EXECUTIVE OFFICES, INTERNATIONAL ASSOCIATION OF ICE CREAM MFRS., Hon. HERMAN E. TALMADGE, U.S. Senate, DEAR SENATOR TALMADGE: During my testimony last month, in response to a question from you about increasing usage of CCC held stocks of dairy products, I indicated that USDA had a relatively unused program that permitted the donation of CCC stocks for use as ingredients in other manufactured and processed foods. The program involves the use of so called "processing contracts". It is designed to make available surplus commodities, i.e., nonfat dry milk powder, butter, cheese, and other non dairy products from CCC storage, which are then used as ingredients for various foods offered to participants in the several USDA feeding programs. Unfortunately, the program has not been used extensively. We believe its lack of acceptance is largely attributable to the fact that many community and county officials are not adequately familiar with it. Large quantities of milk are served through various USDA's Food Service Feeding Programs. However, these are appropriately contracted at the local level. It is our experience that local school authorities are frequently not familiar with the possibility of using surplus nonfat dry milk or milkfat to manufacture other products under the provision of "processing contracts". Because the surplus commodities are donated from the CCC, the cost of purchasing food for the individual feeding service activities can be reduced substantially. We have enclosed a notification recently mailed to our members informing them of this program. A previous communication distributed a year or so ago brought responses from our members to the effect that the contracting authorities at the local level were not familiar with the administration of such contracts. We believe the use of surplus nonfat dry milk in USDA feeding programs could be increased substantially if local purchasing authorities were more familiar with this program. If we can answer any other questions on the subject, please do not hesitate to contact us. Sincerely, Enclosure. E. LINWOOD TIPTON, Economist and Executive Assistant. PROCESSING CONTRACTS CAN LOWER COSTS CCC Surplus Nonfat Dry Milk Is Available for School Contracts at No Cost to Schools or Contractor As Commodity Credit Corporation held stocks of dairy products mount, donations to government feeding programs are increasing. A little-known program, "Contracts for Processing Donated Foods," has been slowly growing in importance. The availability of such contracts was first reported to IAICM members in "Summary for Ice Cream Executives" No. 197 dated Oct. 22, 1975. Basically the program provides that a contractor supplying USDA foodservice projects may receive CCC donated products, i.e., nonfat dry milk, butter, cheese, and other non dairy products directly for processing into other foods to be served under the various feeding services. Currently, according to a recent list supplied by the USDA, there are about 20 such contracts utilizing donated ingredients for manufacturing ice cream and ice cream novelties, twofor milkshakes, and two for reconstituted milk (these are limited to the territories outside the U.S. as nonfat powder is not available for reconstituting milk in the U.S.). USDA officials have informed us that nonfat dry milk powder is available for fortifying fluid milk or fluid milk products, cottage cheese, yogurt or virtually any other food supplied under one of the many feeding programs now in existence. Cheese and butter are also available for use as an ingredient in other foods supplied under foodservice contracts. Under the program there is no cost for the donated commodity, either to the processor or the school. The procedures provide that upon instructions from the appropriate state officials the donated food may be shipped directly to the processor's plant with the government absorbing all costs, including transportation. The manufacturer is required to account for the donated ingredient, and demonstrate that he either used the commodity which was supplied by the CCC or an equivalent quantity of comparable grade in the product delivered under the contract. Presently, this does not require excessive paperwork according to some companies which are using the program. Arrangements to participate under such a program should be made through your local purchasing authority as well as the appropriate state officials. We have reproduced a list of the state school lunch directors along with their telephone numbers, for your convenience. Contracts with provisions somewhat different than the regular contracts are required. USDA has prepared a sample contract, which is available from IAICM/ MIF offices upon request. The CHAIRMAN. Senator Hodges, any questions? Mr. TIPTON. May I offer for the record a document prepared by an ad hoc group entitled "Rescue Marketing Research-USDA," which is a history of the program, plus some suggestions? The CHAIRMAN. Without objection, it will be inserted in the record.* The next witnesses are Mr. George Watts, director of Government relations, National Broiler Council; Mr. Homer Simpson, chairman of Government relations committee, United Egg Producers and president of the Northeast Egg Marketing Association; and Mr. Lew Walts, executive vice president, National Turkey Federation. George, welcome. It is a pleasure to see you back before the committee as a friend of mine, an old friend. We are delighted to have you. You and your associates can divide 10 minutes any way you see fit. STATEMENT OF GEORGE B. WATTS, PRESIDENT, NATIONAL BROILER COUNCIL Mr. WATTS. Thank you, Mr. Chairman. Mr. Chairman, I have a very brief statement which I would like inserted in the record and I will attempt to make that even briefer. The CHAIRMAN. Without objection, it will be inserted in full in the record.** Mr. WATTS. I am president of the National Broiler Council which is a nonprofit trade association representing producer/processors of approximately 75 percent of broiler/fryer chickens produced in the United States. We are very pleased to have this opportunity to come before you and participate in these hearings this morning. The National Broiler Council is concerned over the current economic crisis faced by many sectors of American agriculture. We feel that the problems are much too complicated and severe, however, to be solved with quick and easy answers. We feel that we must be careful not to destroy those factors that have made America the world's most productive nation. We must not jeopardize the free enterprise system in seeking these solutions. We do not believe excessive Government controls are in the best interest of the producer, the consumer or the economy in general. We do believe that the farmer deserves to make a reasonable return on his investment, a profit in the marketplace. The uncertain nature of the business of farming and its vital role in the overall economy demands from Government adequate loan rates and target prices which will encourage sufficient production to feed the American people and contribute to our balance of payments through exports. This, we believe, can be accomplished through setting loan rates at levels which will assure the American grain farmer a stable farm income and at the same time allow the livestock and poultry industries feed grains at prices they can convert to products the American consumer can afford. Mr. Chairman, as you have pointed out on numerous occasions, the Food and Agriculture Act of 1977 gives both the President and the Secretary of Agriculture broad and flexible authority to increase loan rates for corn, wheat, and soybeans, and this is the approach we are suggesting. However, we would like to make it very clear that we are suggesting reasonable loan increases which will serve to encourage sufficient production. We do not feel that it is the responsibility of the Government to guarantee anyone 100 percent of parity. Achieving parity in the marketplace is one thing, and a Government guarantee of 100 percent parity is another matter entirely. In view of the fact that the poultry industry converts grain into meat at a very low conversion ratio, we have always favored reasonably high-grain markets. Speaking strictly for the National Broiler Council, we prefer to handle our problems in the marketplace, and what we want from Government is less interference, fewer burdensome regulations, and more access to world markets. Thank you. STATEMENT OF HOMER SIMPSON, JR., PRESIDENT, NORTHEAST EGG MARKETING ASSOCIATION* Mr. SIMPSON. Mr. Chairman, my name is Homer Simpson. In the interest of being brief, Mr. Chairman, last year a spokesman from our organization appeared before this committee in support of the 1977 farm bill. At that time he stated that if the Government is to guarantee one segment of agriculture that it cannot go broke in its business, why not extend the concept to all segments? We definitely do not want this to happen. Therefore, we support legislation which will cushion the farmer against those perils over which he has no control, but we do not think Government should rob him of his pride in doing a good job and his incentive to do an even better job than his neighbor. I think you, Mr. Chairman, recommended that it should be at about 80 percent of the average cost of production. We recognized this figure would not guarantee grain farmers a break-even price should supplies be grossly in excess of demand, but neither would it encourage producers to grossly overproduce since they would know that the Government would not bail them out. I think I am accurate in saying that egg producers are not opposed to grain producers being guaranteed 100 percent of parity by the Federal Government. However, grain users, such as egg producers, must be given adequate advance warning so that certain adjustments can be made within our industry. It must be recognized that the target prices for feed grains will be reflected in the ultimate price that consumers pay for eggs at the retail store. If this was passed on to the consumer at regular market margins, consumers would have paid 94 cents a dozen for large eggs, instead of 81 cents a dozen, an increase of 16 cents. We have this all in our testimony. See p. 290 for the prepared statement of Mr. Simpson. 29-974-78- -5 In conclusion, Mr. Chairman, I would like to say that America's shell egg industry is totally dependent upon a healthy feed grain industry in the United States. We do not believe that the Government should guarantee producers a profit. We believe that there are sufficient economic incentives in the marketplace to guarantee a profit to efficient producers. We believe and we continue to support the formula suggested by the Committee on Agriculture, Nutrition, and Forestry to be used in computing the average cost of production. We believe that the figures based on a 35-year average of land acquisition costs is a more realistic method of determining land values. Thank you, Mr. Chairman. STATEMENT OF G. L. WALTS, EXECUTIVE VICE PRESIDENT, NATIONAL TURKEY FEDERATION* Mr. WALTS. Mr. Chairman, my name is Lew Walts and at this point I want to compliment the committee for scheduling these hearings on the current cost/price squeeze now being experienced by grain producers. There is no question that members of the National Turkey Federation are vitally interested in appropriate programs which could bring reasonable price stability to the grain-producing segments of agriculture. Such programs, hopefully, would assure the necessary and continuing production of feed grains to supply the demand from poultry and livestock producers, as well as other users. According to the report published earlier this year by the USDA, the producers of meat, poultry, milk, and eggs in the United States are the largest consumers of domestically grown feed grains. The USDA reported that 62 percent of the feed grains produced were used in livestock feeding during the 1976-77 period. Breaking this down still further, the producers of animal protein foods utilized 62 percent of the corn crop, 76 percent of all soybean meal produced and 6 percent of the wheat crop. Based on these figures, it is obvious poultry and livestock feeders have a vested interest in the economy of those involved in the production of feed grains. We are aware, of course, of the various bills which have been introduced in an effort to bring some measure of financial relief to grain producers. A tremendous amount of publicity has focused attention on the demand of some farmers for 100 percent of parity. It is our position a move to the 100 percent of parity concept for feed grains would be a very serious mistake. Such action would trigger widespread reverberations throughout the domestic economy and have a shattering impact on the ability of the United States to maintain a strong and viable export market for grains. For example, based upon farm prices February 15 of this year, corn at that time was $2 a bushel and you move it right into the parity price and you are at $3.54. Soybeans were $5.42 a bushel and moving it into the parity range and you are up to $8.38 a bushel and when you translate the cost of soybeans in relation to the price of oil, then 49 percent of soybean meal at Decatur, based on these actual farm *See p. 292 for the prepared statement of Mr. Walts. |