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pital programs domestically, as well as to be used for lend-lease and foreign-aid programs.

And next, grants by the United States Government and by States should be encouraged for the purpose of extensive steps to determine additional uses and needs of poultry products. These grants should be considered in connection with the State universities, as well as private research and experimental laboratories.

Next it is respectfully submitted that the Senate Agriculture Committee confer with the committee of the poultry industry composed of actual commercial poultry farmers, operators, and organizations periodically to further the recognition of existing problems and discuss the solution of the same.

In view of what I have presented, I think I have given sufficient coverage to the overall brief. And I will send a more detailed brief to the committee for further study.

I would like to extend to this Senate Agriculture Committee the possibility of coming to our congested poultry area, so that many more poultrymen can express their views maybe a little more advisedly or broader than I have here, because I do not want to take any more time. I feel that the Agriculture Committee will probably give more time to the statements in the brief. This is as far as I would like to take

your

time. The CHAIRMAN. Thank you, sir. Your statement, that is, the one The CHAIRMAN. Thank you, sir. The CHAIRMAN. Is Mr. Wesley Engst present? (No response.) Has Mr. Austin come in? (No response.) Did Mr. Van Wagenen come in yet? (No response.)

We will next hear from Mr. Paul Smith. Give us your name in full for the record and your occupation, please. STATEMENT OF PAUL SMITH, ASSISTANT COMMISSIONER, DEPART

MENT OF AGRICULTURE AND MARKETS, ALBANY, N. Y. Mr. SMITH. Mr. Chairman and members of the committee, my name is Paul Smith.

I take it for granted that this committee is entirely familiar with the financial situation on the farms caused by the disparity between agriculture and the rest of our economy. I do not think that I will devote any time to that. I am going to talk about something that I think might help to improve it.

First, I have a few comments to make on the present setup, flexible price supports and rigid price supports.

If we adopt the premise that the Federal Government has the responsibility to assure its 165 million, and ever growing population, a plentiful supply of food at a reasonable price, we must admit that so far we are on sound ground. However, in order to sustain this, it means that we must have a surplus of the various food commodities at all times, never forgetting that the maximum consumption must be the minimum production, and in order to provide for a reasonable carryover against emergency, there has to be a substantial excess.

As of now, I know of no crop which is short. The problem now seems to be that the carryovers are excessive and in the case of many crops unmanageable.

Following the theory of the flexible price support, it would mean that the low parity would be applied to all these crops until the excess was terminated. In other words, without any further planning to control the surpluses other than the low parity when we have excesses, it would necessarily follow that the low parity would be the prevailing parity at all times. Particularly, this has been proven in the case of milk where the low parity has been in operation since April 1, 1954, although the output has increased.

The flexible price-supoprt proponents theorize that, in times of short supply, raising of the parity would increase production which would mean increased total receipts with a higher parity. However, marketing experience has taught us that in times of shortage there is need for artificial price stimulation. The law of supply and demand in these instances operates to the benefit of the producer and the price would be ample without any application of the parity provision. Therefore, we may conclude that flexible parity means the low parity that can be applied under the law on all our crops most of the time.

The following are some reasons why rigid supports without further implementation are unsound. With 90 percent of parity it has been proven--particularly in our basic crops—that production, with favorable weather, exceeds the normal demand. This situation confronts the Federal Government today. If the parity price were continued at 90 percent-and in the absence of an increase in export trade or disposal-we would find ourselves with a terrific and unmanageable glut of all basic food products.

The problem is not as simple as the proponents of either of these two views would have us believe. Flexible supports—meaning low supports--puts agriculture to such an economic disadvantage that it cannot long continue without bankrupting the farmer and affecting our whole economy. Rigid, or 90 percent, supports means using up our land resources to produce beyond our actual demand; and a continuance of this over any lengthy period, and with favorable production weather, results in huge surpluses that just simply cannot be managed.

That leaves us where some new plan for agricultural stabilization must be adopted. It seems to me that the plan that will come more nearly meeting the situation is a combination of the 90 percent, or rigid, parity support to the producer for growing his crops, plus free play in the market place in the merchandising of his crops. I am sure that, if there is a potential demand in this country for more of our food than is actually being consumed, the lower price which would result from putting more on the market would also result in translating that potential demand into an actual demand to the end that some surpluses caused by guaranteed prices to the grower would go into consumer channels. In other words, the farmer, for producing

would receive a guaranty of 90 percent of parity. I have no objection to that going to 100, if practical.

The consumer, on the other hand, would benefit by lower prices in the market place. To make up the difference, the Government would subsidize either the consumer or the producer, or both, to

his crop,

the extent that the disparity between agriculture and the rest of our economy is partially or wholly eliminated.

This plan was first publicized by Agriculture Secretary Brannan during the Truman administration, and I believe that nothing has been advanced since then that will come close to meeting the complicated problems that confront us. This can be offered as a general overall plan, but I believe that many other things must be adopted to supplement the operation of this overall plan. Where commodities are local and perishable, I think marketing orders could properly be put into effect—both State and Federal or a combination of the

But where a crop is nationally grown and the output of one State, particularly of nonperishable products, can be marketed in almost any other State, the Federal Government of necessity must be in the picture.

If this plan of operation, namely, free play in the market place plus 90-percent parity guaranty for the grower still results in excess production, then it would seem wise to invoke some sort of production control. Obviously, there is no point in using up soil resources to produce in excess of amounts that can be disposed of one way or another. This brings up the problem of how best to curtail that production.

The idea of paying farmers not to produce seems to be gaining widespread approval currently. This, in connection with the aboveproposed plan, would perhaps meet the situation provided the producer is placed on a unit-production basis rather than an acreage basis. The fallacy of curtailing acres has been pretty well shown up in the past. The smaller allotment in most cases results in more intensive operation of the remaining acres, resulting in no appreciable decrease in total amounts.

To summarize the above: If we put into effect the following plan it is my belief that the situation would be much improved over any single plan that has been suggested up to now:

1. Ninety percent of parity guaranty to the producer for all he grows.

2. Free play in the market place, as suggested in the Brannan plan.

3. Marketing orders wherever they can be practicably applied.

4. Curtailment of production on a unit basis rather than an acreage basis.

The CHAIRMAN. Would you make the Brannan plan apply to all commodities?

Mr. SMITH. All commodities?
The CHAIRMAN. Yes.

Mr. SMITH. Some provisions of it, perhaps, but not necessarily. I believe in using the marketing order wherever it can be used and to the fullest extent that it can be used.

The CHAIRMAN. I presume such as we have now for the milk industry?

Mr. Smith. That is right. Perhaps they might be used on other commodities, too.

The CHAIRMAX. We have been looking for a formula to do that, and so far we have not been able to find that, that is, to make it nationiride. Some are suggesting it. No concrete plan has been offered.

Mr. SMITH. I want to point out that it is my feeling that neither

the flexible price support under which we operate now, nor the rigid 90 percent is the answer. There has got to be something else. It has to be implemented by other things, marketing orders, and so forth.

I would say this, Senator, that I think that the only use I would have of a flexible parity support would be a differential applied to quality in the commodity. For instance, there is no point in paying 90 or 100 percent of parity to produce something that we do not want, something of inferior quality. In other words, I think the top parity should be on a very top quality product. Then if you want to use flexible parities, put it down on the inferior grades of commodities.

The CHAIRMAN. Thank you. Are there any other questions?

Senator AIKEN. I notice, Mr. Smith, that you agree pretty thoroughly with Mr. Wright on the use of compensatory payments and the support level as indicated in the Brannan plan except where the Brannan plan would provide the supports for 75 percent of the commodities produced, you would provide 90 or 100 percent for all he produces, everything.

Mr. SMITH. That is right.

Senator Aiken. You also agree on letting everything go into the free market.

I was wondering, and I do not know whether you are speaking in an official capacity or not-do you agree on the limitation of production which is contained in the Brannan plan and which at the time it was introduced would limit the production for price support per farm to $24,000 ?

Mr. SMITH. No. I do not think that I agree to that. You have got to bring it up to date, certainly.

Senator AIKEN. Would you agree with the provision of the Brannan plan which would require any farmer in order to be eligible for supports to operate his farm in accordance with plans laid down by the Department of Agriculture?

Mr. Smith. Well, I am not one who fears regimentation by the Department of Agriculture. I am not afraid of that.

Senator AIKEN. You would not worry about that?

Mr. SMITH. I would not worry about that. I think that has been stressed and overstressed. I think somebody else has tried to put out propaganda that that is a terrible thing to put that yoke on your neck. I am not afraid of it. I do not believe the average farmer is.

Senator AIKEN. I have delineated the main points of the Brannan plan. The one you would not go along with is the one which limits the amount of production for price support per farm?

Mr. Smith. The amount of production per farm.
Senator AIKEN. The $24,000?
Mr. SMITH. Not to a specific amount.
Senator AIKEN. Approximately $24,000?
Mr. SMITH. It was named 7 or 8 years ago; no.

Senator AIKEN. That would be, well, 1949. I think prices were a little below what they are now, but approximately the same.

Mr. SMITH. I am not saying that I would go along with all features of the Brannan plan. It is the principle of the Brannan plan as generally known that I am for, I think should be applied.

Senator ÄIKEN. Those were the four features-100 percent support for approximately 75 percent of the agricultural production, Gov

And you

ernment direction of the operations of the farm, limitations on production and the other one that I mentioned.

Mr. Smith. I am for the principle of that. It has to have supplements. I do not have this written out, but I have an idea how the milk surplus could be controlled. If I owned all of the cows in the United States of America that are making this milk, I would probably sell off 15 percent of the cows that were making the 10 percent too much milk, but I do not own all of the cows. They are owned by thousands of different individuals. But a way it could be done through the Federal Government that would accomplish the same thing, in my opinion, is this: Beef prices are low. Dairy cows sold for beef are very low, say, 7, 8, 10, 11 cents a pound.

Mr. Brannan could say to each producer, “There is too much milk produced in the United States of America. Let us get rid of some of the cows that are producing this milk. The ones to get rid of are the poorest cows. Sell them for beef."

But beef in so Jow that you would not get much out of them. Beef is so low that if Mr. Brannan told them that, they would not do it. But if Mr. Brannan said, “I will give you $100 on top of the beef price for every cow that you dispose of, and take out of the dairy," then you would see some dairy cows move into the beef channels. would see 6 or 8 percent of your cow population go out on that kind of a basis.

He could do that. There is plenty of justification for that subsidy which he would have to pay the farmer.

Senator AIKEN. Do you understand that your views correspond to the official views of the State of New York?

Mr. SMITH. I do not know that they do. No; there will be a paper right here later this afternoon. Although you can say that I am speaking from the standpoint of a poultry-dairy farmer, and as assistant commissioner of agriculture and markets, however, there will be another paper read here this afternoon which represents the opinion of the State of New York.

Senator HOLLAND. I note with interest that your program would involve the retirement of 15 percent of the dairy cows, largely at public expense, for beef purposes.

Mr. SMITH. That would be about 50–50—50 at public expense and 50 at the expense of the owner of the cow.

Senator HOLLAND. You know, of course, what straits the livestock industry has been in and how little their product is bringing. How happy do you think they would be about that?

Mr. Smith. I am not touching on that phase of it.

Senator HOLLAND. Having to absorb that 15 percent of the dairy COW.

Mr. SMITH. I know that.
Senator HOLLAND. In addition to all of the livestock slaughterings.

Mr. SMITH. I realize that. There is potential demand in other sections of the world for some of this product, perhaps. If you could translate that into an actual demand in some way.

Senator HOLLAND. We are not trying to work out something that the world approves. We are trying to work out something that the representatives of the people throughout the Nation might approve.

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