and a special form of buying power for machinery, chemicals, fertilizers, and other requirements of production. It certainly enhances the competitive advantage over individual farm owner-operators in a manner that almost defies description.

The National Farmers Organization has advocated the passage of legislation that would require corporations of the type just described to divest themselves of all interest in the ownership and operation of agricultural land and production facilities. We will not belabor the point at this time, nor will we initiate a discussion as to why the Department of Justice and the Federal Trade Commission have not taken an active interest in the antitrust or antimonopoly aspects of the large corporate farming operations. It is intended to show that there are several aspects of the development relating directly to the status of migrant workers who constitute the bottom of the personnel ladder in our whole food production and marketing setup.

A major point to be made is the possible loss of a whole class of capable farm management personnel in this country-and I refer again to the experience of Ralston-Purina. It is well recognized that independent integrators and a number of large corporations converted the production of practically all broilers in this country from the independent farm producer type of agriculture to the centralized factory type of production in a period of less than 15 years.

In the October edition of Broiler Industry, an extensive account of interviews with the management of Ralston-Purina describes the history of the company's experience in broiler production. This review was sparked by the company's announcement on September 16 that it was seriously considering divestiture of all broiler production facilities. It reportedly would sell $40 to $50 million worth of broiler inventory, plants, and equipment.

As late as the mid-1950's Purina still sold all chicken feed through their local dealers. The dealers were drawn into heavier commitments in financing production by the depressions in 1957 and 1959. It moved first into a stage of joint venture operation with the dealers who, in turn, were contracting with growers. In 1961 the company proceeded to a full integration of feed production, hatcheries, egg and turkey production, broiler processing, and distribution.

New sales of Ralston-Purina Co. increased from $647 million in 1961 to $1.57 billion in 1970-these sales are expected to reach the $2 billion level this year. The company is now involved, in addition to being the largest single livestock feed producer in the United States, in soybean processing, pet foods, restaurants, and a broadened line of consumer food products. The decision to dispose of the broiler business apparently was reached in a logical businesslike manner-they have concluded that broiler prices are cyclical and the return on investment does not measure up in comparison with other phases of the business.

In other words, the Ralston-Purina executives have discovered something that thousands of small producers also learned the hard way before they were forced out of production. A decision also was made to dispose of the egg production facilities. The company will retain its turkey production setup and certain facilities to market broilers and Cornish hens. There are no reports that the company effort to produce hogs will be dropped.

If this announced intention to dispose of some of its production and processing facilities represents a probable trend during the next few

years in the management decisions of some corporate structures who have entered agricultural production, one may draw certain conclusions. In practical terms, this corporation participated effectively in displacing a large proportion of the owner-operators who were producing a needed food product. It would be nearly impossible to reinstate owner-operators in this field once they have been broken or forced to move to other types of income.

Management know-how has been lost at the farm level. Now it is endangered at another level as production hereafter will be concentrated in even fewer hands. It would appear that competition between the giants will be lessened when some of them drop out of the game and it is readily apparent that only very large, well-financed buyers can consider purchases of the magnitude contemplated by RalstonPurina. Several questions immediately come to mind: Is the longtouted efficiency of bigness really all that it is cracked up to be? Can the corporate structure provide the knowledgeable management necessary to cope with the many varied hazards involved in agricultural production?

If they undertake it, wipe out the family farm structure and then fail to produce at reasonable prices, will the consumer then be provided with food produced by only a few corporate giants at prices such as we have in prescription drugs today? In some instances consumers are already offered foods that are tasteless and uninteresting because they have been developed largely to satisfy the requirement of mechanical picking and packaging. Must we look forward to more of this?

As an organization, we are convinced that the spectacle of large corporations monopolizing the food production field is a very strong possibility-we are not just crying "wolf." Ralston-Purina is already engaged in swine production. Cattle feeding has moved into very large lot operations in recent years. It is quite conceivable that a few of the conglomerate giants could move into cattle feeding and hog production, and thus place control of our whole poultry and meat supply in the hands of a very few people.

We urge that you consider the implications of corporate farming in agriculture, in its broadest sense. We do not mean to lessen or detract from your well-justified interest in the problems of the migratory worker. Actually, it is quite possible that many who have considered themselves small, independent farmers in the past are about to join the ranks of the migrant farmworker, at least from an economic point of view.

This is well illustrated by reference to the article by Washington Post staff writer Nick Kotz on October 5, 1971. In commenting on the problems of the low-income farmer who may undertake to compete with the large agribusiness corporations through the use of cooperatives, Mr. Kotz tells of the specific problems of the Cooperative Compesina. A small group of these ex-migrant workers are undertaking to produce and market strawberries using money loaned through an OEO program and the Wells Fargo Bank in California. Despite the assistance and the oft-repeated statements of interest in cooperatives and the problems of small farmers, it would appear that the Department of Agriculture would offer little, if any, assistance. In fact, when these small producers do undertake to reestablish themselves at a subsistence level, they may find the Department personnel in direct opposition.

I call your attention to Mr. Kotz' report that the Farmers Home Administration turned down Cooperativa Campesina's request for a loan. When asked to comment on this loan and related problems, Deputy Administrator Homer Preston, of the USDA's Farmer Cooperative Service, is quoted by Mr. Kotz:

The low-income farmer problem is not personally my cup of tea. Our conventional co-ops are not exactly enthusiastic about them. They don't have much to offer except labor and it is less important today. These people are cotton choppers. They are tied in with idealism and civil rights, and a lot of romanticism. The purpose of cooperatives is not to keep mass numbers in farming but to help those who remain.

In any event these expressions of interest are enlightening and you may wish to look into the attitudes expressed by a responsible leader in the Department of Agriculture. Certainly there is an indication of Mr. Kotz writings that the large staff and the power of the Department have been directed along lines quite different from the old Rochdale principle that supported the development of cooperatives and producer associations throughout the United States for many years. I assume that Mr. Kotz, a winner of two Pulitzer Prizes, has his facts right.

We have only one specific action to commend to you at this time. There was an earlier reference to proposed legislation that would require large business corporations to divest themselves of all interest in the ownership and operation of agricultural land and production facilities. It is my hope that this will be introduced before your deliberations are concluded. Even though a decision to support such legislation may not be appropriate in your committee, it may well have a significant bearing on any plans for legislation that you may develop in this committee. We will bring it to your attention informally as soon as possible.

We urge that every effort be made to learn more about the current position of the large corporations in farming and their plans for the future. If we may be of further service through consultation with members of the committee or with your staff, you are assured of our interest and cooperation.

Thank you.

Senator STEVENSON. Thank you, Mr. Frazier.

I will order printed in the record at this point the very fine series of articles by Mr. Nick Kotz that appeared on October 3, 4, and 5, 1971 in the Washington Post.

CONGLOMERATES RESHAPE FOOD SUPPLY

(By Nick Kotz)

The name "Tenneco" is not yet a household word to American consumers, but it weighs heavily on the minds of the nation's embattled farmers and of government officials who worry about the cost of food and the fate of rural America. For Tenneco, Inc., the 34th largest U.S. corporation and fastest-growing conglomerate, has become a farmer.

Its new activities symbolize an agricultural revolution that may reshape beyond recognition the nation's food supply system. Dozens of the largest corporations, with such unfarm-like names as Standard Oil, Kaiser Aluminum and Southern Pacific have diversified into agriculture.

What concerns farmers, processors and wholesalers is that the new breed of conglomerate farmers does not just grow crops or raise cattle. The corporate executives think in terms of "food supply systems," in which they own or control production, processing and marketing of food.

"Tenneco's goal in agriculture is integration from seedling to supermarket," the conglomerate reported to its stockholders. Its resources to achieve that goal include 1970 sales of $2.5 billion, profits of $234 million and assets of $4.3 billion in such fields as oil production, shipbuilding and manufacturing.

The conglomerate invasion of agriculture comes at a time when millions of farmers and farm workers have already been displaced, contributing to the problems of rural wastelands and congested cities. More than 100,000 farmers a year are quitting the land, and more than 1.5 million of those who remain are earning less than poverty-level farm incomes. Their plight is severe.

Although the U.S. census still counts 2.9 million farmers, 50,000 grow one-third of the country's food supply and 200,000 produce more than one-half of all food. The concentration of production is especially pronounced in such crops as fruit, vegetables and cotton.

In 1965, 3,400 cotton growers accounted for 34 per cent of sales, 2,500 fruit growers had 46 per cent of sales and 1,600 vegetable growers had 61 per cent of the market.

The medium to large-size "family farms"-annual sales of $20,000 to $500,000— survived earlier industrial and scientific revolutions in agriculture. They now face a financial revolution in which traditional functions of the food supply system are being reshuffled, combined and coordinated by corporate giants.

"Farming is moving with full speed toward becoming part of an integrated market-production system," says Eric Thor, an outspoken farm economist and director of the Agriculture Department's Farmer Cooperative Service. "This system, once it is developed, will be the same as industrialized systems in other U.S. industries."

Efforts to bar large corporations from farming have come too late, says Thor: "The battle for bigness in the food industry was fought and settled 35 years ago-chain stores versus 'Ma and Pa stores.'

Corporate takeover of the poultry industry did result in lower consumer prices. But for numerous food products, corporate farming has not lowered grocery costs, because the price of raw food materials is not a significant factor in determining final retail prices. For example, the cost of a food container is sometimes more than the farmer receives for the food packaged in it.

The new corporate farmers account for only 7 per cent of total food production, but they have made significant inroads in certain areas. Twenty large corporations now control poultry production. A dozen oil companies have invested in cattle feeding, helping shift the balance of production from small Midwestern feed lots to 100,000-head lots in the High Plains of Texas. Just three corporations-United Brands, Purex and Bud Antle, a company partly owned by Dow Chemical-dominate California lettuce production. The family farmer still rules supreme only in growing corn, wheat and other grains, and even here constantly larger acreage, machinery, credit and higher prices are needed for the family farmer to stay profitably in business.

Tenneco hopes that its new brand name, "Sun Giant," will one day become for fresh fruits and vegetables what "Del Monte" now means for cannd foods. It hopes housewives will pay premium prices to buy its nationally advertised specially packaged fresh produce.

Tenneco, which started out as Tennessee Gas Transmission Co., says it made "giant strides" in 1970 toward its agriculture goals.

Resources rapidly accumulated by the giant conglomerate include: Kern County Land Co., which controls 1.8 million acres of land in California and other states: J. I. Case Co., a manufacturer of farm machinery: Packaging Corp. of America, which makes food containers; Tenneco Chemicals, a producer of pesticides, and Heggblade-Margoleas, the nation's largest processor-marketer of fresh fruits and vegetables.

Even the largest independent California farmers question how they can compete with a corporation which can, at least in theory, own or control virtually every phase of a food supply system. Tenneco can plant its own vast acreage. It can plow those fields with its own tractors, which can be fueled with its own oil. It can spray its crops with its own pesticides and utilize its own food additives. It then can process its food products in its own plants. package them in its own containers and distribute them to grocery stores through its own marketing system. Financing the entire operation are the resources of a conglomerate with billions in assets, hundreds of millions in tax-free oil income and interests in banking and insurance companies. Tenneco, according to reports filed with the Securities and Exchange Commission, had 1969 gross income of $464 million and

taxable income of $88.7 million. Yet due to federal tax breaks, Tenneco not only paid no taxes on that income, but had a tax credit of $13.3 million.

Tenneco officials-who don't want to be named-acknowledge they are building a vertically integrated food delivery system, but they deny any plans for coordinated use of the conglomerate's total resources. Each company must compete and earn a profit separately, they say. Nevertheless the Federal Trade Commission is actively scrutinizing the corporation's agricultural activities for possible antitrust violations.

Tenneco is reluctant to discuss details of its finances in agriculture, but available information indicates the scope of its present agricultural interests.

In 1970, Tenneco reported agricultural and land development sales of $107 million and profits of $22 million. It farmed 35,000 acres directly and 95,000 acres through 324 tenant farmers. It produced 2 million boxes of grapes, 1.5 million boxes of strawberries and large amounts of other fruits and vegetables. But that is only the beginning.

MARKETING FIRM

Heggblade-Margoleas, Tenneco's processing and marketing firm, sold its own products and those of about 2,000 other farmers. Heggblade-Margoleas is the nation's largest marketer of fresh fruits and vegetables and the world's largest marketer of table grapes. Its processing facilities include a new 8-acre plant and the world's largest date processing plant. Tenneco even has its own farm lobbyist in Washington.

Tenneco agricultural operations employ 1,100 full-time workers and 3,000 at the peak of harvest. Faced with a boycott of its other products, Tenneco last year signed a contract with Cesar Chavez's United Farm Workers Organizing Committee.

The 1970 contract signed with Tenneco and other grape growers raises basic wages to $1.75 to $1.80 an hour and provides a piecework bonus that can add another $1 an hour during harvest season. Before Chavez's union began its grape strike, wages averaged between $1 and $1.25 an hour. The contract also established a medical care fund, an economic development fund and safety precautions to protect workers from pesticide poisoning.

Tenneco's future plans include development of its Sun Giant brand produce and putting into production 30,000 newly irrigated acres.

FARMERS OVERPOWERED

The type of food system being put together by Tenneco and other conglomerates frustrates and frightens independent farmers. They see every element of the food business acquiring market power but themselves. On one side, they confront the buying power of giant food chains. Now they must compete with conglomerates that can take profits either from production, processing, or marketing. The individual farmer usually does not have such options. The giant competitors also benefit from a variety of government subsidies on water, crops and income taxes. Contrary to popular notion and most galling to the efficient, large, independent farmer, the corporate giants generally do not grow food cheaper than they do. Numerous USDA and university studies show that enormous acreage is not needed to farm efficiently.

For example, maximum cost-saving production efficiency is generally reached at about 1,500 acres for cotton, less than 1,000 acres for corn and wheat, and 110 acres for peaches. Thousands of independent family farmers possess such needed acreage, and farm it with the same machinery and techniques used by their new rivals.

In fact, studies show that the largest growers incur higher farm production costs as they employ more workers and layers of administrators.

A fullscale economic battle between the conglomerates and independent farmers is now unfolding in the nation's single most important farm area, the rich central valleys of California, which far outdistances Iowa as the first-ranked state in farm sales. California farms grow 40 per cent of the nation's vegetables, fruits and nuts. The state produces at least 90 per cent of the country's supply of 15 crops and leads the nation in 25 others.

"If the Tenneco operation is allowed to go unchecked, it can change the whole complexion of farming in the valley," says Fresno attorney Donald Thuesen. "They have the marketing power to make or break the market. They can sell below cost, as a loss leader, to get other business, and sustain losses that no farmer can afford."