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some 20 of these that have active futures markets, including corn and other feed grains.

Mr. ZWACH. You are the overall Administrator?

Mr. CALDWELL. Yes, sir.

Mr. ZWACH. How many years have you administered this program? Mr. CALDWELL. I have been Administrator since 1960. I have been with the agency since 1950. There are a number of commodities, however, that do not come under our jurisdiction-some agricultural commodities such as sugar, coffee, and cocoa; and all of the metals, propane gas, and things of that nature which are not agricultural. Mr. ZWACH. It is your contention that this exchange accrues to the benefit of potato growers?

Mr. CALDWELL. That is our belief; yes, sir.

Mr. ZWACH. In spite of the fact that 80 percent of them feel it does. not?

Mr. CALDWELL. Our feeling is that growers who use the market properly are obtaining a benefit from it. We do not believe that other growers, who do not use the market are faced with any problems as a result of it.

Mr. ZWACH. You mean benefits to growers only would come for those who join the speculation and the gambling on the market?

Mr. CALDWELL. Well, if they are speculating, they may or may not benefit from it. What I have in mind is hedging, not only by growers but others in the industry: the shippers, the merchandisers, the processors, the chain stores who use the market for hedging purposes.

A hedger is interested in protecting himself against price changes. He is not speculating. He is not gambling in the markets. The speculation in the market is by the persons who are, as a rule, on the other side of the hedgers' transactions.

Mr. ZWACH. Could you give an estimate of the number of people that now make their living from speculating in potatoes that are not growers, never invest a penny of money, but now made their living in the gambling, speculating end of it, people who were not in this potato industry before we had this commodity futures program?

Mr. CALDWELL. We submitted for the record earlier in my statement a schedule showing the number of traders and the amounts of positions classified as speculating and hedging on the New York Mercantile Exchange on various survey dates between 1956 and 1970. These vary, but if I may just take the last one, November 27, 1970, there were 2,757 traders in the market. Of those, 183 were classified as hedgers.

Mr. ZWACH. I have not made a survey, but I think in my congressional district, which is corn country, I think that at least 85 percent of my growers think that this speculating end of it is very, very damaging to their industry. I would hope that your Department takes a real careful survey of all of this. These people are producers. They do not like to get into speculating, they have enough hazards in their business without trying to get into the speculative gambling end of it.

So we have, I think, the great bulk of our producers question seriously this part of our marketing system.

Take automobiles. They never speculate on the price of automobiles; they speculate on the shares of stock. Now, if you can devise a system where speculation in farm products is not on prices but on some other type or character, I would go for it. Prices on corn, without a bushel harvested, plunged from $1.39 to 88 cents in my congressional district last fall. It put them into bankruptcy, many of them. That never happens in a surplus in Fords or in a surplus in General Motors, or a surplus in any other product. But in agricultural commodities, our people are crucified in this program.

This needs a reassessment, because now the input costs $1.05 per bushel to just grow a bushel of corn, without any return for labor or any other benefit. You know where corn prices have been.

So I question seriously whether gamblers and speculators ought to be setting the price of farm products.


Mr. CALDWELL. May I reply, Mr. Chairman?


Mr. CALDWELL. It is our position that speculators do not set the prices, that supply and demand conditions in the market set the prices for all commodities, corn and potatoes, or anything else.

Now, the drop in corn prices to which you are referring was due to a variety of factors which do not, in my opinion, include the futures market.

Mr. ZWACH. There was not a bushel of corn harvested when the prices plunged just this way.

Now, go to the rest of America. We have a surplus of labor in America. We have a big surplus of labor, 6 percent unemployed. We are not putting through the floor the price of labor, are we?

We have a surplus now of professors; they are a drug on the market. Yet, we are not putting them through the floor on the price of their labor. I think our Department of Agriculture needs, and I think as friends of producers you ought to be looking at some of these real serious problems, because just the board of trade needs a very, very careful analysis of the question of whether those fellows ought to set farm prices.

I admit that these producers are lax, we are not setting our own prices. We have no bargaining strength. But I think you, as a Department of Agriculture employee, ought to be dealing with this in depth and length and breadth, and height. I hope that we shall have some suggestions in these areas.

Mr. CALDWELL. The Department of Agriculture is very much concerned, as you know, about the low prices in corn and other commodities, and it is reviewing this in depth. But, as I said earlier, this is a result of factors outside of the futures market, and the futures market merely reflects those factors, as does the cash market.

Mr. ZWACH. There has been a surplus of Fords on the market. I did not see any reflection of prices in Fords. I need a pickup truck on my farm. They have been in surplus, many of them sitting around. I never saw prices go down one nickel because of this surplus.

We have rigidity all across America except in farm products. Think about that a little.

That is all, Mr. Chairman. [Applause.]

Mr. DENHOLM. Thank you.

We appreciate the applause and spontaneous response to the observations of our distinguished colleague from Minnesota. However, we shall have order in the committee room.

Do you have any questions, Mr. Link?

Mr. LINK. Mr. Chairman, I commend those who have come here to present testimony regarding a matter that affects all of agriculture. I think we owe a debt of appreciation to all who have come here, and I can lend my endorsement to the very candid and forceful examples that our colleague, Congressman Zwach, has. I would lend my support to his views.

Mr. DENHOLM. Thank you, Mr. Link.

Mr. Bergland?

Mr. BERGLAND. I have no questions, Mr. Chairman.
Mr. DENHOLM. Mr. Goodling?

Mr. GOODLING. No questions, Mr. Chairman.

Mr. DENHOLM. May I ask you a question on another matter? Do you have under your supervision trading in beef futures?

Mr. CALDWELL. We have under our supervision trading in livestock and livestock products. This would include live cattle, live hogs, frozen products of various types.

Mr. DENHOLM. Would your testimony be the same if it pertained to beef?

Mr. CALDWELL. Yes, it would.

Mr. DENHOLM. Are you familiar with what has happened recently in the Chicago futures on beef?

Mr. CALDWELL. Yes, sir.

Mr. DENHOLM. Do you have any idea how much that has cost the feeders of beef?

Mr. CALDWELL. Well, Mr. Chairman, as I mentioned earlier, I do not believe that the futures market can be held accountable for any reduction in price or for any rise in price, for that matter. I think it is just conditions in the market which are reflected on the futures market.

Mr. DENHOLM. What caused the beef futures to go up in October and November?

Mr. CALDWELL. A supply shortage.

Mr. DENHOLM. How much did they go up over the contract prices? Mr. CALDWELL. I do not have the figures readily available. I shall be glad to supply them for the record, if you would like.

Mr. DENHOLM. Yes, I will appreciate that, if you will do so. Mr. CALDWELL. What period would you like to cover, Mr. Chairman?

Mr. DENHOLM. For period from October 1, 1971, to the present time.

Mr. CALDWELL. To the present time?

Mr. DENHOLM. Yes. I might say that we have had several complaints from feeders in my district. I know that people have tried to

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hedge against the market and that they have experienced tremendous losses on those futures. I think you are aware of that, are you not, Mr. Caldwell?

Mr. CALDWELL. I have heard some complaints about the market, yes, sir.

Mr. DENHOLM. You have heard about it?

Mr. CALDWELL. I have; yes, sir.

(The information above-referred to, follows:)


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Mr. DENHOLM. If there are no further questions of the witness, that will be all, Mr. Caldwell.

Thank you.

Mr. CALDWELL. Thank you, sir.

Mr. DENHOLM. The next witness is Mr. Donald B. Conlin, chairman of the board of the New York Cotton Exchange.

Is Mr. Conlin present?


Mr. CONLIN. Mr. Chairman, my name is Donald B. Conlin. I am the chairman of the board of the New York Cotton Exchange and am here today to express the exchange's objections to the passage of H.R. 7287, a bill to abolish futures trading in Irish potatoes. It seems to me that this bill neglects to consider the highly effective, useful and cost-cutting role which futures trading has come to play in our country's marketing system.

A key to progress in our society has been the evolution of new and improved market institutions to channel the flow of capital into productive uses and expedite the movement of goods and services. As university specialists agree, one of the most highly developed and effective marketing mechanisms is the organized commodity exchange or futures market.

A brief glimpse of the origin of futures tells us a good deal about the value of this unique trading instrument. By and large, futures markets were developed to meet clear and pressing needs. Time and again, crisis situations in individual commodities proved to farmers,

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