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face of the present surplus or would you limit by acreage curtailment until this surplus is worked down?

Mr. CHALKLEY. Senator, I think following Senator Eastland I think maybe that will answer this question, and, if not, I will.

Senator Eastland asked the question about the State Department. In the first place, rice differs from any other commodity, it is a government monopoly in the other two surplus-producing countries, Thailand and Burma. They are interested in the highest price they can get for their rice because they operate their governments on the basis of the profit they make from their rice monopoly. Our States Department sees fit to attempt to build up the economy of those countries at the sacrifice of the United States.

Senator EASTLAND. Rice producers?

Mr. CHALKLEY. That is correct, sir. The State Department has refused to allow the foreign nations, particularly the Philippines, to come into this country and arrange for sales of rice.

Senator EASTLAND. Mr. Chalkley, right there, the State Department says that that applies to Public Law 480 and currencies we get under that, that they have no objection to those currencies taking their dollars, and coming into this country and buying rice.

Now, my own information is that that is a false statement by the State Department, that they urged those countries to use their dollars or whatever foreign currency they have and buy in southern Asia. Is that right?

Mr. CHALKLEY. That is correct, sir.

Senator EASTLAND. Do you have any proof of that?

Mr. CHALKLEY. Senator, before Public Law 480 was passed the Ryukyu Islands asked the State Department to assist them in arranging for purchase of 40,000 tons of rice from the United States. They suggested that it would be more practical for them to go to Burma and buy the rice. In other words, the United States Constitution, I believe, I am not a lawyer, provides that no individual may make any deal with any foreign government without the permission of the United States Government. As these countries, their governments control their food supplies, they first must come through our State Department before they can come to us as producers of the Agricultural commodity. That happened before law 480 became a law.

In the case of the Philippines it was published in the newspapers that the Philippine Congress gave instructions to their Secretary of State and their Department of Agriculture to purchase a hundred thousand tons of rice each year for the next 3 years and if possible to purchase it from the United States.

Senator EASTLAND. That is because our rice, they like white rice instead of the yellow rice of Burma and Thailand, is that correct?

Mr. CHALKLEY. That is correct; and also the quality of our rice is guaranteed. That is, it is free from let us call it foreign matter. I think that is a good term. And when they buy a hundred pounds of rice from us they get a hundred pounds of food.

Senator EASTLAND. You know that our Government has a lot of influence with the Philippine Government and the Japanese Government. Is there any doubt in your mind but that that influence has been used by the State Department to get those countries to not purchase rice from the United States?

Mr. CHALKLEY. I don't. think there is any doubt of it, and I asked and received in the case of the Ryuku Islands a very interesting report from the State Department to indicate that we were all wrong in our assumption of that, but when we read the whole document we found out they had been asked to assist and they felt that the closest place they could get it was the best place to get it.

Senator EASTLAND. I have read a report from the Philippines, a confidential report written from one government official to another, in which it was stated that the State Department had asked the Philippines not to purchase rice in this country. I think it is a national scandal the way the American rice industry has been treated.

Mr. CHALKLEY. I certainly agree with you, Senator, and I was in the Philippines 2 years ago and I made some inquiries and they made a very interesting statement to me. They said this policy of Asia for Asians was not their concept of world peace, that they knew that in event of any international difficulty in Asia the only friend they had was the United States and they wanted to tie closely to us in every way possible and they were interested in buying our products and not buy from others.

The CHAIRMAN. You said a while ago that the ricegrowers attempted in 1954 to get acreage control or marketing quotas. Why was it that the Department was anxious to grow more rice?

Mr. CHALKLEY. In 1953 before the crop was planted, Senator, the United States Government asked all of the rice producers to increase their production because the Armed Forces said they needed rice, and up until October of 1953 we had export licensing on rice. They suddenly took that off and instead of the Armed Forces taking the rice they had said they were going to take, they bought the rice in the Orient and left the American producer with approximately 1 million hundredweight on hand taken over by Commodity Credit.

This market was very sluggish at that time and this time and in December of 1953, realizing what was happening and also realizing that this shift would take place, in particularly the States where it was practical, namely, Mississippi, Arkansas, and CaliforniaSenator EASTLAND. And northeast Louisiana.

Mr. CHALKLEY. That was in the Mississippi group.

Senator EASTLAND. That is right.

Mr. CHALKLEY. That that shift would take place, and any farmer that was smart, realizing that, and there was no cross compliance required, would immediately take advantage of that. That was natural. So we, knowing that, asked them to simply put an acreage allotment on equal to the planting of the year 1953. The Department of Agriculture took figures indicating that there was a large possibility of export and said it was not needed. The result was that while they said the increase in acreage would not amount to more than 4 or 5 percent it amounted to 25 percent. The export figures were less than half of what the Department of Agriculture estimated. The CHAIRMAN. Now, as a matter of fact the price supports on rice have been needed only a few years in the entire period.

Mr. CHALKLEY. That is right and I would like to say this: I listened yesterday with a great deal of interest as to the price-support program on cotton. I want to say that somebody, whether it is the producer or who, has been a little bit more far-sighted in rice than in

other commodities. We have a definite support price on each variety and each type so that the case which you are talking about of cotton, the low-grade cotton having a high support price, we have still got some bumps in ours but the short grain rice is supported for less and medium grain less than long grain, and within those groups each variety of those groups is supported at a different price.

Basically it was done on the basis of acceptance and marketing rather than on the desire of somebody to raise a crop.

The CHAIRMAN. There was evidence adduced in California, as I recall it, to the effect that the allotments and quotas should be put on a variety basis rather than at present. What comment have you on that?

Mr. CHALKLEY. Senator, that is altogether a misstatement because all you do is dislocate markets.

The CHAIRMAN. You won't say this is a misstatement. That is what they want. I want you to criticize whether or not that is practicable and feasible.

Mr. CHALKLEY. It is not practicable and it is feasible and the example is this: California growers have displaced the southern growers in the Puerto Rican markets by virtue of a differential in price in a support program. They were smart enough to put their support price low enough to go into Puerto Rico and take a market where we originally supplied 94 percent of all the rice that went into Puerto Rico; it came from the Southern States. They did such a complete job that they were supplying 82 percent and we couldn't sell our rice because our support on our medium grain that they took was higher than the California price, and at one time the differential was $1.80 a hundred pounds, and Puerto Rico is a price market.

The CHAIRMAN. In other words, California can grow a type of rice that can be produced in greater quantities and more cheaply than can be grown in Louisiana.

Mr. CHALKLEY. No, sir.

The CHAIRMAN. Why the price differential, then?

Mr. CHALKLEY. In the first place, in California there are some 1,000 producers of rice, all of which are relatively large, and all of which are banded together to dispose of their rice crop. In Louisiana there are some 16,000 producers who are rugged, and ragged, indidividuals and they listen to their own dictates and if we in Louisiana could get our people, even half of them, to sit down together and work out our problems as the California people have worked them out in rice, I do not believe that they would have ever been able to take it away, but California assisted us in raising our support price of Zenith rice because they said it was a better rice than they raised and it should bring a higher premium on the markets and while some of us were trying to preach a doctrine when you talk dollars and they shake their heads, well, it doesn't make much difference who buys it, whether it is the Government or Puerto Rico, I will take the dollars.

The CHAIRMAN. The Louisiana growers fell for it.

Mr. CHALKLEY. They fell for it just as our sugar farmers fell for the sugar deal that we are now in trouble about.

The CHAIRMAN. Of course, nobody expected that the sugar production would be as great as it now is.

Mr. CHALKLEY. And nobody expected California to be able to take the Puerto Rican market away from us.

The CHAIRMAN. Going back to this short-grain rice, the support price is how much cheaper than the long grain?

Mr. CHALKLEY. At the present time 60 cents.

The CHAIRMAN. Sixty cents.

Mr. CHALKLEY. Yes.

The CHAIRMAN. Because California loaded up on that kind. Mr. CHALKLEY. They can only grow that kind and in the American market-that is, the continental market-their production is not wanted.

The CHAIRMAN. I don't see how you old ricegrowers permitted Californians to outsmart you.

Mr. CHALKLEY. We did a good selling job. We used to raise Jap rice in Louisiana but found a better rice and sold our seed to California. They tried to raise our rice and couldn't raise it. They had the markets in the Orient. Continental United States market does not take the short-grain type of rice.

The CHAIRMAN. As I remember the testimony, Mr. Lodi said they could grow any kind but they grew for the markets instead of growing for Uncle Sam.

Mr. CHALKLEY. We know they went to the type of rice they could grow and grow successfully. They have two things in California: One is a relatively short growing season, and our high-quality rices take a long growing season; and, second, they have cold water because it comes from Government-built dams in the mountains and that cold water retards the growth of rice. We in the South have gotten our own water, we have dug our own wells, our water is warm enough to make the rice grow.

The CHAIRMAN. So that the ricegrowers of the South in particular would be against putting your allotments and quotas based on variety? Mr. CHALKLEY. Correct.

The CHAIRMAN. What about the price supports? Have you any idea as to that?

Mr. CHALKLEY. Senator, we are gradually attempting and are getting somewhere with it of getting competitive rices on a basis of equal support prices.

The CHAIRMAN. Mr. Lodi, as I remember, further stated that if there was a market, foreign market, for this short rice, that they should not be prevented from growing it, to grow whatever they can and whatever the market would absorb.

Mr. CHALKLEY. Senator, may I inject in this a statement

The CHAIRMAN. Wouldn't that affect rice producers in the South? Mr. CHALKLEY. That is what I was going to show you and show you that the same markets they talk about, the Japanese market— remember that the Japanese market prefers, we are told, pearl rice or Jap rice, whereas the Philippine market doesn't want anything that looks like Jap. All they do is show you sunken ships in Manila Bay and say that is what we want from Japan, rice or anything else. Japanese market, strange as it may seem, has shown a preference for southern medium-grain rice.

The CHAIRMAN. Would they buy it if permitted?

Mr. CHALKLEY. They will buy it at the same price they can buy

the other.

The CHAIRMAN. But it is not supported the same.

Mr. CHALKLEY. No; that is the point.

The CHAIRMAN. Who would take the loss, Government or farmer? Mr. CHALKLEY. Your farmers in Louisiana, Senator, met the price when their new crop came on this year and we have sold rice to Japan in competition with the rice in California.

The CHAIRMAN. Notwithstanding a better support price.

Mr. CHALKLEY. That is correct.

The CHAIRMAN. In other words, are we to understand that the Louisiana growers could have put some of this rice with the Government and obtained more for it, but instead they sold it?

Mr. CHALKLEY. Yes.

The CHAIRMAN. They ought to be commended.

Mr. CHALKLEY. The difference between the price which the Japanese were willing to pay for southern rice to the Commodity Credit at the time when the growers had no rice, that was in April and May, there was a difference of 4 cents a hundred pounds. In other words, Commodity Credit by virtue of their restrictions brought the price down to $6.49 a hundred pounds delivered shipside. Japanese were willing to pay $6.45. They bought rice in the Orient because they wanted some 200,000 tons and that was $80,000, and that buys a lot of rice, the difference in 4 cents.

Now, since that time in August the rice producers in Louisiana sold and also in Texas and some small amount in Arkansas, but their crop didn't come on as early as ours did, they sold their Zenith rices in the green and the mills disposed of some 200,000 tons of rice at $6.45 free alongside ship the ports at the exact price offered.

Senator EASTLAND. How many tons of Louisiana rice will go into loan this year?

Mr. CHALKLEY. The estimate of the Commodity Credit is that 2 million hundredweight in Louisiana will go into loan against 5,200,000 last year.

Senator EASTLAND. That is mighty fine.

The CHAIRMAN. I was very much interested in the suggestion you made to tie in sugar legislation with rice. I would like to say that I am in thorough agreement with that if it is possible.

As I understand, and as you suggested but didn't go into detail, we have restricted production of sugar on a frozen quota basis and with respect to rice, the ricegrowers of this country were supposed to sell to Cuba a little over 3 million quintals, plus 70 percent of whatever they failed to produce at home to meet their demands.

Mr. CHALKLEY. That is right.

The CHAIRMAN. And that the Cuban Government violated that part of the treaty.

Mr. CHALKLEY. That is right..

The CHAIRMAN. What they have really done is to encourage production at home to the extent that the Cubans have to pay a good deal more for the Louisiana rice than they should because of this tariff protection, and then they have expanded purchases abroad.

Mr. CHALKLEY. That is correct.

The CHAIRMAN. Your idea is that if Cuba permits an expansion in her rice production to the extent that it penalizes the consumers of rice in Cuba, that we in turn should increase the production of sugar and thereby reduce the amount of sugar we buy from Cuba.

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