The CHAIRMAN. Is there anything you can add to what has been stated about the milk program? If you could add to that, you are the third one on milk, it would help the committee a lot and also assure other witnesses of being heard if you could limit your suggestions to new thoughts on the subject.

Mr. ELROD. I have some copies of

The CHAIRMAN. We will put your statements in the record. (Papers submitted by Mr. Elrod follow :)

1. On the farm program. We are convinced that the present program is not working and that a program which will limit production is essential. We believe that an acreage rental program has definite merit, but that the program should provide for the acres to be absolutely out of production. The soil-conserving grasses and legumes planted must not be pastured or harvested for hay since this would result in more milk and beef. These industries have already suffered because of the additional production caused by the acreage-allotment program. 2. The farm program should have some publicity from Washington which would educate the public to the fact that farm subsidies are essential if we are to maintain a potential production reserve to meet emergency needs such as we have in time of war. Agricultural subsidies in general, dairy subsidies in particular, although dwarfed by subsidies to other industries, have borne the brunt of antisubsidy publicity. We are opposed to subsidies to industries which cannot otherwise develop sufficient capacity to meet emergency needs, but the vital importance of an adequate agricultural production reserve must be recognized by our Government and by our people if we are to survive as a world power. 3. Too much emphasis is placed by the Department of Agriculture in arriving at the proper level of class prices in Federal orders. The pricing policy of the administration has been based almost entirely upon the supply-demand situation. If there is more grade A milk than a market needs for class I use, the price is considered to be too high. If the market is short the price is thought to be too low. The tendency for farmers to increase their volume of production in times of declining prices is a fact which is given little weight. Drought conditions are not compensated for by higher prices until the supply of milk is reduced.

Actually the severe drought conditions here in recent years have resulted in increased milk production. Higher costs because of transportation of feeds from other areas did not cause farmers to reduce their production. Failure of other enterprises caused more emphasis on dairying. If more weight is given to such conditions in making price decisions, the hardship of farming under such conditions would be reduced without any ill effect upon the market.

Kansas was apportioned only $167,000 as its share of the $15 million brucellosis eradication fund. The eradication program has proceeded very rapidly in Kansas, due largely to the requirements imposed by local milk ordinances. These requirements have been adopted by local health authorities because of, or in order to comply with recommendations of the United States Public Health Service. Because of the fact that under modern milk processing methods, brucellosis is not a threat to the health of milk consumers, it has been unfair to the dairyman for Federal regulations to impose expensive control measures upon him which his neighbors, whose infected beef herds constitute just as much of a threat to public health and causes the dairyman's control program to be more difficult, have no required program of eradication. This situation can be remedied by producers voting compulsory countywide programs. Adequate financing for our present Kansas cooperative program will help bring about more countywide bangs-free areas. This is essential to the welfare of dairymen who are located in beef areas. Kansas ranks high in cattle numbers but very low in the allotment of Federal brucellosis funds. Most neighboring States received several times as much money to carry on their program than did Kansas. Present funds in Kansas will be exhausted by January 1, 1956. At least $150,000 would be required to operate the program from January 1, until July 1, 1956. The program has already been curtailed in Kansas to make the available funds do the most effective job. Kansas has chosen not to pay indemnities in reactor cattle, but to use it in more effective control measures such as calfhood vaccination and milk-ring testing. Money used in this way will result in quicker eradication than money spent on reactor indemnities.

Our members are all required to be on plan A, which is test and sell reactors for slaughter. Most of our members paid their own cost of testing. We have a

vital interest in the program in that if it is not encouraged at this stage our countywide bangs-free area program will be set back several years and will impose greater hardship upon the dairymen who have to comply among beef men who do not. Your immediate suport on reallocation of the present appropriation is urgently needed at this time, and we ask your support of the accelerated program after July 1, 1956.

Upon Federal orders

The Federal milk market order has resulted in a much more stable market. Low as our prices have been in the past 2 years they would have been considerably lower at times, because of price wars which developed in our market. The price cutting could not be passed back to producers because of the Federal order pricing provisions. We are well pleased with the operation of the Federal order in our market except that the level of pricing has been lower than was necessary. We urge that the Federal-order program be continued without change in present legislation. We urge that local producers continue to have priority upon class I sales in local markets.

Upon administrative procedures

We are well pleased with the present procedures in our Federal order hearings. The milk business is highly technical and complicated. If our hearings were held under more formal conditions, practical solutions to our problems would be much more difficult to reach. Time spent in conforming with strict judicial procedures would also result in additional cost, both to producers and milk dealers. We urge that the present system for holding Federal milk market order hearings be continued.

Upon taxation of cooperatives

We urge that the present exemption of cooperative profits from income tax at the corporate level be continued as it is now. Only through cooperatives can farmers have an effective voice in their marketing problems. Permanent improvements in marketing conditions depend to an important extent upon the strength of their cooperatives. Any legislation which would reduce financial reserves would weaken cooperatives at a time when farmer welfare is of vital public interest.

Upon self-help for the dairyman

The self-help program as proposed by the National Milk Producers Federation is a plan which would place the expense of surplus disposal upon dairymen themselves and remove some of the restrictions on foreign trade which exist under the Government surplus program. We urge that legislation be passed which

would provide for such a program to operate.

Mr. ELROD. We are convinced some program which will limit total production is the essential thing we are looking for. One point we are very much concerned about is how freely these soil conserving grasses and legumes under an acreage rental program how freely they could be used to produce milk and meat and we think those acres should be taken out of production and not harvested for pasture and hay.

We believe that a public relations program by the Department of Agriculture is a necessity. Agricultural subsidies in general and dairy subsidies in particular have been dwarfed by other subsidies but have borne the brunt of antisubsidy publicity. We are not opposed to subsidies in other industries which cannot otherwise develop sufficient capacity to meet emergency needs, but the vital importance of an adequate agricultural production reserve must be recognized by our Government and our people if we are to survive as a world power.

We have one other point. We think there has been too much emphasis placed by the Department of Agriculture in arriving at the proper level of milk prices in Federal orders on the supply situation. The pricing policy has been pretty much that if there is enough grade A milk on the market the price is right and if there is too much for

class I use the price is too high and if there is not enough milk then the price is considered to be too low.

The tendency for farmers to increase volume of production in times of declining prices we believe is not given enough weight, drought conditions are not compensated for by higher prices until the supply of milk is reduced. Actually, the severe drough conditions here in recent years has been accompanied by an increase in milk production. Higher costs because of transportation cost and feeds from other areas did not cause producers to reduce production. Failure of other enterprises in fact caused more emphasis on dairying. If more weight is given to such conditions in making price decisions the hardship of farming under such conditions would be reduced without any ill effect upon the market.

Now, in regard to the Kansas brucellosis program, we urge support of this committee in a reallocation of funds so that the program can be continued for the rest of this year and then support for the accelerated program after July 1. I believe that is all the new material I have.

The CHAIRMAN. Any questions?

Senator THYE. What percent of your milk production goes into fluid milk and what percent goes into the manufactured product?

Mr. ELROD. In recent years our manufacturing percentage has ranged from a low of about 19 percent up to about 40 percent. That has been in the last 3 years. Prior to that time we were primarily fluid milk market.

Senator THYE. You have increased the amounts that go into manufactured products?

Mr. ELROD. Yes.

Senator THYE. The tendency is definitely to go up and you are under a Federal milk order.

Mr. ELROD. Yes, sir.

Senator THYE. How many years have you been under the Federal milk order?

Mr. ELROD. It has been under the Federal license and order since 1932 or 1934, I believe, when the license came in, the early years.

Senator THYE. Did you as a producer group suffer a reduction in price at the time that the supports were dropped from 90 to 75 percent? Mr. ELROD. Yes, sir. As I remember, that was about 35 cents per hundred.

Senator THYE. 35 cents per hundredweight and that would be on the basis of 32 percent butterfat.

Mr. ELROD. 3.8.

Senator THYE. 3.8 percent is your average. Then did reduced supports reflect a reduction likewise to the consumer in the price per quart of milk?

Mr. ELROD. Our consumer prices have been in a kind of unstable condition in the last 3 years. There was no accompanying reduction at that time. We had some price wars in the market which clouded the issue, but there was no accompanying price reduction at that time. Senator THYE. The consumer received no benefit from the reduced price supports?

Mr. ELROD. No.

Senator THYE. It was all absorbed by the producer.

Mr. ELROD. Yes.

Senator THYE. Thank you.

The CHAIRMAN. Thank you, Mr. Elrod.

Mr. Heinkel, you are next.

STATEMENT OF FRED V. HEINKEL, PRESIDENT, MISSOURI FARMERS ASSOCIATION, COLUMBIA, MO.

Mr. HEINKEL. My name is Fred V. Heinkel. I am a farmer and president of the Missouri Farmers Association, a state-wide farm organization with a membership of more than 153,000 farm families. The farmers of Missouri deeply appreciate the hearings this committee is holding throughout the country. These hearings are evidence of your recognition that farmers are in deep trouble, and of the desire of Congress to do something to help us solve our problems.

Missouri farmers are interested in many phases of agriculture because their production is greatly diversified. For example, 70 percent of our income is derived from the sale of livestock; cotton is our largest cash crop; we produce large quantities of milk and other dairy products, ranking second in the Nation in the making of cheese. In addition, our production includes wheat, corn, soybeans, tobacco, poultry, eggs, and wool. Our State ranks sixth in the Nation in the production of agricultural products.

Before offering our suggestions for your consideration, I should like to mention a few facts which emphasize the deplorable economic situation of the American farmer.

Net farm income has declined from 16.8 billion in 1947 to approximately 11 billion in the middle of this year, which is about a 35 percent decline. So you can see dealing with this problem is not simple from our standpoint.

During the past year alone there was a decline of about $1 billion, or about 8 percent. The latest figures issued by the United States Department of Agriculture show that there has been a 4 percent decline thus far this year over 1954.

The per capita income trends for farmers clarify the situation. In 1947 the per capita income of farmers from all sources was $822, or 59 percent of nonfarm per capita income of $1,393. But by 1954, while nonfarm per capita income had risen to an estimated $1,837, per capita income of farmers was $913, or only 49.7 percent of that of nonfarmers. The per capita income of farmers shows a rise between 1947 and 1954 only because there were fewer farmers. Thousands had been forced off the land by the economic squeeze.

Nor is this the whole story of depressed farm incomes. Farm operators who comprise the bulk of the farm population, have substantial capital investments in their farmlands and equipment. Presumably they are entitled to a return on these investments, in addition to a salary for the work they do.

If a 6 percent annual return is allowed to all farm operators on their total farm investments, and this is deducted from total income derived from farm sources, it appears that the return to farm operators and their families for their actual labor time averaged less than 40 cents an hour in 1954, or less than 40 percent of the $1 minimum. wage established by the amendment enacted by the Congress last year.

But the objective of farm policy is not just to maintain a minimum wage for farmers, but rather to bring their income closer to parity with the income of other Americans. Obviously, the overwhelming majority of nonfarm workers earn much more than the $1 an hour minimum wage.

These facts, which were obtained from reports of the USDA and our own research department, show clearly that the farmers of America are in serious trouble.

The economic squeeze in agriculture is rapidly eliminating the family-size farms of our Nation. Last year, according to USDA estimates, 100,000 families moved off the land. It is our estimation that probably 300,000 more will be forced to leave this year. Unless prompt action is taken by Congress, more will be forced out next year; and we shall wind up with most of the farmland of the United States being owned and operated by a comparatively few people. About all who will remain in agriculture will be farm managers, and the few mechanicas and workers required to operate the machinery and perform the hand labor tasks for absentee owners of large tracts of land. It is clear to me that we have reached the point in this migration beyond which we should not go. A continuation of this trend will endanger our whole society. The farm problem involves social and political, as well as economic elements. What will be the effect, and how far reaching, on our American way of life, if we allow millions of people to lose their visible stake in our economic system?

American democracy has always had one of its safest anchorages in the myriad of farm homes that dot this land from the Atlantic to the Pacific. The God-fearing, freedom-loving people who dwell in those homes are doing the work of their own choosing, getting satisfaction from raising good crops in soil that they can pridefully call their own. Traditionally conservative and slow to adopt radical ideas, our farmers have always been important stabilizers. Do the people of America dare permit their liquidation through sheer neglect?

There is much argument these days about 90 percent versus flexible supports as a means of solving our problem. If we in Missouri had to make a choice between the two, we would certainly take the old 90 percent support plan, with whatever shortcomings it may have, in preference to the new flexible plan.

The 90 percent support plan has by no means been a failure, as some people contend. Under it, prices of the supported 6 basic commodities declined only one-half of one percent between the 1947-49 average and September 15, this year. Prices of unsupported commodities and those with flexible supports declined 17 percent during the same period. We are convinced that had it not been for the supports on the basic commodities, farm prices generally would have gone even lower than they have.

As to the flexible plan, we knew from having witnessed what happened during the depression years in the 1930's that it would work to the benefit of farmers, as its advocates claimed it would. It was supposed to bring about curtailed production on the one hand and increased consumption on the other, as a result of lower farm prices. Back in the 1930's farmers were compelled by low farm prices to produce more in order to meet fixed costs. The memory of that experience stayed in my mind; and on March 24, 1954, I appeared before your