Sincerely, pamphlet explains why your favorable consideration of H.R. 11243 will be greatly appreciated. Hon. HAROLD T. JOHNSON, F. W. "BILL" BERGESON, TULELAKE GROWERS ASSOCIATION. House of Representatives, Washington, D.C. SIR: Mr. Willie Edwards, our representative at the hearings on HR 11243 and S 2214, has advised that a section of the Tulelake Growers testimony has been questioned. Please incorporate the following statement in the Congressional Record, on our behalf: "Records of potato growers and buyers of this general area verify that prices received by potato growers for "B" or cull grades averages approximately 10 to 12 cents per hundredweight. This is based on records from 1960 to 1969 average net to the grower." We appreciate your assistance in helping to defeat this bill which would be so disastrous to the potato growers. Yours very truly, LARRY C. HAYNES, President. NATIONAL COUNCIL OF FARMER COOPERATIVES, Hon. THOMAS S. FOLEY, DEAR MR. FOLEY: The National Council of Farmer Cooperatives is in opposition to H.R. 11243, the proposed amendment to Section 608 (c) (2) of the Agricultural Marketing Agreement Act of 1937, which would further limit eligibility of processing potatoes for federal marketing orders. Our current policy statement on Marketing Agreements and Orders includes the following: "The National Council favors legislation for the continuation and liberalization of the marketing agreement and order type authority to provide for inclusion of additional commodities under the marketing agreement and order authority, and to specifically provide that fruits and vegetables for processing now excluded may make use of federal marketing orders and agreements whenever such orders or agreements affect the farmer-producer primarily and are approved by a majority of these producers affected. Whenever they regulate the processed product, such orders or agreements become effective only upon the voluntary assent of a majority of the handlers affected, and should be administered jointly by producers and handlers." We recognize that problems do arise from different treatment for different types of handlers or processors, and endorse the suggestion of the U.S. Department of Agriculture spokesman before your Committee that "An alternative method of achieving equity among processors, while at the same time maintaining or strengthening the benefits of marketing orders to producers, would be to remove the existing exemptions for canning and freezing, thereby including all potatoes under the Act." We would appreciate it if you will include this statement as part of the hearing record on H.R. 11243. Sincerely, ROBERT N. HAMPTON, Director of Marketing and International Trade. SHELLEY, IDAHO, June 16, 1969. Hon. THOMAS FOLEY, Representative from Washington, Washington, D.O. DEAR MR. FOLEY: I am writing this concerning an issue which I feel is of great importance to the farm and business people of Eastern Idaho. The issue is whether or not the potato processors should be exempt from potato marketing orders. My interests in this are: 1. I am the District Conservationist for the Soil Conservation Service and as such meet with and talk to many farm and business people. The farmers and small businesses alike are fighting a battle for survival, with few exceptions. Part of my duties are to help these people bolster their economy. 2. I am a member of the Bingham County Technical Panel. This Panel about a year ago named the number one problem of the county as being low farm income. 3. For sometime now I have been acting in the capacity of secretary of a committee to eliminate poverty in Bingham County. So far we haven't found a solution, primarily because of low farm prices over which we have no control. The O.E.O. reported one family in five in the County as living in poverty. The people mostly affected are farm laborers, small farmers and people who have retired or in some other way depend upon agriculture for income. 4. I am a farm owner depending upon a share lease. So far the farm has not been profitable except for one year, 1964, which was a good price year for potatoes because it was a short crop. I would like to make this a profitable enterprise. If my renters can't make it neither can I. The farmer's desire to make a profit is just as great and right as anyone's. The big money crop in Bingham County is potatoes. The economy is primarily influenced by agriculture. This issue could have considerable effect on the farm price of potatoes and influence on the economy of all Eastern Idaho. President Nixon in an address Feb. 3, 1969, to the Department of Agriculture stated, I know that the Secretary in his opening statement made it quite clear that one of the first priority assignments of his administration of this department would be to see to it that America's farmers received their fair share of the increasing growth and wealth and productivity of the Nation." That the farmers are not now enjoying their full share was confirmed by Under Secretary of Agriculture J. Phil Campbell in an address before the American Turpentine Farmers Ass'n Cooperative in Valdosta, Georgia, April 16, 1969. He said. "There isn't a person here who does not know that agriculture has excess productivity-a capacity to produce more than the market will take. And every person here knows that this has been for years, and is today, a major reason why farm people have less than $3 of income per person for every $4 nonfarmers have." Marketing orders, while not affecting the productivity directly does have some effect on the quality, size and amount placed on the market. Today about 80% of the potatoes grown are marketed through the processors. The percentage is growing each year. The number of outlets is becoming smaller. Independent shippers, like farmers, have been and are being forced out. Marketing through processors has mushroomed indicating an economic advantage to them. Part of that economic advantage comes from a sizable quantity of potatoes at a cost to the processor much below the farmer's cost to grow them. It is common practice for the processor to sell select potatoes on the fresh market and process the lower grades and small sized potatoes. Prices to farmers for culls and small size run 10 cents per cwt. and some years amounts to onefourth or more of the total crop. The Russet potato, while a high-quality potato, is difficult to grow and is grown with a high percentage of culls and undersized potatoes because of climate and varietal characteristics. While these low-priced potatoes may cost a little more to process than U.S. No. 1's, when in the package they are worth just as much and do effect a lower price to the farmer for better quality potatoes. To the processor they are highly profitable. The farmer grows them at a cost many times the returns. These potatoes should be kept off the market or the processor should pay a fair price for them. Farmers are disadvantaged in dealing with processors: 1. Processors are more quickly and better informed on potato supplies, end product supplies, price trends, weather influences and other factors which give them definite bargaining advantage. 2. Farmers are usually better equipped, qualified and informed to produce than they are to market. Processors have trained personnel for singular responsibility. 3. Farmers decisions are too often influenced by the need for cash to pay taxes, notes and mortgages. Money lenders require contracts although these contracts may, and often do, disadvantage the farmer. 4. Unoganized the farmer has little bargaining power. He can bargain only with an employee who has limited leeway to make price concessions for the company. The result is a one-way deal. I realize that marketing orders cannot alone correct the inequities of the industry, but I see no fairness nor sense in eliminating 80% or more of the marketing from marketing orders to the disadvantage of the growers. I recommend that marketing orders apply to processors including canners and freezers. While these conclusions are my own, I think they are consistent with the declaration of the President and of the Dept. of Agriculture and with their objectives of restoring to the farmer his fair share of the growth, wealth and productivity of this Nation and of Eastern Idaho. Sincerely yours, MARK E. HILL. FACTORS AFFECTING POTATO MARKETING AND PRICES (Presented by G. B. Wood, Oregon State University) In developing this topic, I would like to do three things. First, I would like to establish some bearing points relative to the potato industry. In other words, I would like to establish what we know about this industry. Second, I would like to review the potato situation. Third, I would like to take a look at the future, to see what we need to know to have a sound progressive potato industry. SCME BEARING POINTS RELATIVE TO THE POTATO INDUSTRY The potato industry has been going through a rather substantial revolution in recent years. There are fewer but larger potato farms than at any time in the history of this industry. They are not only specialized, mechanized farms, but they are well integrated with contract production being commonplace in the industry. In recent years, there has been a rather marked change in the regional production pattern of potatoes. For the most part, acreage has stabilized in the Midwest and East, but it continues to expand in the West. At the same time. yields are up particularly in the West and in Oregon. Processing opportunities are now an important ingredient in the successful potato business. In some cases, processing opportunities are absolutely necessary for the survival of the business. The potato industry has one of the highest rates of instability in both prices and income to growers to be found anywhere in agriculture. The year-to-year variation in prices received for potatoes, when compared to variations in the general farm price level, averages about 47%. This variation is five to eight times greater than the price variation on a year-to-year basis for most field crops. When compared with meat animals, hogs have a year-to-year price variation around the general farm price level of about 16%; and beef cattle have a year-to-year price variation of about 11%. This instability in prices arises primarily from two factors. First, from the very highly inelastic demand for potatoes; and second, from yearly variation in potato production. The demand inelasticity for potatoes is about -0.20. This means that a 1% change in production causes about a 5% change in price, inversely. Consumers want about 110-112 lbs. of potatoes per person per year regardless of the mix in which those potatoes are purchased. It is interesting to note that recent variations in potato production have averaged about 8% per year. About three-fifths of the variation in production is due to variations in potato acreage. The other two-fifths of the year-to-year variation in production is due to changes in yield. The potato industry is highly vulnerable to instability, due to the large investment involved, the high cost of production and the financial commitments necessary to bring in a crop. In most years, the industry has had to rely upon some disposal or diversion program to bring market supplies within reasonable balance to demand. Since the 1950's, the industry has seen potato supplies brought into balance with demand either through weather effects or some form of government program. The potato surplus is estimated to be about 5 to 6% per year. The situation is further complicated by the fact that potato surpluses are very difficult to handle. The industry has relied upon marketing orders to provide some sort of equity in the supply-demand balance. Currently, marketing orders are operative în six areas and cover about 70% of the late crop potatoes. These marketing orders have been most effective in quality improvement. In addition, the United States Department of Agriculture has issued marketing guides to provide a suggested level of production which is likely to result in a realistic price. It appears that these marketing guides have had little effect on the production-marketing balance. On the average, growers have overplanted about 5% based upon the USDA marketing guides. In the late crop potato areas, the overplant has run about 8% per year. THE 1967-68 POTATO SITUATION Total potato production amounted to 305.9 million hundredweight in 1967 which was slightly below the 1966 record tonnage. 1967 potato yields, however, averaged about the same as the 1966 record high of 210 hundredweight per acre. The average production per acre in the 1961-65 period was 200 hundredweight. One complicating factor in 1967 was the record tonnage of fall potatoes, about 2% above the 1966 period. Potato prices were relatively strong into the late summer of 1967 and began to decline as the harvest accelerated. By December '67, the average farm price of potatoes was $1.69/cwt., nearly 25% below a year earlier and the lowest December price since 1963. In terms of parity prices, the December 1967 average price was at 59% of parity as compared to 77% of parity in December '66. Idaho Russet potatoes, for example, were $2.72/cwt. FOB shipping point in January 1968 as compared to $4.46 a year earlier. Oregon Russets in January 1968 were $2.72/cwt. compared with $5.18 the previous year. To help relieve this low price situation, a Section 32 diversion and purchase program was initiated in January 1968. When one begins to examine the buildup of this unfavorable potato year in 1967, all that is needed is to go back to the 1964 year when freezing weather brought the highest potato prices in about 40 years of record. Acreage expanded 8% in 1965 over 1964; another 5% in 1966 over 1965; and in 1967 acreage increased another 2% over 1966. Harvesting weather in the fall of '67 was excellent and storage losses were at a low level. As a result, the 1967 year started with about 9% larger stocks than were on hand in 1966. Larger stocks coupled with a buildup in production in the face of a rather constant total demand for potatoes presented a troublesome situation. What resulted in 1967 was very unprofitable prices to potato growers throughout the country. In 1968, the fall potato crop was down from 1967 in all regions of the country. In December, the fall potato crop was 5% less than last year. All together, the total U.S. potato crop was down about 4%. As a consequence, potato stocks on January 1, 1969, in all fall producing areas were approximately 8% below the record holdings of 1967. In Oregon, January 1 holdings were 5.7 million hundredweight, down nearly 6% from last year. In the Western states, stocks were 11% below a year ago. The smaller supply of potatoes had a corresponding effect on potato prices. As of January 10, 1969, U.S. No. 1A Idaho Russets ranged from $4.30 to $4.60/ewt. FOB Idaho Falls. These prices were from $2.60 to $2.80 above a comparable range a year ago. In Chicago, FOB price was $6.00. In Oregon, the unwashed U.S. No. 1A Russets ranged from $3.50 to $3.60/cwt. in the Klamath Basin. This situation again typifies the high instability that confronts the Oregon and U.S. potato industry. WHAT ABOUT THE FUTURE? It seems to me that one of the most urgent things that needs to be done for the potato industry is to find ways of reducing price instability which will contribute to improved grower returns. This industry is now big business. It is a business with high costs and high financial commitments. It requires a substantial investment. Diversion and disposal programs are not the long run solution to this price instability. Some form of industry managed production seems essential for the successful continuation of this industry. Studies need to be directed toward means by which the demand for potatoes can be manipulated to the benefit of this industry. Most people don't have answers to these questions. Answers will be found in very carefully directed programs of research and development by both industry and by our Land-Grant Universities. The future of this industry lies in the application of science and technology to the potato business. Processing outlets apparently hold the key to area ex pansion. The potato is now a raw material which is manipulated in many ways to develop new food products that will challenge the imagination of the consuming public. Undoubtedly, the development of the processing segment of your industry will continue to be the most glamorous part of the potato business. The Oregon potato industry generates about 22 million dollars of income for our state. The value added by the various processing segments, however, amounts to about 36 million dollars which provides a total income generation of 58 million dollars for Oregon's economy. If the application of science and technology to your business is to be realistic in the years ahead, your industry must contribute more private support to research and development. It seems to me that your industry has a real stake in this kind of investment. It has been estimated by some of our people at Oregon State University that investment in research can pay big dividends—as much as 30% on each dollar invested in research. Any member of your industry who operates his business today as he did three or four years ago is either obsolete or is on the verge of becoming so. The biggest problem that most industries face is to keep up with the times. It is important to know what is going on. The availability of information that will "create change" in the potato business will never be as important to you or as costly to you as it will be in the future. But this is the kind of information which pays those handsome dividends and which prevents obsolescence. Mr. SISK. That concludes the witnesses listed on this particular legislation; unless there is a witness that has been overlooked in the room. The committee wishes to thank all of you, many of you who have come from great distances, to testify on this subject. The hearings are closed. The committee is adjourned. (Whereupon, at 4:20 p.m., the committee was adjourned.) о |