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the flush-production months and stepping up their output in the months of short supply. It is reasonable to expect that they will similarly cooperate nationally.

Suggestions have been made that processors, distributors, and consumers should be represented on the board. The interests of these groups are not the same as those of the producers. Producers are interested in selling a raw agricultural commodity at a fair price; processors and distributors are interested in buying the raw commodity at a low price and selling the processed product at a high price; while consumers are interested in buying the finished product at a low price.

We fully agree that all these interests should be related and that the board should fully cooperate with and consult with the other interests, but we doubt that adverse interests should be represented on the board.

Price stabilization programs are for the benefit of farmers. They are designed to prevent farmers' prices from being driven down by better organized groups, as they have been driven down in the past, until the purchasing power of the farmer is destroyed and the economy of the whole Nation is adversely affected. Serious thought should be given to proposals to put on the board to help administer the farmer's program and to help send the farmer's money men whose interests would be served by wrecking the program or preventing its effective operation.

A somewhat comparable situation exists under the Agricultural Marketing Agreement Act of 1937. The purpose of that act is to protect producer prices. While its operation is now generally accepted, we ought not to forget that in the early days of that program when there was some attempt to destroy it. The processors and distributors made every possible effort to accomplish that result.

Also, if processors, distributors, or consumers desire representation on the board, it would be appropriate to consider raising a proportionate amount of the cost of the program from the sources which they represent. If they are to participate in its operation, they should have a stake in the program, at least to the extent of sharing in its cost.

The board would be authorized to borrow up to $500, million from the Commodity Credit Corporation to get started. All sums actually borrowed would be repaid with interest. It is not contemplated that any Government funds will be used after the board gets established, but the borrowing power would remain in effect as a backlog which could be used in an emergency.

This is in line with many other programs started by the Government, such as the Federal land banks and rural electrification.

The board would neither monopolize nor restrain trade, since the only purchases it would make would be that part of the surplus which no one else would take at the support level. The only control which it would have over prices would be its offer to buy at the support level. It would be subject to the same restrictions about unduly enhancing prices as those which now apply to cooperatives under the Capper-Volstead Act. The very purpose of the plan is, of course, to stabilize producer prices at a fair level and to prevent better organized groups from driving them down to the bankruptcy level as they have

done in the past, and as they would do now if there were no support program.

The principle of the set-aside in the Agricultural Act of 1954 would be applied to surplus stocks on hand at the time the board began its operations. This is necessary to give the board a fair start. It will be handicapped enough by the surplus production level which it would inherit.

No price-support program for milk and butterfat can hope to survive unless it is protected against diverted acres and imports. The problem of diverted acres is becoming increasingly serious as acreage controls are applied to crops in surplus production. Approximately 30 million acres were diverted from the basic crops last year. may increase to 40 million acres or more in subsequent years.

This

It accomplished nothing for agriculture as a whole to control the acreage of one surplus crop and permit diversion to another surplus crop. Livestock and dairy production are in surplus, and the diversion of controlled acreage to increased livestock and dairy production would substantially aggravate the difficulties those commodities alreadyy face. Cross-compliance requirements are sound in principle, only if they are applied to prevent diversion to any commodity in surplus production. Regulations which prevent diversion to some surplus crops but permit diversion to others have the effect of channeling diversion to the unprotected surplus commodities.

Dairy farmers, trying hard to put their house in order at their own expense, should not be expected to pay the cost of removing surplus production resulting from the failure of the Government to so control the acreage diverted from other surplus crops as to prevent their shift to further surplus milk production.

We believe both diverted acres and imports should be controlled by the Government to prevent their interference with the dairy stabilization program. If so controlled, that is the end of the problem. The proposed bill does not forbid diversion from controlled acres nor does it forbid imports. It recognizes that there may be instances where the Government may want to admit some imports or permit some diversion to milk production in the national interest. If so, the Government would be left entirely free to do so, but in such cases the cost of that action would, as it should, be charged to the program benefited and would not be added to the dairy farmer's bill.

The CHAIRMAN. What would you do with the diverted acres; do you say?

Mr. NELSON. The program that we have, we do not feel that the diverted acres should be permitted to be diverted to milk production, unless the Government wants to bear the expense of it, which is in line with some comments made by Senator Eastland, I think, with another witness.

The CHAIRMAN. Some kind of compensation?

Mr. NELSON. Yes, sir.

The CHAIRMAN. And anything else?

Mr. NELSON. And just my own personal feeling about the diverted acres, that they should be treated in some manner to make them more productive, and probably should be diverted on a rotating basis of

some sort.

The CHAIRMAN. That is only of crops that are supported?
Mr. NELSON. Crops that are supported, yes.

The CHAIRMAN. Thank you, sir.

Mr. NELSON. It is contemplated that the board would sell aggressively and effectively in world markets at competitive world prices in a practical, fair and businesslike manner. No unfair trade practices would be used, and no dumping of surplus to the harm of world trade is contemplated. The board would perform no real service to American dairy farmers by causing injury to world trade in dairy products. We fully realize that the plan will be opposed by those friends of the foreigners who have advocated for many years that this country sit on its hands while foreign nations take over world trade in dairy products and who, in fact, would go even further and give away our own market to the foreign nations.

We believe foreign nations will have more respect for this country when we begin to treat them more like the forthright and capable businessmen that they are.

As a practical matter, as long as labor and production costs in this country remain higher than those of other countries, there is little chance that American dairy farmers will produce in any substantial volume for world trade.

Exports made by the board would, of course, be subject to the general restrictions imposed by law in this country on exports and also to the restrictions on imports imposed by foreign nations for the protection of their own agriculture.

Ordinarily, once production is properly related to demand, the board would not have substantial amounts of dairy products for foreign relief uses. Such as it did have would be disposed of in such a manner as not to harm world trade and in full cooperation with the foreign policies established by Congress.

With all the surplus stocks we now have on hand and the urgent need to dispose of them, the federation has never suggested that they be dumped in foreign countries in such a manner as to harm world trade.

The plan would use to some extent a two-price system. The domestic demand would be supplied at a price reasonably related to the cost of the things that farmers buy and to the cost of production. Exports would be priced, as they obviously must be, at prices competitive with world price levels. But there would be no Government subsidy of exports made by the board.

Again as a practical matter, once production is brought into line with demand, the export problem will police itself, because higher production costs in this country will prevent dairy farmers from producing for export in any substantial amount.

Through the self-financing dairy stabilization plan, the dairy farmers of this country offer to solve their own problems at their own expense and to relieve the Government and the taxpayers of that burden.

The principle of an agricultural commodity paying the cost of its own stabilization program is sound, and we offer to lead the way. The CHAIRMAN. Thank you.

Our next witness is Mr. Cloniger.

Give us your full name, please, and your occupation.

I notice that you have quite a long statement here, Mr. Cloniger. I wonder if you would be good enough to submit it for the record, and highlight it for us.

STATEMENT OF S. E. CLONIGER, MANAGER, SOUTHWESTERN PEANUT GROWERS' ASSOCIATION, GORMAN, TEX.

Mr. CLONIGER. Mr. Chairman and Senator Eastland, that is what I intend to do, sir.

I am S. E. Cloniger, and I am manager of the Southwestern Peanut Growers' Association. I live in Gorman, Tex.

We operate in all States which produce peanuts, west of the Mississippi River.

I have three problems that I would like to briefly discuss, and a brief comment on probable solutions.

The first one is the importation of peanuts. The past year we met with the Tariff Commission two different times, and made recommendations as to imports. We had no objection to importing enough peanuts for the edible trade.

The White House and the President of the United States defied all recommendations made, also recommendations made by the Department of Agriculture as to how many peanuts were needed.

I believe it was May 4 that they lifted the import restrictions, and turned it wide open.

Up until July 31 the effects of these imports have been and are as follows: It had lowered the income tremendously. It is forcing small peanut growers off the farms, forcing United States shellers out of business, and could destroy price support on peanuts, which was voted for by more than 90 percent of the peanut growers. It is demoralizing to the good faith of peanut growers in bringing consumption and production in line.

I cite these two examples.

In 1953 the Government had a small loss in peanuts.

In 1954 very little, if any, coffee or tea.

Growers have been trying to bring production in line with consumption.

Now the second thing that I would like to mention to you is the damage tolerance which exists between runner peanuts and Spanish peanuts. Runner peanuts are grown in the southeast areas and Spanish peanuts in the southwest areas.

The CHAIRMAN. Since you have mentioned the loss on peanuts, let me say that during 1953, the losses were $2,975,881; in 1954 the losses were $23,259,266. The loss in 1955 up to June 30 was $2,103,883, and for a total of $118,111,300 from October 17, 1933, to June 30, 1955. Mr. CLONIGER. That is small compared with the years before that; is that right?

The CHAIRMAN. I am not arguing that, I am just giving you the information, since you mentioned it. The years before that-well, in fact, up to 1941, there was no loss; in 1946 there was none. The first loss that we took was in 1951 of $1,238,923, that was the first loss, according to this record I have before me, which comes from the United States Department of Agriculture.

Mr. CLONIGER. In speaking of this damage tolerance, under United States rules runner peanuts have a damage tolerance of 22 percent which is considered a No. 1 peanut. On the Spanish, we have a damage tolerance of seven-hundredths of 1 percent, which gives approximately an $80 advantage in lower price.

The CHAIRMAN. Is that not administrative? That is not in the law, is it?

Mr. CLONIGER. Well, it is partly administrative and partly under

the law.

The CHAIRMAN. It is really administrative?

Mr. CLONIGER. Yes, sir.

The CHAIRMAN. What is your suggestion for the program? Have you any concrete suggestions that would be within the jurisdiction of this committee? You have mentioned the tariff. That is out of the jurisdiction of this committee. We do not deal with tariffs. Any change in the tariff law, as you may know, must originate in the House of Representatives.

Mr. CLONIGER. That is right.

The CHAIRMAN. The Senate cannot do a thing with it unless the House originates it, or originates a tax bill, upon which we can attach legislation which may deal with the subject that you are now speaking of.

Mr. CLONIGER. Yes, sir.

The CHAIRMAN. It is never referred to our committee so, even though I do not mind hearing you, in order to permit others to be heard you might skip over such parts of your statement as deal with the tariff because we have no jurisdiction over that.

Mr. CLONIGER. Yes, sir.

Another thing that affects it, is the constant changing grade factors. The CHAIRMAN. That is another administrative matter.

Mr. CLONIGER. All right. What I would say, then, is that we need legislation for constant irregularities caused by weather which man has no control over in the Southwest area.

The CHAIRMAN. What is your prescription for that—what would you do legislatively?

Mr. CLONIGER. In the Southwest area, we have an average yield of 500 pounds per acre. Our average allotment is 13 acres.

The CHAIRMAN. You want a greater acreage?

Mr. CLONIGER. What I would say is that we need a greater acreage, but if we sell the peanuts, that is, if we do not, we will cut to our teeth. And our record will show that our area has less costs-Virginia has less costs, may I say, than we do but the major portion to the Government is on runner type and the damage tolerance enters into that. And my suggestion is this, if you cannot sell your surplus then cut your allotment.

The CHAIRMAN. You mean of this particular kind?

Mr. CLONIGER. Yes, sir; in the areas that are selling and can sell, increase it.

The CHAIRMAN. You do not grow the runner type here?

Mr. CLONIGER. No, sir.

The CHAIRMAN. Well, we will hear from those boys when we get to South Carolina and North Carolina, I guess.

Mr. CLONIGER. Yes. In your State of Louisiana in 1954, they marketed about two cars of peanuts. You have some growers down there that would like to grow peanuts. This year I think you will have less than a car in the State of Louisiana.

The CHAIRMAN. Is there anything further?
Mr. CLONIGER. Thank you, sir.

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