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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?
(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 OPTRITIVES, PRESENTED TO THE UNITED STATES SENATE FINANCE COMMITTEE, MAY 18, 1948, IN OPPOSITION TO REPEAL OF FEDERAL TAXES ON OLEOMARGARINE
You will agree, I am sure, that the 14 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 scmewhat 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 inarket 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. Standards for regular market butter do not grant this privilege to butter.
3. Oleo can be made with a preservative. Butter cannot.
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 preşent 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
will mean an aid to soil conservation. The other decision, namely that of lowering or reducing the Federal tax on oleo will mean loss of soil fertility. It will mean more soil erosion and destruction.
The wrong decision in this controversy will affect the health and the power of American people for generations to come.
The CHAIRMAN. Senator Thye, will you have your constituent come forward ?
Senator THYE. Senator Ancher Nelsen, of Minnesota, is here. He attempted to arrive early this morning, but due to the lateness of planes and missing connections he came in late this afternoon; but I would like to hear Senator Ancher Nelson. He served in the Minnesota legislative body for a number of years and has dealt with legislation in the State relative to the oleomargarine question.
The CHAIRMAN. Go right ahead, Mr. Nelsen.
STATEMENT OF ANCHER NELSEN, STATE SENATOR, STATE OF
MINNESOTA, ST. PAUL, MINN. Mr. NELSEN. I hope you will excuse the disorganized notes which I have here, because I came in practically unprepared. I have met with your committee and organized my remarks in coordination with what they might have to say, but I was unable to be here because of missing my plane in Chicago. I have served in the Minnesota legislature for 13 years, and at the present time I am chairman of the committee of dairy products and livestock. I am an actual farmer; I operate 280 acres of land in Minnesota, and we have on our farm about 50 head of cattle.
I realize that in legislative bodies you have groups attempting at every hand to better themselves by legislation or any provisions that they may write into the law where they may have a better financial advantage, and that includes the farmer.
So that you may be better grounded in what I have to say, a number of years ago the oleomargarine interests had a terrific battle in Minnesota, and those who are here representing the oleo people will recall that we had a bill there that provided a tax of 15 cents a pound on oleomargarine-uncolored oleomargarine, if you please.
At that session of the legislature I voted against the bill and was nearly politically exterminated because I did, but this was why I did it: I felt that it was unfair for the farmers as a group to put a tax disadvantage against any competitive product if it was sold, as it was intended to be sold, as a product as oleomargarine. We find different things coming along in your legislative bodies; you have it here. You have, for example, the coal people wanting a tax on natural gas, and
I believe it behooves any legislative body regardless of where you are located to try to represent the economy of your Nation. I think that one of the most serious threats to the economy of the United States of America today is our soil-erosion problem and soil conservation. As a dairy farmer, I full well know, and anybody that wants to be honest knows, that we have to have the dairy cow on our farm to provide an outlet for the hay that we are going to have to raise in our contour farming, and what have you, and unless we have domestic fertilizer to
rebuild our soils we are not going to have an economy worth remembering in years to come.
When you fly from Oregon east, or in any direction, the soil-erosion problem is a terrific problem. It is one of the most serious problems facing our people today; and I feel that when we go into this picture of oleomargarine, I full-well know that we have no patent right on any color, but I think we have a moral right; and that is why the people want a yellow oleomargarine, because they like our butter.
The oleomargarine people would like to copy butter because the people, for psychological reasons, seem to enjoy margarine if it is colored.
I am of the opinion that as far as the taxes are concerned the butter people have lost their fight. But I am willing to concede if they will relinquish it so that the public is going to know what they are eating when they eat oleomargarine-and I think it can be done if they are willing to cooperate with us to do it.
can easily see what is going to happen in this battle. You, as the United States Congress, can do one thing, and then you are going to immediately have other individuals doing another. I do not like to see that, but it is bound to happen. I will be put in the same position as I was before, with retaliatory measures, and I think the Congress of the United States should be big enough to compromise this situation, and I think it can be done.
I have no particular clever answer to any problem, but I think that there is one in the picture if the dairy interests and the oleo people will get together and really want to compromise it and work out the problem,
That seems to be the sum and substance of the notes that I have written down, and I hope that something can be worked out. I feel that the economy of our country is dependent upon some solution to this problem. It is true that at the present time the housewife does not like to pay these high prices for butter and I do not blame her; and I, as a farmer, am not satisfied to get 30 cents a pound for pork; I think it is too much.
I do not think the workingman can buy the products that we have been raising through these inflated times because of the war. I think we have to sensibly remember that there were many times when they sold butter at a price that the farmer could not afford to go to a 25-cent movie, and those times may come back. I think we should be temperate and tolerant in working out this problem, in spite of the fact that I think the oleo people have the advantage in this battle at the present time.
The CHAIRMAN. Thank you very much for your statement.
Senator Tuye. Mr. Chairman, might I just impose on the committee for just a few moments and say, as I said before, that I am not a member of this committee and I do feel as though I am imposing here.
However, I would like to say a few words.
The CHAIRMAN. I hope we have made it clear that you are welcome, and we will
to hear what you have to say. Senator THYE. Thank you, Mr. Chairman.