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make cheese, ice cream, and used with skim milk and probably water to take the place of fluid milk.

Sincerely yours,

CHARLES DINEEN, Secretary.

MINNESOTA DAIRY INDUSTRY COMMITTEE,
St. Paul 8, Minn., May 5, 1948.

Senator EUGENE D. MILLIKIN,

Senate Office Building, Washington, D. C. DEAR SENATOR MILLIKIN: There has been referred to your committee the bill repealing the regulatory measures controlling the sale and manufacture of oleomargarine. Few people understand the fundamental importance of this measure to every citizen of our United States. The dairy cow is the only machine that has been given us to transform the grasses of our pasture, the legumes and other hay and rough forage crops of the farm into milk, the most vital and nutritious food given man by Divine Providence and an essential to man's well-being from the cradle to the grave.

The present regulatory measures controlling the manufacture and sale of oleomargarine were passed, not as an industry protection measure, but to protect the general public from fraud. I enclose excerpts crop the First Biennial Report of the Dairy Commissioner of the State of Minnesota made 62 years ago. You will see from this report that as long ago as 62 years, oleo manufacturers attempted to sell oleo, not as oleo, but as butter, and for the price of butter. I also enclose a pamphlet published by the National Cooperative Milk Producers Federation entitled "Nine Reasons Why the Federal Oleo Laws Should Be Retained."

We believe that a study of the prices that have been charged for yellow colored oleomargarine within the past few weeks in Washington will show that they are considerably above what the price would be were only the 10-cent tax added to the price of uncolored oleomargarine. In other words, our belief is that the consumer is being greatly misled in the belief that he is going to get cheaper oleomargarine or only have a slight additional price added if the present control measures are repealed. Oleo propagandists and those who delude themselves with the thought that they will be saving anything if the 10-cent tax on colored oleomargarine is removed, certainly will believe Grimm's Fairy Tales. It just won't happen that way.

Dairy farmers today are facing a critical situation with costs constantly increasing and supply this year at least 5 percent below last year and on the down trend. Butter is an essential part of the dairy industry and its place cannot be taken by the sale of market milk or other products. Farms producing butterfat in many cases are not located near consuming populations. Butter is a concentrated form of dairy food which can be shipped practically anywhere in the United States for 2 cents per pound. On the other hand, many remote localities could not possibly ship market milk or cream. Furthermore, cows produce approximately twice as much milk in the pasture months of May and June as they do, for instance, in November and December. It is absolutely necessary for the welfare of the dairy industry and the consumer to have a means of storing production during the summer months of large production for use in the months when production is cut in half, and butter is the best means of doing this.

Furthermore, two-thirds of the value of the milk is in the solids, not fat. Last year 1,000,000,000 pounds of dry milk were sold in the United States, most of which did not contain butterfat. If there is not a ready market for the butterfat, this most important food product will not be available for the public.

In our opinion, your committee faces one of the gravest responsibilities that has ever faced the Congress so far as agriculture is concerned. It is estimated that in 1947 68 percent of the cows and heifers slaughtered in the United States under Federal inspection came from dairy herds. Around 40 percent of the total beef produced in the United States in Federal-inspected packing plants in 1947 came from dairy herds. No more vital problem confronts the people of the United States than that of soil conservation. The dairy cow is indispensable in maintaining fertility in our soil and the production of food. If the proposals of the oleo lobby are accepted by the Congress, the dairy industry of this country has probably received a fatal blow. It will not be immediate because of present world food conditions. It will, however, be almost inevitable.

Anything interfering with the profitable production of butter would immediately upset the balance in the large markets around our cities where there is almost

twice as much milk to dispose of in the summer months and there must be an outlet for this butterfat in a form which can be stored, or the price of milk must be raised, as the dairy farmer cannot possibly continue to operate with any less yearly return than he is now receiving. Again, without question, if the price of butterfat is reduced, which it will be if oleomargarine tax and regulatory measures are repealed, the price of fluid milk will inevitably need to be raised if it is to be produced by dairy farmers.

You have never heard dairymen object to other spreads for bread, provided the public knows just what they are, even if they are called "butter"; for instance, peanut butter, apple butter, and plum butter are all good spreads for bread, and the dairymen never object to the use of the term "butter." There is nothing to prevent the oleomargarine manufacturers either selling oleomargarine uncolored, or using a distinctive color which would let the product be sold for just what it is. On the other hand, in order to imitate butter and deprive the farmers of the market which they have had since Bible times for yellow butter, the oleomargarine manufacturers are using diacetyl, which imparts a characteristic butter flavor to oleomargarine. A preservative is permitted to be used in the manufacture of oleomargarine. Neither of these chemicals can be used in butter. There is absolutely no reason to use these products except to deceive the consumer. As stated at the beginning of this letter, this bill involves the fertility of our soil, the supply of the greatest of all foods, and the welfare of a large segment of the agricultural population of the United States.

Finally, why do the oleo propagandists insist on the yellow color? They advance all sorts of arguments. Judging the future by the past, there is only one answer and that is so that it may be manufactured, sold, and consumed in imitation of butter. We urge that the present regulatory measures be retained unless the manufacturers of oleo will agree to adopt some distinctive color other than yellow, or so identify their product that it can be neither manufactured, sold, nor consumed as anything but exactly what it is. If the oleo manufacturers will agree to do this, the dairy industry will, in my opinion, go right along with them, asking the repeal of the present regulatory and tax measures. Sincerely yours,

W. S. MOSCRIP, President, Minnesota Dairy Industry Committee.

EXCERPTS FROM THE FIRST BIENNIAL REPORT OF THE DAIRY COMMISSIONER OF THE STATE OF MINNESOTA

The First Biennial Report of the Dairy Commissioner deals to a considerable extent with oleomargarine because the law was created to regulate that product. The report states that "these goods were not presented to the people as substitutes for butter and offered upon their merits, and sold for their value, but as to the best of butter, and for the highest value of that article."

It further declared that "Minnesota is the first to establish a standard against the most unblushing fraud in food that has ever been practiced in this country. Its benefits are many, and, let us hope, will be the awakening of the public mind to the enormity of the frauds in the foods and drinks of the American people, and a united and determined effort to remove them."

The report laments the plight of the people who patronize public eating establishments. It comments upon the tremendous sale of oleomargarine to large users. "Their customers were mostly restaurant, boarding house keepers, and hotels who bought it by the tub. This class of purchasers knew they were buying bogus butter-the contents were made into little round pats and placed by each boarder's plate."

Perhaps the case of Butler v. Chambers (36 M. 69; 30 N. W. 308) decided in November 1886 and which established the powers and scope of the Minnesota law can illustrate the extent of the fraud being practiced by oleomargarine dealers. The case decides the constitutionality of section 4, chapter 149, laws of 1885. This section reads as follows: "No person shall manufacture out of any oleaginous substance or substances, or any compound of the same, or any compound other than that produced from unadulterated milk, or cream from the same, any article designed to take the place of butter or cheese, produced from pure, unadulterated milk, or cream from the same, or shall sell, or offer for sale, the same as an article of food. This shall not apply to pure skim milk cheese, made from pure skim milk.

"The defendant contends that these provisions fall within the general police powers of the State, and are therefore valid. Chapter 133, Laws of 1881, 'An

act to regulate the traffic in oleomargarine,' reads in part as follows: "This act provides that any person who shall knowingly sell, or offer for sale, any article or substance in semblance of butter, not the legitimate product of the dairy, made exclusively of milk and cream, but into the composition of which oil or fat of animals or melted butter, or any oil thereof, enters as a substitute for cream, in tubs, firkins, or other original packages, not distinctly, legibly, and durably branded, * shall be guilty of a misdemeanor,' etc. This section of the act of 1881 was held to be a legitimate exercise of police power.

* *

"The public may be protected by appropriate legislation against imposition in the purchase of articles for consumption; and if, as we may assume, the prevalent compounds resembling butter in appearance and flavor, and put on the market as a substitute for it, and generally known as 'oleomargarine,' 'butterine,' etc., are liable to deceive and mislead purchasers and consumers as to the real nature of the product, and-then we think there may be sufficient reasons why the legislature may, in its discretion, meet the evil sought to be remedied by provisions for the suppression of the manufacture and sale of such artificial compounds altogether (State v. Addington, 12 Mo. App. 217; S. C. 77 Mo. 110; People v. McGann, 34 Hun. 361)."

The court further holds: "As respects the right or liberty of the citizen to engage in business, and conduct industrial pursuits, these privileges are to be enjoyed in subordination to the general public welfare, and all reasonable regulations for the preservation and promotion thereof. 'All property,' says the court in Com. v. Alger (7 Cush. 55), 'is held subject to the general regulations which are necessary to the common good and general welfare. Rights of property, like all other social and conventional rights, are subject to such reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and regulations, established by law, as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient' (Thorpe v. Railroad Co., 27 Vt. 149).

"In People v. Arensburg, the following statement appears: "The amended New York law on the subject under consideration (Session Laws New York 1885, ch. 458, sec. 2) prohibits, among other things, the manufacture, except from unadulterated milk and cream, of any product "in imitation or semblance of" natural butter made from cream, and also prohibits the sale of any article produced in violation of such act.' In People v. Arensburg (40 Hun. 359), a conviction for the violation of that act was sustained, on the ground that the legislature might not only interpose to protect the public health, but to prevent fraud and imposition in the simulation of a healthy article of food universally consumed by the people; and upon this proposition we are disposed to rest our decision in this case.

"Oleomargarine and kindred products have meen manufactured and disposed of to a greater or less extent for years, and there has been sufficient opportunity to test, by observation and experience, their general character, and the methods adopted in conducting the business of the manufacturer and sale of such substitutes for butter, so as to enable the legislature to determine as to the necessity or propriety of police regulation or restriction. It is doubtless easy to introduce cheap and unwholesome ingredients into their manufacture, and the product is easily passed off upon the consumer, under the semblance of butter, without detection of the fraud.

"It is claimed that the act is repugnant to article 4, section 27, of the constitution, on the ground that the subject matter of section 4 is not embraced in the title. But the provisions of that sections are, we think, legitimately connected with the subject of the act and included therein. An article manufactured and sold as butter, which is not a genuine dairy product, would fairly come within the spirit and object of the act, as entitled, without reference to the extent of adulteration, or the peculiar process of manufacture, and though the product be wholly simulated.

"This legislation sufficiently conforms to the title, and, as before observed, is justified, because the adulterated article is not readily distinguished from the genuine, and is easily substituted for it, so as to work a fraud upon those who actually use and consume it, as well as upon purchasers; and for these reasons it was considered by the legislature that the mischief could only be effectually suppressed or remedied by the imposition of severe penalties."

66

The First Biennial Report further states in regard to the sale of oleomargarine that a number of dealers admitted having sold what they had bought for butter but decided afterwards that it was oleomargarine." The report further states that in "canvassing the city I found men selling oleomargarine as butter without

any marks on the tub as requested by the law." Court cases involving this type of fraud were successfully prosecuted in Minneapolis in 1886.

In March 1886, the firm of Anderson & Co., Stillwater, was indicted for selling oleomargarine in tubs. The tubs bore the legend "Eclipse Dairy" as the only label. Anderson & Co. sold this as butter and charged the price of butter for it."

In view of the above history of the establishment of Minnesota law regulating oleomargarine, it would seem that effective curbs need be retained to protect not only the Nation's dairy industry, but also the consuming public who want and pay for genuine butter.

NATIONAL COOPERATIVE MILK PRODUCERS FEDERATION, WASHINGTON, D. C.

NINE REASONS WHY THE FEDERAL OLEO LAWS SHOULD BE RETAINED

Present federal oleomargarine laws provide for a 4-cent per pound tax on the uncolored product and a 10-cent per pound tax on the colored. They also provide for occupational taxes of $600 a year on manufacturers, $480 on wholesalers, and $48 on retailers of colored and uncolored oleomargarine. On wholesalers of only uncolored oleomargarine the taxes are $200 a year. The retailer of uncolored oleo pays a tax of only $6 a year.

These laws should be retained because:

or consumers.

1. They harm no one. They are not burdensome to manufacturers, handlers, The trivial benefits that might be derived from their repeal would be far outweighed by the damage to our agricultural economy and to the consumers' interests.

Proof that the laws are not restrictive to the oleomargarine industry is the fact that since 1941 oleo sales have more than doubled; retail outlets have increased 64 percent. These are the figures of the Bureau of Internal Revenue. The same authority shows some 260,000 retail oleo outlets-about every other food store in the Nation.

As for the consumers' interests, no one pays the 10-cent tax unless oleo is purchased yellow. The 4-cent per pound tax is paid by the manufacturer, and is a negligible amount per capita. The old contention that the home coloring of oleo is tedious and wasteful no longer holds water. Modern packaging enables a housewife who wants yellow oleomargarine to color it easily, quickly, and without waste.

2. Repeal of the laws would open the doors to fraud upon the consuming public. Many believe that fraud is not possible in substituting colored oleo for butter because of the existence of the pure food and drug laws. Actually, these laws have no jurisdiction as long as the frauds are practiced within State borders. Only through the operation of present Federal tax laws can the Government reach within State borders to suppress and prosecute fraudulent practices.

To permit colored oleo without the present regulatory laws would invite widespread substitution of an inexpensive yellow imitation for a genuine product. Among the thousands of handlers of oleo-in warehouses, trucks, stores, restaurants, and elsewhere-there would be those who could not resist this lure of easy money.

3. Repeal of the laws would seriously damage an important segment of American agriculture and threaten the Nation's dietary standards.

Uncontrolled and ruthless competition of a low-cost product in almost identical imitation of butter would hurt butter prices and drive many farmers out of dairying. Unfortunately those who say "let the consumers drink milk" do not have the answer to this dilemma.

To have enough milk to meet fluid demands in the slack season requires more than enough milk in the flush season. Some of this excess must go into butter. Without a butter outlet farmers would cut their herds toward the point where there would be insufficient fluid milk in the slack season. Cattle numbers would continue to decline. In the final analysis the question is whether America is to continue its meat and milk products diet, or revert largely to a grain and field crop subsistence.

4. Repeal of the oleo laws would not benefit any segment of American agriculture.

Soybean oil and cottonseed oil bring no more when sold for oleomargarine than when sold for other uses. If the oleo market disappeared, the other outlets would still be available. As it is, the oleo industry accounts for only 5 percent of the farm returns from soybeans and only 12 percent of the farm returns for

the total cotton crop. Even in its total, cottonseed oil accounts for only 7.26 percent of the cotton crop value. Of this, 3.27 percent comes from the shortening industry and 2.54 percent from other uses.

5. Repeal of the laws would be costly to consumers.

Already (in the city of Washington, D. C., for example) colored oleo has sold on the same day at 14 to 20 cents per pound more than uncolored brands. The tax is only 10 cents per pound.

If present laws were repealed, the production of colored oleo could be expected to virtually displace uncolored oleo. There would be nothing to prevent the colored product from being sold at substantially higher prices than the uncolored-with little or none of the uncolored available. At the same time the price spread between colored oleomargarine and butter might be great enough to accomplish the primary purpose of the oleo interests-to drive butter from the table spread market.

6. Other laws already give oleomargarine a disproportionate competitive advantage over butter.

Oleomargarine already has been given competitive privileges which are denied to butter. It may be "fortified" with vitamins, flavored with butter flavor, and preserved with benzoate of soda. None of these nor any other extraneous substances may be added to butter.

7. Other imitations of good butter are taxed; why should, oleo be exempted? Adulterated butter-which, like oleo, is an imitation of good butter-carries the same per pound tax and the same manufacturers', wholesalers', and retailers' occupational taxes as does colored oleo. Renovated or process butter carries the same per pound tax as uncolored oleo. There is no reason why an exception should be made for oleomargarine.

8. Oleomargarine is not entitled to the color yellow. The claim that oleo has as much right as butter to the color yellow is false. Oleo in this country is produced from the oils of cottonseed and soybeans. The oleo industry claims it must bleach these oils white because of Federal laws. The real reason is: when cottonseed oils are turned into fat they become gray; and when soybean oils are turned into fat they become green. So to have a uniform color the oleo manufacturers must bleach out the gray and green colors. It is impossible to produce a natural yellow oleomargarine from domestic oils. Butter, on the other hand, is always yellow-although at some seasons of the year it is less yellow than at others. When color is added to butter it is for the sake of uniformity-not for the purpose of making it look like some other product. In tests run at the University of Wisconsin on four commercial milk supplies, it was found that the natural color of butter is at its lowest ebb during March and April. Even at this low ebb, it never went below 2.0 Lovibond Tintometer units, Oleomargarine become subject to the 10-cent color tax when it exceeds 1.6 Lovibond units of yellow and red combined.

9. Repeal of the oleo laws would set the precedent for other imitation foods. The relative nutritional values of oleomargarine and butter has no bearing on the repeal of the oleo statutes. Even if oleomargarine were identical in nutritional values with butter, the repeal of the laws would set a dangerous precedent. Such actions would establish the philosophy that an imitation food product achieves full legal legitimacy if it is nutritionally equivalent to the product it imitates. The floodgates would be down to a whole category of simulated dairy products such as filled cheese, filled ice cream, and filled milk. Our standards of food products would be undermined. Imitations and substitutions would take over our food industries.

STATEMENT OF WILLIAM J. MURPHY, DAIRY COMMISSIONER, STATE OF NORTH DAKOTA, TO SENATE FINANCE COMMITTEE ON OLEOMARGARINE TAXES

Mr. Chairman, I am happy to have this opportunity to discuss with this committee the matter of Federal taxation of oleomargarine. I will make this statement as brief as possible and request that the subject matter contained herein be given due consideration by this committee.

As dairy commissioner for the State of North Dakota, I am charged under our State statutes with the responsibility of supervising the production, processing, and sale of all dairy products in North Dakota so as to further the interests of our dairy farmers. I am also responsible to the consumers in protecting them against the fraudulent sale of imitations and substitutes of dairy products. From the viewpoint of both dairy farmers and consumers I am deeply concerned with the implications of the River's bill, which is now before your committee.

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