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In section 105 we would suggest that producers be compensated for participation in the acreage reserve program by payment in cash only. If paid in cash, farmers can upon their own election, buy stored feed grains from the Commodity Credit Corporation at prices not less than 105 percent of the support level of such feed grains, plus reasonable carrying charges. The certificates suggested in the draft would accomplish no purpose. Their use would needlessly complicate the administration of the program and would result in cheap feed, low market prices in relation to support prices and induce further production of dairy and livestock products.
If the program is operated on a voluntary basis as we suggest, the major portion of the payment should be made at the end of the crop year and forfeited by farmers who use soil-bank acres for grazing or hay.
In establishing the rate of payment an additional factor should be taken into consideration. This factor should be the increased cost of producing crops on the smaller acreage remaining in farms after setting aside the soil-bank acres. These increased costs would be partially depreciation on machinery and permanent improvements and partially caused by spreading the farmers' own labor over fewer acres. Farmers who spend their full time operating their own businesses cannot be expected to take a further cut in income from their own labor. It is pointless to argue that they should seek supplemental income off the farm.
The last sentence of section 105 can be eliminated if payments are made in cash and if the prices of feed grains purchased from Commodity Credit Corporation are retained at not less than 105 percent of the support price, plus carrying charges.
Section 106 should be amended in such a manner as to restrict the Commodity Credit Corporation from selling feed grains at less than 105 percent of the support price for such feed grains, plus reasonable carrying charges.
Section 106, as drafted, might well result in eventually emptying the Government warehouses, but in turn such procedure could nullify any short-time advantages the program might otherwise afford farmers. If feed grains are released by the Commodity Credit Corporation at low prices to offset acreage reductions made by farmers, prices of agricultural products could not advance but instead would go down from their present inadequate levels. Furthermore if feed grains are sold by Commodity Credit Corporation at prices less than 105 percent of support levels, plus reasonable carrying charges, the cheap feed made available would again encourage production of dairy and livestock products and thus transfer the surplus problem from grain producers to dairy and livestock farmers. The low market prices resulting from the proposal would force farmers to market all of their current production to the Government and then to purchase their own needs for feed grains from the Government. The net results from such an operation would be a program of direct subsidies to farmers. This would be a complete departure from the intent of all agricultural programs adopted to date. Farm incomes would be measured more and more by the amount of subsidies appropriated and less and less by prices established in the market place.
Section 107 should be eliminated from the bill. This section, if retained, would again have the effect of preventing price increases to farmers as long as the Government held feed grains. It is our opinion that farmers need to have their incomes boosted now and that the soil bank was proposed for this purpose. If the soil bank is not to result in increased incomes to farmers until the Government warehouses are emptied, they best know it so that they can propose cther remedies.
Subtitle B, section 109 (a) (4) should read as follows: "Not to pasture the acreage established in protective vegetative cover." This language would suffice with a voluntary program under which any farmer could pasture such land only by forfeiting the soil-bank payments. Such procedure would again allow farmers to make free choices as to land use, depending upon their relative opportunities for maximizing their own incomes.
In section 109 (b) (1), the following should be eliminated : "but not to exceed a maximum amount per acre or facility prescribed by the Secretary for the county or area in which the farm is situated.” This language is superfluous in that it provides for the Secretary to merely place a maximum on an amount previously determined by him as being necessary and desirable.
In section 114 it would seem desirable to outline in the bill, certain standards for the Secretary, for the purpose of protecting the interests of tenants and sharecroppers. Throughout the bill there appears to be more discretion for the Secretary than would seem warranted by the importance of the bill.
If the soil bank is expected to result in a higher price level for products of American farms, it will require more general use of import quotas under section 22 of the Agricultural Adjustment Act. It would appear that this problem should be recognized and provided for in the bill. Unless import quotas are imposed, the reduction in domestic agriculture production can be replaced by foreign production and its impact will make price increases to American farmers virtually im. possible.
In title II, section 202, we would suggest the advisability of determining the effect of designating States as outside the commercial wheat producing area. If this proposal would mean an increase in wheat production and lower market prices in relation to support prices, it might well be eliminated.
While we heartily endorse the intent of section 204, we would suggest that it be amended to make available $75 million for the fiscal year ending June 30, 1956, and that the program be spread to include other recipients.
Section 206 (a) should be amended to restrict the Commodity Credit Corporation from disposing of its storabe commodities at less than 105 percent of the current support price for such commodities, plus reasonable carrying charges. The provision as written would prevent private storage of grain and would prevent market prices from exceeding the support-price level.
Section 206 (b) should be eliminated. This provision again would lower the market prices below support prices and would result in cheap feed and further aggravate surplus problems facing dairy and livestock producers.
Section 4084, "refunds on certain sales to farmers," should be adopted.
In summary, while we think that the soil-bank bill has much to its credit, we feel strongly that the safeguards suggested should be incorporated. Furthermore, we can see little in the bill as written that would offer the much needed relief to farmers from the cost-price squeezing facing them this year.. Sincerely yours,
PATRICK B. HEALY, Assistant Secretary, National Milk Producers Federation. The CHAIRMAN. We will be glad to consider that, after we get through these hearings, when we proceed to draft the bill for the committee.
Mr. Healy. The things that we say here about soil bank, we believe would apply to whatever bill was introduced because they are the things which we consider to be necessary in such a program to protect the interests of dairy farmers.
The CHAIRMAN. Very well; proceed.
Mr. HEALY. While soil-bank proposals which have been introduced are primarily aimed at other than dairy farms, the dairy farmers have a distinct and pointed interest in them. We believe that there are certain provisions which must be written into any soil-bank program in order to make it effective for the commodities at which it is aimed and to prevent its working to the destruction of programs designed for other products. Our proposals for such a program include:
1. The program must be voluntary.
2. Payments under such a program must be sufficiently high to assure compliance with the program by those who join it.
Senator Young. If the payments for the soil bank were high enough, would you oppose making it mandatory for past diverted acres?
Mr. HEALY. What we are afraid of in any mandatory programwell, in the first place, again I must say that we have not seen enough of the mechanics of the thing to tell exactly how it will work, and before we could say that a program should be mandatory, we would like to know how it would fit into individual types of farming.
Our object in these first three proposals is to assure compliance, because we know that if the program is gone into and is not properly policed, then it will not do what is expected of it.
The CHAIRMAN. Do you not think, however, that if you should make the payment that is supposed to be made to the farmer, conditioned on his carrying out his other programs, that the Congress may put on the statute books?
Mr. HEALY. Certainly.
The CHAIRMAN. Why do you not say, to the farmer, "Now, we are going to pay you your price supports provided you carry out the soil-bank proposals, particularly, the reserve acres”?
Mr. HEALY. Well, that is the point on which we are just not too clear yet. Therefore, we sort of feel that the farmers should have the option of choosing either or both programs, instead of both or
If the program were mandatory the farmer would have to come under both programs or be under none; is that not true?
The CHAIRMAN. You could make it mandatory for one and optional for the other.
Personally, I believe that the one in relation to the reserve acres, the only way to make that effective—if you do not make it compulsory, you might as well forget about it, because the idea there is of a temporary nature and to last 2 or 3 years until we rid ourselves of these surpluses.
It is another gadget by which we can prevent ourselves from aggravating our surplus problem, as to that phase of it. Mr. HEALY. I would say "No" as to that phase of it.
The CHAIRMAN. Of course, I can see your point of view there, if it is not cultivated land, make it optional, and if he does participate in it, then to the extent that he does, he would receive payments as to what he does.
Mr. Healy. There is one other thing that I would like to say. Later on in this testimony, I make a case for a commodity by commodity approach to these subjects and we feel that this soil-bank thing is aimed primarily at the grain farmers and cotton farmers, and so on and we would not like, by what we say or advocate here, to infringe upon what they, who know considerably more about their own commodities, might feel about it.
We do not take a back seat from anybody when it comes to talking about milk, but we feel that the grain people probably know more about their business than we do.
Therefore, we would not like to advocate something here that may be opposed to the best interests of that group of farmers.
Senator YOUNG. That is a reasonable attitude to take.
3. Any deviation on the part of the farmers from compliance with provisions of the program as it is announced, should result in immediate and drastic cuts in soil-bank payments.
The CHAIRMAN. Why do you say “cuts”? Why not eliminate it? Why pay them at all?
Mr. HEALY. We would go that far.
Mr. HEALY. 4. Cover crops which are sown on banked acres should not be harvested nor should pastures placed under the program be
grazed because if these practices were allowed the result would be a shifting of heavy surpluses from grain, cotton, and other crops to livestock and livestock products.
Here, of course, we are interested in the effect that such diversion of banked acres would have upon milk production. The dairy farmers of this country, faced with serious problems such as those with which they have been confronted during the past several years, have maintained supply of their product fairly closely in balance with demand for it.
When one considers the multitude of individual decisions made by the 212 million dairy farmers each year which result in total milk production, and further considers just how closely production is related to demand for this product, he must become aware of the delicate balance which has been struck.
Therefore, we are constantly alert regarding diversions of acres and feed from other programs which might adversely affect the slight imbalance now existing.
5. There must be included in any soil-bank program, protection against imports which would replace crops not grown because of banked acres. It would certainly benefit no one in this country to pay farmers to take acres out of production on one hand and on the other hand to permit the country to be flooded with produce of other lands.
Senator YOUNG. I think you are touching on something that is very important. If the farmers of this Nation are required to take out of production additional acres, maybe 30, 40 million acres, it would do no good if to the north of the United States, Canada, keeps on producing all of the grain they are now, with no reduction program and dumping that feed on us at cheap feed prices.
Mr. HEALY. That is right. That is what we call to your attention right here.
Senator Young. Do you think some provision should be written in the bill itself to assure something on that?
Mr. HEALY. It may not be necessary, so long as the Congress, as it did during the first session, continues to maintain vigilance over our import restrictions, the quantitative restrictions, for instance, that we have in dairy under section 22 of the AAA Act.
Senator YOUNG. For the last 5 years we have imported more than half a billion bushels of feed grain and practically all from Canada alone. None of it was needed, we produced all we needed ourselves.
I do not think we should stop a country like Canada from exporting things to us, but, certainly, we should not permit them to increase their farm exports to us, at a time when we are further reducing our own production.
Mr. HEALY. That is correct.
Then further, if because of some international diplomacy in which the Government wishes to engage, it is felt that it is wise to import products from certain countries in order to gain dollar credit for them, that may be well.
But, certainly, the farmers of the Nation should not foot the entire bill for it, as they would, should restrictions be lifted.
The CHAIRMAN. What would be your method of handling that, by import quotas, or tariffs?
as we are now.
Mr. Healy. Here again I speak only for milk, and we are satisfied with the quantitative restrictions we now have under section 22 of the AAA Act.
Senator Young. On the other hand, if you import a lot of feed grains and keep on importing them and feed grain prices are below support levels in my area, we will keep on increasing dairy production
Mr. Healy. We view that with mixed feeling, too. We like cheap feed but we can see into the future when this cheap feed will create additional surpluses.
Senator YOUNG. In Iowa, the cattle numbers, as I recall, are up 25 percent in the past 4 years.
In my own State they are up 31 percent, largely because of an abundance of cheap feed.
If we are going to keep on with this cheap-feed policy, we will never solve our surplus problems.
Mr. HEALY. We recognize that, and view it with some alarm.
Mr. HEALY. With the safeguards which we have suggested above included in a soil-bank program it is our belief that a sound soilfertility program can be developed.
PRICE SUPPORT LEVEL
During the coming marketing year the price of manufacturing milk should be supported at not less than $3.75 per hundredweight without regard to parity calculations.
It was at this level that support operations were carried out through the marketing year March 31, 1954. During this period dairy farmers realized returns somewhat in line with their cost of production.
The CHAIRMAN. What percent of parity would that be?
Mr. HEALY. It would be now, it is pretty hard to say because there are several ways of calculating parity.
The CHAIRMAN. Well, the way we do it, the way the Department of Agriculture does it.
Mr. HEALY. It would be about 90 percent, the way the Department does it.
The CHAIRMAN. What is the butterfat content?
Senator THYE. I think it would be well if the record reflects how you arrive at your parity figure and how the Department of Agriculture arrives at its figure; otherwise, the two statements are in conflict.
Mr. HEALY. Senator Thye, this is the dollar level at which milk was supported prior to April 1954. And as I say here, it was at this level that the support operations were carried out through the marketing year ending March 31, 1954, and during this period dairy farmers realized returns somewhat in line with their cost of production.
That is why we have chosen that figure.
Senator THYE. That is right; and you go on and state that, the current support program of 75 percent of parity or $3.15 per hundredweight for manufacturing milkthat was the next line
Mr. HEALY. Yes.