highly specialized business; and employment would be affected seriously in a great many interrelated lines. We would like to mention also the thousands of men who are employed on the trucks which gather the cream, going up through the highways and byways of the country, just like the mailman does to deliver to the rural mailbox. They are picking up the cream to be brought into the creamery, to be shipped by express or train, or be hauled by truck into the creamery. The livelihood of those men is at stake in this legislation. I would like to call the attention of the committee to the threatened loss of jobs and income for thousands of men who are distributing butter to grocers and homes in hundreds of metropolitan areas throughout the Nation, as well as the loss of these convenient means of securing butter, so long enjoyed by the housewives of the Nation. We have just made a survey which indicates that in excess of 72,000 milk-and-dairy products drivers and salesmen who derive their salaries and commissions from the sale of butter to grocers and homes in the metropolitan areas, will either lose their jobs, or their salaries and commissions will be affected by the outcome of this legislation. In the fourth place, I would like to point out that labor receives more from the consumer's purchase of a pound of butter than does the manufacturer. Labor's income from the sale of butter is exceeded only by the income received by the farmer who produces the butter fat. Much of the criticism leveled at the butter industry for high prices since the war has come from the very workers whose products have increased in price as much as or more than butter. We do expect to pay more for an automobile or a suit of clothes, or to build or repair a house than before the war. All of the major costs of living have increased directly as a result of higher labor costs, and butter is no exception to this. I have some figures taken from the Bureau of Labor Statistics with respect to factory workers' earnings, showing the increase from 1939 to 1948. You will note that the hourly pay has gone from 6313 cents in 1939, to $1.287 in 1948. It should be noted that butter prices have increased almost in line with workers' increased earnings, and I show here figures from the Bureau of Labor Statistics showing a percentage change to February 15, 1948, from August 15, 1939, of 195.7 percent. Butter has always been regarded as one of the most efficient products of the farm. The dairy farmer gets a higher percentage of the consumer's butter dollar than for any other food product. The dairy farmer in 1947 received 76 percent of the retail price of butter. The oleomargarine industry, in sharp contrast, returned only 30 percent of the consumer's dollar to producers of oil. Labor stands next to the farmer in securing a large share of the price paid by consumers for butter. The labor cost of butter production has been steadily mounting, not only in the direct processing of the butter, but in the cost of supplies, transportation, maintenance of plant and equipment, as well as overhead expenses. Higher labor costs have been a problem for the dairy farmer. They have been a problem in transportation, and in the handling of the commodity all the way through to the consumer. All manufacturers and food processors are facing somewhat higher labor costs this year than prevailed last year, and this is in spite of the fact that the present wage rates in the butter industry are the highest ever experienced. In the fall of 1946, our organization in Chicago was called upon to assemble some detailed cost figures from butter manufacturers whose 77 plants produced almost 150,000,000 pounds of butter annually. These figures reflected accurately the big increases in the costs of materials and labor required to produce butter in 1945 as compared with 1940, a prewar year. They showed that the total cost of manufacture, including printroom costs, overhead or indirect costs, and direct selling expenses, had increased 37 percent. When applied to the total butter made, this meant an increase of $15,000,000 a year. Butter is still the basic barometer of the dairy industry, and affects other dairy products' costs as well. During the last few days we have surveyed butter production costs in 1947 and 1948, compared with 1945 and 1940. Labor costs in 1947 and 1948 have increased from 7 percent to 15 percent over those in 1946. That means an increase of 10 to 20 cents per hundred pounds of butter manufactured, with supply costs increasing from one-fifth to one-third in 1 year. Added to these principal items is a reduction in volume per plant. Thus, total manufacturing costs have been increased about a cent a pound, compared with the same months a year ago. Using typical cost figures supplied us from various types of creameries, it is evidence that it costs at least 46 percent more to produce and market a pound of butter now than it did in 1940 and somewhere between 5 and 8 percent more than it did 2 years ago. The CHAIRMAN. Is that the creamery level? Mr. POTTER. That is the creamery level. Yes, sir. Every merchandiser in the food business is aware that grocers and other retailers expect greater mark-ups in 1948 than before Pearl Harbor, when they used butter as a loss leader, or for its turn-over and ability to draw trade into the store. Labor costs have affected the retailers' cost of operations also, and these costs will be added to the consumer's food bill, whether she buys butter or oleomargarine. That is a factor in the retail price of butter as well as margarine or another food product today; the higher labor costs involved on the part of the retailer. You might like to know just what it costs to manufacture and merchandise a pound of butter. We have made a pretty careful check, and we believe that we are conservative in indicating that processing costs range between 6 and 63 cents a pound, compared with about 4 cents a pound in 1940. It is to be expected that in many small plants where butter is churned as a side line, or as a part of other processing operations, costs are somewhat higher. I would like to urge the committee to weigh carefully the economic impact upon industrial labor in this country if two and one-half million dairy farmers are suddenly deprived of the cash income they have been receiving for butter and cream. Our neighbors to the north, in Canada, have long recognized the importance of this trade relationship between farmer and laborer. Within the past month the Canadian Senate has again supported this "fair trade" position by voting overwhelmingly to continue a ban on the sale of any oleomargarine whatsoever in Canada. We believe that consideration, so far as labor is concerned, is a very important item over the years to come, when labor will be seeking more and more outlets, more and more customers for its output. In summary, I would like to emphasize to the committee that the repeal of these taxes on oleomargarine are in reality a double-edged sword, one edge opening the doors to wholesale fraud which other agencies available will not be able to prevent, and the other edge causing higher prices for oleomargarine, instead of reducing them. Neither of these results will benefit the working people of the Nation and, on the contrary, can cause them serious harm. If Congress wishes to take the word of the oleomargarine industry literally and provide the "poor man's spread" at a truly economical price, I propose an investigation of the unreasonable margins they have effected between the producer and the consumer. Let's really protect the "poor man's table" from an industry that returns only 30 percent of the consumer's purchase price to the farmer, while butter returns farmers 76 percent, or more than three-fourths of the price paid by consumers. Rather than encourage imitations of butter, one of the finest foods available on the dining tables of America, I propose that this committee recommend an investigation by Congress into way and means of making butter more readily available, in larger amounts, and at prices within reach of the wage earners of America-all of whom would rather have genuine butter than imitations; or, at least, to know the spread they are eating is the one they paid for. The CHAIRMAN. Are there questions? Senator LUCAS. I should like to ask Mr. Potter one or two questions. Mr. Potter, on the last page of your manuscript you state: I propose an investigation of the unreasonable margins they have effected between the producer and the consumer. Let's really protect the "poor man's table" from an industry that returns only 30 percent of the consumer's purchase price to the farmer, while butter returns farmers 76 percent, or more than three-fourths of the price paid by consumers. My question is: Do you have a break-down, a total break-down, where all of the costs of butter and margarine are set forth, from the time it is first produced until finally the consumer gets hold of it? Mr. POTTER. Senator, I do not have a complete break-down for margarine. I have not made a study of that. But I have it for butter. Senator LUCAS. Do you have a complete break-down for butter Senator LUCAS. And I would like to have the margarine fellows make a study of that same problem and submit that to the committee. I would like to see where all of the costs go, for a pound of butter, from the time it starts from the farm until it finally gets into the consumer's hands; a complete break-down as to who gets all that money. The consumer has to pay approximately 90 cents a pound for butter today, and I would like to know who gets the 90 cents. The CHAIRMAN. Mr. Potter, will you take it upon yourself to supply that? Mr. POTTER. Yes. The CHAIRMAN. When may we have that? Mr. POTTER. By the end of the week? The CHAIRMAN. If you can get it in sooner we will appreciate it. Who is here on the part of the oleomargarine people who will undertake to give us that information?. Will you come forward, please, and give your name and address to the reporter? Mr. TRUITT. I am Paul Truitt, president, National Association of Margarine Manufacturers. The CHAIRMAN. And will you give us that information within the next few days? Mr. TRUITT. Yes, sir. Senator LUCAS. You understand my question? Mr. TRUITT. I think so; yes. (The information to be supplied by Mr. Potter and Mr. Truitt in response to the request of Senator Lucas is as follows:) Source: Cooperative Auditing Service, Inc., Minneapolis, Minn. Data are averages of records of 118 plants for the fiscal year, 1946-47. NATIONAL ASSOCIATION OF MARGARINE MANUFACTURERS, Washington 4, D. C., May 21, 1948. Hon. EUGENE D. MILLIKIN, United States Senate, Washington 25, D. C. DEAR SIR: This is to advise that notwithstanding the fact that I accepted your oral request for data on margarine production costs in good faith and answered affirmatively that I would furnish such information, I now find this impossible. There are several reasons. The association has never collected, nor does it have in its possession by any other means, any cost or price data. In fact, I am governed by a policy which limits my source of such information, hence information while I may, in turn, supply, to such data as I may obtain from published Government material. Further, but with the foregoing aside, I made a quick attempt to gather this data, only to find that cost studies requiring considerable time and expense would be required. Each company in this association makes from several to hundreds of food products. No company making only margarine, of which there are only three or four, is available to my inquiry, since none of these are members of this association. I may, however, point out a fact which is common knowledge, but which may possibly have escaped the attention of the committee. Margarine, by law, must contain a minimum of 80 percent fat. Hence, at least 80 percent of the price of any given pound of margarine is determined by the price the manufacturer paid for the oil going into that margarine. The remaining 20 percent of the price of a given pound of margarine necessarily therefore covers all other ingredients' manufacturing and selling costs. With the hope that this fact will prove helpful to the committee, and that the absence of highly detailed information will not raise insurmountable problems, I am, Sincerely yours, The CHAIRMAN. Albert J. Nelson? PAUL T. TRUITT, President. Will you please identify yourself to the reporter, Mr. Nelson? STATEMENT OF ALBERT J. NELSON, SWANVILLE, MINN., ON BEHALF OF NATIONAL CREAMERIES ASSOCIATION Mr. NELSON. I am Albert J. Nelson, of Swanville, Minn. I have been somewhat indisposed the last few days, and I hope the committee will bear with me if I have a little difficulty in giving this paper. The CHAIRMAN. Just take it easy, Mr. Nelson. Mr. NELSON. I operate a dairy farm and I am appearing here today on behalf of the National Creameries Association which represents approximately 270,000 dairy farmers and their families through the patronage of our 911 member creameries, of which approximately 80 percent are farmer-owned cooperatives. I will present my case today as a farmer interested in the probable effect of this bill upon other dairy farmers, leaving it to other witnesses to set forth the other problems and repercussions which would be likely to arise from the passage of such a measure. Believing that the interests of the southern farmer are not very far removed from those of his northern country cousin, I venture the opinion that if the southern farmer were fully acquainted with the facts of the case, he would conclude that this is a piece of legislation which is less concerned with his welfare than it is with the welfare of those who seek to exploit him. In common with those who have preceded and who will follow me upon this witness stand, I maintain that the real issue is not one of taxation but of seeking to sell a product in the guise of something that it is not. I join with others in saying that the dairy farmers of the United States have no more desire to restrict the sale of oleomargarine, if it is sold for what it is, and will be willing to have it sold without tax, providing it is not colored yellow. But as long as oleo is colored yellow, it constitutes an open invitation to fraud upon the consuming public. Evidence presented at this hearing shows how great a temptation to fraud is represented by the difference in the price of butter and of oleomargarine. As a dairy farmer, I am well aware of the fact that the immediate effect upon butter of removing all barriers to the sale of yellow oleomargarine might not seem to be very serious on the face of it. A shortage of dairy products still exists and butter, particularly, feels the effects of that shortage, since it is the end product which gets only the milk fat that is left after the demand for other dairy products has been satisfied. But, gentlemen, it is also that end product which must absorb all surpluses, and the loss of every pound from |