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Price per ton (farmers stock)_.

Plus discount (penalty) on price of Runner farmers stock (per ton) 1.

4. 19 3.86

8.05

Total advantage to Runner sheller (per ton of farmers stock). 11.75 percent damage in shelled peanuts=1.17 percent in farmers stock. 1.17 percent at $3.30.

The above advantage to the Runner sheller of $8.05 per ton of farmers stock is equivalent to 60 cents per pound of shelled peanuts. This advantage will gradually eliminate the Southwest as a producer of Spanish peanuts. The Southwest is unable to produce Runner peanuts as this variety requires more rainfall than is the average in the Southwest. The Southeast is switching from Spanish to Runners, producing three times as many Runners now as Spanish. The quality of Runner peanuts has been improved in the past few years, eliminating any difference that there could have been in damage between Runners and Spanish. Unless grade is adjusted to equal basis, demand for Spanish will be eliminated. The grade can be adjusted to equal basis by adjusting the tolerance for damage in U. S. No. 1 shelled Runners so that it will be the same as the tolerance for damage in U. S. No. 1 shelled Spanish; or by adjusting the tolerance for damage in the price support schedule for Runner farmers stock so that the penalty for damage will start at 4 percent instead of 2 percent. The CHAIRMAN. We thank you very much, Mr. Cloninger. The next witness is Mr. Walter Connell. Before Mr. Connell begins his statement, the Chair notes that there are six witnesses representing the State soil conservation districts. The Chair doesn't know whether they all expect to present the same viewpoint or not, or whether they can combine their statement and take more time or whether they would like to have the time divided. Mr. Boswell?

Mr. BOSWELL. Mr. Chairman, we have one spokesman with a written statement that we wish to file. One man will speak for the group.

The CHAIRMAN. Can you give us his name now? Will you be the spokesman,

Mr. Boswell?

Mr. BOSWELL. Yes, sir.

The CHAIRMAN. We will hear from you next, following Mr. Connell.

3. CONSTANT CHANGING OF GRADE FACTORS AND TIGHTENING UP ON GRADES LOWER GROWERS' INCOME

The constant changes of grade factors and tightening up of penalty and minimum grades for peanuts eligible for loan has lowered peanut growers' income for the past 5 years, possibly $12 per ton.

(1) The trade, shellers, and end-users talk quality, gig farmers and blame them for poor quality, however, when it comes to buying peanuts they buy on price, not quality.

(2) The damage tolerance which exists between shelled Runner under United States rules allows Runners 21⁄2 percent damage and Spanish 0.75 of 1 percent is not consistent with other grade determinations.

(3) We do not want to lower the grade of Spanish but want Runners graded on equal basis.

(4) Runner peanuts are used in over 70 percent of all peanut butter, because of damage tolerance which lowers the price of Runners approximately $8 per ton. (5) The area which produces Runner peanuts obtains approximately 99 percent of all Government contracts for peanut butter.

(6) Foreign material specifications have been reduced from 15 percent to 10 percent. Damage discounts have been increased from $19.20 per ton to $35.70 per ton. Discounts for loose shelled kernels were added in 1954 for first time and discounts were more than doubled in 1955 for loose shelled kernels.

(7) Some kind of support should be made available for peanuts which can be used for edible trade that are not eligible for loan, because of grade factors.

Each year there are a large volume of peanuts that do not meet loan specifications, usually because of weather conditions. Growers are forced to accept whatever price they are offered. There is no way to estimate loss to growers on peanuts which do not meet loan specifications.

(8) Electric machines are now in operation which can pick peanuts at a lower cost of operation to shellers.

Results: Peanuts are brought from growers because they do not meet loan specifications at oil or below oil prices.

4. LEGISLATION NEEDED FOR HARDSHIP CASES IN SOUTHWEST AREA, DUE TO CONSTANT FLUCTATION IN PRODUCTION, BECAUSE OF WEATHER CONDITIONS OVER WHICH MAN HAS NO CONTROL

Types of peanuts and areas which are costing the taxpayer in excess of reasonable amount in those types and areas, allotments should be cut and areas and types which are moving peanuts into edible trade allotments should be increased. Average yield Southwest area approximately 500 pounds per acre. Average yield Southeast area approximately 1,000 pounds per acre. Average yield Virginia-Carolina area approximately 1,500 pounds per acre. (1) Southwest growers being forced off farms.-In 1952 there were approximately 40,000 peanut growers in the Southwest area. In 1955 there are approximately 30,000 peanut growers in the Southwest area. Average allotment, Southwest area, 13 acres.

The minimum sales price as set by CCC for the 1955 crop is too high to move peanuts out of the loan into the edible trade. (Southwestern Peanut Growers' Association and the Southwestern Shellers Association recommended that a minimum sales policy should be same as the 1953 sales policy, a year of normal production and a year in which Southwestern Peanut Growers' Association moved better than 70 percent of peanuts placed under loan into the edible trade.) The cooperatives should not be tied down with a minimum sales price. Sound realistic diversion program needed

On the desirability of a sound and realistic diversion program for No. 2 shelled peanuts when there is a surplus of peanuts to be diverted by CCC: Such a program will divert peanuts from the edible market at less cost to the Government than will the diversion of farmers stock peanuts. Furthermore, such a program will result in the consuming public receiving a uniformly good quality product of edible peanuts. However, the No. 2 program for 1955 proposed by the Department of Agriculture but not yet put into operation is not a sound and realistic program. The proposed highest price to be paid by CCC for No. 2 Southwest Spanish peanuts is 14.5 cents a pound. The price is graduated downward depending on the quality of the No. 2 peanuts to a low of 11.75 cents a pound. These proposed prices compare with the current market price for No. 2 Southwest Spanish peanuts of approximately 17 cents a pound. It is obvious that the Government cannot hope to acquire very many No. 2 peanuts when they are offering such a very low price for these peanuts. (The current market price for No. 1 Southwest Spanish peanuts is about 19 cents a pound.)

Hardship cases of Southwest area not controlled by man

One of the great problems facing both growers, shellsers and end-users in the Southwest area is the tremendous fluctuations in production. For example, in 1954 which was admittedly a very poor year, only about 59,000 tons were produced in the Southwest area, compared with an estimated production of 150,000 tons in 1955.

A substantial portion of our allotted acreage about 25 percent in the Southwest area-is not harvested, and that there is no adjustment in the allotment to the States in the Southwest area to take account of this underharvesting. This underharvesting of allotted acres results from two factors. In the first place, considerable acreage is frozen on farms where it is not now being used. This is particularly true in fringe production areas where it is considered that the reduced acreage allotment that farmers receive today is inadequate to justify planting any peanuts. (It takes at least 3 years for a farmer to lose his allotment through nonuse, and for other farmers who will use it to then get the benefit of it.) The second reason for underharvesting is the fact that although the acreage is planted, as a result of adverse conditions it is sometimes not harvested. In order to better assure an adequate income to peanut growers in the Southwest area, and to better assure an adequate supply of Southwest Spanish peanuts to the users of such peanuts, that the acreage allotment in each individual State, not only in the Southwest area but in all three areas, be increased sufficiently to allow for the estimated underharvesting. In other words, the additional acreage allotment would be increased sufficiently to normally insure that about the initial acreage allotment would be harvested. This correction in the legislation may be made very simply by a one-sentence addition onto section 358 (c) (1) as follows: "In order that each State may harvest acres allotted the Department of Agriculture could estimate the proportion of acreage allotted to the State that will not be harvested for any reason, and increase acreage allotment for each State sufficient acres for the estimated harvested acres to equal intended allotted acres."

(2) Because of weather conditions, etc., the Southwest area is under harvesting peanut allotment approximately 100,000 acres per year.

On short crops prices increase to a few growers, however, the total income is decreased.

On short crops we lose Spanish market which is impossible to fully recover for our type of peanuts.

(3) An amendment to Agriculture Act of 1938, section 358 (c) (1), page 64, could be added as follows: "In order that each State may harvest acres allotted the Department of Agriculture could estimate the proportion of acreage allotted to the State that will not be harvested for any reason, and increase acreage allotment for each State sufficient acres for the estimated harvested acres to equal intended allotted acres."

Example: Assume a State has an allotment of 10,000 acres. The average harvested acres are only 7,500. Increase that State's allotment by 2,500 acres.

SUMMARY OF FACTS AND NEEDED CHANGES

SWPGA on record that minimum sales policy set by CCC too high to allow movement of peanuts

On the current sale policy of CCC it is the unanimous desire of both growers and shellers in the Southwest area that southwestern peanuts move into edible channels rather than into the hands of the Government where they would probably eventually be diverted to domestic crushing or exported at a substantial loss to the Government. The present sales policy of CCC almost insures that peanuts that do come under the loan program will never be able to be repurchased by shellers and processed for the edible trade. The present markup from the loan advance of $228 a ton is $18.90 a ton on Southwest Spanish peanuts. The present large supplies of peanuts plus the fact that large quantities of peanuts are moving to shellers at the loan advance price in the Southwest area, all contribute to making it highly unlikely that peanuts could be purchased by shellers and marketed at the present markup of $18.90 a ton. Shellers will purchase all of the peanuts which they reasonably can with their own or borrowed funds. However, many shellers are very limited as to the funds which they have available. Once they exhaust their available funds in purchasing peanuts, then the only way in which they can process additional peanuts for the edible market is through buying from the association peanuts which have been placed under loan. The present sales policy established by CCC makes this highly unlikely. Shellers in the Southwest area are at a competitive disadvantage with shellers in other areas because of the large proportion of sound mature kernels that must be paid for by them as sound mature kernels, yet marketed as No. 2 peanuts. From each ton of farmers stock peanuts, the Southwestern sheller obtains somewhere in the neighborhood of 250 pounds of No. 2 shelled peanuts. This compares with a figure in the neighborhood of 150 pounds of No. 2 shelled peanuts in the other areas. Yet in all areas the shellers purchased these peanuts as sound mature kernels. Higher cost of operation Southwest area and low production

The higher cost both as to the cooperative and to shellers in the Southwest area in acquiring peanuts in comparison to costs in other areas. These increased costs are brought about through the scattered production in the Southwest area compared with the more closely knit centers of production in the rest of the country Need damage tolerance correction between Runner and Spanish

The variation in damage tolerance between shelled No. 1 Runners and shelled No. 1 Spanish. The present United States grades provide a tolerance of only three-fourths of 1 percent damage in Spanish peanuts, whereas they allow a tolerance of 21⁄2 percent damage in the shelled No. 1 Runners. We feel that the United States consuming public is entitled to have a good quality product when they buy something labeled "U. S. No. 1 grade." Furthermore, the average consumer when he sees a peanut product marked as made from No. 1 grade peanuts assumes that the same grading standards have been applied to it as to any other peanuts. It is not our desire to lower the quality standards on Spanish, but rather to raise the quality standards on Runners. The Southwest area is placed at a competitive disadvantage because of the failure of the Department of Agriculture to rectify this inconsistency in their grading system.

We recommend and firmly believe that it is necessary a flat extension of duel parity be extended next 2 years and a thorough study be made before any lowering of price of peanuts to growers.

Southwestern Peanut Growers' Association-Penalty on minimum grade factors-Peanuts eligible for loan

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NOTE.-Constant changes in grade factors and minimum specifications on loan peanuts, has lowered growers' income approximately $12 per ton in past 5 years as shown above.

The CHAIRMAN. We will next hear from Mr. Clinton Smith. Give us your full name and occupation.

STATEMENT OF CLINTON SMITH, RAYMONDVILLE, TEX.

Mr. SMITH. Mr. Chairman and Senators, I am Clinton Smith, a farmer from Willacy County, located in the southern tip of Texas. I farm both dry land and irrigated, some I own and some I rent. My chief farm enterprises are cotton, grain sorghum, and beef cattle. Until it got too rough I did grow a few vegetables.

I believe my operations are fairly representative of a large farming area known as the lower Rio Grande Valley (Cameron, Hidalgo, Starr, and Willacy Counties), and that the opinions I shall express here will in large measure reflect the thinking of my neighbors. The CHAIRMAN. That is the rich part of Texas?

Mr. SMITH. Some people think that. We think we have got a good country.

Senator EASTLAND. You dodged the question, answer it.

Mr. SMITH. You are talking about

Senator EASTLAND. Is that the rich part of Texas?

Mr. SMITH. You are talking about the land?

The CHAIRMAN. I mean it agriculturally.

Mr. SMITH. I agree with you.

I would like to add my endorsement to the general idea of total farm acreage control, commonly called the soil fertility bank.

However, since this plan has already been outlined, I would like to discuss some problems which are of vital importance to us and should concern the entire cotton industry of the United States. According to information made available to us recently certain staple lengths of cotton are building up in the Government loan, whereas, others are actually diminishing. Any program which fails to take into account the real value as reflected by market demand is eventually headed for a breakdown. What has actually happened is that some varieties of cotton are being grown for the loan, and as the supply of these varieties builds up in the loan, the result is less and less allotment, regardless of variety or staple length grown.

Senator EASTLAND. What are those?

Mr. SMITH. The record shows that they are low grades or staple varieties.

Thus a vicious cycle continues until the desirable staples disappear from the loan, and furthermore, become in such short supply that the mills must turn either to less-desirable cottons, or to synthetics, or to foreign-grown cotton.

If anyone doubts this he has only to examine the facts. Mexico is upping her production at a rapid rate. And what varieties? The same variety which under most conditions produces a staple length of 1 1/32 to 1 3/32 inches-the very one which is becoming less and less common in the loan.

This can be corrected by adjusting the loan price to more nearly fit the market value, or by adjusting the average allotment according to varieties or both.

Senator EASTLAND. Is that what you produce in the Rio Grande? Mr. SMITH. Part of it, yes.

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