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Governor FREEMAN. They added those on?

The CHAIRMAN. Yes. So it is correct the way I see it. The discrepancy is the $8 million that they did not show on one side of the sheet, and then the $8 million for Government payments in 1 year that was not reflected on 1 side of the sheet.

Governor FREEMAN. The Government payments; yes.

The CHAIRMAN. There was no error to it. It is very plain if you read it.

Senator AIKEN. Senator, if the market price for wheat is $1.70, as it runs largely through the East, and the support level is $2.06, or whatever it is at the present time, it is the open market price which is used in figuring those monthly income statements rather than the loan price, which may not show up until the next year, if ever. I do not know if it ever shows up or not.

The CHAIRMAN. This statement, though, is on a yearly basis, and if you add to the figures on one side, that is, the side where they give a detail of each commodity, you will find that that addition is $1 billion and so much, and if you turn on the other side, you will see what the support payments were, and if you add the support payments to what is on the side that the Governor is now looking on, you will see the correct figures. It is not an error.

Senator AIKEN. It is no wonder that people get mixed up.
Governor FREEMAN. I must say that I do.
The CHAIRMAN. Well, I did not.
Let us go on.
Senator Young. Let me ask one question, please.
Governor, you spoke of this farmer who was farming 50,000 acres.
What type of farming was he in?

Governor FREEMAN. Wheat.
Senator YOUNG. Mostly wheat?
Governor FREEMAN. Mostly.
Senator YOUNG. Other grains, and sugar beets?

Governor FREEMAN. No; just wheat. That is what I was told, Senator. I did not talk to the man myself or investigate it personally. You know the person, I think, in the Red River Valley.

Senator YOUNG. We do not have a farm in North Dakota that size anyplace in the State that I know of.

Governor FREEMAN. This is in the Red River Valley up near Halma. It is the biggest in the whole area.

Senator SCHOEPPEL. Senator, I would like to ask the Governor, do you have any laws on your statute books preventing corporate farming as such?

Governor FREEMAN. No.
Senator SCHOEPPEL. You, of course, are aware that some States do?
Governor FREEMAN. No; I was not aware of that, Senator.
The CHAIRMAN. Proceed, Governor.
Governor FREEMAN (continuing).

GENERAL AGREEMENT

Thus far I have commented upon aspects of the farm problem about which, I believe, there is general agreement on the part of most of those concerned with agriculture. They might be summarized by saying that we have an extremely, and increasingly, productive farm econ

omy which is not at present receiving the benefits from increased production to which it is entitled. This economy is based upon the typical American family-size farm, which ought to be preserved and encouraged in the interest of the entire Nation.

It is important, not only to farmers but to all Americans, to make sure that the 13 percent of our population that lives on farms has a chance for economic well-being; and it is therefore a threatening cloud over our current economic picture that agriculture is suffering a serious decline at a time when other segments of our economy are booming

SURPLUSES AND PRICES

Surpluses are generally taken as a symptom of the malady which afflicts American agriculture, and it would seem that the current agricultural program is directed solely at the elimination of that symptom. Yet few ailments can be cured by attacking symptoms alone without considering the real cause.

Agriculture deals with basic human needs, and our agricultural enterprise should produce: (1) Enough for a high standard for our own people, including those in lower income levels who do not now have adequate nutrition; (2) a large enough reserve to serve as a stockpile to meet any natural or manmade emergency; (3) a supply of food which can be used, by means of a wise international policy, as an instrument for peace and democracy in those underdeveloped countries whose people are hungry.

And we must not forget that our rapidly increasing population will bring about rapidly increasing demands for food. We must therefore conserve and enhance the productivity of our soil—as well as our capacity to make use of that productivity—to make sure that we can meet our needs in the not-so-distant future.

Policies which we follow with regard to surpluses are most significant. We need to remember that reserves and surpluses are not the same; that in a commodity as vital as food we always need some carryover in case unforeseen circumstances create a need. Such a carryover should be regarded as desirable rather than something to be eliminated-unless we want to operate under an economy of scarcity. To regard all supplies not currently needd as surplus is therefore not only erroneous but harmful to our society.

But even small surpluses will depress prices, particularly if administrative officials permit them to have that effect. And obviously millions of independent farmers, acting individually, cannot make adjustments necessary to meet changing demand.

Senator SCHOEPPEL. Mr. Chairman, I would like to ask the governor this question.

He may or may not have had the opportunity to have seen or heard what Mr. Thatcher presented to the committee when he was here. In substance, it was that some determination should be made as to the amounts of the grains that are held which might be necessary for us to seal completely off and hold as a strategic reserve.

Now, I am not using his language exactly, but that is the sum and substance, as I understood it.

Now, do you think something along that line should be done?

Governor FREEMAN. Yes, sir; I do. I think that we should have a definite measure of strategic reserve in food and agriculture, just as

we have it in minerals and other things, as a part of our national security in protecting the welfare of our people.

Senator SCHOEPFEL. Of course, you would understand as a matter of good housekeeping and in the interests of holding down losses by spoilage that this grain should be rotated ?

Governor FREEMAN. That would follow.

Senator SCHOEPPEL. But particularly insulated completely as a reserve?

Governor FREEMAN. Yes. And I think if it were specifically clearcut and understandable some of the pressure on the market place would be relieved by so describing and handling it, which I do not think is done today. [Continuing.]

FREE-MARKET PRINCIPLE CANNOT WORK

This leads to one of the fallacies in the present farm programwhich lies in the assumption that if surpluses could be eliminated the operation of the so-called law of supply and demand would function in a free market to resolve the problems of agriculture. This is not the case.

Experience has shown that lower prices do not cut down production, but rather increases it. In Minnesota our dairy farmers have been hit hard by the drop in dairy prices—the sale of dairy products in our State brought in $20 million less in 1954 than in 1953. Yet in August 1955 milk production on Minnesota farms was 612 million pounds, or 6 percent, higher than our milk production in August 1954.

Farmers try to produce more in order to maintain their income and meet their overhead. They will continue to do this as long as they can. It is probably true that if prices should continue to go down far enough for a long enough time a substantial number of farmers will become marginal and quit. They will no longer have the money or credit or incentive to operate. This eventuality seems to be the basis of the claim inherent in the present flexible lower price policythat in the long run lower prices will eliminate surpluses by eliminating farmers.

If the run were long enough, it might come about that millions of farmers would give up in poverty and desperation. I have been told by many young farmers, veterans who began farming after the war and borrowed money to get started, that they are about to give up unless some change occurs soon.

I have had this personal experience, incidentally, in many parts of Minnesota.

But this is not, and never has been, the American way. Our worship of some so-called law of survival of the fittest has never extended to the length of allowing people to suffer increased loss and bankruptcy in order to get rid of them and thus get rid of the problems they present. Moreover, should many of these farmers give up, the land would still remain, and could easily be incorporated in the development of the corporation farms to which I referred. The land would probably continue to produce surpluses.

Nor do we apply these free market ideas to other areas of our economic life. We give depreciation allowances and tariff protection to industry. We have fair trade laws which permit private interests to fix minimum prices. We subsidize transportation and publications

because we regard it in the national interest to do so. A healthy agricultural economy is certainly as important to the national interest.

Furthermore, agriculture is of all industries the one to which the law of supply and demand could apply least effectively. Demand may be somewhat predictable, but no human agency can foretell what weather and other natural hazards may do to the supply. Nor hare we devised any way, except through Government, by which millions of farmers can get together to determine what share each of them should contribute to any needed supply,

Agriculture, like industry, expanded greatly to meet wartime needs. Our Government encouraged this expansion, as essential to national security. In order to induce farmers to expand their productive facilities they were guaranteed prices at a high fixed percentage of parity. Now that the need for increased production seems no longer present, the problem is how to make the necessary adjustment. The measures taken to cushion this adjustment for industry are well known. Certainly, when changing conditions call for economic changes, farmers should not be the lone group called upon to make the sacrifices and to suffer the losses attendant upon such readjustment.

What ought to be the goals of an agricultural program to solve the farm problems—and what are the principles that should be followed in our efforts to achieve those goals?

Farmers are entitled to parity income and Government programs should insure a situation in which farmers could achieve such parity. Parity in income means that farmers operating efficiently could achieve an income which in terms of ability, effort, and investment involved—would be on a par with those averaged by nonfarm families or the population as a whole.

The family-size farm economy
Senator AIKEN. Mr. Chairman.
The CHAIRMAN. Senator Aiken.

Senator AIKEN. I would like to say to the Governor that as far back as the Agricultural Act of 1948, we wrote in a provision instructing the Department of Agriculture to work out a formula to determine parity of income for farmers. Nine years later, they have not come up with any formula. They seem to find it almost impossible to work out a formula.

The CHAIRMAN. As I recall, it was in the 1938 act.

Senator AIKEN. We have been trying that for years, to try to get a satisfactory formula. Now when most people use the word "parity," they really mean "equity” these days, rather than income.

Governor FREEMAN. Yes.
Senator AIKEN. And parity of income is what they should mean.
If anybody can work that formula out, it would be helpful.

Senator YOUNG. Has there been anybody working in the Department of Agriculture for the past 5 or 6 years on trying to develop a new parity formula? I cannot recall anyone since my time.

Senator AIKEN. We got a report along about 1950, but it did not tell anything. In other words they have not been able to work it out.

Senator YOUNG. I think it would be well if this committee made a request of the Department of Agriculture to have some of their top people try and work out a more equitable parity formula.

Senator AIKEN. Yes.

The CHAIRMAN. Proceed, sir.

Governor FREEMAN. I have found so often when return to an individual farmer is concerned, the investment involved is so often ignored in terms of computing what is the proper return.

Senator AIKEN. We have a really paradoxical situation. We can come up with figures showing that farm income is way below the average nonfarm income, and yet come up with another set of figures showing that the net worth of the average farm family is about $5,000 more than the net worth of the nonfarm families.

All that means, I guess, is that the farmer gets his money tied up and cannot spend it.

Governor FREEMAN. I think that is probably what is does mean. Senator AIKEN. And you get so many paradoxical situations.

Governor FREEMAN. That is true. This goes back to my comment on figures, that it is so difficult.

Senator THYE. Mr. Chairman, that is easily understandable. An average farmer on 80 or 160 acres must have anywhere from $8,000 to $16,000 as personal property without real estate.

Senator AIKEN. That is right.

Senator THYE. And a man can have a pair of overalls and canvas shoes and gloves and make his living that way by being employed. Therefore, it is impossible to determine equity on the basis of what are his assets and what is their values, because for a man making a living down here on the street, all he needs in the world are those shoes and a pair of overalls and canvas gloves, in climatic conditions that are reasonable, and not too cold. But a man operating a farm has got to have a personal investment or he is not in the business of farming.

The CHAIRMAN. On the other hand, Senator Thye, I believe that the average farmer is more frugal than the city man.

Let us go on.
Senator THYE. Thank you, Senator.
Senator AIKEN. Correct.
Senator HUMPHREY. You should talk to my wife.
The CHAIRMAN. Proceed, Governor.
Senator Young?

Senator YOUNG. We apply an entirely different system to labor than we do to agriculture. Now, in agriculture, we say, when you produce too much, your price goes down. We do not say to labor, if there is a surplus of labor, if you are producing too much, work for a little ess, and that will solve your problem, do we? Governor FREEMAN. No; we do not. Senator Young. We usually give them more money and less hours. Governor FREEMAN. That is exactly right. Senator Young. And we apply exactly the opposite to agriculture.

Governor FREEMAN (continuing). The family-size farm economy hould be sustained and encouraged as the most desirable form of gricultural production from the point of view of both social and economic efficiency:

While on occasion the huge corporation-type farm may produce more profits, the other social and economic consequences are so alien o our American standards that our farm policies should definitely be lirected toward the preservation of the family farm.

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