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(c) A direct subsidy payment to the farmer on all good to prime lambs up to 100 pounds in weight sold for slaughter which will insure parity for the producer.
(d) No subsidy payments shall be paid to packer-feeders.
(e) The total of all subsidy payments plus CCC grain loans shall not exceed $20,000 for any one individual, partnership, or corporation. To be eligible for subsidy payments on livestock, the farmer shall have complied with his TGCAA.
We recommend that these measures be put into use immediately to help lighten the burden of the current price-cost squeeze closing around the farmer and to help stabilize agricultural production and prices for the long-range future.
SPOKANE COUNTY POMONA GRANGE,
Fairfield, Wash., November 19, 1955. Hon. WARREN G. MAGNUSON, Senate Office Building,
Washington, D. O. DEAR SENATOR AND ALL CONGRESSMEN FROM THIS STATE: With the farm problem certain to be an important factor in the new session of Congress as well as the coming election; this letter is written in the belief that you as Congressmen will be interested in the opinion of local constituents back home.
Here in Spokane County, State of Washington, we have a diversity of production that includes grains, legumes, hay, dairy and poultry products, fruits and vegetables. With such a diversification our grange discussions cover a broad and inclusive survey of the agricultural situation, and conclusions reached therefore represent more than a mere personal attitude.
We believe the farm problem can never be solved other than by sound economic principles, void of politics, and motivated by the ethics of equality and fair play. The experiences of farm programs during the past 25 years seems to verify this and should serve as criterions for the future.
It still remains that we reap what is sown, and though we can deceive ourselves we cannot fool nature. That which is false in principle will prove itself as will the true precepts of sound logic.
So it is with the policy of flexible supports for agriculture in an economy of fixed prices for industry and guaranteed wages for labor. The results are inevitable. Likewise the theory of rigid supports reveal its faults when applied to all-out production. The natural incentive therefrom was for quantity production irrespective of use of the product or maintenance of soil fertility. The accumulative results of these two policies is a large surplus of doubtful quality, deterioration of the soil, and a declining farm income.
Our conclusion is that the farmer is entitled to full parity for that portion of his production necessary for domestic requirements, according to its use. That under such limitations surpluses would not accumulate as a burden nor be an expense to the Government. This will necessitate placing quotas in terms of units rather than acres which should create emphasis for quality rather than quantity production. Since soil fertility is important in quality production, soil building should become the incentive rather than depletion.
It is now well proven that production controls alone cannot assure success, hence the only other avenue of approach is in the marketing field. Congress has taken noteworthy stands along this line. The Agricultural Marketing Act passed in 1929 is very notable, declaring it “to be the policy of Congress to promote the effective merchandising of agricultural commodities in interstate and foreign commerce, so that the industry of agriculture will be placed on a basis of economic equality with other industries."
As a result of this act and the Capper-Volstead Act of 1922 farmers have become well organized to market cooperatively, lacking only systematic procedures, stable prices and surplus controls to really become effective. Even the perishable commodities now have cooperative market outlet in the American National Foods, Inc., which grew out of the Marketing Act of 1929. Consequently many perishable commodities are now marketed under one brand, known as the Blue Goose, and in many markets both at home and abroad.
Congress made another notable move in 1933 when under the Agricultural Adjustment Act it declared its policy "to establish and maintain such balance between the production and consumption of agricultural commodities and such marketing conditious therefor, as will reestablish prices to farmers at a level
that will give agricultural commodities a purchasing power with respect to articles that farmers buy." This latter now better known as parity.
The above two objectives have never been combined in a workable enterprise. Reducing parity to fractions instead of reducing its application to domestic requirements was a default in declared policy. Under present supports the Government has become the marketing agency which is not its natural function. Likewise the producer being divested of responsibility in surplus control and marketing efficiency has only a selfish motive to follow.
The ideal objective would seem to be one in which the Government provides cooperation in determining parity prices, marketing quotas, and financial assistance, with a maximum of farmer administration. This comes under the category of self-help such as requested by the dairy industry under the recommendation of the National Milk Producers Federation.
Encouragement of the self-help principle to induce farmers to assume more responsibility in the marketing and surplus control of their own produce might well call for a Federal Farm Board representing all the segments of agriculture as near as possible. Such details are included in the booklet enclosed which we drew up a few years ago.
This idea applied to wheat would call for a representative corporation pero forming many of the functions of the Commodity Credit Corporation with surpluses becoming the responsibility of the producer. Under such a program surpluses could be pooled for export at world prices. They could be used as a premium in kind for a national full-coverage crop-insurance program that would also serve as an ever-normal granary. Controls could be administered by the present agricultural stabilization committees with marketing through regular channels under the direction of the national corporation.
The problem of financing, especially for seasonal commodities, is always an important factor. The dairymen in their request for a self-help program ask for a Government appropriation of half a billion dollars. A more logical solution would be for Congress to give to the Banks for Cooperative the right to create the credit they use in such financing, as private banks are privileged to do. They could then finance any such project at administrative cost. The Banks for Cooperatives are well proven in their experience in financing and guiding cooperative ventures. They are limited in funds however and since their projects involve only credit the right to create it should be their privilege. Either this or Government appropriations.
As an objective such an overall program will be difficult to attain with the Government holding large quantities of surplus commodities in storage as a threat to the market, especially in the case of wheat. The transition will likely have to be gradual because of this surplus and the storage space it occupies.
A proposal in this direction is the so-called domestic parity plan. It is not an end in itself but could become the means to such an end for surplus commodities. It recommends full parity for wheat on domestic requirements for ford. the money to be raised by millers purchasing of certificates, which of course would be passed on to the consumer. Such a policy may be questioned as it is the same principle as the processing tax included in 1933 AAA which was later declared unconstitutional.
For the domestic parity plan to begin under the existence of large surpluses would necessitate both bushelage quotas on domestic food requirements and acreage allotments on feed wheat with a support price sufficient to prevent it from disrupting the price of corn. It would be better for such feeds as oats and barley to be without supports as they only create more surpluses.
With the encouragement of producer-controlled marketing under the full parity concept, the disposal of Government surpluses abroad when and where possible either at world prices or for starvation relief, and at home as relief under a food-stamp plan; a glimmer of success can be visualized for the future.
One factor long talked about but never promoted that should be applied in conjunction with the full parity concept is preservation of the family-sized farm. This could be done in the case of wheat by giving each producer a minimum of say 1,500 bushels in marketing certificates providing his farm has a produs tion record of at least 3 years. This is applying the same principle as the income tax exemption to marketing. The decrease in farm population and increase in the size of farms is a serious trend toward concentration of wealth and population. That, incidentally, is another reason why fractions of parity make no sense in the security of agriculture.
Farm programs to date have given little encouragement to the producers of perishable commodities. In this field we suggest legislation giving producers
the right to organize and bargain collectively on minimum prices, conditions of sale, grades, etc., under State or National guidance. Disagreements to be settled by arbitration. This to give producers an equal voice with processors in marketing. The Province of Ontario, Canada, instituted this system in 1938 with very satisfactory results for a number of commodities. It creates a better understanding of the common welfare.
We conclude our reminiscing with a vote for the soil-bank idea, now floating around. This is one place where subsidies seem logical in which the Government would subsidize the retirement of some surplus acres from commercial production for a number of years by requiring that production thereon be returned to the soil. Such a program would be appropriate in conjunction with better production and marketing if we are to build for the future. It must be on a voluntary basis.
We have concentrated our thoughts into one letter with many signatures to
SPOKANE COUNTY POMONA GRANGERS,
(And 22 members).
STATEMENT FILED BY DONALD M. COUNIHAN, WASHINGTON REPRESENTATIVE,
AMERICAN CORN MILLERS' FEDERATION As stated by Mr. Charles B. Shuman, president of the American Farm Bureau Federation before the Senate Agriculture Committee on January 18, 1956, the two-price system on rice will bring disaster to the American corn farmers' market for corn and will deprive him of the market for 50 million bushels of corn unless proper safeguards are included in any such program.
The 125 members of the federation, scattered throughout 26 of the States, consume an estimated 75 million bushels of corn per year. They produce food products such as table meal and grits and breakfast cereals, as well as animal feeds and corn oil. They consume approximately one-third of all the corn that leaves the farm for domestic use other than animal feed, and they consequently are an important outlet for the farmers' cash corn and their demand greatly strengthens the price the farmer receives for his corn.
Included in the membership of the federation is a group of mills whose business has grown up and is dependent upon the brewing industry. Although this group produces food products of the character above mentioned as well as a line of industrial products, a substantial portion of every bushel that they mill goes to the brewing trade and without this brewery business these mills cannot survive.
It is estimated that this group of mills consumes from 40 to 50 million bushels of corn per year during normal times. In addition to food products, they manufacture critical materials such as core binders for the foundry industry, sealers and binders for the explosives industry and adhesives for a wide range of critical industrial uses. During times of national emergency they are classified as an essential industry and corn is allocated to them on that basis.
Historically, for every pound of rice that is used in beer about 3 pounds of corn are used. Tonnagewise, the ratio has been about 300 million pounds of rice products to about 950 million pounds of corn products.
About 9 months ago this ratio started to change, and it changed solely because the price of brewers rice free on board New Orleans dropped from about $6 per hundredweight average for the year ended August 1, 1954, to as low as $2.25-$2.50 per hundredweight over the ensuing 6 months' period. This shocking drop in the price of brewers rice cannot be accounted for by any corresponding drop in the price of rough rice or by any drop in milling costs. It can only be explained as a direct result of the 1953 and 1954 rice-milling programs of the United States Department of Agriculture.
Brewers rice has historically sold above the price of rough rice, and historically it has sold at about 60 percent of the price of Zenith milled heads.
During the period under consideration brewers rice dropped substantially below the price of rough rice, and at the same time table rice increased very sharply in relation to the market value of rough rice.
In other words, during this period milled-head rice for the consumers' table increased substantially over its historic price relationship to rough rice, and
the price of brewers rice decreased to less than one-half of its historic relationship.
Due to the above, already a sizable loss of business has occurred to the corn miller and corn farmer. This should not be aggravated by any dumping of rice in any form on the United States brewery market. The two-price system for rice will not serve to reduce surpluses which is the ultimate aim in farm legislation but might even increase them. Certainly it does not aid the United States in its foreign relations to alienate allies by seeking their historic and long standing marketing outlets. If there is such a two-price program without safeguards for corn—what would be its effect on corn?
1. it will lose to the corn farmer, forever, a 50 million bushel market for corn which has historically belonged to him. This point is extremely important as this 50 million bushels is approximately one-sixth of all the corn sold in the commercial market for nonfeed use. One can readily see the terrific impact this would have on the market price-making mechanism for corn.
2. It will drive down the price of corn and all other feed grains.
All rice, except that sold for feed, sold in the United States should be required to be under the marketing certificate program so that industrial users would be required to pay for the program as well as the ordinary consumer of rice. If table users are to be taxed to support this export program, then all of the users except feed mixers should pay their fair share in fair play. Certainly there is no justice in making the poor table consumer of rice pay to support an export program and let industrial users of rice, such as starch manufacturers and brewers, be exempt.
To accomplish this, the following amendment is suggested in the Senate Agriculture Committee print of January 17, 1956. On page 32, section 380 L, after (b) add a new subsection (c) as follows: "(c) 'Domestic food consumption includes all domestic uses except usage for animal feed."
Why does the dry-corn miller need a provision in the rice two-price plan stating that all domestically consumed rice except for animal feed purposes must pay the processing tax?
i. What will happen if the two-price plan for rice becomes law?
(a) About 26 million pockets as normal domestic rice usage in the primary quota—the brewers rice from this portion is the normal historical brewers rice market. On it the tax would be automatically paid, therefore no problem.
(b) The additional secondary production of 24 to 34 million pockets—what happens to this?
(1) The Department of Agriculture estimates the market price of rice would be about $2.85 per hundredweight under the two-price plan.
(2) It is assumed that the table rice from the 24 to 34 million pockets would be sold for export. The brewers rice resulting from the above milling would be for sale in the domestic market at a ruinously low price. In order to compensate for this ruinously low price it is absolutely essential that a processing tax be added to the price of brewers rice to maintain it at its normal relationship to corn brewers grits.
(3) An additional problem in our relationship with brewers rice is the objective of the administration's farm bill to raise the price of corn; thus we would be caught in a two-way squeeze.
(4) Under the above set of circumstances with some moderate changes in rice-milling technique, it is conceivable that rice could take the entire beer-grit market from corn, a market which has historically belonged one fourth to rice and three-fourths to corn, or the equivalent of 50 million
bushels of corn. It is not the objective to put the rice miller out of business. We do, however, wish to maintain our normal and historical share of the beer-grit market.
Therefore, in order to protect the corn farmer and the corn miller, any rice goods sold domestically should carry the processing tax. Surely it is not the function or the intent of the Government agricultural program to subsidize one industry at the expense of another.
STATEMENT FILED BY HON. ARTHUR V. WATKINS, A UNITED STATES SENATOR
FROM THE STATE OF UTAH Mr. Chairman, I appreciate the opportunity of appearing before this distinguished committee which has the great responsibility of recommending farm legislation which will promote the economic prosperity of our rural population and expand our national economy.
I appear before you this morning not only as the senior Senator from Utah, representing the people of that great State, but also as a practical farmer. For many years I operated a ranch for the production of grain and alfalfa hay; and I now operate a fruit farm in Utah County. I can therefore appreciate, from firsthand experience, the hardships which extreme output fluctuations have upon farm prices and farm income.
But in light of all the current discussion about the declining parity ratio and prices received by farmers, and the fact that this is an election year, Mr. Chairman, it is very important that we see this matter in proper perspective. Commonsense and respect for the facts concerning the basic soundness of American agriculture ought to guide the Congress in enacting farm legislation.
Therefore, Mr. Chairman, I should like to point out some of the factors which clearly indicate that American agriculture is basically in a sound condition:
First, the Council of Economic Advisers in its publication, Economic Indicators, for January 1956, points out that net income per farm at the end of the third quarter of 1955 was only $8 less than at the end of the third quarter of 1954.
Second, the prices paid by farmers for family-living items increased only 1 point from 273 in January 1955 to 274 in December 1955. This indicates a relatively stable consumer price level. The prices paid by farmers for production items, on the other hand, declined 11 points from 254 in January 1955 to 243 in December 1955.
Third, the total value of all farm assets is some $163 billion, down only $3 billion from the peak. Total debt of all farmers is $18 billion, only 11 percent of total farm assets. Farmers as a whole own enough stock or other liquid assets, quickly convertible into cash, to more than pay this indebtedness.
Fourth, only 3 out of 10 farmers have mortgage debts and over 80 percent of all farms mortgaged are mortgaged for less than 50 percent of their market value over one-half are mortgaged for less than 30 percent of their market value.
Fifth, perhaps the best indicator for determining the basic soundness of any segment of the economy is the trend in the number of bankruptcy cases filed by different types of business. Cases involving farmers have constituted exactly six-tenths of 1 percent of the total number of such cases for the past 5 years1951 through 1955. In 1955, only 386 out of 59,404 bankruptcy cases involved farmers, and remember, Mr. Chairman, the 1954 agricultural census reveals that we have some 4.7 million farmers.
Now, Mr. Chairman, there is another matter that I should like to discuss for a few moments. The 1950 agricultural census provided us, for the first time, with income data by economic class of farms. Many agricultural economists who have analyzed this data have consistently pointed out (as several did to the Joint Committee on the Economic Report during the 1955 hearings on the President's Economic Report) that the income position of those owners or operators of one-third of our farms which produce 85 percent of our marketable crop value was very good in 1949, and that even in spite of the price difficulties farmers have experienced since 1950, they have maintained their position.
In 1940 over half of all farmers—more than 3 million--produced crops, the average value of which was only $700. Five years later, one-third of our farms were producing only 4 percent of the crop value; another one-third produced an additional 16 percent. Think of it, in one of the most prosperous years ever enjoyed by farmers, two-thirds of our farms produced only 20 percent of the marketable crop value. In 1948, 43 percent of our farms-over 21% millionproduced only 6 percent of the gross farm income. This was in the year, Mr. Chairman, which saw the total farm net income aggregate at the postwar peak of $17.6 billion. If adjustments are made for price level fluctuations, the contribution of these farms has not altered much for the better over the past 7 years.
What significant conclusion can be drawn from this data? What implications, Mr. Chairman, do they have for price support policy? Namely these :
1. Two-thirds of our so-called farms produce very little for sale, and in many cases cannot even produce the food required to meet the needs of their operators. and their families.