The CHAIRMAN. If your offer were accepted would your patents then become the common property of everyone that wanted to use them without royalty of any kind to anyone?

Mr. PETERS. That would be all right with me.

The CHAIRMAN. I mean, would that be the effect? Would your present licensees give up whatever right they have?

Mr. PETERS. They would have to pay the royalties to the new owners which in this case would be the entire oleo industry.

Now if the oleo industry wished to divorce any further payment of royalty they might wish to do that.

I was further motivated in this position by this standpoint. In reading past testimony on this problem the oleo industry has never presented any testimony from the standpoint of the general welfare, showing the impact that any reversal of these laws or showing what the present laws have upon our over-all economy.

The dairy industry on the other hand has made very serious attempts to present careful analyses showing how our over-all general economy is affected both pro and con.

The CHAIRMAN. We had testimony to that effect this afternoon. Mr. PETERS. From the oleo industry?

The CHAIRMAN. No, from the dairy industry.

Mr. PETERS. I see.

From my standpoint I do not see how the principle of free enter prise could continue.

The CHAIRMAN. I might say that we have asked the oleo people to give us a memorandum on the economic impact of the ramifications of their business.

Mr. PETERS. I see.

When I was with Armour for a while I was a district manager for them in the Southwest, and I had part of Texas, Oklahoma, Kansas, Arkansas, and Mississippi. In that territory most of the farmers who milk cows depend on the sale of cream for the maintenance of those cows, and if this market is taken away from them, I do not like to contemplate what will happen to literally hundreds of thousands, and if I have been a party to bringing that on, I would not sleep good. The CHAIRMAN. Any questions, Senator George?

Senator GEORGE. No questions.

PROBABLE ECONOMIC EFFECTS ON THE DAIRY INDUSTRY OF REPEAL OF ANTIMARGARINE

LEGISLATION

During the debate in this Congress on the bills to repeal the Federal antimargarine laws, opponents of this legislation have frequently contended that the consequences of repeal would be harmful not only to the producers of butter but to the dairy industry generally. The Congress and the people have been told that, if antimargarine laws are repealed, a considerable number of dairy cattle will have to be slaughtered-a number which, depending upon the zeal of the speaker, is estimated variously from 2 to 5 or even 10 million.

We are told that dire consequences would naturally follow repeal of antimargarine legislation because such repeal would result in (1) the widespread substitution of margarine for butter; (2) a consequent loss of a great portion of the present butter market; and (3) eventual economic injury or ruin to great numbers of dairy farmers, and injury, as a result, to our entire economy. A careful scrutiny of these arguments will show that they all have one quality in common-there has been an almost total failure to clothe the bare statement with substantiating fact, statistics, historical analogies, or any of the more accepted modes of proof. We have been asked to take on faith this basic argu

ment of the butter lobby-an argument on which their major case against margarine tax repeal must rest or fall.

To determine whether this argument is sound or not, it is necessary to examine it point by point.

First, would repeal of antimargarine legislation-not merely Federal, but State as well-result in the widespread substitution of margarine for butter? The answer to this query must, of course, be partly speculative. But in this instance we must proceed as we proceed on all legislative matters that come before us; we must use our best judgment as to its probable effects-a judgment based on what factual data we have available at the time.

It is significant to note that during recent years, when butter production and consumption have steadily declined, there has been no corresponding increase in margarine production and consumption.

For example, per capita butter consumption in 1940 was 16.9 pounds; per capita margarine consumption was 2.4 pounds. In 1946, per capita butter consumption was 10.5 pounds; per capita margarine consumption was 3.8 pounds. In other words, the American people on an average bought 6.4 pounds less butter in 1946 than in 1940, but during the same period per capita margarine consumption increased only 1.4 pounds. The implications of these figures are clear: many people stopped buying butter, but only a small portion of this number bought margarine instead. Actually, in 1946 the American people consumed 5 pounds per person less table fat than they had consumed in 1940-to their definite nutritional loss.

In terms of total production, butter decreased from 2,240,000,000 pounds in 1940 to 1,501,000,000 pounds in 1946. Margarine production increased from 317,952,000 pounds in 1940 to 514,458,000 pounds in 1946. If margarine were really responsible through competition for driving more than 30 percent of the butter produced in 1940 off the market during this 6-year period, then margarine production should have increased to nearly the same extent that butter production decreased. It is significant that not even the butter lobby has blamed margarine, to any extent, for this loss of their market.

What actually caused the decline in butter production and consumption, then? Some proponents of butter's case say that wartime restrictions which encouraged the diversion of milk to whole milk uses were responsible. During the war years, these restrictions did have a deterrent effect on butter production. But these restrictions have been removed now for nearly 2 years. Butter has not come back-except for a brief and illusory spurt shortly after the removal of price controls. Butter production in 1948 shows a steady drop from 1947 levels. There must logically, then, be some other reason than wartime restrictions for the decline.

I think the most obvious reason is this: Butter, in most areas of this country, represents the low end of the market for the dairy farmer. The sale of his product for use as fluid milk, for cheese manufacture, for ice cream or condensed milk or evaporated milk, all offer a higher return generally than the sale of his milk for butter manufacture. During the 10 years between 1936 and 1946 the average price received by the dairy farmer for the sale of butterfat as fluid milk or cream was approximately 74 cents per pound; for cream sold as butterfat, about 37 cents. Bureau of Agricultural Economics figures for 1946 tell a similar story: The average price to farmers for 100 pounds of whole milk used for fluid milk or cream was $3.92; for the same quantity of milk diverted to butter manufacture, $2.24. During the same year, the average price paid to producers for 100 pounds of whole milk for use in evaporated or condensed milk, cheese, and other whole milk uses was $3.93.

It should be clear, then, that margarine has not driven butter off the market. Nor were wartime restrictions-except insofar as they accustomed many people to do without butter-responsible. The real reason for the decline in butter production and consumption has been, and is now, the competition from other uses of milk-the higher returns which dairy farmers receive from bottled fluid milk, cheese, ice cream, etc., as compared with butter.

Much additional evidence is available to indicate that over the years neither the production nor the price of margarine has been an important factor on the production or price of butter. One could also cite such examples as the neighboring States of Kentucky and Tennessee, where, despite severely restrictive State laws against margarine, Tennessee's dairy farmers received lower prices for their products, including butter, than the dairy farmers of Kentucky, which had no such restrictive State laws.

This con

In 1942 the Wisconsin College of Agriculture, in the heart of the dairy district, made a study of the relationship between margarine and butter prices. clusion resulted: "There is no evidence in the past that oleomargarine has been an important factor in causing low butter prices."

I shall not labor this point, but I should like to indicate why margarine in the past has not been, to any considerable extent, competitive with butter.

Traditionally, margarine has been a cheap fat as compared with butter. In the early days of its manufacture, it lacked the flavor and some of the nutritional elements of butter. As a result, only those who could not afford butter bought margarine. And it is true today, I think, that a great many people still prefer butter to margarine and will buy butter regardless of whether these punitive taxes and restrictions are removed from margarine or not.

Prior to the wartime era, margarine was used primarily by the lower-income groups. In 1941 the Bureau of Agricultural Economics made a study of the relation between family income and consumption of dairy products. Their findings are especially significant in regard to butter consumption. They reported, for example, that nonfarm families with an income under $500 consumed on an average of 7.2 pounds of butter per person per year. As family income increased, they found that per capita consumption of butter increased. Families with an income of $500 to $1,000 consumed on an average of 12.1 pounds per person of butter per year. Families with an income of $2,000 to $3,000 had a per capita butter consumption of 16.6, and this rose to 20.6 for families with an income of $5,000 and over. To recapitulate, families with an income of $1,500 to $2,000 consumed more than twice as much butter as families with an income under $500, and families with an income over $5,000 consumed nearly three times as much butter as the lowest income group.

I have cited the available evidence on this question not for the purpose of attempting to prove that there would be no substitution of margarine for butter in the event the Federal antimargarine laws are repealed but to indicate that substitution would probably not be nearly as great as some of the opponents of this legislation would have us believe.

Of course, margarine production is likely to expand greatly, and there will most certainly be some substitution. But we must remember that there is a table fat deficit which butter, apparently, cannot fill and which margarine has hitherto been prevented by legislative handicaps from filling. In the 1920's, for example, the annual per capita consumption of margarine and butter combined averaged approximately 20 pounds. In the 1940's it has averaged considerably less-about 16.5 pounds. In 1947 it was 16.2 pounds. The two previous years it was considerably lower.

Margarine production would have to increase 80 percent over its highest annual total, 1947, in order to bring the table fat consumption of the American people up to previous levels, assuming that butter production maintained its 1947 level. If we are to reach the desired goal of many nutritional experts-the per capita consumption of 36 pounds of table fat per year recommended by the Bureau of Human Nutrition and Home Economics-margarine and butter will both have to expand production.

The second contention of those who claim that repeal would mean the disruption of the whole dairy industry is that as a result of the widespread substitution of margarine for butter, butter production would be further curtailed. I have already offered evidence to show that this substitution would probably not be nearly as great as is claimed. But let us assume that both contentions are correct-that repeal would result in the widespread substitution of margarine for butter and that a great part of the present butter market would be wiped out. Remember, these are assumptions only-assumptions which have little basis in historical or contemporary evidence.

This brings us to the third eventuality pictured by the butter interestseventual economic injury and ruin to great numbers of dairy farmers, followed by the destruction of millions of dairy cows.

Would this be the consequence of a further decline in the butter market? Would such a decline destroy a large part of the dairy industry-or any part of it? Once again we touch the realm of prophecy. But again we are fortunate to have historical evidence to indicate the answer. For during recent years, as we have seen, the butter market has been reduced approximately one-third. Total butter production, as I have already pointed out, has declined fairly steadily. In 1940 it was 2,240,000,000 pounds. In 1946 it was 1,501,000,000 pounds. It rose somewhat during 1947-to 1,650,000,000 pounds-but the recovery was temporary, and the decline has set in again in 1948. Butter production during the first

4 months of this year is more than 15 percent under the same period in 1947. Has this decline in butter production resulted in the disruption of the dairy industry? Has it been accompanied by a loss of revenue, by a reduction in total milk production? Finally, has it resulted in the slaughter of great numbers of cattle?

The facts speak for themselves fairly and convincingly. There has been no disruption of the dairy industry as a result of the decline of butter production. Total cash receipts to farmers from the sale of dairy products has increased from $1,118,000,000 in 1939 to $3,716,000,000 in 1946. There has been, of course, a rise in prices generally during this period, but this general price rise cannot possibly account for the proportionately much greater increase in dairy income. Two other factors are important: (1) Dairy farmers were diverting milk from the low-price butter market to the higher-priced whole-milk markets; (2) total milk production, far from decreasing as a result of the decline in the butter market, has increased from 109,334,000,000 pounds in 1939 to approximately 120,000,000,000 pounds in 1947.

And, finally, there has been no totál decrease over this period in the number of dairy cattle, despite the butter lobby's charges. Records of the Bureau of Agricultural Economics show that in 1940 there were 24,940,000 dairy cows and heifers 2 years old and over. On January 1, 1948, there were 25,165,000.

Dairymen and livestock breeders generally agree there is a certain periodic cycle in the numbers of cattle and livestock. Thus, in 1945 the number of milk cows and heifers 2 years and over had reached 27,870,000. This represented an increase of nearly 3,000,000 since 1940. But butter production during the same 5-year period had declined more than 500,000,000 pounds. In other words, from 1940 to 1945 butter production decreased approximately 25 percent, while total number of dairy cattle increased 11 percent.

But from January 1, 1945, to January 1, 1948, there was a decrease in milkcow numbers from 27,770,000 to 25,165,000. Butter opponents of margarine-tax repeal have used this short-period comparison to buttress their contention that the number of dairy cows, already low, would be further decreased by tax repeal. More objective dairy economists point out that there are several factors which account for this drastic decline in numbers of dairy cattle over such a short period. One is the cycle previously mentioned. This was at its height in 1945. The downward swing began that year, and apparently still continues. This natural development has been accentuated by another factor, a rapid increase in meat prices, which has made it profitable for farmers to dispose of their less productive dairy cattle for slaughter. Reduced feed supplies, accompanied by high feed prices, curtailed livestock feeding operations in many cases and prompted marketing for slaughter and closer culling of herds. Labor costs were up, and dairying, particularly farm butter manufacture, requires considerable farm labor.

There is no evidence that declining butter production was responsible for this reduction in dairy cattle numbers. As a matter of fact, the decline in butter production during these 3 years was less precipitate than it had been during the previous 5. In 1945 butter production was 1,701,000,000 pounds. In 1947 it was 1,650,000,000 pounds-a decline of approximately 3 percent. Cow numbers, on the other hand, declined a little more than 9 percent.

A careful study of the relationship between total milk production and number of dairy cattle in recent years reveals a significant trend. Total milk production from 1940 through 1947 increased 9 percent. Number of dairy cattle increased 1 percent. This emphasizes the fact that the least efficient dairy cows have been culled and the better producers retained and that more efficient farming practices have been followed. In our over-all economic picture this is a healthy factor.

Thus, we see that there has been no total decrease in cattle numbers during this period as a result of a sharp decline in butter production. How, then, can anyone argue, in the light of this record, that further decline in butter production in the future would produce a decline in dairy-cow numbers? There is no relation between butter decline and reduction in dairy-cattle numbers in the past. Even if margarine-tax repeal should fulfill the worst fears of the butter interests and result in a drastic decrease in butter production, there is no reason why cow numbers cannot be increased to a level sufficient to fill all our whole-milk needs in the future. It is also difficult to see how even the most stubborn proponent of the dairy industry's need for so-called protective legislation can say, in the face of these facts, that repeal of antimargarine legislation would result in economic injury and the slaughter of millions of dairy cows.

There is an allied argument of repeal opponents with regard to the prospective disruption of the dairy industry. They have gone so far as to say that our

whole agricultural economy would be altered and that our way of life would be inevitably changed as a result of a substitution of a vegetable diet for an animal diet.

I doubt if even the people who advance this contention seriously believe it. It is as distorted as some of the more modernistic paintings. It might have been dreamed up by Salvadore Dali. It is based on a series of wholly unproved assumptions i. e., margarine-tax repeal would destroy the butter market, disrupt the dairy industry, result in the slaughter of most of our cattle, and so forth. These assumptions are not only unproved but, as we have seen, the overwhelming weight of available evidence is against them.

My only purpose in mentioned this contention-and we might call it the in extremis argument of the butter interests-is to call attention to one point which is usually made in connection with it. It is a point which is superficially appealing until closely scrutinized. It is contended that the dairy industry is a soilconserving industry per se and that cotton and soybean farming must, of necessityfi result in soil depletion. It is contended that only the dairy industry makes it possible for American agriculture to avoid one-crop systems-with their destruction of soil fertility-and establish proper crop rotation. Hence, so the extreme argument goes, the repeal of margarine taxes will destroy the dairy industry and result in the slaughter of all the cows. Consequently, our agricultural economy will rapidly deteriorate under the impact of soil erosion and depletion resulting from the expanded planting of soybean and cotton crops. There is no need to waste time debunking this horror story. But I think it would be helpful to pin down the implication of this soil-conservation argument. This implication is that butter production specifically, and the dairy industry generally, practice superior soil-conservation measures, while soybean and cotton farming must inevitably deplete the soil.

Every good farmer knows that it is perfectly possible to build up the land and at the same time plant crops such as corn, cotton, soybeans, and many others. The degree to which this is done depends to a large extent on the intelligence and skill of the farmer. At the same time, bad grazing practices as practiced by some dairy farmers-though fortunately not a great number-can and do strip the land and injure the soil.

Technicians in the Soil Conservation Service of the Department of Agriculture report: "If soybeans are grown, even as a clean-tilled crop, with proper conservation methods and practices to protect the land, they are no worse on the land than any other clean-tilled crop such as corn. * * * The soybean crop, which is a legume, benefits the land by adding nitrogen to the soil throgh its roots."

These technicians go on to say that many dairy farmers are guilty of improper utilization of their land. Pasture lands can be geratly injured by grazing at wrong seasons or by grazing too much stock per unit of land.

Surely, the dairy farmers must give soy and cotton farmers credit for as much good sense in soil conservation as they themselves claim. Any farmer, farming any crop or grazing any animal, can injure his land by ignorance of proper soil-conservation methods.

Moreover, real soil conservation involves more than maintaining fertility and avoiding erosion and depletion through proper farming and crop selection methods. It also involves the most economical use of a given amount of land. C. F. Christian, farm marketing specialist at Ohio State University, reports as follows after a study of the relative economy of butter and margarine production: 66* * * An acre of soybeans can be grown with 14 hours of man labor and will make about 225 pounds of margarine.

"The dairyman raises an acre of grain, usually corn, and has another 2 acres in hay or pasture to produce 225 pounds of butter. The acre of corn will take at least 30 hours' work, and hay and pasture require more work, and care of the cows will involve another 150 hours in producing 225 pounds of butter.

"A pound of butter represents 10 times the amount of farm labor and 3 times the amount of farm land that is represented by a pound of margarine."

In 1943 agricultural economists at Iowa State College, Ames, Iowa, the heart of the butter territory, studied this problem in detail. Their published report stated that 1 acre of soybeans will produce as many pounds of vegetable fat as 2 acres devoted to dairying will produce of animal fat. They also reported that 1 man-hour of labor will produce 13.3 pounds of soybean oil compared with only 1.5 pounds of butterfat.

This Iowa State College survey concluded by recommending that "restrictions on the sale of margarine-State exercise taxes, license fees, etc.-should be removed so that its consumption may be encouraged."