has been introduced by two of my former colleagues, Congressman Edwards and Congressman Gubser of California.

I was raised on a farm in Idaho and have been associated with Idaho farmers and their problems throughout my life. I served one term in the Idaho House of Representatives in 1955-56 and two terms in the U.S. Congress from 1961 through 1965. I am presently a vice president of the American Potato Co. with main offices in San Francisco, Calif., and processing plants in Blackfoot, Idaho, and Moses Lake, Wash. I am a director of the Dehydrated Foods Industry Council, and it is in this capacity that I appear here today to testify for S. 2214. Our executive secretary has polled the potato members of our council and found them to be unanimous in their support of this legislation.

It is our feeling that this legislation merely updates the historical exemption that canners of fruits and vegetables were granted from the original Marketing Order Act of 1937. We understand that when freezing had become a major factor in the preservation of fruits and vegetables that Congress in its wisdom extended to freezers of fruits and vegetables in 1946 the same exemption that had previously been enjoyed by the canners. The legislation that you are considering today will extend to dehydrators and other processors of potatoes the same exemption that is presently enjoyed by canners and freezers.

Mr. Chairman, we feel that this is good legislation and that its passage is necessary for dehydrators of potatoes to compete with canners and freezers on a fair and equitable basis. It has been suggested here today that this could be accomplished by removing the exemption which the canners and freezers currently enjoy. This would be a terrible mistake. As I understand it, the original reason for this legislation was to correct an injustice that was done to the Pik-Nik Co. of San Jose, Calif. which resulted in their plant being closed temporarily because of restrictions resulting from a potato marketing order which applied to Pik-Nik but did not apply to other shoestring manufacturers with whom they were competing because they purchased their potatoes in different sections of the country.

Therefore, the removal of the canning and freezing exemption would not correct this in any way. Further, it is important to understand that the potato marketing orders, where in existence, are regional. Many potato-producing areas do not have marketing orders. In other areas they are inactive and in those areas where they are in existence, they have different regulations and provisions.

Members of our association have no objection to potato marketing orders as long as they continue to operate as they have in the past and are applied only to potatoes for the fresh market. However, we are definitely opposed to marketing orders being applied to processors because this cannot help but give one processor an unfair advantage over another processor because of the difference in marketing order regulations in the many areas in which competing processing plants are located. Therefore, we feel this legislation is not just in the interests of Pik-Nik Co. but it is in the interest of all processors of potatoes, dehydrators, and potato chippers and anyone who utilizes potatoes. Now, I would like to add for the record a definition of other processing. The legislative history should make it clear that the term "other processing" is intended to refer to operations which commonly involve the application of heat or cold to such an extent that

the natural form or stability of the potato undergoes substantial change. And this is true in chipping, dehydrating, and the manufacturing of shoestrings.

Mr. Chairman, one other question I would like to answer that was raised by Mr. Hedlund earlier was that marketing orders are successful because they are employed by many areas of the country, and this is true, but there are many areas that have rejected marketing orders and that have caused their marketing orders to be inactive. Now, it is true that now we have an order in Idaho that we certainly have no quarrel with because it does not regulate the processors. There are attempts to change it to make it regulate the processors and that is why we feel this legislation is urgent. There is an order in Washington that has the authority to regulate the processors but does not. But in Maine their order is inactive and in North Dakota, and in Minnesota, and in the district of the gentleman from California, Mr. Sisk, marketing orders have been voted out. So, I do not want the impression to be left here that marketing orders are the salvation of the potato farmer. In areas such as Idaho where the farmers want them and use them, we certainly support their utilization to build the image of Idaho potatoes and to promote the quality of their product.

In conclusion, Mr. Chairman, one other thing I would like to make clear is although this has happened to Pik-Nik today, it can happen to any dehydrator tomorrow. For example, there is in Washington State, Pronto Foods Co., a dehydrator of potato flakes. In my home State of Idaho, Idaho Fresh-Pak dehydrates potato flakes, and in the Red River Valley, Pillsbury dehydrates potato flakes. If in any of these areas a marketing order is put into effect that says that one of these dehydrators cannot use field-run potatoes and must use U.S. No. 1 potatoes, they would find themselves in exactly the same position that Pik-Nik is in today. And I would like to further point out that this has been talked about here by Mr. Hedlund and others as a sweeping change which is not so, because the only area in which processors are being regulated as to what potatoes they can use today is in the Klamath Basin, and I would say that rather than help the producer, this regulation has hindered the producer's ability to market his crop. I heard yesterday in an informal conversation with Mr. Lovins from the State of Washington that they had gone down to the Klamath Basin and purchased potatoes down there and shipped them to the State of Washington for freezing because they could buy them in the Klamath Basin cheaper than they could buy them in the Columbia Basin, and if we were to follow the suggestion of Mr. Hedlund and take away the exemption that freezers enjoy, then they would not have been able to do that.

Of all of the russet producers in the West, the Klamath Basin, because they regulate potatoes going to processors, this last year enjoyed the lowest return to their growers of any russet-producing area. Idaho, with freedom for their processors, had the highest. Washington, with freedom for their processors, had the next highest.

In Idaho when a farmer produces his crop, he can sell it on the fresh market, he can sell it to a freezer or a canner or to a dehydrator or to a chipper or to a shoestring manufacturer without regulation, and that is the same freedom that we are asking for all farmers and all processors nationwide. The same is applicable today in Washington but in the Klamath Basin these farmers can sell only on the fresh

market or to canners or to freezers as far as the processing grade or the size B portion of their crop is concerned. And if you were to follow the suggestion of Mr. Hedlund, they would not have even been able to sell to the freezer.

So, Mr. Chairman, I feel that this is good legislation and I would urge the committee to act favorably on it. I think it is important to the entire potato industry nationwide.

Thank you, Mr. Chairman.

Mr. FOLEY. Thank you, Mr. Harding.
Mrs. May?

Mrs. MAY. Mr. Harding, I gather that you do not agree with the Department's statement that this bill would significantly reduce the effectiveness of marketing orders as a means of strengthening returns to the producers?

Mr. HARDING. I certainly do not. I think the best way to strengthen returns to producers is to allow them to have as broad an area as possible into which they can market their crop, and I think if the producer has the alternative of selling on the fresh market or to a canner or freezer or dehydrator or chipper or shoestring manufacturer on a bargaining basis without any restriction, that is how he is going to achieve the highest return for his crop.

Mrs. MAY. Thank you, Mr. Harding.

Mr. FOLEY. Mr. Jones?

Mr. JONES. No questions.

Mr. FOLEY. Mr. Goodling?

Mr. GOODLING. Thank you, Mr. Chairman.

Just one question. As I pointed out to the previous witness, the chief objection apparently from the Department stems from the fact that the Pik-Nik people process their product and then can it. Is it not true that all dehydrated potatoes are first processed and then packaged? Mr. HARDING. That is very true, and in the dehydration of potatoes, extreme heat is applied, and we have canned them and nitrogen packed them and we joined the National Canners and have been paying dues for about 8 years, the company I am associated with, in the hopes that some day we might be recognized as a canner if this thing ever got tough. But from a practical matter, if improved packaging comes along and we can put our product in a milk carton or maybe in a vacuum packed piece of cellophane, and we can pass on to the consumer considerable packaging savings, should we be denied the right to do that because of a strict definition of canning? And that is why I think the only fair and equitable thing to do is to exempt all potatoes for processing from marketing orders and put us all on the same basis. Mr. GOODLING. I think this is a very serious aspect of the ruling from the Department. It includes one and not all, but it could eventually include your organization and might, conceivably force a lot of people out of business.

Mr. HARDING. It is very possible and I would predict if this legisla tion is not passed, that if the choice of the committee was to try and change the definition of canning to include Pik-Nik, that very shortly with marketing orders varying around the country, in the future you are going to be faced with dehydrators that are in exactly the same competitive crisis as Pik-Nik. There is going to be confusion and chaos in the industry. That is why I support this legislation.

Mr. GOODLING. That is all, Mr. Chairman.

Mr. FOLEY. Mr. Myers?

Mr. MYERS. Mr. Harding, a moment ago the representative from Pik-Nik said that the U.S. No. 1 B potato now was being sold to the starch industry and that they were not being lost. Are you familiar if the sale is through a marketing order?

Mr. HARDING. Well, yes. In the marketing order area, and that is the discrimination, they can sell in the Klamath Basin marketing order area to processors in that area, and that includes for processing into starch without restriction.

Mr. MYERS. They are not excluded from the marketing agreement. Mr. HARDING. They are excluded from the marketing agreement in the Klamath Basin.

Mr. MYERS. The starch industry presently buying the questionable potato here in the Klamath Basin is excluded from the present marketing agreement.

Mr. HARDING. That is right. And Pik-Nik would be excluded too, if they were in the Klamath Basin. If their plant was located in Oregon, they would not have this problem.

Mr. MYERS. You mean, they could have themselves excluded if they were in Oregon?

Mr. HARDING. If they were within the Klamath Basin marketing order area, right.

Mr. MYERS. Interstate commerce.

Mr. HARDING. No. The fact that the marketing order committee has provided that they cannot ship this size B No. 1 potato outside of the marketing order area.

Mr. MYERS. I guess we are going to have those marketing order people later, so I will ask the questions then.

Thank you.

Mr. FOLEY. Thank you very much, Mr. Harding. We appreciate your testimony.

I think perhaps to bring a little equity into the arrangement I am going to vary from the witness list and take some opponents of the legislation so as not to make all those who take the opposition stance wait until the late afternoon.

I will call now on Mr. Harry L. Graham, representing the National Farmers Organization.

I might say to all the witnesses that we are going to have some difficulty finishing even with an afternoon session. We have so far gone through only five witnesses in an hour and a half. Those witnesses who wish to will be able to place their statements in the record and to make appropriate extemporaneous remarks from their printed testimony. Mr. Graham, it is always a pleasure to see you. I think all the subcommittee members know that Mr. Graham, the former distinguished representative of the National Grange, is now representing the National Farmers Organization. His experience and competence, I am sure, will serve the N.F.O. as well as they served the National Grange.

STATEMENT OF HARRY L. GRAHAM, LEGISLATIVE REPRESENTATIVE, THE NATIONAL FARMERS ORGANIZATION

Mr. GRAHAM. Thank you.

Mr. Chairman, members of the committee, for the record, I am Harry L. Graham, legislative representative of the National Farmers Organization. The NFO is an organization, an association of farmers whose purpose and program is to block together enough of their production of any and all agricultural production that they can collectively bargain together for improved prices.

We are convinced that the ultimate victory in the perpetual battle for farm price is to be found in the use of the proven techniques of collective bargaining, but we are very much aware of the contribution which can be made by the proper use of the powers and the authority of the State and Federal Governments to maintain some stability in the highly volatile agricultural markets.

This is especially true in relationship to those markets where it is easy for the giant processing industries to bring unwarranted economic pressure on segments of the production and thereby destroy any possibility the farmers may have had to obtain a fair return for their production.

Certain commodities are particularly vulnerable because parts of their production are put to different uses. Oranges, apples, milk and potatoes fall within this category because they are used both in their natural state and for processing into forms which are partially or completely prepared for use.

Before the passage of the Agricultural Act of 1937, even when only a minor section of the production went into the processing uses, this was always priced at the so-called surplus prices which was almost invariably lower than the prices paid for the product when it was used in its original form. The net effect of this system was to drive the prices for all of the production of a given commodity down to the level paid for that which went into surplus or manufacturing usage.

The Agricultural Act of 1937 provided a method which could be used when desired to isolate the production which went into processing from that which was used in its original form. This was by using market orders, developed through a "hearing" process at which all segments of the industry was represented, including the general welfare, and which could be instituted only after a two-thirds majority of the producers approved of the projected order through a referendum.

Such market orders function by classifying the product according to usage, pricing it according to this use classification, and thus permitting that which goes into manufacturing usage to carry a different and lower price when the necessity for this is indicated in the evidence presented at the hearings.

Such orders can also be used to control grade and quality and to indicate the usages to which each can be put and to prohibit the use of some grades and quality which would not be in the general interest.

At the present time, about one-half of the potatoes being marketed in the United States are moving under either State or Federal market orders or both. Other areas have used market orders and have rejected them when they did not seem to answer the particular problems of their areas.