REPORT OF THE ASSOCIATE ADMINISTRATOR OF THE AGRICULTURAL ADJUSTMENT ADMINISTRATION, IN CHARGE OF THE DIVISION OF MARKETING AND MAR- UNITED STATES DEPARTMENT OF AGRICULTURE, DIVISION OF MARKETING AND MARKETING AGREEMENTS, DEAR MR. SECRETARY: I present herewith reports for the Division of Marketing and Marketing Agreements and the Federal Surplus Com- modities Corporation for the fiscal year ended June 30, 1939. The re- ports for these two agencies, which are supervised under the direction of a single administrative official, are submitted jointly because of the very close interrelationship between their programs and activities. THE PLACE OF MARKETING AGREEMENT AND SURPLUS REMOVAL PROGRAMS The marketing agreement and surplus removal programs of the Department are designed primarily to help farmers meet a basic problem with which they have contended for a long time. This is the question of getting a fair return from an agricultural commodity after it is produced. These programs represent a direct attack upon the various marketing difficulties of farmers. They make possible more orderly selling conditions for agricultural commodities, and encourage increased distribution of crops which are produced in surplus. The agreement and surplus removal programs serve the interests of consumers, as well as those of farmers. The stability they bring to agricultural marketing is just as important for those who consume a product as it is for those who produce it. And the surpluses which are handled by the removal programs are salvaged for the use of consumers who otherwise would not be able to get them. SUPPLEMENT EFFORTS OF FARMERS In recent years there has been a growing realization that programs to meet marketing problems must go hand in hand with measures to solve production problems. This fact is definitely recognized in the national farm program, of which the marketing agreement and surplus removal programs are an integral part. These measures supplement the conservation, adjustment, and ever-normal granary features of the broad program. They provide farmers with the machinery to deal more effectively with the marketing phase of their operations after crops have been produced. The two types of marketing programs, marketing agreement and surplus removal, are closely interrelated. They seek the common goal of more efficient marketing, and they are frequently developed together. Surplus removal activities, for instance, may be planned as a direct supplement to cooperative efforts being made by growers through marketing agreement programs. GREW OUT OF NEED The marketing agreement and surplus removal programs grew out of agriculture's need for additional help to improve conditions under which farm products had to be sold. In their efforts to promote more orderly marketing and to protect farm income from falling to extremely low levels, farmers had already turned to group action in working out solutions. They organized cooperatives and worked with handlers of farm commodities in setting up clearing house arrangements and other mechanisms. These attempts sometimes ran into difficulties. The few who chose not to cooperate were often able to obtain the benefits without sharing in the burdens of united action, thus weakening the industry's program. Farmers then turned to Government for aid, in their search for machinery which would lend support to their organized efforts. Today, marketing agreement and surplus removal programs are meeting this need. They are fostering cooperation among farmers and improved working relationships between producers and handlers. The resulting adjustments are distinctly in the interests of the general welfare. MARKETING AGREEMENT PROGRAMS Marketing agreement programs provide for regulating the handling of agricultural commodities in interstate or foreign commerce. They are designed to encourage market stability for farm products and to promote an orderly exchange of goods. The main objectives, as stated in the declared policy of Congress, are (1) to establish returns to farmers at a level more nearly approaching the level of the prices of things farmers buy, and (2) to protect the interests of the consumer by approaching the parity level gradually and by taking no action which has for its purpose the maintenance of prices. to farmers above that level. The programs operate through marketing agreements and orders issued by the Secretary of Agriculture under a democratic procedure which requires their consideration at public hearings, and provides for referenda among producers and the assent of handlers. While marketing agreements may be used for any agricultural commodity, orders, which make the terms of the agreements applicable to all handlers, may be issued only for specific commodities. These are milk and its products, all fresh vegetables, fresh fruits (in the case of apples only those produced in Washington, Oregon, and California), olives and asparagus for canning, tobacco, pecans, walnuts, soybeans naval stores, package bees and queens, and hops. DEALING WITH MARKETING PROBLEMS Marketing agreement programs apply to handlers of agricultural commodities. They do not apply to farmers in their capacities as producers. In general, two methods are employed through the programs in dealing with farmers' marketing problems one for milk and another for such commodities as fruits and vegetables. PROVISISONS FOR DAIRY PRODUCTS For milk, the programs establish minimum prices which handlers in a marketing area are required to pay producers, and, in addition, provide for a method through which payments are made. Through these programs it has been possible to bring greater stability to a number of milk markets, improve competitive relationships among handlers, and provide for more equitable treatment for producers in the sale of their milk and in the returns they receive. PROVISIONS FOR CROPS The programs for commodities in the fruit and vegetable field in the main provide for the regulation of shipments out of a producing area on the basis of volume or the grades and sizes of the commodity which may be shipped. The volume of shipments of a farm crop. may be regulated under a marketing agreement program so as to supply the market with all it can take without seriously depressing returns to growers. In thus preventing gluts, speculative risks resulting from long-distance shipping and high handling charges are minimized. During seasons when a crop may be short, volume regu- lation of shipments may be used to help the industry spread the marketing of the total supply over the entire normal shipping period. Thus, both in times of heavy production and also in times of light production, marketing agreement programs provide the means for equitable participation by all growers in the more orderly distribution of their products. Regulating the grades and sizes of a commodity shipped helps to adjust market supplies more nearly in keeping with demand conditions for particular grades or sizes. By keeping off the markets low-grade and heavily discounted sizes of a product, growers are frequently able to prevent direct cash losses. At the same time, they are given a better opportunity to sell those grades and sizes of the product which are more in demand by consumers. SCOPE OF OPERATION During the last fiscal year, more than 40 marketing_agreement programs were in effect for milk and dairy products and for other farm products such as fruits, vegetables, nuts, and hops. Approximately 1,300,000 producers were directly affected through the operation of these programs. Since marketing agreement programs were first made available in 1933, much has been learned concerning the possibilities and limitations of this new approach to the marketing problems of farmers. The policies which are being followed in the development and operation of these programs have grown out of practical operating experience. The programs are now emerging from the experimental phase and are taking their place as permanent machinery available to agriculture in dealing with certain parts of the complicated marketing problem. The sizable store of information and experience which has been acquired is being used constantly further to improve this democratic means for the three-way cooperation of farmers, handlers, and Government. SURPLUS REMOVAL ACTIVITIES Surplus removal programs frequently supplement the efforts which an industry makes under a marketing agreement program, or through other means, to improve selling conditions. The immediate objective is to help farmers deal more effectively with burdensome, pricedepressing surpluses which glut their markets. The broader objective is to widen outlets for farmers and to stimulate the use by consumers of needed supplies of farm commodities. TYPES OF PROGRAMS Three types of surplus removal programs are employed in carrying out these general objectives. They are: (1) Programs to encourage increased domestic distribution and consumption, (2) domestic diversion and new use programs, and (3) export subsidy programs. All of these are designed to assist farmers in moving surplus supplies of agricultural commodities which otherwise would seriously depress prices. INCREASING CONSUMPTION The programs to encourage increased domestic distribution and consumption are designed primarily to bridge the gap between the surpluses on farms and the lack of adequate food supplies among millions of the Nation's consumers. The most significant development in this field of activity during the last year was the inauguration of the surplus food order stamp plan. Under the stamp plan, increased buying power is given to needy low-income families for use in purchasing commodities officially listed as being "in surplus." This plan utilizes the normal channels of trade in getting the surplus commodities from the farmer to the families who need them. The stamp plan was developed in the search for a more effective means of encouraging the consumption of surplus commodities. Previously, the principal method used to secure this increased consumption was the purchase of surpluses by the Federal Surplus Commodities Corporation and their direct distribution to the needy and unemployed through State welfare agencies. While the direct purchase and distribution activities are being continued, experimental operation of the stamp plan during the last weeks of the fiscal year proved encouraging enough to warrant a gradual expansion of this new method for handling surplus commodities. In the cities where the stamp plan is put into effect, the direct distribution of surplus products by welfare agencies is discontinued. ENCOURAGING WIDER USES The diversion and new use programs seek to develop and encourage future domestic outlets and new uses for farm products. Certain agricultural commodities produced in surplus quantities have been sold in very limited amounts or not at all in parts of the United States. Under a diversion program, provision may be made for payments to producers for the sale of surplus commodities in new domestic markets. The purpose of the payment is to equalize the returns from sales in the new outlets with those realized from sales in normal markets. In this way, new markets may be developed. The diversion programs operate through agreements between the Secretary of Agriculture and organizations, usually organized for the purpose by the various industries. Under these programs, surpluses of agricultural commodities may also be diverted from normal channels of trade in efforts to expand the production of byproducts and to develop new uses. Usually the lower qualities of a commodity are used for byproduct purposes. The expansion of this form of diversion is carried out through payments to growers. The elimination of supplies of lower grades from direct competition with the better-quality products, particularly when a surplus exists, removes the price-depressing effect which the low-quality stock tends to exert on the entire production. At the same time the use of surpluses in byproduct channels is fostered. New uses for surplus agricultural commodities are sought largely by making available to certain public institutions supplies which may be used for experimental purposes. Through such a program the use of cotton, for example, is being tested in the construction of highways |