rapidly rising prices resulting from decontrol, great quantities of sugar would be held back or brought up by those who had connections and willing to pay the price.

3. Under decontrol at this time, the sugar produced from the currect beet crop would be quickly dissipated and flow into the shortage areas. This would create a great scarcity of sugar in the agricultural areas at the time of the harvest, thus resulting in spoilage of crops.

4. Decontrol or relaxation of the present rationing method, in the face of the very evident short supply, would disrupt the normal flow of sugar for many months to come and bring about such rises in price as to cause great hardship to the housewives, farmers, and the tens of thousands of small businesses dependent upon sugar for their products.

5. Immediate legislative action to extend sugar controls is imperative. Should the pending court actions cause a halt in OPA's ability to issue rationing for the second quarter of the year, tens of thousands of small businesses will be forced to shut down.

We respectfully urge the passage of Senate Joint Resolution 58 as presently amended.

Senator FLANDERS. Mr. Smith, in urging the passage of this resolution, I would take it that you also were favorable to shifting the responsibility for administration to the Department of Agriculture?

Mr. SMITH. Mr. Chairman, we have given very careful consideration to that factor, and we feel that it could probably be most logically administered through the Department of Agriculture.

Senator FLANDERS. Are there any questions?

Senator Bricker?

Senator BRICKER. No questions.

Senator MCCARTHY. I have one.

Mr. Smith, there is a question in my mind: We have been getting a tremendous lot of mail from confectioners, bottling men, soft drinks people, and they all seem to be unanimous against decontrol.

Likewise, we have a tremendous flow of mail from the ordinary farmwife and housewife and they are about 100 percent in favor of decontrol.

I wonder why you have these two groups who differ so thoroughly on this question? Have you given any thought to that?

Mr. SMITH. If you will pardon me, Senator McCarthy, I believe that one answer to that could very readily be that some months ago two or three of the sugar brokers issued various statements pertaining to the sugar situation. I think some of those statements may have brought about certain conclusions on the part of the housewife that she should write in and ask for more sugar. On the other hand, the report that Mr. Ralph Ward referred to, the industry council sugar report, is one in which we have followed very closely the studies contained therein and have gone right along with those studies.

We have kept our people so informed, with the result that we feel the industry people who have had an opportunity to be enlightened on the facts have had a better opportunity to realize fully what decontrol would mean at this time, and the very fact that decontrol would not bring more sugar into the United States.

Senator MCCARTHY. If you were to decontrol at this time I assume there would be a great number of new businesses starting up, for example, new individuals starting up bottling soft drinks, new men going into the confectionery business, undoubtedly?

Mr. SMITH. Senator, I believe that those who would like to start up feel that they might get some sugar through decontrol, and feel that under continued control the chances are they would not at this. time.

I really believe it is a little misconception on their side, because quite logically, if you get into such a condition as that, the suppliers are most apt to take care of their old customers.

I don't believe that the new customers would have much of an opportunity to benefit very much by decontrol action.

Senator MCCARTHY. I should like to ask this: Is it possible that one of the reasons why the 8,000 confectionary manufacturers whom you represent are against decontrol is because the present control, using the historical use as a basis for rationing, does eliminate all possible new competition?

Mr. SMITH. May I suggest, Senator, that I believe our industry would be quite typical of most of the sugar-using industries, in that we probably have more than twice the capacity that we will be able to utilize even under the increased rationing that we will have this year.

Now, we realize this, that while you are holding down the present users, if you cause them to give up in order to encourage new users to come into the field, while it looks like a very good opportunity, because the demand is naturally far in excess of the supply, it probably would not be a very just thing to do, even to the new user, who would very quickly find that he would be in time perhaps losing his investment through not being able to meet the demand.

Now, the main thing is, to answer your question more directly, if I may: The confectionery people have been held at 80 percent. That is not 80 percent of their capacity but 80 percent of their normal use. And that is if they get the full realization of what they may get at the maximum this year.

Up to this time it has been even 60 percent, and prior to that 50 percent; so realization that they are that much below what is a normal operation makes them realize that a fair and equitable distribution that gives fair treatment and equal treatment to all is much preferable to letting them try to scramble against the rising costs to try to keep going and keep alive.

Senator MCCARTHY. If I may summarize your testimony, without putting words in your mouth: The principal reason why you are against decontrol, why all of the men you represent are against it, is because if you decontrol it will provide further competition in your line of business?

Mr. SMITH. I don't believe that is quite right, Senator, if I may Senator MCCARTHY. Is that one of the reasons?

say so.

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Mr. SMITH. NO. I am sorry. With the exception of a few very large people in our industry, some employing 2,000 or more people, most of those are small-business people who would be unable to protect themselves under a decontrol policy, both through a continued flow of supply and pricewise.

Senator MCCARTHY. Just one further question: The present method of rationing does eliminate potential competition, except on the part of veterans, a few veterans, very few, who are able to start up some businesses under the veterans' preference?

Mr. SMITH. I don't believe that is quite so much of a factor as it is that the present rationing insures them that they are going to get their fair and equitable share of the limited supply.

Senator MCCARTHY. Let us put it this way: Let us assume that I want to start up-which I don't-a little plant to bottle soft drinks. Let us assume that I am not a veteran. There is no way in the world which I can do that under the present method of rationing. Am I right?

Mr. SMITH. So far as I know.

Senator MCCARTHY. So that your trade, the men whom you represent, have in mind, I assume, that by continuing present controls, they eliminate potential competition. Is that not actually the principal reason why you oppose decontrol?

Mr. SMITH. No, sir. As I say, the competition factor that is already within the field is such that there are more than enough people to satisfy far more demand than we expect to have created. We have got the competition. A few more won't make much difference in a competitive way. But if they have to share the sugar they have with the newcomers-maybe not in their own line of trade: maybe it would be the alcohol people, and maybe it would be somebody else that you would find would not have the remotest connection with the confectionary business, but would be taking their sugar away from them that they are still short of, cutting them down still further below this percent of their normal use.

Senator MCCARTHY. One final question:

We agree, however, that the present system of rationing does create a monopoly in the men who have been in business over the past 4 or 5 years; so that a man from the outside cannot get into that kind of business.

You have a little monopoly as long as you can maintain the present system of control.

Mr. SMITH. Well, if you take 125,000 users as a monopoly, maybe you are right.

Senator MCCARTHY. No further questions, Mr. Chairman.
Senator FLANDERS. Senator Maybank?

Senator Sparkman?

You are excused. Thank you, sir.

Mr. SMITH. Thank you.

Senator FLANDERS. Gordon Peyton.

STATEMENT OF GORDON P. PEYTON, COUNSEL FOR THE ASSOCIATION OF COCOA AND CHOCOLATE MANUFACTURERS OF THE UNITED STATES

Mr. PEYTON. My name is Gordon Peyton. I am counsel for the Association of Cocoa and Chocolate Manufacturers of the United States.

After a careful review of the factual situation as stated by the Department of Agriculture with relation to sugar supplies and present and prospective demand therefor, the membership of the Association of Cocoa and Chocolate Manufacturers of the United States has concluded that the allocation of sugar and price ceilings on sugar should be continued.

The Association of Cocoa and Chocolate Manufacturers of the United States is made up of manufacturers located in eight States.

The Boldemann Chocolate Co., D. Ghradelli Co., and Guittard Chocolate Co. are located in California; the Blommer Chocolate Co., in Illinois; Walter Baker & Co. and United Chocolate Refiners, Inc., are located in Massachusetts; Brewster-Ideal Chocolate Co., Hooton Chocolate Co., and Stollwerck, Inc., are in New Jersey; F. Bischoff, Inc., Cocoline Products, Inc., Merckens Chocolate Co., Peter Cailler Kohler Swiss Chocolates Co., Inc., Rockwood & Co., and C. J. Van Houten & Zion, Inc., are located in New York; Bachman Chocolate Manufacturing Co., Blumenthal Bros.. Hershey Chocolate Corp., Klein Chocolate Co., and Wilbur-Suchard Chocolate Co. are located in Pennsylvania; the Washington Chocolate Co. is located in Washington; and Ambrosia Chocolate Co. is in Wisconsin.

Sugar is one of three major ingredients used by the chocolate manufacturer. The other two are cocoa beans and milk. There is some chocolate made by others than those comprising the membership of this association, but most such manufacturers are members of the National Confectioners' Association, which supports the continuance of sugar controls.

The capital investment of the membership of this association is estimated at something over $75,000,000 and the sales in dollar volume for the year 1945 approximated $165,000,000.

It is believed that the supply of sugar at this time, according to Government figures, does not justify the relinquishment of sugar controls. Such action might well result in much higher prices, inequitable distribution, unwarranted economic disturbances among industrial users of sugar, and increased consumer costs for sugarcontaining products, as well as create unfair competition for the housewife in obtaining her needs.

If the outturn of the Cuban crop proves to be in the volume currently anticipated and other cane areas develop a supply up to expectations, and if the beet crop of the United States approximates 2,000,000 tons, there is reason to believe that controls could be lifted before the end of 1947 without undue market disturbances.

Hurricane damage or a failure to meet the anticipated beet yield could make it necessary to continue distribution and price controls until such time as the volume of the 1948 Cuban crop could be deter

mined with reasonable certainty. It is therefore considered advisable to continue the authority to exercise necessary controls until the end of the first calendar quarter of 1948.

The cocoa and chocolate manufacturers, individually and as a group, have generally been opposed to the application of Federal controls to industry except in instances where such controls were essential to meet wartime emergency demands.

The freedom of industry to solve its own problems should be encroached upon to a minimum consistent with the national interest. However, it is believed to be unwise and unwarranted to remove existent rationing and price controls when such removal would tend to invite economic disruption, whereas continuance of such controls for a relatively brief period would bring about an orderly transition. from a restricted to a free operation.

We do not feel that there is sufficient time during which controls should continue to change radically the adopted system of rationing. It is our opinion, therefore, that the broad basic authorities now in effect should remain operative insofar as they relate to sugar regulations.

The proposed legislation places general administrative responsibility in the Secretary of Agriculture. We believe that the Department of Agriculture should be the focal point of food regulations, and we are confident that the Secretary will act to end allocation and price controls as soon as the supply justifies such action.

Necessarily our position is based upon the assumption that the supply-and-demand figures of the Department of Agriculture are reasonably accurate. There is little possibility that current supply figures can be very far off, and, therefore, unless a rather drastic, sudden, and unanticipated drop in demand takes place, the continuance of sugar allocations and price controls would seem to be the wise course. Circumstances are such that definite action on the extension of the authority to allocate sugar and to control prices thereon must be taken immediately to be effective. The early passage of necessary legislation, therefore, is urged by the Association of Cocoa and Chocolate Manufacturers of the United States.

Senator FLANDERS. Mr. Peyton, you are the first one who has expressed the optimistic hope that we might get rid of controls next October or November.

Is that just a hope, or do you feel you have reason to think it might well happen?

Mr. PEYTON. Well, I think, Mr. Chairman, that if everything works favorably, there is an opportunity, perhaps, by next October to remove both price controls and rationing. I think, however, that that is an optimistic view, and that in order to make that feasible, the most favorable happenings must occur.

Senator FLANDERS. Am I right in reading between the lines on the top full paragraph on page 3 that you would feel a bit more confident in the relaxation of controls in the hands of the Secretary of Agriculture than in the hands of the OPA?

Mr. PEYTON. I believe the majority of the membership of the association would feel that way; yes, sir.