REPORT TO THE PRESIDENT To the PRESIDENT: UNITED STATES TARIFF COMMISSION, The United States Tariff Commission, in response to your requests dated December 13, 1939, and January 25, 1940, has made an investigation and held hearings with respect to wheat and wheat products under the provisions of Section 22 of the Agricultural Adjustment Act of 1933, as amended,' and Executive Order No. 7233, and herein reports its findings and its recommendations. On the basis of the information obtained, it appears that wheat and wheat flour are practically certain to be imported under such conditions and in sufficient quantities as to render or tend to render ineffective and to interfere materially with the program undertaken under the Soil Conservation and Domestic Allotment Act with reference to wheat, and to reduce substantially the amount of flour processed in the United States from wheat produced in the United States. The Commission therefore recommends that imports of wheat and wheat flour be limited by quotas, as hereinafter set forth. The evidence now before the Commission does not warrant findings with respect to feed wheat or feed flour (i. e., wheat and flour unfit for human consumption), or with respect to wheat products other than flour. As used in the findings and recommendations, the words "wheat flour" include semolina, crushed or cracked wheat, and similar wheat products, but the words "wheat" and "wheat flour" do not include wheat or flour which is unfit for human consumption. The Commission will continue its investigation with respect to the products on which findings are not made at this time and will report on them when evidence sufficient to warrant findings is available. FINDINGS AND RECOMMENDATIONS 1. The Commission instituted this investigation under Section 22 of the Agricultural Adjustment Act of 1933, as amended, on the 14th day of December 1939, pursuant to a request of the President. On December 19, 1939, the Commission gave notice that a public hearing would be held on January 4, 1940. The notice was posted at the office of the Commission in Washington, D. C., and at its office in New York City. It was published in the Federal Register for December 21, 1939, and in Treasury Decisions and Commerce Reports for December 28 and 30, respectively. The notice was also sent to press associations, farm organizations, millers, importers, and other organizations, firms, and individuals known to the Commission to have an interest in the matter. 1 Section 22, as amended, is given in appendix A, p. 35. On January 26, 1940, pursuant to a further request of the President in accordance with the act of January 25, 1940 (54 Stat. 17) which expanded the scope of section 22, the investigation was extended, and the Commission gave public notice that the hearing was reconvened for February 12, 1940. This notice was made public and was called to the attention of interested organizations and persons in the same manner as was the notice of December 19, 1939. It was published in the Federal Register for January 27, 1940, and in Treasury Decisions and Commerce Reports for February 1 and 3, respectively. As extended, the purpose of the investigation is to determine whether wheat or wheat products are being or are practically certain to be imported into the United States under such conditions and in sufficient quantities as to render or tend to render ineffective or interfere materially with the program undertaken with respect to wheat under the Soil Conservation and Domestic Allotment Act, as amended, or to reduce substantially the amount of any product processed in the United States from domestic wheat. At the hearings held in Washington, D. C., on January 4 and February 12, 1940, parties interested were given opportunity to be present, to produce evidence, and to be heard. The record of the hearings is attached hereto and made a part of this report.2 The Commission also assembled the information available in its files with respect to wheat and wheat flour and obtained additional data from representatives of the Department of Agriculture. Representatives of the Commission also conducted a field investigation and obtained data from commission merchants, traders, importers, and exporters, supplementing the information previously obtained. After all the information obtained, as stated above, had been assembled and analyzed, the Commission kept in close touch with the wheat situation, watching developments affecting the wheat market and keeping current all pertinent statistical data. 2. The principal purpose of the wheat program under the Soil Conservation and Domestic Allotment Act, under which land has been diverted from wheat to soil-conserving crops, is to adjust wheat production to effective demand, and thus to aid in achieving the objective of bringing wheat prices and the incomes of wheat farmers to higher levels. Because of decreased export demand unaccompanied by an adequate decrease in domestic production, large stocks of wheat have accumulated in the United States, with attendant depressing effect on prices. The huge stocks of wheat in foreign countries, notably in Canada, have kept "world" prices low notwithstanding the pegging of prices by government action. In an effort to ameliorate this condition, the Federal Government has made loans available to farmers, based on varying percentages of the "parity price" of wheat, and have thus enabled them to withhold their wheat from market pending more favorable price conditions. As a result, of the assistance rendered by the government to wheat farmers, the spread between the domestic price of wheat and prices prevailing in "world" markets has been raised considerably, but since the domestic price until recently remained much less than foreign prices plus United States duty, no consequential quantity of foreign wheat has been entered for consumption in this country for several years past. 2 Not published. 3. Anticipation of the passage of legislative measures in the United States Congress looking toward increasing the amount of loans to be made available to wheat farmers has in the last few weeks caused the domestic price of wheat to rise markedly.3 During the period April 23 to May 16, the cash price of No. 1 Dark Northern at Minneapolis rose from 90% to 994 cents per bushel, whereas the price for the most nearly comparable grade at Winnipeg remained practically constant in terms of Canadian currency, at about 73%1⁄2 cents per bushel, equal to 66% cents in American currency. The difference between the two prices just quoted does not represent the exact spread between domestic and Canadian wheat in the competitive United States markets because of differences in transportation and marketing costs. Including costs of delivery to Buffalo, the principal competitive United States market, the May 16 closing price of No. 2 Northern Manitoba, in United States currency, plus the duty of 42 cents per bushel, was only 7% cents above the price of No. 1 Dark Northern. The spread between domestic and foreign prices has thus already closely approached the point at which it is profitable for importers to enter duty-paid foreign wheat for consumption in the United States, and is practically certain to reach that point. 4. The extent of acreage allotted to domestic wheat farmers under the Soil Conservation and Domestic Allotment Act is increased or decreased as the carry-over of wheat diminishes or increases. In other words, if the carry-over is large, the acreage that may be planted by farmers in the United States with the benefits of the program is less than if the carry-over is small. Thus, if the carry-over, already very large, should be substantially increased as a result of large imports, the tendency would be for these imports to render ineffective and to interfere materially with the wheat program under the Soil Conservation and Domestic Allotment Act. 5. On May 10, 1941, there were approximately 32 million bushels of Canadian wheat in storage or afloat at points in the United States. Practically all of this wheat at the time of its arrival was destined for export to countries other than the United States, either as wheat or as flour milled in bond in the United States. The quantity is not abnormal for the transit trade and as a part of that trade it does not interfere with the domestic wheat program. However, much of this wheat is available for immediate entry for consumption if the excess of domestic over foreign prices should increase sufficiently to make such entries profitable. Furthermore, there were, on the above date, over 100 million bushels of Canadian wheat stored at Canadian points from which it could be moved to the United States in a short time. 6. In view of the widening spread between domestic and foreign prices of wheat and the availability of large stocks of foreign wheat which may be entered for consumption in the United States, the Commission finds that wheat is practically certain to be imported into the United States under such conditions and in sufficient quantities as to tend to render ineffective and materially interfere with the program undertaken with respect to wheat under the Soil Conservation and Domestic Allotment Act, as amended, and to reduce sub See Public Law No. 74, 77th Cong., approved May 26, 1941. stantially the amount of flour processed in the United States from wheat produced in the United States. The Commission accordingly finds it necessary that quotas be imposed on wheat entered, or withdrawn from warehouse, for consumption in the United States. 7. The same conditions which would cause imports of wheat to be entered for consumption in the United States would, if imports of wheat were restricted by quotas, cause alternate imports of flour for consumption, and this would have substantially the same effect on the wheat program as imports of wheat. The Commission accordingly finds that wheat flour is practically certain to be imported into the United States under such conditions and in sufficient quantities as to reduce substantially the amount of flour processed in the United States from wheat produced in the United States and thus tend to render ineffective and to interfere materially with the domestic wheat program. 8. The Commission has determined that entry for consumption of relatively small quantities of wheat and flour will not tend to render ineffective or materially interfere with the wheat program or substantially decrease the amount of flour processed in the United States from domestic wheat. The quantity so ascertained for wheat is 800,000 bushels annually, and for flour, 4 million pounds (equivalent to about 94,000 bushels of wheat). In order to provide an equitable distribution of these quantities among supplying areas and to assure compliance with the proviso to section 22 (b), quotas must be allotted to the various countries. In general, the quotas are allocated in proportion to the imports from the several countries in the 12-year period 1929-40, but no country entitled to a quota of wheat has been allocated less than 100 bushels and no country entitled to a quota of flour has been allocated less than 1,000 pounds. For administrative convenience the quotas are all expressed in round figures. None of the quotas is less than the minimum set in the proviso referred to above, namely that limitations under section 22 may not reduce the quantity permitted entry from any country below 50 percent of the average annual imports from such country during the years 1929 to 1933, inclusive. 9. In order to prevent entries of wheat and wheat flour from rendering or tending to render ineffective or materially interfering with the program undertaken with respect to wheat, or from reducing substantially the amount of any product processed in the United States from wheat produced in the United States, it is necessary to prescribe the limitations on entries, or withdrawals from warehouse, for consumption indicated in the following table. These limitations relate to the total quantities of wheat and wheat flour which may be entered, or withdrawn from warehouse, for consumption and to the quantities of such wheat and wheat flour originating in the various countries which may be so entered or withdrawn during the period of 12 months beginning with the day the proclamation of the President regarding quotas becomes effective and during each corresponding 12-month period thereafter. |