(The complete statement is as follows:)

My name is Robert C. Jackson. I am Washington representative of the National Cotton Council of America, which has its headquarters at Memphis, Tenn. The National Cotton Council represents all six branches of the raw cotton industry, including cotton farmers, ginners, warehousemen, merchants, spinners and cottonseed crushers. Its membership extends throughout the 18 cotton-producing States from Virginia to California. Its sole purpose is to increase consumption of American-grown cotton, cottonseed and the products thereof.

One of its chief objectives, reaffirmed unanimously by its delegate members every year since the National Cotton Council was organized in 1938, is the repeal of Federal and State laws, which unfairly handicap the production and distribution of margarine a product made chiefly from oils grown by cotton farmers and other farmers of America.

It has been contended that the interest of the cotton industry in the repeal of antimargarine laws has been exaggerated and that these laws affect the economy of the cotton-producing States in only a very minor way. To understand how false this contention is, it is first necessary to examine briefly the extent to which the cotton States depend upon profitable markets for cotton and cottonseed products.

About one-fourth of all the fiber consumed in the entire world is produced on the cotton farms of the United States. Nearly one and one-quarter million of our farms and more than 5,000,000 of our farm people depend heavily upon cotton for existence. In eight Southern States, farm income from cotton and cottonseed in recent years has averaged more than one-half of the total cash farm income from all crops combined. In all these States, farm income is a big part of the total income from every source, including trade, finance, transportation and industry, and a major part of the income from all these other sources is based upon the handling of cotton. Cotton spells prosperity or depression for a large area of this country and experience has taught us that we cannot have a prosperous nation, except for brief periods, when there is a depression in any substantial portion of the country.

The income of cotton farmers is derived from the sale of two products, cotton lint and cottonseed. On an average, the seed brings about one-fifth as much income as the lint, but for millions of people that one-fifth is the margin between low income and starvation.

The price of cottonseed is determined largely by the price obtained for the oil which is crushed from it. During the last completed crop year, oil accounted for about 55 percent of the market value of the four products of cottonseed oil, meal, linters and hulls. The two biggest markets for cottonseed oil are shortening and margarine. During 1947 the margarine market alone took 32 percent of all cottonseed oil consumed in this country and was the biggest single user of the oil. Thus any legislation that restricts the margarine market hurts the cottonseed producer and, therefore, the whole cotton industry.

One of the most reprehensible effects of antimargarine laws is that they weigh most heavily upon the neediest farmers of the cotton producing areas. Cottonseed is particularly important to them, for by tradition and business practice the one part of the cotton crop which is almost always left unmortgaged in the hands of the man who grew it is the seed. More often than not, the entire proceeds from the sale of the lint are used to pay off the mortgage which was necessary, in the first place, in order to get the money to produce a crop. It is, therefore, usually the seed money on which the farmer relies to carry him and his family from the end of one crop to the beginning of another and which determines how much he can do toward providing himself and his family with something more than the barest essentials of life.

In view of the fact that the average per capita income for 1946 in the 11 States of the Southeast was only $801, anyone with normal humanitarian instincts will readily understand why legislation which restricts the market for cottonseed is so strongly opposed not only by cottonseed producers but by all the people of the areas involved,

The economic effects of existing antimargarine legislation upon the cottonproducing areas are not limited to restricting the present low income of our farmers but also darken their future by denying them an opportunity for avoiding or cushioning any set-back in the years ahead in the price of cottonseed by development of a new market. The production of edible oils from American farm products has been running nearly 50 percent ahead of the prewar rate largely because of an unprecedented demand arising from a world-wide shortage of fats

and oils. As this shortage is filled and as the present high demand returns to more normal levels, it is obvious that we are going to have to expand our domestic market for edible oils or face a drastic decline in both the price and production. Removal of the antimargarine laws would permit the expansion of the domestic margarine market for cottonseed products; retention of the antimargarine laws would prevent that expansion and leave cotton producers particularly vulnerable to the expected drop in the demand for edible oils.

It is important to note that the markets that margarine should and can exploit are chiefly markets which are not being supplied today. Although standards of living have been going up, per capita consumption of needed, nutritious table fats has been steadily going down. During the 1920's, total per capita consumption of margarine and butter averaged 20 pounds per person. By 1946, due almost wholly to the decline in butter consumption, per capita consumption of margarine and butter combined was only 14.3 pounds. This decline was due chiefly to the fact that the dairy industry has been neglecting butter more and more in favor of the more profitable whole-milk market. In 1936, butterfat and farm butter represented 27.9 percent of total dairy cash income. In 1946, that figure had fallen to 14.8 percent. The Bureau of Human Nutrition and Home Economics has recommended a per capita consumption of 36 pounds of table fat annually for "an adequate diet at moderate cost." It is apparent that butter cannot and will not fill this nutritional need of our people and that margarine is handicapped in filling it by the legislative restraints placed upon it.

The harmful effect of these antimargarine laws upon the health of our country falls with special weight upon the very people who grow the cotton. No one needs a better diet more than this large low-income group. No one is less able to pay the price of butter. The margarine taxes, however, strike the cotton farmer a double blow. By restricting his markets, they reduce his cash income. By making margarine more expensive and harder to get, they reduce his chance to buy good food with the few dollars that he does make.

In this connection, it is important to note that the Federal license fees imposed upon wholesalers and retailers of margarine are particularly burdensome to the small independent rural merchants who comprise the chief food outlets in most of the cotton States. For the country as a whole in June 1947, according to the Commissioner of Internal Revenue, only about 1 in 2 retail stores was licensed to sell margarine; only about 1 in 100 was licensed to sell yellow margarine. This situation was aggravated in most cotton areas where there are fewer chain stores and more small independent grocers. As a result, many cotton farmers cannot even buy the margarine into which their cottonseed oil goes.

But we do not oppose antimargarine laws solely because they penalize the pocketbook of our farmers, or even because they harm the health of low income groups throughout the country. There is another and perhaps a more important reason for opposing all such legislation.

The margarine laws are wrong in principle. They are politically immoral. They are undemocratic and un-American. They penalize the farmer who produces cottonseed, soybean, or peanut oil, for the ostensible benefit of the farmer who produces butter. They restrict one domestic food product in an attempt to favor another. They take money from the pocketbooks of one group of our farmers and attempt to channel it into the pocketbooks of another group. They tax a necessary food of the poor and leave untouched a rival food which not everyone can afford to buy.

A great many people have said: "Why doesn't the cotton industry take a lesson from the dairy people? Why don't you solve your problems with a tax on rayon, like the tax on margarine?"

The cotton industry accepts the premise but rejects the principle. Starting from zero in the early 1900's, the rayon industry has each year steadily increased its productive capacity. In 1947 domestic rayon consumption totaled almost a billion pounds, or the equivalent in usable fiber of about one-fourth of the cotton consumed. We believe that a tax on rayon is justified if a tax on margarine is justified but we do not believe in the principle of internal domestic tariffs on one American product for the benefit of another. We are willing to compete with rayon in the open market energetically and fairly in the traditions of our free-enterprise economy. We reject the whole idea of legislative privilege and discrimination, whether applied to cotton and rayon or to margarine and butter. We have not asked, and we shall not ask, for penalty taxes on our synthetic competitor. At the same time, we believe we are perfectly justified in demanding that the penalty taxes on margarine be removed.

In conclusion, let me suggest that everyone who has to take a stand on this great national issue should do so with a sense of history-with an appreciation of the changing conditions that come with changing times. We believe that sincere and open-minded men, who may have found some merit in the antimargarine laws in the past have come to realize that the time for ending them is here. Today, the average American-the housewife, the laborer, consumers everywhere-have become familiar with the raw facts of the case. The slow process of public education has gone on for many years and it has been tremendously quickened by the general concern over food shortages in the recent past. Deep and widespread resentment over these taxes is sweeping the country. Almost very important newspaper in the country, almost every widely read magazine, and almost every columnist and news commentator has taken up the campaign. This is a cause on which people from every section of the country, of every political affiliation, of every shade of liberal or conservative thought, are joined.

We

Today, public opposition to the antimargarine laws is so widespread and so strong that we believe they cannot and will not be tolerated any longer. respectfully urge your committee to recommend their repeal.

The CHAIRMAN. Thank you very much.

Mr. JACKSON. Thank you, Mr. Chairman.

The CHAIRMAN. Is Mrs. Elizabeth Christian now in the audience? (No response.)

This list of witnesses was supplied to us by Senator Fulbright. It. is my understanding that it represents the oral presentation which the public wishes to make. Is there anyone in the audience who had intended to testify orally and who has been omitted?

If not, then we will recess until ten o'clock tomorrow morning. (Whereupon, at 4 p. m., an adjournment was taken, to reconvene at 10 a. m., Tuesday, May 18, 1948.)

OLEOMARGARINE TAX REPEAL

TUESDAY, MAY 18, 1948

UNITED STATES SENATE,
COMMITTEE ON FINANCE,
Washington, D. C.

The committee met, pursuant to recess, at 10 a. m., in room 312, Senate Office Building, Senator Eugene D. Millikin (chairman) presiding.

Present: Senators Millikin, Butler, Hawkes, Martin, George, Barkley, Connally, Byrd, Johnson, and Lucas.

Also present: Senators Thye, Dworshak, and Fulbright.
The CHAIRMAN. The hearing will come to order.

Let the record show the presence of Senator Thye, of Minnesota. We are very glad to have you participate, if you wish, Senator. Senator THYE. Thank you, Mr. Chairman.

The CHAIRMAN. The first witness is John Brandt, president of the Land O'Lakes Creameries, Inc.

Will you be seated, please, and identify yourself to the reporter.

STATEMENT OF JOHN BRANDT, PRESIDENT, LAND O'LAKES CREAMERIES, INC., LITCHFIELD, MINN.

Mr. BRANDT. My name is John Brandt, president of the National Cooperative Milk Producers Federation, and president of the Land O'Lakes Creameries, Inc., of Minneapolis. I live in Litchfield, Minn. In presenting our case on this subject of repeal of the tax on oleomargarine, I thing we could divide this question into two categories: one of fair practice, and the other of its economic results.

I would first like to deal with the subject of fair practice.

The repeal of the oleomargarine tax as it was passed by the lower House certainly would deal a blow to the right of the dairy industry to a long-standing trade-mark, which is the color yellow. Butter has been known by the color yellow ever since anybody has ever known anything about butter, and it is, as we claim, the common-law trademark for butter.

Butter is manufactured entirely from a dairy product, from milk, with nothing added to it, and is therefore a product wholesome so far as the consumer is concerned.

The question of its relative merits and food value and consumer preference could easily be decided if you were to place the consumer's choice of oleomargarine or butter at the same price. There is not any question but what the consumer would choose butter in preference to oleomargarine, and therefore from that standpoint alone I think the general public would consider oleomargarine an inferior product to butter.

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