Senator YOUNG. At the 60 percent parity the farmers would go broke, at that price.

Mr. WESTRICH. Some of them would.

Senator YOUNG. Most of them, would they not?

Mr. WESTRICH. In my opinion, no.

Senator YOUNG. What would you think, how much credence would you lend to recommendations of a group of farmers, for example. if they got together and recommended how you at Sears, Roebuck should handle your business? How much credence would you give to a proposal like that?

Mr. WESTRICH. If the farmers were typical

Senator YOUNG. Supposing a group of farmers got together, and they made certain recommendations as to how business and industry should run itself-how Sears, Roebuck should run their businesshow much attention would you pay to it?

Mr. WESTRICH. I am not appearing for Sears Roebuck but I would say if a representative group of our customers gave us a program we would give it serious consideration.

Senator YOUNG. As to how to run your business?

Mr. WESTRICH. We certainly would, because the customer is our boss.

The CHAIRMAN. Proceed, sir.

Mr. WESTRICH. (a) In 1955, the support level of the 5 basic commodities of wheat, corn, rice, cotton, and peanuts ranged between 8211⁄2 percent to 90 percent of parity, and the sixth, tobacco, was supported at 90 percent when marketing quotas were approved.

Actually, wheat was the only basic commodity supported at the 8212 percent level. The current levels of support on basic commodities range between 75 percent and 90 percent and are still too high in relation to production.

Flexible price supports should be given greater opportunity to be effective by lowering the lower limit of support below the present 75 percent minimum on basic commodities so that the supports are only a protection against extremely low prices.

(b) The present act uses a rigid schedule to set the minimum support prices of basic commodities. This schedule is such that if supplies are reduced measurably, the support price can rise to the 90 percent level and the buildup will begin again.

For example, if by some chance the Commodity Credit Corporation was able to dispose of its entire stock of wheat, the support price would immediately rise to 90 percent of parity and experience has shown that growers would again expand production.

This difficulty would be alleviated by lowering the yearly supply percentage necessary to establish price support at a specific level. Supply percentage is the percentage that the total existing supply on hand at the beginning of the crop year is of the normal supply. It is imperative that there be a lowered level of support to prevent the Government from continuing to be a major market for farm commodities.

Point II: Apply the modernized parity formula to all price-supported commodities as soon as practicable.

Under the Agricultural Act of 1949, a new parity formula was devised which recognized gradually changing relationships between pro

duction costs of individual farm commodities and consequent shifts in their relative market prices.

This provision was made for adjustment of parity prices of individual commodities so as to reflect the relative prices in the most recent preceding 10-year period.

Transitional parity price is being used to prevent a sharp drop from the old formula to new formula prices. Through 1955, the parity prices on the basic commodities were not to be less than what they would have been if computed prior to 1950. They will now drop to 95 percent of the old formula in 1956 and continue to drop 5 percent per year until all basic commodities have shifted to the new formula.

Parity is not a measure of income; it relates the price received for a commodity to the prices the farmer pays for commodities and services purchased.

The new parity formula is more realistic and should be introduced faster than existing law now provides.

Point III: Enact legislation for a soil-bank plan which will take sufficient land out of production to reduce surpluses and store fertility in the soil. The plan should be voluntary, require participation in it as a requirement for eligibility for price supports, and not result in transferring difficulties of one farm product to another.

Because prevention of further accumulation and elimination of existing stocks of Government-held surpluses is of utmost importance to the well-being of American agriculture, a sound soil-bank plan should be put into operation as soon as possible.

An effective soil-bank plan will reduce considerably the acreage planted to crops and pasture and the resulting unneeded production. At the same time, it will provide an opportunity for farmers to practice good conservation of their land and store fertility in the soil. It can serve as a step toward the eventual permanent retirement of many acres of low-grade land which, ideally, should not be under cultivation.

Thus, it can be a long-range, as well as a short-range, solution to some of our most serious farm problems.

While the objectives of a soil-bank plan are desirable, they will not be attained unless all of the conditions of the recommendation are met in their entirety. The plan adopted must be effective enough to reduce production sufficiently to bring about a reduction in surpluses. It should encourage good soil-conservation procedures, be voluntary, require participation in it in order to qualify for price supports, and not cause difficulties to be transferred from one farm product to another. A plan without these provisions would not be in the best interest of agriculture, or the American people.

Senator ANDERSON. I wonder if you really feel that you have a voluntary plan and still require participation in order for a farmer to qualify for the price supports? If the farmer said, "If you will give me certain sums of money, I will hold some land out of production," and then proceeded to put that land in production, I would think he might sacrifice his right to price supports.

But surely you do not mean that every other farmer, if he does not come into the plan, would lose his right to price supports, do you? Mr. WESTRICH. That is what we mean, yes.

Senator ANDERSON. Then it is not voluntary.

The CHAIRMAN. Not voluntary.

Senator ANDERSON. The farmer cannot live without price supports. Mr. WESTRICH. Many of them are doing it currently. A lot of people have elected not to go in under price supports and have sold their crops on the free market. It is our contention

Senator ANDERSON. Well, go ahead. I do not quite agree with that. Senator THYE. Mr. Chairman, I think that Mr. Westrich is now speaking about a local area, where they either feed all they grow into a dairy herd, or a poultry flock or a feeding lot operation. They are not like a wheat producer. The wheat man does not feed all of his grain.

Mr. WESTRICH. That is correct.

Senator THYE. And a cotton man does not feed his cotton.
Mr. WESTRICH. That is correct.

Senator THYE. And the peanut man does not feed his peanuts.
Mr. WESTRICH. That is correct.

Senator THYE. So your thinking is entirely geographical and confined to an area in the vicinity of Chicago where you have milk produced and delivered to Chicago and sold. There you practically feed everything you grow.

Mr. WESTRICH. No, sir, we are not. But we are trying to be realistic on this, feeling that if a compulsory program were put into effect, you are going to not get good public support from the farmer, because the typical American does not like to be told what he has to do.

Senator THYE. I know but how high a rental do you think you would have to pay to get compliance so that you would affect the surplus? How much an acre? We will confine it right to your own area. Mr. WESTRICH. In that area it will vary greatly. Senator THYE. We will confine it to Illinois.

Mr. WESTRICH. In Illinois I believe it will vary.

Senator THYE. You have some poor land, but otherwise you have exceptionally good land as a whole.

Mr. WESTRICH. I think what you will have to do, my personal attitude on this is this, that as long as the surpluses exist, you will have a continuation of your present program. If a soil-bank program is to be made to work, it has to be made interesting and effective to the farmers.

Senator THYE. All right, to make it interesting, how much would you propose to pay an acre, for the average land in the State of Illinois?

Mr. WESTRICH. I frankly am not prepared to answer that question. Senator THYE. Now we have to get the answers, and here you come from Illinois to give us advice.

Senator ANDERSON. The Secretary of Agriculture could not answer the question. He ought to have a better chance to answer it than Mr. Westrich. I do not know why you expect this witness to.

The CHAIRMAN. We will have him or his staff back here tomorrow to find out.

Senator THYE. I will not pursue that question any further. But in your company-you are supervisor of the farm equipment department of Sears, Roebuck & Co. in Chicago, Ill.-has that department of Sears, Roebuck maintained the same volume of sales, or have sales fallen off?

Mr. WESTRICH. They have fallen off.

Senator THYE. What percent have they fallen off?

Mr. WESTRICH. That is difficult to answer, because in the department, on the basis of which we carry our figures, we have a great deal of what we refer to as urban merchandise. That merchandise that can be used both by the suburbanite as well as by the farmer.

Senator ANDERSON. You have fencing?

Mr. WESTRICH. There is fencing, for example. There is a great deal of fencing that is done in the residental area of the urban towns. Obviously, none of that goes into the farm.

I can mention specifically to you that last year the poultry business alone which we do segregate, was off roughly 35 percent.

Senator THYE. Do you do any credit in your department?

Mr. WESTRICH. Yes, sir.

Senator THYE. What have been your collections and credit problems?

Mr. WESTRICH. Our credit problems with the farmer have been excellent. The farmer is one of our best credit risks.

Senator YOUNG. On page 4, I read this statement:

On November 30, 1955, the Commodity Credit Corporation had an investment of $8,206,826,000 tied up in farm surplus commodities.

If a bank loans money to a business institution, do you call that an investment--if a bank loans money, I say, to Sears, Roebuck, do you call that an investment by the bank?

Mr. WESTRICH. If a bank?

Senator YOUNG. Loans money

Mr. WESTRICH. To Sears, Roebuck?

Senator YOUNG. Or any other business institution, do you call that an investment?

Mr. WESTRICH. Well, I call it a loan myself. It is a security that they have.

Senator YOUNG. Well now, it is true that on November 30, 1955, the Commodity Credit Corporation had loans and investments of a little over $8 million dollars.

This is the record of the Department of Agriculture, Report of Financial Conditions and Operations as of November 30, 1955.

This says, "Of the total of 1955 investments, $2,076,523,000 represented the balance of loans outstanding."

Why do you include loans outstanding along with holdings of the CCC?

Mr. WESTRICH. My understanding, if it is correct, of a loan-when a farmer puts something in loan, he is not guaranteeing to pay the amount back that he has put in the loan.

The Government has advanced him that money. And the only reason, the only way that individual redeems that loan was if the free market would advance over and above the price on which the money was loaned. Then he would redeem it. Otherwise, he leaves that with the Government. So it is an investment on the part of the Government.

Senator YOUNG. Many of these loans are repaid, though, are they not? Mr. WESTRICH. I don't know of any.

Senator ANDERSON. May I just say that I agree with a good many things that are in your statement. I think I would have to say to you that your committee better check up on what Senator Young has said, because a great many of these loans are paid.

I agree with you on modernized parity and a great many other things but on this thing I think Senator Young has a valid point. The figure is used frequently, and it is not a figure of their investments. It is a total obligation that they have assumed and I think it includes loans which normally might be repaid.

I mentioned the other day that a certain cotton man that I knew in California put his whole cotton crop under loan. It ran to some $3 million. It was a whale of a crop. The Government never paid a nickel for that. He paid every dollar back. He did not want to pay a higher rate of interest. It was convenient and easy for him to put it under the loan and it went under the loan.

Senator YOUNG. Are not most of the tobacco loans repaid?

Senator ANDERSON. Most are repaid. I only want to say to you in the interest of fairness, I think, your organization ought to check that because I am quite sure that Senator Young is right.

Senator YOUNG. The picture is bad as it is, but do not make it worse by $2 billion.

The CHAIRMAN. Proceed.

Mr. WESTRICH. Point IV: Increase public and private efforts to expand marketing of farm products at home and abroad. This should include liberalizing restrictions on sales of farm commodities to Iron Curtain countries.

It is apparent that there are no ready markets at home or in other countries for our surplus farm commodities. However, it is desirable that efforts be made to find and develop markets wherever and whenever they exist.

Everything possible should be done to insure that as much encouragement as possible be given to enlarging the amount of sales made through private channels.

While it is not desirable to dump our surpluses on the world markets, it is still highly important that strong competitive selling be continued.

Domestically, care should be taken not to disturb private sales by unusually high marketings of Government-held surplus commodities during harvest periods.

Trade with Iron Curtain countries should be encouraged so long as it is advantageous to the United States. Exchange of agricultural surpluses for strategic war materials should be encouraged. This is a very needy market and might eventually consume fairly large amounts of our surplus commodities.

Point V: Repeal the agricultural products provisions of the Cargo Preference Act and ease any other restrictions which may retard the movement of surplus farm commodities into foreign trade channels.

The Cargo Preference Act requires that 50 percent of all surplus commodities financed by Government loan, sold for foreign currency. or given away under foreign-aid programs, be shipped in United States flag vessels.

Since some of our best foreign customers for agricultural products are also maritime nations, this is a real impediment to the rapid disposal of surplus farm commodities.