point, and destination. We are also selling wheat for foreign currencies under Public Law 480. We have thus far been able to subsidize wheat exports without precipitating an international price war or other serious complications by observing the provisions of the International Wheat Agreement. We doubt that any multiple-price plan thus far proposed could produce a substantial increase in United States wheat exports unless we are prepared to withdraw from the wheat agreement, break the world price to ruinous levels, and run the risk of seriously disrupting our relations with other wheat-producing countries. The CHAIRMAN. I presume you favor the wheat agreement? The CHAIRMAN. Have you ever looked into the possibility of its lending itself to cotton? Mr. SHUMAN. We have studied, of course, the possibilities of extending the wheat agreement to other commodities, and we would certainly be willing to explore those possibilities with other countries if such conferences could be arranged. We are not as hopeful that they will be productive with other crops, as our experience with wheat has been fairly good, although not as good in recent years. In the absence of an international agreement such as the wheat agreement, export subsidies and other multiple-price plans are likely to be regarded internationally as export dumping. The United States has an antidumping law and we can expect affected nations to retaliate if we dump our products. Such retaliation would not necessarily be confined to the commodity that is being dumped. Our entire foreign trade is being involved as well as our friendly relations with other countries. A multiple-price plan would not increase our quota under the wheat agreement. It would not solve the foreign exchange problems which tend to limit our wheat exports. It would not change the fact that our wheat is not always competitive in terms of quality. Since we already are subsidizing wheat exports in order to meet competition in the world market, it appears that the real objective of those who advocate adoption of some new multiple-price system is to dump surplus wheat into the domestic feed market. This would mean the most unfair sort of competition for producers of corn and other feed grains such as oats, barley, and grain sorghums. It would be unfair competition because the relatively high price received by wheat producers on the domestic food portion of their crop in effect would subsidize the production and dumping or surplus wheat into the domestic feed market. Senator THYE. Mr. Shuman, if you do not mind an interruption, you now have reference to the two-price plan? Mr. SHUMAN. Multiple-price plan, we call it. Some call it the twoprice plan. There are a number of names. Senator THYE. I wondered whether it was directed right at the socalled two-price plan. Mr. SHUMAN. Yes, sir. Senator THYE. Thank you, sir. Mr. SHUMAN. As long as he received a satisfactory average return for his wheat, the wheat farmer would not be greatly concerned with the price of feed wheat, but the producers of corn and other feed grains would not have higher prices in a protected market to average with low feed prices. We are very much opposed to this approach. A supplemental program of supporting domestic wheat prices at a level based on the support prices of corn and other feed grains with an adjustment for differences in feeding value would not remove this objection to the multiple-price approach. Corn supplies are at a record level and corn producers already are being forced to share the feed market with the increased supplies of other feed grains that are being produced on acreage diverted from marketing quota crops. The support level for oats, barley, and grain sorghums was dropped to 70 percent of parity in 1955 and mounting supplies indicate that a reduction from the present price support level of 87 percent of parity is in prospect for corn. It is one thing for feed producers to accept lower price supports as a part of an effort to balance production and use. It is quite a different matter to subsidize wheat into the feed market in such a way as to prevent the prices of corn and other feeds from rising above their support levels. Senator YOUNG. Would you mind a question at this point? Mr. SHUMAN. No, sir. Senator YOUNG. The use of wheat as feed grain has been greatly reduced, has it not? Mr. SHUMAN. Some. The price support program in many respects has priced wheat out of the normal feed market. Senator YOUNG. But at least to that extent, then, the wheat producers have been making a great contribution to the feed producers, have they not? Mr. SHUMAN. Yes, sir. The Government price support program and the Government storage of wheat has taken it out. In fact, the next sentence there is just along that line. It says: Producers of other feed grains cannot reasonably object to the use of wheat as feed if it is fed on a fair competitive basis, but wheat fed at cut-rate prices under a multiple-price plan would not be fair competition. I believe that sentence kind of answers the point you were making, Senator. Senator YOUNG. All right. Mr. SHUMAN. Some multiple price proposals not only would be unfair to feed grain producers, but also would work an injustice on many domestic wheat growers. Under the so-called certificate plan for example, food wheat marketing certificates would be distributed to all wheat growers on the basis of their historical production without regard to whether they have been producing wheat for domestic food consumption, nonfood uses, or exports. This would discriminate against the producers who have been producing the types of wheat that the domestic food market desires. In effect, the certificate plan would tax the producers of hard red winter and white wheat. Furthermore, within each class of wheat the producers of high quality wheat that is actually sold for domestic food uses would be taxed to support payments to the producers of low quality wheat that is not desired by the domestic food market. This would encourage producers to continue production of less desirable wheats. The wheat problem is difficult. There is no magic formula for its solution. We can, however, move toward a solution by continuing present programs to encourage exports, by letting needed adjustments take place in the price support level, by increasing emphasis on quality production, and by adopting a sound soil bank program. RICE The principles involved in a multiple price approach are the same for rice as for wheat. There are, however, some important differences in the way such programs would operate for the two commodities. A multiple-price plan for rice would have relatively little impact on the United States market for other commodities, except dry milled corn, whereas a multiple-price plan for wheat could have a substantial effect on the domestic feed market. It should be noted that approximately 50 million bushels of corn is used annually for brewers' beer grits. This is one-sixth of all corn moving in commercial channels for industrial use. This market for corn could be destroyed if rice is subsidized for this use by a two-price system. This should not be permitted since it would constitute unfair competition with commercial corn. It also should be noted that one, there is no international agreement on rice comparable to the wheat agreement, and that two, United States supplies normally are smaller in relation to world trade in the case of rice than in the case of wheat. There are, however, some serious problems involved in most multiple-price proposals for rice. Most such proposals treat Cuba as a part of the domestic market. All self-supporting multiple-price plans either directly or indirectly involve what amounts to a tax. Since the Constitution prohibits export taxes, it probably would be difficult or impossible to develop a program that would enable us to collect the higher price on Cuban sales. In any case, it would be a bad precedent for the United States to discriminate among its foreign customers for farm products even though Cuba were to agree to such a discrimination in the case of rice. The CHAIRMAN. Mr. Shuman, it has been suggested, I think, by the vast majority of ricegrowers of the country, located in California, Louisiana, Arkansas, and Texas, which as you know are the four main rice-producing States Mr. SHUMAN. Yes, sir. The CHAIRMAN. There has been much toying with the idea of a two-price system. Don't you think it might be well that we try out one, try it out on rice, since it affects few farmers and only four States, and see how it works, rather than keep on talking about it and not doing anything about it?" Mr. SHUMAN. We are suggesting here that there be a pretty careful examination of the possible effects of this type of approach before there is a trial. The CHAIRMAN. Well, that has been done for the past 4 or 5 years. We have been looking into it, looking into it, and doing nothing about it. Mr. SHUMAN. We have an alternate proposal here that might be of interest to you. The CHAIRMAN. In a bill? Mr. SHUMAN. Not in a bill. We have it suggested here. We have an alternate approach which we think perhaps the ricegrowers might prefer to try before they tried this other. Now, that, of course The CHAIRMAN. Have you got it written out? Mr. SHUMAN. Yes, right here in the next two paragraphs, I think. The CHAIRMAN. All right. Let us hear it. Mr. SHUMAN. As in the case of wheat, the problem of making an equitable division of the domestic market between producers who now sell varying percentages of their rice production to domestic and foreign consumers is by no means minor. We have seen no evidence to indicate that growers who have domestic markets that have been developed through the promotion of cooperative and company brands would be willing to pay a tax to finance payments to growers who produce largely for export. As in the case of wheat, we now have a two-price plan for rice actually since the CCC is offering stocks for export at less than domestic prices. We also are offering to sell rice for local currencies under Public Law 480. Our best information is that there is no overwhelming demand for United States rice, even on concessional terms. We are told by some potential foreign buyers that we are not producing the varieties desired and that in many cases they prefer rough rice, while much of Commodity Credit's rice has been milled. We recommend-this is our recommendation-that consideration be given to the holding of a referendum prior to December 15, 1956, and that rice producers be given an opportunity to vote on one, continuation of the present program, with strict acreage restrictions, or, two, higher acreage allotments with more variability in price-support levels, coupled with a vigorous merchandising program designed to regain and expand markets for rice. The CHAIRMAN. But you would have acreage curtailment in either plan? Mr. SHUMAN. Yes. One would be a quota plan. The second would be an allotment plan. The CHAIRMAN. Yes. Mr. SHUMAN. And we believe that due to the fact that there are these distinct differences in the kind of rice produced in this country, that it would be very difficult to operate a two-price plan that would be equitable, and that perhaps this type of program would be of more appeal to the ricegrowers than the other. But The CHAIRMAN. Well, what would you do with this? How would you handle the increased amount of rice you produce on your alternative plan No. 2, then? How would that be handled? Mr. SHUMAN. We think that The CHAIRMAN. Wouldn't that tend to aggravate the conditions, since you have so much of the commodity on hand? Mr. SHUMAN. We think that there would be more of a differential in the price paid because some of the kinds of rice which we produce are in much greater demand than others. The CHAIRMAN. I believe you are talking of California right now, are you not? Mr. SHUMAN. In the rough rice, there seems to be more demand for export in some areas. The CHAIRMAN. Yes. Mr. SHUMAN. We also think that if there was a differential in price, we might see a very marked increase in the use of some of the kinds of rice which now are going in Government storage. The CHAIRMAN. What you are saying there would please the Californians, but would be poison to Louisiana, Texas, and Arkansas. Mr. SHUMAN. I do not know. I think we would want to submit it to the growers, as to whether or not they wanted to go this route. We would not want to say that this was it unless they were favorable toward it. The CHAIRMAN. Well, we held hearings for 5 weeks in the fall, and I believe that if you were to take a look at the hearings, you would find that the majority, the vast majority, of ricegrowers all over the country are desirous of trying a two-price system and seeing how it works and seeing what results would come out of it. Mr. SHUMAN. We have had from time to time some meetings of ricegrowers in Farm Bureau and we have had various proposals supported. We think perhaps this referendum might be rather revealing as to what their desire was. Shall I proceed? The CHAIRMAN. Yes, sir. Mr. SHUMAN (continuing). Agricultural Act of 1954: The Agricultural Act of 1954 marks a significant change in the direction of farm price-support programs in that it recognizes the principle of using changes in price-support levels to encourage needed production adjustments and aid in moving excess supplies into market channels. The fact that this recognition was long delayed and the gradual transitions provided for by the 1954 act mean that time is required to work out of our present difficulties. We fully recognize that farm programs are not static. They deal with dynamic factors and consequently require constant review and improvement. (1) At our last convention we reaffirmed our belief in the principle of variable price supports. We also continue to favor provision for 90 percent of parity price support for the first year that marketing quotas are in effect for any commodity immediately following a year in which marketing quotas were not in effect on such commodity. Thereafter the level of price support should be determined by farmers' success in bringing supplies into line with normal as defined in existing law. (2) We support extention of the modernized parity formula to all commodities on the basis provided in existing law, but urge further studies on the problem of improving the parity formula. Senator THYE. May I interrupt at that point? The CHAIRMAN. Senator Thye. Senator THYE. How many crops would you contemplate would still be eligible for the 90 percent in the 1956 crops? Mr. SHUMAN. They would all be eligible if they brought their production into line. But that is, of course, not too realistic. I think soybeans Mr. WOOLLEY. Flax. Mr. SHUMAN. Probably flax, and probably others. Tobacco, certainly. Senator THYE. Of course, that is fixed by law now. 64440-56-pt. 8- -15 |