, in complete detail, factors such as shrinkage, quality deterioration, or interest on investment.

As you know, it was carefully explained that all figures given on all warehouses surveyed did not include the factors of shrink, quality deterioration, or interest on investment. The record is very clear on this in all cases, and these three items were discussed in detail throughout the hearings.

I am indeed sorry if you feel that not all the elements were brought out in your testimony. My suggestion is that you prepare a written statement, outlining your further views on these items, and forward same to us so that it may be included in the printed record.

Once again, thank you for your cooperation.
Sincerely yours,

RICHARD M. SCHMIDT, Jr.,

Counsel, Special Agriculture Investigating Subcommittee, Committee on
Agriculture and Forestry, U.S. Senate.

Mr. RICHARD M. SCHMIDT, Jr.,

LINCOLN, NEBR., January 18, 1960.

Counsel, Special Agricultural Investigating Subcommittee,

Committee on Agriculture and Forestry,

U.S. Senate, Washington, D.C.

DEAR MR. SCHMIDT: In following your suggestion, made in your letter of January 15, that I prepare a written statement and forward same to you so that it may be included in the printed record, I am herein outlining my views on the items I was not given an opportunity to discuss at the hearing.

First, in determining costs of storage, no consideration was given to the factor of shrinkage. In fairness to the 11,000 warehousemen, this factor should be considered, since he is held responsible for delivery of the exact amount of each warehouse receipt. Shrinkage is inevitable and the only recourse the warehouseman has, is to charge such shrinkage (determinable only at inventory or shipping time) against cash grain operations, owned, or purchase market grain to fill the shortage due to shrinkage in storage.

In our operation at the close of our fiscal year, on April 30, 1959, the year under survey, our shrinkage was $15,703.30 based on 7,991.5 bushels shrinkage, priced at $1.961⁄2 basis Omaha. The survey study made of our operations shows storage accounted for 95.33 percent of the total bushels, and cash grain operations accounted for 4.67 percent of the total bushels. Applying these ratios to shrinkage loss, produces a storage operating loss of $14,969.96.

In our opinion this shrinkage should be a part of storage cost, and not be charged to some other portion of a business operation.

Second, no consideration was given to quality deterioration as a factor in costs of storage. Since grains are living organisms, every warehouseman experiences difficulty in maintaining quality over extended periods. Complete control is virtually impossible. The warehouseman is obligated under the uniform grain storage agreement to deliver, not only the quantity, class, and grade, but the quality indicated by the warehouse receipts.

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