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The last figure I saw as to the gross national product was in excess of $380 billion. In 1947, the peak year in agriculture, it stood at $232 billion, and farmers' net income was $16.7 billion. In 1951, just 4 years later, it had gone up to $364 billion, an increase of $132 billion, yet net farm income had slipped to $12.5 billion, a decline of 25 percent in net farm income in the face of a 57 percent increase in the general level of prosperity. Farm net income is slipping steadily and conceivably can slip another 25 percent while the general level of prosperity increases a total of 100 percent and more.

This means that so long as national prosperity keeps increasing, only the farmer is hurt. But let the general economy slacken for whatever cause and cease to expand, and bad times on the farm lead to national trouble.

A look at agriculture's contribution to the national economy quickly tells you why this is true. Farm use of industrial goods now stands at 36.2 percent. Agriculture is a $12 billion to $13 billion customer of industry and labor every year, and that is for production supplies alone and does not include the farmer's purchases of consumer goods, which also run into the billions. Agriculture still produces 60 percent of the raw materials used in this country. It is the base industry on which rests employment of 40 percent of all the employed persons in the Nation today. In addition to those actually employed on farms, 10 million are employed full time in the marketing of farm products and 6 million are working in plants producing for farmers. It should be easy to see that at least 40 percent of the purchasing power of the Nation stems directly or indirectly from agriculture. It is easy to see why agriculture can't keep slipping without serious effects on the overall economy-without eventually hurting stocks and bonds and every phase of our economy. If farmers are allowed to go through the wringer again, then a serious depression sooner or later is inevitable. Let's look at some of the industrial products taken by agriculture. A few years ago the use of finished steel by farmers was estimated at 7 million tons. Today it has dropped to 61⁄2 million tons. Farm use of rubber once stood at 320 million pounds. It is down now to 285 million pounds. The use of crude petroleum, on the other hand, has jumped from 161⁄2 billion gallons to 17%1⁄2 billion gallons-more than is used by any other industry. Use of electric power is up from 15 billion killowatt-hours to 22 billion. (That's more than enough to supply the cities of Baltimore, Detroit, Chicago, and Houston for a year.) Fifty million tons of chemical materials (five times the amount used in 1935) are used on farms. And I could go on with a much longer list. For instance, three-fourths of all tractors for domestic use in 1950 went to farmers, 20 percent of all trucks; and in 1951, 30 percent of the tonnage hauled by railroads consisted of agriculture products. Does that sound like agriculture, because it has less farmers in relation to the total population, is less important to the total economy than it was in the 1920's? Does it justify the farmer's constantly dwindling share in national prosperity?

II. GENERAL PRICE-SUPPORT LEGISLATION

1. Elective support programs

With reference to price-support legislation, Virginia growers have certain specific and definite views, but it is most difficult if not impossible to thoroughly talk about a peanut price-support program without some consideration of a general price-support program. To illustrate, we have consistently sought and backed a program calling for not less than 90 percent of parity price supports for peanuts when producers have voted for marketing quotas and acreage allotments, as contrasted to flexible supports. However, we are sometimes misunderstood by some as wanting 90 percent of parity supports for peanuts but selfishly saying to the producers of other commodities, "Your price support level should flex down". On the other hand, we have been misunderstood by others as in effect saying they should have a 90 percent program because, we, peanut growers want one. In other words, meddling. I assure you neither is the case, as our recommendations will bear proof, for neither our country nor agriculture are in any position to stand pitting consumer against farmers or one farm group against another farm group.

Basicly, Virginia growers believe it is almost as impractical to have 1 pricesupport program for a multitude of different commodities, each with varying export, import problems, varying effects of price on consumption, varying degrees of competition with domestic and foreign commodities and varying marketing practices as it is to attempt doing all of the jobs on a farm with 1 piece of equipment. This leads to a recommendation that farm legislation be enacted

which will permit a choice each 3 years in a referendum of several price-support programs by the producers of the various commodities. What we have in mind is legislation which would permit growers, in a referendum, and separately for their own commodity decide each 3 years whether they would have for the next 3 years for example (1) a 90 percent of parity program, with production controls, (2) a flexible program with production controls or (3) another program or 2 programs considered especially adaptable for the problems inherent with perishable commodities.

Under such a program, it would be necessary to group the various agriculture commodities into several groupings based upon the adaptability of the programs to the various commodities, and spell out just which of the several programs would be available to each of the several groupings.

What we propose is in effect saying no one is in as good a position to make such a decision as are the growers of the different commodities. If they make an unwise choice it is promptly brought directly home to them and they will be the most interested and have the most at stake in making a different choice in the next referendum, or, if conditions should change so what was a wise choice 3 years ago is now a bad choice, the legislative machinery is available for the growers to make the change without having to have another round of farm legislation.

We are confident the overwhelming sentiment of all Virginia peanut growers is for a price-support program of at least 90 percent of parity whenever growers have voted to submit to marketing quotas and acreage allotments, together with specific strengthening changes to be outlined. This has been and is the unanimous position of our board of directors. Our people know that in 1954, with no support or controls, during the first 4 months of the year farmers produced 4.1 billion pounds of liveweight hogs, for which they received $1,055 million. During the same 4 months in 1955, they produced 4.9 billion pounds and received $802 million. They had complete flexibility. This is a decline of 24 percent in gross income from hogs in the face of a 16 percent increase in production. Further, for the 12 months' period ending May 1, 1955, the total annual value of hog production in America decreased by $1,700 million. Under the foregoing proposal we offer a means for producers of other commodities to have the same basic program when such is adaptable, while at the same time not forcing a 90-percent program on the producers of any commodity if they prefer no support program or one of the other choices.

Opposition to such an approach is anticipated from some who continue to represent that the vast majority of all farmers favor one particular program or no program at all. Such an approach would completely unmask these representations and many would find themselves completely exposed in their representations of what farmers actually desire. Undoubtedly, there would be much said about the stake certain producer groups have in the price level of the commodities produced by other commodity groups. Granted, there are cases of such secondary interest, but they are totally secondary to the primary interest of the farmers producing the commodity. The secondary interest is similar to the interest farmers have in the price set on steel by the steel industry but no one proposes farmers be permitted to participate in determining what price steel will be. Some group has to decide such questions and we submit it must be decided by those with the primary interest, that is the growers of the commodity in question. Others will perhaps attempt to avoid their exposure by arguing that farmers are not well enough informed to make such decisions. Such a philosophy we reject as a rank underestimate of the ability of farmers to capably and fairly make their own decisions.

We feel strongly that any person, group, or agency coming before this committee representing that growers prefer one program over another should have enough confidence in their appraisal of grower sentiment and thinking, together with their desiring to show their good faith, as to preclude them opposing a true grower decision in a referendum. Certainly our association has no reason for hesitancy on this question.

2. Parity formulas

Unquestionably, the one most disturbing economic matter to Virginia peanut growers in this era of a continuing decline in farm income is the severe, permanent, and unjustified consequences of the modernized parity formula.

The new formula, starting in 1956, unless corrective legislation is promptly enacted, will reduce the parity level for peanuts by 19.1 percent. This means a cut of 2.35 cents per pound in the support level if we have a 90 percent program,

or an estimated further cut in the annual income of peanut growers of approximately $41,120,000, (874,913 tons-October 1, 1955, crop report X$47 per ton= $41,120,000) when the new formula becomes fully operative. If this is coupled with a flexible support level of 4 cents per pound, (75 percent of 11 cents=8.25 cents compared to 12.25 cents) or a net annual loss to growers of approximately $70 million. There is little basis for theorists to assume any material portion of such a loss would be recouped by growers because of increased consumption due to lower prices. First, any such results from lower prices to growers are contingent upon the lower price being passed on to the consumer and rarely, if ever is very much of the cut in price to growers, reflected in consumer prices. Second, Marketing Research Report No. 16, USDA, BAE, 1952, Peanuts and Their Uses For Food is the most recent and authoritative study I know of which deals with this question. This study concludes the demand for both cleaned and shelled peanuts is inelastic, and a 1 percent change in wholesale price is associated with a change of approximately 0.4 percent in consumption. It has been our understanding that the accepted concept of parity involved the following:

1. Selecting a base period; for peanuts in the old formula it was 1910-14, during which base period the economy of agriculture was considered to be in a reasonable and desirable balance with the overall national economy.

2. Computing the average price received by growers during that base period, for peanuts it was 4.8 cents per pound.

3. Multiplying this average price received in the base period by the latest index of prices paid by farmers. Thus, if prices farmers pay doubles, parity prices double, if prices farmers pay go down one-half, then parity prices go down one-half.

The objective was, that whenever the price of a commodity, such as peanuts was selling at parity, a farmer could sell 10,000 pounds of peanuts and buy in the aggregate as much food, clothing, building materials, machinery, fertilizer, and the like as he could with the same amount of peanuts during the 1910-14 base period.

In connection with the passage of the Agriculture Act of 1949, Congress adopted a different formula, called the modernized parity formula. At the time the formula was adopted the experts in the Bureau of Agriculture Economics testified before the Senate Committee on Agriculture and Forestry that within a 4-year period the old parity and the new parity would coincide. In other words, they testified it would not matter after 4 years whether the old parity or the new parity was used, because the two prices would come together. The Senate said if it will take 4 years to accomplish it, they would wait 4 years from 1949, and let it become applicable 4 years later.

At a later date, the Senate Committee on Agriculture and Forestry recognized that these two prices were not moving together. Therefore, Congress in June 1952 passed Public Law 585, which extended dual parity for 2 more years. Congress said if they do not move together at the end of that time Congress will again take it up and try to make something out of it.

Today the two have not moved together and under existing legislation the current extension of dual parity expires December 31, 1955. The hour is upon us to now do something about this situation. We have every confidence that since the predictions of the officials of the Bureau of Agriculture Economics, and bearing in mind it was upon these predictions the new formula was adopted, have not been borne out, the Congress will take prompt steps to permanently extend dual parity and thoroughly study the entire complex problem. Results so far from the predicted results indicate the formula is basicly wrong.

As contrasted to the previous concepts of parity, the modernized formula does the following:

1. Uses the last 10 years as the base period, without any assurance whatsoever as to whether a particular 10-year period will represent a period of a healthy balance between the economy of Agriculture and the national economy. The last 10-year period for peanuts is one of the most abnormal periods experienced by peanut growers. It involved the gradual adjustment period from a war production for oil, to production for edible purposes. During this period the adjusting has been reasonably gradual to avoid extremely serious economic repercussions and was not unlike the reconversions of business from manufacturing ships, planes, guns, tanks, and the like to normal peacetime production, but inherent with this was a sizable surplus in all years except 1954. Such a surplus situation resulted in keeping prices depressed to, or near the net loan price which even with a 90-percent program has been as low as 83 percent of parity. Such years,

are what make up our most recent 10-year average. Also of some adverse effect are the matters previously pointed out in respect to including 1950 and 1951 oil peanuts in the averages and in all 10 years erroneously figuring the market price on peanuts harvested from excess acreage.

2. Next, the new formula brings into the picture an entirely new concept by requiring the base period price be adjusted by dividing into it the index of prices received by farmers. This index includes wheat, rye, rice, hay, corn, oats, barley, grain sorghums, cotton, tobacco, cottonseed, flaxseed, peanuts, soybeans, grapes, strawberries, snap beans, cabbage, carrots, cauliflower, celery, onions, lettuce, green peas, green peppers, spinach, tomatoes, Irish potatoes, sweetpotatoes, dry beans, beef cattle, calves, hogs, sheep, lambs, milk, wholesale and retail; butterfat, eggs, chickens, turkeys, and wool.

Many of the foregoing items are produced to a very limited extent by our peanut growers while the vast majority are not produced by our growers to any degree.

What in the world should the price received for rice, grapes, strawberries,. cabbage and the like have to do with parity for peanut farmers? We say, absolutely nothing.

3. Now the base period having been adjusted by the prices received, the result is multiplied by the parity index which is an expansion of the index of prices. paid used in the old formula.

The result is so-called modernized parity which will siphon off approximately $41,120,000 per year from peanut growers alone. When you take this additional amount from the growers, the entire economy of the producing areas will be badly hurt, together with the treasuries of the localities, State, and Federal Government to which taxes are paid, and I do not believe any one involved will like to consider the results as modernized.

In effect, what the new formula does to peanut growers and the producing areas is to take the relatively depressed grower markets of the last 10 years, and incorporate them into a permanent formula which will then serve to progressively lower the support level for future years. We see no hope under the new formula for anything but a worsening situation.

We point out that peanut growers will receive a lower support price at 90 percent of modernized parity, than they will at even 75 percent of old parity. We are mindful of the complexities of this problem and that perhaps the experts are still confused. We appreciate that the so-called modernized formula results in a higher parity price for some commodities. We are not familiar with their needs for an upward adjustment but perhaps such is merited. However, we are familiar with what it will do to peanut growers and the economy of the entire producing areas.

We earnestly, sincerely, and urgently recommend the following:

Permanently extend dual parity, retroactive to January 1, 1956, and as soon as practical undertake a thorough study of the parity formula question with a view of eventually devising a formula which will be fair to all, consistent with the fundamental concept of parity and will work as intended. An extension of dual parity other than on a permanent basis is most disturbing to marketing. For example, at present, it is natural that buyers and users of peanuts will closely watch their buying of supplies from the 1955 crop in order that they have the minimum inventory possible when the cheaper 1956 crop moves to market. This is slated to continue for 4 years of transitional parity. On the other hand, if there was another limited extension of dual parity, the same market-disturbing situation would prevail as the new termination date of dual parity drew near and the basic problems caused by the new formula would still not be dealt with.

3. Section 22

Amend and strengthen section 22 of the act so as to help prevent the reoccurrence of the unfortunate experience of peanut growers this year regarding the importation of foreign peanuts. First, the two proceedings before the United States Tariff Commission this year brought home very clearly the need for the Tariff Commission to have the authority to impose both quantitative limitations and additional duty. The Tariff Commission interprets the section as precluding this.

Second, the section should be so amended as to make it perfectly clear that whether the procedure be a new investigation or the continuance of a previous: investigation the proponent should be required to proceed through the Secretary of Agriculture who will conduct such investigation as he may deem proper,.

report his findings to the President and the President then either order or not order the Tariff Commission to undertake an investigation, or supplemental investigation. Attached hereto as enclosure 2 is a memorandum filed with the Tariff Commission, which request was in our opinion wrongly denied.

When growers of any commodity have curtailed production and are on the threshold of achieving a long-sought balance between supply and demand, to have a situation where a small group who would profit materially by breaking the market, can go direct to the Tariff Commission and have a new supplemental hearing ordered is dynamite. It is dynamite to growers, as we found out and the uncertainty also serves to upset the market at all levels. The mere announcement, regardless of the merit in the request for investigation or the final outcome has such an effect. Such situations can happen without the growers or the USDA ever knowing about it. In late 1954, our group learned late one morning the Commission was to consider a direct request that day at 2 p. m. Immediate calls to the USDA revealed they knew nothing about it but soon became active. Through the prompt action of many we are confident a premature announcement of an investigation was delayed a reasonable time. This did occur and right at the time growers, whose program section 22 is for the protection of, were then in the midst of harvesting a drought-struck crop. Even though the announcement of an investigation was delayed, the rumors incident to the matter caused the market to react adversely. It can happen again to peanut growers and can happen to the growers of other commodities unless corrective action is taken.

III. GENERAL PEANUT LEGISLATION AND PROGRAM OPERATION

1. Self-financing and promotional

Virginia peanut growers are now giving thought to and studying means of further improving the peanut price-support program, a program which we consider one of the more effective and better prorams now operative. We are especially interested in a practical method of permanently putting the program on a self-financing basis and at the same time provide a continuing fund which would permit an effective, year after year national campaign to promote and increase the per capita consumption of peanuts and peanut products.

At this time our thinking is not final and we realize, this, together with certain other recommendations must not only be refined but thoroughly coordinated with growers in other States. However, our present thinking and approach is along the following lines.

(a) Assuming other recommendations hereinbefore and hereinafter, made, are incorporated in revised legislation, then in addition to the elective price-support programs before outlined from which peanut growers could each 3 years select a price-support program, peanut growers would each 3 years also be permitted by referendum to elect a self-financing and promotion program. In event the program had appeal to the growers of some other commodities to which the program was reasonably adaptable, as we believe it would, certainly we would favor them having the same opportunity of choice.

(b) $6 per ton would be added to what would otherwise be the support price; $12 per ton would be deducted from producers by buyers and remitted to a central fund by buyers, on all peanuts marketed by producers, to cover the cost of handling and diverting peanuts not needed to meet edible requirements. and provide adequate promotional funds. The law should make it possible, with grower approval in a referendum, to within reasonable upper and lower limits, increase or lower the $6 and $12, on the same prorata basis (one-half of the total deduction added to the support price), as experience indicates necessary. The amount of the payment could thus be fixed each 3 years to provide funds estimated to be needed to cover handling, diversion and promotion costs for the next 3 years, plus any amounts owed to CCC or minus any surplus carried over in the fund from prior years.

(c) Since growers would be paying the funds, except that portion passed on in the finished product, which would be practically negligible to the consumer, a predominately grower committee, but providing for sheller, broker, and manu-facturer representation would be established to jointly administer the fund with the USDA. This committee should have definite authority and not be a fifth wheel. Also, the legislation should spell out the method of selecting the committee, and give it real authority in handling the diversion of any surplus. (d) As much as 35 percent of the total yearly fund, the exact amount to be determined by the committee, would be made available on a contractual basis by the Secretary of Agriculture to an agency or agencies designated by the

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