wholesale houses, along these marketing areas, are paying enormous rents for the facilities they are using; are they not? Mr. CROW. Yes; they are. The CHAIRMAN. They could, by payment of the same rental, have modern facilities with up-to-date refrigeration and handling facilities. Mr. CROW. And in some cities they can get the most modern facilities for a lower rent than they are paying now. The CHAIRMAN. We have some other witnesses now, Mr. Crow. I would like to excuse you for a moment, but with the right to call you back. Mr. GRANGER. Mr. Chairman? The CHAIRMAN. Excuse me. Mr. Granger. Mr. GRANGER. Then, if the railroads are going to benefit, the wholesalers are going to benefit, and the consumers are going to benefit, why does not private enterprise take hold of this problem and solve it? Mr. CROW. I think there are several reasons for that. One is the difficulty of getting these groups together so that they can take a uniform course of action. In some of the places where they have gotten together they are having difficulty in financing the proposition themselves, because private lending agencies do not understand the problem sufficiently to know whether they want to put up the money or not. The CHAIRMAN. Is it not a fact that the municipality of New York has the right to feel that the Washington Street market is impressed with a public interest, because through that market several States are served? Mr. CROW. That is right. The CHAIRMAN. And from the 48 States the producers ship their produce into that market; is not that right? Mr. CROW. That is correct. The CHAIRMAN. Or forty-odd States. Mr. CROW. It is more than a New York city problem. The CHAIRMAN. It is more than a New York City problem; it is actually more than a New York State problem? Mr. CROW. That is right. The CHAIRMAN. It is a national problem, and that is the only justification for this legislation; is not that true? Mr. CROW. I think so. The CHAIRMAN. We talk about the Washington Street market, but the same situation obtains to a greater or lesser degree in other cities? Mr. CROW. That is right. The CHAIRMAN. Such as Philadelphia, Boston, and other places? Mr. CROW. Yes. The CHAIRMAN. But you use that market simply because it is the largest market? Mr. CROW. But I think Mr. Granger's point is well taken, just to give my personal opinion. I believe these groups will benefit from such improvements as we are talking about, and therefore, that the construction of facilities should not be subsidized. In other words, they should be a self-liquidating proposition. The CHAIRMAN. That is contemplated by this bill; is it not? The CHAIRMAN. Each loan will be amortized over a good number of years at a reasonable interest rate, and it is contemplated that the rents received from the property will liquidate the loan? Mr. CROW. That is right. Mr. GRANGER. Do I understand the chairman to say this is merely an insurance proposition? The CHAIRMAN. Yes. It does have an insurance provision in it. In that connection, Mr. Crow, would you mind just taking a few minutes to explain the high spots of the bill? Mr. CROW. The bill provides that in any locality where they have a large market that is presently insufficient, if the local people will develop satisfactory plans for an efficient facility and can make a showing that they will reduce the cost of distribution if they carry out those plans, they may make application to the Federal Government to insure up to 85 percent of the cost of the construction of such a facility, with a maximum interest rate of 4 percent. Private financial institutions would make the loan, and they, of course, could make a 100-percent loan if they wanted to, but the insurance would apply only to the maximum of 85 percent. Out of the interest collected, which could not exceed 4 percent, one-half of 1 percent would go to the Federal Government to pay for the insurance. There is nothing in the bill that would require any city to build new facilities, and there is nothing in it that would require them to take advantage of this bill, if enacted, if they want to provide facilities in some other way. Under this proposal they could request a direct Government loan only if they could show that they had the right kind of plan; that they were going to get signed leases from responsible people to move into it; and that they could not get loans from private financial institutions. If they seek a direct loan from the Federal Government, the interest rate would be at the maximum figure of four percent. They stand the chance of getting a lower interest rate if they go to private financial institutions, because 4 percent is simply the ceiling in that case. If they get a direct loan from the Federal Government and later some private financial institution should be willing to take that loan over, they may be required to refinance the loan with the private. financial institution and take it out of the Government's hands. That, as I understand it, is the essence of the bill. The CHAIRMAN. Thank you very much, Mr. Crow. I will now call Dr. J. L. Maxton, extension agricultural economist, Blacksburg, Va. Dr. Maxton, would you like to be heard now? Dr. MAXTON. I certainly would, sir. The CHAIRMAN. All right, Dr. Maxton. We will be glad to hear from you, sir. STATEMENT OF DR. J. L. MAXTON, EXTENSION AGRICULTURAL ECONOMIST, BLACKSBURG, VA. Dr. MAXTON. In 1776, John Adams introduced resolutions in Continental Congress to encourage agriculture. In 1779, George Washington in his last annual message made an appeal for a national board of agriculture. From those early dates up to the present, the response of Government to agriculture has been such as to lead us to expect approval of H. R. 8320 as a continuation of a policy now 174 years old. We have had production problems and these have developed into marketing pains. Few of us can enjoy these pains as did Rosalind's Orlando and announce we do not wish to be cured. We know the cure and sooner or later it will be used; but thank goodness this time, it is hoped, in the form of preventive medicine. The gains in agricultural production have made agriculture's problems largely those of distribution. One of the most important is the need for efficient wholesale marketing facilities for perishables. Marketing and therefore marketing facilities became a Federal problem in 1913 when Congress authorized the creation of an office of markets in the department. This came about as a result of agitation by farmers and city people who complained about the spreads between farm and city prices. The handlers in many instances have been justified in their margins because the obsolete facilities available for their use made handling charges necessarily high. Marketing research in the facility field has uncovered the cause for a portion of the high costs of distribution. State agencies have assisted in this research work and have tried by various means to have improved wholesale marketing facilities built. In 1939-41 certain Virginia agricultural agencies with help from the VAE, USDA, made studies of the existing marketing facilities at Richmond, Norfolk, and Roanoke. These studies were gone into in greater detail in cooperation with the Production and Marketing Administration, USDA, in the period from 1944 to 1949. Mimeographed reports of these studies are available in the offices of the Production and Marketing Administration of the United States Department of Agriculture. In 1940 the General Assembly of Virginia passed a bill permitting the creation of produce-marketing authorities as an implement to speed up the building of improved wholesale producemarket facilities. One such authority has been established for Richmond, but as yet there is no improvement in the physical market facilities for that city. In the study of the Richmond market facility made in 1939 by State agencies and the Bureau of Agricultural Economics, USDA, it was found the facilities were built originally in 1913 to service 100,000 people and were then servicing 220,000, having expanded onto the streets. Only two of the wholesale independents had car-door unloading facilities at their place of business. The streets were narrow and congested and slowed up selling and delivery. A single dealer's books at that time showed extra cartage costs because of a lack of back-door rail facilities of $3,056, extra storage costs of $7,000, and unnecessary losses in spoilage and deterioration of $4,000. The study showed a saving possible then of $100,000 annually from a properly located wholesale facility for perishables with back-door unloading direct into wholesalers stores. It was also estimated an additional saving of $100,000 would result to buyers from time saved and reduced mileage traveled. In 1946 a joint study was made of the wholesale marketing facilities at Richmond by certain Virginia agricultural agencies and the Production and Marketing Administration of the United States Department of Agriculture. After a thorough study to determine the facilities needed and their cost it was determined, at that time, that the dealers who would operate in such an improved market facility could affect savings of $163,000 annually in operating costs. In the publication The Wholesale Market for Fruits, Vegetables, Poultry and Eggs at Richmond, Va., released by the United States Department of Agriculture in March 1948, on page 91 in the second paragraph, appears this: It is estimated that the dealers who operate on the proposed new market for Richmond can effect savings of $163,257 in operating costs as a result of improved facilities for handling produce. In a study made by State agencies and the Bureau of Agricultural Economics, USDA, of the marketing facilities at Norfolk, Va., in 1939, it was found these facilities had been built in 1923 and were then largely inadequate. This study disclosed that a modern market facility would result in se vings in excess of $50,000 annually by wholesalers because of reduced expenses of operation, less labor and less spoilage. In a second study made by the PMA of the United States Department of Agriculture, in 1949, it was estimated $44,345 savings could be made by nine wholesalers of perishables and two poultry and egg dealers in a modern market facility. In a study, Information on Proposed Sites for Consolidated Wholesale Produce Market in Norfolk, Virginia, released in 1949 by PMA, USDA, on page 17, appears the following information: TABLE 10.-Comparison of present business costs to 9 fruit and vegetable dealers and 2 poultry and egg dealers with estimated costs of some items in proposed new wholesale market in Norfolk, Va. 1 Assumes 90 percent of fruit and vegetable receipts by rail will be unloaded directly from car to wholesale stores at average savings of $25 per car trucking cost. Based on savings of 1 percent of value of fruits and vegetables; elimination of breakage and grade deterioration in eggs as described in a preceding paragraph. Additional savings would accrue to buyers and farmers selling at wholesale as a result of time saved because of decreased congestion in a new market. In a study made of the Roanoke wholesale market for perishables in 1941 by State agencies and the Bureau of Agricultural Economics, USDA, it was found the facility had been built in 1918 by the sale of $200,000 of 42 percent bonds. These bonds were neither serial or callable, so the city has had to pay $270,000 in interest in addition to the original sum borrowed. These bonds could have been retired within 15 years from market income had they been callable. For the period 1918 to 1945 the gross annual income from the Roanoke market averaged $41,808. The gross expense was $17,312, leaving an average net income of $24,496 per year to the city. It was estimated in this study that the saving in cartage alone by rail unloading directly into wholesalers stores would be $11,000 annually. Other savings would result from less handling, less waste and deterioration, and savings in time to both sellers and buyers. These studies show the inadequacy of present facilities. They also show the need for modern wholesale marketing facilities for perishables. All of these markets lack direct rail connections to wholesaler stores; they lack suitable cover and display space for farmers selling at wholesale; they lack buyer parking space, traffic is congested; hours of sale cannot be regulated or supplies on the market determined with reasonable accuracy. In each case over a period of 10 or more years efforts have been made to obtain adequate financing for a modern wholesale market for perishables without success. Two bills have been presented to the Virginia Legislature as aides to financing. One, the market authority bill giving a city the right to sell bonds, etc., has been enacted into law and a market authority was set up for Richmond in 1946. As yet things are in the planning stage as far as a modern market facility is concerned for that city. A second bill introduced in 1950 for the purpose of making $1,000,000 available in a revolving loan fund for market. facility construction was defeated by a narrow margin. Over this period of time a dependable loan fund source for market facility construction has not been developed. The matter appears to be one of national concern since Virginia receives produce for sale by rail or truck from nearly all States in our Nation and by ship from many foreign countries. All of the studies made indicate revenue possibilities in excess of expected expenses of operation including interest on the capital invested and normal depreciation. Because of the findings from studies made as to the need for modern facilities and the savings possible by their construction and because of the numerous attempts to find sources of capital for their construction without success, it is requested careful consideration be given to H. R. 8320 and if possible it be passed so most States will have a source of loan fund for the construction of modern wholesale marketing facilities. In my work in marketing as a member of the VPI faculty I have come to consider marketing facilities in the light of public utilities such as waterworks, power sources, transportation agencies, etc. Although they are of particular service to the people of the State for supply source purposes, they also are of major service to producers and handlers of supplies in many States and countries as their market outlets. All of these people would benefit from facilities which reduced costs of distribution as a result of efficiencies obtained. I see this in the light of a business deal available to our people who are interested in building efficient market facilities. They would like a dependable loan fund source. They expect to pay the regular interest rate as stated in the bill. They expect to comply with the repayment requirements. We are in need of the things which the present provisions of H. R. 8320 if enacted into law would make available to us. If this bill was in the form of a grant or subsidy to be paid for out of taxes a majority of our people would be opposed to it. Since it is not a subsidy but a straight business proposition we favor the bill fully. We have the facts which show that our present facilities are obsolete and inadequate; that new modern facilities could be built and paid for out of savings from efficiencies introduced. Available sources of loan funds for this purpose have been lacking and as a result a loan fund such as H. R. 8320 for construction and insurance purposes would |