In regard to the contract, the sections which we, in Nebraska feel are the most objectionable are as follows: In Section 10 and 11 "h", regarding the breakage of corn, soybeans and grain sorghums, the willingness of CCC to accept one-half the market discount where the breakage causes a lowering of the grade is of some help, however, this is an example of CCC's toughening of the contract and will naturally have a different bearing upon the cost of operating under the contract which consistently places tighter restrictions upon the operator. Again, in Section 13 "a", (ii), 11 (c), (d),(f), Commodity still retains the right to reject grain not meeting the specifications set forth in these sections of the contract. With the right of rejection it will be physically impossible, if CCC enforces the contract, for a country warehouse to offset his deficiencies against his grade premium account. As you know, it is nearly impossible for a country elevator to take co-mingled grain from large capacity buildings and ship it out and meet exact grade requirements. With Commodity having the privilege of rejection, this would mean that a country warehouseman could have nearly all of his grain rejected consequently could be loaded out, for all practical purposes, in order to meet the requirements of a small loading order. The other section which we believe is quite unfair to country warehousemen is in Section 15 (a), in which Commodity maintain their right to recover more than the average full market value of the outstanding warehouse receipt in case of loss by fire or other means. There is no reason for Commodity becoming involved with insurance settlements as long as they are paid the value of the grain at the local market on the day of the loss. Naturally this is not a common place thing but frequently puts a warehouseman in the position of owing Commodity more money than the average value of the grain in the warehouse and Commodity receives more for their grain than any other receipt holder. Then, going on to Section 11 (h), dealing with Food and Drug, we have the same objection, unless it has been corrected, as we had at the Town Hall meeting in Kansas City in which this section is ambiguous and difficult to understand and makes it permissible for CCC to place the responsibility upon the warehouse man. We realize this is a difficult section and that is why it is more important than ever that the trade have adequate protection under this section. Our country elevator operators have no means of knowing when grain is received from the farmer as to what fumigants were used by the farmer and in what amounts, while the grain was stored on the farm nor does he have any way of knowing if certain insecticides might have been used and in what quantities. Some of these have no tolerance at all by Food and Drug, consequently an elevator operator receiving grain for store from the farmer remains at the mercy of not only all his customers but also of residues from the use of fumigants in his own place of business. There is certainly some way these sections can be re-worded, making it more clear and understandable by the country trade. We believe these are the sections which will most effect our Nebraska people. This letter is being sent to you in the hope it will provide some basis information as to the manner in which the recently announced rates for government storage will effect the grain elevator industry in South Dakota. In order that this may not be labeled as pure conjecture on our part, we have reviewed the actual figures which the government obtained in South Dakota from those elevators which were selected for examination under the Government Cost Survey conducted by CCC. We do not have access to the survey figures on line elevator companies in South Dakota, but we did obtain copies of the actual surveys for seventeen South Dakota owned warehouses which we believe were virtually all of the firms in that category which were surveyed in our State. These surveys show under the cost of storage Schedule VI, the annual per bushel cost which the government calculated to be applicable in each case. These cost figures range from a low of .061 at one elevator, to a high of 22.7¢ in another. In breaking these figures down, we find that there were only six elevators among those surveyed, whose cost figures were at or below the 8.74 which the government released as their computed average cost of storing grain. In contrast we find that there were eleven warehouses whose cost figures were above the government's reported operational cost average and we might add that most of these were substantially above that figure. As a matter of fact, many of these have cost figures which are actually in excess of the annual storage rate now being suggested by CCC as compensatory for the storage of government grain. Even if we were to admit that the government had added a reasonable sum for risk factors and return on the capital investment, we could only conclude that the average South Dakota elevator would be condemned to operating on a marginal basis or at a severe loss. This leads us to the inescapable conclusion that Marvin McLain knew exactly what he was talking about when he was quoted as saying, "Many of them, I think, will go bankrupt before we get through with them". What this means is that the smaller country warehouses, such as we have in South Dakota, are being condemned to bankruptcy simply because certain large storage operations have received total storage payments that do not look good in print. We cannot agree with Mr. McLain's stated conclusion that this is a free enterprise operation in which this possibility was a calculated risk from the beginning. As has been repeatedly stated, the vast majority of these small warehouses did not enter into the storage business in the anticipation of making a windfall at government expense. They entered into it at the urging of USDA functionaries and of their own patrons because this was urged upon them as a responsibility to the government and to the farm people for whom this program was initiated. They did so with the full knowledge that they were building storage space far in excess of any normal requirements in their community and they are now being told that if they do not wish to accept an inadequate payment for their services, that the government will substitute itself in their business by buying additional bins or using surplus shipping space to house the farm products from their community. Over the years we had come to believe that in this country we could expect some sort of a judicial remedy from the arbitrary decisions of appointive public employees. We do not know, in this case, whether such a remedy is available to our members but we are certainly not willing to admit that the handling of this year's Uniform Grain Storage Agreement negotiations reflect a fair and equitable settlement of the issues involved. South Dakota has always had very strict storage laws, the benefits of which CCC has consistently seen fit to invoke for their own protection in connection with the storage of government grains. The South Dakota Public Utilities Commission has never abdicated its statuatory authority to establish storage rates and the regulations under which they are applied. In the past, they have seen fit, at the request of licensed warehousemen in this area, to approve the Uniform Grain Storage Agreement as a substitute contract when government owned grains are involved. This has been done on the basis that the Uniform Grain Storage Agreement represented a negotiated contract which was agreed upon between CCC and qualified representatives of the warehousemen themselves. Such a situation does not apply at the present time and we are not aware at this writing as to what action may or should be taken in this regard. Sincerely yours, FARMERS ELEVATOR ASS'N OF S. D. dif Anderson CLIF CANDERSON May 9, 1960 Το Whom It May Concern: The following is an example of what could have happened to one of our country elevators had the loading orders been settled under the terms of the new 1960 Uniform Grain Storage Agreement rather than under the 1956 Agreement due to the new conception of the terms "fairly representative" and the revision of Section 11 (f) "protein falling below 3/10 of one percent" to apply to Country Loading Orders. In December of 1959 the Osborne McMillan Elevator Company of Reeder, North Dakota received two loading orders for Spring Wheat of approximately 15,000 bushels each selected from a CCC inventory of 91,757.84 bushels of various grades and proteins. On Loading Order #39,684-C the trust average called for shipment of #1 DNS, test weight 58.6#, protein 14.30 with a Minneapolis Cash Market value based on the date of the last car shipped of $2.23-1/3 per bushel. Nine cars were shipped on this loading order all of which had a test This car was ordered sold out by CCC because of one of two reasons, (1) that the grade was not acceptable to their sales committment or (2) they were unable to find terminal storage disposition for it because of the damage. Under the terms of the new contract this car would no doubt be rejected. Value of car $2.20-7/8 Loss per bu. .0244 Total $37.54 Total cash loss because not "fairly representative" ......... $43.58 May 9, 1960 Eight of the nine cars shipped on this loading order had protein in excess of the requirements. On one, MILW 705618, the protein was 12.80, considerably lower than the 14.30 called for on the trust. Under the new 3/10 tolerance this could be rejected and the cash loss per bushel to the warehouseman would be 0344 amounting to a total of $48.22. The total loss to the warehouseman on the three rejected cars would be $91.80 which he pays to CCC in cash with no recovery possible. On the remaining six cars the premiums resulting from his giving CCC better grain than called for amount to $238.48. Under the 1956 contract he was allowed offset of the $91.80 discounts and against the $238.48 premiums and the difference was set up in the premium account. Under the 1960 contract he has paid CCC in cash for lower quality and has set up in his account $238.48 paper credit which he may never get the benefit of, as discounts always result from lower quality and therefore might be considered "not farily representative" and rejected by CCC. On Loading Order #40,105-C the trust called for shipment of #1 DNS, 59.02 test weight, 14.06 protein with a Minneapolis cash value of $2.2263 per bushel. Ten cars were shipped on this loading order and all of them had higher test weight and protein than called for on the warehouse receipts surrendered on the loading order. One of the cars shipped, ERIE 86071, graded #3 account of 6.5 damage content and was ordered sold by CCC as it did not fit in with their sales requirements or they could not find terminal storage space for the car because of the damage. The value of this car was $2.19-5/8 against the value of the trust of $2.2263 a difference of .03 cents per bushel or a total of $45.05 which under the 1960 contract would be paid for in cash by the warehouseman as a reject. Premiums on the other nine cars shipped on this loading order amounted to $74.18. It seems logical enough that under the 1960 contract a car with grade conditions similar to the above would be rejected by CCC as not being representative and the warehouseman would find himself in the unstable position of having to pay CCC in cash $45.05 for under-quality and having $74.18 set up in a probably unusable premium account all on the same loading order. This is but one example of many where the disallowing of discounts on rejected cars could result in serious losses to our company. We firmly believe that this part of the agreement should be allowed to remain the same as in the 1956 agreement in that at no time can the warehouseman get paid in cash for any deliveries made to CCC for better quality than called for on the warehouse receipts. We see no reason why he should be penalized in cash when many times through no negligence on his part the quality might not conform to CCC's opinion of "fairly representative." 58385 0-60- -37 |