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while at the same time recognizing "that wide fluctuations in potato. prices attract a type of speculation, the control of which presents problems beyond those found in the case of less perishable commodities."
Some of these same hard-to-control problems were most recently in evidence when the CEA took more than a year merely to announce that trading had indeed taken place on the New York Mercantile Exchange in violation of the rules back in May 1970. Secretary Benson equivocally stated "By focusing supply and demand factors at a central point, futures prices, in the absence of manipulation, are competitively determined." That's a big "in," as was shown in February of last year when a large Miami Beach trader was fined $140,000 in a New York court for unlawful trading in Maine potato futures. In March of 1970, this same trader was also indicted by a Federal grand jury on charges of conspiring to engage in illegal gambling activities. Perhaps this is what Secretary Benson was referring to when he said: "Wide fluctuations in potato prices attract a type of speculation the control of which presents problems beyond those found in the case of less perishable commodities."
In August 1963, Secretary of Agriculture Freeman, softening, if not revising USDA's prior position, at least recognized one of the problems by pointing out in his letter to Congress that "many of those engaged in growing and handling Maine potatoes feel that the exchange disrupts orderly marketing by encouraging growers to hold potatoes until late in the season, thus abandoning early season markets to other producing areas."
In August of 1965, Secretary Freeman, while again not recommending for or against enactment, cautiously agreed with his predecessor's 1958 opinion that the "exchange appears to perform satisfactorily in crystallizing market information and disseminating futures price quotations," and that these quotations "furnish a basis for cash trading." Freeman, however, went one step further stating:
But it is also true that operation of spot potato markets in other producing areas, less affected by futures trading—and in markets for commodities where there is no futures trading, indicates that this function of crystallizing market information in these other areas is being performed satisfactorily between buyers and sellers.
Also in 1965, USDA admitted that prices established in the futures market are "distorted away from freely competitive values ***" In 1971, however, the Department proclaims "*** price fluctuations do not appear to be increased by futures trading."
In addition, this year, USDA identifies "overproduction, rising production costs, the need to improve merchandising methods to present an attractive product to the consumer, and the pressing competition among producing areas for markets" as grower problems while ostentatiously declaring "the banning of futures trading in potatoes will not solve the problems plaguing the potato grower.' Of course not-but many believe it would certainly be one giant step in the right direction.
And so it is, then, that the battle lines are drawn again-the "David" of potato growers and the "Goliath" of a Government gambler alliance, as the USDA continues to illustrate the futility of
relying on Government to act on behalf of individuals. But in the words of Samuel Johnson, "If your determination is fixed, I do not counsel you to despair-great works are performed not by strength, but perseverance."
Even though we have been informed at the last minute that the opponents of this bill, namely the New York Mercantile Exchange, will not be presenting testimony until a later date, the story that they will have to tell must be the same as they have presented in previous years. We are certain that you will be told that futures trading in Maine potatoes is of great benefit to the growers. Economists will point out that without futures trading, Maine potato farmers would not long be able to continue growing potatoes. You will be told that, because of futures trading, Maine farmers have consistently received higher prices for their potatoes than growers in other parts of the country, and USDA statistics will be cited to prove that point. I submit the only people that are saying that are representatives of the New York Mercantile Exchange, because certainly the growers are not saying that they are receiving higher prices. They do not know it if they are.
In paid advertisements in a daily newspaper published in Aroostook County, Maine, the main information office of the New York Mercantile Exchange showed from USDA figures "Prices received by Maine potato farmers average higher than prices received by Red River Valley and southern Idaho farmers in 11 out of the last 15 years and for northern Idaho, the Maine potato farmer received better prices in 9 out of the last 13 years." What the Exchange's socalled information office neglected to say was that Idaho and Red River Valley prices don't reflect the cost of packing and that the prices received by the farmers in those areas are actually the amounts paid for naked potatoes and in the case of Idaho for naked potatoes into storage areas. The Maine prices are those paid to growers after growers have incurred the expense of storage, grading, shrink, packaging and loading into rail cars and into trucks for transportation. The University of Maine has developed information which indicates that the packing costs incurred by farmers in Maine were 72 cents per hundredweight in 1969, 70 cents per hundredweight in 1968, 68 cents per hundredweight in 1966. Subtract the cost of packing from the USDA average price received by farmers and the story changes.
In the same advertisement in the April 15 edition of the Bangor Daily News appeared this quotation "Idaho has futures trading on the Chicago Mercantile Exchange; they aren't trying to eliminate futures trading out there."
In view of Mr. Parr's testimony today representing the potato growers of Idaho, Inc., and the Idaho Potato Growers-Shippers Association, it is obvious that here is another case where the perpetrators of this propaganda, whether accidentally or by design, failed to do their homework and report information to Maine farmers accurately and completely. But this is nothing new. Maine farmers have unfortunately had to live with halftruths and deliberate misrepresentations ever since 1957 when on September 11 of that year, the New York Mercantile Exchange Business Manager, John Claggett, in a
news release pointed out "The recent vote of the Maine growers on the subject of futures trading shows that the exchange for all its efforts has failed to get across to growers the true value and function of futures trading in Maine potatoes." "I am fully convinced," Claggett said, "that if growers understood the value to them of the opportunity to hedge their crops, if they appreciated the true advantage of this chance to insure their investment in their crop, the vote would have been as heavily for the exchange as against it." That was in 1957, following the first poll of Maine growers which indicated overwhelming opposition to futures trading even then. Apparently, in the more than 15 years since 1957, the Maine grower still does not "appreciate the chance to insure his investment" by gambling in the futures market.
In view of all the previous hearings leading to the same conclusions-I was going to say we are trying to make brevity the keynote here, but it is pretty hard to do that when you are on page 15 of the statement. We are trying to. At the same time, we are dealing with a somewhat technical subject and will, of course, do our best to clear up any questions at any time.
Thank you very much.
Mr. FOLEY. Thank you very much, Mr. Bull. You have certainly given the committee a very forceful statement and we will look forward to having the opportunity to call you back to the witness table at the conclusion of the testimony of the other witnesses.
Mr. BULL. Yes, sir.
Mr. FOLEY. Thank you very much.
Now I would like to call to the witness table Mr. Headlee Wright of Monte Vista, Colo.
Mr. Wright, you testified previously before the subcommittee. We are glad to see you again.
STATEMENT OF HEADLEE WRIGHT, MONTE VISTA, COLO.
Mr. WRIGHT. Thank you, Mr. Chairman.
My name is Headlee Wright. I am a potato grower from the San Luis Valley in Colorado. I grow 350 acres of potatoes that are produced for the fresh market.
During the past 8 years I have had the good fortune to be closely associated with the potato industry throughout the United States. In 1964, with the hiring of a very good farm manager, I became manager of the San Luis Valley Potato Administrative Committee. This committee is the administrative arm of both Federal and State marketing orders in area 2 of Colorado. It was also the responsibility of this office to keep the local growers informed on happenings across the Nation that would affect supply, price, and general conditions.
The committee was one that wanted their manager informed and to be known in other potato areas so, a good share of my time was spent in traveling to other potato areas, especially those that shipped into the same marketing States as we do. In 1965 I was elected treasurer of the National Potato Council and served as an officer until being elected president in 1969.
During the year 1969, I had the good fortune of traveling to all the major potato producing areas and talking with growers all across this great Nation.
The one thing that has plagued the potato producer during this time is overproduction. I found that the problems in the potato business are interrelated. What one area does affects all other areas. If one area is too low on price, it has a direct effect on those areas in its immediate marketing area and an indirect effect on the rest of the Nation.
There seems to be no doubt about the ability of the potato producer to produce. Being in overproduction or near surplus most of the time, any tendency to withhold or not maintain a flow to market, will cause the problem to become greater.
As we from other areas watch Maine market its crops, we find that the bulk of it is marketed in the late spring, due to a hedge on the commodity exchange. Now this may be good or bad for the individual who has the hedge, but it plays havoc with the orderly marketing of a potato crop.
If, for any reason, a housewife passes up buying a potato for one meal this simply adds to the surplus. She will not double up on the next meal.
Mr. Chairman, I strongly urge you to support H.R. 7287, which would abolish futures trading on potatoes.
I would say one of the prime examples of how this can affect growers throughout the whole United States was the deliveries in Chicago last May and how the market was completely disrupted for more than 2 weeks and rumors have it that some of the negotiations used to help certain individuals were quite shocking.
The potato growers and their organizations all over the United States have opposed futures trading on potatoes. The National Potato Council, representing all potato producing States, has had a resolution to abolish futures trading on potatoes for several years. The potato industries in Colorado and other States are opposed to it. We find that the main ones in favor are the speculators or nonpotato growers who have no interest in the overall potato industry.
Mr. Chairman, we have been told by men of Congress many times. to get our industry together and you would do something for us. We have gotten together in the past and I feel we are together again. The potato growers of the United States do not want this over their heads. Mr. Chairman, I strongly urge the passage of H.R. 7287. I thank you for allowing me to appear.
Mr. FOLEY. Thank you very much, Mr. Wright. If you, too, can remain, we will call you back at the conclusion of the testimony. The next witness is Mr. Gilman Albair of Caribou, Maine. Mr. Albair?
STATEMENT OF GILMAN ALBAIR, VICE PRESIDENT, MAINE POTATO COUNCIL, CARIBOU, MAINE
Mr. ALBAIR. Mr. Chairman, members of the committee, my name. is Gilman Albair and I live in Caribou, Maine in Aroostook County. My son and I plant 270 acres of potatoes and 80 acres of grain.
My homestead farms are in the fifth generation. I am now 1st vice president of the Maine Potato Council and chairman of the elimination committee, made up of 12 members for the elimination of future trading of Maine potatoes on the New York Mercantile Exchange. I am also mayor of the City of Caribou, Maine.
Prior to 1966, I was in favor of futures trading in Maine. In 1966, I wrote a letter to the Maine Potato Council that I was very much opposed to future trading. At that time a few people called me a traitor, which I took with a grain of salt.
In 1962 Mr. Carl Smith, the former commissioner of agriculture, and vice president of the Bangor and Aroostock Railroad, visited me and explained to me how I could use futures trading to better our marketing of potatoes as far as hedging was concerned. Having a lot of respect for Mr. Smith, I said to myself that we are missing the boat somewhere along the line. He also asked me if I would go to Washington on behalf of the board and I told him I would think it over, which I did. He called me later and I said I would go to Washington to testify in favor of keeping futures trading. There was a large group that had flown down with their expenses paid by the New York Mercantile Board.
Now the point I want to make is that in our spare time, we were royally entertained by those in favor of keeping the board. At that time, I was drinking whisky sours. The more I heard of the horse trading that they were using to keep the board, the more sour the whisky sours became. I never realized that a tool could be used in that way.
When I got home all these things bothered me very much. One day I said to myself, I should go to New York and see for myself how this mercantile board really operates, which I did. The day I was there it was a really quiet day as far as trading is concerned. I asked a gentleman by the name of F. J. Reardon if this was a normal trading day and he said no. He then explained to me the mechanics of the board and how trading is conducted in the pit. I said what do you do for action and he left me and went and spoke to two or three other gentlemen. He then came back and said, "Gil, we will have a little action," which they did. It looked like a herd of cattle stampeding to the pit. Everyone's hand went up and the board then went up 7 cents. Inside of 5 minutes it was back to the same trading price.
This was just one small example of how the board is often manipulated by a small group of people while the people back in Maine are wondering what is happening. Here again I made up my mind, that if a man wades in the pool the fishing is damn poor.
Again I went home and I made up my mind that I could be all wrong and I tried hedging and it never worked out. I was always behind the 8-ball losing money.
I know for a fact that farmers who have never used the trading. board are far better off than the small number of farmers who do use the board.
Since 1963, I have observed that the New York Mercantile Board has not regulated itself well at all.