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I know for a fact that at times, there are certain people who can get in and out easier than others. I also know that deliveries are often mishandled, as are routings of board cars.
I have had two gentlemen tell me that have seats on the board that we will have them walking out with holes in their shoes.
I asked Mr. Reardon if he would be instrumental in keeping potato futures trading. He told me that he had a big investment in Aroostook County and that he would let the farmers take the course that they felt was in their best interest.
Futures trading creates an unreal market situation and demand. Contracts are often traded before the potatoes are even planted and harvested. All of this results in wide swings up and down of futures prices which often have nothing to do with actual market conditions.
On the last trading day for May futures contracts in 1970, certain individuals were allowed to trade out of order. Later Llwellyn Watts, chairman of the New York Mercantile Board, admitted that there had been trading violations.
On another occasion a Mr. Cohen from Florida was fined over $125,000 for trading irregularities.
In closing, I would point out that the mercantile is manipulated by a few for their own profit while the farmers of Maine suffer losses. Abe Lincoln once said that our Government is by the people, for the people, and of the people. I urge you eliminate the board because 82 percent of the farmers who are adversely affected by it want it ended.
Mr. FOLEY. Thank you very much, Mr. Albair. We are going, of course, to ask you to await the question period with the other witnesses and we would appreciate it if you could remain in the hearing
Mr. ALBAIR. Mr. Chairman, if it is in order, I have another statement here which will take just a few minutes and I will omit the names of the members of the Elimination Committee. I would like to read this here.
Mr. FOLEY. Would you identify on whose behalf the statement is being read?
Mr. ALBAIR. This is on behalf of myself and some few testimonies that were taken out of the past hearings. I have some figures here which I could enter three of these pages here for a matter of record, and I would like to read the last-page that I have been concerning figures that I have taken out of the New York Mercantile Yearbook, 1968, and some figures from the Department of Agriculture Fruits and Vegetable Division Report No. 54.
Mr. FOLEY. We will be very happy to have the statement read if it is not too lengthy.
Mr. ALBAIR. Fine. The record of hearings on H.R. 904, 88th Congress, held April 8, 9, and 10, 1963, contains statements in support of abolition by some of the leading brokers, dealers and buyers of the Maine potato industry. Since the facts of this case are essentially the same now as they were in 1963, I would like, with your permission, to cite portions of the testimony presented at that time by these leading and most respected people of our industry.
Warman Warehouse Inc., Presque Isle, Maine, November 29, 1962.
Fred Warman (deceased) said some of the factors are most damaging to the potato industry of Maine. Several commodity exchange houses are putting out very bearish letters to stimulate "their own business." He also said the fact that potatoes are a perishable commodity means it does not lend itself to board futures trading.
Maine Farmers Exchange of Presque Isle, Maine, March 26, 1963. President Lawrence Thibodeau said, "It is my firm conviction that the overall potato industry in Maine cannot survive unless we develop an orderly marketing program whereby we market a steady flow of potatoes from September 1 to June 1."
He said, "I feel that this would be impossible as long as the mercantile is in operation and therefore, although it may be benefiting a few, for the interest of many and the overall industry, I feel that the futures trading of potatoes should be eliminated on the New York Mercantile Exchange. I feel that futures trading on commodity markets is not practical on perishable commodities."
Ken L. Ballard of Northern Farms Inc. of Presque Isle said on January 9, 1963, "We are sick and tired of being told by the New York board operators what to do, when to do it, and what is going to happen in the markets 8 or 10 months in the future."
Speaking on H.R. 10282 during hearings held on that bill in the spring of 1958, one of our most prominent potato growers said, "We, as growers, ask you to pass this bill and put the potato pricing mechanism back in the hands of those who actually grow and handle potatoes, and take it out of the hands of a few well-financed speculators who, I repeat again, are leeches on our industry." Mr. Chairman, these figures that I would like to make a matter of record are taken from the New York Mercantile Yearbook, 1968, and from the U.S. Department of Agriculture, Fruits and Vegetables Division, Report No. 54.
1966 mercantile trading (cars)_.
1966 Maine potato futures contract settled by deliveries:
*Less than 1/10 of 1 percent of potatoes delivered on the futures board.
U.S. Department of Agriculture, Fruit and Vegetables Division, Report No. 54
1966 total rail car shipments_ 1966 total truck shipments.
A total of 32,540 that were shipped out of the State of Maine, rail cars and truck shipments. So the point that I would like to bring here, you can see that there is a vast difference between 590,330 cars traded on the mercantile in 1966 to what were shipped out of the State of Maine-483 cars.
Mr. Chairman, we have had an unfortunate thing that has happened to one of our committeemen here the first of the week. He was
supposed to be down here today to testify and Monday afternoon, he had a heart attack and died. This was Mr. Wilfrid Cvr from Grand Isle, Maine. They sent down his testimony to read and if you wish, I will insert it in the record or read it, whatever your wishes are. Mr. FOLEY. Why not proceed and read it, Mr. Albair? Mr. ALBAIR. Fine.
STATEMENT OF J. WILFRID CYR (DECEASED), GRAND ISLE, MAINE; AS READ BY GILMAN ALBAIR
Mr. ALBAIR. "Gentlemen of the subcommittee, my name is J. Wilfrid Cyr, I live in Grand Isle, Aroostook County, Maine. I am now growing about 100 acres of potatoes.
"I appreciate this opportunity to appear before you in support of H.R. 7287. I am in accord with the great majority of Maine potato growers, who have repeatedly expressed themselves against the trading of their product on the NYME and emphatically plead for its elimination.
"I have been engaged in farming for over 25 years. I have hedged potatoes successfully on the exchange when the process was possible. That was at the very beginning, in 1952-53 and 1954. I have tried repeatedly since but to no avail.
"I will not burden you with boring statistics but instead, I shall attempt to give you the dirt farmer's point of view and his reasons why hedging on the exchange has become an impossibility. At the same time give you a closer look at the deplorable situation we are in today, due primarily to this evil known as futures trading.
"We are told repeatedly by the opponents that the farmers need to be educated on how to use the exchange. A few years past, Dr. Alvah Perry of the University of Maine was offering to meet with any 10 interested people to give a seminar on hedging on the exchange. I have submitted my name as an interested party on several occasions. Nothing ever materialized and to my knowledge no such seminar has ever been given anywhere in Aroostook County.
"In spite of my limited knowledge on how to use exchange, I try to keep abreast of it everyday to try to detect a trend, to anticipate a use. I am unhappy to have to report to you that in the last 15 years, the level of trading has been too low for a farmer to hedge and realizes his cost of production. The farmer doesn't need a professor to tell him that you cannot insure a risk by incurring a loss.
"The farmer, being by nature an innovator, was enthusiastic about the exchange at the beginning. He used it as it should be used to insure his risk. On a small scale to be sure; until he began to sense that the exchange maybe was controlled or perhaps even conducted. Those who have used it more extensively, are no longer with us today. Now, no professor could ever convince a farmer that the thing isn't manipulated."
Mr. FOLEY. Mr. Albair, if I may interrupt for just one moment, the Chair wanted an opportunity to introduce to the committee and to those present, before he leaves, a very distinguished visitor. Congressman Hathaway has pointed out that a former Governor of Maine, a very distinguished Maine citizen, is with us-former Gov
ernor John H. Reed, who is now Chairman of the National Transportation Safety Board.
Governor Reed, it is a pleasure to see you and have you in the committee room.
Mr. REED. Thank you very much, Mr. Chairman. I would like very much to stay with you a little later, because it is a great pleasure to come up and see my fellow Maine potato farmers, but I must go back to work now.
I certainly wish them well. They know where I stand on this issue. Mr. FOLEY. Thank you very much.
Proceed, Mr. Albair.
Mr. ALBAIR. "In the last few weeks, I have noted a slight upward trend in trading. It is not totally unexpected in view of the announcement of the hearing being held here today. I expect that the trend will continue upward for some time, again in view of the announcement of the postponement of the opponent's testimony. I would even venture to say that it is probably the main reason for requesting the postponement. Namely, to allow more time to conduct the level of trading into a more favorable position to support the arguments to be presented.
"This brings me to the next point which I want to bring out for your consideration. Allowing that the exchange is left to take a natural and normal course and that the level of trading rises to the level so as to make hedging possible again or even attractive. Until a farmer has recouped and accumulated some capital to be able to do it. on his own, he is therefore compelled to borrow. Although the credit agencies, I am sure, are theoretically in agreement with the principles and process of hedging; they in turn will be inclined to do a little hedging on their own so as not to overextend themselves. Consequently, you have one form of hedging becoming a hedge to prevent or at lease seriously limit a more desirable form of hedging.
"There is another way in which a farmer may possibly take advantage of hedging, again predicated upon a more favorable level of trading than has existed in the last 15 years. And that is to contract for his fertilizer and/or spray materials, and let the supplier do the hedging. Let him foot the deposit and margin. To avoid disappointment, the farmer should bear in mind that even though the possibility may be left in, the attractiveness will surely be taken out."
"There are those who contend that futures trading is not to blame for our present deplorable situation. They blame it instead on oversupply. I say it most certainly is. Futures trading has been the most significant contributor to overproduction. How long will it continue? Just as long as there are farmers. A farmer to farm, has to plant. To plant, you have to have fertilizer, spray material, machinery, etc., so you borrow. As long as you can borrow, you borrow. You even beg to borrow until you realize that you're borrowing to go begging when you quit.
"I said earlier that I have been engaged in farming for over 25 years. I am the fourth generation on the farm I now occupy. The day is fast approaching when I'll have to yield to the fifth generation. What will I have to yield? I guess I am still considered the legal owner of the farm I occupy. In reality, I am farming Government land. In
a manner of speaking you might even call it a reservation. So I live and work on a reservation. I live also with the uncertainty as to how long the Government will reserve for me the privilege of farming this land.
"One last observation about future trading. It is the contention of the opponents that the cash market always follows the futures market. I have no quarrel with that statement as long as we establish in which direction. If the future market goes down, the cash market is sure to follow-quickly and completely. If the futures market goes up, the cash market will respond much more slowly and cautiously, sometimes only to the point of remaining steady.
"No need to tell you that my forebears had their problems and faced many difficulties. I remember well the great depression of the thirties. My father had a hard go of it like everybody else. But never, never, for one instance, did he face the stark reality that I am facing today. But, again with God's help and your support by enacting this legislation. I still entertain the hope of once more enjoying the best part of wealth, namely independence."
That is all, Mr. Chairman.
Mr. FOLEY. Thank you very much, Mr. Albair. Of course, the committee is very, very sorry to hear of the death of the witness. His statement will be included in full as you read it in the record.
The next witness will be Mr. Vernon James of Elizabeth City, N.C.
STATEMENT OF VERNON G. JAMES, PAST PRESIDENT, NORTH CAROLINA POTATO GROWERS & DEALERS ASSOCIATION, ELIZABETH CITY, N.C.
Mr. JAMES. Mr. Chairman, members of the committee, I will probably give you the shortest statement in history, as I have heard these hearings before and I want to avoid repetition. I would like to tell you who I am and who I represent and what stand I take.
My name is Vernon G. James, I live in Elizabeth City, R.D. 1, N.C. I am a past president of North Carolina Potato Growers and Dealers Association, past president of National Potato Council, past president of Weeksville Vegetables Growers Association, past member of North Carolina General Assembly, having served in the House for two terms. If you have ever seen a "has been," I am it. Mr. FOLEY. You are a very distinguished one.
Mr. JAMES. I am presently president of James Brothers, Inc., growers and distributors of farm produce, potatoes included.
For the past 6 years the North Carolina Potato Growers and Dealers Association have voted their opposition to future trading in potatoes. On January 17, 1972, this past Monday, at a semiannual meeting, they reaffirmed their opposition to future trading.
I am here today in support of the Hathaway bill, H.R. 7287. This legislation is needed. Future trading in potatoes disrupts orderly marketing.
My chief complaint is: Trading ends in May each year. This is just prior to harvesting potatoes in North Carolina. Many people