INDUSTRY EFFORTS TO MEET THE PROBLEM

The United States rice industry cannot afford to be placed in the position of a residual supplier. Not only can it not afford to be placed in this position from the standpoint of the industry but, we believe, it is to the best interest of the United States to maintain a stable rice-producing economy. In view of the extremely critical situation in the Far East and with rice being the food item which is in demand and which would be extremely critical in event of action similar to that which developed out of the Korean situation, we believe it is in the best interest of the United States Government with respect to its foreign commitments, its foreign economic policy, and its defense activities, to keep a healthy stable producing machine in the United States rice industry.

The industry is aware of the fact that it must continue its effort to expand the consumption of rice in the United tates. Rice producers in the States of Texas and Arkansas are, at the present time, spending about a half million dollars a year of their own money in an effort to increase rice consumption in the United States. Mississippi and Louisiana are organizing promotional campaigns. These are not efforts to advertise brands of rice. They are simply all-out efforts to increase rice consumption. The millers and brand advertisers are spending millions of dollars a year in an effort to promote and increase the consumption of rice and I am sure that you gentlemen of the committee have seen more rice advertising on your television screens in the past 18 months than you have in any much longer period before that time.

The rice industry has been aware of our situation for some time and in 1953 even while export controls were in effect, the rice industry advisory committee strongly urged the Secretary of Agriculture to impose acreage controls on the 1954 crop in order to prevent the surplus situation that we face today. Again, in December of that year the advisory committee repeated its urgings that acreage controls be imposed on rice production. No such action was taken.

We are thoroughly aware, as rice producers, that, regardless of where the fault may lie, all of us face a most difficult situation and must work to a solution which is sound and satisfactory to everyone and every agency concerned. We pledge you our cooperation to that end.

A DOMESTIC PRICE-SUPPORT PROGRAM FOR RICE

I am sure all of you are familiar with the study printed as House Document No. 100 and entitled "A Study of Various Two-Price Systems of Price Support and Marketing Which Could Be Made Applicable to Rice." The study was made by the Department of Agriculture pursuant to section 315 of Public Law 690, 83d Congress.

This study is one of the most thorough and objective studies it has been my pleasure to see. I think it covers the subject well.

I have a personal objection to designating the programs which have been discussed in connection with rice as "two-price systems." When I think of a twoprice system of marketing, I think of a fixed domestic price and subsidized export price. I believe this is the picture most people see when that descriptive title is applied. I think "domestic price support program" would more accurately describe what we were talking about. I have heard very few suggestions to the effect that our problems in the rice industry should be solved by Government subsidization of the rice which we export. I will continue to use the two-price designation for simplicity but, I hope, with all of us having a clear understanding of its meaning.

All of our discussions and suggestions center around some method whereby the rice producer in the United States can retain a measure of price support for the rice which goes into our primary markets and yet be allowed to produce, if he can do so economically, for other export markets where price is one of the principal factors.

Because of the peculiarities of the demand for rice and its heavy dependence on export markets neither a support level at 90 percent of parity with rigid controls nor the so-called flexible support program can solve our problems. If we are priced out of our export markets we have lost an outlet for a large portion of our crop and the loss is sudden and abrupt. Both the "rigid" and the "flexible" programs of price support contemplate reducing acreage and production until the market is able to absorb all of the production at a fixed level of parity. One would maintain the level of parity while the reduction is being made while the other simply reduces the level of parity at the same time the acreage is being

reduced until, in either case, the production is reduced to the point where the market price again approximates 90 percent or some other fixed level of parity. Actually, when we are in trouble the remedy lags just 1 year behind the ailment. The reduction of acreage and of support levels occurs after we have lost our markets and accumulated surpluses.

It has seemed to many of us who have been working with and studying the so-called two price method of price support and marketing that this is the most feasible plan of supporting producer prices at a reasonable level of parity and at the same time giving the producer as much freedom and flexibility in his operations as possible with little cost or risk to the United States Government. As we see such a program, the producer would have substantially greater benefit than he had under the present program and substantially the same benefits as he would have under a rigid support program. In addition, he would have an opportunity, if he so desires, to produce additional amounts of rice with the only requirement being that such production must be moved into export markets and the only penalty being that he would not be eligible for price support on the additional production. Thus, if an individual producer wanted to produce beyond his domestic allotment, he would do so at his own risk and there would be no obligation of any Government agencies to take care of him if he got into trouble.

House Document 100, prepared by the United States Department of Agriculture at the direction of Congress, provides the strongest argument that I have yet seen for a two-price program of rice marketing. Table I of the study on page 28, gives a very clear illustration of the reasons why a two-price program is so attractive to the rice producer when it points out that under a 90 percent price program the total returns to rice producers would be $190.7 million with acreage controls accounting for a reduction in acreage of about 10 percent below the 1955 acreage. Under a 75 percent support program acreage controls would allow about 7.75 percent increase over 1955 acreage and the total return to rice producers would increase by $1.6 million to $192.3 million. With prices supported at 65 percent of parity and no acreage controls the total return would be increased by $5.3 million while under a two-price system, total returns to producers would amount to $232.9 million, an increase of $42.2 million over returns under the 90 percent program and an increase of $3.6 million over a 75 percent level of supports which is the lowest that price supports can drop under the flexible support program now in effect.

I realize that these studies are based on levels of parity support and price indexes at the time the study was made. I believe, however, that the general relationship between the four types of support programs would remain fairly stable and that we could expect relative differences between the various programs to remain substantially the same.

I believe that these figures can become more meaningful if we apply them to a hypothetical farm with a 100 acre allotment. Table I indicates that if the farmer was willing to take 75 percent of parity supports he could expect an increase of about 0.84 percent in gross income on a 20.3 percent increase in acres. In other words, he could expect his gross income to be $17.92 per acre less and his total gross income to increase about $87 as a result of the additional 20.3 acres he planted.

At the 65 percent of parity support level, according to table I, the farmer could expect to be allowed to plant an additional 36.59 acres and that he would receive about $27.49 less gross return per acre of his total gross return as a result of planting an additional 36.59 acres would be about $288 more than if he planted only 100 acres at 90 percent of parity.

Under a two-price system, gross income to the farmer, without acreage controls would increase by $2,434 and he would plant about 37 acres more than he would under a 90 percent control program.

On page 30 the USDA study has put down most of the advantages of such a price support program as follows:

(1) "Two-price marketing would make possible for producers to maintain exports at a relatively high level."

(2) "Avoid future drastic acreage reductions."

(3) "Result in larger gross returns to producers than obtainable either under present legislation or under free market prices."

(4) "Require no Government subsidization."

(5) "Restore to producers greater freedom of initiative in planning operations in accordance with changing market conditions without sacrificing basic income protection accorded under present legislation."

(6) "And it would eliminate the need for large-scale Government storage and disposal operations associated with the operation of the present program.” If the producers are willing to accept their part of the burden of disposal of such stocks in return for a long time stable approach to the problem of rice price supports and marketing, I think they are to be commended and that the program is worth trying.

The study points to only 2 disadvantages of the 2-price method of marketing for rice. They are: (1) "The complex administrative procedures which would be required to insure the effective and efficient operations of such program,” and (2) "the ability of the United States rice producers to compete for a larger share of world rice markets *** would probably be regarded in export trade as a Government dumping program." Although both of these objectives have merit, we cannot believe that they are serious enough as to cause abandonment of consideration of a program which has so many obviously attractive features. Admitting that administrative procedures might be difficult, I think it is pertinent to point that the United States Government administers many more complex proposals than is involved here and even the United States Department of Agriculture administers more complex programs than would be involved in a two-price method of marketing for rice. I think either the present price support program with its acreage allotments, marketing quotas, enforcement of acreage allotment, enforcement of marketing quotas and collection of penalties, grading and storage, and purchase under present price support operations, and disposition of stocks, or the administration of exports within and outside the International Wheat Agreement or the administration of the many other Government programs might be cited as involving much more complex administrative procedures which have been successfully solved.

The second disadvantage is an assumption that other governments might regard such a program as "a Government dumping program." Considering the fact that most other rice producing countries of the world operate on a two-price method of marketing, and that such objections have not been critically raised against other United States exports of agricultural commodities which are actually subsidized, which would not be the case with rice, I cannot see the validity of this objection.

The USDA study states, on page 1: "The rice industry faces the alternatives of drastically reducing its production or of maintaining its foreign markets by selling at prices below the present levels of domestic price supports." I know of no one in the rice industry who contends that a two-price method of marketing is the perfect solution or that it does not have its attendant problems. I think the above quoted paragraph very succinctly states our alternatives and that, given the tools to do the job, the rice industry will accept their part of the responsibility in trying to develop a long time, stable marketing relationship which will serve the interest of the producers, the economy, and the Government agencies charged with administration of farm laws.

United States rice production constitutes less than 2 percent of the world rice supply and even in 1953 and 1954, the largest export years for United States rice, our rice shipments to the Far East accounted for only 3 or 4 percent of the total cereal imports in that area.

When I was in the Far Eastern exporting countries of Thailand and Burma in September of this year, I found government officials there much more concerned about the inroads of wheat and other subsidized cereal grains which were taking their traditional rice export markets than they were about the small quantities of rice which the United States might have available for export. The percentage of rice in the cereal imports of the Far East has dropped from 88 percent prior to the recent world war to 31 percent of total cereal imports today.

OTHER PROBLEMS OF THE INDUSTRY

I think Congress needs to take a very real look at our overall economic and foreign policy as it applies to and affects agriculture According to a Department of Commerce press release this week, total annual personal income in the United States for the first 9 months of this year averaged $13,500 million more than the first 9 months of last year but annual farm income was down over $1 billion from the first 9 months of 1954.

Also in this week's press is a report of the USDA Foreign Agriculture Service which estimates world cotton production this year at 4 percent higher than last year's output and states that "increased acreage in nearly all countries outside the United States is the major reason for the production boost." I believe the

same thing applies to rice and most other agricultural commodities which are subject to production restrictions in this country.

It is my personal feeling, and that of many of our members, that the Secretary of Agriculture is doing an honest, conscientious job with the tools he has at hand but that the tools are not adequate to meet the situation. I am sure that if we continue to reduce acreage we will eventually reach the point where our agricultural commodities will be at parity in the market place but to the farmer who must pay for his farming equipment and support the family, total income, which is price times volume, is much more important than a fair or equitable price on such a small quantity that he cannot carry on his farming operation.

I think a part of our farm problem, and perhaps a big part of it, lies with our foreign economic policy as administered by the State Department. I was told by a State Department official last year, in effect, that it is the job of the State Department to administer policy as they see it and that they assume agricultural organizations, USDA and Congress will look after the farm interest in foreign economic policy.

I was told by a Ryukyuan government official in September of this year that when the Ryukyuan government wanted to buy some 30,000 tons of rice a couple of years ago they were advised by our people that they should negotiate with Burma although they had used and liked United States rice and it was their first preference and they had to pay United States dollars wherever they bought. In checking with our Government people in Okinawa I found that this instruction had been cabled to them as a classified document and they could not reveal its contents, but that in effect this was exactly what had happened.

One week later I sat in the State Agricultural Marketing Board office in Rangoon, Burma, and saw listed on blackboards on the walls the loading dates and destinations of rice shipments. With the exception of one small cargo, all of the 20 or 30 loadings which I noted were destined for the U. S. S. R., Poland, East Germany, and other Communistic bloc countries.

I talked with a high government official in the Philippine Islands who told me that this government and people were very much embarrassed last year after receiving permission to negotiate with the United States for some 300,000 tons of United States rice to read in the newspapers that the United States State Department felt that they should buy from Burma and Thailand or other Asiatic sources and not from the United States. He stated, as nearly as I can quote: "The United States is our best customer and we like to do business with the people who do business with us. Our people like and want to use United States rice. We have to pay United States dollars wherever we buy. You can talk about Asia for the Asians as long as you want to but when the going gets rough we know who will be on our side."

I am sure most of you are familiar with the violations by Cuba of the GATT rice trade agreement which Cuba has with the United States. These violations have been protested time after time over a period of years but the State Department takes the attitude, and has so written to Members of Congress, that Cuba faces economic difficulties and that to require them to live up to their trade agreement might leave them subject to Communist influence although Cuba expects us to live up to the letter of the law with respect to our sugar agreement with them. I think my feelings in this matter can be boiled down to about this. If United States agriculture is to be a weapon of economic foreign policy then let us call it that, charge the bill to the State Department or other proper agency, and quit blaming the United States farmer and United States agriculture for the fact that there are fewer markets and that he is producing more than he can sell As I say, I think it is time Congress took a long searching look at our overall policies as they affect agriculture when we continue to cut back acreage and farm income in this country and tell the farmer that this is all that he can expect in a peacetime economy while other agencies of our Government are exerting every influence to keep our products from competing with other countries of the world and still other agencies of Government are spending millions and hundreds of millions of dollars of United States taxpayers money to increase agricultural production in almost all other countries of the world.

WAGE AND HOUR LAWS

Another action which Congress might take which would help to alleviate the cost-price squeeze in which the farmer is caught in a look at our wage-and-hour laws and particularly with respect to a definition of the "area of production." Wages make up a big part of cost to agriculture. There is no logical reason,

with trucks and modern hard-surfaced roads everywhere, to say that because rice is produced more than 10 miles from a rice drier, the drier is subject ot wage-andhour laws when it would otherwise be exempt. Nor is there any reason for saying that a rice drier which needs railroad sidings, power, fuel, etc., which is not located near any city should be exempt but that because it happens to be located within so many miles of a city of a certain population it ceases to be an agricultural enterprise and should be subject to all of the provisions. In our opinion, "area of production" should be defined as the area in which the agricultural products are produced and because the city limits have been expanded to come within a certain number of miles of the processing facility should not cause it to cease to be in the area of production if it is still handling the products actually produced on the farms in that vicinity.

Another provision in this respect is with regard to irrigation systems. As you know, rice is produced under controlled irrigation. If the irrigation system is a cooperative one or takes its pay in a share of the crop. it is exempt from wage and hour regulations. If it charges a cash rent for its water services, however, it is not exempt. This is true even though, on the whole, those which charged a flat cash rate per acre for supplying water provide the service at a lower cost than do those which charge a share of the crop. We believe any irrigation system serving agriculture should be exempt.

Mr. Chairman and members of the committee, we appreciate the opportunity of presenting our views to you. Thank you.

TABLE 1.-Acreage and production of rough rice in the United States, 1935-55