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that speculation, shown by all regular reports and full market surveys to have been predominantly long in futures, is price-depressing. In each of these three common themes, the proponents simply contradict themselves.

Nor do the proponents alter the facts by reiterating assertions which are contrary to fact and have been rebutted before. In the 1963 hearings we heard both the perishability argument and the contention that futures caused the Maine grower to hold his crop in storage and suffer late season losses. Both arguments were refuted in my 1963 testimony, both have been refuted in Mr. Watts' testimony which you will be hearing soon and both are refuted in the study which I have submitted and commend again to your perusal. A futures market is more important, especially to the producer, for a crop without a carryover than a crop with a carryover. Growers who have stored their crop have done better, on average, than those who sold early-and growers who have hedged their stored potatoes in futures have done better than those who stored unhedged potatoes.

Finally, you were also during the course of the January hearings, exposed to some folklore which tells you that all wisdom and common sense reside in our yeomanry, and that professors and bureaucrats may be clever people, but they are not to be trusted because they lack wisdom and common sense.

As one born and raised on a farm I sometimes am tempted to accept the first piece of folklore. As one who has spent his adult life hobnobbing with professors and bureaucrats, I am sometimes tempted to accept their second bit of folklore. But if I have acquired any common sense in my double-exposure of more than half a century, it tells me that there is no wisdom and no sense in attacking scapegoats. Yet this is what the proponents of H.R. 7287 are doing.

I thank you kindly for giving me this opportunity to be heard in this matter.

Mr. FOLEY. Thank you very much, Dr. Gray. I appreciate your testimony.

We shall ask you also to remain, if you can, and, following the testimony of Mr. Watts, we shall question you altogether.

We do have a rollcall vote in progress in the House at this time. The subcommittee has just had a little consultation here and we would not, Mr. Watts, want to have your testimony interrupted with members coming and going. I think what we will do at this juncture is to recess until 1 o'clock this afternoon. At that time, we can take up Mr. Watts' testimony. Normally the subcommittee would recess until 2 o'clock, so this way, we shall actually pick up about a half hour of additional time.

Will any of the witnesses who are to testify find it difficult to return at one?

[No response.]

Mr. FOLEY. Mr. Watts, will you be able to return?

Mr. WATTS. I shall be here.

Mr. FOLEY. Then we are recessed until 1 p.m.

(Whereupon at 11:35 a.m., the hearing recessed until 1 p.m. on the same day.)


Mr. FOLEY. The subcommittee will come to order.

At this time, we will be happy to hear from Mr. Llewellyn Watts, Jr., chairman of the board of the New York Mercantile Exchange.

Mr. WATTS. Thank you, Mr. Chairman, members of the committee. I beg your indulgence to read a short statement from Mr. Frederick H. Vahlsing, Jr., who is in Central America and could not appear. May I read it?

Mr. FOLEY. Yes, proceed.


Mr. WATTS (reading)

Mr. Chairman, honorable members of the House Subcommittee on Domestic Marketing, I am here to speak against H.R. 7287. I am Chairman of F. H. Vahlsing, Inc. and Vahlsing Christina Corporation. In Maine, we are major processors responsible for the processing of marketing of 8,000 to 10,000 acres of potatoes per annum.

I am against H.R. 7287 because it restricts free trade. I am in favor of futures trading in potatoes, which the bill would ban, because potato futures trading is the right of a farmer who wishes to buy or sell ahead. My firm made the very first trade in Maine potato futures back in 1947, 17 cars. We were incorporators of the contract.

Since potato futures trading began, just over 30 years ago, more than 5 million contracts have been traded to a very good purpose in helping farmers finance their crops by virtue of having a place to sell. The futures market gives the farmer a firm sale for his production, which he can then bank and use for financing. A farmer could be able to sell or buy ahead, as the potato futures contracts of the New York Mercantile Exchange allow him to do. It is a good, fair contract for both buyer and seller.

Futures trading helps farmers in grain, wheat, oil, cotton, orange juice, sugar, and a variety of other commodities, as well as potatoes. Futures trading is a financial instrument that is a natural ingredient of their businesses and which does no harm to anyone. When investors buy or sell futures for speculation, this too, is their right, and it only helps the farmer to do a better job of helping himself.

I respectfully and vehemently urge that H.R. 7287 not be acted upon favorably by this committee.

In the interest of saving time, Mr. Reardon is here and he has a little throat trouble. I shall read his statement and he will be available later for questions if anybody wants to ask him.


Mr. WATTS (reading).

Chairman Foley, honored members of the House Subcommittee on Domestic Marketing, my name is Robert Reardon. I am president of

F. J. Reardon, Inc., Cambridge, Mass. We are major factors in the Maine potato business in three different ways: as potato shippers, as suppliers of fertilizer, and as suppliers of lime. The fertilizer business is called Lionel Therriault Fertilizer. The lime business is called Les Amendments Calcaires. I wish to testify against H.R. 7287.

We sell fertilizer and lime to Maine farmers and in return they agree to give us a certain amount of potatoes. We immediately hedge these potatoes on the New York Mercantile Exchange and protect ourselves, and this is the only way we can do business with most potato growers in Maine. We know our money is secure. Otherwise we would not be able to put a fixed value on the potatoes we were to receive, and we couldn't really do business with farmers who have poor credit ratings. I don't know what they would do for fertilizer and lime if fertilizer dealers couldn't accept potatoes from them long in advance of payment-and we couldn't accept the potatoes without the existence of futures trading.

Obviously, futures trading is helping to keep the small potato farmer, with little or no capital, in business-whether he realizes it

or not.

We have used futures for at least 25 years. Before the advent of futures, there was little knowledge up in Maine about the value of potatoes and dealers really used to be able to steal potatoes from the growers for very little money. The existence of futures prices helps these farmers who know future values even if they don't ever trade futures. Many farmers today don't remember what it was like when they had no idea of true values. You might think that for this reason I would be against futures trading, since futures make a more informed farmer who is tougher to bargain with when buying potatoes, but I am not. Futures are a highly useful, modern, economic way of making the potato business safer for all of us, the farmer and the dealer. I strongly support futures and hope you will act unfavorably on H.R. 7287.

Mr. Reardon will be available for questioning at any time you want.
Thank you very much for permitting me to read his statement.
This is my statement, gentlemen.


Mr. WATTS. Mr. Chairman and members of the subcommittee, my name is Llewellyn Watts, Jr. I am chairman of the board of the New York Mercantile Exchange. On behalf of the membership of the exchange, I thank you for the opportunity to appear before you to present this factual statement.

The New York Mercantile Exchange was chartered in 1872, and for a hundred years has served agriculture and commerce. It is a nonprofit member corporation, and is licensed and regulated by the CEA. The membership is made up of 408 producers, commission house partners or officials, jobbers, processors, retailers, independent and chain, shippers, brokers, banks, transportation interests, and independent investors. The interests involved are all the way from production to final distribution.

I suggest your careful consideration to the very able statement of Henry Wilson, president of the Chicago Board of Trade. Therein is contained incontrovertible evidence of the critical necessity for futures hedge markets, especially with so-called perishable products. You have heard from Mr. Alex Caldwell, the able and experienced Administrator of the CEA and from the chairman of the New York Cotton Exchange, Mr. Conlin on both the technique and value of futures trading in potatoes. We will present witnesses and statements from Maine, Michigan, Minnesota, New York and elsewhere. The presentations of the proponents of this legislation have been most unusual. For the first time in the memory of seasoned observers, an attempt was made to state a case for elimination of an important marketing tool for potato producers and every other segment of the industry without the presentation of a scintilla of statistical or other hard evidence. For those of you who doubt this unusual statement, I suggest the examination of the record of the 2 days of hearings January 20-21, 1972. We believe that the dignity of this committee requires more than opinions and innuendoes. It requires the development of a statistical and factual record so that the case can be fairly and objectively appraised. This will be our main objective today. First, the impression was left before this committee that the potato futures contract disrupts orderly marketing and results in extremely low prices in May because farmers are induced to hold until delivery against the May contract. What does the evidence show? From official USDA figures, we find that the price received by Maine farmers for May potatoes generally exceeded the season average price for Maine Potatoes as follows:

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