my understanding was that it was his hope that the farmers would get together to try to help themselves and put a plan of their own in, instead of what they did; instead of doing that they increased the production, and that made the trouble that we are in today. In other words, instead of converting all of your milk into cheese and butter for a ready buyer, Uncle Sam, if you had put into effect a plan to sell more raw milk, the dairy people might not be in the trouble they are today. You increased production because of the 90 percent of parity supports. Mr. JEROME. We have such a program working now. The CHAIRMAN. You should have done it sooner. You might not be in so much trouble today, maybe. Mr. JEROME. Well, that is right. The CHAIRMAN. It is not only the Government that must come in and help but it is the farmers that must try and cooperate to help themselves. You cannot depend upon the Government entirely. I have some facts that show that some farmers, instead of converting their raw milk into cheese, would go into butter; if they could get more for cheese, they would go into cheese, because Uncle Sam was a better buyer. So if that self-help program had been started and if the farmers had tried to regulate themselves instead of doing as you did, and many others, the dairy people might not be in the trouble they are in today. Thank you ever so much. The next witness is Mr. Kaseberg. STATEMENT OF PAULEN W. KASEBERG, WASCO, OREG. Mr. KASEBERG. Mr. Chairman and gentlemen of the committee, my name is Paulen W. Kaseberg. For over 18 years I have been farming near Wasco, Sherman County, Oreg. My farm was homesteaded in 1882 by my grandfather, and has been operated as a dry-land summerfallow farm since that time. This year I had 34 percent of my summer fallow diverted from wheat and for the coming crop year the diversion amounts to 39.4 percent due to the national wheat acreage allotment program. That is a matter of concern to me; however, its severity is lessened by the provision permitting feed grains to be grown on these diverted acres. These feed grains are not particularly profitable, but they do prevent the diverted land from becoming subjected to severe erosion from both wind and water. Another matter of grave concern which I wish to call to your attention and which is not generally understood by many people is that of the so-called modernized parity formula. It is difficult for a farmer to understand how the parity price of wheat can be falling when his implement dealer tells him that implement parts have taken a 15-percent raise due to an increase in the price of steel; or, when his local petroleum dealer informs him that gasoline or diesel oil has gone up another cent per gallon; or, when his skilled hired man comes around and says that he needs a raise because his brother-in-law who just left an adjoining farm is now getting $22 per day in his new job in town. We have been told that the reason for a decline in parity has been a decrease in living costs, yet on October 22, 1955, the Department of Labor reported that September living costs were two-tenths of 1 per cent higher than September of 1954 and only one-half an index point below the record living cost of October 1953. It has been indicated that a cause of lowering the parity index has been the decline of the cost of feeds and seeds to the farmer. I take this to mean that our own price decline is used against us to determine the parity index. If this is true, I declare it to be extremely unfair. Where, then, is the gimmick in the parity formula that is working to the disadvantage of the wheat producer? To answer this question a person has to go back to the original definition of parity. Parity price, parity ratio, and parity income are the various standards used in agriculture to measure the degree to which farm prices or incomes are in line with what the Congress has defined as a fair goal or objective. Parity price is that price which will give agricultural commodities the same purchasing or buying power in terms of goods and services that farmers buy that the commodities had in a specified base period. In the Agricultural Act of 1948 a new method of determining parity prices was enacted. The 1948 revision specified that the relative parity prices were to be based on actual relative market prices for the 10 preceding years. Thus farm products whose market prices were lagging behind the general level of farm prices would have their parity prices lowered. This is especially true of commodities continuously produced in excess of domestic and export requirements. Therefore, the wheat farmer is faced with a continually declining parity ratio because of the 10-year market price injection into the modernized parity formula. This so-called modernized parity formula will, in itself, reduce the support price of wheat by approximately 38 cents per bushel, as compared to the old parity formula. This price decrease is often overlooked by those working on the farm problem, but cannot be ignored by the farmer who feels the effects of this cut in income just as keenly as he does the income reduction due to the flexible loan program. In the determination of the national wheat acreage allotment, Congress has authorized and directed the Secretary of Agriculture to compute annually a national acreage allotment for wheat which will produce a sufficient quantity to meet all domestic and export demands and, in addition, provide for a reserve supply of 30 percent over and above those requirements. Applying these provisions of law, the following facts are evidence that it is the mandate of Congress to provide production programs of abundance for wheat. In the case of the acreage allotment provisions, we find that the normal domestic consumption of wheat plus the estimated exports equals the estimated required production. The law directs that there must also be established a reserve supply equal to 30 percent of these requirements. This would call for a total supply of 130 percent of the normal requirements for domestic consumption and exports. Thus there can be no doubt that it is the intent of Congress and the purpose of the Department of Agriculture that our production programs for wheat must, at all times, provide for supplies in excess of the normal supply. The achievement of these objectives would eliminate any possibility of wheat prices at the parity level. Without the present set-aside provisions being now employed by the Secretary of Agriculture the sliding-scale formula requires by law that the price support percentage of parity value to be set at 75 percent whenever the supply percentage is 130 percent of normal supply. Therefore, without a change of law, or without the use of the setaside provision, the wheat farmer cannot for many years to come expect to receive more than 75 percent of parity until the present surpluses are worked off in one way or another. The manner in which these surpluses could be disposed of are: An expanded feeding program, a large industrial outlet, an export subsidy program, and increased use in domestic human consumption. It has been said that we wheat producers should not compete with other feed grains, yet in 1943 when over 400 million bushels were fed under a feed grain subsidy, wheat accounted for only 10 percent of the record feeding that year in the United States. Large volumes of wheat could be moved by an industrial outlet into alcohol which could be used in motor fuel to upgrade the octane content. An expanded export-subsidy program could be developed with cooperation of the State Department, and lastly our domestic food market would be expanded by the use of new wheat foods and by use of better understanding of nutrition on the part of the consumer. I realize these suggested programs all call for appropriations, but I also realize the present surpluses cost money for storage, deterioration, handling, interest, and administration. I urge you to give these cost factors close study. I wish it were within my ability to give as ready answers to the solution of eliminating the undesirable features of the modernized parity formula as it is to provide suggestions for surplus disposal. Of course, there have been made great technological improvements in farm machines, farm chemicals and farm methods, but when we face the picture presented by this modernized parity formula we cannot see a future in it for the wheat producer. A decline in a 10-yearaverage marketing price only accelerates declines in future parity ratios. The only escapes from a decline in the parity ratio would be for our surpluses to become exhausted and normal reserves depleted. Those conditions could only arise from war or from devastating droughts which would virtually wreck both the agricultural economy and the overall economy of the Nation. I am sure that no one desires or anticipates either of these solutions. We farmers realize that we must be on good relations with our city consumer, but we are only asking for fair treatment. We feel that at a time when the Nation is in a period of economic expansion and industry is at peak production it is a poor time to ask agriculture to face economic disaster. As previously mentioned, it does not seem equitable that producers, who in conformity with governmental programs, are called upon to produce wheat in such abundant supplies, should receive a penalty in the form of lower parity prices and reduced price supports as well as acreage reduction of the sharpest kind as a result of these programs. The modernized parity formula is diametrically in opposition to the program of abundance so essential to wheat. I am sure that it was not the intention of the Congress when the modernized parity formula was enacted into law to create the situation that is now taking effect with respect to the commodities produced in abundance as compared with those not so produced. There have been suggestions made from time to time by farmers for the improvement of the parity relationship and some of them are: To tie the parity figure to the cost of living index, to set farm prices on a basis with wage rates, to establish farm prices on a basis with steel prices, to set farm prices on a ratio with the index of industrial production, and perhaps there are others. In this agricultural era of improved machines, chemicals and methods, farming is rapidly becoming a business whereby the operator in order to survive the cost-price squeeze must become not only a production engineer, a cost accountant, a part-time veterinarian, a firstrate mechanic, a chemist, an expert soil analyst, and an optimist. Since the modernized parity formula will go into effect on a transitional basis in 1956, we request the Senate Committee on Agriculture and Forestry to give immediate consideration to the detrimental effects of this formula on wheat. The CHAIRMAN. Thank you, Mr. Kaseberg. STATEMENT OF KENNETH FRIDLEY, WASCO, OREG. Mr. FRIDLEY. Honorable Chairman and members of the committee, my name is Kenneth Fridley, my farm is located in Sherman County, Oreg., near Wasco. It lies in what is known as the great Columbia River Basin. It is one of the most highly mechanized farming communities in the United States. This farm consists of 640 acres of cropland, and 105 acres of farmland seeded to grass which is used for pasture, in addition to 170 acres of wasteland which produces some forage for cattle. One-half of the 640 acres is summer tilled or summer fallowed to store moisture and build up the nitrates in order to produce the next crop. This is a typical method of farming in the dry regions of the Pacific Northwest. This farm is operated entirely by myself and three teen-age sons. It could probably be considered a typical family-size farm. As a commercial wheat farm it is small. There are only 2 or 3 farms in my neighborhood having as few acres. Cash income from wheat is supplemented by income from a small herd of registered Aberdeen-Angus cattle. I do some feeding of steers myself and are owned jointly by myself and three sons and daughter, all of whom have been or are engaged in 4-H work since attaining eligible age. As a wheat farmer my major concern is to maintain an income adequate enough to stay solvent and to maintain a decent standard of living. This would include education for my children, a normal parental concern that they be prepared to enter today's highly technical and competitive society. Late events have created doubts and a feeling of despair in the minds of the farmer. We hear statements issued by our Government officials relative to the solid position of agriculture in our economy and that in the long pull the farmer will come out on top. A far more discouraging aspect of the farm program is the specter of statements emanating from policy levels of the Federal Government relative to the surpluses accumulating in the hands of the Commodity Credit Corporation at terrific cost to the taxpayers. The adverse effect of these statements on public opinion is creating a situation which may take years to correct and may even create the impression that the American farmer should "go it alone." It is a strange paradox that the American farmer should be treated as an economic delinquent when he has responded in every crisis in the past two decades to expand and produce to feed his countrymen and the rest of the free world. This he has done without cost-plus guaranty or fast tax writeoff or Government capital to expand the farm factory. Now that the farmer is suffering from that expansion he is reaping his reward, lowered price, curtailed production, and increasing costs. Under the present program the farms of my county are being allotted a wheat acreage of 60.6 percent of the total base acreage. Barley, a poor substitute for wheat, may be planted on the diverted acres. For example, my yield this year was 26 bushels per acre on an allotment of 244 acres, bringing a return of $8,458.66 gross after rent. The barley yield was 1,000 pounds per acre on 65 acres, bringing a total gross of $910 after rent. Income per acre on barley was $31 per acre less than for wheat. This I believe to be a typical example in the area. The combination of the two crops brought a total gross income of $9,374.66. Compare this with costs of $3,747.70 for repairs to equipment and farmstead in order to raise this crop. I have used only the equipment item, exclusive of seed, gas, oil, supplies, taxes, and so forth, to point out one fact-the cost of equipment in the operation of a commercial wheat farm. Total costs exclusive of labor were $10,582.79. To replace a tractor now being used on the farm and purchased in 1935 at a cost of $3,500 would today cost $13,042.92. Senator THYE. That is the large diesel unit? Mr. FRIDLEY. Yes, that is the type commonly used in the area. Mr. FRIDLEY. According to how heavy the soil is from an 8 bottom to 10 on the same unit. In my area they are using 10 and a short distance, 10 miles away, they are using 8 on the same unit. It depends upon how heavy the soil is. In other words, how sandy or how much loam. Other farm equipment has increased in like proportion in cost. If depreciation of equipment used in the production of wheat at 10 percent rate were added to the cost of repairs and maintenance, the cost would amount to $8,547.70, roughly over 85 percent of the total gross of this year's grain crop. Total operating costs were $10,582.79, or an actual loss of $1,208.13. I was struck with the closeness of these figures with those of Jack Smith on his 700 acres, as opposed to my 640-very nearly the same. In addition to this, the investment in equipment of $48,000, the investment in land of $80 per acre, I think that is very conservative, or $52,000 makes a total investment of $100,200 to produce a crop of grain. This is a one-man industry. Compare this with the average investment of $11,000 per worker in industry. Another gripe of the wheat producer is the actual, if not apparent, discrimination against him under the present farm program as compared to the producer of another commodity-corn. The percentage factor applied on the base acreage in my country is 60.6 percent, contrasted to the fact that no marketing quotas or penalties are applied if a producer of corn overseeds his allotment. This has been made possible by congressional action at the corn producer's request. As a consequence, the percentage of grower compliance is small due to |