Secretary BENSON. Of course, we have, as you know, eight guides which the Congress has given us for arriving at these support levels. They are all mentioned here in my statement.

One of them is the supply and demand situation, and the price level of other commodities is another. One of the very important ones is the importance of the commodity to agriculture and the national

economy.

Of course, wheat is one of our most important commodities. We can adjust these levels up after we set them. We cannot go back down, as you know.

The CHAIRMAN. I realize you can do that, but couldn't you by the same theory, instead of placing the level at 82.5 or 86, make it 90 percent? Couldn't you support that authority if you desired to exercise it?

Secertary BENSON. Yes, we have the authority to set the minimum below 90 percent. To go above, we would have to have appropriate hearings to develop information.

The CHAIRMAN. Under your theory and the theory of those who advocate flexible price supports, the idea is, as your supplies increase, to lower price supports so as to discourage production.

How do you reconcile that theory with your idea of now announcing administratively the price support of wheat at 83.7 percent of parity?

Secretary BENSON. Of course, you must keep in mind, Mr. Chairman, that this is actually a reduction in the dollar support level. If you take into consideration your transitional parity, the dollars and cents actualy is slightly below a year ago. So it is not actually an increase in dollar support.

The CHAIRMAN. How does that fit in with your view that flexible price supports should be based on the theory that as the supply increases, the price should be kept low in order that we do not have more production? I understood that it was partly on this theory that the President vetoed the farm bill. He took the position-and I am sure that is your position also-from what I have heard you say beforethat by fixing a rigid price support of 90 percent, it would encourage production.

That is correct, isn't it? That is your view, isn't it?

Secretary BENSON. Generally speaking, Mr. Chairman, that is correct and the flexible principle is intended to work in that direction, but we realized early last summer, with the prospect of an unusually heavy crop of wheat, that we would need some program to supplement the agricultural program of 1954.

The CHAIRMAN. Was that announced any time before the veto message was submitted to Congress?

Secretary BENSON. Yes, I think we indicated we would need something in the form of a soil bank

The CHAIRMAN. I am talking about price supports now. The increasing of price supports from the level you fixed last June.

Secretary BENSON. We never made any firm statement that we would increase them.

The CHAIRMAN. But you determined they would be fixed at 76 percent because of the supply then on hand at that period.

Secretary BENSON. That was our very early estimate, Mr. Chairman, and we frequently change that as the season advances.

The CHAIRMAN. I understand that, but how has the supply changed to give you the opportunity to raise the level of support from the 76 you fixed to 83.7 percent of parity?

Secretary BENSON. There has been an overall strengtehning of prices, for one thing. That is important. Then we think the prospect for moving the wheat out of the country has also given some encouragement.

The CHAIRMAN. Through what method?

Secretary BENSON. Our P. C. 480 program.

The CHAIRMAN. You mean what is frequently referred to as the giveaway program?

Secretary BENSON. No, some of it is barter, some giveaway. There has been some improvement in the outlook for supports. Of course, when we made that estimate, our first estimate, we didn't have a very good indication as to what the harvest would be. It was a very rough estimate and so it was our very best estimate at the time. There have been some changes since that time.

The CHAIRMAN. Well, now, according to the figures that you sent the committee at my request, the supply percentage for wheat, as of April 17, 1956, was 107.5 percent. As I understand the law, that would mean that if it was followed strictly as intended by the Congress, it would mean that your support level couldn't be in excess of 75 percent.

Am I correct in that?

Secretary BENSON. I wonder if I could read my statement? It will cover several of these points.

The CHAIRMAN. I would rather ask a few questions now.

That

is why the committee called you here, to get answers to a few questions. You will be given ample opportunity to say what you want and defend any of the statements made by the President but we brought you here so that you might be asked a few questions. Senator AIKEN. May we all ask a couple of questions?

The CHAIRMAN. Surely.

Secretary BENSON. I think a number of these questions can be answered if I can present the statement, first, Mr. Chairman, to cover the whole field.

Senator AIKEN. Do I understand that the importance of the wheat industry to the national economy is possibly the primary factor for determining the support price of wheat?

Secretary BENSON. Yes.

Senator AIKEN. I understand you to say that when it became apparent the Congress was not going to approve a soil bank, except in connection with other provisions which the President could not approve, you then realized that it was necessary to take some other means of increasing the income of wheat farmers, in their interest and in the interest of the national economy?

Secretary BENSON. Yes, when we set it at 76 percent, of course, earlier we already knew that we would probably get the soil bank; at least, we hoped we would. We were working on it and when we found we were not going to get it, we didn't get it in the legislation, we wanted to do what we could to hold up the wheat prices for the farmer. At the same time, we didn't go above last year. We actually went a little below.

Senator AIKEN. Do I also understand that when the economy of the producers of basic commodities-any one of them-is threatened by crop failure or the crop is cut very short, for one reason or another, you would still have authority to increase the support level above 82.5 percent at any time after the beginning of the new crop year; is that so?

Secretary BENSON. That is correct. It is entirely possible we may do that.

Senator AIKEN. Your principal reason for raising the support level of wheat was to enhance the income of the wheat producer which had been cut seriously by the reduction in acreage allotments, and which it appeared could not be made up through a soil bank in time to do them any good this year.

Secretary BENSON. Yes. As a matter of fact, the cutback has been very substantial. From 79,000,000 down to 58,000,000 acres. That does affect the economy in the wheat-growing areas. Inasmuch as we didn't get the soil bank, we thought we were justified in giving some aid through this approach, assuming and hoping we might get the soil bank in time for the fall crops this year.

The CHAIRMAN. The President stated unequivocally-and I quote from his statement:

To return now to wartime 90-percent supports would be wrong. Production would be stimulated. Markets would be further destroyed, instead of expanded as must be done. More surplus would accumulate, and surpluses are price depressing. Regimentation by ever stricter production controls would be the end result.

Now, I hope that you will concede to the committee that in placing 90 percent of parity price supports in the bill, we hoped to do what you now say you are planning to do, and that is increase the prices of these commodities so the farmer could fare a little better.

The question I would like to ask you now is how do you expect to decrease production by the use of 83.7 percent of parity price supports for wheat this year?

Secretary BENSON. Again, I point out that that is a lower dollar and cents figure than we had last year.

I would like to say overall there is a principle involved here. The flexible principle is just as the President indicated. It is desirable. 90 percent rigid supports have resulted in the loss of markets. We have priced ourselves out of the markets in some cases. Cotton is one of the best examples. Our surpluses have been built up under this system. We don't intend to go back to it. Neither do we intend 82.5 as a rigid level.

The CHAIRMAN. Mr. Benson, the committee at first had provided a 2-year reinstatement of 90 percent supports. In conference it was reduced to 1 year. The purpose of including the provision was to do the very thing you now want to do, and that is to increase the income of the farmer. That is all we had in mind. I know that is all I had in mind when I supported it.

Now, the thing that I find strange is that the President saw fitI suppose through your advice to veto this bill, primarily, I believe, because of the 90 percent level of price support.

Now, I want to ask again in all earnestness, will not production of the basics be stimulated as much by what you do administratively as

what the bill provided, support prices of 90 percent? That is what I would like for you to give us a frank answer on now.

Secretary BENSON. No; I do not think so, Mr. Chairman.

The CHAIRMAN. Why not?

Secretary BENSON. What is more, I think there are several other very objectionable features of the bill.

The CHAIRMAN. Let's take one at a time. I am talking about supports at 90 percent of parity because I think that was the main reason the bill was vetoed.

Secretary BENSON. No; it is not the main reason. There are also the dual parity, the multiple price plan, and mandatory price supports under this feed grain. They are all very objectionable.

The CHAIRMAN. Now, I go back to this proposition and ask for a frank answer. How could you explain that production of wheatand other basic commodities would be reduced under your plan of doing administratively what we sought to do legislatively when the acreage upon which wheat is planted and cotton is planted, are already allotted. Our bill didn't increase the acreage 1 square inch, and under the plan that you are now proposing, and which the President has advocated to the American people, the acreage will remain the same with supports at 83.7 percent for wheat, and 82.5 percent for cotton, as it would have remained, had 90 percent been the price support level in accordance with the bill.

Secretary BENSON. I am surprised again, Mr. Chairman, we have not raised the dollar and cents level above last year. They have actually been reduced some.

The CHAIRMAN. We are talking about production, Mr. Secretary. That is what we are talking about now. The statement made by the President and I am sure abided in by you-that production would be stimulated by making 90 percent of parity price supports effective

1956.

Secretary BENSON. I am sure, Mr. Chairman, you recognize that the higher the supports, the higher the price, the greater stimulus to production, and the greater stimulus to acreage we now use. The Congress recognized that when they paid greater supports to get maximum production during the war.

The CHAIRMAN. Now, Mr. Secretary, most of your wheat has already been planted. How can you stimulate production on that particular wheat now?

Secretary BENSON. I am talking about the general principle of higher supports tending to encourage greater intensification

The CHAIRMAN. I would be inclined to agree with you if they were the facts, but they are not the facts.

Secretary BENSON. I think that is exactly what happened; otherwise, the Congress made a serious mistake in setting high rigid supports during the war to get higher production.

As a

The CHAIRMAN. Now, Mr. Secretary, I am not going to sit here and argue with you about what Congress did during the war. matter of fact, 90 percent of parity price supports did not come into being through the Agriculture Committee. It was through the Stabilization Act that supports became effective at 90 percent of parity. Thus, under the Stabilization Act a floor was placed under farm prices by which the farmers would be protected. We applied the

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 HOLLAND. How are we going down the line here?

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.

Now, to go on with my 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.

4. The perishability of the commodity.

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 822 percent of parity, without regard to supply.

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