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REPORT No. 1719
AMENDING THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED AND AS REENACTED BY THE AGRICULTURAL MARKETING AGREEMENT ACT OF 1937, AS AMENDED
May 29 (legislative day, May 28), 1940.-Ordered to be printed
GILLETTE, from the Committee on Agriculture and Forestry,
submitted the following
[To accompany S. 3426]
The Committee on Agriculture and Forestry, to whom was referred the bill (S. 3426) to amend the Agricultural Adjustment Act, as amended, and as reenacted by the Agricultural Marketing Agreement Act of 1937, as amended, having considered the same, report thereon favorably, with a recommendation that the bill do pass with the following amendment:
Strike out all after the enacting clause and insert in lieu thereof the substitute amendment.
GENERAL PURPOSE OF LEGISLATION
Bill S. 3426 would amend the Agricultural Adjustment Act, as amended and as reenacted by the Agricultural Marketing Agreement Act of 1937, as amended. The amending bill recommended for enactment contains 16 sections which are explained in detail in this report. Most of the provisions of this bill are for the purpose of clarifying the present language of the act, thereby removing the basis for unnecessary and expensive litigation which would otherwise be involved in the enforcement of marketing agreement and order programs developed pursuant to the act. Other provisions of the bill seek to obtain a more uniform application of this legislation to different commodities and groups and to extend the application of marketing orders to commodities for which such orders are not now authorized. The nature of this legislation, as well as the types of marketing-control programs which it authorizes, are sufficiently important to merit special attention in this report before considering the detailed provisions of the bill.
GENERAL STATEMENT ON MARKETING CONTROL LEGISLATION AND
Programs for the control of interstate marketing of agricultural commodities, and their products, were first authorized by a few short paragraphs in the Agricultural Adjustment Act which was approved May 12, 1933. This act authorized the Secretary of Agriculture to enter into marketing agreements with and to license the interstate handlers of any agricultural commodity or product thereof. These two authorities were separate and distinct. It was not too clear at the time this legislation was enacted as to just how these authorities would be used to accomplish the purposes of this act. This authority permitted the development of three types of programs=(1) a purely voluntary program involving only marketing agreements between the Secretary of Agriculture and the signatory handlers; (2) a purely regulatory marketing program, involving only the use of the license; and (3) a combined voluntary and regulatory program using both the marketing agreement and license.
It soon became apparent that the marketing agreement alone would be ineffective because all handlers would not sign and their uncontrolled activities would place the signatory handlers in an unfavorable position. Furthermore, the major proportion of the volume of certain commodities is handled by a very few handlers who were opposed to signing marketing agreements except when the provisions of the program were to their particular advantage. For these reasons, marketing agreements were supplemented by licenses. Under special circumstances, the license was issued without the agreement being made effective. In most instances, except in the case of fluid-milk markets, the authority provided by the act to issue licenses independent of the marketing agreement was sufficient to secure the cooperation of most handlers in the development of practical marketing agreements which a substantial percentage of the handlers would sign.
During the period from 1933 to 1935, a large number of marketingcontrol programs were developed under the broad provisions of the 1933 act. Such programs were made effective in numerous fluid-milk marketing areas and in the case of crops; in various areas specializing in the production of fruits for fresh shipment, canning, and drying; vegetables for fresh shipment and canning; nuts; tobacco; rice; and several other commodities. While these early programs were quite effective in accomplishing the purposes of the act, they soon encountered serious enforcement difficulties. The license, being of primary importance, had to be strictly enforced if the programs were to continue to accomplish their objective.
In many respects the license provisions of this original act, as well as the licenses which were issued, were subject to many of the same legal difficulties as were involved in the National Industrial Recovery Act and its codes of fair competition. Therefore, when this latter act was declared unconstitutional by the Supreme Court on May 27, 1935 (A. L. A. Schechter Poultry Corporation et al. v. United States, 295 U. S. 495) Congress deemed it desirable to make substantial amendments to the marketing-control provisions of the Agricultural Adjustment Act. Among the principal amendments made at that time, August 24, 1935, were (1) substitution of orders for licenses; (2) designation of the terms and conditions which orders might contain; (3) establishment of the administrative procedure to be followed and conditions which must be met before orders might be issued, including the holding of public hearings and the making of appropriate findings by the Secretary; (4) limiting the issuance of orders to the smallest practical production or marketing area; (5) requiring a determination by the Secretary, before an order could be made effective that its issuance was favored or approved by two-thirds of the producers by number or volume, and requiring termination of any order or agreement when such termination was favored by a majority of the producers. In addition to these amendments which were designed to strengthen the legal basis for these programs and to assure that they would be beneficial to and have the support of producers, the authority to issue orders in the place of licenses was restricted to certain specified commodities or groups of commodities. This amendment specifically excluded the issuance of orders for most fruits and vegetables for canning, in spite of the fact that some of the most effective of the earlier programs were in respect to these commodities. Following these amendments, numerous legislative attempts have been made, at the request of producers, to bring canning crops and other excluded commodities within the provisions of the act. Subsequent amendments have extended the order provisions of the act to apples produced in the States of Washington, Oregon, and Idaho; hops; and to certain other commodities which were excluded in 1935.
The 1935 amendments greatly improved the enforceability of marketing-control programs. Following these amendments, most court decisions upheld the validity of the act and the marketing orders until doubts were raised by the Supreme Court's decision on January 6, 1936, in the Hoosac Mills case (United States v. Butler, et al, 297 U. S. 1). While this decision did not involve the marketing agreement and order provisions of the act, certain lower courts construed it as rendering the entire act invalid. To meet this problem, Congress re-enacted and amended the marketing-agreement and order provisions in the legislation known as the Marketing Agreement Act of 1937. This action by Congress appears to have removed all major legal weaknesses in this legislation, though this was not entirely recognized by certain lower courts until the Supreme Court's decisions on June
1939 (United States of America v. Rock Royal Cooperative, Inc., et 307 U. S. 533; and H. P. Hood and Sons, Inc., et al v. United States, et al, 307 U. S. 588). These decisions were in respect to two cases involving the Marketing Agreement Act of 1937 and marketing orders in the New York and Boston milk markets. These decisions upheld the validity of these two milk orders and the act in respect to all legal questions raised. While the legality of the Marketing Agreement Act of 1937, so far as all major issues are concerned, seems to have been established and recognized by the courts, certain litigation still persists in respect to numerous minor detailed questions involving the interpretation of certain provisions of the act.
The Marketing Agreement Act of 1937 provides a unique means of developing programs for the orderly interstate marketing of agricultural commodities and products thereof. The act itself imposes no regulation on the handling of any commodity. It does not prescribe a specific detailed marketing program for any commodity produced or marketed in a particular area. It does not even assure that there will be a marketing program for any commodity produced or marketed in any area. The act constitutes enabling legislation under which a large variety of specific types of programs may be developed, programs which can best meet the peculiar marketing problems of producers of specified commodities by marketing or production areas.
The marketing problems of milk producers are different from those of the producers of farm crops. Likewise, the marketing problems of milk producers vary from market to market. The same is true among the different crops and for the same crop in different production areas. These differences necessitate considerable flexibility in the act to permit the development of programs which will most effectively meet the needs of producers.
Marketing agreement and order programs do not seek to control, either directly or indirectly, the volume of production of any agricultural commodity. Except in the case of the highly organized fluidmilk markets, they do not provide for price fixing, and here such authority is limited to the fixing of minimum prices to be paid producers. These programs are not dependent upon subsidies or other payments to producers from Federal funds. Operating expenses are shared pro rata by the industry within the production or marketing area involved. In many programs, industry committees composed mainly of producer representatives serve as agencies of the Secretary in the making of current recommendations concerning current detailed operations of the programs.
In the case of fluid-milk markets, the problem of producers is largely one of securing price stability, uniformity of purchase methods, and equitable methods of sharing the burdens of market surpluses. Market orders for milk require that handlers purchase milk according to use classifications. Handlers in a particular market purchasing milk for a given use are required to pay a specified minimum price. Surplus milk which is used in the manufacture of certain products, having to meet less rigid health requirements, is priced lower than milk used for fluid distribution. Milk orders provide plans for making settlements with producers which distribute the burden of surplus equitably among producers.
Marketing-control programs for crops may employ various plans authorized by the act for the regulation of market supplies. "The particular plan used must of necessity depend upon the nature of the commodity and the organization within the industry. Conditions may be such for certain crops or areas that no program can be undertaken. Many fruit and vegetable programs have been designed to prohibit the shipment or processing of inferior grades of the commodity, particularly when supplies are excessive or when the shipment of such grades would cause losses to producers. Other programs are designed to regulate the rate flow of the commodity to market, thereby preventing periods of market gluts or scarcity. Where supplies are extremely excessive, as commonly results from abnormally favorable yields, the quantity to be marketed may be limited and equitably allotted among handlers and producers. Such programs were effectively employed in 1933 and 1934 in the peach-canning industry of California, and in the hop industry of Washington, Oregon, and California during 1938 and 1939. For commodities having several market outlets, producers' returns may be substantially increased by controlling the volume of the commodity going to certain market outlets and by diverting the surplus to lower-priced outlets where the demand is more elastic. The Pacific coast walnut industry has operated a marketing-agreement program of this type continuously since 1933.
These various types of market-supply control programs for crops are specifically authorized by the Marketing Agreement Act of 1937. The act does not undertake to deal specifically with the type of program which must be used for a particular crop produced in a particular area. The conditions are so variable, that the details of each particular program must be determined administratively upon the basis of the standards and in accordance with the procedure established in the act.
The requirement that each specific program must be approved by two-thirds of the producers before it can be made effective assures protection to producers and furthermore places the primary responsibility for the initiation and development of the individual program in the hands of producers. Where this initiative is not exercised, or where the evidence submitted at public hearings does not justify program for a particular commodity, the program is not undertaken or made effective. Where producers are organized and actually engaged in the cooperative marketing of their products, they have a fuller appreciation of their marketing problems and are, therefore, in a more favorable position to obtain the advantages afforded by this legislation.
CHANGES IN THE EXISTING ACT 1 PROPOSED BY THE AMENDING BILL
Provisions of the act proposed to be omitted are enclosed in black brackets and new matter is italicized. Each section or subsection of the existing law affected by an amendment is quoted in full, showing the relationship of the proposed change to the present statute. Section numbers appearing without brackets are those appearing in the existing act; those enclosed in light-faced brackets before each deletion and/or addition are section numbers of the amending bill. If only one section number in brackets appears before a deletion and no other number is indicated for a subsequent addition, both the deletion and the addition are made by the same section of the amending bill.
SEC. 2. It is hereby declared to be the policy of Congress
(1) Through the exercise of the powers conferred upon the Secretary of Agriculture under this title, to establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce as will establish prices to farmers at a level that will give agricultural commodities a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of agricultural commodities in the base period; and, in the case of all commodities for which the base period is the pre-war period, August 1909 to July 1914, will also reflect current interest payments per acre on farm indebtedness secured by real estate and tax payments per acre on farm real estate, as contrasted with such interest payments and tax payments during the base period. [Sec. 1.) [The base period in the case of all agricultural commodities except tobacco and potatoes shall be the pre-war period, August 1909-July 1914. In the case of tobacco and potatoes, the base period shall be the post-war period, August 1919July 1929.] The base period shall be the pre-war period, August 1909-July 1914, except that for those agricultural commodities and products thereof which are subject to the provisions of section 8c, the base period shall be the post-war period, August 1919-july 1929, ör such part thereof as is determined pursuant to the provisions of section 8e.
1 The term "Act," as used herein, means the Agricultural Adjustment Act, as amended, and as reenacted by the Agricultural Marketing Agreement Act of 1937, as amendea.