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Washington, D.C.

The subcommittee met, pursuant to call, at 10:10 a.m., in room 1301, Longworth House Office Building, Hon. Thomas S. Foley (chairman of the subcommittee) presiding.

Present: Representatives Foley, Denholm, Link, Matsunaga, Goodling, and Zwach.

Also present: Representatives Hathaway, Kyros, and Bergland; Lacey C. Sharp, general counsel; Hyde H. Murray, associate counsel; and Christine S. Gallagher, chief clerk.

Mr. FOLEY. The Subcommittee on Domestic Marketing and Consumer Relations will come to order. The subcommittee meets this morning for the consideration of H.R. 7287, to prohibit trading in Irish potato futures on commodity exchanges.

(H.R. 7287, introduced by Mr. Hathaway, and the departmental report, follows:)

[H.R. 7287, 92d Cong., first sess.]

A BILL To prohibit trading in Irish potato futures on commodity exchanges Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) no contract for the sale of Irish potatoes for future delivery shall be made on or subject to the rules of any board of trade in the United States. Notwithstanding the foregoing, such futures trading shall be permitted in the case of any future in which trading has been initiated on or before the date of enactment of this Act, but in no event shall such trading be permitted in the case of any future which would mature more than twelve calendar months after the calendar month in which this Act is enacted. The terms used in this Act shall have the same meaning as when used in the Commodity Exchange Act.

(b) Any person who shall violate the provisions of this section shall be deemed guilty of a misdemeanor and upon conviction thereof be fined not more than $5,000.

Hon. W. R. POAGE,

Chairman, Committee on Agriculture,


OFFICE OF THE SECRETARY, Washington, D.C., September 24, 1971.

House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This is in answer to your request for a report on H.R. 7287.

The bill proposes to prohibit trading in Irish potatoes for future delivery on any board of trade in the United States. Most of the futures trading has been in Maine-grown potatoes at New York, although there has been a substantial recent growth in futures trading in Idaho-grown potatoes at Chicago. Therefore, the bill, in effect, will ban futures trading in potatoes from Maine and Idaho.

We recommend that H.R. 7287 not be enacted.

Futures trading, as in many other commodities, fulfills a useful and needed economic function in the marketing of potatoes. The facilities of the exchanges are being used by many growers, cooperatives, shippers, merchants, chainstores, and processors as a means of hedging price risks. The proportion of futures trading in potatoes reported as being used for hedging purposes compares favorably with that of other commodities. Potatoes have been subject to wide price fluctuations. By use of hedging, farmers, dealers, and others in the potato industry have been able to protect themselves from this price variability and able to market potatoes on an economic basis.

The potato futures market also fulfills a vital economic function by furnishing a pricing basis open and known to all. The focusing of supply and demand forces into one place, and the wide dissemination of prices competitively determined in the market, are of benefit to all persons concerned with the marketing of potatoes.

Even though there is a wide variation in potato prices from season to season and within a particular marketing season, price fluctuations do not appear to be increased by futures trading. The prohibition of futures trading would not be expected to eliminate wide price movements which are inherent in the marketing of a commodity having, as do potatoes, an inelastic demand and substantial variations in the size of the crop from year to year.

The banning of futures trading in potatoes will not solve the problems plaguing the potato grower. It will not remove the problems of overproduction, rising production costs, the need to improve merchandising methods to present an attractive product to the consumer, and the pressing competition among potato producing areas for markets.

The Office of Management and Budget advises that there is no objection to the presentation of this report from the standpoint of the Administration's program.


RICHARD LYNG, Assistant Secretary.

Mr. FOLEY. The bill, introduced by the gentleman from Maine, Mr. Hathaway, will be heard in two parts. Today we have a number of witnesses and, subsequently, we shall have additional witnesses scheduled early in March. The committee will, of course, have to adjourn its hearings when the House goes into session at noon. The House meets today to receive the state of the Union message from the President, and following the session this afternoon, the committee will reconvene to hear those witnesses who have not had an opportunity to testify this morning.

The Chair hopes that we shall be able expeditiously to conclude the hearings for those scheduled witnesses today and that it will not be necessary to schedule additional hearings tomorrow, but if any witnesses have not concluded their testimony, the Chair will convene the hearings tomorrow to accommodate any witnesses from out of town.

At this time the Chair is delighted to welcome to the hearing room two of our distinguished colleagues, representing the State of Maine, the Hon. William D. Hathaway, and the Hon. Peter N. Kyros.

I am particularly happy to greet both of our distinguished colleagues and welcome them to the subcommittee. We are anxious to hear your testimony on this legislation.

Mr. Hathaway.


Mr. HATHAWAY. Thank you, Mr. Chairman. I certainly appreciate the opportunity to testify here this morning in support of H.R. 7287, the bill which Mr. Kyros and I have introduced to prohibit trading in Irish potatoes for future delivery on any Board of Trade in the United States.

The proposed legislation has been endorsed by Maine's Governor Curtis, the Maine State Legislature, and has received widespread support among people in the potato industry, both in Maine and elsewhere. I would like to insert in the record a statement by the Governor, the text of the joint resolution enacted by the Maine Legislature in February 1971, and numerous letters, telegrams, and statements of support for H.R. 7287.

Mr. FOLEY. Without objection, they will be received. (The documents above-referred to, follow :)


I am presenting this statement in support of H.R. 7287 because of my deep concern for Maine potato growers and the Maine potato industry. The marketing history of fresh Maine potatoes during the past decade has been very erratic, threatening the very life of the industry in our State.

Over the past 10 years a number of bills to eliminate futures trading on commodity exchanges have been introduced in the Congress by members of the Maine delegation of both parties. Continued bipartisan efforts within the State of Maine are evidenced by the unanimous passage on February 25, 1971 of a Memorial to the Congress by the Maine State Legislature.

Maine potato growers, a little over a year ago, voted overwhelmingly in favor of such elimination and many of our key farm leaders have labored for this


The Memorial of the Maine Legislature declared futures trading of Maine potatoes represents "the antithesis of a satisfactory marketing scheme."

I concur in this judgment and am convinced that removal of such trading will benefit Maine's potato industry and the economy of the State as a whole.


In the Year of Our Lord, One Thousand Nine Hundred and Seventy-One

We, your Memorialists, the Senate and House of Representatives of the State of Maine in the One Hundred and Fifth Legislative Session assembled, most respectfully present and petition your Honorable Body as follows:

Whereas, the Constitution of the United States provides that the Congress may regulate commerce among the several states; and

Whereas, Irish potatoes grown in Maine are now traded in futures contracts on the New York Mercantile Exchange, 6 Harrison Street, New York City, N.Y.; and

Whereas, the essential ingredients of a successful potato marketing program include orderly and continuous marketing, minimum short-term price fluctuation and incentives for quality produce; and

Whereas, futures trading of Maine potatoes on the New York Mercantile Exchange represents the antithesis of a satisfactory marketing scheme by encouraging consolidation of sales within the months of March, April and May; maximizing short-term price fluctuation and failing to recognize other than minimal quality; and

Whereas, Maine potato producers, through self-imposed commodity taxes, have for years attempted to improve the handling and quality of the product

reaching consumers and such efforts have been diluted largely by the effects of futures trading of Maine potatoes; and

Whereas the price at which future contracts are bought and sold has a direct and immediate effect on cash prices received by producers for potatoes in Maine and all other areas producing potatoes for market; and

Whereas, experience has proven that futures trading can be carried on without detrimental and depressing effect on price only in the case of those commodities which can be stored for extensive periods of time either within the areas of production or the areas of marketing and distribution; and

Whereas, Irish potatoes are a perishable commodity that do not lend themselves to extended periods of storage, especially following preparation for market; and

Whereas, Irish potatoes historically are one of the most volatile commodities in terms of price range and in degree of sensitivity to myriad market factors, including rumors, speculation, available supply both in storage and in the market places, as well as many others; and

Whereas, many production areas of other states have vehemently registered their opposition to the continued trading of Irish potaotoes futures, and producers in Maine, by mail ballot, have continuously voted overwhelmingly in favor of abolishing futures trading in Maine potatoes; and

Whereas, the Congress of the United States has already established a precedent for the action to be proposed by this resolution in the insatnce of another perishable commodity, namely onions; Now, therefore, be it

Resolved, That we, your Memorialists, recommend that the Congress enact legislation abolishing futures trading in Maine potatoes upon the New York Mercantile Exchange or up any Commodity Exchange; and be it further

Resolved, That the Secretary of State be directed to transmit duly attested copies of this Resolution to the President of the United States, to the Vice President of the United States, to the Speaker of the House of Representatives, to the Chairmen of the Senate and House Committees on Agriculture, to the Secretary of Agriculture, and to the Members of Congress from the State of Maine.

House of Representatives, Read and Adopted February 24, 1971. Sent up for Concurrence.


Clerk. In Senate Chamber, Read and Adopted in Concurrence, February 25, 1971. HARRY N. STARBRANCH, Secretary.



Mr. Chairman, thank you for the opportunity to testify in support of H.R. 7287, introduced by my able colleague from Maine, Congressman Hathaway, which would prohibit the trading in Irish potato futures on commodity exchanges. I have introduced a companion measure in the Senate, S. 1947.

This legislation has been approved by the Senate in the past, and it has also received the support of the House Agriculture Committee. The need for this legislation is greater today than ever before. It is being supported this year not only by growers in Maine but in Idaho as well.

The mechanics of futures trading have discouraged potato farmers from establishing an orderly marketing program. Lack of such a program has resulted in rapid price fluctuations which often do not accurately reflect true supply and demand. Maine potato farmers have consistently voted to end the trading of potato futures. The most recent vote was taken in October, 1970, when 82 % of the farmers opposed futures trading. It is also noteworthy that all major farm organizations, including the National Potato Council, are recorded in support of legislation to end the trading of potato futures.

In behalf of the potato farmers of my state, I urge the Subcommittee to approve the pending legislation. Each year that potato futures trading remains in effect, potato farmers both in Maine and Idaho are penalized. The farmers deserve the help of Congress in achieving the best possible marketing system to maintain a fair price for their product.

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