Now, at that time, we would anticipate calling back any witnesses who have testified and who find it possible to come tomorrow. But we would understand if any of the witnesses, either from Maine or from other States, would have other obligations and would not be able to come. Would any of the witnesses who have testified today find it difficult, other than those already mentioned-Mr. McCaleb and Mr. Tarburton-to return tomorrow at 10 o'clock? [No response.] Mr. FOLEY. I think it would offer the committee an opportunity to explore a little more fully what is admittedly a very complex and difficult subject. So at this juncture, the Chair would like to thank all those who are in attendance today and the subcommittee will adjourn, to meet tomorrow morning at 10 o'clock. (Whereupon, at 4:05 p.m., the subcommittee was adjourned until Friday, January 21, 1972, at 10 a.m.) 75-753-72-6 PROHIBIT TRADING IN IRISH POTATO FUTURES FRIDAY, JANUARY 21, 1972 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON DOMESTIC MARKETING AND CONSUMER RELATIONS OF THE The subcommittee met, pursuant to recess, at 10:05 a.m., in room 1301, Longworth House Office Building, Hon. Thomas S. Foley (chairman of the subcommittee) presiding. Present: Representatives Foley, Denholm, Link, Goodling, and Zwach. Also present: Representative Hathaway, Christine S. Gallagher, chief clerk; and Lacey C. Sharp, general counsel. Mr. FOLEY. The Subcommittee on Domestic Marketing and Consumer Relations will come to order. The subcommittee meets again today in consideration of H.R. 7287, by Mr. Hathaway, and Mr. Kyros of Maine, to prohibit trading in Irish potato futures on commodity exchanges. The next witness will be John Mooers of Houlton, Maine. STATEMENT OF JOHN MOOERS, HOULTON, MAINE Mr. MOOERS. Mr. Chairman, members of the committee, my name is John Mooers. I reside in Houlton, Maine; have been a potato grower and shipper for 24 years. Twelve of these years, I was director of the Main Potato Council, 2 years of which I served as its president. I will attempt to give you a straightforward account of why I know at least 80 percent of the growers in my State wish to abolish futures trading of Maine potatoes on the New York Mercantile Exchange. For 15 years, the proponents of the exchange have been trying to educate the Maine potato growers to the virtues of hedging a portion of their crop on the exchange. They contend that it is an economic tool that can be used to guarantee a profit or to insure against possible losses, that it represents a ready market at guaranteed prices any time that the growers feel it is to their advantage to move. Why, then, after so long a time, have growers failed to take advantage of this exchange vehicle? There are many reasons. I will list a few of them. First off, the potato grower is basically by nature a perennial long. He is a bull. This is part of his survival kit and the consumer should thank God that he is so constituted. He instinctively views a short seller as his natural enemy. The grower knows that this fellow. spurred on by wire houses, will raid him at the first signs of vulnerability, thus interferring and undermining any attempt he may be making to support and maintain a constructive market. Two. He feels that at times, the exchange has contributed to overproduction, thus forcing him under pressure of expediency to use the very vehicle that brought it on in the first place. This is the cancerous aspect of the exchange the exchange has a tendency to feed on itself. Three. The grower has been told that the exchange simply reflects the cash market. With potatoes, this is a dubious fact. In Maine. nothing is bought or sold without at least a sideways glance at the board. Four. At best, hedges are usually cost of production or less and most of the time, the better hedges come late in the shipping season. Credit agencies have become leary of financing the May contracts because it is just too much of a risk. Five. Banks and other credit agencies who finance hedging operations demand that when the grower liquidates his position on the board, he sell his actuals simultaneously on the cash market. This is not always easy to accomplish and it puts the grower in no position to bargain. He is a temporary captive and his actions tend to undermine or soften cash market prices. It means an increase in offerings regardless of market conditions. It also represents a threat of outright deliveries. All this tends to make a nervous market. Occasionally, the grower gets caught up between the powerful opposing forces of longs and shorts. This makes for a real circus. I have seen times that if it had not been for the stable, steady, buying practices of the large chain for consumer packages, complete and utter chaos would have taken place. The grower does not like the feeling that he is only a pawn in a bigger game. Banks and fertilizer companies are pro-mercantile because they are a first in type of people. They are going to get theirs. The growers are the ones who are coming out of this on the short end. Then you have the odd grower who has no compulsion to dumping his crop on the market, thus undermining his neighbor and possibly the value of his own potatoes that are still in storage that he has not sold. The potato grower in Maine knows that they will never build a constructive cash market if it is based on thousands of individualistic expediencies. That day is past. I have no quarrel with exchanges in general. I have no doubt that they serve a useful purpose for some commodities, but I think potatoes, because of their perishable nature and the fact that they are not totally processed, plus the short shipping season, do not lend themselves to exchange trading. I fear that when it comes to the futures trading of potatoes, the notion is one that sounds good in theory but falls short in practice. I know that there are two sides to any argument and even if the pros and cons were equal, in this country, the attitude of the grower should tip the scales. He is a prime factor and his efforts are essential to our society. He is not a parasite. I urge you gentlemen to respond favorably to our request to rid our industry of futures trading of potatoes on the New York Mercantile Exchange. Thank you. Mr. FOLEY. Thank you, Mr. Mooers. Following the testimony of Mr. Turner, we are going to call all the witnesses back. We will call now Mr. Dan Turner, Jr., of Fort Fairfield, Maine, president of the Potato Council. STATEMENT OF DAN TURNER, JR., FORT FAIRFIELD, MAINE, PRESIDENT, MAINE POTATO COUNCIL Mr. TURNER. Thank you, Mr. Chairman. I might say that one of the privileges of being president of an organization is that you maybe have a little bit to say about the decisions that are made, and being last at this hearing, a good many of the points have been covered and it may make my job a little bit easier here this morning. Mr. Chairman and members of this committee, my name is Dan Turner, Jr., and I am a potato farmer farming in a small town. called Easton, situated in the central part of Aroostock County, the largest and northernmost county within the great State of Maine. I appreciate this opportunity to appear here before you today in support of H.R. 7287 as president of the Maine Potato Council and as a potato producer deeply concerned for the future of the Maine potato industry. After all of the discussion of potato futures trading that we have listened to and read over a period of about 18 years or more, the contentions and opinions of the people involved have not changed much, if at all. About 80 percent of the Maine potato farmers still do not like futures trading in their product and emphatically plead for its elimination. In the January 17 edition of the Bangor Daily News, an employee of the New York Mercantile Exchange is reported to have described the Maine Potato Council's chartering of a Northeast Airlines airplane to transport these approximately 85 Maine growers to this hearing as a flagrant misuse of tax money. He was speaking about the fact that this association paid $6,876.45 to underwrite the cost of roundtrip air transportation to Washington. This amounts to about 50 percent of the total cost. You heard Mr. Bull say earlier that the financial support of the Maine Potato Council is derived from a 1.2 cent per hundredweight on all potatoes sold assessment paid to the Maine Potato Commission. The council then presents its annual budget request for funds to the commission, which in turn allocates a sum from its receipts to finance the council's activities. On October 29, 1970, the Maine Potato Commission allocated the sum of $20,000 to the council to underwrite the cost, whatever they may be for, in an effort to eliminate futures trading on the New York Mercantile Exchange. In addition, in a ballot by Maine growers in October of 1970, 81 percent voting said yes to the question, do you want the Maine Potato Council to use what resources it has to seek elimination of trading on Maine potatoes on the New York Mercantile Exchange. If spend |