even! The April-June egg price realized was only 51.9¢, or an estimated loss posi tion of 4.5¢ per dozen eggs produced. When President Nixon announced the new Economic Stabilization Program on June 13, the egg industry was frozen into a loss position. The effective New York wholesale market quotation of 59¢ during the base period could not be used for pricing eggs during the freeze because of industry marketing practices. Most producers price current week deliveries on the previous week's quotation. This is done because major food stores need at least a week to plan their specials, etc., and must know what their costs will be prior to planning sales. Therefore, in reality, the freeze base price for many egg producers is the highest price of the week prior to the June 1-8 base period. The highest price that week was 55¢ (New York).

Looking into the July-September quarter, we project that the egg producer must realize a 56¢ wholesale market in order to meet his cost of production.

Attachment "C," referred to previously, indicates the average cost of producing a dozen eggs during the January-March period of 1973 rose 10.6¢ per dozen in feed costs alone over the previous year. If projections are accurate, feed costs will add about 14¢ per dozen over last year to the cost of egg production in the JulySeptember quarter. It is interesting to note that the total costs of producing eggs during the January-March period of 1972 was only 26.8¢ per dozen.

Feed costs in previous years represented 60 percent of the total cost of produc ing a dozen eggs. Since December 1972, the proportion of production costs due to feed has risen steadily to about 71 percent today.

As a result of these factors-high feed cost and the Economic Stabilization Program-egg producers have severely cut production by reducing layer numbers and by canceling production plans. The U.S. Department of Agriculture recently announced that the nation's laying flock totalled 287.5 million-the smallest flock size since 1961. In recent weeks, producers have accelerated fowl slaughter to further reduce losses. USDA's fowl slaughter report for the week ending June 27 showed egg producers sent to slaughter 3,255,000 hens, an increase of 10 percent above the previous week's slaughter and 25 percent greater than the same week in 1972. Such action indicates a severe shortage of eggs in the supermarkets of the nation in the weeks and months ahead. My own operation has had to short all orders approximately 10 percent in recent weeks. We fear that soon, if this trend isn't reversed, consumers will not be asking the prices of eggs, but will be asking whether or not a supermarket has eggs for sale.

FOOD STORE ENTRY INTO EGG PRODUCTION

Although not directly related to the current egg production problems outlined already, I would like to introduce another problem facing independent egg producers which may have present and future impact on the price of eggs to the consuming public. In recent years, independent egg producers have witnessed a steady rise in the number of "outside" capital being invested in egg production. Part of this has come from investors seeking diversification of investments, some has come from conglomerate-type investment firms seeking to spread risks, some has come from high income-type investors seeking tax shelters, but the most alarming to the egg industry is the actual entry into egg production by certain major and minor food store chains.

Traditionally, egg production has been controlled by independent farmers who chose this segment of agriculture for their livelihoods. Modernization, technology, and consumer demands for quality and finite standards has brought about local, concentrated production units among independent producers. Such changes require major financial investments and great economic risks. Also, traditionally, the egg industry suffers cyclical price patterns, which have tested even the most securely financed producers. Yet, even today, the egg industry is made up largely of independent egg producers. Egg production is among the few agricultural interests common to every state in the nation.

Large food store chains have apparently found investments in egg production a two-fold advantage. First, cash accounting in agriculture permits losses to be written off and profits, which are normally taxable, to be plowed back, tax free, into greater production. Therefore, from a tax and investment standpoint, a diversified food chain which controls both production and retail sales of a given product is in a relatively sound position. Secondly, even in times of depressed prices which drive some independent egg producers out of business, these food store chains are able to withstand the financial burden by their utilization of superior financial resources and they can maintain adequate egg supplies without

undue concern about the highs or lows of the market on which independent egg producers must compete. Such an attitude may even contribute to the longevity of many economic problems confronting the independent egg producer. It is obvious that a food store chain which owns all or a portion of its egg production can exert tremendous influence on both the price and marketings of independent egg producers who compete in the same market area. By virtue of the fact that food stores control all the shelf-space, they can determine the amount of eggs which will be displayed and by whom. Eggs are among the most profitable items in a food store, according to reports published by the food industry, and it is readily known that eggs are high on each households food needs. To the extent that a food store chain can influence the price paid producers, the food chain can influence the profit derived from egg sales.

Concrete data on the extent of food store entry into egg production is difficult to obtain because the stores are not required to report their production affiliations to any regulating agency of the federal government and those egg producers, who are either working for the food store chains, or are in partnership with them, are unwilling to talk about their situations. We do know of certain major food store chains which are directly and substantially involved in egg production, such as Kroger and Safeway food store chains, and, to a lesser extent, some smaller food store companies.

Independent egg producers consider the entry of food store chains into egg production among the most alarming developments in our industry in recent years and we believe it will have considerable impact on the future of the industry. It is evident that as independent producers are eliminated and food store chains take over production in a given area, the stores can exert tremendous leverage on other independent egg producers in the area. A store that buys eggs from independent egg producers must compete with stores which own their own production so the leverage can even be extended to egg producers who are not suppliers of stores which own part, or all, of their own needs. To the extent they are able to eliminate independent, competitive offerings of supplies by independent producers, the food store chains may very well exert a monopolistic influence in the market. They may very well use their economic advantage to exert unreasonable pressures on other food store chains in the same market area.

Two things the major food chains have that independent egg producers do not have are solid financial bases and a guaranteed market. They can pour whatever resources they need into egg production and place the investment on their books as capital expansions. The cash system of accounting in agriculture allows the company to reinvest whatever profits from egg production back into further expansion, or to write-off losses. Such practices allow them to build up production units very rapidly at a very low cost to themselves. This gives a chain store, with its superior financial resources a tremendous advantage over independent producers who normally have only minimal financial resources.

Finally, it is obvious there is a limited market for eggs. The market is not expandable except as the population grows or other gradual influences which might bring about a need for more eggs. When a food store chain takes away the marketing space of its own stores from an independent producer and replaces the producer's supplies with its own production, there is no place for the independent egg producer to go with his production. He can either go out of business or attempt to capture some other independent egg producer's market. Such practice deteriorates the egg market in a given area, and if substantially large, can affect the market price for eggs in much of the United States.

The egg industry is not covered by the Packers and Stockyards Act which was utilized many years ago to bring about a divestment of meat packers from production interests. No federal agency effectively monitors this type of activity. The Packers and Stockyards Administration does not have jurisdiction over the egg industry and the Federal Trade Commission has, in the past, taken little interest in such agricultural matters. Therefore, there is no effective method for the procurement of accurate data on this problem. There is no effective means of preventing the increase of this type of unfair investment practice because monopolistic practices are difficult to prove. From the information we have available, we are greatly concerned, as apparently the meat industry was concerned when meat packers entered the meat production field, several years ago.

This trend is both alarming to independent egg producers and, we believe, dangerous to the future price and supply of eggs which the American consumer demands. To the extent food store chains can exert control over the market by their ownership of the product, they will be able to dictate the prices consumer

will pay in the supermarket. The competitive influence of numerous independent egg producers will then be effectively eliminated.

We, therefore, respectfully request this Subcommittee to use its congressional powers to investigate this problem to determine if food store chains' entry into egg production is not an unreasonable, monopolistic practice which affects the marketing of shell eggs and poses serious threat to the future competitiveness of the egg industry.

CONCLUSION

Mr. Chairman, I would like to again thank you and this Subcommittee of the House Judiciary Committee for giving us this opportunity to testify concerning these serious egg industry problems. We hope this Subcommittee will use its powers to further investigate these issues in order to prevent such economic situations from confronting the American egg producer, and ultimately, the American consumer, in the future.

Respectfully submitted.

JERRY BOOKEY,

President.