July 18, 1973
Page 24524
Mr. MUSKIE. Mr. President, the combination of the administration's lack of action on the economy in the earlier part of this year, and the stringent: 60-day freeze imposed last June, have created serious hardships for food producers – and the prospect of food shortages for consumers.
The Senate today is considering an amendment which would alleviate the prospect of food shortages. This measure would require that adjustments be made in food price controls whenever the Secretary of Agriculture certifies that food supplies would otherwise "be reduced to unacceptably low levels."
The problem this amendment would correct is dramatically illustrated by the current difficulties of the poultry industry in Maine. The freeze allowed poultry feed grain prices to remain at historically high levels, but prevented poultry feed processors and poultry producers from accounting for these increased costs in their prices. Similar problems have been encountered by the Maine dairy and meat processing industries.
George Humphrey, president of the Maine Poultry Industry Association, summed up this problem in a recent letter to me. He wrote:
The total result of the price freeze on the poultry industry is the elimination of the economic incentive to produce. Economic incentive is the single factor that will cause poultry and egg producers to produce in the future. The present situation in the poultry industry, if continued, can only lead to reduced productivity.
This decreased productivity carries the threat of serious food shortage. To protect the consumer from these shortages, I urge my colleagues to adopt the amendment before us today.
Mr. President, I ask unanimous consent that Mr. Humphrey's letter, and other relevant correspondence, be inserted in the RECORD at this point.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
MAINE POULTRY INDUSTRY ASSOCIATION
Orono, Maine,
June 28, 1973.
To: Maine Senators and Congressmen.
Re: Recent Price Freeze.
Senator EDMUND S. MUSKIE,
Senator WILLIAM D. HATHAWAY,
Congressman PETER N. KYROS,
Congressman WILLIAM S. COHEN.
DEAR SENATORS AND CONGRESSMEN: Further explanation of the effect of the recent price freeze on the poultry industry, both in the Nation and in Maine, is probably not needed at this time. We are sure you have been made aware of the financial stress on producers of poultry products. However, the enclosed is further evidence.
There are many examples of hardship and near disastrous results which we could cite in Maine. However, of major concern is the fact that the total result of the price freeze on the poultry industry is the elimination of the economic incentive to produce. Economic incentive is the single factor that will cause poultry meat and egg producers to produce in the future.
One of the keys to future price stability according to George P. Schultz, Chairman of the Cost of Living Council, is improvement in productivity throughout the food industry. The present situation in the poultry industry, if continued, can only lead to reduced productivity. This is contrary to views of the Cost of Living Council.
We in Maine urge your prompt attention to the problems of the poultry industry resulting from the price freeze.
Sincerely,
GEORGE HUMPHREY, President.
[From the Bangor Daily News, June 27, 1973]
POULTRY INDUSTRY FEELING PINCH
(By David Bright)
The recent price freeze imposed by President Nixon is beginning to be felt within the poultry industry, both in the nation and in Maine.
The problem now threatens temporarily to put feed, bird and egg producers out of work or at least on a diminished scale of operation. And it will begin to affect the consumer soon as eggs and poultry begin to vanish from grocers' shelves.
The situation results from Nixon's orders that all processed foodstuffs be frozen on the retail level at the price they were commanding during the week of June 1 to 8, and that all wholesale prices after the first sale be frozen at that same level. The President failed, however, to act on raw farm prices, including soybeans, corn and other products which go into feed.
As a result, feed producers who deal in a processed product, are finding it costs them more to produce and market feed than they are being paid for it. Similarly, egg farms and broiler firms, who mix their own feed, cannot raise prices to retailers enough to cover the increased costs of buying feed ingredients.
Dean K. Webster, president of the H. K. Webster Company Inc., which markets Blue Seal brand feed to most areas in Maine, said that his firm is now losing between $15 and $20 a ton on poultry feed.
The situation has gotten so bad, Webster said, that even a freeze on feed ingredients wouldn't help at this point, since costs would still tower over the frozen price levels.
Frank Reed, a former extension economist and now executive director of the New England Grain and Feed Council, pegged the government's export policies on grain as one cause for concern.
Without control on exports, he said, grain dealers can get the prices they ask in foreign trade. To compete, domestic buyers must pay the prices.
In a letter to his customers this week, Webster noted that his losses "will grow more substantial every day and every week that the price freeze remains in effect."
Egg producer George Humphrey of Gray, who has his own feed mill, estimates he is now losing $3,000 a week because of the freeze. The retailers now work on such a small profit margin, he said, that they cannot afford to buy eggs unless the wholesale price is dropped back to correspond with the lowering of retail prices to the June 1 to 8 level.
"That limits my price," he said, "but costs for my feed will continue to rise. Soybean meal, a processed product, is frozen at a record high price, while corn continues to rise."
As a result Humphrey said, he is now selling every bird with an egg production below 65 per cent, and predicted that the volume of the egg business soon will. fall. It takes 18 months to produce a layer, he said, so the effects of the freeze will be felt long after the freeze is lifted.
The traditional Thanksgiving turkey could also be a rarity this year, he said. Those birds are just beginning to be bred now, but many farmers are holding back, knowing that it takes about 100 pounds of feed to produce a full-sized turkey.
At Penobscot Poultry in Belfast, Herbert Hutchins said the firm will sell a breeder flock Wednesday to cut down on the number of birds. He said that unless something was done immediately, the firm will begin to take other measures to reduce the volume of birds.
Hutchins said that the firm is now losing $30,000 to $50,000 a week because it is costing more to grow the birds than it can get for them. A sideline feed business is losing $40 a ton, he said, and probably will be discontinued.
And what about the consumer? Doug Brown of Bangor, who operates a chain of grocery stores in Maine, doubts that the shelves will be empty, but said prices will continue to be high. There will be no more specials on poultry (which accounts for 15 per cent of all meat sales) and possibly no specials on other items.
J. L. HAVES & Co., Inc.,
Lewiston, Maine,
June 25, 1973.
Senator EDMUND MUSKIE,
Senate Office Building, Washington, D.C.
DEAR SENATOR: Enclosed is a copy of a letter sent to President Nixon this date, outlining some of the difficulties being experienced by small businessmen because of the 60 day freeze.
Respectfully,
NORMAN E. HAYES, President.
J. L. HAYES & Co., INC.,
Lewiston, Maine
June 25, 1973.
Hon. RICHARD M. NIXON,
President of the United States, Washington, D.C.
DEAR MR. PRESIDENT: I am just one of the many small businessmen being eased out of business by the 60-day price freeze. I could list at least a hundred items on which I have had to absorb a price increase these past two weeks, but I'll restrict myself to two items on which I simply cannot absorb the increase and continue to sell the item.
I contacted the Internal Revenue Service representative in Maine only to realize that it would take too long for an exemption request to be processed to afford me any relief. I cannot absorb the loss involved while awaiting the decision. I was told that I could expedite the process by forwarding the request and then flying to Washington, D.C., for an appointment with Mr. Kirk. Unfortunately, during the height of my busy season I cannot afford the time to spend a day or two in Washington.
I requested permission to increase my prices while awaiting a decision provided I would refund the increase if my request were denied. I cannot even do this. I cannot raise my prices because of the freeze. I cannot sell goods for less than they cost me. What do I do?
What do I do in my feed grain operation? I buy a railroad car of feed from a mill in New York every 10 to 14 days. My ceiling prices are based on the car shipped the end of May. However, the mill increased its prices a minimum of $6 per ton the first week of June. Hence, I'll be unloading, warehousing, and delivering feed out of the car I received this date for less than $4 per ton. I cannot operate like this for very long. Furthermore, one particular feed, a 14% coarse non-urea Dairy ration, is costing me $1.80 per ton more than I can sell it for. Since I allow a customer a $2 per ton discount on deliveries of a ton or more, I'll be unloading, warehousing, and delivering this feed for $3.80 less than it costs me.
My only alternative is to sell this car of grain at a loss and then retreat from the feed business. Since the other grain dealers are faced with the same problem, it would not surprise me to see sales of feed grain drop by 50% in this area. This will cause a shortage of eggs, milk, etc., as dairy herds, poultry flocks are trimmed back 50%. We need your immediate attention to and resolution of this problem. Since it takes about three weeks to receive a car of grain, I must decide now whether to remain in the grain business. I cannot wait for an exemption request to be processed.
What do I do in my grass seed operation? I supply local contractors with grass seed mixtures for housing projects, city parks, etc. I booked one particular grass seed, Kentucky Bluegrass, at 48¢ a pound nine months ago. It will cost me $1.20 a pound for the same seed today which is 25% above my ceiling price for contractors. What do I do? I cannot afford to sell grass seed for less than it costs me.
The basic problem is that many small businessmen, like myself, order once a month or once a quarter. Hence, we find ourselves in a bind since costs have legitimately increased to us, but we cannot pass on the increase. Since I operate a business characterized by very small mark-ups, I cannot tolerate this squeeze for very long and maintain a healthy business. We, the small businessmen, need your immediate assistance. There simply is not enough flexibility in the present freeze.
I would welcome the opportunity to discuss my particular problems with any representative you might have in this area. I have several constructive ideas I feel should be incorporated into Phase IV to make Phase IV more equitable to the small businessman.
Please help! The present situation is intolerable.
Respectfully,
NORMAN E. HAYES, President.
JUNE 21, 1973.
Hon. EDMUND S. MUsKIE:
Part of the following information on Maine milk prices paid to dairy farmers on the Boston market was provided by Mr. Ed Micka of the University of Maine.
Milk Prices : April 1973 $7.50 per cwt. Out of this we pay .64 per cwt. for hauling, .05 Maine tax, and .03 per cwt. for the Market Administrator. April 1972, we received $7.00 per cwt. Out of this came the same hauling and taxes as above, or an increase of slightly over 7%. May 1973, we received $6.93 per cwt. with the same deductions as above, or a decrease of approximately 8 % in 30 days.
Grain Prices: June 1972 at the Agway Store in Skowhegan, Maine, grain was $3.68 per cwt. June 1973, the same grain, at the same store was $5.62 per cwt. or an increase of over 50%. These prices are based on bulk feed delivered in 6 ton lots. The price would be approximately $14.00 per ton more in bags. Attached is USF Bulletin showing the increase in all feeds.
Gas: June 1972 gasoline in Skowhegan was 33.9 per gallon. June 1973 at the same place, gas was 39.9 per gallon, if you are lucky enough to get any, or an increase of approximately 18%. Fuel is an absolute necessity if the farmer is to continue operating. Some farmers have already been refused gasoline.
Fertilizer: In May 1972, 15-8-12 was $69.50 per ton in bags. Today the same, fertilizer, at the same store is $87.80, or an approximate increase of 30 %.
The following items have all increased at about the same rate: barbed wire, baler twine, veterinary and milk room supplies, building supplies for upkeep of the buildings, new machinery and replacement parts:
We read in our farm magazine, June 25th issue of Hoards Dairyman, page 778, that the government is now proposing to import an increase of a billion dollars entirely accounted for by the dairy products which will further suppress our prices. The following is a quote from the editorial of Hoards Dairyman. "Dairy producers in foreign countries do have advantages over dairy farmers in this country when it comes to production costs. Their labor coats are much lower, and they aren't required to meet the strict sanitation requirements imposed upon our producers. This latter point always has been of real concern to us. Our dairy products must compete with cheaper foreign products on which no on-farm inspections are required. Unless foreign dairy products meet the same high standards imposed on our dairymen, the administration is creating a double standard for dairy products, which is unfair to both American Consumers and American Dairy Farmers."
Some years ago the Federal Marketing Administrator moved their office and the personnel from the State of Maine. Since that time there has been a great deal of dissatisfaction with results of the services of that office. It seems to us their checks of our butter fat samples are not handled in the proper manner. Class II and surplus milk from other markets are finding their way into our Class II markets. The order seems concerned merely with the dealer and very little concern with the producer even though we are being forced to support this office with finance from our milk checks.
We have to operate under the Louisville Plan, which in farmers language means that money is taken out of our milk checks in flush season. If we do not produce as much milk in the fall as we do in the spring, we do not get back all of the money that was taken out. We feel that this plan should be done away with. For the milk that we produce today we do not receive any money for at least thirty days.
If we were fortunate enough to be producing milk for the Maine market, these price increases may not seem as severe to us, or had we been fortunate enough to have been one of the counties to receive surplus grain last winter, it would have been somewhat easier.
We would like to extend our appreciation to Mr. Muskie, his aide, Mr. Charles Micoleau, and Mr. Muskie's office staff for their time and efforts in this matter.
ARMOUR & Co.,
Rockland, Maine,
July 11, 1973.
Senator EDMUND MUSKIE,
Congress of the United States, Washington, D.C.
DEAR SENATOR MUSKIE:The price ceilings that have been established on Food Products has resulted in reduced production of meat and poultry which in the long run will mean shortages and higher prices for Consumers.
We are now feeling an acute shortage of all pork products. It is reported that Poultry Producers are selling Breeder Flocks and destroying Baby Chix.
Due to reduced production in Meat and Poultry Plants, workers are being laid off.
Will you please use all of your influence to have Ceiling Prices removed from Food Products immediately.
Sincerely yours,
ROBERT C. HANSCOM, Manager.
JOSEPH KIRSCHNER Co., INC.,
Augusta, Maine,
July 11, 1973.
Senator EDMUND S. MUSKIE,
Senate Office Building,
Washington, D.C.
DEAR SENATOR MUSKIE: Some time ago we wrote to you about the problems that we were having because of the ceilings imposed on the meat industry by the President on March 29.
At the time of the imposition of the ceilings we had been selling our products at a loss, so the ceilings locked us into a loss position.
A request for exception to increase some of our ceiling prices was prepared by our Company and filed with the Cost of Living Council on May 9, 1973. A copy of their reply to this is enclosed, along with a letter from our attorney.
We find this a very difficult decision to accept. As businessmen we do not feel that we can offset our increased costs of raw materials by reducing our operating expenses. If we could reduce our operating expenses, we would already have done so. The meat packing industry has always operated on a very low profit margin, and because it is so competitive, those of us who have been able to survive over the years have been able to do so only because we already had kept our operating expenses at a minimum.
All we are asking is that we be allowed to pass through on a dollar for dollar basis per pound of raw material price increaseswe are not asking for this on a percentage basis.
Our Company would greatly appreciate any action you could take to help relieve our situation; and any action you might take to insure that the Cost of Living Council, in formulating Phase IV, takes into account the factors set forth above.
Very truly yours,
VINCENT KIRSCHNER, President.