Senator SCOTT. So are we in North Carolina, but shouldn't we give the family-type farm help in getting adjusted upward in its size? Mr. AGNEW. Senator, I think we have no alternativeSenator SCOTT. I mean in the acreage as we have it now.

Mr. AGNEW. That is correct, because they cannot be an efficient unit from a mechanized operating standpoint unless they are adjusted upward.

The CHAIRMAN. How would you do that, by liberal credit to give them the chance to buy more land so they can utilize it or make it big enough to afford machinery?

Mr. AGNEW. You certainly can't force it but the fact that the investment in farming is so high per worker now, most of the people who can get away from it are going to more lucrative forms of employment and it is naturally adjusting itself. We have classed as farmers a great many people in South Carolina in the Piedmont section where we are industrialized to the point of practically no availability of farm labor, practically all farmers are part-time farmers and that within itself presents a problem. But certainly in the language that somebody in the Department of Agriculture expressed recently the farmers have been walking about in a dream world, that doesn't seem to make sense to me in view of the fact that at the highest point of the average prices for farm commodities 3 or 4 years ago, which was 103 percent of parity, then the statistical record bears out the truth of the fact that per-worker income on the farms of the country was even then only half the average per worker income of people off the farm.

So a hundred percent of parity as it is presently calculated doesn't at all guarantee the farm people parity of income. After all, that is the basic thing that we are aiming for. That is the thing that you gentlemen have distinguished yourselves in trying to help to do and get a program moving.

It is a very difficult thing and it has to be approached in many angles, not just farm-price-support level is enough, we have to do something about expanded export markets. There have been many proposals made the 2-price system, the 3-price system, compensatory payments, now the soil-fertility bank-and so far as we are concerned based on our observation of the way the compensatory payment plan is operating with respect to the wool industry this year that doesn't hold much promise. It is going to be extremely expensive and the wool producers actually aren't going to maybe get the major benefit.

It seems to me that the wool industry itself may benefit to an even greater extent than the wool-industry producers. If my information is correct, and I think it is reliable, only about a third of the wool clip of this year has been sold, and that is the lower grades at prices from 35 to 40 cents, and that two-thirds of the better grades are still awaiting sale; the wool industry is patiently stiting by until the time the year begins to expire and the wool producers must sell their clip in order to collect from the Government the compensatory payment, and then the wool industry has benefited and the thing is going to be expensive.

Some time ago it was estimated to cost $55 million or $65 million and actually may be higher than that. So compensatory payments don't hold much promise. If we applied them all across the board to all agricultural commodities the cost would simply be prohibitive.

We have no sources of tax revenue from which to get any such money. As far as the two-price system is concerned, our people in South Carolina don't look with very great favor, or haven't up to this time, we have another policy development session the 21st of November, 1 week from today, and we may change, but up to now we haven't looked with a great deal of favor upon the thing because we realize that the surplus portion produced above the requirements for domestic needs would be a burden on the market and that that thing would certainly be a very expensive proposition.

The CHAIRMAN. Mr. Agnew, your views so far have been negative—that is, you talked against certain things that have been proposed. Now, have you any proposal of your own? Forget you are a farm bureau member and think as Agnew the farmer. What would you suggest to this committee?

Mr. AGNEW. I would suggest first, as a very serious consideration, give consideration to something to come out of the half dozen proposals made called soil-fertility-bank proposals. It seems to me for that area is a supplemental program to the present support-price program, but not as a substitute, for a support-price program, it may be that something can be worked out that will afford these people, who lose income by reason of reduced acreages, may find a way to take acres out of cultivation and not put them into competitive crops that are also in surplus and yet have a little additional income that will enable them to pay taxes and survive during the period that we are working over the surpluses.

The CHAIRMAN. All right, sir. Is that all, sir?

Any questions?

Mr. AGNEW. I would like to make 1 or 2 more statements, if I may. The soil-fertility-bank program has a very desirable aspect in that it obviates the necessity for so much attention being given to the control of diverted acres. We get them out of production and don't have to control them. Now if we control absolutely control-diverted acres you are almost forced to control the planting of every acre on every farm because you can't put your finger exactly on those diverted

acres.

We farmers in South Carolina are not favorably inclined toward mandatory control of the use of diverted acres, although we realize that there is the hazard of putting those acres into crops maybe not eligible for price support but in surplus position.

The CHAIRMAN. Mr. Agnew, in that connection let me ask you this, sir. Suppose that the Congress should write into the law a provision to set aside 10 percent of the land on any farm and let us asssume further that this 10 percent does not equal the amount of diverted acres that a farmer could plant, let's say, in peanuts, cotton, and wheat.

Mr. AGNEW. And tobacco.

The CHAIRMAN. Tobacco. You have those three here in South Carolina. Do you think it is fair to other producers of commodities to permit the farmer to plant whatever difference there is between the 10 percent and the amount of diverted acres, let's say, if it is only 10 or 15 percent more, do you think it is fair to let him plant crops that would increase the difficulties to the wheatgrower up in the North or the ricegrower in Louisiana or any other grower of a crop that is suffering the same as cotton and others?

Mr. AGNEW. Well, we feel this way about that, Senator: If that 10 percent is not enough to control the thing, let's make it a little bigger, 15 or 20 percent.

The CHAIRMAN. In other words, make it enough to take care of the diverted acres?

Mr. AGNEW. Of the surplus. We are producing about 15 percent more on the average than we have any use for for domestic consumption or for export.

The CHAIRMAN. Your suggestion is that the percentage of acres to be taken out of production be at least equal to these diverted acres so that no harm will be done to the producers of crops that are already in trouble.

Mr. AGNEW. Approximately that.

The CHAIRMAN. All right.

Mr. AGNEW. I would like to make this point, if I may, gentlemen: There is only one approach that we have to the solution of that problem and that is upgrading agriculture, because there is no probability of doing anything detrimental to industrial protection, there is nothing in the picture that is apt to happen with respect to lowering the minimum wage level, for instance, so we have only one way to go and that is up with agriculture if we get on a par.

The CHAIRMAN. Thank you.

Any questions?

Thank you ever so much.

(Mr. Agnew's prepared statement follows:)

This statement is made on behalf of the officers and directors and the more than 19,000 farm families in South Carolina who are members of Farm Bureau. We are grateful for this opportunity. We wish to commend you for making known the fact that you did not want this hearing to be used as a sounding board for farm organizations, but rather that you wanted to hear from as great number as possible of individual farmers in South Carolina as to what they desire by way of improvement in farm-program legislation, particularly with respect to support prices for farm commodities.

We would like to give you a few quotations from our 1953 policy resolutions: 1. "We believe that farm people are better qualified to speak for themselves than is anybody else."

2. We favor a reduction in Federal taxes just as quickly as it can be accomplished without impairing our defense program. Our Federal Government should take the proper steps to gradually decrease the national debt but any debt-reduction program should encompass proviisons for maintaining a free and prosperous national economy."

3. "The primary interests of farm people aside from overall national problems, have to do with maintaining abundant production of foods and fibers without loss of opportunity and freedom to participate fully in development, maintenance, and expansion of a sound and prosperous economy. We pledge our vigorous support of every part of a program to accomplish this objective."

4. "We joint heartily in widespread support of the provisions of the Agricultural Act of 1949, and we shall just as heartily join in defense of its basic provisions if need be. We favor 90 percent parity support price for all basic commodities, and that producers earn such supports by voluntarily adjusting production to consumption. We favor 90 percent of parity support price on any basic crop when growers, by a two-thirds majority vote, impose marketing quotas upon themselves."

5. "We do not favor any two-price system."

6. "We oppose a Federal sales tax."

7. "We vigorously support rural electrification and REA telephone service to the point that American agriculture be adequately serviced, and we shall vigorously oppose any move designed to cripple these services or to hinder expansion to the point that American farmers be not completely and economically serviced."

8. "We believe that the prime responsibility for recommendations pertaining to the development of a sound national farm program, including acreage control and support-price features of such a program, rests upon the individual producers of each separate commodity, and that recommendations of such producer groups should prevail if and when such recommendations can be justified and proven not to be contrary to the public interest or the overall farm program.” The following are from our 1954 resolutions:

1. "We agree that overplanting of any allotment crop should render a farm ineligible to receive soil-conservation payments."

2. "We are opposed to cross compliance. Eligibility for support price should not be affected by overplanting of one allotment crop except to the extent of that one crop."

3. "We urge the Congress to investigate and publicize the causes of the wide spread between farm prices and prices to consumers."

4. "Since the control of diverted acres would have an effect of discouraging the proper diversification of crops, including the adoption of new and different crop varieties which are not likely to be in surplus. we are opposed to the control of diverted acres and favor the adoption of control programs on individual crops if and when these crops become in burdensome surplus."

5. "Since the Federal transportation tax was imposed as an emergency measure and since this tax affects both producers and consumers of agricultural products, we request the South Carolina congressional delegation to use its full influence in obtaining the repeal of the transportation tax law."

6. "We support the basic principles of present law with respect to support prices on basic commodities and other commodities. Such support is predicated upon the fact that such provisions of present law are the result of having given individual treatment to the separate commodities based upon their characteristics, adaptabilities, and support price program experience. We believe in the adjustment principle and its practical application as a basis for determining the level of support price by law. We do not believe that all basic commodities. are entitled to the same level of support price without regard to a practical application of the adjustment principle as evidenced by the separate commodity producer groups in living up to their obligations under the adjustment principle."

Our State farm bureau resolutions committee meets here in Columbia next Wednesday to formulate policy resolutions for presentation to our delegatebody at its annual meeting to be held at Clemson on November 20, 21, and 22. Several hundred local farm bureau meetings have been held during recent months in this State. Most of our county farm bureau organizations have recently held their annual meetings and resolutions from these respective counties are pouring into our office for consideration by the State resolutions committee and the voting delegate body. Some of these expressed policies may be changed at this next annual meeting of the South Carolina Farm Bureau on November 21 next.

When the index of prices received for agricultural commodities was 113 percent of parity as an all-time high, the average per capita income of people off the farm was approximately double the average per capita income of people. on the farm. Therefore, even 100 percent of parity as an average price for all agricultural commodities would not afford farm people much more than one-half of their share of the national income on a per capita basis.

In other words, approximately 200 percent of parity would be required to give farm people the average per capita income that off-the-farm people in this country are receiving. This does not indocate that farmers in recent years have been living in any dream world.

The Congress faces a very difficult situation with respect to making adjustments that will enable farm people to earn and get a fair share of the national income in this time of prosperity.

In recent years farm prices on the average have declined some 23 to 24 percent while the cost of production on farms has risen by 29 to 30 percent. Although gross farm income in 1954 was exactly the same as in 1947, production expenses had increased $4.3 billion, resulting in a $4.3 billion reduction in net farm income.

The cost of marketing farm products has increased rapidly since 1947. The record shows a steady increase from $18.4 billion in 1947 to $24:5, billion in: 1953. These costs have certainly not been reduced since 1953.

Agriculture is unique in that it is much less able to pass on its tax burden to consumers than would be true so far as most industries are concerned. In recent years farmers have paid an annual Federal tax of about $60 million on gasoline used on farms. An additional 1 cent per gallon Federal tax would increase this burden by approximately $30 million annually.

If you gentlemen of the committee had not already been thoroughly familiar with the fact, you. would have learned in this series of hearings that farmers are really in a tight squeeze between lowering prices and increasing costs of production.

We believe that you realize as well as we do that farmers today are in relatively very poor position as compared to other segments of our economy insofar as relative prosperity is concerned. We believe that the Congress really desires to do something about this bad situation in agriculture. We recognize the problem, but we do not have any ready answer. We realize also that the level of support price is no answer to all the problems of agriculture.

We realize that there is abroad in the land many pressures from many directions for lower prices for farm commodities. In the face of the facts, we know, and we feel certain that you know, that there is no real justification for such pressures to lower farm prices.

For instance, recent findings of some of the Nation's most competent economists clearly indicate that a reduction in the price of cotton would not be reflected at the consumer level, would not materially expand the domestic consumption of cotton, nor would it materially expand the foreign demand for American cotton. These same economists found by careful analysis of the cost of production of cotton in this country that the average American cotton farmer could not stand any reduction in the price of cotton when viewed from the standpoint of costs of production. They presented facts and figures to show that in this southeastern area where mechanization is not generally practiced, allowing 62 cents an hour for farm labor, that the average cost of production of cotton under existing conditions is 42 cent per pound which is 6 cents per pound more than we have received for any cotton of the 1955 crop. In spite of the fact that agriculture has lost one-third of its labor force in the last 15 years, and the population of this country has increased by about 3 percent a year, we are plagued with surpluses of most farm commodities. We have too much of most everything that comes from the farm. This is fine for the consumer, but it is terrible for the farmer.

As aids to the solution of the basic problem of trying to adjust agricultural prosperity to the same high level being enjoyed by business and industry and labor, many and varied proposals are being made. They include 2-price systems, and even 3-price systems, various soil-fertility bank programs, sale of farm commodities abroad for soft currency, export subsidies and giveaway programs at home and abroad. Still another is a program of compensatory payments.

Since industry and business and labor are being afforded protection by way of tariffs and the imposition of import duties and quotas and the minimum wage, and since it is not likely that the removal of any of these protections will soon become politically feasible, then the major problem at hand resolves itself into one of trying desperately to raise the level of agricultural prosperity to the level of prosperity being enjoyed by other segments of our national economy.

There are many who seem to believe that agricultural prosperity is really relatively unimportant since such a minor part of the labor force of this country is actually employed on farms. We need but recall what happened in 1920 when the War Finance Board decided to stop the inflation spiral after World War I to see what would likely happen again if the same kind of treatment be meted out to agriculture. The basic philosophy that prevailed at that time was that if industrial prices and wages were kept at a high level that the consumer buying power would be sufficient to create a demand for agricultural products and prevent lower farm prices. The net result of that kind of treatment was that by 1930 business, industry, labor, and agriculture altogether were beginning to wallow in the mire of real depression.

History indicates that an agricultural depression in this country will certainly eventually result in a general depression. With farm prices headed downward and production costs rising, the trend is certainly in the direction of a farm depression. The major problem is how to reverse the trend in farm prices and farm income. Price alone is not enough since production times price determines income.

Compensatory payments afford no satisfactory solution as evidenced by the way such a program is operating in connection with the wool industry at present.