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growers to determine the market value of potatoes at any time. Bids and offers are made openly. There is public registration of all executed contracts. The information is open and accurate.
In conclusion we wish to state that the Maine potato industry can ill afford the elimination of this valuable market. Its aid in obtaining short-term financing, its ability to transfer price risks, its great source of market information, and its integrity as an open public market with iron-clad contracts can only result in benefit to the Maine potato industry.
STATEMENT OF CHARLES PANGBURN, POTATO GROWER, CARIBOU, MAINE
Mr. Chairman and Honorable Members of the Subcommittee on Domestic Marketing of the House Committee on Agriculture. I am Charles Pangburn of Caribou, Maine. I have been a potato grower and shipper for over thirty years. My present acreage is approximately 350 acres.
I wish to tell you why I am strongly opposed to H. R. 7287 and wish to see futures trading in our potatoes continued without interruption.
Without a futures market where I could hedge a part of my crop to pay my expenses, I probably would not be farming today.
The New York Mercantile Exchange offers me and/or my creditors an opportunity to sell enough of my crop to cover my accounts payable. In this businesslike manner they can stay in business and I can continue growing potatoes to feed the consumer. This is necessary and is the only business I know.
I have to carry insurance on equipment, buildings, and people, so why shouldn't I insure price risks by hedging enough potatoes to cover expenses. It appears to me that in our democratic system we need an open market such as this, offered to speculators and the trade, and regulated by the USDA Commodity Exchange Authority.
I urge this Committee to vote against H. R. 7287.
STATEMENT OF RAYMOND CYR, POTATO GROWER, VAN BUREN, MAINE
Mr. Chairman and Honorable Members of the Subcommittee on Domestic Marketing of the House Committee on Agriculture. I am Raymond Cyr, a potato grower in Van Buren, Maine, where I have lived all my life and am presently farming the family farm.
I raise 175 acres of potatoes and sell on the New York Mercantile Exchange every year to assure me of a price that I feel is better than what it costs me to produce these potatoes. I sell November, March, and April and lift my hedges when the month comes and sell these cars on the open market.
I am a director of Agway, Inc., a large cooperative in Presque Isle, Maine. I have been farming for 18 years and feel that as this industry gets more competitive, I need to have the chance to hedge my potatoes on a futures market. I grow seed for Agway, but I have to sell a part of my crop on the open market and this is where I use the New York Mercantile Exchange to assure me of a satisfactory price for these potatoes.
I am strongly opposed to H.R. 7287.
STATEMENT OF NORMAN A. GUY, POTATO SALES MANAGER, FORT KENT, MAINE Mr. Chairman and Honorable Members of the Subcommittee on Domestic Marketing of the House Committee on Agriculture, I am Norman A. Guy, Manager, Fort Kent Seed Growers Assn. of Fort Kent, Maine. I handle seed, tablestock, and processing potatoes for our members. I wish to state that I am opposed to H.R. 7287 which would ban the trading of Potato Futures.
I feel that futures trading is needed for the benefit of the potato farmer and should be continued without interruption. In my humble opinion, I feel that when used properly, Maine Potato Futures Trading is the best means by which a potato grower can be assured price protection for his crop. When used properly, as an edge, it will protect his investment and assure him of a profit for
that investment. It protects the small grower as well as the large grower. The potato grower has the opportunity to market his crop at anytime during the market season, if and when he is satisfied with the price.
Discontinuation of Futures Trading will not in anyway solve the problems of the potato grower, as claimed by the opponents of this bill, but may well mean lower returns and lower prices for his crop, especially the small farmer. It is my sincere belief that if the potato grower would understand fully the working of the Futures Market he would be against this proposed bill, and would use the facilities and the service of the New York Mercantile Exchange to sell his crop.
I would like to call your attention to an article in the February issue of “TOP OP” (a farm journal publication) under the heading, FUTURES MARKET. This article points out the reasons why Corn Growers were reluctant to use the Futures Market to edge their crop. Even though corn is considered a basic, non-perishable commodity compared to potatoes which are perishable, the reasons given for not using the Futures Market were basicly the same. This again brings out the fact that lack of understanding of the Futures Market is the real problem.
Hon. CHARLES M. TEAGUE,
Congressman, California 13th District,
CARIBOU, MAINE, February 8, 1971.
DEAR CHARLES: I have been requested to express my views to you and the Agricultural Committee of the House of Representatives on the subject of the elimination of the Mercantile Exchange on Maine potatoes.
At the outset let me say that I am giving my opinion as an individual and not as representng any faction of the potato industry in Maine or of the banking business.
I resigned as President of the Aroostook Trust Company last November and am not a candidate for the Board of Directors at their annual meeting in February.
However, over the period of approximately thirty years that potatoes have been bought and sold on the future's market, I have observed some of the things that have happened in potato marketing. When the Mercantile Exchange first got into operation, the farmers were afraid of it, trading was rather slow and the big majority of farmers did not use it. Also, during part of the 1940's potatoes were subsidized by the U. S. Government. After the subsidy was stopped (except for starch potatoes and feed for animals) there was more interest in the future's market. More farmers began to sell for delivery on the New York Market a portion of their crop for future delivery. This worked all right when the farmer sold at a fair price and had the potatoes on hand to make shipment at the trading date. In fact most of the banks in the County of Aroostook would advance to the grower money required by the Exchange, taking back a brokerage assignment, when they had faith in the farmer and knew that he could fill his contract. The banks, however, did not finance farmers whom they felt were simply speculating on the market.
I would say that from the period from 1950 to 1960 the Mercantile provided an opportunity for the alert farmer to sell part of his crop at a better price than perhaps he would have gotten by simply holding his crop to the end of the season. I think that you should know that the whole system of marketing potatoes had changed during this period. The processors had come into the Aroostook County area and were buying a fair percentage of potatoes. The other buyers (other than for seed potatoes) were largely bought by the large chain buyers. The number of smaller independent buyers accounted for only a very small portion of the crop.
After 1960, I believe that the rules of the exchange were changed somewhat. The trading months are now November, March, April and May. Usually many more trades are made for April and May because usually the price is higher during those months. This has created a bad situation. For instance if the shipments scheduled for May were consumated, and the cars shipped, it
glutted the market. And while the farmer usually got his money, it made a very bad situation in transportation and in the time involved by the farmer during his planting season.
Furthermore, I believe that the Mercantile Exchange has become now pretty much of a speculative deal on the part of both the seller and the buyer. It is my opinion that is not good because so many factors enter into the deal. Many of the buyers I feel are just trying to make a quick buck, and often have the opportunity to manipulate the market to their own advantage. This is merely my thinking and I have no evidence to prove it. I do know that some farmers have been hurt badly by trying to beat the market. Also the number of transactions are so entirely out of line with the production of potatoes, and cars actually shipped, that it has very little relation to supply and demand.
The elimination of trading Maine potatoes on the Mercantile Exchange is not a cure-all for the potato growers of Maine. The basic need I feel is more concentration on selling practices that give the consumer a good grade of potatoes packed uniformly. This would probably require more central packing facilities.
However, in conclusion I believe that unless speculation as it now exists can be changed, it would be to the advantage of the Maine potato farmer to eliminate the present system under which Maine potatoes are traded on the Mercantile Exchange.
S. W. COLLINS.
LOUIS N. RITTEN & Co., INC.,
Hon. W. R. POAGE,
Chairman, House Agricultural Committee,
DEAR CONGRESSMAN: The potato industry has done a better job of marketing since Idaho futures have been traded in Chicago (1968 to the present). In 1967 prior to Idaho futures the government had to purchase and divert to non food usage 14.7 million hundredweight of potatoes and cash prices declined as low at $3.30-$3.50 Chicago. We have had two records crops since 1967 and marketed them at average or better prices Futures have also acted as a stimulus to boost farmer prices on many different occasions.
Potato processing accounts for more than 60% of potato usage in Idaho. In each of the last two seasons the processors have used their own supplies early and let the farmer with the open potatoes wait until late in the season. Price insurance is a must for a farmer who grows open potatoes for the processor. Futures not only provide the price insurance but they also provide a marketplace where prices are determined competitively.
Price insurance is a proven economic tool-potato farmers are developing into a major medium of risk reduction. We all learn from our mistakes and there have been a few flaws in the Idaho contract. As these flaws were detected the Chicago Mercantile Exchange acted promptly to amend the contract. Many changes were made this past summer and more changes are being contemplated. Futures contracts for corn soybeans cattle, etc. have been changed many times and have become an integral part of the marketing picture.
Maine contends that their futures market tends to delay marketing of their crop. My own feeling is that heavy competition in the season prevents Maine from competing at low price levels. As other areas clean up Maine becomes the source of supply; I do not believe that futures are the prime cause.
What is really lacking in regards potato futures is knowledge of how they can be used to aid a good marketing plan. Most farmers have never attempted to integrate futures into a pre determined marketing program. More farmers and businessmen are becoming aware of the value in good price insurance. Let's work towards improving the futures market, not eliminating it; give the changes that have been made a chance to prove themselves and direct criticism to the Exchanges where improvements in the contarcts can be made.
SCHEDULE OF FUTURES PRICES AND CASH PRICES FOR IDAHO POTATOES
Chairman, Committee on Marketing and Consumer Relations,
DEAR MR. FOLEY: We would like to go on record as being opposed to this bill. The trading of commodities on the futures market is a long-established part of the economic framework of our company and is a very useful tool in the business management of the farm community and the food processing industry. It is my very firm belief that trading in commodity futures is also considerable benefit to consumers in that the prices arrived at are a distillation of all of the information possessed by everyone and thus a true reflection of economics is achieved. Were this not the case, individual groups possessed of particular bits of information could much more readily control and take advantage of situations which would not be in the interest of the general public.
As a processor, we use huge quantities of fats and oils and potatoes. The futures market of both of these products are important to us in determining the future costs of our manufactured products, future contract prices to our customers as well as providing a medium for hedging unsold inventories.
I see no reason to single out the potato futures market for demise. I believe the potato futures is an accurate reflection of the many circumstances throughout the country which go into determining a fair price for potatoes in a free market.
I have heard rumors of trading abuses, particularly with regard to a midwestern exchange. This, it seems to me, is beside the point. I should hope that the government has ample power to regulate these exchanges, and I think they should use it to the maximum degree.
In conclusion, we are in favor of commodity trading in general and in potatoes, fats and oils in particular. We are also in favor of stringent CEA supervision, control and regulation in the trading of all commodities. We would appreciate your making this letter a part of the record in the consideration by your committee of HR 7289.
JOHN L. BAXTER, JR., President.
JOSEPH SLEEPER GENERAL STORE,
SUBCOMMITTEE ON DOMESTIC MARKETING AND CONSUMER RELATIONS OF THE COMMITTEE ON AGRICULTURE
DEAR SIRS: My concern, as a Caribou business man and a Northern National Bank Advisor, has never been greater for the local potato farmer. The potato farmer's cash flow and profit has been on a steady decline over the past ten years. The local farmer has no chance to market his crop fairly on the Exchange. He has had to pre-sell his crop each year below the cost of production. The Exchange is in no way benefiting the farmer. My business success in Caribou depends greatly on the farmer. If something is not done in the near
future to eliminate the Exchange it will be a tragic situation for all area business men. The farmers' situation is critical and the livelihood of the whole area depends primarily on the farmer.
NELSON F. SLEEPER, Partner.
East Grand Forks, Minn., February 26, 1972.
SUBCOMMITTEE ON DOMESTIC MARKETING,
U.S. House of Representatives, Washington, D.C.
GENTLEMEN: The purpose of this letter is to urge you not to act favorably on H.R. 7287, the bill to eliminate futures trading in Irish potatoes.
Passage of this bill would deprive potato growers throughout the country of urgently needed protection. We operate 1500 acres of potatoes and futures trading gives us great elasticity and protection in financing and in price protection. Futures trading is an important economic function in today's agriculture, and to those of us in the potato industry, an understanding of how and when to use futures trading for price protection is part of our basic training. Getting rid of futures would be like getting rid of our modern fertilizers and seed potatoes. It would return us to a much more primitive way of operating. We in the potato business need to stop overproducing, we need to improve our grading and marketing, we need to find more ways to process potatoes and we need to upgrade the image of our product with the consumer. The elimination of potato futures trading will accomplish none of the real needs of the industry. The loss of futures trading would simply hamper those of us who are working hard to supply the public with excellent potatoes with as little risk as possible to ourselves and at the lowest price per hundred pounds possible. Both Producers and public would suffer, and who in the world would possibly gain? The ability of potato farmers to hedge their crops on the futures market is a precious right and should be protected. We urge you not to pass H.R. 7287 and eliminate futures trading, an economic tool those of us who raise potatoes need so much for the protection of our businesses.
THOMAS W. RYAN.
Mr. SISK. The committee stands adjourned, subject to the call of the Chair.
(Whereupon at 12:04 p.m., the committee adjourned, subject to the call of the Chair.)