support level was adjusted. This will, I think, show that the increase in the production of milk in the last 2 years has not been as rapid as it was in the previous period of time under the fixed price support program.

In connection with this table, it may be noted that the major increase in production occurred in 1953 when support prices were at 90 percent of parity.

The real reasons for the overall increase in 1955 are increased productivity per cow, the result of widespread use of artificial insemination; the most favorable milk-feed ratios in many years, and the relative advantage of dairy production compared to some alternative opportunities.

We need some increase in the production of milk, because we have a rapidly expanding population, and the consumption of milk during this last 2-year period has increased per capita substantially,

The CHAIRMAN. You do not question the figures submitted by Mr. Healy, do you?

Mr. SHUMAN. I had no opportunity to examine them. Of course, I don't question them.

The CHAIRMAN. Let us see, except for the estimates for 1956, we had them placed in the record from the Department, for 1953, 1954, and 1955, and as I remember, they correspond with the figures. Mr. SHUMAN. I don't question the figures.

Senator THYE. Mr. Shuman, I think both you and I would agree that the New England area last summer had a drought situation with an extreme heat prevailing through much of the summer. Heat will bring on an increased consumption of both ice cream and fluid milk. It has a tendency, of course, to decrease the production per farm because of the scarcity of pasture; it naturally pulls the production

down.

That in itself had a favorable effect upon the supply of milk in the New England area, and the increased consumption of ice cream and fluid milk.

I tried to study the situation very carefully last summer to see whether there was an influence here of a price factor that was responsible for bringing down production per herd or per farm in various areas. I found, however, that geographically the drought had some influence in the New England area and the heat had increased the per capita consumption both of fluid milk and of ice cream.

That has concerned me, because I know what the trend is and I am worrying about the future.

Mr. SHUMAN. A rather interesting comparable set of statistics was furnished by the area in the Midwest, southern part of the Midwest, in the summers of 1953 and 1954, where we had an unprecedented drought, and during that period of time we had the continuation of rather high fixed price support on some dairy products, and instead of having a reduction in the production of dairy products in these drought-stricken areas we had an increase.

Senator THYE. You are aware of what brought that about?
Mr. SHUMAN. I think it was the price incentive.

Senator THYE. No. It was the feed situation, and we pulled surplus hay and grain from clear up in Wisconsin, Illinois, Minnesota. And the only thing in the world that they had to live off of were the dairy herds to which they were feeding that surplus hay and grain. They had nothing else. Their wheat was gone. Their corn was gone. Their crop was gone.

We were shipping hay from Wisconsin and Minnesota clear down to Oklahoma. Truckloads of hay were to be found on every highway that fall, all through that north region going south.

They had not a thing to live off or, except their meager cream checks and milk checks, and because we subsidized the feed, instead of the cull going to the slaughter yards as the beef animal oftentimes went, it was kept to be milked because we were subsidizing both the hay price and the concentrates.

I have been living with this problem. I have tried to check it. When they did not have a thing to live off of down there except that dairy cow, and we put the feed and the hay in there, they milked that cull and that is why you had some of that production coming out of that drought area that looked unreasonably high in comparison with the feed supply. But we were shipping it down there.

Mr. SHUMAN. Senator Thye, I would like to draw the comparison of similarity in that situation and the present situation in the dairy industry because I made a rather short answer when I said that it was price incentive.

I meant the price incentive both from the standpoint of the product and the attractive price of feed.

One of the reasons why we have not had more adjustment, in my opinion, in the production of dairy products at the present time is that we have had in effect a subsidized feed market. We have had no control of diverted acres.

Senator THYE. You are right on that.

Mr. SHUMAN. They have gone into the production of feed.

Senator THYE. That is where we made our mistake all along-you will pardon the abrupt interruption, but you were so dead right that I just wanted to be agreeing with you on that phase of it. Mr. SHUMAN. Thank you.

Furthermore, the present type of price-support program on corn and oats, feed crops, is such that a minority of the farmers producing corn are complying and they have corn to go on the free market. That corn on the free market, as you know, is at a fairly attractive price for feeding dairy animals.

We do have counteracting forces which have in great measure or in some considerable measure nullified the effect that you would have expected to have from adjustment in price.

The CHAIRMAN. Proceed, Mr. Shuman.

Mr. SHUMAN. We must say frankly that it is our conviction that the policy of fixing prices for certain farm products-as contrasted with a policy of using price supports to prevent excessive price fluctuations and to encourage the orderly marketing of farm commodities-is a serious mistake.

It is our belief that this mistake in policy has been an important factor contributing to development of our excess productive capacity

and the present unsatisfactory farm-income situation. The level at which prices are supported ought not to be a partisan political issue. It ought to be approached from the standpoint of what makes sound economic sense for agriculture.

We believe that the principles expressed in the Agricultural Act of 1949, as amended by the Agricultural Act of 1954 are sound. Our ideas with regard to the surplus reduction and soil bank proposal are designed to supplement the provisions of this existing legislation. The Farm Bureau proposal for surplus reduction and soil bank program has four major aspects:

1. That, in order to qualify for price supports, producers be required to put an acreage of soil-depleting cropland the amount to be determined by a percentage of the acreage currently in supported crops in the soil bank.

This would have the effect of channeling into the soil bank some of the acres that are being diverted from controlled crops. The unrestricted use of diverted acres presently is working a hardship on producers of uncontrolled commodities, including livestock producers, and I might add dairy producers.

The reward for taking land out of production under this phase of our proposal would be eligibility for price supports; however, producers agreeing to place such land in the soil bank for 3 or more years would also be eligible for annual payments under point 3 below.

The CHAIRMAN. Does that apply to allotted acres only?

Mr. SHUMAN. No.

The CHAIRMAN. Or total acres?

Mr. SHUMAN. A percentage of the acreage currently in supported crops; in price-supported crops.

The CHAIRMAN. Well, you mean allotted?

Mr. SHUMAN. No, that would include

The CHAIRMAN. All acres?

Mr. SHUMAN. Price-supported crops; in other words, this would be soybeans, oats, corn, wheat, cotton, and some others.

The CHAIRMAN. You would relegate it to the price-supported crops such as the basics and make it apply strictly to allotted acres in those crops?

Mr. SHUMAN. No; we would apply it to all price-supported crops. The CHAIRMAN. All right.

Mr. SHUMAN. I might say that this recommendation, as I understand, is very close to the recommendation that I understand is your recommendation, Senator Ellender.

The CHAIRMAN. I know that is what I recommended. I wanted to be sure that we saw eye to eye on the character of the land to be set aside.

Mr. SHUMAN. Yes.

Senator YOUNG. You would pay farmers for placing their diverted acres under soil-building practices or in the soil-bank plan; would you not?

Mr. SHUMAN. We would require that those farmers who expected to use price support place a certain percentage of their price-supported acreage into the soil bank.

Now, if they chose to only put that acreage in for 1 year, we would not pay them for that. However, if they agreed to put it in for 3 years we would give them compensation.

Senator YOUNG. Are you speaking now of their allotted or diverted acres?

Mr. SHUMAN. I am speaking of the requirement to place a certain percentage of their price-supported acreage into the soil bank.

Senator YOUNG. That is optional now; is it not? The Secretary's proposal is optional.

Mr. SHUMAN. I am not sure about the Secretary's proposal because I have not had the opportunity really to study the bill that they have submitted.

Senator YOUNG. Maybe I am not clear on your position. If a farmer had an 80-acre wheat allotment you would require that he take part of that 80 acres and put it under a soil-bank plan?

Mr. SHUMAN. Suppose the farmer had 80 acres of wheat total and he also was raising 20 acres of hay, oats or soybeans, any price-supported commodity, so that he had 100 acres of price-supported crops, we would require that a percentage of this 100 acres and I hesitate to quote a percentage because we are not recommending any certain percentage, but, say, that percentage was 12 or 15 percent, or 10 percent, then he would be required, before he could get price support on his wheat to place into the soil bank, if it was 12 percent of that, that is 12 acres, and if he only put it in for the 1 year, he would not receive additional compensation other than the price support.

But if he signed up to continue that 12 acres in the soil bank for 3 years he would ge the regular rate for whatever that might turn out to be, putting those acres in the bank.

Senator YOUNG. Would you go beyond the diverted acres, if the farmer had

Mr. SHUMAN. Yes; we cover that, I think, in one of these next points. You mean we would permit him to put other acres in? Senator YOUNG. Require him to place under the soil bank additional acres over and above his diverted acres?

Mr. SHUMAN. No; we would not require any other.

Senator YOUNG. I see.

Senator HICKENLOOPER. But he could?

Mr. SHUMAN. He could.

Senator YOUNG. He could?

Mr. SHUMAN. Yes.

The CHAIRMAN. Since it is very important to curtail further production so as not to aggravate our surpluses, would you look with favor upon a proposal that would separate, as suggested by the President, if a farmer is allotted, let us say, 100 acres of wheat under the present law-that is his allotment and he agreed to curtail that, say, 20 percent, or 20 acres would you not think it wise that such acreage be treated in a different category to what the average diverted acres would be for soil-conservation purposes?

Mr. SHUMAN. We believe this next, No. 2, provides for the proper handling of that problem.

The CHAIRMAN. I am sorry to have anticipated it.

Mr. SHUMAN. That is all right. That is a very good question and we say:

64440-56-pt. 8-14

2. Producers who voluntarily decide to underplant any allotment may do so and receive a payment in the form of negotiable certificates valid for the purchase of CCC stocks.

3. Producers who voluntarily wish to do so may participate by placing any amount of cropland they desire in the soil bank for a period of not less than 3 years. Payments for such participation may be either in negotiable certificates drawn against CCC stocks or other forms of payment.

The CHAIRMAN. Why would you not be willing to leave that to the discretion of the Secretary of Agriculture, because it may not be necessary that the crops be diverted for as long as 3 years?

We may have a drought or there may be the necessity to draw on those acres before the time limit that you impose occurs.

Mr. SHUMAN. Well, I think that the reason for providing for a 3year investment in the soil bank is that, in the first place, if it was for 1 year only, there could be in many parts of the United States, such crops planted on the soil-bank acreage that by the end of the 12month period under which they were in the bank there would be such a growth of roughage and hay that you could get almost normal production from them in the first few months of the next year.

The CHAIRMAN. Under your plan the farmer would not be permitted to utilize that for any purpose; would he?

Mr. SHUMAN. I don't think you could control beyond the contract period. You could keep him from using it during his year that he had it in but suppose it carried over for 2 or 3 years, I mean the crop had built up quite a growth there, it is very difficult to see how you could keep him from using it after the end of his contract period. However, the main point there is that you probably would not get very much adjustment downward in production on a 1-year basis. We believe that only if this acreage is going to be retired for a period of, perhaps, 3 years will we get substantial adjustment. It is possible to handle the land in such a way in many parts of the United States that the next year's production would almost make up for the laying out for the 1 year.

The CHAIRMAN. Proceed, sir.

Mr. SHUMAN. 4. No harvesting or grazing will be permitted on any soil-banked acreage. ACP payments may be made on an acreage placed in the soil bank if approved practices are performed on such acreage.

Maximum effort should be made to reasonably utilize existing surpluses to carry out all phases of the surplus reduction and soil-bank plan.

It is important that the rates of payment be varied in such manner as to (a) reward producers for their effective contribution toward balancing supplies with demand and (b) to obtain adequate participation to make the program effective.

Attached is a copy of a draft bill carrying out the principles enumerated above.

We have prepared this bill in the belief that it is the best means of conveying to the committee the details of our proposal. (The draft bill referred to above is as follows:)