Mr. CARLSON. S. 2626?

Senator DOLE. S. 2626.

I think it was introduced last week sometime. I do not find the cattle section, but as I read your statement, you are not suggesting that the Government get into your business anymore, are you! Mr. MCMILLAN. Right.

Mr. CARLSON. Right.

Senator DOLE. I am familiar with the so-called principle of fives and your position on imports.

As you know, we had hearings just last week in the Finance Committee and I guess there are more hearings scheduled. Hopefully, we can work out some measure that will be carried out as Congress intends it to be carried out.

Thank you very much.

Senator MELCHER. Thank you both very much.

Our next witnesses, if I can read this list properly, are Vernon Rausch, Chuck Bellman, Mike Fabrizi, concerned cattlemen of the Dakotas, Pierre, S. Dak.

[No response.]

Senator MELCHER. Are Messrs. Rausch, Bellman, and Fabrizi here? [No response.]

Senator MELCHER. George Levin, Western South Dakota American Agriculture Movement, Hereford, S. Dak.

Welcome to the committee.

Please proceed.

STATEMENT OF GEORGE LEVIN, WESTERN SOUTH DAKOTA AMERICAN AGRICULTURE MOVEMENT, HEREFORD, S. DAK.

Mr. LEVIN. First, I would like to make a change. There is a misspelling in the agenda. It is "Western" and not "Wesler."

I would like the testimony of a friend of mine submitted for the record. He has spent a lifetime studying this problem. He could not be here, so he asked that his testimony be supplied for the record. His name is Homer Ayres from Sturgis, S. Dak.

Senator MELCHER. Homer Ayres from Sturgis, S. Dak.

Mr. LEVIN. Yes, sir.

Senator MELCHER. His testimony will be made a part of the record immediately following yours.*

Please proceed.

Mr. LEVIN. Mr. Chairman, my name is George Levin. My wife and I, along with our two sons and their families, operate a ranching and farming operation near the foothills of the Black Hills in western South Dakota. We raise cattle and wheat. Cattle is our main industry. My folks homesteaded in the Hereford community in the early days and we have carried on after them in this business.

As I say, I represent the Western South Dakota American Agriculture Movement. That is a group of ranchers in my area. I am chairman of the board of directors of the Independent Stockgrowers that

*See p. 227 for the prepared statement of Mr. Levin, and p. 236 for the statement of Mr. Ayres.

prosecuted the antitrust case in California where we proved price fixing on the part of the retail chains in this country.

A Federal law guaranteeing 100 percent of parity for all farm products would go a long way toward solving low-price problems for American agriculture and make it possible for this Nation's independent food producers to continue to produce and thus guarantee the food supply for all of us. It is only by keeping food production in the hands of many that we can be assured of food abundance.

Every citizen whether he is aware of it or not, has a profound interest in how we treat food production in this country. It is important to all of us, we believe, to arrest the trend toward concentration of our food-producing resources into fewer and fewer hands. If we do not, ultimately the food will be produced by a few giant corporate entities, as is now the case with oil and coffee. They will have the power to lift prices so that the stockholders can secure as large a dividend and officers can be paid as large a salary as any other big corporation or conglomerate, either with price fixing or huge Federal grants, or both. When we reach that point, gentlemen, not only will our food supply be in jeopardy but the very foundations of our democratic institutions will have been seriously eroded.

We think that livestock must be included in any plan of 100 percent of parity for agriculture products. We reject the notion that limiting imports of red meat into this country will automatically lead to prosperity for cattle producers. In our view, it is unrealistic to expect the Congress to act in any meaningful way to restrict imports. To do so, would not only feed the flames of protectionism that are threatening world trade, but also seriously aggravate the balance-of-payments problem.

Secretary Bergland told a meeting of farmers in Omaha, Nebr.. January 6, 1978, that there are two ways to achieve the objectives of 100 percent of parity by Federal law. He said it could be done by either forcing market prices up to parity levels, with resulting strict production controls or we can allow commodity prices to seek their own price levels in the marketplace and make payments to the producers that make up the difference between average market prices and the parity levels.

We think that the latter is a better alternative.

By allowing commodities to seek their own level in the marketplace. we do not run the risk of interfering with the flow of goods in world trade. If, on the other hand, we raise commodity prices in the marketplace to parity levels, in the absence of multilateral agreements with other countries, we become noncompetitive in world markets and threaten our agricultural trade position.

Another disadvantage of raising market prices to parity levels is the likelihood of consumer resistance to higher food prices. That rise could be substantial if processors and handlers follow their normal pattern and increase their margins dramatically with each small rise in farm raw material prices.

Raising commodity prices in the marketplace to parity, in the view of many, would cause inflationary pressures to increase. That's something that many feel we cannot tolerate at this time. By using the incentive plan approach we substantially avoid this problem.

Probably the most important reason of all for adopting the incentive plan approach is the flexibility with which it can be applied to achieve specific goals. We can more accurately target those whom we want the incentives to go to. We think, for example, that the large corporations who are in the farming business do not need further incentive to farm. Likewise, we should find ways to limit incentive payments to agribusiness interests and professional people who are directly involved in farming. People living on and operating small farms of insufficient size who have off-farm jobs will need special consideration. The incentive plan approach gives us the flexibility to deal quite effectively with

each of these situations.

With this concept of incentive payments it is unlikely that there would be a need for production control at all. If supplies of a certain commodity increased beyond the immediate need, prices would fall in the marketplace until the surplus was eliminated. The resulting lower cost to consumers would help to lower the inflation rate and that would tend to offset the increased cost to the program.

Even though it is highly unlikely, a situation could arise where changing the production pattern may be necessary. If it does, we think that it can be better dealt with by providing greater incentive in areas where more production is needed or by some type of land conservation program to take land out of production.

It has been stated by Secretary Bergland and others that the incentive payment approach was, maybe, a good idea, but the cost would be too great a burden for society to bear. The cost referred to is what is needed to produce the food that all of us need. If that is too much for all of us to bear, how can anyone who is the least bit fairminded expect 4 percent of the population to continue to carry the load.

However, if the costs of this program reach a level that seems to be excessive, there is much that this Government can do to reduce those costs. Stricter enforcement of the antitrust laws is one example. It has been demonstrated in Federal district court in California that price fixing by a certain retail food chain cost cattle producers 20 cents a pound on all cattle sold in the period that the antitrust suit covered. Today, assuming that the same relationships exist, 20 cents a pound added to the price that cattle sell for would bring all classes of cattle above the parity price. In that case, the incentive plan costs for cattle would be zero. Enforcement of the antitrust laws would, in our view, benefit all livestock producers and substantially reduce the cost of the program for all livestock.

Another example where potential program costs could possibly be reduced is in the major export items such as wheat and feed grains. Our Government should be able to play a leading role in orchestrating grain agreements that would have as an objective substantially higher world grain prices. If grains sold at higher prices in the world market, it would mean that incentive payments to grain producers would be reduced.

The remaining cost, which should not be burdensome, could be financed by a steeply progressive income tax weighted toward upperincome taxpayers. This would be more equitable and less inflationary than paying the cost increases with higher food prices. In any case, we believe that the cost to the taxpayers would be more than offset by positive gains for the economy.

The fact should not be lost on anyone either that if farmers have increased income they will become substantial taxpayers and will, at that point, be carrying their share of the load.

Up to this point, farmers stand virtually alone in this society without at least some insulation from the ravages of inflation even though that inflation is largely due to Government spending for war preparedness, national defense, foreign aid, et cetera. Wage laborers, salaried people, and social security recipients get cost of living increases that go a long way toward compensating for the inflation rate. As a result, cost of living increases set the wages and salaries for some. 50 million Americans. Farmers will, under this proposal, merely be joining the other segments of our society who have, for a long time, been shielded from inflationary pressures.

It has been stated by some that payments made to producers, under such a plan as we have suggested here, would be a subsidy.

Senator MELCHER. I am sorry to interrupt, but I need to find out how long this hearing can go on.

Mr. LEVIN. I do not have a lot left here.

Senator MELCHER. All right, we will let you finish.
Can you finish in a minute or two?

Mr. LEVIN. Possibly.

There are cases where payments out of tax funds going to some industry can be considered a subsidy. We don't believe that farmers fall into that classification. The evidence we have seems to suggest that farmers are in a class by themselves when it comes to being subjected to market manipulation by their Government and by corporations with whom they must deal in the buying and selling of their goods. It would take too much time here to recount all the examples of Government interference in the markets for farm commodities. Most of this activity has had the effect of depressing prices and robbing farmers of income that an unencumbered market would have given them. It is only fair to state this kind of activity transcends both Democratic and Republican administrations.

We also have cited how certain food chainstores were convicted of price fixing that cost farmers 20 cents a pound on all cattle sold in the 4-year period that the antitrust suit covered. It is the Federal Government's responsibility to enforce the antitrust laws. This Government has chosen to ignore that court decision. The Justice Department has refused to act, so livestock producers continue to be robbed in the marketplace.

If farmers are reimbursed with incentive payments for what they were robbed of as a result of market manipulation, it should not be considered a subsidy any more than if one was robbed on the street and had his losses returned by the police department, and then is said to have been subsidized by the police department.

Mr. Chairman, I have in this statement what the program is that we are suggesting, if you want to give me more time.

I have submitted an index of the different documentation, some prices of the cost to produce feeder calves, first of all, and then showing you the middleman's price spread and instances of Government. interferences and evidence of import and export and also the parity levels on the different livestock items.

I hope this committee does not buy the argument that the cattle cycle is going to solve our problem because over the 25 years of computation that I did on livestock prices, there is only once that we reached parity. I show here in my document our cost for producing a feeder calf. Just to get the cost of production, we have to get 70 cents per pound which is above parity price and we would have to get $1.35 a pound to get anything at all for capital investment and if we want to get something for management, we have got to get $1.60 per pound and that is figuring 100-percent calf crop.

At 90-percent calf crop, you have to receive more a pound to be on an equitable basis with other people who get cost of production plus management costs plus profit, so I hope that you don't get the idea that the cattle cycle will solve the problem.

Senator MELCHER. Where is Hereford, S. Dak.?

Mr. LEVIN. In Meade County, near the Black Hills.

Senator MELCHER. I used to live in Fall River County and I went to Oelrichs High School. I don't remember being in Hereford.

Mr. LEVIN. It is one of the little post offices they haven't taken away from us, Senator Melcher.

Senator MELCHER. I assume you are in favor of restricting imports?

Mr. LEVIN. To answer, I would like to refer you to pages 1 and 2 of my documentation.

On page 1, I show the packer price spread, gross figures and dollars per carcass. It shows what they got for beef in 1949 up to the present time. Starting in 1949, it was $35 a carcass coming across in 1974, they are up to $10 a carcass. They stayed pretty constant.

Page 2 is the retail price spread that we are looking at. You can see, and I want to apologize for the rest of the people who have my statement who do not have these charts, but I did not have documentation for all the things that I published. I did not have time to get it done. The retail price spread has gone from $55 for a beef carcass in 1949 to over $260 a beef carcass in October of 1977. My point is this is where the problem is.

In our antitrust case in California, we brought those people into court. They awarded six ranchers $212 million in damages. I was a witness. I helped provide the documentation that brought about that conviction. The jury said the price fixing on the part of the retailers cost the ranchers 20 cents a pound on all they sold over this 4-year period that the antitrust case covered.

What I am also saying is that I think imports are small, very menial compared to the problem in the retailing market.

A point of interest is that the Great Atlantic & Pacific Tea Co. which paid out $9 million to us in attorney's fee and damages, did not once raise the issue of imports in their defense. It seemed like their attorneys are not that naive if there was really the big thing about imports.

I asked our attorneys why they didn't raise that point. I was told they investigated that and when you put this in its true context, imports are such a small factor compared to price fixing that they did. not think it was worthwhile. The big part is the retail ripoff to both the producer and consumer.

Also as to world trade, you are aware of the protectionism that is pressuring this country. It is unrealistic that you will get a city Con