is the rapid rise in the potential of the Nation's farms-the rise in capacity to produce and in output. If the present stocks were by some magic wiped out, a continuation of the support levels prevailing since the war would bulge warehouses again in very short order.

The rise in capacity and output is the result of two factors: the stimulation of the war and postwar period with their abnormal demands; and the ingenuity and resourcefulness of farmers and the farm industrial economy in finding ways to circumvent the attempts made legislatively to restrain output of some commodities. These restraints put a premium on output of the unregulated commodities.

Closely linked to this rising potential-in fact, making it possibleis the fourth factor, the major technological revolution through which griculture during the past 2 or 2 decades has been almost completely ansformed. The committee is, of course, thoroughly familiar with e many facets of that revolution. Not only has almost every phase of agriculture been materially changed by it, the significance of the factor is that the revolution is by no means over. We may reasonably expect further developments to provide additional major changes, most of them tending to raise the potential of farm output in relation to present-day inputs of land and water resources, capital and labor. This factor alone adds to uncertainties as to what will be the future of farming. It would be easier to underestimate than to overestimate the possibilities for the future in the application and use of the fruits of past and future research and experimentation.

The fifth factor is the present cost situation in farm production. If the farm cost structure were not so stubbornly unyielding, if producers could see some compensating adjustments on the cost side comparable to the price level declines, there would be obviously less to the farmer's predicament than there now is. Costs have two dimensions to the producer. One is the quantity or amount used. The other is the cost price per unit. The farmer has very little control over, or effect upon, the cost rates.

As to these cost rates, there seems little prospect under foreseeable short-run conditions that any substantial reduction is likely. Their rigidity is a reflection of the increasing tendency in our economy to put more and more of our operations on a contractual basis, presumably in the interest of stability. The relatively high level of cost rates is the inevitable result of war and postwar inflation. It is hard to see how anything short of a protracted recession or depression will bring them down materially.

Substantial gains in productivity and efficient use of resources in other parts of the economy may give some relief, but then only if such gains are reflected in prices of products and services. Wages, transportation and other utility rates, capital costs, taxes all reflect the mutual spiraling of inflation as they fed on each other while the dollar was cheapened-all reflect to a considerable extent the rigidities of institutionalized pricing.

Senator ANDERSON. Would you stop there for just a second? I would kind of like to clear up, to my own satisfaction, this Steagall legislation figure.

If you take 1948 as the end of it, the cotton carryover, for example, was 2,398,000 bales. If you take 1949 as the end of it, which I think you should, probably it is 2,991,000 bales. I remember Mr. Cannon

telling me at one time that he thought anything under 2 million bales for the United States was actual scarcity.

Corn was down to 1,124,000 bushels, which is just barely enough to get by with, and wheat in 1948 was down to 84 million bushels, and in 1949 was down to 196 million bushels, when the millers will tell you that anything under 250 million bushels is scarcity, so I do believe you can safely say that the Steagall legislation is not in any way responsible itself for the accumulation of surpluses.

Mr. GARVER. On the quantity side of costs the producer has somewhat more control than he has over cost rates. But here, too, there is less room for variation than most people seem to suppose. While there is scope in farming, as in every other phase of economic life, for more efficient and effective use of the resources that are represented by farmers' costs, very little short-run improvement can be expected from "more efficiency" in farming. Gains in this direction will be helpful and to some extent necessary and will be forced upon producers, but such gains are not of themselves a sufficient answer to the problem of basic adjustment in agriculture, they are at most only a part of more comprehensive changes.

I have expressed a judgment of the prospects for costs and technology. What are the prospects of expanding markets? They are, in our judgment, good, but probably will be slow in developing and therefore long range in character and of little help in the short run. There seems to be basis for hope that export markets can to some extent be recaptured if we go after them with skill, aggressiveness, and do it competitively as to quality and price. Much of the success in this direction will depend upon the wisdom of our agricultural, trade, and other policies, both domestic and foreign.

There is room also to expand domestic markets in addition to supplying the increase in population. According to most experts a substantial fraction of the Nation's people do not consume a minimum diet adequate to maintaining physical and mental health and vigor. Nor are all such people to be found in the lower-income brackets. Skillful and effective educational work is much needed in this area. An illustration of the nature of this problem is found in an article in the December 1955 Reader's Digest, entitled "Our Starving Teen-Agers," by Myril Axelrod.

Expanding markets by the development of new uses for farm products and the development of new products has been much emphasized for years. While research and exploration should, of course, be pursued vigorously along these lines, it would seem to us a mistake to raise high hopes for a net increase in markets for farm products going into such outlets. Invention, research, and industry are working along many lines that could counteract agricultural development, and the future is too uncertain to be reasonably sure that such work will result in a net gain of markets for agriculture.

This brings me to surpluses and output. These are the 2 of the 5 that I have not commented on. These two are sort of Siamese twins which, operating together at the same time, aggravate each other. In spite of resale provisions adopted by the Congress to insulate stocks from having a depressing effect on the markets, the programs under which we have operated have nullified these limitations. The setasides seem to us to have done little more than open the valve of price supports and thus indirectly open the throttle of production. Now

the pressure is great to whittle the stocks down to more manageable size. That they are currently price-depressing seems to be a matter of general agreement.

A combination of circumstances and actions has given us more stocks than the economy can digest or carry without staggering. In a situation so infinitely complex it is foolhardy to risk judgment, but it appears to us that if we did not now have stocks beyond a reasonable and manageable carryover the farm price level would probably be 7 percent or 8 percent above its present levels, and possibly 10 percent higher. This would give us a parity ratio in the range of 85-88 percent. The surplus situation is aggravated by an excess of output from the total of agriculture perhaps as much as 3 percent or 4 percent above what current markets will take at prices reasonably satisfactory to farmers. This proclaims to the markets, in effect, "Not only are we overloaded but there's more coming to add to the load." There seems little doubt that the level of price supports, the attempts to limit production of some of the basic crops (with the resultant "slippage" by diversion of acreages and other resources to nonbasic commodities) and the price-cost pressure on producers to achieve income have all combined under relatively favorable growing conditions to give us more output than we are able to absorb at prices satisfactory to producers. It appears to us that an adjustment of output downward by the 3 percent to 4 percent, if stocks were also normal, would add enough buoyancy to the farm price level to give us a parity ratio in the probable range of 91-95 percent.

Senator MUNDT. Later on in your paper do you get into whether it is just a formula for adjusting the output downward?

Mr. GARVER. For making this adjustment?

Senator MUNDT. Yes.

Mr. GARVER. Yes; we do.

Senator MUNDT. Later in your paper?

Mr. GARVER. Yes, Senator Mundt.

I should like now to offer on behalf of the national chamber some comments and consideration bearing directly on a few specific issues which we believe your committee is most immediately concerned with in the speedy drafting of farm legislation. These will deal with the soil-bank approach, surplus disposal, the domestic parity approach, the question of the level of price supports, the transition to modernized parity, and the suggestions to limit eligibility of producers for price-support loans.

SOIL-BANK APPROACH

The soil-bank idea started out as a relatively simple proposition that it is sound conservation to maintain soil resources in the land rather than spewing them out wastefully in products excessively above what the current markets can absorb. But because so many complexities of agriculture relate to this idea and are unavoidably involved with it, the variations on the theme have multiplied into numerous versions to the point where analysis and appraisal are possibly only by taking one facet or phase of the problems at a time and considering each more er less by itself.

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It seems to us there have developed in the various proposals for a soil bank four discernible objectives: to promote better conservation; to reduce output; to reduce surpluses; and to supplement farmers' incomes. It seems obvious to us that a workable soil-bank program cannot serve all four such masters faithfully at the same time. If priority is given to conservation, incentives offered should be only enough to induce the diversion and soil-conserving use of such acreages as will achieve an optimum of conservation at a minimum of expense. By such a standard, the supplements to farm income directly would apparently be relatively minor, and would indirectly help incomes only to the extent that some reduction in real total farm output enhanced prices and thus ultimately income, probably long range. This assumes that participants would not concentrate resources on other acreages, thus increasing output per acre.

The effect on output would be limited to the extent that optimum conservation might conflict with the short-run objectives as to output. We would not think that the conflict can in the public interest be resolved by a decision that everything produced above what the market will take at some predetermined price level is by definition a waste that should be conserved.

We believe that the national interest calls for a level of farm prices that will permit the maximum use of our agricultural wealth while returning to the farmers who produce it incomes that will cover their costs and permit them to earn for themselves and their families net incomes comparable to the returns in other businesses requiring similar abilities, degrees of skill, and capital investment.

Senator MUNDT. That is what I would call a definition of parity. Do you agree that you are seeking parity for the farmer?

Mr. GARVER. We find so many parities and so many constructions put on it, we have tried to avoid it as a target, but in essence, Senator Mundt. That is the kind of fair treatment that we think should be given.

Senator MUNDT. To me parity and equity are virtually interchangeable in talking about the farm program and farm prices, and I wondered if you associated yourself with that concept, or whether to you parity meant something different from that.

Mr. GARVER. No. Our aversion to parity is largely because it is given so many different meanings, and sometimes it is given an absolute fixed meaning, which doesn't meet this kind of a condition.

Senator MUNDT. That still does not exactly answer the question as to whether you associate yourself with my feeling, and I am looking for information, that parity and equity are virtually interchangeable. We have kind of fastened on the word "parity," but it is an effort to get equity for the farmer, and I think your paragraph very clearly sets forth that you are seeking equity for the farmer.

Mr. GARVER. That's right.

Senator MUNDT. Or what we sometimes call a parity position. We want the farmer to have a parity position with other segments of the

economy.

Mr. GARVER. Well, Senator Mundt, I will try to answer it as directly as I can by saying if we wanted to define parity this way, we would say yes, this is parity.

Senator MUNDT. That is all, Mr. Chairman.

The CHAIRMAN. The point I was going to make is this: As I understand that paragraph, it is really that you believe that the farmer ought to get parity income, forget about the price but parity income. Mr. GARVER. That's right.

The CHAIRMAN. An income similar, as you say, to that received in other businesses requiring similar abilities, degrees of skill, and capital investment. That is parity of income.

We have had that in the law since 1937, haven't we, as I remember it, and that has been the goal we have been trying to attain, and I wish you would give us the key to do that. That is what we are striving for.

Mr. CARVER. Well, perhaps when I read the next paragraph, the fight will really start then.

Senator JOHNSTON. You count out Mr. Benson in the next sentence. Go ahead.

Mr. GARVER. This could, and perhaps should, involve the eventual voluntary withdrawal of some of the families from agriculture who cannot achieve comparable status under such a price level.

The CHAIRMAN. This committee is trying to make it so that people remain on the farm. As you know, small farmers have been the backbone of our industry for many years. You are advocating that something be done to send them somewhere else where they may make a better living?

Mr. GARVER. No, sir; we are not advocating that something be done to send them somewhere else.

The CHAIRMAN. What do you mean when you say is this, and I quote, "This could, and perhaps should, involve the eventual voluntary withdrawal"?

Mr. GARVER. The whole point of it, Senator Ellender, is this: that we think you will not achieve this kind of an equitable treatment for farm people, or achieve the parity, Senator Mundt, and we agreed this defines parity, that you cannot achieve that and still keep all the people in agriculture who are there now.

That is the whole point of this statement. We think we will not achieve it until there is further voluntary withdrawal of those who can find better opportunities elsewhere.

The CHAIRMAN. In other words, what you are advocating is let those who have the equipment, who have the money to go on and mechanize and make it in a big way, let them handle it and let the little fellow get out. Is that what it amounts to?

Mr. GARVER. Senator Ellender, I don't believe it is all a matter of little fellows and big fellows. Some of the most efficient and effective units I have seen throughout the country have been little fellows who have done very well for themselves, and some of their brothers in the same sized class somehow don't do nearly so well.

I would say that if you just take a given size as far as family size is concerned, as far as the size of the farm is concerned, say some types of operations under 50 or 60 acres, that there will still continue, under a fair treatment to agriculture, under the kind of parity we talk about in this paragraph, there will still continue some of those to operate and make a good standard of living, but some of their brothers who, for various reasons would rather go elsewhere, will do so.

Now, that does not mean that there will not be some continued upgrading of the size, the 60-acre man may become a 70-acre man and so