roads this exemption under section 402 (c) was very specific that shipper associations would not be under this legislation.

That is the only point that I make. We have no kick about the freight forwarders. They are doing their job and a good job.

Mr. HINSHAW. For example, would you have any objection on behalf of the people whom you represent to the appeal of part IV in toto? Mr. SHERRY. I think that would be immaterial. I do not think it would hurt us.

Mr. HINSHAW. Not a bit?

Mr. SHERRY. Not a bit. While shippers' associations have sprung up like mushrooms in these recent years, particularly since the PCWA case before the Supreme Court, the shippers' associations that are operated as shippers' associations were intended to operate would not be affected by knocking out part IV and putting freight forwarders back on a basis such as they were previous to that part. Mr. HINSHAW. A competitive basis.

Mr. SHERRY. I do not know if you would call it a competitive basis. These things are individual. Shippers' associations are primarily formed to handle specific instances in particular cases, where a freight-forwarder operation is one that covers a chain and is dependent on a profit.

Mr. HINSHAW. There would be no room in the business for you if freight forwarders were to reduce their rates to the costs of pool-car shippers and such associations as you represent?

Mr. SHERRY. Speaking for S. and R., I do not think that a freight forwarder could, because he would have to pay the same basic carrier rates as we do, and we operate without a profit.

Mr. HINSHAW. Wait a minute. You operate without a profit, you say, certainly, but you have expenses, too, have you not? Who pays the expenses?

Mr. SHERRY. Expenses such as what?

Mr. HINSHAW. Do you not run some kind of an office?

Mr. SHERRY. The agent pays those. I pay those.

Mr. HINSHAW. The agent of what?

Mr. SHERRY. Of the association.

Mr. HINSHAW. That is what I say. There are certain expenses of the association.

Mr. SHERRY. That is right. There are certain expenses, but they are comparatively negligible.

Mr. HINSHAW. So they are the same expenses that the freight forwarder would have.

Mr. SHERRY. To a degree possibly, but there is no solicitation expense anywhere.

Mr. HINSHAW. Do you have a limited membership, or is it open? Mr. SHERRY. No; we have a very limited membership. In fact, I would say that our board of directors has turned down over 300 applications for membership and we have about 80 members.

Mr. HINSHAW. That is all, Mr. Chairman.

Mr. ROGERS. Thank you.

Our next witness is Mr. Roy F. Hendrickson of the National Federation of Grain Cooperatives.

STATEMENT OF ROY F. HENDRICKSON, EXECUTIVE SECRETARY, NATIONAL FEDERATION OF GRAIN COOPERATIVES

Mr. HENDRICKSON. I am Roy F. Hendrickson, executive secretary of the National Federal of Grain Cooperatives.

This is a voluntary organization of 22 regional grain marketing cooperative associations through which farmers belonging to approximately 2,500 local cooperative associations market a substantial volume of corn, wheat, soybeans, flaxseed, dry beans, dry peas, and small grains, harvested in all of the principal grain-producing areas.

A number of these associations employ river transportation increasingly and others plan to do so, and they are opposed to the repeal, as proposed in section 14 of H. R. 6141, of the dry bulk exemption contained in section 303 (b) of the Transportation Act of 1940.

These marketing associations, created, owned, and controlled by farmers, have substantial investments in river loading and receiving elevators, and three of them own barges.

River transportation has meant that they have been able to offer grain and oilseeds at a price, including transportation, which has made it possible to find buyers far distant from the surplus producing areas, thus expanding outlets to the advantage of farmers.

Because producers of grain have a difficult surplus problem now, and in the foreseeable future, markets must be expanded in every way possible. River transportation has opened up markets, and will continue to do so; and the dry bulk exemption, in effect for 15 years, has contributed to this.

The volume of grain moved on the Mississippi, Illinois, Ohio, Missouri, Tennessee, Columbia and connecting rivers, has increased markedly in the last 4 to 5 years. Facilities for handling grain, employing river transportation, have been expanded on the assumption that the dry bulk exemption was settled policy. Considerable further expansion of these facilities is pending and will be postponed for the most part until this aspect of national transportation policy is clear.

It is the opinion of these cooperative organizations that have expanded river facilities that repeal of the dry bulk exemption would inevitably result in higher transportation rates, reducing the availability of services and eliminating the flexibility of grain movements which are so often dictated by transportation costs and availability of

service.

Repeal of the exemption would not result in diverting the traffic to the regulated river carriers or to the railroads. Instead, substantial markets would be cut off altogether while diversion of more traffic to trucks would doubtless result, with one more alternative: forcing these cooperatives and their competitors into the river transportation business for their own account.

The grain cooperatives have no desire to get into the transportation business in any form. Their function is primarily to market the farmer's grain and oilseeds in the largest volume possible at the best price obtainable so as to improve in every way possible the net realized income of the producer.

I will give you a brief picture of the extent to which a number of these associations are now concerned with river transportation.

The Illinois Grain Corp., a cooperative with headquarters at Chicago, is 1 of 16 cooperatives sponsored by the Illinois Agricultural Association which has 200,000 farm family members in Illinois.

This grain cooperative is owned by some 5,000 individual farmer shareholders, 100 county farm bureaus, and 158 member county cooperative elevator associations.

In the aggregate, including cross-country rail grain handled, the company handles upward of 40 million bushels annually. Actual purchases for the 11 months ending last May 31 totaled 41,071,752 bushels.

It has a terminal elevator at Chicago, on water, with a capacity of 2,250,000 bushels, and it has inland waterway subterminals on the Illinois River at Morris, Hennepin, Lacon, Havana, and Dallas City.

It has recently completed a facility at Tampa, Fla., with a capacity of 160,000 bushels to receive grain for the expanding market there by oceangoing barges which carry substantial quantities of phosphate rock for delivery to supply cooperatives in Illinois and nearby States, which are distributed to farmers for their use.

Thus, in all, this cooperative has capacity of 3,120,000 bushels with an investment of $3,300,000, with these elevators all chiefly dependent upon water transportation.

The inland waterway subterminals are gathering points for grain trucked to the waterway from a distance of up to 100 miles, with the average radius 30 to 40 miles.

When grain is amassed in these elevators, it must move out via barge. For some years the primary market from the Illinois waterway was in the Chicago market. Since about 1949, an increasingly important percentage of waterway elevator receipts has moved to destinations in the South. There has been a considerable movement to New Orleans for export, as well as to intermediate points such as Memphis and receiving elevators on the Tennessee River.

During the 11-month period ending May 31, the waterway subterminals originated and shipped 8,897,000 bushels of grain. Of this, about 50 percent or 4,389,000 bushels went to Chicago. A total of 3,370,000 bushels moved from the river elevators directly to New Orleans. The balance of the shipments included these points: Memphis; Decatur, Ala. ; and Tampa, Fla.

Mr. Fred J. Watts, Jr., general manager of this cooperative, in supplying me with these figures said of them:

The above-quoted figures will illustrate our cooperative's need for a high degree of flexibility of movement on the part of the carriers upon whom we must rely to move this volume of grain to widely scattered destinations. A considerable portion of the grain moved to destinations other than Chicago is carried by exempt carriers.

We are apprehensive that extension of regulation would tend to stifle competition and eventually eliminate some of the smaller carriers upon whom we must rely for the maintenance of our services and facilities for our members and stockholders.

Another increasingly large shipper of grain and oilseeds by river is the Farmers Union Grain Terminal Association, of St. Paul, Minn., of which Mr. M. W. Thatcher, president of this federation, is general

manager.

Only in the last few years has the dream of farmers in the Central Northwest territory, of using the Mississippi to open new markets for their products, been substantially realized.

A predecessor organization, the Equity, established an elevator on the Mississippi at St. Paul many years ago, but for a long period of time it found little use so far as water transportation was concerned. Now, a tremendous and growing volume of business is done through the elevator which now has three truck dumps, in addition to rail receiving facilities.

This cooperative, which markets well in excess of 100 million bushels of grain and oilseeds for its members annually, shows this increase in river shipments for the last 5 years:

These figures do not include barges the cooperative loaded for others, which has been substantial at times.

It will be noted that there has been a continual increase in sale, but note should be taken of the decrease in tonnage of corn, oats, and rye in recent years. This was due entirely to what we regard as a temporary market situation, under which prices on these three commodities in the Minneapolis-St. Paul market, instead of being lower than those existing for the same commodities at Chicago and points further east, were actually higher.

This was due largely to Canadian imports of feed grains and increased production in the eastern consuming area, together with the important factor of relatively poor crop in the Western Corn Belt in 1955, due to drought.

We have, therefore, every reason to believe that a heavier movement of corn and oats will be resumed in another year or two, and there are expectations of a tremendous, further increase in soybean shipments due to the expansion of crushing facilities and feed demand in the Southern States.

This cooperative also ships very substantial quantities of grain on the Great Lakes, and has the largest grain terminal facility at Superior, Wis., in excess of 12 million bushels.

Mr. E. J. Barry, head of the grain merchandising department of the Farmers Union Grain Terminal Association, in commenting on the proposal to repeal the dry bulk exemption, in correspondence with me, said this:

During the past year barges have been in extremely tight supply. If we had to depend entirely on the common river carriers for our service, we doubt if we could have moved one-half of the tonnage that we actually did move.

Any obstacle that is thrown in the way of competition to the large common carriers by the small, independent contract carriers is a blow to the purposes and objectives of a cooperative grain-marketing concern which is working on behalf of its farmer-owners to expand their outlets for grain.

This cooperative, as is true of the Illinois Grain Corp. and the Indiana Grain Cooperative, a division of the Indiana Farm Bureau

Cooperative Association, has become a reluctant owner of barges, simply to increase the flow of grain pressing for markets at distant points.

The Indiana Grain Cooperative has been an active user of water transportation for many years, and built and operates a grain-receiving facility at Decatur, Ala. Very considerable quantities of grain it originates in Indiana, Illinois, and Kentucky, find markets in the South, and soybeans are a major commodity so far as volume is concerned.

The Cotton Producers Association, of Atlanta, Ga., which has a grain-marketing division which is a member of this federation, has under consideration the building of receiving facilities on the Tennessee River at the present time. This is in connection with receiving grain, oil meal, and other ingredients for its expanding feed service in Alabama and Georgia, where there has been marked increase in livestock and poultry production.

At Kansas City, Kans., in the Fairfax district, the Farmers Union Jobbing Association has a large, new elevator, which as soon as service is available, will be equipped to load barges on the Missouri River.

Another member of the federation, the Equity Union Grain Co. of Lincoln, Nebr., has under consideration the building of a loading facility at Nebraska_City, Nebr.

The Farmers Grain Dealers Association of Iowa, a large cooperative serving farmers in that State, has under consideration similar facilities on either the Missouri or the Mississippi River.

In the West, the North Pacific Grain Growers, Inc., of Portland, Oreg., and Spokane, Wash., has under consideration the creation of barge receiving facilities at Portland. A member of that organization, the Pendleton Grain Growers, Inc., loads very substantial quantities of wheat on barges at a facility it operates on the Columbia River, not far from Pendleton.

All of these developments are in the direction of seeking to enlarge and expand grain markets on behalf of farmers, and we therefore urge that the existing dry bulk exemption be left unchanged as national policy.

I will be very glad to try to answer any questions you or Mr. Hinshaw might have.

Mr. ROGERS. Thank you, Mr. Hendrickson. Mr. Hinshaw, do you have any questions?

Mr. HINSHAW. I think the statement is quite clear and it requires no examination.

Mr. ROGERS. Thank you, Mr. Hendrickson. I concur with Mr. Hinshaw. I am pretty well familiar with your operations because you are very active in my section of the country and you have done a great job out there.

Mr. HENDRICKSON. That is right. Unfortunately, we do not have any rivers there.

Thank you.

Mr. ROGERS. Thank you very much, Mr. Hendrickson.

Mr. HENDRICKSON. Thank you.

Mr. ROGERS. Our next witness will be Mr. John C. Allen, general traffic manager of Sears, Roebuck & Co.

Mr. Allen, if you will come forward and identify yourself, you may proceed.