As in the flexible support system, a system operated through quality differentials could very well work out in a way that the bottom figure of a 60 to 90 percent range would be the one that does the supporting, rather than the top figure.

Minnesota's average prices received by farmers on November 15, 1955, were as follows:

71

70

60

54

78

50

With such a situation in effect it would be disastrous for the Congress to adopt a farm law which would go no further than the President's proposals in seeking to rally farm prices and income.

The basic components of the 1956 Farm Act should be:

Return to 90 percent supports on basic commodities with action to continue use of the old parity formula on these items.

Establishment of minimum 90 percent supports on the feed and oil-seed

grains.

Establishment of a 90 percent support system on dairy products operated through production payments to the farmer on the whole milk.

Establishment of measures to assure 90 percent of parity returns on hogs, beef, eggs and poultry, providing specific authority for use of direct payments as a support measure, premium payments to encourage marketing of hogs and beef at prime weights, along with present surplus removal authority.

Provision for a conservation acreage reserve with benefit payments sizable enough to compensate for the loss of income due to diversion of the acreage.

OCTOBER 27, 1955.

Hon. EZRA TAFT BENSON,
Secretary of Agriculture,

United States Department of Agriculture,

Washington, D. C.

It is very evident already that hog farmers are adopting a wait-and-see attitude. Hog marketings at South Saint Paul have dropped from a high of 23,000 on October 25 to 16,000 on Wednesday and 12,000 today. Obviously farmers are waiting for the buying program to be put into action to see what its effect will be.

If buying is delayed for any length of time, these hogs will unnecessarily build up in weight and numbers and there may be a rush for the market in midNovember or December which could break the market in spite of whatever you can do with a pork-buying program of such a limited nature as you have already announced.

We hope that in your appearance at Moorhead on Friday, October 28 you will be able to give some new assurance to midwest farmers that the downward hog price trend will be reversed.

We note that you have expressed doubts that the expenditure of $85 millions in the next 10 months will do more than hold the present price level on hogs, if even that much.

We would agree that the use of pork purchases may not do very much to rally prices.

Of course, it is important to stop the hog price decline. But it is more important to rally the price, because the farmers will be in serious difficulty if prices are allowed to level off at about the $12 figure.

We believe that you should concentrate your efforts on activities which will bolster prices in the next 2 months in order to get the hog producer through this emergency until Congress can convene and act. The available money should be used now, not spread out thinly over a 10-month period.

If you have doubts that very little of the $85 million spent in buying pork products will trickle down into the hands of the farmer, then why not use a more direct method?

We believe you have authority under paragraph 3 of section 32 to use tariff funds to "reestablish farmer's purchasing power by making payment in con

nection with the normal production of any agricultural commodity for domestic consumption." This authority could be applied to hog production because the hogs coming to market in 1955 will be very near to normal. The marketings will be up from the low point of 1954, but compared with the 10-year average of marketings from 1944 to 1953, the 1955 hog surplus amounts to only 1 or 2 percent more than normal.

While there is no authority for a permanent program of direct payments in the agricultural acts of 1949 or 1954, there seems to be unmistakable authority and precedent for a temporary program under the section 32 law, which is the same authority under which the pork-buying program is contemplated.

As closely as we can determine, there are about $117 millions in section 32 funds which could be used for pork purchases or hog payments in the balance of this fiscal year. I would recommend that this money be used in the next 2 or 3 months.

Using this money for direct payments to farmers would enable you to increase the farmer's return by about $3 to $3.50 per hundredweight. Under a pork-buying plan, it is probable the action would result in only a negligible gain.

In other words, using the money in direct payments could mean that the farmer would get ten times the benefit from the money spent as compared with a surplus pork-buying program. There is a substantial difference in these administrative alternatives as to whether the benefit will go to the packer or to the farmer.

It is important that action be taken quickly to insure that hogs come to market in an orderly fashion and at the most favorable weights.

We believe that orderly marketing would be promoted if you would announce tomorrow that whatever program is launched would be effective November 1 or retroactive to some earlier date, so that farmers would be able to send their hogs to market when they are at prime weights and with the assurance that they will not miss out on any of the benefits of the support measures.

The use of section 32 funds for direct hog payments to farmers could be handled through the ASC committees with comparatively light administrative costs.

Also, the expenditure of these available funds in direct payments to farmers would not interfere with any pork-buying program for school lunches or welfare needs. If you know of outlets for $85 millions of pork products in the school lunch or relief programs, by all means the purchases should be made. But, you have almost unlimited funds and authority under other laws under which these purchases and distribution could be made.

A halfhearted program at this time will only build up worse trouble in the coming months. We sincerely believe that the most constructive step would be to move vigorously to rally the price in the next 2 months and to leave the longer range solution of the situation to the Congress.

EDWIN CHRISTIANSON, President, Minnesota Farmers Union.

The CHAIRMAN. Any questions? Senator YOUNG. I am not quite clear, Mr. Patton, what portion of acreage conservation or the soil-bank program you are opposed to. Mr. PATTON. It is phase 1 on allotted-the one applying to allotted crops and using certificates or commodities to pay to the farmer. I do not think that fundamentally means anything.

Senator YOUNG. That would be under the second phase, would it not, conservation?

Mr. PATTON. Phase 1. We are for phase 2, except that we think, Senator Young, it ought to be enlarged.

Senator YOUNG. I am a little bit confused on the new terms myself. You are for the soil-bank part?

Mr. PATTON. The Secretary proposed a soil bank of two parts, as I understand it, Senator. The first part was what he termed an "acreage reserve," which will apply only to allotment crops. I think he listed four.

Senator YOUNG. You are for that part of it?

Mr. PATTON. We are opposed to that part of it.

Senator YOUNG. Even where voluntary?

Mr. PATTON. Yes, sir; because we don't think it means anything. It could have a bad effect. It could sell commodities on the market place at the same time that the farmer is taking them out.

We would rather put the emphasis on the second phase proposed by the Secretary which we are for. We would like to have it increased. We think it would be more effective and we would rather see the money, if there is money to be spent there, because it would apply not only to the allotment crops but would apply clear across the board.

Senator YOUNG. I can see some danger, particularly if the payments were not sufficient, and if we did not safeguard certain things. For example, in a community that might have a lot of absentee landowners, they might decide to take most all of their land out of production and accept these payments. Some of their land might be important parts of farm renters' units.

You would have to guard against that. I think you have made a good contribution in your statement. I think we do have to consider these proposals very carefully.

Mr. PATTON. Thank you, sir.

The CHAIRMAN. Any further questions?

Senator ANDERSON. Mr. Patton, on page 2, you ask what caused this decrease. What did? You start off with a subject, you call sliding scale farm-price supports.

I have here a chart prepared by the Department of Agriculture, in response to a request that I sent to them, which shows how farm income and national income have moved along together, and then at this point which is 1948, farm income begins to drop away and national income keeps on going up.

On the chart we have a little spurt, which represented the Korean war, and then farm income drops again. Then it drops some more. Two-thirds of that drop came during 90-percent price supports.

Why do you not add 90-percent price supports to your list of what caused the decrease?

Mr. PATTON. Because I do not happen to think that they did. Senator ANDERSON. It is twice as much as under the sliding scale, as you call it.

Mr. PATTON. I am not talking about just the law. I am talking about the policies that were applied beginning in 1953.

Senator ANDERSON. To that I would agree to some degree. There are some things that contributed to the surplus I would criticize as vigorously or more vigorously than you do. I wonder if it might not be proper to say that during this period of the accumulation of these surpluses, meaning less accumulation of them, that agricultural prices dropped under both 90 percent and flexible price support; therefore, maybe this surplus has some relationship to the price fall.

Mr. PATTON. Well, in the first place, I never thought the 90 percent of parity support program was a perfect program by any means. And in the second place, the administrative policies in relation to any program are fully as important as the provisions of the law. Senator ANDERSON. More so, in some instances.

Mr. PATTON. In many instances more so.

Senator ANDERSON. Vigorous administration and poor law will look pretty well.

Mr. PATTON. Philosophically, I don't agree with the philosophical concept of the sliding scale.

Senator ANDERSON. I understand that. I do not intend to go over that ground.

Take another point, in 1948, income was $1634 billion to the farmer and national income was under $200 billion. Today national income has gone above $300 billion and farm income has dropped off, to $10,800 million. You used the figure of $10 billion 5.

I think it will be $10 billion 6. We know it will be in the neighborhood of $10.5 billion. We dropped over $6 billion in the farm economy while the national income has gone up by half of what it was, up from $200 billion to $300 billion.

Do you not think that poses an awfully bad picture to the farmer of this country?

Mr. PATTON. It certainly does. He is trying to deal in a free market with a market that is rigged from stem to stern in every other way. The prices of steel are determined by a few corporations, the utilities are set and established by boards to guarantee income.

Here is the farmer going through the economic wind tunnel and it is proposed in some quarters that he get into the free market, which is a fallacy, in my opinion.

Senator ANDERSON. Now, up here in this high period, the farmer got 54 percent of the consumer's dollar. Actually, when the original reports came out, they said 55 percent. They recalculated it and got it down to 54. But there is a world of published statistics showing it was 55, but everybody agrees that it is down now.

Mr. PATTON. Yes, it is; 39, I think.

Senator ANDERSON. 39 percent.

Now, it went down from 55 to 45 under 90-percent supports. It went down from 45 to 39 under flexible supports. Would you not think that if we were really going to cure this, we have got to do more than spend our time on the price-support level?

Mr. PATTON. Let me say again, Senator Anderson, that while income is the keystone, I am not one of those who think that just a pricesupport program is going to solve all of agriculture's problems.

In the first place, we have never, in my opinion-I know several Secretaries who have tried it-we have never had a thoroughgoing, tough investigation of where the spread is and who actually gets it. And there is a good reason for that, because any time the Secretary starts to make a really thorough investigation, he begins to get a lot of pressure. So we have never really faced up to that.

Second-and this is very important-I think the other thing that we have to remember in this whole context is that agriculture has never really been prosperous except when our economy was expanding at at least 7 to 10 percent per year, and whenever it has been expanding at less than that rate, then agriculture has been in trouble.

The other important facet, of course, is, in my opinion, that we should have had a food policy way back. Three times in my generation we have been asked to go all out to produce, and I am not so sure, incidentally, that the surpluses that everybody seems to be crying about are not a very good thing, since we have been at the brink of war 3 times in the last 3 years.

Senator ANDERSON. That came as a great shock to some of us.

Mr. PATTON. It did to me. But we certainly would need that food.

Senator HUMPHREY. The Department of Agriculture did not know that, though.

Senator ANDERSON. If we are going to maintain the brink-of-war policy, probably we are going to need some of these surpluses. Mr. PATTON. We certainly will.

Senator ANDERSON. Because we will finally get there if we keep on "brinking."

Mr. PATTON. I am not suggesting that as a way of meeting our surplus problems, by any means.

Senator ANDERSON. I think that is the least desirable.

Mr. PATTEN. But I do think we ought to have both a long-range and a short-range food policy for this country. Are we going to be off and on about our food shipments to other countries? Are we going to use food as an instrument of helping to build the peace? Are we going to go on with 20 million people in this country not having an adequate nutrition? Is this great and wonderful democracy, capable of producing $400 billion of goods and services a year, finally going to wipe out poverty in this country? It is completely within our range. And if we can do that, Senator, our problem in dairying, many problems we have in vegetables and meats, and even to a degree in feed grains, would be wiped out in a very short period of time.

These are basic things, it seems to me, and the American farmer cannot go on being asked, as we were three times in my generation and the generation of the men around this table, to go all out in production and then be left holding the bag.

When I asked for war contracts for farmers during the war, when everybody else was getting one, the thought was that I was asking for something out of this world.

We finally did, through the efforts of you, Senator Ellender, and others, get the Steagall amendment, which carried us a little ways past the war thing. We were criticized for it, but nevertheless it was a good thing.

But this is not just an agricultural problem. This is America's problem, and I do not think that agriculture should be beaten over the head for providing this country with a more adequate supply of food and fiber than any country in the world has ever been provided with. We have done our job.

Senator ANDERSON. The problem is the disposition of it.

Mr. PATTON. We have done our job. We have done our job as farmers.

Senator ANDERSON. I just want to say that on the 14th day of January, a year ago, I bought 208 head of cattle and put them into a feed lot, to rough around the farm for a while. I sold those cattle, the first installment of them, 52 of them, in Los Angeles a week ago last Tuesday. I averaged 18 cents when I bought them. I sold them and I got 13 cents for the heifers, and a fat price for the fat steers. I got 15 cents for those.

And the explanation was that they had floods in California and too many cattle in the market that day.

I shipped the second batch to Oklahoma City last week, and I will find out what the trouble is there. But whatever it is, it is not reflected in lower meat prices, I can assure you.

Mr. PATTON. That is right.