our soybean crop. The relative importance of these two crops has changed drastically within the past few years, corn maintaining its supremacy but soybeans climbing from nothing 25 years ago to second place among all crops in the great Midwest area within that period of time.

Iowa, as you no doubt know, ranks fifth in the number of dairy cows on farms but ranks first in the production of creamery butter. Other dairy States, such as Wisconsin, Minnesota, and New York, have long since discovered that there are more profitable markets for their products than butter, even with butter at the high prices it has been the past few years. Let me quote you figures from a typical group of northeast Iowa farms, where they are selling dairy products to creameries for the production of butter; to cheese factories for the production of cheese; to evaporators for the production of evaporated milk; and milk pools where the product is used as fluid milk.

For February that group of farms received an average price of 97 cents for butterfat going to creameries for butter production; $1.17 for butterfat going to evaporators; $1.21 for butterfat going to cheese factories; and $1.21 for butterfat going to be sold as fluid milk.

You can see why these farmers would much prefer to sell the dairy products from their farms to manufacturers who use all of the milk product rather than to manufacturers who can utilize only the butterfat content of the milk. This feeling is shared by other dairymen and today there is not enough butter produced to supply the demands of the consuming public.

Butter is still too cheap compared with the price of other dairy products, and yet it is too high priced for many people to buy. Proof of this lies in the fact that between 1934 and 1947 the per capita consumption of butter shrank from 18.3 pounds to 11.9 pounds. We farmers in that great midwest area must produce soybeans in order to have adequate supplies of protein feeds with which to maintain the health and productivity of our cows and other farm animals. We would therefore like to see the soybean oil from these beans not compete with but rather supplement the fat supply which the housewives of our Nation need.

It is my observation that the pressure for maintenance of current margarine taxes does not come from the man who milks the cows, but rather from the man who makes and handles the butter. I would like to voice the opinion that if the members of the Finance Committee will inspect closely the communications they have received supporting the current margarine legislation they will find the major portion of them have come from the middlemen of the dairy industry-not from the men and women who milk the cows.

In the average American farmer there is an inherent sense of fair play. He sees the folly of the present discrimination, and he knows that the consumer is paying the bill once, and the producer is paying it a second time. He does not believe in class legislation on any farm product.

Gentlemen, those of you who are familiar with the price structure in the fats and oils industries of the United States know that many fats and oils are interchangeable in usage, and that there is a definite relationship in price between them; whenever the lard market fluctuates, cottonseed and soybean oil do likewise. Whenever butter moves

upward or downward, other oils and fats move in proportion. The usage and the price of one oil cannot be separated from the other oils which find usage in the same foods and industries. They are all tied together and must be considered as a group. The oil buyer buys the oil which he can secure at the lowest price and which is adapted to his needs. Thus, the price of any one edible oil immediately affects the prices of all other competitive oils. The price of soybean oil affects the price of corn oil, cottonseed oil, peanut oil, lard, and all other edible fats.

Margarine is the second largest user of soybean oil in America today. Only vegetable shortening uses more. About 20 percent or one-fifth of our soybean oil goes into margarine, but that one-fifth wields great influence on the price received for the entire production because it is a high-value usage and tends to raise with it the price structure of the entire industry.

From every bushel of soybeans the processor makes two commodities. One is soybean oil, of which he extracts from 8 to 10 pounds per bushel. The other is soybean oil meal, of which he obtains about 45 pounds per bushel. The prices which the processor obtains for the oil and the meal determine the price which he can pay for soybeans. When the processor must take a lower price for his soybean oil he must either raise the price of meal or lower the price which he can pay for soybeans. He has no alternatives.

A high value usage for soybean oil, such as margarine, enables the dairy farmer and the general livestock feeder to buy soybean meal at a lower price and still maintain adequate supplies. Without that higher price for the oil the production of soybeans would go down and the meal would not be available for livestock feeding.

We must make a choice. If the range country of the west wants protein; if the poultry producer of the Northeast wants protein; if the dairyman of Minnesota and Wisconsin wants protein; if the swine producer of Illinois or Iowa wants protein, then we must provide high value uses for a major portion of the soybean oil. If we do not, then we will not have the protein.

High value usage means food usage. Margarine is the logical field for expansion, for the per capita consumption of table spreads in the United States is at an all-time low, and the mere return to former consumption levels would require millions of pounds of soybean oil. Butter is not available to fill the needs for table spreads, and it is doubtful if our agricultural economy can ever again support butter production on a basis comparable to that of the 1930's. Margarine is the alternative. It is made from vegetable oils which are cheaper in price because of lower production costs, and which utilize to much greater advantage the land and labor resources of our Nation. One acre of land will produce three times as many pounds of edible fat through soybeans as through the production of butterfat. One hour of labor on that same farm will produce fully 10 times as many pounds of edible fat through soybeans as compared with the same amount of time with dairy cows.

Pearl Harbor found us with our supplies of two major commodities shut off by the Japs. One was rubber. The other was vegetable oil. The Government of this Nation spent millions of dollars of tax money replacing the rubber. Many millions of dollars of taxpayers' money

went into experimentation and into plants and equipment. Much of it was sacrificed; much Government money is still invested in those plants. They cost the average taxpayer dearly. The farmers of the Nation on the other hand, through soybeans, replaced the oils which had formerly been imported, without the expenditure of a single dollar of tax money. The production of soybeans was doubled and more. Governmental decree required that soybean oil be used in foods only because of its great value there in our wartime economy. The meal enabled livestock feeders, including dairymen, to do one of the greatest of all wartime production jobs.

We in the United States can never again afford to place ourselves in the position of being dependent upon the other side of the world for our supplies of a major and essential food commodity. Certainly we cannot afford to do so with world conditions as they are today. Are we going to continue to deny the soybean grower who provided the edible oil and the protein to win the war his logical market for his soybean oil? Is his reward for a marvelous wartime production job, in effect, to be a tax of 10 cents per pound on his soybean oil?

Now, gentlemen, let us look at this thing from the standpoint of common sense. Let us review the situation briefly.

Approximately 20 percent of all the soybean oil produced in America goes into margarine, with 230,000,000 pounds being used in 1947. This market is second only to shortening among our customers. The 20 percent of the soybean oil which goes into margarine exerts influence far above that level in the price of the entire production of soybean oil, because it is a high-value use. Soybeans now supply over 60 percent of the oilseed meal supplies of the National used in livestock feeding. They supply well over 43 percent of all protein feed, both of vegetable and animal origin, used by the livestock feeders of the Nation. Take away the favorable high-value market for soybean oil and you also take away the protein feed.

The CHAIRMAN. Are you supplying all of the needs of livestock? Mr. STRAYER. We are not; not all of the recommended needs. The correct nutritional levels for our livestock population would require even more protein than is available today.

The CHAIRMAN. But despite the level to which you refer, are you filling the orders for soybean meal that you are getting for livestock feeding?

Mr. STRAYER. During the past winter; yes. During the summer it is problematical, because the processing level will go down during the summer months.

The farmers of America are among the largest users of margarine in the Nation.

Only 14 percent of the income of the dairy industry of the United States comes from the sale of butter. In the State of Wisconsin, acknowledged as a dairy leader, only 1.9 percent of the 1946 dairy income came from the sale of butter. Per capita consumption and production of butter is falling steadily.

Neither butter nor margarine nor any other commodity has a monopoly on yellow color. The same artificial coloring is used in butter as is used in yellow margarine. Soybean oil in its natural state is a golden yellow color, just as June butter is a natural yellow.

Standardization of butter necessitates the use of artificial coloring the major portion of the year. Standardization of the color of margarine would require a similar coloring agent. One product has the same right to that coloring agent as the other. Neither can justify taxation of the other as a means of market monopoly.

The producers of butter and margarine have a joint problem. The per capita consumption of table spreads in the United States in 1935 was 20.1 pounds. In 1945 and again in 1946 it fell below 15 pounds per person. Correct nutritional standards specify minimum of 35 pounds per person, or over twice the 1946 rate of consumption. Butter production, on a per capita basis, sank from 18.2 pounds in 1934 to 10.5 pounds in 1946. There are only six States in the United States which produce enough butter to supply adequate table spreads for their own populations. There simply is not enough butter to go around. Our population is increasing rapidly, with a population increase in the past 9 years equal to the total current population of Canada. The per capita consumption of table spreads in America should be increased. But can the dairyman now logically defend his position when he is saying to the consumer of the Nation: "We can supply as butter only twothirds of the table spread you use, only one-half as much as you formerly used, and only one-third as much as you need, but we are going to extract from you a penalty of 10 cents per pound on all that which we cannot supply"? Frankly, I would hate to try to defend that position.

Gentlemen, the primary objective of any long-range agricultural program developed for this Nation should make provision for the production of the greatest possible amount of food for the greatest possible number of people at the lowest possible price commensurate with the maintenance of favorable living standards for the farm family doing the production. Such an objective does not and cannot include provision for confiscatory taxes designed to prevent the consumption of healthful food products grown on American farms.

There is no place in a free American economy for class legislation such as the present margarine taxes and restrictions. The American Soybean Association recommends your immediate action on the removal of Federal taxes, license fees, and restrictions on the sale of margarine, both colored and uncolored.

On many midwestern farms the soybeans and the butterfat are joint products of the farming operation, and the soybean oil meal is fed to the dairy cows, the poultry, the hogs, and the beef cattle on that same farm. The producer of soybeans who does his own thinking is not worried about the repeal of the margarine taxes, for he envisions in that repeal not only an increased market for his soybean oil at a relatively high price but he sees continued high production of protein feed in the form of soybean-oil meal and thus an opportunity to continue production of milk, meat, and eggs on an economical basis.

The producers of soybeans are not out to wreck the dairy business, as some individuals would have you believe. They do visualize the needs of the Nation and understand the problems of food production and distribution within our cities and our rural areas. They believe that justice should prevail and that over a period of years the man who

milks the cow will benefit even more from the removal of the taxes on margarine than will the soybean producer, so long as that margarine is made from domestically produced fats and oils and the protein meal is available for livestock feeding.

We do not come to you asking for special privilege; nor do we ask for the retention of a special privilege previously granted. We do not ask for restrictions on the sale of other commodities. Neither do we suggest substitution of margarine for another commodity, for there is room in America for both when sold on their own merits.

We do suggest that the consumers of Americas have a perfect right to buy butter if they prefer butter; that they have a similar right to buy margarine if they cannot afford butter or prefer margarine; and that in making such purchase they should not be forced to pay tribute to the Government or to the producers of another commodity.

We further maintain the soybean producer has a perfect right to sell his crop through the medium of margarine which is colored the same color as the soybean oil which he produces, without the extraction of 10 cents per pound tribute to Government.

We recommend the immediate removal of Federal taxes, license fees, and restrictions on the manufacture and sale of margarine made from soybean oil, cottonseed oil, corn oil, peanut oil, and the other fats and oils produced on the farms of America.

The CHAIRMAN. Thank you very much, Mr. Strayer.

The chairman wishes to suggest to the remaining witnesses for today that they carefully review their prepared testimony and eliminate as much repetition as is possible. We will be glad to include the full statements in the record, together with any abbreviated statements which may be made.

We will meet again at 2: 45.

(Thereupon, at 1: 20 p. m., a recess was taken until 2: 45 p. m., the same day.)

AFTERNOON SESSION

(The committee reconvened at 2:45 p. m., upon the expiration of the noon recess.)

The CHAIRMAN. The meeting will come to order.

Mr. John N. Hatfield is the first witness this afternoon. ·

Mr. EARNGEY. Mr. Chairman and members of the committee, my name is Willard B. Earngey, Jr., superintendent of the Norfolk General Hospital, Norfolk, Va., and member of the council on Government relations, American Hospital Association.

The CHAIRMAN. What did you say your name was?

Mr. EARNGEY. Willard B. Earngey. I am a member of the council on Government relations of the American Hospital Association. Mr. Hatfield was unalterably detained in Fhiladelphia; and I am, therefore, submitting his report.

In accordance with your request, Mr. Chairman, we have submitted to the committee a complete report. We have one or two brief points we would like to make, and then we will conclude our discussion.

The CHAIRMAN. Mr. Hatfield's statement will be entered in full immediately following the gentleman's remarks.