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as a minimum, it was necessary to set up a gigantic arm of the Food Administration in the United States Grain Corporation, and practically to take over the control of distribution. Following the armistice, in addition to the maintaining of that machinery, it was also necessary for the Congress to make available a billion dollars to sustain the price of grain.
Further, Mr. Chairman, if under this law the moral obligation would be upon the Secretary to name a lower price if a price was found to be unduly enhanced, it seems to me that the same obligation would rest upon the Secretary to name a higher price if its investigations found that the price which was complained of was really too low. So we would have perhaps an endless series of complications.
Farmers are only asking for permissive legislation to enable them to help themselves. They are asking this in a spirit that they wish to do exactly what the law requires.
I believe that the passage of this bill in the same text as it passed the House would do as much as any other thing to stay the unrest in rural communities; not because of its psychological effect upon the farmer, but because this is the most important bill before the Congress from our viewpoint. It is permission to help ourselves. We are not asking the Government to sell our crops for us, nor to make a price. All we are asking is to permit us to have equal opportunities such as are now enjoyed by great aggregations of capital like the Chicago packers. If you will give us that we will go ahead and try, so far as the distribution of farm products is concerned, to help ourselves develop the right kind of machinery
to do it.
Thank you very much, Mr. Chairman.
Senator WALSH of Montana. I want to ask you a few questions. You are secretary of the National Association of Milk Producers? Mr. HOLMAN. The National Milk Producers' Federation.
Senator WALSH of Montana. And that is a federation of local milk producers' associations?
Mr. HOLMAN. That is a federation of district and regional milk producers' associations.
Senator WALSH of Montana. Tell us about that organization.
Mr. HOLMAN. The unit of organization of our member associations is around the large markets. For example, take New York: There is a large area from which milk goes into New York normally. That is known as the New York milk shed. In explaining this, we sometimes try to show that just as these are divides where the water runs down hill, or down a mountain, so the location of cities around this country produces a natural milk shed.
Senator WALSH of Montana. You might speak of it as a drainage basin.
Mr. HOLMAN. It is a drainage basin. Now, within the New York territory, milk comes from a part of Connecticut, all of New York State except the Adirondack region-where no milk is produced for market purposes-a tier of counties along the northern part of Pennsylvania, and the northern part of New Jersey, and a few counties in Vermont and Massachussetts. The Philadelphia association has a similar drainage area; the Pittsburgh association, the Chicago association, the Twin Cities association likewise. In nearly every case where these large cities have these associations formed around them, more than one State participates in the organization.
Of course within the area there are other types of dairy industries than the production of whole milk for city consumption; but our associations were founded primarily upon reaching the fluid milk market. We also sell and have to sell the entire product of our farmers. If there is more milk than will go into New York City, we have to sell it for ice cream or for condensing purposes or for butter or cheese; and there are varying prices for the milk, depending upon the purposes for which it is used.
Senator WALSH of Montana. You are going more into detail than I wanted. I simply wanted the character of the organization.
Mr. HOLMAN. There are a score of member associations of this kind that are organized to sell their milk.
In addition to acting as collective bargaining agencies, most of our organizations are now taking on the erection of plants in order to care for the surplus. For instance, in the New York area they are now operating possibly 80 manufacturing plants, ranging all the way from the primitive cheesery or creamery to the most highly equipped milk factory. We have found that this departure is necessary because there are in this country two or three great milk products combinations, like one British concern I could name, which operates in every milk region of this country. These huge combines are in a position to bear the price down in order to get a very low-priced product for canned-milk purposes. Oftentimes the price offered is so far below the cost of production that the farmers of the country would suffer very materially if they did not have their agencies to act for them.
Senator WALSH of Montana. About these various cities the producers of milk organize themselves into local associations, and then these local associations are federated in your organization? Is that the idea?
Mr. HOLMAN. Yes, sir. Our organization, with headquarters here, itself does no marketing nor any business of any kind. It is simply an information agency, and it acts as a common voice for these organizations on matters such as the legislation which is now under consideration.
Senator WALSH of Montana. Now let us take the city of New York. How many of these associations supply milk to the city of New York, or is it all supplied by one?
Mr. HOLMAN. It is practically all supplied by one so far as organized milk is concerned. I believe Mr. Miller stated that about 60 per cent of the total milk of that area is bargained for through the Dairymen's League.
Senator WALSH of Montana. I have forgotten now just exactly what he said about the rest of them, about the other 40 per cent. How do they market their product?
Mr. HOLMAN. The price of milk throughout the country since the war is made from month to month, made by a conference, as a rule, between the dealers and committees of the producers' associations. Mind you, in this discussion, Senator Walsh, keep in mind the fact that here is the consumer over here, and between the consumer and the producer is a very tightly, efficiently organized body of men known as distributors."
Senator WALSH of Montana. Yes.
Mr. HOLMAN. Now, the dealings of the farmer are with the distributor, and not with the consumer.
Senator WALSH of Montana. Exactly; we have the same thing in the city of Washington.
Mr. HOLMAN. In New York, for example, they have what they call the Milk Conference Board, an organization of dealers which meets once a month, usually about the 20th to the 25th of the month, with the executive committee of the Dairymen's League.
Senator DILLINGHAM. The first board representing the distributors? Mr. HOLMAN. The first board representing the distributors. That board was created during the war.
The question of the price of milk comes up. The Dairymen's League have been in the meantime studying the market, and particularly the cost of production, and they have a well-recognized formula developed by Dr. George F. Warren, of Cornell, which is used generally as the basis of ascertaining what the cost of milk production has been during the past month. They make an offer, and after this it is the usual question of bargaining until they reach a price. Senator WALSH of Montana. But what I wanted to know was how the producers of this other 40 per cent, not controlled by the Dairymen's League, market their product-what kind of a system they have for marketing it. How do they bring their product to the distributors in New York City?
Mr. HOLMAN. I get your point there. That is purely a question of whatever the dealers or the distributors wish to pay for it.
Senator WALSH of Montana. No; I am not speaking about the price at all. What I want to know is whether the individual farmer drives into New York with his milk, or puts his can on the car, or how it is done.
Mr. HOLMAN. A concern like Borden, for example, has country plants out as far as 400 miles from New York. At each of these plants is a manager, and to these plants the milk is brought from once to twice a day by the farmers along the roads. The milk is then assembled into cars. Special milk trains pick this milk up at each point.
Senator WALSH of Montana. That is to say, there are private corporations that go out in the country and buy milk, which they bring in and sell to the distributors in competition with you?
Mr. HOLMAN. Let us take a country point for example. Some of the shippers of milk at that point will be members of the Dairymen's League. Perhaps 40 per cent of them will be farmers who do not belong to the league at all. These farmers, however, bring their milk in to the same man, the only difference being that the farmer who is unorganized benefits by the price of milk which the organization has been able to make for him, although not paying dues.
Senator WALSH of Montana. Then really the Dairymen's Association handle not only their own products but the products of some or a greater portion of this 40 per cent that do not belong to the Dairymen's Association?
Mr. HOLMAN. No, sir. The Dairymen's Association only bargain for the sale of the milk of their own members. It is optional with Borden or with the other organizations as to whether they will pay the same price; but you know they would get into trouble if they did not pay as high a price.
Senator WALSH of Montana. But you are directing your attention to price. That is not what I want to know. I want to know how these other farmers get their milk into the market.
Mr. HOLMAN. They move it to the same receiving station as the organized farmers.
Senator WALSH of Montana. But to whom do they deliver it? Mr. HOLMAN. They deliver it to Borden or some other distributor who may operate a country receiving station.
Senator WALSH of Montana. That is, to other private corporations engaged in the purchase of milk which they then sell to the distributors?
Mr. HOLMAN. Or the consumers.
Senator WALSH of Montana. Now, let us take the city of Philadelphia. Do you have your organizations about there?
Mr. HOLMAN. Yes, sir.
Senator WALSH of Montana. About what percentage of the milk furnished the city of Philadelphia do you handle ?
Mr. HOLMAN. I could not answer that categorically, but it is a very much smaller percentage than is handled by the Dairymen's League. The association is very much smaller.
Senator WALSH of Montana. That is, the Dairymen's League is smaller there?
Mr. HOLMAN. No; the Interstate Milk Producers' Association is much smaller than the Dairymen's League.
Senator WALSH of Montana. That is to say, the Dairymen's League handles a higher percentage than 60 per cent of the milk furnished the city of Philadelphia?
Mr. HOLMAN. The Dairymen's League handles probably a higher percentage for New York than the Interstate does for Philadelphia. Senator WALSH of Montana. Oh! The Interstate is the cooperative organization in Philadelphia?
Mr. HOLMAN. Yes, sir.
Senator WALSH of Montana. You do not know just what percentage they do handle, though?
Mr. HOLMAN. I could not answer that. Do you know, Mr. Campbell?
Mr. CAMPBELL. I do not.
Mr. HOLMAN. But it is smaller?
Mr. CAMPBELL. Yes; much smaller.
Senator WALSH of Montana. And is the remainder of the milk furnished to Philadelphia handled in much the same way, by being sold by the producers to private persons who thus gather it up and sell it to the dealers?
Mr. HOLMAN. I think I may have misstated the answer to one of your questions. The men who do the gathering-up of the milk are the dealers, and not middlemen between the farmer and the dealer. The dealers have their country receiving stations, and the farmer deals directly with the dealer, whether the farmer is organized or unorganized.
Senator. WALSH of Montana. I understand; that is, with the distributors?
Mr. HOLMAN. Yes, sir..
Senator WALSH of Montana. The distributors have country stations, and thus the farmer delivers his milk directly there without the intervention of the association?
Mr. HOLMAN. Yes, sir; and without paying the costs of
Senator WALSH of Montana. But in most of these cases the negotiations which result in the fixing of a price are carried on by your association with dealers?
Mr. HOLMAN. Yes, sir.
Senator WALSH of Montana. The fellows on the outside benefiting, just the same as the man who does not belong to a labor union benefits by the agreement made between the employer and the labor union concerning wages?
Mr. HOLMAN. Exactly; that is the idea. In cities where milk is not organized, the dealer is the man who makes the price, and the farmer takes whatever the dealer offers from time to time.
Senator WALSH of Montana. Now, Mr. Holman, I am interested in this Wisconsin cooperative law. That permits nonmembers to sell their products through the cooperative associations?
Mr. HOLMAN. By inference; yes, sir.
Senator WALSH of Montana. And, as I understand, really requires the cooperative association to take their products?
Mr. HOLMAN. By inference only.
Senator WALSH of Montana. Whether it is expressed or implied? Mr. HOLMAN. Personally, I stand for that principle.
Senator WALSH of Montana. What advantage, then, has the member of the association over the man who stays out of it?
Mr. HOLMAN. The rate of dividends on patronage. The Wisconsin law provides that the nonmember shall receive a dividend on patronage at the rate of 50 per cent of what the member would have; and that law, by the way, is being amended at the present time, Senator Walsh. I have here a copy of the proposed amendments-I am not sure but that they have passed at this time-in which they go in great detail into this whole question of how dividends shall be made; and one amendment to the law reads as follows:
After listing the various ways that dividends shall or may be allotted, the distributors shall distribute all remaining net profits by uniform dividend to patrons of the association, including stockholders and nonstockholders alike, based in amount upon the volume of business conducted by such patron with the association: Provided, That the rate of such dividend to stockholders shall be double the rate of such dividend to nonstockholders.
But under this new law it even requires that the association shall set aside a surplus before it can make a dividend on share capital. It is a very complete law.
Senator WALSH of Montana. Is there a similar cooperative law in the State of Illinois ?
Mr. HOLMAN. No, sir. I am glad you mentioned that. The constitution of the State of Illinois is of such a character that cooperatives are not able to form on the one-man one-vote basis. They may do that in a modified way-five shares.
Senator WALSH of Montana. The bill which is before us, I take it, does not itself authorize the creation of corporations. It contemplates that these corporations, or cooperative associations, shall be organized under State laws.
Mr. HOLMAN. Yes, sir.
Senator Walsh of Montana. Did you say that you approved the change in section 1 there which authorized the associations contemplated by the bill to deal with anybody engaged in producing the articles referred to?