AFTERNOON SESSION

(Pursuant to the recess, the subcommittee reconvened at 2 p. m.) Senator FLANDERS (chairman of the subcommittee). The meeting will please come to order.

I may say that we have quite a long list of those who wish to appear. It would seem to be in order, therefore, to set a limit on the time that each one can take, say 10 minutes, and if you can condense your statements and presentations to that length of time, I think we will be able to get through the list.

The first name on the list is Mr. H. M. Baldrige, representative of the United States Cane Sugar Refineries Association, Washington, D. C.

Now, I have not yet gotten the level of your voice, as they say in broadcasting, but I take it that all of these folks here are here because they are interested in sugar; we will try to make ourselves heard.

STATEMENT OF H. MALCOLM BALDRIGE,

REPRESENTATIVE,

UNITED STATES CANE SUGAR REFINERIES ASSOCIATION, WASHINGTON, D. C.

Mr. BALDRIGE. I represent the cane sugar refineries, the great majority of the plants on the east and west coasts, who buy most all of the product, raw sugar, from Cuba, Puerto Rico, Hawaii, the Philippines, when they are in production. We process and refine it. We have plants on the east and west seaboards, and also in Texas.

The allocation of sugar ends the 31st of March, and price control ends the 30th of June. That is an important statement, Mr. Chairman, because today in this country, for 1947, there is a shortage of 1,000,000 tons of sugar. That statement is not disputed and is uncontroverted. That is based on three fundamental principles.

First is the increased normal consumption that the American public uses, when we get to normal times, plus the increase in population. Since our last census there has been an increase. And then you have the reserve stocks that everybody has to have. By reserve stocks, I mean that when sugar comes to normal the average housewife will want 15 or 25 pounds of sugar on the shelf. The small industrial user wants a backlog. The large industrial users especially want a backlog. And the refiners want a backlog.

So the basis of that is, during the year 1947, we are 1,000,000 tons of sugar short.

The next statement, Mr. Chairman, is that there is no more sugar in the world for 1947 to correct that situation.

I believe that also is undisputed. All of the sugar is earmarked, allocated, and there is no area in the world today where more sugar can come in in 1947 to relieve the situation of 1,000,000 tons that we are short. No matter how high the price goes, no more sugar comes into this country.

The beets are planted in the spring. In the fall they harvest and process, and the beet crop for 1947 comes in the year 1948. Cane takes longer, 18 months.

No more sugar is coming from the Philippines, Java, or from Formosa or from any other country.

We heard about warehouses bulging this morning. One of the Senators asked about that.

Of course, when the beet crop is in at that time for a short time the warehouses do bulge. But that is for the entire year's distribution, and unfortunately the impression gets around that we have lots of sugar when in reality the situation is just a temporary one.

As far as the refiners' interest in this, Mr. Chairman, we think we are able to take care of ourselves better than any group if controls go off and confusion and chaos comes. We have a close touch with the world sugar situation. We have our stocks on hand. We believe that we could take care of the situation, but we are very much in favor of continuing controls because we know exactly what would happen. We know the confusion that would result. We know the race that would ensue, with everybody trying to buy sugar.

We realize that the large industrial users and the speculators would be the ones who would make the money and who would get the sugar. We realize that they have warehouses to store sugar. They have cash with which to buy large supplies of sugar, and they have the connections in which they can put pressure on from the people where the sugar comes from.

The result is that if controls are taken off and this race to the swiftest that I am describing, the people will lose, first the housewife, and next the small industrial user, who does not have the cash and does not have the storage space.

That is a picture that will come unless controls are continued under this situation.

People use the example of butter and meat, that when controls came off butter and meat, the price went temporarily up and now is back down. Of course there were thousands of cattle on the ranges and on the farms. A great deal of butter was in the warehouses. Realizing this thing, when the controls were taken off, the price went up and immediately into the market came the cattle and the meat and the butter.

That now is not true with sugar, Mr. Chairman, because just as I said before, there is no place for sugar to come in. People draw the conclusion in World War I; at that time there was a tremendous increase in the price of sugar, almost four times what it was; but in 4 or 5 months, to take advantage of this increase in come the great supplies from Java, Formosa, from the other places in the world.

Again I call your attention to the fact that there are no supplies like that and that cannot happen.

You have before you today 95 percent of the entire sugar industry, grocers, producers, beet, Hawaii, Puerto Rico, refiners, everybody who knows the sugar business, and I think all of this afternoon you will hear one after the other urge the continuation of control, knowing exactly what would happen.

I would like to just say one word about the opponents because I understand they are coming on Monday. There are people who are against controls. I think the main personality that you will hear

from is the Pepsi-Cola Co. If the race is to the swiftest, the PepsiCola Co. is one of the companies that will be able to survive; not only the fact that they have the warehouse and they have the cash, but they also in Cuba have the biggest Hispano sugar mill refinery.

I did not know what other people would come, but I do think that the vast majority that you will hear this afternoon, 98 percent of the people will be in favor of continuing controls.

In normal times the refiners are absolutely against Government control. It is impractical. The whole thing is wrong, and the only reason that they talk this way is that this is not normal. Times like these are not normal, and the situation is entirely different.

I would just like to say one more thing, to mention three or four things about the bill.

In the first place, these are the important things that I think should be concentrated on.

On line 13 on the second page, are the words "sugar-containing products." That is in the definition of sugar. That sounds as if we are enlarging controls, but that is not true. The reason for that is to keep out from Cuba and the other countries some of the makeshift candy that came in so that they could cheat our laws and bring sugar in.

We have handled it by the next paragraph in which it says, "No further controls or regulations that were not in effect on February 18 will be allowed under this bill."

That is a cover-all passage that definitely answers the question. They are not putting on any more controls.

I call your attention also to the fact that the Secretary of Agriculture can take off the control of either allocation or price, or both, which I think is a very important thing, because the time might come when the Secretary would like to take off the control on allocation but still have price or vice versa, to take the control off price.

Line 14, if the Secretary fails to certify on October 15, then controls go off.

Senator FLANDERS. That is on page 3.

Mr. BALDRIGE. The middle of page 3. That places the responsibility on the Secretary of Agriculture. That places the responsibility on the Secretary of Agriculture to report to Congress, and if Congress is not in session, to the Clerk of the House or to the Senate, the statement and the reasons why controls must be continued, and that is a further safeguard, all of these things tending to the fact that everybody wants to see controls taken off as soon as possible.

OPA is done away with under the bill. The powers go to the Secretary of Agriculture.

Senator FLANDERS. I take it you are in favor of that change.
Mr. BALDRIGE. We are in favor of that change.

Senator FLANDERS. The Secretary of Agriculture does not seem to agree with you.

Mr. BALDRIGE. This is a difficult thing to administer, I tell you. and it means more responsibilities and more problems on there on an already very busy office. But under the circumstances, they have a sugar section over there. They know the situation and they are the ones that should handle it.

In closing, just let me call your attention to this. Mr. Earl Wilson, who was head of the sugar section up until 3 or 4 months ago, who preceded Mr. Jim Marshall, has gotten out 40 questions and answers, and I think you gentlemen all have them, which I think is one of the finest things that has been gotten out on this question.

It gives the questions and then the answers, and I call your attention to that. I will hand one in, if you gentlemen do not have it. I will hand one to the clerk before the afternoon is out.

(The paper referred to is as follows:)

QUESTIONS ON THE IMPENDING SUGAR CRISIS ANSWERED BY EARL B. WILSON, PRESIDENT, CALIFORNIA AND HAWAIIAN SUGAR REFINING CORP., LTD.

(Mr. Wilson entered the sugar business in New York in 1919. At the outbreak of World War II he was vice president of the National Sugar Refining Co., New York. From 1941 until 1943 he served as a consultant on sugar with the War Production Board and the Board of Economic Warfare. In February 1943 he became director of the Sugar Division, Commodity Credit Corporation, United States Department of Agriculture, which administered the Government's wartime sugar programs with the exception of rationing and price control. In August 1945 he was made director of the Sugar Branch of the Department of Agriculture, which position he resigned in May 1946.)

Question. What is the situation regarding sugar controls?

Answer. As the law now stands, the authority to ration sugar expires March 31, 1947, and the authority to control prices expires June 30, 1947.

Question. Why not permit these controls to lapse on the above dates? Answer. In the face of an estimated 1,000,000 ton U. S. sugar shortage in 1947, the lifting of controls before the end of the year is almost certain to result in higher sugar prices for both housewives and industrial users, accompanied by critical shortages in many areas remote from sugar refineries.

Question. Wouldn't higher sugar prices bring more sugar into the market? Answer. That is extremely unlikely, since there are no "extra" or unaccountedfor sugar supplies in this country, and there is no exporting area in the world that could send sugar to us in any volume, no matter how high the price went, since we are already in control of the bulk of the production in the Caribbean. We might attract small additional supplies from countries now short of sugar, but in even greater need of dollar exchange; but such supplies would be negligible, and would be at the expense of people already suffering from nutritional deficiencies.

Question. Wouldn't higher sugar prices stimulate increased production? Answer. If they did, it would not in any way relieve the present situation. Sugar beets planted this spring would not be harvested until fall, and the sugar they would produce would not be available before 1948. Sugar cane takes even longer-practically 2 years from planting.

Question. Who will suffer most of controls are lifted precipitately?
Answer. The two consumer groups which will suffer most are:

1. Housewives, who not only may have to pay as high as 40 cents a pound for sugar, as was the case following World War I, but who may not be able to get sugar at any price in many sections of the country since sugar normally flows first into the markets closest to sources of supply, "feeding out" into other sections only when supplies are fully adequate. In addition, housewives aro sure to feel any price increase in the cost of candy, pastry, canned fruits other foods containing sugar.

2. Small industrial users, such as bakeries, candy manufacturers, so manufacturers, etc., who generally have neither funds with which to b ahead of current needs, nor the facilities for storing large quantities of or other supplies. This situation would almost certainly be aggravated by advance buying of large concerns, with adequate cash and storage fact immediately upon removal of controls.

Question. Is there any historical parallel to the present situation?

Answer. Yes. Following World War I, sugar was decontrolled on December 5, 1919, in the belief that the sugar available in 1920 would approximate the demand during that year.

Question. What happened to sugar prices and supplies in 1920?

Answer. Knowing that estimated supply and demand were in very close balance, a few firins rushed into speculative buying of sugar as soon as controls were removed. This started a stampede of distributors and larger industrial users to cover not only their current requirements but future needs. As a result, prices were rapidly forced upward, actually tripling in a period of only five months after decontrol; and because the heaviest absorption of sugar was in our few sugar producing localities, many parts of the United States were left virtually without sugar at any price. Later, when sugar supplies caught up with demand, and prices fell rapidly, many dealers and processors who had bought sugar at high prices suffered severe losses, and many were forced into bankruptcy.

Question. Is the situation now as serious as in 1919-20?

Answer. It is far more critical in eevry way. During World War I, the world's chief sugar-producing areas outside of Europe were undisturbed. The supply of sugar in this country was thus virtually unimpaired. Increased wartime consumption was the thing that brought about a consumer shortage during that war, not any material decrease in our supply of sugar. Rising sugar prices here, in 1920, thus were able to attract large quantities of sugar from Java and elsewhere.

In the recent war, however, the vast sugar-producing areas of Java and the Philippines, particularly, were lost to us throughout the war. As a result, in the face of greatly increased wartime use of sugar, available supplies were actually decreased by millions of tons. More than that, neither Philippine nor Java sugar will be available to us for an indefinite period; certainly not in 1947. Thus, there is no prospect of relief from those areas if removal of sugar controls results in speculative hoarding of visible United States supplies.

Question. Why should newspapers give editorial space and radio stations give time to publicize the situation?

Answer. The public is greatly concerned, and with good reason, over high food prices. Here is a case where the public, cooperating with the sugar industry, can, by making its wishes known to Congress, keep down the price of an important basic food. It is a chance to translate talk about high food prices into action to stop one price advance.

Question. Lifting meat controls brought more meat * lifting sugar controls bring more sugar?

* why wouldn't

Answer. The cattle were on the ranges, held there in hope of more favorable prices. When price controls were lifted, the meat came on the market. As above noted, there is no "extra" sugar anywhere in the United States to be "thrown on the market" regardless of price attraction. The same holds of other sugar-producing areas. There is actually a world shortage of sugar.

Question. It has been stated that in some parts of the country "warehouses are bulging with sugar," yet people can't get enough to do home canning. Is this true; and if so, why is it? Answer. Beet sugar is a seasonal crop, harvested in the fall and refined late in the year. The supply must then be stored so its distribution may be spread but over the next 12 months, until another crop has been harvested. For that reason, there are large quantities of sugar in warehouses in beet-growing areas now; but if it were all released for immediate use, there would be a shortage of supplies during the latter part of the year. Sugarcane matures the year around, though the heaviest production is in the first 6 months; therefore, cane sugar moves more evenly from the refineries into distribution throughout the year. However, there will always be some supplies in warehouses, as it is not considered safe ever to be without a reasonable reserve against possible disasters which might upset the normal, orderly harvesting, refining, and distribution of cane-sugar crops.

Question. Aren't we receiving additional supplies of sugar from the Philippines

now?

Answer. We have had no Philippine sugar since 1941, and will have none before 1948. Under wartime Japanese rule, Philippine cane fields were either neglected or put to other uses, and the sugar mills were dismantled or allowed to deteri