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industry committee for use in publicizing peanuts and peanut products and promoting their increased consumption.

(e) It is estimated the funds accruing to the general fund from payments of $12 a ton by growers would be sufficient, after allowing for the maximum promotional funds, to cover the cost of diversion of surplus averaging 8 percent of the total production.

We believe this basic approach offers much promise and we ask your study of the general approach as we continue to work on refinements and coordination with other growers.

IV. SPECIFIC PEANUT LEGISLATION AND PROGRAM OPERATION

1. Minimum national allotment and section 358 (c) (2)

Within the framework of the farm elective programs proposed we recommend enactment of legislation which will accomplish :

Minimum national allotment and section 358 (c) (2): Repeal the present minimum allotment provision whereby the minimum national allotment is now fixed at 1,610,000 acres, so that allotments and quotas for edible purposes could be fixed more closely in line with demand. However, together with and most important, is the necessity to amend section 358 (c) (2) of the Agriculture Adjustment Act of 1938, as amended, so as to remove the discretionary authority of the Secretary and in general assure that the original intent of this section is complied with. We learned the hard way this year just how such discretionary authority can result in putting the program in a bad light.

Section 358 (c) (2) of the act states in part as follows: "Notwithstanding any other provision of law, if the Secretary of Agriculture determines, on the basis of the average yield per acre of peanuts by types during the preceding 5 years, adjusted for trends in yields and abnormal conditions of production affecting yields in such 5 years, that the supply of any type or types of peanuts for any marketing year, beginning with the 1951-52 marketing year, will be insufficient to meet the estimated demand for cleaning and shelling purposes at prices at which the Commodity Credit Corporation may sell for such purposes peanuts owned or controlled by it, the State allotments for those States producing such type or types of peanuts shall be increased to the extent determined by the Secretary to be required to meet such demand but the allotment for any State may not be increased under this provision above the 1947 harvested acreage of peanuts for such State."

Report No. 169, 82d Congress, 1st session, House of Representatives thoroughly explains the legislative intent of section 358 (c) (2). This report states in part as follows: "Probably the most important provision of the accompanying bill is the provision which will assure an ample production of all types of peanuts. One of the important provisions of the Agriculture Adjustment Act of 1938 as amended is section 304 which establishes consumer safeguards. Under that provision it is made the duty of the Secretary of Agriculture to administer the statute so as to provide for the maintenance of a continuous and stable supply of agriculture commodities from domestic production adequate to meet consumer demands at prices fair to both consumers and producers. The provisions of the accompanying bill will enable the Secretary of Agriculture to give full effect to the consumer safeguard provision by permitting him to increase at any time the acreage allotment for any State producing a type of peanut which is in short supply.”

Further, we are attaching as enclosure 1, a copy of our statement made at a public hearing on the 1955 question in Washington, D. C., on April 29, 1955, together with our letter of April 14, 1955, to Mr. Earl M. Hughes, Administrator. Frankly, in our opinion the law is clear, the legislative intent is spelled out and the facts were not questioned. The official USDA figures bore out the facts we were extremely conservative in the type increase requested. The Secretary nevertheless announced a 7142 percent, across the board increase for all peanuts. The damage to growers, the program and unnecessary cost will be felt for a long time. This recent experience indicates the reason for our plea that section 358 (c) (2) of the act be rewritten substantially as follows:

"Notwithstanding any other provision of law, if, on the bases of the average yield per acre of peanuts by types during the preceding 5 years, the supply of any type or types of peanuts for any marketing year, beginning with 1956–57 marketing year, will be less than the last 5 years average production of any type or types of peanuts, less any quantities of the particular type or types diverted by CCC to crushing, plus 15 percent, the State allotments for these

States producing such type or types of peanuts shall be increased to the extent necessary to provide, on the basis of the average yield per acre of peanuts by types during the preceding 5 years, a production of each type or types of peanuts of not less than the last 5 years average production of any type or types of peanuts, less any quantities of the particular type or types diverted by CCC to crushing, plus 15 percent. The total increase so determined shall be apportioned among such States for distribution among farms producing peanuts of such type or types in the 3 years immediately preceding the year for which the allotments are being determined. The additional acreage so required shall be included in the national acreage allotment, the production from such acreage shall be included in the national marketing quota, and the increase in acreage allotted under this provision shall be considered in establishing future State, county, or farm acreage allotments.

The addition of 15 percent to the 5 years average is based upon peanut growers electing to utilize the self-supporting and promotion-financing option previously recommended. An 8-percent diversion would be paid for by growers if that much had to be diverted and the population increase plus an effective promotion would reasonably take care of the remaining 7 percent. Otherwise the addition would be only 6 percent.

The foregoing does the following:

A. Removes discretionary authority of the Secretary and places the final adjustment by types on a mandatory basis which gears the production of each type to the proven edible trade demands, or in inverse relation to surplus production ; plus a reasonable increase over the 5-year average.

B. Removes the cause for peanut growers from the various areas to have sharp differences over the degree of increases or lack of increases, with the USDA in the middle, by providing a clearly established method of acreage adjustments by types. The proposed method uses factual information which is readily available, eliminates the trouble-causing phrases which permit adjustments for trends, abnormal conditions, etc., and the requirement that the Secretary must conclude (guess) the production from the increased acreage, plus the production from previously allotted acreage will move at not less than 105 percent of support price, plus reasonable carrying charges as a condition to making a type increase. Obviously such a conclusion is next to impossible to factually justify.

C. Includes such increases in the history for establishing future allotments. This will tend to, over a period of time, lessen the degree of annual type adjustment.

D. In effect says to the growers of the various types, the more you sell into the edible trade, the better your promotion and selling efforts, the more responsive you are to consumer preferences for quality, etc., and the nearer you approach costing CCC no money for diversions, the more acreage will be given you. In other words, a real incentive to effectively do the foregoing as contrasted to the present situation.

Legislation which will permit the Secretary to establish a national allotment closely in line with estimated requirements, by repealing the minimum allotment provision, will not run any necessary risk of an inadequate supply in case of a far below normal crop. Nor is it necessary to have legislation other than what we now have to assure such protection. Such assurance can be provided by the Secretary utilizing authority he now has. There are two courses of action available:

(1) In event of a short crop, the Secretary can barter or buy; we prefer bartering as long as substantial surpluses of commodities are held by CCC, for sufficient peanuts to assure an adequate supply. Such peanuts would be the property of CCC and not require any lifting of prevailing import restriction. CCC could then, upon a showing of need, make the peanuts available to users at prices fixed by CCC, so as to assure no interference with the operation of the price support program. Any peanuts so acquired by CCC and eventually found to be in excess of needs could be diverted to oil. During the past crop year when the question of a shortage arose, we, together with others, urged the USDA to follow such a procedure and avoid all of the trouble caused by two investigations by the Tariff Commission, but without favorable results. It seemed ot us to make sense for the USDA to barter, for example, surplus wheat to India for peanuts. Such would have relieved us of that much wheat, putting it where people are hungry, stopped carrying costs on same, and even if CCC had way overestimated the quantity of peanuts, the diversion to oil returns would have represented a fair return for the wheat.

64440—56-pt. 6--21

Second, the possibilities of CCC, each year, carrying over as shelled peanuts, in cold storage, a reasonable cushion of the various types and grades offers enough potential to warrant thorough study. This approach contemplates an annual rotation of the inventory. The cost of maintaining this inventory plus the lack of benefit as being a help in reducing surpluses of other CCC stocks indicates it is definitely a second choice.

After all, we should bear in mind that if carryover is adjusted as herein recommended there have only been 2 years since 1909 when the crop was so far below normal, that the revised carryover would be inadequate. 2. Prompt diversion

Current crop report estimates indicate a surplus from the 1955 peanut crop now being harvested of approximately 184,000 tons, assuming normal carryover is changed as herein recommended. This surplus is occasioned by a combination of above normal yields, granting of a 742 percent increase in allotments without proper regard to needs of the various types and to some less degree, the handling of the importation of foreign peanuts in 1955. We do not believe there will be any surplus of Virginia type, despite our indicated above normal yield.

However, we in our area are just as much effected as any one by what the Secretary may not do about promptly diverting the overall surplus to oil. Under legislation now on the books, all the Secretary has to do to slide the 1956 support level to 75 percent of transitional parity is to do nothing about a prompt diversion. We are alarmed at reports and indications which indicate such may happen.

If such does happen, then it is estimated a 75 percent of transitional parity support level for the 1956 crop will mean $31 million less income to peanut growers than they would otherwise receive for the same crop at a 90 percent of transitional parity support level. Compared to 90 percent of the old parity formula it will be a loss of $41 million.

It is generally understood that certain manufacturers of peanut products are urging the Secretary that he do nothing about diversion, basing the requests on the theory they are apprehensive about an adequate supply. With harvest well along and the quantity and quality known, this is ridiculous. Of course the motive is peanuts as cheap as possible, the man who grows them and his costs not considered.

There is no reason in the world to incur storage costs, risk some deterioration of quality and value, all of which will be charged up to the peanut program, and delay diversion until such time as it is too late to reflect a support level of at least 90 percent of parity for the 1956 crop.

In summary, a continuance of doing nothing about diversion can only result in very cheap peanuts for manufactures in 1956, unnecessary costs charged to the program and from $31 million to $41 million less income for growers.

We believe this matter warrents your timely attention. 3. Penalty for overharvesting

Change the penalty for peanuts harvested from acres in excess of allotments from 50 percent of support to 75 percent of support price and permit county committees to give weight to a producer's previous compliance in determining future farm allotments. Virginia growers recognize stern controls are necessary for the effective operation of a program designed to keep a healthy supply. demand balance. The relatively few growers who deliberately overplant and overharvest not only contribute to overproduction at the expense of the vast majority who comply but their actions tend to reflect unfavorably on the program. 4. Normal supply

Change the definition of “normal supply" by changing the allowance for carryover from 15 percent to 20 percent of the estimated domestic consumption plus estimated exports. Such a change is needed to provide a carryover which will realistically reflect present-day trade and industry practices. For the last 5 years the industry has, in order to keep the pipelines open, elected to carry over as of August 1, exclusive of CCC stocks, an average of 131,000 tons. Cur. rent legislation results in a carryover of approximately 99,000 tons. Clearly this is a needed change to cope with present-day trade practices and is not in any way a back door means of obtaining a setaside.

5. Net loan be announced support

Spell out in firm language that the net loan advance is to be the announced support price. At present we have a support price of 90 percent of parity for peanuts, the loan is approximately 86 percent of parity, and in some years of a 90-percent program the loan advance has been approximately 83 percent of parity. We all recognize that the loan price is the floor from which the market is bid up and the loan price is the important figure or level. Unless this is done, the Secretary of Agriculture, at his discretion, can continue to flex the effective support level, which is in effect the loan price, far below the support price set by legislation. All he has to do is decide there will be greater deductions for storage, handling, inspection, insurance, etc., in arriving at the loan price. 6. Basic to controlled

All reference in existing agriculture legislation to "basic commodities” be changed to "controlled commodities." The word "basic" has caused peanut growers a world of trouble and may well become a problem with others. Repeated efforts by some manufacturers to destroy the peanut price-support program have argued that peanuts are not basic, and hence the program should be eliminated. We know there is nothing more basic to the peanut-growing sections of our producing States than peanuts. We submit the legislative history indicates it was simply a name assigned to a group of commodities which lent themselves to production controls and were storable and the producers of the commodities were willing to accept production controls as prescribed by the Congress. Despite the general understanding by those in agriculture, hostile writers, or any of those seeking destruction of the program, by use of such an approach can certainly confuse the public and an alarming number of Representatives. 7. Computing average prices

Two things are currently being done within the United States Department of Agriculture which tend to result in a lower support price. In both instances, we firmly believe the actions to be inconsistent with the law. Specifically, the Department, in arriving at average prices received by growers, which figures are then used in computing parity under the modernized formula, are taking into account

(a) The price received by growers in 1950 and 1951 for excess peanuts for oil, such production for oil having been expressly authorized by law; and

(b) The price received by growers, during all 10 years, for peanuts grown on acreage in excess of their allotment at a price equal to the difference between the market price and the marketing penalty.

We are not at all satisfied with the answer these procedures do not affect the parity price under the new formula very much. It is wrong. It may be relatively small but when added to other relatively small reductions of income, the total is an alarming one. If this matter requires legislation in order to correct, then we ask that such needed legislation be enacted. If it does not require legislation we ask this committee to determine why the law is not being complied with. 8. Effects of increasing penalties and discounts

We ask that the trend in recent years toward higher grade discounts and penalties be reviewed to see if corresponding upward adjustments in the support price have been made. If, in fact, such offsetting upward adjustments have not been made and we are of the opinion they have not been fully made--a material lowering of returns to growers has taken place without authority and contrary to the law. If such a practice is not stopped, it has the potential of making the support level and the parity formula almost meaningless. 9. Vacant lot peanuts

Eliminate the unrestricted planting and harvesting of 1 acre or less. The increasing practice of more and more vacant lots and garden plots being planted in peanuts year after year—in many instances, numerous 1-acre plots being working by the same person---tends to make production control more difficult and demoralize the within quota growers. We recommend such plots be treated like any new grower allotment and farm.

Our association assures this committee our full support and cooperation in strengthening and further improving our program. We further assure our support of constructive efforts to soundly bolster the farmer's fair sharing of our national prosperity.

We thank you.

JUSTIFICATION FOR 10-PERCENT INCREASE IN ACREAGE ALLOTMENT FOR VIRGINIA

TYPE FOR 1955

(Enclosure 1)

1. GENERAL

There are several provisions of the Agriculture Adjustment Act of 1938 as amended which are pertinent to the request of Virginia growers for a 10-percent increase in acreage allotment for the 1955 crop.

Section 304 of the Agriculture Adjustment Act of 1938 as amended is particularly pertinent in view of the recent reopening of hearings before the Tariff Commission at the request of the Secretary, regarding the matter of increased import quotas for peanuts. Section 304 states in part: "In carrying out the purpose of this Act it shall be the duty of the Secretary to give due regard to the maintenance of a continuous and stable supply of agricultural commodities from domestic production adequate to meet consumer demand at prices fair to both producers and consumers."

Also most pertinent to this request is sectior 358 (c) (2) of the act which states in part as follows: (1) “Notwithstanding any other provision of law, if the Secretary of Agriculture determines, on the basis of the average yield per acre of peanuts by types during the preceding five years, adjusted for trends in yields and abnormal conditions of production affecting yields in such five years, that the supply of any type or types of peanuts for any marketing year, beginning with the 1951-52 marketing year, will be insufficient to meet the estimated demand for cleaning and shelling purposes at prices at which the Commodity Credit Corporation may sell for such purposes peanuts owned or controlled by it, the State allotments for those States producing such type or types of peanuts shall be increased to the extent determined by the Secretary to be required to meet such demand but the allotment for any State may not be increased under this provision above the 1947 harvested acreage of peanuts for such State."

(2) Report No. 169, 82d Congress, 1st session, House of Representatives, thoroughly explains the legislative intent of section 358 (c) (2). This report states in part as follows: "Probably the most important provision of the accompanying bill is the provision which will assure an ample production of all types of peanuts. One of the important provisions of the Agricultural Adjustment Act of 1938 as amended is section 304 which establishes consumer safeguards. Under that provision it is made the duty of the Secretary of Agriculture to administer the statute so as to provide for the maintenance of a production ade quate to meet consumer demands at prices fair to both consumers and producers. The provisions of the accompanying bill will enable the Secretary of Agriculture to give full effect to the consumer safeguard provision by permitting him to increase at any time the acreage allotment for any State producing a type of peanuts which is in short supply.”

In substance our request today—and it is the same request that has been made several times previously to the Department-is to earnestly ask the Department to incorporate current supply, demand, and other pertinent data into the method set forth in section 358 (c) (2) and act accordingly. We refer specifically to our letter of April 15 to Mr. Earl M. Hughes, Administrator, Commodity Stabilization Service, United States Department of Agriculture.

2. APPLICATION OF CURRENT DATE TO SECTION 358 (C) (2) (a) “On the basis of the average yield of peanuts by types during the preceding 5 years." The Virginia-type average for the years 1950-54 inclusive is 1,565 pounds per acre. (b) “Adjusted for trends in

and abnormal conditions of production affecting yield in such 5 years." The last 5-year history of yield of the Virginia type indicates an upward trend and we are frank to say an adjustment upward for trends in yields would be indicated.

However, the next phrase specifically refers to adjustment for abnormal conditions affecting production. This clearly indicates a downward adjustment as we have been blessed with far better growing conditions and spared a bad producing year during the last 5 years. If we compare the 10-year average 1945– 54 production of the Virginia type with the natitonal average, less the Virginia type, during the same period, we had an average of 1,335 pounds per acre, compared with a national average, less the Virginia type, of 673 pounds per acre,

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