1234 GENERAL FARM PROGRAM 



For the last several years the board of directors of the National Cooperative 

 Milk Producers Federation has been giving serious consideration to the develop- 

 ment of a long-time agricultural program. Furthei, we have given careful 

 consideration to Secretary of Agriculture Brannan's proposal. The board of 

 directors and representatives of member Associations of the National Cooperative 

 Milk Producers Federation have gone on record in opposition to the use of pro- 

 ducer payments to support the income of dairy faimers under price-support 

 legislation. Rather, the federation favors the continuation of the Hope-Aiken 

 Act (the Agricultural Act of 1948), providing that a few clarifying and beneficial 

 amendments are made to this act, whereby dairying will be given mandatory 

 price support protection equal to that now provided for other major commodities 

 under title II of the act. 



This is not the first time that proposals of this nature have been made as to 

 programs for the dairy industry. Under the Secretary's present proposal, it 

 is apparent that in time it would be planned that the dairy farmer be given either 

 a production or marketing quota in order to control and limit the volume of 

 milk production or marketings. 



Early in 1934 the Department of Agriculture proposed, under the first Agri- 

 cultural Adjustment Act, that dairy production on the individual farm be brought 

 under control by a system of farm -production allotments, with cooperating pro- 

 ducers to receive benefit payments financed by a processing tax on dairy products. 

 The Department presented this plan to dairy farmers in a number of regional 

 meetings, and dairy farmers rejected the proposal because they considered it 

 unworkable. They believed it unsound to freeze the dairy enterprise and to 

 limit opportunity of developing dairying in areas of the country where sound farm 

 management calls for its expansion. We have no reason to believe that they have 

 changed their attitude regarding quotas or allotments designed to limit marketings. 

 As a matter of fact, it is highly probable that they now would be even more opposed 

 to restriction of the volume of marketings, because many of them have expanded 

 their production at the request of the Government during the war. 



We have had considerable experience with subsidies of one kind or another 

 during the war. Starting December 1, 1942, a payment of 3% cents per pound 

 of cheese was made, the program continuing until January 31, 1946. Butter 

 prices were rolled back 5 cents per pound on June 1, 1943, in order to reduce 

 living costs, and butter manufacturers were subsidized at the rate of 5 cents per 

 pound throughout the war. 



However, even then it was found impossible to get the production volume of 

 milk and milk products that the Government desired — so instead of raising prices 

 to producers to stimulate more production, direct subsidy payments to producers 

 were started in October 1943. These reached very high levels before the war was 

 over. The payment on butterfat finally reached a level of 17 cents per pound, 

 and the payment on milk reached 90 cents per hundredweight. The producer 

 subsidy on butter was thus about 13.6 cents per pound of finished butter, as com- 

 pared to a 41.5 cent per pound price for 92-score butter at Chicago during the 

 period. Ninety cents per hundredweight of milk represents about 90 cents per 

 case of evaporated milk, roughly 9 cents per pound of cheese, and almost 2 cents 

 per quart of fluid milk. Counting the roll-back in butter prices, plus the subsidy 

 on butterfact, consumers were getting their butter during this subsidy period at 

 about 19 cents less per pound than was actually being paid to producers and manu- 

 facturers for producing butter. 



When the war was over, it became necessary to discontinue the subsidies. The 

 costs had been very large. The total cost of the subsidy on butter and cheese 

 as such was $276,000,000. During the war and until decontol day, the direct 

 payment program to the dairy farmer cost the Government $1,200,000,000. 



When the subsidies were removed, the market situation became chaotic. The 

 butter roll-back subsidy was removed October 31, 1945. Wholesale butter prices 

 immediately jumped 5 cents per pound. The direct payments to producers on 

 butterfat and milk were discontinued June 30, 1946. The price of butterfat 

 immediately increased 18.4 cents per pound, and the wholesale price of 92-score 

 butter at Chicago 18.2 cents per pound. Farm prices of milk sold wholesale 

 jumped 66 cents per hundredweight. Consumers were very disturbed. They 

 did not realize that the low prices they had enjoyed during the war were due to 

 subsidies which they would in time have to pay for in any case by higher taxes. 

 When they had to pay what the commodities were worth on the market without 

 subsidies, they thought the farmers were gouging them. It is my judgment that 

 the subsidy program and its aftermath did the dairy farmer permanent harm by 

 alienating his customers. We do not want that experience again. 



