Miscellaneous documents-Continued Page Proposed flexible domestic support plan for rice, submitted by the rice program development committee Reports of the resolutions committee, Kansas Association of Wheat 3801 3909 Statement filed by Frnest E. Edmundson, Jr., Crowley, La... 3932 3936 Statement filed by C. V. Cochran, Topeka, Kans....... Statement filed by the American Cotton Manufacturers Institute... Statement filed by Hon. Harlan Hagen, Representative in Congress from the 14th Congressional District of California_ 3939 3940 3941 Statement filed by Marion D. Murray, agricultural representative, 3943 Statement filed by Dwight C. Beach, master, and Pauline C. Collin, Statement filed by Hon. Arthur V. Watkins, a United States Senator 3945 3947 3949 Statement filed by Leo V. Bodine, executive vice president, National 3959 Statement filed by the Hon. Price Daviel, a United States Senator from the State of Texas.. 3961 Statement filed by the Hon. William Langer, a United States Senator from the State of North Dakota___. 3962 PRICE-SUPPORT PROGRAM THURSDAY, JANUARY 12, 1956 UNITED STATES SENATE, COMMITTEE ON AGRICULTURE AND FORESTRY, Washington, D. C. The committee met, pursuant to call, at 9:35 a. m., in room 318, Senate Office Building, Washington, D. C., Senator Allen J. Ellender (chairman) presiding. Present: Senators Ellender (chairman), Johnston, Holland, Anderson, Humphrey, Scott, Aiken, Young, Thye, Hickenlooper, Mundt, Williams, and Schoeppel. The CHAIRMAN. The committee will please come to order. When the committee last met, it decided to meet this morning at 9:30 for the purpose of hearing Secretary Benson outline to the committee the proposals submitted last week by the administration on the farm problem. Mr. Secretary, I notice you have a prepared statement. Secretary BENSON. Yes, Mr. Chairman. And, if it please the committee, I would like to go through that statement as quickly as I can. The CHAIRMAN. Without interruption? Secretary BENSON. Without interruption. I believe that will save the time of the committee. The CHAIRMAN. Very well, sir. Unless there is objection, it will be so ordered. You may proceed, Mr. Secretary. STATEMENT OF HON. EZRA TAFT BENSON, SECRETARY OF AGRICULTURE Secretary BENSON. Thank you very kindly, and I appreciate very greatly this opportunity. First of all, I wish to express my thanks to you for the extensive hearings held by this committee throughout the country last fall, which helped in ascertaining the attitudes and obtaining the suggestions of our farm people regarding current agricultural problems. We appreciate the courtesy of this committee in making it possible for the Department of Agriculture to have a representative present at these hearings. I also wish to commend the chairman and the members for the speed with which this committee is moving to consider agricultural legislation. It is now only 9 days since the Congress convened. Just 3 days ago President Eisenhower transmitted his special message on agriculture. The chairman has named February 15 as a target date for the completion of this legislation. You will find all the resources of the Department of Agriculture at your service as you work within that demanding schedule. We are as eager to move forward as you are. Ordinarily, in his first appearance of the year before this committee, the Secretary of Agriculture would give a rather extensive summary of the current agricultural situation. Appended to this testimony is a series of charts describing the economic condition of agriculture and the status of certain of our programs. We can spend as much or as little time on them as you wish. I will summarize by saying that almost all sectors of agriculture feel the price-depressing influence of heavy supplies. As we went into 1955, our carryover of farm commodities was at an all-time record. Superimposed on these huge stocks came a series of events that never before occurred in combination: the cresting of the cattle cycle and the hog cycle at record or near-record peaks in the same year, crop yields 9 percent above the previous record, total farm output at a new record 3 percent above last year, and the world food production at an all-time high. For most of the country, 1955 was the year when the pictures in the seed catalogs came true. THE SURPLUS The President discussed three causes of our agricultural difficulties. One was the distortion of production and markets brought about by war and the continuation of wartime price supports far beyond wartime needs. A second was the near-record harvest and peak numbers of livestock piled on top of previously accumulated carryovers. The third was the rigid cost structure and high capital requirements facing a farm family today. Wartime incentives were continued in peacetime to protect farm incomes. Therein they have obviously failed. The decline in farm income from 1951 until the harvest of the 1955 crops occurred under the old law. Only during recent months has the Agricultural Act of 1954 begun to be operative. Our stocks of farm products have grown despite vigorous efforts to get rid of them-efforts in which this committee has aided in formulating constructive legislation. We have sold into the domestic market whenever we could do so without depressing prices of what farmers were trying to sell. We have donated vast quantities of food to our needy people. We have sold overseas for dollars wherever and whenever possible. We have sold for foreign currencies. We have bartered for strategic materials. We have donated to foreign countries whenever we could do so constructively. Surplus disposals by the Commodity Credit Corporation have risen from just over half a billion dollars in fiscal 1953 to more than $1.4 billion in fiscal 1954, and to more than $2.1 billion in fiscal 1955. Yet, aggressive as the disposal efforts have been, they have not kept pace with the problem. For each bushel equivalent sold, approximately one and a half have replaced it in the stockpiles. Heavy loan operations, partly a consequence of the big cotton crop, will in all likelihood make necessary a further increase in CCC bor rowing power during this session. This is further evidence that the time has come for vigorous action. A year and half ago the Congress passed the Agricultural Act of 1954. This act moved toward a more realistic use of the essential tool of price supports. But the law is smothered by the surpluses accumulated under our past programs. Our surpluses must be reduced as the essential precondition for the success of a sound farm program. What the President proposed is a direct and effective attack on the surpluses themselves, an all-out operation which we should not ask the Nation to undertake more than once. When, through this program, our surpluses are reduced, we should avoid as a plague those programs that would build them up again. This is not a program to empty warehouses so that they might be filled again. SOIL BANK To help bring about a balance of supplies and markets, the President proposed the establishment of a soil bank, which would be in two parts. ACREAGE RESERVE One part of the soil bank would be called the acreage reserve. This is really a deferred-production plan. It would be voluntary and temporary, aimed at reducing production, and hence carryover, of those crops which today are in greatest surplus. The President recommended that the Congress consider this plan for wheat, cotton, corn and rice. He set up as a target the reduction of carryover for these crops to normal in 3 or 4 years. Essence of the program is that farmers would voluntarily reduce production below their allotted acres. They would place specific acres into the reserve, receiving in return, as compensation, certificates which would be redeemable by the Commodity Credit Corporation in cash or in kind. Basis for the value of the certificates would be the normal yield on the dsignated reserve acres. With production reduced, commodities now in Government hands could be used to supply market needs. Thus CCC stocks could be reduced without depressing current market prices. Farm incomes would be protected and increased during this adjustment. As we have considered the acreage reserve program, certain principles have emerged, which seem essential to its success. 1. The inducement offered farmers would have to be generous. Before farmers would comply they would have to feel that their incomes would be at least as high as if they planted their allotted acres. Broad participation is necessary to assure success of the program. In establishing the percentage of the normal yields on the reserve. acres which would determine the value of the certificates, we will have to take account of the farmer's alternatives, since that is what farmers themselves will do. Legislation should establish suitable criteria and leave room for administrative discretion. 2. The acreage reserve program will work only for allotment crops. Sale of stocks back into the market would be disastrous unless room is created in the market by a cutback in current production. Without such cutbacks, prices would be forced down. Or, if price support is provided, other stocks would move into CCC hands to offset stocks moved out. The program must be so operated as to give a lift to the market, not to beat down prices. 3. The acreage reserve program is not a substitute for a vigorous disposal policy. CCC should continue and strengthen its efforts to sell or otherwise dispose of its commodities abroad and at home. Failing this, we might fail to reduce our stocks and the objective would be lost. An aspect of this program is common to all programs which rely on acreage limitations in order to hold production in check. Farmers may intensify operations, increase yields, and partially offset the effect of the program. However, the size of the acreage cut proposed and the temporary nature of the program seem to me to give good reason for anticipating success. The scope of the acreage reserve program could be impressive. If applied to wheat, cotton, corn, and rice it could create a place in the market for more than a billion dollars worth of Commodity Credit Corporation stocks in a year's time. We would use the surplus to use up the surplus. An increase in net income of farmers would come from buoyancy in the price structure caused by evidence to the trade that the surplus problem was finally coming under control. Presently the trade is fearful that our surplus may continue to increase or may be dumped. Prices are thereby depressed. Certificates could in all probability be issued as soon after the planting season as compliance could be determined. The immediate effect of the certificates would be to increase the net incomes of farmers. Income from the certificates would more than replace normal net income from sales of products from the reserve acres. The very fact that farmers would come into the program would itself indicate that they considered this their better alternative. The program would have an insurance feature in this respect: even though crops might fail, the cooperating farmer would still receive a certificate based on normal yields from the reserve acres, which would have a cash value. The acreage reserve program would be largely and perhaps wholly financed by commodities already owned by the Government rather than by a new outlay of funds. In terms of alternatives the acreage reserve program is not costly, but economical. Whether we shall be able to avoid a loss by taking any other course is doubtful indeed. Storage costs run about a million dollars a day. In about 8 years, the carrying costs on a bushel of wheat equal the value of the wheat. Time and shrinkage, storage and other costs are eroding away the present value of these stocks. Consequently, the real cost to the Government-taking these and other facts into consideration-will be substantially less than the apparent cost in payments made on certificates. Above all, there is the price-depressing effect of the surplus, which levies a heavy and growing burden on our farm and ranch people. Our economists estimate that the huge surpluses reduced farm income in 1955 by the staggering sum of more than $2 billion. This is nearly |