The Secretary agreed to direct the resources of the Adjustment Administration toward assuring producers a reasonable return for their product, and to use Administration funds, together with those available from the Relief Administration, toward arriving at this end. Since immediate action demanded a temporary expedient, the Secretary authorized John Brandt, president of the Land o' Lakes Creameries, Inc., to purchase surplus butter for resale to the Administration. Under this plan, more than 11,000,000 pounds of butter were bought from August 17 to October 25, inclusive. The authorization stipulated that no profit would accrue from these purchases either to Mr. Brandt or the Land o' Lakes Creameries, Inc., which is a cooperative organization.

Prices paid to producers of butterfat throughout the country are based on market quotations in the New York and Chicago markets, and purchases were made on these exchanges with a view to sustaining fair price levels. Butter was also bought under this arrangement in Philadelphia and Buffalo.

FARM CREDIT ADMINISTRATION ADVANCED FUNDS

The Secretary entered into an agreement to repurchase from Land o' Lakes whatever quantities of butter Mr. Brandt bought in carrying out his instructions. This operation was conducted with an outlay of $2,474,461.52. All of these purchases have been turned over by the Secretary to the Federal Surplus Relief Corporation. The Farm Credit Administration advanced to the Land O' Lakes $1,000,000 in several loans during the period of these purchases, all of which has been repaid.

When the Secretary designated Mr. Brandt to act for him informally, he suggested to the groups represented that an organization, representative of the whole industry, be formed with which he could deal on a formal basis for the general benefit of producers of milk and the processors of butterfat.

DAIRY MARKETING CORPORATION FORMED

The suggestion materialized in an industry-sponsored organization, known as the Dairy Marketing Corporation, set up as a clearing house to handle surplus dairy products in cooperation with the Secretary of Agriculture. This corporation's board of directors included representatives of the producers and the processors and distributors of milk, butter, and cheese. No officer, director, or member received any compensation for work for the corporation.

The Secretary entered into an agreement with the Dairy Marketing Corporation by which it was to purchase butter for resale to the Secretary in such markets and at such prices as he should designate. The total cost of the dairy products thus purchased by the corporation for the account of the Secretary included the actual cost of the products; out-of-pocket handling charges, such as transportation, incurred by the corporation; and a commission not exceeding one eighth of a cent per pound of butter.

Purchases through the Dairy Marketing Corporation totalled 32,178,740 pounds of butter. Considerations of production, consumption, existing storage stocks, conditions in past years, relief requirements, and the desire of the Secretary to obtain the maximum benefits for the people from the expenditure of available funds, determined the whole course of action.

The agreement with the Dairy Marketing Corporation was effective October 25 and was terminated December 16. Purchases were made daily, first on the New York and Chicago markets and then on the New York, Chicago, San Francisco, Portland, and Seattle markets.

Subsequently, the dairy purchasing program was turned over to the Federal Surplus Relief Corporation, which, as agent for the Secretary, now is asking for bids on butter in New York and Chicago. It is proposed to purchase 1,000,000 pounds each week for 3 weeks during February. Payments will be made on the basis of average weekly market quotations, as reported by the Bureau of Agricultural Eco

nomics.

Using Relief Administration funds, awards of contracts were made during January for the purchase of 5,800,000 pounds of butter, 4,200,000 to be bought in Chicago and 1,600,000 in New York. Funds from the same source will be used in the purchase of another 9,200,000 pounds, bids on which are now being invited. While prices will be based upon Chicago market quotations, actual purchase and delivery may be accomplished at many cities throughout the country.

Every effort is being made to afford equal opportunity to small and large creameries and distributors of butter to share in these purchases on a fair-price basis. The minimum basis for bidding will be 20,000 pounds, or one car lot. This reduction from a minimum of 200,000 pounds is intended to offer smaller concerns the same advantages larger firms would enjoy under higher minimum deliveries.

HOLDINGS DOWN TO NORMAL

By January 1 figures compiled by the Bureau of Agricultural Economics indicated that the butter surplus buying program had attained the objective of bringing the butter storage supplies near the normal level.

Of 111,210,000 pounds of butter reported in storage on that date, 39,932,000 was the property of the United States Government. In addition the Relief Corporation had outstanding proposals calling for bids on 18,011,000 pounds of butter. When this purchase is made the total removed from commercial channels of trade will be 61,242,318 pounds, of which 3,300,000 had been distributed January 1.

After deducting Government holdings and proposed purchases, the net commercial storage holdings will be 53,266,000 pounds as of January 1, 1934, as compared to 52,410,000, which is the total average for January 1 holdings in storage for the 5 years preceding 1933.

The present commercial storage holdings are not much more than a normal 2 weeks' supply for the Nation. The Government-owned supply is rapidly being distributed to the needy and underfed by the Federal Surplus Relief Corporation.

Surplus dairy supplies are being further reduced by purchase of cheese for relief purposes. On January 5, the Federal Surplus Relief Corporation awarded contracts for the purchase of 3,602,000 pounds of cheese at various points through the country. New purchase of cheese will be made during February.

DEPARTMENT INSPECTS COMMODITIES

Inspections of commodities acquired through the Federal Surplus Relief Corporation or other agencies are made by the representatives of the Department of Agriculture whose normal function it is to make these inspections either for the Government or for commercial inter

ests. On approval, the goods are accepted by them for the Secretary. Vouchers are approved by representatives of the Bureau of Agricultural Economics and the Bureau of Animal Industry of the Department of Agriculture and by the representatives of the Comptroller in the field auditing service. The vouchers are then presented for payment to the Army finance officers who are employed, for the sake of economy, in making disbursements outside of Washington. Final audit is made by the Comptroller's Office in Washington. The warehouse receipts or other evidences of title for all goods purchased with funds allocated by the Secretary of Agriculture are sent to the Agricultural Adjustment Administration in Washington so that the title actually comes into the possession of the Secretary. The goods are thereafter donated to the Federal Surplus Relief Corporation.

PROCEDURE OUTLINED

As an example, procedure which was followed in the purchase of butter is briefly outlined: Purchase orders were issued naming quantities, grades, and maximum prices; butter was purchased for the Secretary on the mercantile exchanges; invoices, negotiable warehouse receipts, and vouchers were delivered to the chief inspector of the Bureau of Agricultural Economics at Chicago, who inspected or caused to be inspected, the butter, which was graded and weighed by a representative of the Bureau. Thereafter, being in possession of the warehouse receipts, the chief inspector accepted this butter for the Secretary and for the Government. He executed an acknowledgment of receipt for the Government on the voucher which was then sent to the finance officer, United States Army, for payment. The warehouse receipts were sent to the proper officer in the Agricultural Adjustment Administration who, after having prepared proper records, delivered these warehouse receipts under authority from the Secretary to the Federal Surplus Relief Corporation as a donation for distribution through the Federal Surplus Relief Corporation and/or the Federal Emergency Relief Administration, to the underfed and needy.

PAINSTAKING AUDITS of all trANSACTIONS

Thorough and painstaking audits of all financial transactions have been carried on currently with the expenditures of money, and every safeguard has been thrown around the handling of property so that the Government may obtain the goods for which it pays, and these goods may be promptly delivered to the custody of the Federal Surplus Relief Corporation.

Distribution of commodities by the Surplus Relief Corporation is made through State and county relief channels in the same manner as the distribution of funds. A representative of the Secretary of Agriculture is on duty in the office of the director of procurement, Federal Surplus Relief Corporation, to assist in distribution. Representatives of the comptroller, Agricultural Adjustment Administration, are also on duty with the Relief Corporation maintaining records, accounting and auditing all items in which the Secretary of Agriculture is involved.

Exhibit 15 of appendix F shows the amount and cost of each commodity purchased with Agricultural Adjustment Administration funds for distribution through relief channels.

CHAPTER 13

MISCELLANEOUS CODES AND MARKETING AGREEMENTS

Besides the codes of fair competition mentioned in connection with the several commodities dealt with in this report, the Agricultural Adjustment Administration has devoted much time to the consideration of a large number of miscellaneous codes relating to food products, fishery industries, alcoholic beverages, and other industries not directly related to agriculture.

As described in the section of this report headed "Objectives and Mechanisms", most of the codes for industry remote from agriculture and not closely related to prices paid to farmers have been transferred by Executive order to the National Recovery Administration. This has relieved the Agricultural Adjustment Administration of an enormous burden and permitted it to concentrate on its principal task-the increase of farmers' purchasing power.

With repeal of the eighteenth amendment, regulation of the domestic manufacturing, wholesaling, and importing of liquor has been made effective through codes and marketing agreements. Codes have been put into effect for the alcoholic beverage importing industry, the distilled spirits industry, the distilled spirits rectifying industry, the brewing industry, the alcoholic beverages wholesale industry, and the wine industry. The codes are administered by code authorities named by the industries themselves. The code authorities and administrative matters in general are, however, subject to the jurisdiction of the Federal Alcohol Control Administration.

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