You had the incentive, too, of the price-support level which, due to the fact that the flexible price-support program had not become operative was still an incentive to increase production.

Senator YOUNG. Here you have actual cash prices to farmers down 30 percent over what they were in 1951, to levels that are breaking many farmers. Yet you have the highest production in history this

year.

Certainly, it does not sound very encouraging. I mean, flexible supports do not seem to lend any encouragement that they will control surplus in the future by lower prices, either by lowering cash prices or by lowering price supports, do they?

Mr. SHUMAN. Actually, we have not had a chance yet to evaluate whether or not the flexible price-support program would have an effect that would cover that.

Senator THYE. You would not deny that the dairy industry has taken the full effects of the flex, would you?

Mr. SHUMAN. The dairy adjustment in price was an administrative decision, and is not part of the flexible price-support program. Senator THYE. Mr. Shuman, dairy is my own amendment. The CHAIRMAN. Yes.

Senator THYE. I was the author of the resolution that created the senatorial study committee that went out and held hearings.

I attended most of them, and then we came in here and drafted what was then the 1948 act. The flexibility features we wrote inand this was at a time when we had an embargo on fats and oils to prevent an unreasonable exportation of the commodity and product that was short in supply. We put the flexibility features in the act to get a shift from grain to the feed crops so as to encourage an increase in livestock, to get the fats and oils of which this Nation and the world were short.

So that was the flexibility of which I, as I sat in this very chair, anticipated at the time we wrote the 1948 act.

I am the author of the amendment that created a mandatory support on dairy products.

Prior to the time of my amendment, it was discretionary on the part of the Secretary as to whether he bought or supported dairy products.

Mr. SHUMAN. Yes.

Senator THYE. So I got a mandatory provision in the act and I took some heat because I voted against 90 percent, in order to get action on the dairy amendment that I had. And we got it in.

It is as flexible as language can write it between 90 and 75 percent. It was at 90. The Secretary deemed it advisable to drop it to 75 percent. He dropped it to 75 percent.

And the history is here that we have gotten increased total poundage of dairy products.

That is what is confusing me, when you say it has not been operative. That is why I went into a little history of it.

Mr. SHUMAN. I beg your pardon. I did not intend to disagree with your recital of the facts.

It is not a part of the act of 1954, as I understand it. However, there has been a reduction in the price support of dairy products of which we all know.

As to why there has not been more adjustment, there has been considerable adjustment in the production pattern and the consumption pattern in dairy products as a result of the adjustment in pricesupport levels.

No. 1, from the production standpoint, as I understand the most. recent figures, there have been some shifts in the production pattern. There has been a rather normal continuation of the total overall increase, but in some areas of the country, particularly those areas where costs are higher, apparently there has been some downward adjustment. Production has increased seasonally in the northeast where tall pastures were unsually good because of heavy rain accompanying the hurricanes.

The production per animal of dairy products has increased. The adjustment where made has apparently been by farmers reducing or culling their herds and eliminating some of the lower producing animals.

During this same period of time when there has been some adjustment going on from the production standpoint, there has been a marked increase in consumption-fluid milk consumption particularly has continued upward.

The consumption of butter and cheese has increased considerably in this country.

The statement that there has been no adjustment on the part of farmers cannot be substantially supported because there has been adjustment.

The last report on cow numbers dated July 28, 1955 shows that only one area increased from 1954 to 1955 while all other areas decreased.

So far as the overall production there is no indication that there has been any increase brought about by decrease in prices. That kind of a philosophy just will not stand up.

There have been decreases and increases according to the economic pressures that exist in particular areas.

Senator YOUNG. Could I ask one question there? Why do we take such desperate steps as we are in a new agricultural proposal to control surpluses if we have any hope at all that the flexible or lower supports will help control surpluses in the future?

Mr. SHUMAN. We don't take the position that the level of price support alone can bring about these adjustments that are necessary. In fact, we take the opposite position that the level of price support alone is not the answer to these problems. However, a guaranteed

price at a high level encourages uneconomic production which creates surpluses and destroys markets.

Senator YOUNG. The impression was left by the American Farm Bureau Federation and others that flexible supports would do this job of taking care of surpluses up to now-was it not?

Mr. SHUMAN. No; I think we have always stated that price had a function. And that until we permitted price to perform its function we would be in trouble, but that merely adjustment of the level of price support would not solve the problems in agriculture.

I do not think we have ever emphasized the level of price support as the only factor. There are many factors.

Senator YOUNG. I guess I confused you with the Secretary of Agriculture. May I ask one more question?

Do you believe that we ought to leave our import duties and regulations the same as they are now for feed grains when we go about taking 20 or 40 million additional acres out of production?

What I have in mind is the import of feed grains. We have imported, as I stated earlier, over half a billion bushels in the last 5 years.

I would think that if we improved prices at all in this country by these programs, which we hope to, then our imports would be even greater. Here we have Canada to the north which has no program whatever to reduce production.

Do you think we should put quotas on imports, try to hold them at the previous 5-year level or do something to curtail imports in the future?

Mr. SHUMAN. That is a very good question, one in which we are very much interested, because it is in the theory of export sales of farm products that we feel we can improve farm income and deal with these surpluses.

But the problem of securing increased export sales is a very large one. It isn't one to which you can just give a simple "Yes" or "No"

answer.

Canada is one of the best customers for our American farm products. We sell them probably as much or more than any other country. Now, it is true that they do sell to us. We buy some of their farm products.

It would at first glance seem that we ought to shut out all of the farm commodities.

Senator YOUNG. I was not advocating that. I was advocating that we at least hold the line in the future.

Mr. SHUMAN. Of course, the producers of dairy products would want to shut out practically all dairy products and the wheat producers practically all wheat and the oat producers practically all oats. So, if we start closing the door to these imports we probably would close the door to our exports to Canada.

Senator YOUNG. I think you misunderstood my question. My question was: Should we try and hold our imports to something along the line of the level that we have had for the last 3 or 4 years or shall we permit them to increase to degree because of the better price we hope to get under this program-they have no production controls program whatever?

Mr. SHUMAN. Certainly, we would hope that we would not see drastic increases in the imports of these competing products. That is

true. And we would be very much interested in examining the cases. I think under our present reciprocal trade agreements and the provisions for correction of damage, that we can examine cases where there seem to be unwarranted increases in competing products entering this country. We would favor action to prevent drastic increases in imports.

Senator Young. I would not feel justified in voting for any program of this kind if I thought that feed grains were going to flow over the border in increased quantities. We live along the border and it is disturbing to our farmers to see imports coming over daily when we can't find markets. It is bad enough now. It could become immeasurably worse in the future.

Mr. SHUMAN. We believe there are adequate provisions of law which if properly administered would prevent dumping in this country. We would favor watching at all times to see that they were not taking unfair advantage of our adjustment program.

Senator YOUNG. Thank you.

The CHAIRMAN. Without trying to provoke an argument on what caused our huge surpluses, you do agree, I presume, that no program, whether it be the flextible price support or a return to the rigid pricesupport program can be made to work unless and until we get rid of these surpluses. Are we agreed on that?

Mr. SHUMAN. We think that the surplus accumulation is, of course, one of the reasons why no price-support program can work right. We should start an orderly reduction of the surplus accumulations and while that orderly reduction is going on, it would be foolish to permit further accumulations.

We have to do both: We have to reduce the input and to increase the output from the surplus pile.

The CHAIRMAN. Do you agree that the theory back of the so-called flexible price-support program is to make the support price of the commodity so low that it will cause the farmer not to want to plant as

much?

Mr. SHUMAN. That is not the way we would state the theory of flexible price supports.

The CHAIRMAN. I wish you would put in the record what it is, once and for all. What is your theory back of the flexible!

Mr. SHUMAN. I will be glad to try to state it.

I think our previous statements before your committee would probably do it more adequately than I could offhand. The American Farm Bureau Federation believes that price has a function to play in the decisions of producers and consumers as to whether they will expand or contract production and consumption of farm products.

We believe that when the action of Congress is such as to, in effect, fix the price of any commodity, at a fixed price level, regardless of whether the judgment is that the price level is high or low, that fixing of the price disrupts very seriously the decisions of producers and

consumers.

Price supports should be used to assist farmers to market commodities in an orderly manner, and avoid forced selling when markets are seasonally oversupplied. The higher prices are supported, the greater production is encouraged, and the more markets upon which farmers ultimately must depend are impaired.

The CHAIRMAN. What difference does it make whether the price is fixed at 90 or 75? It is all price fixing; is it not?

Mr. SHUMAN. I think we would agree that price fixing in itself is the major difficulty. It is more apt to be fixing, if the support is placed at an uneconomic level than if it is one which would permit the fluctuation of prices in response to supply and demand factors.

We favor price support at levels which will prevent the extremely wide fluctuations in price that have historically been the great trouble in American agriculture.

The CHAIRMAN. As I understood it, all along the idea is to fix the prices so low that it will discourage the farmer from producing more, if we have a lot of surplus.

Mr. SHUMAN. That is not an adequate statement of our concept of the flexible price-support program.

Our concept is that while farmers should not be guaranteed a price so high as to encourage surplus production that also we must move away from the fixing of price. If that can be done in such a way and at such a time as not to completely destroy agricultural prices, then the agricultural price received by the farmers would be higher than the level fixed by Government action.

The CHAIRMAN. Depending on supply and demand?

Mr. SHUMAN. Yes, sir.

The CHAIRMAN. So if you discourage the production by giving lower price support the idea is that you can discourage the production of it, that a time will come when demand and supply will be in balance; and, therefore, the farmer will be able to go to the market place and get 100 percent of parity. Is that it?

Mr. SHUMAN. I think that if prices were permitted to vary up and down in response to changes in supply and demand, that farmers and consumers both would act in these two opposite ways:

Farmers, faced with variation in price, might not care to go into the production of certain crops, but if the price is fixed and guaranteed they would go into the production of those crops.

That does not mean that it is necessarily a matter of the level that the price is, but it is a matter of a guaranteed price which assures them that such a price will continue from year to year.

The CHAIRMAN. But that guaranty would be made, whether the price was flexible or rigid, would it not?

Mr. SHUMAN. I don't think to the same extent.

As you move away from a fixed price level, you would presumably get to the place where prices could vary in response to changes in supply and demand.

The CHAIRMAN. Well, now, reverting to the question raised a while ago by Senator Thye that was outlined by the preceding witness, we had the 90 percent rigid price support for 1953 and the production of milk then was 121 million pounds.

Since 1953, 1954, 1955, and 1956, we have had the flexible price support program in effect, and milk production has increased, or will increase by this year, by up to 7 billion pounds.

How do you account for that?

Mr. SHUMAN. I would like the privilege-I do not have them hereof inserting in the record at this place, the figures on the changes in production of milk in the last 2 years; particularly, since the price