Mr. THATCHER. You can't nicely do it. With cotton you reduced the acres, but the yield was up and you got more cotton off fewer acres; is that correct?

The CHAIRMAN. That is correct but the Lord was good to us, Mr. Thatcher-it was 1 in 10.

Mr. THATCHER. That we can't know, can we.

Senator THYE. No.

Mr. THATCHER. We can't nicely determine that.

Senator THYE. Would you have a proposal of how we would arrive at what would be a fair and a proper compensation for that which we finally denied the producer to till and harvest a crop from?

Mr. THATCHER. As best I could I would project the production of these grain crops and then I would rewrite my parity formula, just like they have rewritten it figuratively for labor.

If we are going to have fewer units to sell and these people, these farm families, are to be preserved in employment on the land, for social as well as economic reasons, if that is the policy of the Nation, then I would put in a higher percent of support.

If you introduce the reduction in units into your parity formula, you might conceivably have a support price of $3 on wheat, raised on 40 million acres. The increase in the cost of the wheat in the loaf of bread would be nothing to speak of.

I would raise the unit price because this fellow on the land is the same as anybody else, in the factory or even in the Congress, he will have to have enough money to live on or he will have to get out. I think that is plain sense.

The CHAIRMAN. Senator Scott.
Senator SCOTT. No questions.

The CHAIRMAN. Senator Mundt.

Senator MUNDT. First of all, Mr. Thatcher, I would like to congratulate you on this family-type survey. I have read a great part of this little Bible and it has some interesting information. I do not believe we can get too many facts on the farm problem and this comes right off the farm and I think it will be very helpful to us. I am glad you made it available.

Mr. THATCHER. We are making a quick spot check in your State with the same panel members that are in this survey. The returns so far received were brought down by plane last night.

I think they show a decrease of 7 percent in net income. That is from returns from more than 10 percent of the farms reported on in this book.

Minnesota is down 7 percent. And Wisconsin is down 13 percent. North Dakota and Montana are up about 5 percent due to bigger crops. Senator HUMPHREY. Is that from 1954 down to 1955?

Mr. THATCHER. These figures are for the year ending December 31, 1955.

Senator MUNDT. Do you have them firmed up and checked? I think we would like to introduce them in the record to supplement what you have said.

Mr. THATCHER. I can just give you the preliminary indication because it will take some time to get complete figures.

Senator MUNDT. I saw in one of the local South Dakota papers the other day that our income is down 5 percent. I do not know whether

that was the State college survey or the Department of Agriculture

survey.

All of that jibes pretty well with what you have found on your spot

check.

Secondly, I am very much intrigued by the emphasis you place on what I would call this strategic reserve of foods and fibers. This is nothing new in the cold war. We do that in metals. We have worked out a pretty good program of sealing off these stored metals which are accumulated in the stockpile for possible emergency use.

I have felt for a long time and so stated that I think a strategic reserve of foods and fibers which are sealed off from the market are just as much a part of the legitimate defense program as a strategic reserve of bombs or planes or ships.

And I think that we should be able to work out a formula which would keep that strategic reserve from being a so-called surplus to depress the market the same as we have done in metals. I am glad you placed emphasis on that.

It seems to me that a year ago or 2 years ago, when the Department of Agriculture came up with this set-aside idea, they took about half a step in the right direction. Let us take the other half-step and get it into strategic reserve instead of set-aside and seal it off.

Do you feel if that could be done, as an experienced grain man, so designated that we could hold-I do not know about the size; you say it should be 500 million bushels of wheat, some might say 400, some might say 600, but a committee of experts should be able to agree on some figure, and once it was determined, do you think that could be held and not have any impact?

Mr. THATCHER. I do. If I were general manager and you were my board of directors, I would recommend to you after serious consideration of this whole question that the whole country be notified that not a pound of stuff in the hands of the Federal Government is for sale. It is to be frozen right there for the time being.

Senator MUNDT. Probably could be rotated in and out except for that.

Mr. THATCHER. Yes. Then I would take the next 2 or 3 years, in addition to the programs we are talking about, to work off slowly what we later determine as excess. The instant that the whole trade was aware that was the firm policy of the United States and that it was going to be for a period of years, because we are going to lick this thing, you would find the trade moving in to buy their normal supplies that they used to carry but which the Government now carries.

For illustration: We were all on notice last year that the support price of wheat was going down 18 cents a bushel on the new crop. All of us in the business tried our best to get rid of every bushel we could so as not to carry over any against that decline in price.

I was running trucks all over the Northwest, a very improvident way of moving stuff in, to get rid of it so I would not get caught with it. We were stuck with around $250,000 to $300,000 of a particular wheat we just could not get rid of. Everybody else, every prudent businessman, was doing the same thing.

We are coming to the crop of 1956, and everybody is on notice that the support price is to be 27 cents a bushel lower yet. I was just talking with one of our wheat men who is here to answer questions I think

may arise, and he says they are beginning to feel that cut already, even though harvest is months away.

Now, the mills are beginning to ease out and buy as niggardly as possible, because nobody wants to own wheat that is going to be 27 cents a bushel. next summer. You will see it reflected in the distant futures in the wheat market.

Senator ANDERSON. Twenty-seven cents less?

Mr. THATCHER. Yes; going from $2.08 to $1.81. Everybody is on notice not to own wheat. Any prudent businessman is going to divest himself of property where he knows the price is going down. The result of it is that the Government carrier the whole load, every bit that we can push onto the Government, naturally.

The CHAIRMAN. May I suggest an amendment to the statement you just made about sealing it off?

If we were to let the foreigners know that we were not going to give them this wheat that might have an effect on exports.

Mr. THATCHER. Who knows it better than you do? Every buyer in the world knows.

The CHAIRMAN. Let the world know.

Senator MUNDT. The strategic reserve would do exactly that-this would be for your national defense in case of wartime emergency, or our domestic use in case of a serious nationwide growth.

I am hopeful that this commttee can do somethng in that regard. I read in the President's message a little phrase that indicated that it might have his support.

He was thinking about it. He talked in terms of keeping some for emergency purposes and so forth. Keep it like you keep these stockpiles of metal. Do not turn them into the market unless there is some emergent need.

Now, turning to a different point

Mr. THATCHER. In connection with that, we are pretty substantial handlers of grain. For the year ending May 31, last year, we handled over 100 million bushels. We are in constant touch with the trade all of the time--the processors, our competitors, and all.

This is common discussion, what I am laying out here, when they talk. They think the programs and the policy are plain nuts. They do think that.

Senator MUNDT. On page 2 of your statement, Mr. Thatcher, you said:

The farmer's cooperation to make such an acreage reduction program effective will rest on the attractiveness of the incentives offered him. If these rewards do not increase the farmer's take-home pay, he will turn his back on the program. That certainly is a statement of fact.

We have had discussions both ways on this soil bank, acreage reserve, conservation reserve concept, which I think all around this table feel is going to be in the new bill in some way or another when we write it; that is, I mean some phase of it.

I would like to know the argument-some say it should be voluntary, some say it should be compulsory. Do you have any expression on that?

Mr. THATCHER. As I said a while ago I do not think there is halfintervention when the Government intervenes and I don't think there is half-compliance.

If the Government is going to fully intervene for full parity, then I think the farmers have to fully comply. If they don't

Senator MUNDT. Does that mean that you believe there should be compulsion that the farmer go into this acreage conservation program? Mr. THATCHER. No, I think he should stay out of it entirely if he wants to.

Senator MUNDT. That is, voluntary?

Mr. THATCHER. Yes. But if he comes in, he takes the whole Government program. He just does not pick pieces of it, if the Government program is complete parity.

Senator MUNDT. You are using Charlie Shuman's definition of voluntary, which to me means compulsion. He said that it should be voluntary but he had to go in there.

Mr. THATCHER. I would provide a lack of incentive for the farmer that stays out. That is for sure.

Senator MUNDT. I would like to put a bigger carrot out in front of the house so that he would have to go into it voluntarily.

Mr. THATCHER. I would provide ways-I am sure that I could think up ways and means to make it worth his while to be in. He would suffer plenty if he were out.

The CHAIRMAN. Any further questions?

Senator ANDERSON. The wheat certificate plan would be one way. Mr. THATCHER. The wheat certificate plan was a good example— you are absolutely right.

Senator MUNDT. No. 6

Mr. THATCHER. I hope you remember that when you sit here.

Senator ANDERSON. Very well. I had to remind you of it just now. Senator MUNDT. Point No. 6 is one that some got into a heated controversy on before this committee and on which I am certainly still open-minded.

As I read it, you think we should retain the present provision in the law; in other words, sales in the domestic market should not be made at less than 105 percent of the support.

Mr. THATCHER. We can give you competent testimony on that. You should not take it out. There is another provision, No. 7, which goes together with that.

None of these deals between the Commodity Credit Corporation and the trade, the processor, should be private.

And I want to say right there that I have the greatest regard for all of the men I know who are handling the program for the CCC. They are fine fellows; I like them; I do not impute anything peculiar about their transactions at all. I think they are high-class men.

But I say this: It isn't in accord with Government practices and policy or Government ethics for a representative of the Government to make an exchange privately with a processor, swapping wheat the processor has bought knowing he doesn't want to process it.

He does that knowing at the same time that the Government has wheat on hand he would like to process. And so they arrange for an exchange.

I think this is all honestly done. I want to say that. In making the exchange, under the law, the representative of the CCC has to take the support price, add to it 5 percent, and the accrued cost for interest and storage.

In addition to that, he adds premium values as determined in the CCC loan schedule.

Almost constantly, the premium in the loan schedule is much less than the cash premium at the market place, much less.

So this procedure, even at 105 percent, has a very serious depressing effect on the prices of premium grain, costly to the producers.

Now let me illustrate. The CCC now has very little high protein wheat. I happen to have some wheat out on the farm. I had a sample sent in. It grades only No. 3, but because it has a high protein content of 17.4 percent, on the day they checked the sample, it was worth 29 cents a bushel over the No. 1 futures price.

If, however, the Government still had a lot of that wheat which they heretofore traded off, if they had that in their hands and would offer it in the exchange at the support price, plus 5 percent, plus the carrying charges, plus the loan value premium, that 29 cents premium on my wheat would be knocked clear down.

Senator MUNDT. You are taking me into a little different pasture from the one in which I was seeking to browse here.

Mr. THATCHER. I want to get you in the one in which we live in the market place.

Senator MUNDT. In South Dakota where they have pretty much of a drought, the farmers are trying hard to buy some of this Commodity Credit wheat at less than 105 percent of support prices.

You know there are proposals before us to make it possible for them to do that. I think you would oppose that.

Mr. THATCHER. Why not go on the cash market and get it? Corn is way down on the loan value.

Senator MUNDT. It was not there.

Mr. THATCHER. It has been all fall. It has been down 50 cents under the loan value. That is about all fall. I am interested in your situation there, as you know.

Senator MUNDT. Yes.

Mr. THATCHER. I would even possibly give it to them but I would not make it a reduced price. I would loan it to them and let them pay for that in years ahead. I would not destroy the cash market by turning the Government loose to sell at any price they want to sell at.

The CHAIRMAN. Senator Humphrey, any questions?

Senator HUMPHREY. First of all, I want to express my thanks to Mr. Thatcher for his testimony, and join with Senator Mundt in commending Mr. Thatcher on this survey. As Mr. Thatcher knows, I had the privilege from time to time of discussing with him and with some of his staff some of the preliminary findings in this survey. This is the sort of thing that the Government ought to be doing, and it is not doing it.

And that is why I have suggested that the Council of Economic Advisers as set up under the Employment Act of 1956 do this kind of work so that a private organization does not have to come in here and present this kind of information when it ought to be fully available on a contemporary basis at least once a year, maybe twice a year, from the Government of the United States.

I was interested, Mr. Thatcher, in your comment on what has been happening in the trade, in reference to the supply of commodities..