STATEMENT OF MILO K. SWANTON, EXECUTIVE SECRETARY, WISCONSIN COUNCIL OF AGRICULTURAL COOPERATIVE, MADISON, WIS.

The CHAIRMAN. Proceed, Mr. Swanton.

Mr. SWANTON. I am Milo K. Swanton, executive secretary of the Wisconsin Council of Agricultural Cooperative, and I am also a farmer living on and operating a livestock and dairy farm and for more than 20 years I have been a grower of leaf tobacco in Wisconsin. I merely want to summarize some of the major oleo arguments which have been answered by previous people who have testified. The CHAIRMAN. Mr. Swanton, do go right ahead.

Mr. SWANTON. Major oleo arguments answered by factual evidence: Argument 1: Repeal will lower prices of margarine, cutting cost of living, especially for low-income families.

Rebuttal: Over 95 percent of the oleo purchased in the Nation is taxed at only one-fourth cent per pound. Opinion poll shows tax is no deterrent to use, that 68 percent of people now use oleo.

Argument 2: Consumers demand yellow oleomargarine. Rebuttal: Opinion poll shows only 38 percent of people insist on yellow oleo; 62 percent say the color is unimportant.

Argument 3: Dairy farmers are not really interested in the oleo-tax question because fluid milk sales are more profitable than butter sales. Rebuttal: Over 1,176,000 dairymen depend on butter as the most profitable outlet available to them. For millions more farmers producing fluid milk and other dairy products butter is the "gold standard."

Argument 4: Repeal of taxes, they say, will increase total farm income by increasing demand for cottonseed and soybean oils for margarine.

Rebuttal: When a consumer buys butter the dairy farmer gets 76 percent of the sale price. When a consumer buys oleo the farmer gets 31 percent of the sale price.

Argument 5: Repeal of oleo taxes will not create wholesale fraud because proper labeling and packaging will prevent.

Rebuttal: An independent, impartial survey of 153 restaurants in major cities throughout the country showed that one out of three was serving customers oleo, claiming it was butter. According to pure food and drug law administrators, their machinery is inadequate to prevent Nation-wide fraud.

Argument 6: Oleo tax discriminates against the industry and discourages the sale of its product.

The CHAIRMAN. Mr. Swanton, I did not get the impression from the witness today from the Pure Food and Drug that they consider their machinery inadequate. Am I in error on that?

We had a witness this morning from the Pure Food and Drug and at least from him I did not get the impression that he believes their enforcement machinery is inadequate under the present law. If I am wrong on that, I would like to have my memory refreshed.

Mr. SWANTON. Well, it was my impression that his testimony indicated that as far as the chemical components and from a standpoint

of nutrition, they were not in a position alone to do it without the aid of the Internal Revenue Department.

The CHAIRMAN. I see what you mean.

Mr. SWANTON. That is, at the present time you have the Federal Food and Drug Administration on account of the tax provisions; you have the policing made possible through the activities of the Internal Revenue Department.

The CHAIRMAN. I have gotten a general impression out of the hearing that as between all of the existing enforcing agencies it is working very satisfactorily.

Mr. SWANTON, As the law stands at the present time.

The CHAIRMAN. That is what I am talking about.

Mr. SWANTON. Yes, however, as far as the testimony given by the Federal Food and Drug Administration, if the taxes were taken off you would not then have the policing machinery of the Internal Revenue Department which would take away the present provision which we feel helps to make the status quo.

The CHAIRMAN. That was made clear by the witness.

Mr. SWANTON. Rebuttal: Oleo sales have more than doubled since 1941.

Argument 7: Retail outlets for oleo are limited because of high license fees.

Rebuttal: Oleo is now sold in 265,000 stores, an increase of 100,000 outlets since 1941.

Argument 8: Consumers are virtually unanimous in their demands that oleomargarine taxes be repealed.

Rebuttal: Opinion survey shows public lacks information on the subject. For example, 45 percent do not know that there is any tax on oleo; and only 3 percent know that the tax on white oleo is onefourth cent per pound.

Argument 9: Yellow is the natural color of oleo; present law requires manufacturers to bleach out the color.

Rebuttal: Armour Research Foundation reports that oleo made from soybean oil is naturally gray-green, while oleo made from cottonseed oil is offwhite. Bleaching is to remove undesirable colors ond offensive odors and tastes.

Argument 10: Repeal of oleo taxes will permit yellow oleo to sell at the price of white.

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Rebuttal Recent survey shows that in cities where yellow oleo is sold, its price is as much as 27 cents per pound higher than white oleo, although the tax is only 10 cents.

Gentlemen of the committee this outlines briefly some of the arguments presented by the oleo people and the answers as we see them coming from those who have testified before your committee. I want to say in conclusion that as a farmer milking cows and producing on an average of about 150,000 pounds of milk on our farm which goes primarily into the city, fluid milk, and Swiss cheese, not a pound going into butter, nevertheless I like a majority of the 178,000 farmers in the State of Wisconsin and elsewhere whose milk is not going into butter see in this proposal a danger sign as has been outlined by those who have testified previously.

The danger of a battle of substitutes along the whole front against the dairy industry, filled milk, filled cream, filled ice cream and yes, filled cheese.

So, we feel that this is a very serious question to be decided; that it means a determination of which road America is going to follow, whether we are going to go down the road of a balanced type of agriculture, cash crops such as are raised in the South and such as we are raising also in the North and a livestock industry such as we have developed in the North and which we hope will be developed and is being developed in the South.

With that balanced type of agriculture we will have a stronger economy and we will have a higher level of nutrition. But, if we take the other road it is our opinion that we will then be taking the road that, for example, Sicily, Italy, Greece, China, and India have taken and that is a very serious threat and it involves this whole program of soil conservation.

The CHAIRMAN. Does that complete your statement, Mr. Swanton? Mr. SWANTON. Yes, sir.

The CHAIRMAN. Thank you very much.

(The following supplementary statement was later submitted for the record :)

SUPPLEMENTARY STATEMENT BY MILO K. SWANTON, EXECUTIVE SECRETARY OF THE WISCONSIN COUNCIL OF AGRICULTURE CO OP: RATIVES, PRESENTED TO THE UNITED STATES SENATE FINANCE COMMITTEE, MAY 18, 1948, IN OPPOSITION TO REPEAL OF FEDERAL TAXES ON OLEO MARGARINE

You will agree, I am sure, that the 4 cent per pound tax on non-yellow oleo is no handicap to the oleo manufacturers nor does it throttle consumption. The real issue is ethical more than economic. It is not a battle between the North and the South. The oil industry is growing in the North. The dairy industry is growing in the South.

The issue today is largely whether two fats of vastly different origin and somewhat different dietary standards are competing fairly or unfairly for consumer demand.

We believe that consumers have a right to buy either oleo or butter in the market place. We believe, however, that in that right the consumer should be guaranteed protection against fraud and deception. We believe that producers of dairy products are justified in their position that oleo made and sold in imitation of butter amounts to a trick on consumers and constitutes an unfair trade practice against the dairy industry.

The 10 cents per pound tax on yellow oleo does not begin to equalize the unfair trade practice engaged in by the oleo manufacturers. Any product, such as oleomargarine, that depends upon imitation and deception for the success of its business and which takes advantage of wide margins of profit between cost and selling price, is most likely to capitalize on the further economic advantages that will accrue by repeal of the 10 cents per pound tax on yellow oleo. Consumers have been lead to believe that the shortage of oleo that previously existed was the result of taxation. The real reason, of course, was that fats and oils were in general short supply. Consumers have been lead to believe that butter is high priced because of the 10-cent tax on yellow oleomargarine. The facts are that the price of butter is where it is because of high cost, of milk production. High cost of milk production has been due to high cost of feed, high taxes, scarcity of machinery, high transportation costs, high building costs, scarce labor and high labor rates, high cost of seed, fertilizer and high cost of all other elements of production. The oleo tax contributes nothing to the present price of butter.

Unfortunately and erroneously, cotton and soybean farmers have been propagandized into thinking that the present oleo tax issue is of vital concern in the marketing of their crops. The facts are that the cotton and soybean farmers have a greater income from the sale of their seed products in the form of dairy feed than they have in the purchase of vegetable oils used in oleo.

For example, in 1945 the farm value of cottonseed sales amounted to $229,690,000. Eleven and thirty-seven one hundredths percent of this value was used in the form of dairy feed while 10.3 percent of this value was consumed as oil

in the manufacture of oleo. The same year the total of soybeans sold as grain (not for hay) amounted to $386,557,000. Thirteen and fifteen one hundredths percent of that value was used by the dairy industry. Only 5 percent of that value was sold to the manufacturers of oleomargarine.

The soybean and cotton farmers should also realize that the oleo manufacturers prefer to buy coconut oil rather than soybean or cottonseed oil. In the future they will buy their oils from the Philippine Islands and from other South Pacific areas at the earliest possible opportunity.

Neither Federal law nor Federal regulations specify what oil shall be used for oleo or in what proportions. For example, in 1925 oleo consisted of 40.2 percent animal fats, 14.4 percent American vegetable oils and 45.5 percent imported vegetable oils. In 1933 they used 14 percent animal fats, 10.5 percent American vegetable oils, and 75.5 percent imported vegetable oils. When World War II came along, it became difficult to get imported vegetable oils, when the use of imported vegetable oils dropped to 10.9 percent.

According to prewar figures, about one-half of 1 percent of the cotton growers' income was derived from the sale of oil used in oleo. In the sale of butter the dairy farmer gets about 76 percent of the consumers' dollar. In the three principal butter-producing States, Minnesota, Iowa, and Wisconsin, where 41 percent of the Nation's butter originates, 80 percent of that butter is made in cooperative creameries, controlled entirely by dairy farmers living on and working family-sized farms.

The margins of profits enjoyed by the manufacturers of oleo are so wide as to be frightening when you analyze them. According to prices existing on March 12, 1948, the cost of crude oil going into oleo coming from cottonseed and from soybeans, after figuring freight charges from oil mills to oleo refineries, after including the cost of unloading, refining, bleaching hydrogenation, deodorizing, loading and icing of cars, cost of added chemicals, shrinkage, and freight from refinery to oleo plant amounted to 21.38 cents per pound (after crediting the overrun resulting from the addition of water, curd, salt, and preservative). Add to this the cost of final processing such as plant overhead, labor, Federal tax, addition of vitamin A and packaging and the cost of packaged oleo f. o. b. factory was 25.65 cents per pound. Compare this with the average price of 35 cents per pound paid by retailers of oleo on that same day, March 12, 1948. The costs between 25.65 cents and 35 cents are 1.72 cents for selling expense and freight, another 1.5 cents chargeable to wholesalers handling and delivery costs. This leaves a margin of 6.13 cents per pound. These tremendous profit margins make possible the millions of dollars that the oleo interests spend in propaganda to lead public opinion away from analyzing the real facts.

On the other hand, ask any dairy farmer selling butterfat to a creamery and he will tell you that invariably he receives more per pound for his butterfat than the wholesale price charged for the finished butter. This is possible because the butter industry pays the cost of making, selling, and transporting out of the margin that results from the fact that a pound of butter, like a pound of oleo, contains about 18 percent low priced ingredients such as moisture, curd and salt.

In this oleo tax controversy you have heard much about trade barriers. You have heard little about unfair trade practices. Why of all the colors in the spectrum do the oleo people demand the yellow color of butter? Why do they flavor it like butter? Why do they add foreign ingredients to give it frying qualities something like butter? Why do they imitate the vitamin content of butter? Why do they duplicate the specific gravity and melting point of butter? The answer to these questions, of course, is that they are determined to trade on the long accepted standards by which the civilized world has for centuries recognized the goodness and quality of butter.

By virtue of the so-called Standards of Identity promulgated in 1941, the oleo makers were granted complete power to confuse and confound the consumers of America.

Let us go back for a moment to the ethical issues involved, the unfair trade practice of trading on well-recognized and long-accepted standards of identity for a basic food now being imitated. For example, "Brookshire" cheese was too similar to Swift & Co.'s "Brookfield" trade mark to be permitted. Will Rogers once found that "Illiterate Digest" was too similar to "Literary Digest" to be legalized. An automobile manufacturer was prevented from using a certain shaped radiator because it too closely resembled the Packard radiator design.

Within the last few months Life Magazine took legal steps against a Wisconsin hotel man alleging that the first page of his advertising too closely resembled

the format of Life Magazine. Life Magazine sued this Wisconsin hotel operator in Federal court, claimed damages, and forced change of the first page of the advertising even though there was no element of competition. This, gentlementhe use of the word "Life" is claimed to be an infringement even though "Life" like "Liberty and the pursuit of Happiness" are the inalienable rights of every American as stated in our own Declaration of Independence.

Oleo interests want American consumers to think that oleo is the victim of discrimination by the dairy industry. The real facts show, however, that oleo is a privileged and protected product. Here are a few facts about the protection and rights granted to oleo that are not granted to butter:

1. Oleo can be made from any number of fats. Butter can be made from only one fat,

2. Oleo can be made by heating and reprocessing.

market butter do not grant this privilege to butter.

3. Oleo can be made with a preservative. Butter cannot.

Standards for regular

4. Oleo may contain monoglycerides and diglycerides. Butter does not. 5. Oleo protection against foreign imports and competition is 22 cents per pound. Protection for butter against foreign imports and competition is only 7 cents per pound.

6. If more than one fat is used in the making of butter, or if, like oleo, any foreign substance is added, the resulting product must be labelled “Adulterated butter" and must pay a 10 cent per pound Federal tax the same as oleo. Oleo is always made from more than one fat and yet is not classified nor is it compelled to be labelled as adulterated._

7. If heating and reprocessing methods, used in making oleo, are ever used in making butter, the product must be labelled "Renovated butter" and must pay the same Federal tax as nonyellow oleo. Yet oleo made this way is never labelled "Renovated."

Bear in mind that this drive by the oleo people to repeal the 10-cent Federal tax is only the first wedge in a concerted drive to legalize and to propagandize for other dairy substitutes. It is the first round in a battle of substitutes against our entire dairy industry. The next attack will be on the filled milk statutes. The next drive will be to legalize filled cheese and filled cream. Already filled ice cream is being made.

Repeal of the present Federal tax regulating oleo would mean that—

1. All oleomargarine would be colored yellow and consumers would have no adequate protection against fraud, deception, and misrepresentation.

2. No Federal control would be left over production and sale of oleo because supervision and policing by the Internal Revenue Department would be eliminated.

3. Loss of a large portion of the bread-spread market would force the slaughter of about 2,000,000 dairy cows.

4. This would result in less rather than more dairy products-although nutritional experts say that dietary standards demand that we have more instead of less.

5. It would bring about a scarcity of milk solids so badly needed in the diet of our people because milk solids cannot be produced except when separated from the butterfat.

6. Less livestock will mean less soil fertility, more soil erosion, less conservation.

7. The 27 oleo manufacturers, with almost monopolistic control, could increase the cost of oleo to consumers by at least another 5 cents a pound, thereby increasing their already high profits by another $50,000,000 a year on a billion-pound annual volume.

The proposed repeal of Federal oleo taxes would open the door to a deluge of fraud and deception upon American consumers hitherto unknown.

Repeal would leave the United States in a sad position among the civilized nations of the world. Canada and New Zealand do not permit the manufacture or sale of oleo. France, where oleo was first made, still prevents imitation of butter yellow color. Other countries require the use of sesame seed oil or some other ingredient to prevent imitation of one or more of butter's physical characteristics as a means of precenting consumer deception.

It is up to this Senate to choose between two roads-one that leads to continued high level of national nutrition or the other road that will lead to lower food standards as well as to consumer confusion and deception. You face a decision involving national agricultural policies. One decision, that of retaining present oleo taxes and controls thereby reducing fraud and deception, also