The Justice Department has begun a wide-ranging investigation into possible manipulation of potato prices.
Potato processors, potato brokerage firms and potato futures market traders have been ordered to produce records of buiness dealings going back as far as 1971.
The subpoenas were issued at the request of the Justice Department's antitrust division, which reportedly is conducting a grand jury investigation in New York.
The investigation is seeking "to determine whether or not there was a conspiracy or restraint of trade" involving various potato industry firms and individuals, according to one source who received a subpoena.
The latest investigation is said to go far beyond an earlier probe by the Commodity Futures Trading Commission (CFTC) of dealings on the New York Mercantile Exchange, where contracts for future delivery of potatoes are bought and sold.
That investigation led the New York Mercantile Exchange to revamp the terms of its futures contract and to discipline several members who defaulted on futures contracts in 1976.
As a result of that investigation, the CFTC last March disciplined two of the nation's largest potato merchants, John R. (Jack) Simplot of Boise, Idaho, and Peter J. Taggares of Othello, Wash. Taggares and Simplot were banned from trading in potato futures for six years after they failed to deliver nearly 1.000 boxcar loads of potatoes sold on futures contracts.
At that itme Gaggares and Simplot were accused of trying to drive down the price of potatoes. They in turn accused other potato speculators of seeking to force up prices by such tactics as diverting boxcars so the crop could not be delivered and the price would rise.
After the CFTC completed its investigation, the Justice Department reportedly picked up the case and broadened its scope.
One source indicated the Justice Department has subpoenaed as many as 60 persons in the current investigation. U.S. marshals "went up and down the Snake River Valley on a regular milk run," he said. The valley is one of Idaho's major potato-growing regions.
Another source said, "It would be a mistake to assume the focus of the investigation involves the potato default," although records of the New York Mercantile Exhcange have been subpoenaed.
The potato industry investigation comes just as the Agriculture Department has moved to aid potato farmers in Idaho who are suffering from a bumper crop that has depressed prices.
Perfect potato weather gave Idaho farmers yields that were almoslt 10 percent higher than normal, flooding the market with russets, the tan-skinned potatoes favored for baking. Prices to paid to growers have dropped from around $3.20 per hundred-pound bag last year to about $2 a bag this year.
But retail potato prices have not reflected the depressed market, with potatoes selling in local supermarkets for $1.29 to $1.39 for a 10-pound bag, about the same as a year ago.
Between the supermarket and the grower is a chain of middlemen who frequently make more money than the people on the ends of the transaction.
"Increases in costs between the farm gate and the consumer have absorbved the reduced price of the product," said Clifford Ouse, assistant to Agriculture Secretary Bob Bergland.
Consumers will probably pay another penny a pound for potatoes as a result of the Agriculture Department's decision Wednesday to divert about 9 million hundredweight of potatoes from human consumption to cattle feed.
The USDA will pay growers up to $2 a hundredweight to feed their crop to cattle rather than sell it on the open market. The subsidy will keep many Idaho farmers from going broke by giving them a market for potatoes that otherwise could not be sold, said an aide to Sen. Frank Church (D-Idaho), who pushed the action.
The USDA action was bitterly opposed by some potato processors and futures market speculators, indicative of the wide gap between growers and processors.
Led by Alexander Sinclair, an Idaho potato futures broker, the processors took their case to Alfred Kahn, President Carter's inflation fighter, but failed to persuade administration officials that the action would harm consumers.
The effort to block the diversion program, potato growers contend, was another example of attempted price manipulation by futures market speculators who stand to lose millions of dollars if potato futures prices increase.
The complaints of potatoe farmers led Sen. Church to propose legislation during the last session of Congress to prohibit trading in potato futures. The bill died, but Church plans to reintroduce it.