Instability in production and demand creates serious problems. Even small changes in either causes relatively large changes in prices.

Farmers exercise little, if any, influence on prices in the market places. They live and operate in an economy dominated by administered prices in industry, by wage levels protected through union action, and by Government favors to both. Fair trade laws, protective tariffs, minimum wages and social security are but a few of the many protective measures given by Government to business and labor and are beyond farmer control.

The decline in farm prices occurred when nonagricultural employment and income were advancing to a new high. Consequently, it is apparent that while a high level of employment and income are essential in maintaining prosperous conditions, they do not assure farmers of dependable markets and fair prices for their commodities.

Price supports simply place floors at levels determined to be desirable for farmers and the Nation. They become operative only when free markets fail to take the output of agriculture at or above those levels. They tend to reduce fluctuations so that consumers can be assured of abundant supplies and farmers a reasonable share of the national income.

While we must always strive to develop a program which will enable farmers to get full parity in the market place, there is likely to exist, even under the most favorable conditions, a need for price supports.

There is a growing need for some price support for livestock and dairy products. The farmers of the Nation sold their livestock in 1951 for $11.5 billion, when the volume of production was considerably lower than it is today. In fact, stepped up production until there was enough to provide everyone with 153 pounds and gross receipts dropped to $9 billion. Any price-support program for dairy and livestock products should be carried out in a manner that will move the products into the channels of consumption.

Some groups advocate the use of production payments for livestock and dairy products. It is our opinion that this plan may lead to real trouble for farmers. Its use, once begun, could so change market demands that all farm products would eventually be forced to call for similar action in self-defense. Farmers would then be dependent upon Government payments for their existence, and a portion of the consumer cost for farm commodities would be shifted from the market place to the taxpayer. We should strive to find a way to get a fair return for farm commodities with as little direct subsidy as possible.

PRICE GOALS FOR AGRICULTURE

Some people argue that farm prices are too high and that a lower price will expand consumption, foreign markets and income for producers. Past experience does not support this theory.

Farmers are businessmen and workers. They should receive a wage and investment return comparable with the nonfarm segment of the economy. If farmworkers received the minimum wage now fixed by law and a return on their investment comparable with manufacturing corporations, it would more than double the net income of agriculture according to Lloyd Halvorson, economist for the National Grange. It would be tripled, he said, if farmworkers received wages comparable with the average factory workers.

This analysis shows that full parity, as now determined, would return about $9 billion less than the amount required to give farm workers only the minimum wage fixed by law and owners an investment return comparable with manufacturing corporations. It points up the reasonableness of farmers when they ask for a price support (minimum wage) at only 90 percent of the current parity figure. Can anyone expect farmers to be satisfied with less?

While there are many factors that must be taken into account, the record indicates that price supports at 90 percent of parity is not too high if our objective is to assure farmers a fair share of the national income.

Our examination of the problems leads us to conclude that a new formula is needed for determining parity. If full parity were to give farm workers and owners a wage and investment return comparable with the nonagricultural sector of the economy, then it would be possible to provide for a wider range between the level of price supports and parity without bankrupting the agricultural producers of the Nation. We hope that Congress will inaugurate a study of this question at once.

Our members believe that the successful operation of any price-support proTram depends upon the willingness and ability of producers to adjust production

to effective demand. For that reason, we favor price supports on the basic commodities at not less than 90 percent of parity when producers have not rejected marketing quotas or any other effective method for adjusting production to current needs. We question the use of price supports at this level for an extended period of time when producers are unwilling or unable to make these adjustments. There are short run considerations, of course, which justify price supports in the absence of production adjustment programs.

PRODUCTION ADJUSTMENTS

The current supply and demand situation points up the need for production adjustments. While this is a rather simple operation for many nonfarm business organizations, it presents a complicated problem for farmers. Factors that cause nonfarm business to cut production sometimes stimulates more production in agriculture. Experience has demonstrated that voluntary methods for the most part are ineffective and that Government action is required.

Some advocates of a flexible price-support program seem to believe that variations in price relationships will encourage production adjustments. This method may be desirable in some instances and should be used under those conditions. Our experience with tobacco, cotton, and peanuts shows that some other method is needed for these crops. For example, cotton prices dropped to 7.6 cents per pound in 1932, the lowest in 30 years, and farmers were told that another big crop in 1933 would mean even lower prices. In 1932 there was planted 36,490,000 acres and yet in spite of the warnings, cottongrowers increased their acreage in 1933 to 40,280,000 acres. The effect of the low price was to stimulate more production. Other examples could be cited to show that low prices do not necessarily bring about needed production adjustments. We have found the quota system to be the most satisfactory method for adjusting the production of tobacco, cotton and peanuts.

We do not contend that all production adjustments can or should be handled in this manner. It is interesting to note, however, that the two programs, tobacco and sugar, approved in the President's message use quotas and price supports to maintain abundance and assure producers and consumers of fair and stable prices. Flue-cured tobacco growers have called for a re-examination of the acreage allotment for 1956 and such adjustment in the allotment as may be necessary in gradually bringing about a better relationship between supply and demand. The entire tobacco program can be destroyed by piling up supplies in excess of need.

Congress is exploring the possible use of poundage quotas for burley tobacco. The adoption of such a program is fraught with grave dangers. Burley growers in North Carolina have taken a firm stand in opposition to this proposal. We hope that Congress will drop this proposal.

Marketing agreements and orders can be employed to stabilize markets. We hope that Congress will broaden the act to cover additional commodities and provide for the continuous operation of marketing agreements and orders despite any short-run price variations.

There are many soil bank and land rental proposals now being discussed as another way for balancing production with demand. There is general public support for conservation expenditures. It seems to us that major emphasis must be given to measures which conserve resources and yet do not result in an immediate increase in production. It is our belief that an expansion of the present agricultural conservation program offers the most practical method for doing the job. The land capability survey needs to be completed as soon as possible so that an effective conservation program can be carried out.

The Nation has a vital stake in abundant supplies or reserves. How large should these reserves be and how should they be handled? The need for a sound national policy is evident. A small surplus brings bankruptcy to farmers and a short supply means high prices for consumers. Some way should be found to assure the Nation of abundant supplies without destroying the price structure of producers. We hope that Congress will explore this problem at the earliest possible time.

CONCLUSION

We have confined our remarks primarily to price supports, production adjustments, and world trade since they are the primary questions now under consideration by this committee. For the record, we want to state that research and education are important tools in solving farm problems and need to be further expanded.

which would not otherwise be readily available. To the extent that farmers can solve their problems in this manner, the need for direct Government action is minimized and the private capitalistic system made more secure. While I am sure that the members of this committee realize the need for cooperatives, we must never forget that there are powerful forces seeking to weaken or destroy their effectiveness. We hope that this committee will continue to give its full support to these organizations.

Crop insurance is proving its worth. Farmers covered by insurance are less likely to need special assistance when there is a crop failure from any cause. Disasters can be met, even in individual cases, on a more realistic basis and at less cost to the Government through this program than in any other way. It is our hope that this program will be extended into more counties as rapidly as possible.

The operation of an effective program will cost money. In appraising the cost, we hope that the possible price tag for the alternatives will also be carefully considered. Failure to keep agriculture strong endangers resource development and the general economy of the Nation. If farmers must depend upon free market prices, then production and demand must be balanced within a very narrow range or prices cannot be maintained at or near parity levels. This means that a crop failure or the existence of some emergency demand may create serious shortages and force prices to very high levels. All of these alternatives have a price tag, too. It is our opinion that the net cost to the Nation will be much less if we provide farmers with the tools that will assure them of reasonable prices so that abundant supplies will be available at all times. The words of the old Spanish Proverb are worthy of consideration-"Take what you want, take it and pay for it."

Again, we thank you for giving us an opportunity to present this statement here today.

Mr. CALDWELL. The problems of agriculture are largely due to excess supply. Production has been rising faster than effective demands and in addition we have lost some very important markets. I would remind the committee, however, that this situation developed during the period of falling farm prices and rising consumer income. Consequently there is little or no possibility of solving the problems of agriculture by lowering prices at the farm level. We do not believe we will expand consumption or bring about the necessary adjustments in the levels of production by further squeezing the farmer through lower price supports which will reduce their income.

We believe the net effect of a lower price-support policy will be a further cut in farm income. We recognize the complex nature of the problems and we believe a commodity-by-commodity approach is desirable and necessary. A program that will work for tobacco may not fit rice and a program that would work for rice may not be satisfactory for wheat. Some of us favor a commodity-by-commodity approach. The CHAIRMAN. You mean as is now the case with respect to basics? Mr. CALDWELL. Yes. I believe there is some tendency on the part of people to talk about rigid versus flexible price supports as though the answer to the whole farm problem will be found in one method or the other of price supports. We don't believe that is true. There are basics underlying principles and problems that must be dealt with for each commodity and price supports are a device for keeping the farmers' income from dropping to ruinously low levels. We would place No. 1 emphasis on expanding markets. There is some tendency I believe among people to assume that with population growth that the surplus problems of agriculture will be eliminated. I don't believe we can live long enough for that to happen. If we depend upon increases in number of people to take up the surplus of agricultural

that time arrives.

Then we have seen market patterns, especially for cotton, change rapidly in the past. Threat of foreign competition and synthetics suggest a need for a comprehensive study of price, quality, and marketing procedures. In some markets price is not a factor where it is all-important in others.

While there is little, if any, possibility that a lower price now will materially increase markets for cotton, we must recognize the effect of price on market demand as we face the future. We need a research program that will lead to lower production costs, improved quality and better marketing procedures.

You realize I have been a member of the Cotton Research Advisory Committee of the Department of Agriculture since it was created and you recognize in these statements that I am pretty well sold on the needs for expansion of research designed to cut the cost of production, and increase market outlets for cotton.

The CHAIRMAN. Let me ask you this: Do you think it will ever be possible for us to produce cotton in North Carolina and other cotton States to compete with the peon labor in Mexico and Brazil and Peru and Pakistan and other parts of the world?

Mr. CALDWELL. I don't believe so unless they increase their standard of living and change their methods considerably.

The CHAIRMAN. To make theirs go up.

Mr. CALDWELL. That is right.

The CHAIRMAN. If we wait until that time you will keep a lot of cotton in storage for many years.

Mr. CALDWELL. Yes. You will notice I am not recommending that we follow that practice. By building a program it should be possible to hold an expanded cotton market on a basis which will give producers a constantly rising standard of living. Anything less will not be acceptable to the Nation. While we are on cotton, there is evidence that some cotton manufacturers are blending synthetic fibers with cotton when it can be done without consumer knowledge or resistance. Manufacturers will likely follow this practice more and more, and thus destroy a market for cotton unless steps are taken to correct this situation.

We would suggest that Congress enact a labeling law which would require manufacturers to declare the fiber content of their fabrics. That is in the interests of both consumers of cotton goods and producers of raw cotton.

There are some potential world markets for large quantities of agricultural commodities. You are more familiar with that than any of us in the room having traveled extensively around the world and we believe some steps can be taken that will help us to maintain a reasonable share of those world markets.

I think you know that, I for one believe that there may be instances where the domestic parity or two-price program properly safeguarded may help us to expand and gain world markets for surplus agricultural products that would otherwise not be available. You probably have heard about that while traveling through the wheat regions and in other sections.

The CHAIRMAN. In connection with that, as I stated a moment ago there are 2 or 3 very important suggestions made in which the farm

organizations of this Nation differ, and it is my hope that you people can get your heads together and come with a united program.

If you folks can't agree how do you expect the Senate to agree? One pulls against the other. I think this problem is so serious that all of the farm organizations ought to forget about their memberships, forget who did the job but try to create a climate whereby they can get together and get a program that will be long lasting and that will save American agriculture.

Mr. CALDWELL. We agree with that.

The CHAIRMAN. All right. I am hopeful you folks, you, the Grange, and the Farm Bureau, and Farmers Union can get together on at least some of the major suggestions made during these hearings and you have just put your finger on one of them, the two-price system. Whether that will work I don't know, but it may be necessary for us to try it on some of the programs and rice has been suggested as one. That is from my State. I don't know how it will work but I am willing to use it as a guinea pig to see how the two-price system will work. If the Farm Bureau, the Farmers Union, and the Grange and other organizations can get together and say here is a program we will agree on, let's try it, that goes as I said for the fertility bank and cross compliance. Those are things we are going to have to solve one way or the other before we get a good workable bill.

Mr. CALDWELL. I would say that we agree wholeheartedly with you. I have the honor of serving on the executive committee of the National Grange and at our last meeting we invited the executive committee of the Farm Bureau Federation to spend a day with us and when we ineet again in January we will spend a day with them. In addition we invited members of the executive committee of the National Farmers Union to come in and spend a day with us. It is my belief we should be more interested in solutions than credit. The No. 1 thing is to get the job done.

The CHAIRMAN. Instead of meeting in January, why don't you start next month? Get the ball rolling so that we can get a bill before Congress and enact it before February 15. I think these organizations could perform a greater service to the farmer by forgetting, as you have just indicated, who will advance the best ideas. Just get your heads together and get to work.

Mr. CALDWELL. We also believe that in some special lines that other steps may be necessary in expanding markets. For instance, the special school-milk program is helping expand markets for milk. We would like to see that reenacted on a permanent or continuing basis. We think it is in the interest of better health and at the same time it is going to help provide a market for a livestock product that will be good for soils and good for America as we face the future.

We would also suggest the possible use of a domestic food-allotment program and similar devices to help meet the problems of low-income consumers and we have some in this country.

The CHAIRMAN. That plan has been suggested by quite a few organizations. Let's hope that is one on which you might get together and present a united front.

Mr. CALDWELL. In the field of foreign markets we want to commend the Congress and the administration for the current effort to expand world markets, the transfer of agricultural attachés to the Depart