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Mr. GARVER. Senator, I will simply answer by saying it is my judg; ment that it would be hard to conceive of more corn being consumed than there has been consumed now.
Senator THYE. Then where would it go if you did not have an orderly sealup of the surpluses that have been built up in every area in which corn is produced? Where would that corn go except either into the feed lot or on to the cash market to further depress the market? It is just commonsense if you know the agricultural economy at all.
Mr. GARVER. I would think that there would have been some of this corn acreage distributed around to some other commodities because the relative prices would have been different.
Senator THYE. What would you advise a good, diversified farmer to shift to now?
Mr. GARVER. Well, I would not attempt to advise him unless I knew his own operation.
Senator THYE. I realize that. But not generally knowing the individual, take the commodity. What commodity would you advise a farmer to shift to today?
Now, I will name them. You certainly would not shift to barley, because that is already in distress in its price relation to the Nation's economy. You certainly would not encourage him to go to oats, would you! And there might even be some question of the wisdom of encouraging an expansion in beans and flax, because of the present oil supply and high-protein feed that comes from the flax meal and the soybean meal which has to find the feed lot as an end use. Your feed lots are already in distress because you have got too much pork and you are threatened with too much beef.
Now, if that is the situation, where would you advise that farmer to put an addtional acre of any kind of crop? The whole wisdom here is an orderly method of getting a reduced farm plant, and you cannot do it except by retiring acres from a harvested crop. That is what we are trying to resolve here. You could not induce the producer to go somewhere else with his corn acres, because every other category of crops is in distress as badly as corn and, therefore, you had better help us to find an orderly way of retiring acres rather than advocating throwing corn into the chaos of uncontrolled acreage. You would be in trouble if you get into that position.
Senator ANDERSON. Let me ask Mr. Garver-
Mr. GARVER. I still say that as far as this soil bank is concerned, I emphasize that corn acreage and everything else should go into this. So the question that I answered about corn not having a program was simply an answer to Senator Holland's question about why I felt there would be differentials and why it should be voluntary, and I think these are illustrative of the reasons why it should be voluntary.
Senator ANDERSON. Let me ask Mr. Garver if in any way you are referring to the difference between the acreage allotment and the marketing quota. There is an acreage allotment on com, but there is not a marketing quota on corn.
Mr. GARVER. That is right.
Senator ANDERSON. And the acreage allotment might be used as a basis for benefits even though the corn itself is kept free by the marketing quota.
I fully subscribe to what Senator Thye has been pointing out. The corn-hog ratio is most unfavorable, the most unfavorable that I find it in many years. I did not realize that the corn-hog ratio had gotten down to 9. It is 13.5 where you have a balance between corn and hogs.
Senator THYE. And, Senator Anderson, you know that you would not encourage any prudent farmer or feeder to put any more into the feed lots than what you are now putting into the feed lots.
Senator ANDERSON. Not with a 9.2 corn-hog ratio.
Senator THYE. No. And a beef feeder is confronted with the same problem.
Senator ANDERSON. Yes, sir.
Senator THYE. Your farm plant is too large. That is your problem today.
The CHAIRMAN. Proceed, Mr. Garver.
Senator HOLLAND. Mr. Chairman, since I asked the question that set off this course of questioning, may I ask one more?
The CHAIRMAN. Surely.
Senator HOLLAND. Isn't this the fact—and if not, please give your own views on it-isn't the trouble that we have had in corn and the great overplanting and the fact that those who obeyed their allotments frequently took advantage of cheap corn produced by those who did not follow their allotments-isn't all of that and the confusion that is attendant to it the result of the fact that there was no penalty for nonobservation of the corn allotments?
Mr. GARVER. I think that is important. That is right.
Senator HOLLAND. So what you are really saying is this, is it not, that if we are going to have allotments, let us have some machinery to make them effective?
Mr. GARVER. They should have teeth in them if we expect them to work.
The CHAIRMAN. All right, Mr. Garver.
Mr. GARVER. To the extent that inducements are more than this are “disposable income” in the hands of farmers, there will be strong motivation to use such funds as capital to intensify output on acreage not reserved in order to augment income. If this happens, the soil. bank program would fail to that extent in achieving short-run adjustment. Onerous as restrictions are, this seems to indicate the necessity of shifting temporarily from acreage and quota limitations to outright quantity quotas for those crops under restriction, and possibly to other commodities also.
The version of the soil-bank proposed by the President seems to put the priorities on supplementing farm incomes and attacking the twin problems of surplus and output. This is in line with the analysis of the five factors I have just reviewed.
The chamber's position is that national farm policy should aid in protecting farmers against an undue share of the burden of price declines. The soil bank offers a hopeful approach of dealing with the present problems of adjustment.
There may be dangers that could raise doubts about its effectiveness in achieving adjustment. Much would depend on how thoroughly
provisions are made to prevent stimulation of production on acreages not reserved for the soil bank.
I should like to make three comments on the problem of surplus disposal. The national chamber would favor the Government getting out of the commodity business for good as rapidly as possible. That may mean some temporary additional jolts to some commodity prices, but we believe it would be best for the business of agriculture in the long run. It should not need to be said that we also favor the Government staying out of the commodity business once it gets out.
Secondly, we do not believe it is possible for Government to engage in commodity selling without impairing seriously and eventually destroying the very markets upon which farmers must depend for continued success and economic health. No matter how carefully surplus disposal is circunscribed by law, we do not believe it can be made at home or abroad without weakening market demand.
Senator MUNDT. One question. When you talk about the fact that this may involve some necessary additional jolt to commodity prices, would you agree with me that the farmers should not be made the victim of those jolts, whatever they are?
Mr. GARVER. I would agree to the extent possible to insulate him from the jolts. The second paragraph qualifies my view on the first.
Senator MUNDT. This is now Government grain, you see.
Senator MUNDT. And if you dump it on the market or do something else, whatever you are talking about there, I do not think it would be fair to assume that the farmers would be the victim of those jolts.
The CHAIRMAN. Proceed, Mr. Garver.
Senator AIKEN. May I ask what he would do with the surpluses if you object to their being sold; what would you do with them?
Mr. GARVER. I do not object. I think they ought to be Senator AIKEN. You say: We do not believe it is possible for Government to engage in commodity selling without impairing seriously and eventually destroying the very market upon which farmers must depend for continued success and economic health. No matter how carefully surplus disposal is circumscribed by law, we do not believe it can be made at home or abroad without weakening market demand.
Mr. GARVER. That is right.
Mr. GARVER. I would sell them, but recognize that while you are doing it, you are going to do some damage to your markets.
Senator MUNDT. What are you going to do to protect the farmers against that recognition?
Mr. GARVER. I frankly do not think you can. I think it is a part of the jolt of this thing, that some of the protection you thought you were giving them in accumulating the surpluses is bound to be weakened as long as they stand there or while they are being sold.
The CHAIRMAN. All right.
Mr. GARVER. Thirdly, we assume that this committee has given thorough study to the possibility of not only earmarking a part of our stocks as a national security reserve, but locking them up securely so that they are genuinely insulated from the markets until such time as they are needed.
DOMESTIC PARITY, OR TWO-PRICE PLAN The national chamber has taken no position on this controversial proposal. Our only comment would be that if the Congress decides that a trial is justified as an experiment, the legislation should be so framed as to indicate the objectives, and should set up criteria for judging the success or failure of the experiment. It should provide for termination of the experiment if it is not a success.
LEVEL OF PRICE SUPPORTS
We believe that there are only two possible constructive uses of price supports. The first is to foster orderly marketing during a marketing season. This use would be to prevent the exploitation of the farmer's need for revenue at a time of temporary seasonal glut at peak marketing times. Such use contemplates the liquidation later in the season of any stocks acquired as the result of this price support. For this use it is of paramount importance that the support be at a level that equates the season's supply and demand.
The second possible constructive use of price supports is to prevent, in periods of general recession or depression, an undue share of the burden of price declines from falling on farmers. Such use contemplates the holding of any stocks acquired only until the worst of the dip is over and then feeding them back into the market as recovery progresses.
The vel of supports should, we believe, be such as to permit prompt orderly liquidation under these conditions, and supports in this situation should be undertaken only with the firm commitment that the stocks will be liquidated under such conditions.
Beyond these two possible constructive uses of price supports we believe that the use of the device is a destructive one for farmers themselves. Whether at fixed level such as 90 percent of parity, or at periodically changed variable levels, price supports out of line with basic supply-and-demand conditions can have 1 of 2 consequences. They can succeed only to the extent that they constitute monopoly pricing. This requires the strict limitation of all agricultural production so that the support level is achieved in the market place by really trimming supply. Congress has shown repeatedly that it will not effectively impose such tight restrictions. I am convinced that genuine restriction of output is the last thing farmers themselves want. The tastes they have had of partial attempts have convinced them that the hypothetical gains in income from this kind of regimentation are too small a price for the limitation of income opportunities and the loss of freedom it would impose upon them.
Continued and permanent use of supports at unrealistically high levels, whether fixed or variable, can only drive agriculture further and further out of adjustment with its market. With failure to control, the alternate consequence of such supports is that they inevitably end up with the Government as the market, piling up stocks that can only disrupt and demoralize, and eventually destroy the markets.
For these reasons we believe that proposals to vary supports of basic commodities in relation to grades and quality are not only unnecessary but harmful. A support of a grade at 90 percent when the supply
of that grade is not in surplus could become virtually a guaranty of surplus. It could make the Government, rather than use, the market for top-quality stocks.
The values of different grades are a delicate and changing relationship in the markets. The market is that place where such values should be determined and regulated by price. The Government has acquired stocks of low-quality commodities in the past because the level of supports was too high.
If we are to continue to try to live with the mechanics of parity formulation, we feel it is imperative that we quit trying to look backward in the hope that we can somehow restore the relations of a past golden era. In our judgment the more nearly parity, for whatever it is worth, is in line with predominating economic conditions, the more effective it is as a guide. Parity needs to be modernized so as to reflect the price and cost relationships of recent history. The rapidly changing technology of agricultural production and the major shifts in demand for the different farm products make modernization imperative, if parity is to be of any use as a commonsense guide. We would certainly oppose any delay in the transition to the partial modernization of parity already provided by statute.
LIMITATION OF ELIGIBILITY FOR PRICE SUPPORTS
Since we have already indicated our view that price supports are of limited usefulness, we can see little point to the argument over how the benefits of the price-support programs should be divided. If we are to continue to have excessive price-support levels, the application of the proposed cutoff is only a solution under which some farmers will produce for the market while others will be privileged to produce for sale to the Government at a higher price, and is in effect a two-price system. This would deprive some producers the use of the loan program for orderly seasonal marketing, which many of them use it for.
We would oppose such differentiation.
Some farmers are finding ways to make basic adjustments to the changing agricultural situation. Let me illustrate by two examples:
Twenty years ago our national population was 126 million. The farm population was then 32 million. Since then our national total has increased 29 percent. If the farm population had increased by the same rate, there would be on our farms today nearly 42 million instead of the 22 million now there. If that 20 million difference were on the farm today, the per capita income of farm people would probably be scarcely half what it is. The point, it seems to me, is that here are 20 million people who in effect have sized the farm situation up and made a basic adjustment.
The second illustration is somewhat similar. The income of people on farms from nonfarm sources has nothing to do with the farm business as such. But the estimated $6 billion earned off the farm last year by farm people is also a pattern of a basic adjustment that hundreds of thousands of farm people have made.