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The CHAIRMAN. Who bears those losses?

Mr. NELSON. The dairy farmers.

The CHAIRMAN. This self-help program that you are now advocating, you say is now before Congress?

Mr. NELSON. There have been bills introduced; yes, sir.

The CHAIRMAN. And are those the ones you are referring to?

Mr. NELSON. Yes, sir.

The CHAIRMAN. Do you know that that self-help program that is before Congress envisions the appointment of a committee or a board by the President, that would give it legislative powers?

Mr. NELSON. As I understand it and what I am suggesting is that the board be appointed; that is, a board of 15 members be appointed, but it might have what you would call quasi-legislative powers, but since the board derives its authority from a congressional act, by the same token if it abused its power, it is felt by us that Congress could take them away.

The CHAIRMAN. I understand that Congress could create it now and destroy you next day, but the question I am asking you is: Is it not a fact that this board would have complete control of every drop of milk produced in the country?

Mr. NELSON. Yes, sir; that is correct.

The CHAIRMAN. It would be given the power to regulate?

Mr. NELSON. Yes, sir.

The CHAIRMAN. Do you also know that this self-help program to which you refer provides for a contribution by way of an advancement from the Federal Treasury of half a billion dollars?

Mr. NELSON. Yes, sir.

You are anticipating my statement. That is in it.

The CHAIRMAN. Why do you call it self-help? How can it be selfhelp?

Mr. NELSON. The program envisages a loan from the Commodity Credit Corporation of $500 million to set up the program initially, and also it is anticipated that that $500 million would be paid back.

I do not believe there is any difference in that suggested program and in the present program provided for the Federal land banks and the electrification programs.

The CHAIRMAN. They are different.

You have security there, but you would not give any security. You would just get an advance to a board created by the Government, and if losses are sustained, why, the Government, of course, would have to bear the brunt.

Let me point this out to you: I was just figuring here; since October 17, 1933, through June 30, 1955, the entire program for the support of dairy products has been $707,487,620. That is the entire loss. That is only $200 million more than you want to start your program, which may be a loss.

Mr. NELSON. Frankly, we feel that if this program were established, this self-help program, we could more efficiently merchandise the product, under those losses, yes, sir, for these reasons

The CHAIRMAN. If you could do that, why do you not get it out of the dairy farmers?

Mr. NELSON. That is what we propose to do. The dairy farmers would pay it.

The CHAIRMAN. Why do you not stay clear of the Government then, if you think you are going to recover it all, if you think it will be such a huge success, and since the dairy program is such a huge one in contrast to the others, why can you not finance it yourself and not come to the Government?

Mr. NELSON. Because we are frank to admit that we cannot do it without the help of the Government. The evidence of what we can do with the help of the Government is evidenced by what has been done under the Federal marketing program in market order areas.

In those areas there has been a tendency in the cooperatives, I think you will agree, which have demonstrated their ability and willingness and eagerness to level off the supply of milk and to provide milk during normally deficit periods, and to level off the surplus periods.

The CHAIRMAN. You would not want to disturb that; would you? Mr. NELSON. No, sir.

The CHAIRMAN. And yet your board would have the right to do that the board could step in, in all of this whole production and do something about it; could it not?

Mr. NELSON. The board could only do it through announcing a price that it was willing to pay for the product higher than the minimum prices set by the order program.

The CHAIRMAN. That price, if it is low, would have to be accepted, or else you would violate the rule.

Mr. NELSON. You mean if the order price was lower?

The CHAIRMAN. Yes.

Mr. NELSON. Yes; that it true, but I do not think that we could contemplate that the board members, picked from groups suggested by dairymen, would do that.

The CHAIRMAN. I am just speaking of possibilities.

Mr. NELSON. Yes.

And I will say this to you in all candor: that we would be willing to accept and endorse any safeguards to avoid the sort of thing that you are suggesting under this program.

The CHAIRMAN. Yes.

Of course, I am not prepared to say what I will do on the program, but it has been before Congress for quite some time. And whenever you hear of a self-help program, I wish you would change it to something else do not make it self-help, because it is not.

Mr. NELSON. I would be glad to accept anything. The only reason I chose that name is that I knew that was the name that had been suggested to you.

The CHAIRMAN. We have heard it all over the country. It is not self-help. It is a program that is really at its inception financed by the Federal Government; is it not?

Mr. NELSON. Yes; there is no question about that. That is right. The CHAIRMAN. Suppose that the cotton people wanted to do the same thing, or the rice people or the wheat people. We have some suggestions that they would like to have a program of their own.

Suppose we gave it to you. Do you think that we would have a reason to refuse it to others?

Mr. NELSON. No, sir; I do not.

As a matter of fact, I have suggested this self-help program to farmers engaged in other types of farming. I do not pretend to know enough about their business to know whether it would work

with them, but at first blush, just talking off the top of my head, it would seem to me that it would be a desirable thing for some of them. The CHAIRMAN. You may proceed.

Mr. NELSON. By handling dairy-product surpluses on a privatebusiness basis, it will not be burdened with the redtape inflexibility and costliness of Government-operating policies.

Under self-help, dairy farmers will support their own prices. They will finance surplus inventories as they arise, and bear the losses involved in their disposal.

THE LEGISLATIVE REQUIREMENTS FOR SELF-HELP

The self-help program requires the enactment by Congress of enabling legislation. This legislation would authorize

1. A dairy stabilization board of 15 members to be appointed by the President from nominees selected by milk producers, and an advisory committee representative of other segments of the dairy industry, agriculture, and the consumers.

2. A referendum to determine whether or not a majority of the voting dairy farmers favor the program.

3. The establishing of stabilization levels at which the board would purchase dairy products.

4. The levying of assessments on all milk or butterfat sold by individual farmers in commercial channels-to be used to cover losses on surplus disposal and to pay other costs of administering and furthering the program.

5. The disposal of surplus products without the restrictions that now apply in Government disposal operations.

HOW SELF-HELP WILL WORK

Under the self-help program dairy-product prices will be supported as under the Government program-by the purchase at pricesupport levels of dairy stocks not absorbed by the regular channels of trade. Under self-help the levels at which prices will be stabilized will be determined by the board prior to each marketing year. These levels will not be at the minimums to assure ample milk supply, but at the optimum justified by the general economic conditions affecting dairy farming and the demand for milk and dairy products.

To cover operating costs and anticipated losses for the marketing year, the board also will establish each year the amount of the stabilization fee to be assessed against all milk and butterfat moving in commercial channels. Thus the dairy farmers will pay the costs for the benefits they derive from the program.

Dairy farmers, however, will not bear the costs of handling surpluses arising from dairy-product imports, or from acres diverted to dairy production from Government programs in other segments of the agricultural economy.

Under the self-help program there will be no restrictions on dairyproduct imports. Government policymaking bodies will retain complete freedom of international trade relationships. But in times of surplus production at home, the Government will compensate the dairy stabilization board for the value of products imported, because such imports would merely serve to increase our own surplus. The

Government assumes this same obligation under its present program. Neither will self-help interfere with Government programs of production control for other crops. But in any marketing year in which dairy surpluses occur, and in which Federal acreage allotment programs result in a diversion to milk production, the Government again will compensate the dairy stabilization board, for milk production resulting from such diversion. The Government assumes this obligation under the present program, too.

The cost to the Government in compensating for imports and for production resulting from diverted acreage thus will be the same under self-help as under the present Government price-support program.

THE PLUS BENEFITS OF SELF-HELP

The self-help program holds several distinct advantages for both consumers and dairy farmers.

For the consumer it means

1. Freedom from the tax burden involved in Government price supports of dairy products.

2. Assurance of an adequate supply of milk and dairy products at reasonable prices through the maintenance of a healthy and prosperous dairy industry. Unduly consumer prices can and will result from an unwarranted shrinkage of the dairy industry.

3. A healthy market on the farm for city-produced goods. For the dairy farmer self-help means

1. Assurance of optimum year-round stabilized prices, without dependence on Government price supports and without production controls of marketing quotas.

2. Protection from surpluses caused by imports or acreage-reduction programs.

3. The benefits of new and expanded outlets for dairy products. 4. Consumer goodwill because of the demonstrated willingness of dairy farmers to cut free from Government dependence for the support of their prices.

5. Assurance of expert and efficient management of surpluses free from the restrictions and inefficiencies inherent in Government operation.

THE SELF-HELP PLAN IN DOLLARS AND CENTS

At what percent of parity will dairy product prices be stabilized under self-help? What will the cost be in stabilization fees on milk and butterfat? What will dairy farmers stand to gain in dollars and cents? The answers to these three questions are of paramount interest and importance.

It should be recognized at the outset that if prices under self-help were to be stabilized at 75 percent of parity and if consumption and production levels remained the same as under the Government programs, producers would lose from 4.79 to 19.16 cents per hundredweight in making the change. (See table 3.)

But it is anticipated that the stabilization levels will not be the same under self-help; that consumption will be higher, and that perhaps production will be tempered moderately-since the stabilization fees will tend to discourage unnecessary production. Prices to producers under self-help, therefore, will be higher than under the

Government program, even after allowing for the amount of the stabilization fee.

Under the self-help program the stabilization fee necessary to offset losses on purchases and to administer the program will vary with (1) the level of supports, (2) the amount of products purchased, (3) the loss of products purchased, and (4) the administration expenditures in the program.

Assuming economic conditions comparable to 1955 and using present population figures, estimates can be made of the stabilization fee necessary to underwrite the cost of the self-help program. (Total milk production for 1955 is estimated at 124 billion pounds, of which 107 billion pounds will be marketed from farms as whole milk or cream. It is anticipated that about 6 billion pounds of the 107 billion will be surplus production.)

As for the gains in dollars and cents to dairy farmers, assume for the purpose of illustration that prices were stabilized at 90 percent of parity under self-help, as compared to the present 75 percent under the Government program. Producers then would stand to gain 63 cents per hundredweight of milk at a cost to them ranging from 7.6 to 30.4 cents, or a net gain ranging from 32.6 to 55.4 cents per hundredweight of milk. From the table above other comparisons can be made for price levels ranging from 75 to 100 percent of parity.

Under self-help, dairymen will strive to maintain prices consistent with prevailing economic conditions, consumption of milk and its products and the tendency to increase production being considered. Under the present Government program, on the other hand, prices are supported at levels ranging from 75 to 90 percent of parity, as the Secretary of Agriculture determined necessary to assure an adequate supply. This means simply that self-help prices will be supported at the optimum level consistent with the national economy while Government price supports are held to minimum levels necessary to insure an adequate supply.

It is not necessarily the purpose of self-help to guarantee parity prices to dairy farmers. Although the objective of any dairy program should be to assure prices to producers at 100 percent of parity, this objective may not be attainable because of physical limitations in removing excess production which may result from any established price level. The alternative would be production controls. Most dairy farmers feel that production controls would reduce their net income to a greater degree than prices somewhat below parity.

THE SCOPE AND INFLUENCE OF SELF-HELP

The self-help program is an extension, on a national scale, of the philosophy of cooperation. It is a program, therefore, that will become effective only if approved by a majority of voting milk producers in a national referendum.

It is believed that with farmers operating a program for their own benefit, paid for at their own expense, they will do a better job of stabilizing prices and production than is possible under a Government program. In countless markets where cooperatives operate, milk producers have proved their willingness to adjust milk and butterfat production to the market needs by leveling off their output in

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