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This plan is based on the assumption that price support at 90 percent of parity would be available to producers, but that it would be limited to that portion of the crop distributed in the primary or domestic market. The primary market in this sense should include the continental United States, the Territories, and exports to Cuba. The secondary market would be exports to all countries except Cuba. Market prices in the secondary market would be allowed to seek their own level in competition with rice produced in other parts of the world.

The certificates should be given to producers to cover that portion of their allotment of the domestic or primary market and should be issued to each producer in his name. Although issued to the producer, the certificate should be negotiable upon his endorsement.

The certificate would be acquired by processors from producers as a prerequisite to shipments in the primary market, which shipments must be in the same amount as the quantity covered by the certificates. Outside of the certifi cated quantities, the processor would be free to sell as much as he could in export markets.

There may be objections that the plan requiring marketing certificates would permit the trading in certificates with consequent detriment to a processor who distributes primarily in the domestic market. Processors, cooperative or commercial, who had historically a substantial percentage of the export market would be in a position to demand exorbitant prices for surplus certificates over and above those necessary to cover their domestic distribution. However, we believe that this objection can be obviated by a stabilization plan in the Commodity Credit Corporation which would have the effect of keeping the value of the certificate at all times at substantially the difference between the support price and the market price.

Any two-price plan must have effective sanction to prevent rice purchased for the secondary market from finding its way into the primary market. Distribution in domestic markets would have to be on the basis of certificates. The requirement of certification would be dispensed with on proof of export filed with the Department of Agriculture. By this means, any attempt to sell secondary market rice in the primary market would involve a false representation to the Government in connection with the proof of export and the existing statutes relating to punishment, civil as well as criminal, for false representations to the Government would be applicable.

It is the belief of the Rice Growers Association that the plan which calls for the utilization of market value certificates is the most practical and workable that can be devised. We therefore urge its adoption to the end that the producer shall be supported on that portion of his crop needed for domestic requirements and shall be free to produce for export in accordance with such expanded markets as may be developed in competition with world rices.

As a separate and distinct suggestion, it is the opinion of the Rice Growers Association of California that it is unfair and uneconomic to restrict production of California rice at all. Californians have had no difficulty in distributing their rice in the years since 1949. They have not found it necessary to come to the Government to place their rice under support in substantial quantities as was the case with southern rice. This results from the fact that in certain markets, such as Puerto Rico and Japan, there is a preference for California rice for which a premium price is paid. There are good economic and agricultural reasons for segregating California rice from southern rice in connection with restrictive legislation. We urge that this committee carefully consider this whole question.

The CHAIRMAN. Our next witness is Mr. Sebbas.

But before that, Congressman Hagen desires to place a statement in the record at this point.

(The prepared statement of Hon. Harlan Hagen, Representative in Congress from the 14th Congressional District of the State of California is as follows:)

We welcome Members of the Senate from other States to our progressive farms because we know that only by personal inspection can you truly appreciate the achievements and problems of our farmers.

We are hopeful that, with such understanding, you will devise agricultural programs which will preferably serve our needs but which, at a minimum, will 64440-56-pt. 4- -4

do us no damage or inequity either in their basic concept or by a statutory trick or device. We want the more basic agricultural programs tailored to California's needs-needs which we feel are representative of the most deserving farmers throughout the United States. At the same time we are aware of the problems of subsistence farmers in other areas and we will support special programs for them.

One of the principal facets of California agriculture we wish to impress upon you is the fact that it is basically a small-farm economy. For example studies reveal that our most typical cotton farm is one of 40 acres. It is a kind of farm which will produce generations of farmers, enjoying an American standard of living, if the conditions which permitted its growth are either stabilized or improved. We want relief for small farmers in basic commodity programs geared to a definition which includes our small farms and medium-sized farms.

We solicit your cooperation in reclamation programs so necessary to a proper solution of our irrigation and other water-use problems. Without adequate water California agriculture cannot exist and it must be produced artificially. We are grateful for help on these programs in the past.

Another program in which we have a major interest is the elimination of Federal taxes on farm product transportation and the general reduction of discriminatory freight rates. Our farmers are too greatly penalized by discriminatory taxes and rates by reason of our distance from the great eastern markets. Finally we might hope that future expanded programs of payments for soilconserving practices might include payments for calculated nonuse of ground waters to the end that our ground water tables might be conserved and most economically used.

The CHAIRMAN. You may proceed, Mr. Sebbas.

STATEMENT OF A. C. SEBBAS, LOVELOCK, NEV.

Mr. SEBBAS. Mr. Chairman and gentlemen, my name is A. C. Sebbas, and I am in farming.

The rigid high farm supports of 90 percent of parity is not the answer in controlling the basic commodities-wheat, corn, rice, cotton, tobacco, and peanuts.

The parity-price policy aimed at restoring to farm prices the same relations to prices of goods farmers buy, as that which existed during some historical base period, was first used under the Agricultural Adjustment Act of 1933. The Agricultural Adjustment Act of 1938 authorized price supports at 52 percent to 75 percent of parity, war emergency measures boosted supports to 85 percent in 1941, and to 90 percent in 1942.

The support of 90 percent parity was supposed to increase production to meet the demand at home and abroad during the war years and postwar emergency. And at that time demand boosted farm prices above support levels. Today high supports have still encouraged farmers to produce more commodities than people will buy in the market, also puts a price on American commodities above the world market prices.

Rigid supports creates artificially high prices that encourage farmers to produce more of a given crop, whether needed in such quantities or not. A farmer is guided by prices; also encourages others to speculate in farming. But these are not prices that reflect the community's demand for a commodity.

Rigid supports of 90 percent cost large sums in money to administer, and to enforce these crops to their historical locations. It also limits the farmers managerial freedom, and transfers the responsibility from the individual to the Government.

One of the basic grain crops grown in Nevada is wheat. This crop is grown mostly in the irrigated areas of the State. In these areas the

Agricultural Adjustment Act of 1933 was put into effect up to 1955. The shift of crop acreage in this commodity had approximately doubled in acreage and production. Since 1950 to 1955 a large share of the wheat produced has gone into storage as surplus wheat.

Under the provisions of the Agricultural Act of 1955 passed by Congress 12 States were designated as being outside the "commercial wheat-producing area." Nevada was included as one of these States, in which there is no restriction on the acreage of wheat you might plant for harvest in 1955.

However, since no wheat allotments or no reductions of wheat acreage is required of producers in noncommercial areas, the 1955 wheatprice-support rate for noncommercial areas has been set at 75 percent of the support rate in commercial areas. Commercial areas supports were set at 82.5 percent of parity, or $2.06 per bushel. For noncommercial areas, the basic support of-75 percent times 2.06-$1.54 per bushel or approximately $50 per ton.

It is interesting to note that the price farmers received for wheat in 1954 on the open market was around $65 a ton. The 1954 price support for wheat was around $70 a ton-a difference of approximately $5 a ton in favor of price supports, of which a large portion of the wheat went into storage.

In 1955 the price farmers received for wheat on the open market is around $55 a ton. The 1955 price support for wheat is around $50 a ton-a difference of approximately $5 a ton in favor of the open market, of which a large portion of the wheat has gone into regular trade channels. The acreage in 1955 was greatly reduced by a drought in parts of the State; and the other areas, the acreage planted was slightly down.

By reducing the support price the Government has made wheat fall in line with the other crops produced in these communities-or perhaps it has helped the farmer regain some way of telling whether it is better to raise other crops, or perhaps how a particular piece of land can be put to its most economical use.

Price-support and production-adjustment programs have a place in the overall agriculture program. A program should be designed to place a floor under commodities to protect a farmer in his costs, and to encourage efficiency, freedom of enterprise, and self-adjustment; not a ceiling on commodities to encourage a farmer to produce to artificial prices and unmanageable surpluses.

The CHAIRMAN. How would you do that-you are contending now that we ought to have a law to protect the farmer in his production; is that your statement?

Mr. SEBBAS. I think through a floor similar to our parity, which would be similar to our flexible farm-support program, which would be the Government.

The CHAIRMAN. How could that be established; in other words, if we were dealing with Nevada only, it might be possible to find a happy medium, whereby we could say that the cost of production in Nevada is X number of dollars per bushel. Navada grows irirgated wheat. How would you do that in North Dakota or Kansas or maybe here in California, where you grow dry land wheat-I presume they do hereI do not know-but I imagine it is not all under irrigation-how would you set a price that would be applicable to all of the States that produce the commodity, let us say, wheat?

Mr. SEBBAS. That could be adjusted by your parity prices based on the past years, or your historical base in certain areas. It would vary throughout the Nation in certain areas.

The CHAIRMAN. Do you not think it would cause a lot of confusion to have the Kansas growers get X dollars, and North Dakota just a little less, and Nevada just a little more can you not see the difficulties that may arise in the administration of such a law whereby you would return the cost of production?

Mr. SEBBAS. I do not quite get you on that. There would be a difference between your States. Your whole setup is based on your rules and regulations set up under the program. Well, then, your parity is based on your historical fact that comes out of certain areas.

I think, going back to the start of the agricultural act, where you have your difference, well, 52 to 70 percent of parity, whereas your production comes in higher, well then your parity rate should be down lower. In other words, when you have an overproduction, your support price would be lower, which would discourage a high support price; whereas if your production is down, the incentive would be to raise.

The CHAIRMAN. You would not need them, if you could produce what you could sell.

Mr. SEBBAS. That is right.

The CHAIRMAN. That is what the Secretary meant when he said. to make production and consumption equal.

Could the farmers do that themselves, or would they need some kind of a law as a guidance?

Mr. SEBBAS. Well, I think they would need some kind of a law or guidance, maybe, to protect them from ruinous prices. They should be let down gradually, and not to have them pulled out from underneath them.

The CHAIRMAN. Thank you, sir.

Mr. SEBBAS. Thank you.

The CHAIRMAN. We will next hear from Mr. McKeehan.

Will you state your name for the record in full?

STATEMENT OF S. ATWOOD MCKEEHAN, MERIDIAN, CALIF.

Mr. McKEEHAN. Mr. Chairman and gentlemen, my name is S. Atwood McKeehan and my residence is Meridian, Sutter County, Calif. I am a farmer; my father and grandfather were farmers before me. I have never followed any other occupation. I own 800 acres of land and rent 800 acres more, making a total farm operation of 1,600 acres. I produce wheat, rice, dry edible beans, barley, alfalfa, and have had some beef cattle. At present I have no cattle.

I became actively engaged in farming in 1909. What wordly goods I may have, have been accumulated by farming. First as a tenant farmer and later by becoming a landowner. I continue to rent what land I can.

I came here today to discuss the subject of wheat. Wheat is an important crop for California farmers. California does not raise or produce enough wheat to meet our consumptive needs and yet, through the operations of the wheat-allotment program, our wheat acreage has steadily declined.

Farmers are rugged individualists. They do not like restrictive laws and regulations. Their one idea is produce-to produce to full capacity and then produce more. That is what farmers did until we ran headlong into the depression of the 1930's. Government regulation and assistance during the 1930's, after 1932, did help the farm economic position.

It is my personal belief that the wheat farmer has been under regulation and support for such a long period that the sudden removal of such support would be complete disaster. Conversely, I do not believe that high supports with rigid allotments that reduce the acreage year after year is the answer, either.

When a support price is much higher than the price of competing commodities the tendency is to price the supported commodity out of the market. That has happened to our wheat market and has built up the large surpluses on hand.

It is my belief that wheat farmers must become realistic and produce wheat for the market at a price that the market is willing to pay and not produce for Commodity Credit Corporation stockpile.

It is my belief that support prices should be at figures that would be a floor under the market at which efficient farmers-includes land, the farmers' ability to manage, and equipment-would be able to keep in operation; not necessarily profitable for all farmers.

There are some changes in the law I would suggest for better administration to meet California conditions.

The period of crop history in order to determine a grower's allotment should be 5 years instead of 3 years. At least 4 years' history should be the minimum. A 3-year history period does not give the diversified farmer of California's Central Valley a true picture of operations. The operations of California farmers are so diverse and crop-rotation periods are longer than 3 years. In many cases a 3-year history completely eliminates the farmer who has a longer croprotation period. The 3-year period has completely eliminated many long-established wheat farmers.

I believe that the release and reapportionment provisions of the 1955 farm-wheat-acreage release and reapportionments should be reenacted as a part of any crop-acreage-allotment program.

I refer specifically to section 334 of the Agricultural Adjustment Act of 1938, as amended, and which was further amended by Public Law 690, 83d Congress, approved August 28, 1954, which added a new subsection (f) to the original act. Subsection (f) should be established as a permanent part of the wheat acreage allotment law. The opinions expressed in this letter are strictly my own and I submit them in hope that more workable farm legislation may be enacted.

Thanks to the committee.

The CHAIRMAN. How would you accomplish that? I would like to see it done.

Mr. MCKEEHAN. I would like to see it done, too.

The CHAIRMAN. Will you write us a prescription?

Mr. MCKEEHAN. I do not think that I can write a complete one, but I do believe that the use of the flexible-price support, as it has been called, during the period of years was heading us in that direction. I think it did have some merits. I still think it has some merits.

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