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floor and the President applied a ceiling of 100 percent. That is how the 90 percent supports came into being.
I don't want to argue that with you. The question I want answered, if you can and if you will, is how do you expect not to have more production-how can you expect to have less production, under these recently announced price supports, percentagewise than you would expect to get under what the Congress proposed to do legislatively?
Secertary Benson. Mr. Chairman, you have pretty well answered that question yourself when you said the fact that the crop is already planted now, and you wouldn't influence the acreage this year. That principle is correct in influencing production generally speaking. This year the spring wheat is already planted and, of course, the fall wheat is planted so it won't influence the acreage.
The CHAIRMAN. Now, what about the production?
Senator Williams. I would like to suggest, Mr. Chairman, that the Secertary be extended the courtesy of making his statement first. It is a short statement, and I think we can ask the questions more intelligently after the statement than before. I think we should let the Secretary proceed without interruptions.
The CHAIRMAN. If that is the will of the committee, we shall so proceed.
Secretary Benson. I'll not take time to explain the table on the first page. It think it is self-explanatory. It shows the 1955 supports and then the 1956 supports, both the previously announced supports and those announced in the President's message. to
statement. The law provides that the basic commodities may be supported above the minimum levels specified in the flexible scale. Eight factors are named as guides. These are:
1. The supply of the commodity in relation to the demand therefor.
2. The price levels at which other commodities are being supported and, in the case of feed grains, the feed values of such grains in relation to corn.
3. The availability of funds.
5. The importance of the commodity to agriculture and the national economy.
6. The ability to dispose of stocks acquired through a price-support operation.
7. The need for offsetting temporary losses of export markets.
8. The ability and willingness of producers to keep supplies in line with demand.
We do not have the weapons we had counted on to pull down the surplus and strengthen farm prices. Price protection is needful, to bridge the gap until a sound soil bank can become operative.
During this interim period, we feel that discretion clearly provided in the law should be used to give needed strength to farm prices.
I hasten to add that support at these levels is based on the prospect of sound soil-bank legislation that will attack the surplus problem head on. I do not approve of a permanent floor for the basic commodities at 821/2 percent of parity, without regard to supply.
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We have not, to my knowledge, hitherto drawn upon our authority to support prices above the minimum levels indicated by formulas in the law. The reason is that, in our judgment, circumstances did not warrant. Now, the situation is different. Had a soil bank been put into operation on 1956 crops, supplies of these crops would have been reduced. The law requires recalculation of the support price prior to the beginning of the marketing year, based on changes in the current parity index and changes in supply. If supplies had been reduced by the operation of the soil bank for 1956 crops, the recalculation of the support price would have put these supports in the vicinity of the figures named by the President. A reason for setting the supports as
we have is our feeling that farmers should not be penalized by the failure to get soil-bank legislation for this year's crops.
Once support prices have been announced, the law provides that they cannot be lowered. They can be raised, however. For this reason, it is a matter of prudence to announce support at a conservative level, and raise that level if conditions warrant. Our original announcements reflected this prudence; our recent action takes into account changes in the legislative situation and in prospective supplies. Naturally, it also takes into account the pertinent ones of the eight factors indicated above, primarily the importance of the commodity to agriculture and the national economy.
There was another provision in the President's statement, the full meaning of which has not yet been grasped by many people. That is the announcement that price supports would be made available for noncompliance corn in the commercial area.
In the past, price supports have been available to corn growers who kept within their acreage allotments. Outside the commercial corn areas, farmers can grow corn without limitation and get price supports at a lower level. Farmers in the commercial corn counties who exceed their acreage allotments, and this is about half of them, have been denied price supports of any kind. As a result, corn during harvest has been marketed in such quantities as to severely depress prices, not only of corn but of all feed grains.
In the absence of the provision announced by the President, this situation could be aggravated in the fall of 1956. The law prescribes the manner of establishing allotments. The present corn allotment is only 43 million acres, a reduction of about 15 percent from last year. It is so sharp a reduction as to make compliance exceedingly difficult for many farmers. This could mean much corn out of compliance and distressed prices of corn next fall.
Making all corn eligible for supports will help stabilize markets for corn and other feed grains. It will stabilize prices and supplies of feed grains for livestock producers.
The level of support for corn not within acreage allotments will shortly be announced. It will take into account the level of support made available to cooperators, the level of support available to corn producers in the noncommercial areas, and the levels at which other feed grains are being supported.
For the present marketing year, support prices of manufacturing milk will be increased 10 cents a hundred pounds and the support price for butterfat will be raised 2.4 cents per pound.
The dairy situation has improved. The industry is doing a splendid job in promoting sales of dairy products. We shall team up with the
dairy industry in an expanded promotion and merchandising program this year. The special school milk program and the special military and veterans milk programs have stimulated consumption. Increased population and rising levels of living result in increased use of dairy products. Purchases of surplus dairy products have been down 2 years in a row. As a result of reduced purchases and as a consequence of our sales and donations, we are now virtually out of butter. Our stocks of nonfat dry milk are very low and cheese supplies, although substantial, are sharply below a year ago. There has been a decline in the number of milk cows. The intended reductions in feed grain acreage and the higher support prices of oilseeds may result in higher feed costs. It is in view of these facts that support levels for dairy products were increased in order to assure an adequate supply of these products.
The increase in dairy price supports is one of the items proposed by administration spokesmen in the House a week ago in an effort to reach agreement on a bill which the President could sign. This action and the provision for the 821/2 percent of parity floor under prices of basic commodities are for 1 year only. With the uncertainties regarding legislation and prospective supply and demand conditions, it would be hazardous now to project these levels beyond 1956.
The President indicated the intention that Department of Agriculture funds be used where assistance will be constructive, to strengthen prices of perishable agricultural commodities. We will have well over $400 million for that purpose during the 12 months beginning July 1.
We have had such purchase programs in the past-beef in 1953 and pork in more recent months. These programs helped raise prices of cattle and hogs for hard-pressed livestock men. We also have used these programs for commodities such as fruits, potatoes, and vegetables when they were in temporary distress. The committee is familiar with these programs and, I am sure, is in agreement with the President's promise to use them constructively.
The details of our cotton export program were announced early this week. As a consequence, we expect a sharp increase in cotton exports during this coming year.
Under title I of Public Law 480, which permits sales of surplus commodities for foreign currency, we have agreements signed with 25 countries. These involve United States agricultural commodities valued at $936 million, export basis, or $1,259 million, CCC cost. A 2-year agreement for $96 million of commodities was signed a few days ago with Indonesia. By the end of this fiscal year, additional agreements are expected to bring the total to the full $1.5 billion authorized. I am convinced that we have not yet exhausted all opportunities to increase, in a constructive manner, the export of surplus agricultural products. We shall strive continually to move our stocks into those foreign and domestic outlets that can make good use of them.
The foregoing actions are all administrative, and will be taken as soon as we can get the machinery in motion..
The President requested Congress to pass a soil-bank bill so it can be put into operation before fall seeding of next year's crops. It should be possible to accomplish this with a minimum of difficulty, since the main features of the soil bank have been generally agreed upon.
Soil-bank bills were offered in both Houses yesterday embracing the provisions of title II of the conference report, with a few modifications. These bills offer changes from the conference report in which this committee will be interested.
1. The requirement that payments can be made only after compliance has been checked was broadened. This will give effect to the President's recommendation that the Congress authorize the Government to begin making payments to a maximum of 50 percent after the farmer signs the contract.
2. The forestry provisions which were included as title VI of H. R. 12 have now been made subtitle D of the soil-bank bills.
3. Certain provisions which were dependent upon other titles in H. R. 12 have been modified to take account of the fact that these other titles are not now a part of the legislation. The tie-in with the corn referendum is in this category.
We have pretty well worked out the administrative procedures for the soil bank. These have now been shelved, of course. We could very easily pick up where we left off, if the sound legislation requested by the President is provided. We should start work shortly if we are to be ready properly to begin the soil bank on crops seeded this fall. As the President said:
The long delay in getting this bill makes it too late for most farmers to participate in the soil bank on this year's crops. But we can ready ourselves for crops seeded this fall. Farmers should know as promptly as possible the terms of the acreage reserve so as to plan for fall crops. Plowing for fall crops will be underway within 90 days—then comes liming, fertilizing, and seeding in rapid succession. We can move rapidly to put the conservation reserve into effect.
Fortunately, the soil-bank bills offered yesterday permit considerable administrative discretion, so that difficulties now unforeseen can in large degree be met as they arise. We are sure that the Congress expects the administration to exercise this discretion. If given the legislation, we will do so in the best interest of farmers and their families.
We all desire to increase farm incomes and cut down surplus stocks. The early enactment of a sound soil-bank bill, with the provision for advance payment made by the President, will accomplish both of these objectives. Advance payment would help pay for land preparation, limes, fertilizer, and other expenses involved in getting the soil bank started.
I wish to assure you that the President's comments regarding the delay in enacting the soil bank were not directed at this committee. The chairman of this committee has worked extremely hard. He has obviously done his best to move the legislation forward as rapidly as possible, and for that he deserves high commendation.
This brief_statement will serve to spell out in some detail those parts of the President's message as seem to me to need amplification.
Senator JOHNSTOx. Mr. Secretary, I notice here that wheat was supported in 1955 at 82.5 percent of parity-I believe that is correct—and now you are increasing it to 83.7 percent.
Secretary BENSON. Yes.
Senator JOHNSTON. Now, corn you supported last year at 87 percent. This year it is 86.2 percent, according to the way you have adjusted it by your last adjustment. Isn't that true?
Secretary BENSON. Yes, sir.
Senator Johnston. Now, then, rice, 86 percent support last year; this
year, 82.7 percent. Cotton, 90 percent in 1955; you have reduced that to 82.5 percent. Peanuts, at 90 percent in 1955, you have cut to 82.5.
Secretary BENSON. We have not announced the support level on peanuts yet, Senator Johnston.
Senator JOHNSTON. But you have here 82.5 percent.
Secretary Benson. Yes, as a rigid provision. I have no objection to imposing it if there is justification for it.
Senator JOHNSTON. Now, then, going back, you had suggested wheat at 76 percent, and now you make it 83.7 percent. What was your reason for that?
Secretary BENSON. The dollars and cents on all of these items you mentioned have been reduced-effective parity shows a decrease, because we start moving toward the modernized parity this year.
Then, as I have indicated earlier, this item of the importance of these commodities to the economy in the area, to the farmers concerned, was a factor. We are all concerned about giving the farmer as much protection as we can. If we had gotten the soil bank, we would have gotten at our surplus problem, and helped bolster farm income, too.
Senator Johnston. There is something in the President's message that it looked like politics in the bill we passed. Do you think it is politics when you treat all commodities alike and give them 90 percent?
Secretary Benson. I am not one to judge how much politics there is in 90 percent.
Senator JOHNSTON. That is treating them all alike; isn't it? You haven't treated them all alike here. Can't you see a little bit of politics mixed in here?
Secretary BENSON. We have done our best to set the minimum at the best place for the commodity and the area.
Senator JOHNSTON. The Republican policy in this next election doesn't expect any votes down where the cotton grows. So you have cut them back.
Secretary Benson. I think no one can justly indicate that the Department has not been fair with cotton. It was at 90-percent support last year. We announced only Tuesday of this week an export sales program for cotton.
As a matter of fact, this decline in price is right in line with what the industry itself has recommended. They pointed out that they have to do something on price and on research in order to do something to regain the markets they have lost. We have lost most of our export market for cotton on the 90 percent.
Senator JOHNSTON. You spoke of wheat, that they had been reduced from 78 million acres to 55 million. Did you mention the fact that cotton had been reduced from over 27 million down to 17 million?
Secretary BENSON. No, but I could have done that, and I recognize that is a very substantial reduction.