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Second, the possibilities of CCC, each year, carrying over as shelled peanuts, in cold storage, a reasonable cushion of the various types and grades offers enough potential to warrant thorough study. This approach contemplates an annual rotation of the inventory. The cost of maintaining this inventory plus the lack of benefit as being a help in reducing surpluses of other CCC stocks indicates it is definitely a second choice.

After all, we should bear in mind that if carryover is adjusted as herein recommended there have only been 2 years since 1909 when the crop was so far below normal, that the revised carryover would be inadequate. 2. Prompt diversion

Current crop report estimates indicate a surplus from the 1955 peanut crop now being harvested of approximately 184,000 tons, assuming normal carryover is changed as herein recommended. This surplus is occasioned by a combination of above normal yields, granting of a 742 percent increase in allotments without proper regard to needs of the various types and to some less degree, the handling of the importation of foreign peanuts in 1955. We do not believe there will be any surplus of Virginia type, despite our indicated above normal yield.

However, we in our area are just as much effected as any one by what the Secretary may not do about promptly diverting the overall surplus to oil. Under legislation now on the books, all the Secretary has to do to slide the 1956 support level to 75 percent of transitional parity is to do nothing about a prompt diversion. We are alarmed at reports and indications which indicate such may happen.

If such does happen, then it is estimated a 75 percent of transitional parity support level for the 1956 crop will mean $31 million less income to peanut growers than they would otherwise receive for the same crop at a 90 percent of transitional parity support level. Compared to 90 percent of the old parity formula it will be a loss of $41 million.

It is generally understood that certain manufacturers of peanut products are urging the Secretary that he do nothing about diversion, basing the requests on the theory they are apprehensive about an adequate supply. With harvest well along and the quantity and quality known, this is ridiculous. Of course the motive is peanuts as cheap as possible, the man who grows them and his costs not considered.

There is no reason in the world to incur storage costs, risk some deterioration of quality and value, all of which will be charged up to the peanut program, and delay diversion until such time as it is too late to reflect a support level of at least 90 percent of parity for the 1956 crop.

In summary, a continuance of doing nothing about diversion can only result in very cheap peanuts for manufactures in 1956, unnecessary costs charged to the program and from $31 million to $41 million less income for growers.

We believe this matter warrents your timely attention. 3. Penalty for overharvesting

Change the penalty for peanuts harvested from acres in excess of allotments from 50 percent of support to 75 percent of support price and permit county committees to give weight to a producer's previous compliance in determining future farm allotments. Virginia growers recognize stern controls are necessary for the effective operation of a program designed to keep a healthy supplydemand balance. The relatively few growers who deliberately overplant and overharvest not only contribute to overproduction at the expense of the vast majority who comply but their actions tend to reflect unfavorably on the program. 4. Normal supply

Change the definition of “normal supply" by changing the allowance for carryover from 15 percent to 20 percent of the estimated domestic consumption plus estimated exports. Such a change is needed to provide a carryover which will realistically reflect present-day trade and industry practices. For the last 5 years the industry has, in order to keep the pipelines open, elected to carry over as of August 1, exclusive of CCC stocks, an average of 131,000 tons. Current legislation results in a carryover of approximately 99,000 tons. Clearly this is a needed change to cope with present-day trade practices and is not in any way a back door means of obtaining a setaside.

5. Net loan be announced support

Spell out in firm language that the net loan advance is to be the announced support price. At present we have a support price of 90 percent of parity for peanuts, the loan is approximately 86 percent of parity, and in some years of a 90-percent program the loan advance has been approximately 83 percent of parity. We all recognize that the loan price is the floor from which the market is bid up and the loan price is the important figure or level. Unless this is done, the Secretary of Agriculture, at his discretion, can continue to flex the effective support level, which is in effect the loan price, far below the support price set by legislation. All he has to do is decide there will be greater deductions for storage, handling, inspection, insurance, etc., in arriving at the loan price. 6. Basic to controlled

All reference in existing agriculture legislation to "basic commodities” be changed to "controlled commodities.” The word "basic" has caused peanut growers a world of trouble and may well become a problem with others. Repeated efforts by some manufacturers to destroy the peanut price-support program have argued that peanuts are not basic, and hence the program should be eliminated. We know there is nothing more basic to the peanut-growing sections of our producing States than peanuts. We submit the legislative history indicates it was simply a name assigned to a group of commodities which lent themselves to production controls and were storable and the producers of the commodities were willing to accept production controls as prescribed by the Congress. Despite the general understanding by those in agriculture, hostile writers, or any of those seeking destruction of the program, by use of such an approach can certainly confuse the public and an alarming number of Representatives. 7. Computing average prices

Two things are currently being done within the United States Department of Agriculture which tend to result in a lower support price. In both instances, we firmly believe the actions to be inconsistent with the law. Specifically, the Department, in arriving at average prices received by growers, which figures are then used in computing parity under the modernized formula, are taking into account

(a) The price received by growers in 1950 and 1951 for excess peanuts for oil, such production for oil having been expressly authorized by law; and

(6) The price received by growers, during all 10 years, for peanuts grown on acreage in excess of their allotment at a price equal to the difference between the market price and the marketing penalty.

We are not at all satisfied with the answer these procedures do not affect the parity price under the new formula very much. It is wrong. It may be relatively small but when added to other relatively small reductions of income, the total is an alarming one. If this matter requires legislation in order to correct, then we ask that such needed legislation be enacted. If it does not require legislation we ask this committee to determine why the law is not being complied with. 8. Effects of increasing penalties and discounts

We ask that the trend in recent years toward higher grade discounts and penalties be reviewed to see if corresponding upward adjustments in the support price have been made. If, in fact, such offsetting upward adjustments have not been made and we are of the opinion they have not been fully made a material lowering of returns to growers has taken place without authority and contrary to the law. If such a practice is not stopped, it has the potential of making the support level and the parity formula almost meaningless. 9. Vacant lot peanuts

Eliminate the unrestricted planting and harvesting of 1 acre or less. The increasing practice of more and more vacant lots and garden plots being planted in peanuts year after year-in many instances, numerous 1-acre plots being working by the same person—tends to make production control more difficult and demoralize the within quota growers. We recommend such plots be treated like any new grower allotment and farm.

Our association assures this committee our full support and cooperation in strengthening and further improving our program. We further assure our support of constructive efforts to soundly bolster the farmer's fair sharing of our national prosperity.

We thank you.

JUSTIFICATION FOR 10-PERCENT INCREASE IN ACREAGE ALLOTMENT FOR VIRGINIA

TYPE FOR 1955

(Enclosure 1)

1. GENERAL

There are several provisions of the Agriculture Adjustment Act of 1938 as ". amended which are pertinent to the request of Virginia growers for a 10-percent increase in acreage allotment for the 1955 crop.

Section 304 of the Agriculture Adjustment Act of 1938 as amended is particularly pertinent in view of the recent reopening of hearings before the Tariff Commission at the request of the Secretary, regarding the matter of increased import quotas for peanuts. Section 304 states in part: "In carrying out the purpose of this Act it shall be the duty of the Secretary to give due regard to the maintenance of a continuous and stable supply of agricultural commodities from domestic production adequate to meet consumer demand at prices fair to both producers and consumers.”

Also most pertinent to this request is section 358 (c) (2) of the act which states in part as follows: (1) "Notwithstanding any other provision of law, if the Secretary of Agriculture determines, on the basis of the average yield per acre of peanuts by types during the preceding five years, adjusted for trends in yields and abnormal conditions of production affecting yields in such five years, that the supply of any type or types of peanuts for any marketing year, beginning with the 1951-52 marketing year, will be insufficient to meet the estimated demand for cleaning and shelling purposes at prices at which the Commodity Credit Corporation may sell for such purposes peanuts owned or controlled by it, the State allotments for those States producing such type or types of peanuts shall be increased to the extent determined by the Secretary to be required to meet such demand but the allotment for any State may not be increased under this provision above the 1947 harvested acreage of peanuts for such State.”

(2) Report No. 169, 82d Congress, 1st session, House of Representatives, thoroughly explains the legislative intent of section 358 (c) (2). This report states in part as follows: "Probably the most important provision of the accompanying bill is the provision which will assure an ample production of all types of peanuts. One of the important provisions of the Agricultural Adjustment Act of 1938 as amended is section 304 which establishes consumer safeguards. Under that provision it is made the duty of the Secretary of Agriculture to administer the statute so as to provide for the maintenance of a production adequate to meet consumer demands at prices fair to both consumers and producers. The provisions of the accompanying bill will enable the Secretary of Agriculture to give full effect to the consumer safeguard provision by permitting him to increase at any time the acreage allotment for any State producing a type of peanuts which is in short supply."

In substance our request today—and it is the same request that has been made several times previously to the Department—is to earnestly ask the Department to incorporate current supply, demand, and other pertinent data into the method set forth in section 358 (c) (2) and act accordingly. We refer specifically to our letter of April 15 to Mr. Earl M. Hughes, Administrator, Commodity Stabilization Service, United States Department of Agriculture.

2. APPLICATION OF CURRENT DATE TO SECTION 358 (C) (2) (a) “On the basis of the average yield of peanuts by types during the preceding 5 years.” The Virginia-type average for the years 1950-54 inclusive is 1,565 pounds per acre.

(6) "Adjusted for trends in yields and abnormal conditions of production affecting yield in such 5 years." The last 5-year history of yield of the Virginia type indicates an upward trend and we are frank to say an adjustment upward for trends in yields would be indicated.

However, the next phrase specifically refers to adjustment for abnormal conditions affecting production. This clearly indicates a downward adjustment as we have been blessed with far better growing conditions and spared a bad producing year during the last 5 years. If we compare the 10-year average 1945– 54 production of the Virginia type with the natitonal average, less the Virginia type, during the same period, we had an average of 1,335 pounds per acre, compared with a national average, less the Virginia type, of 673 pounds per acre,

or a margin of 662 pounds per acre during this period. Comparing the last 5-year period production of Virginia type with the national average production, less the Virginia type, we have a 1,565 pound per acre average yield in the Virginia-Carolina area as compared to a 726 pound per acre national average yield, less the Virginia-Carolina area, or a margin of 839 pounds per acre. In other words, due to abnormal good growing conditions the margin between the 10-year average and the last 5-year average has increased by 177 pounds per acre. We feel it is most conservative to say that any upward adjustment for trends in yields would be more than offset by a like downward adjustment for abnormal conditions affecting production. That is to say, adjustment for trends in yields would have to be upward by more than 177 pounds per acre if such adjustment for trend in yields is not to be entirely offset by a downward adjustment for abnormal conditions affecting production in the amount of 177 pounds per acre.

Being fully aware of and appreciative of the hazards to growers in a surplus production, namely depressed market prices, depressed support level in 1956 and future years and jeopardy to the overall program, we are interested in being extremely conservative in arriving at the amount of any indicated increase. In the interest of being conservative we take the position that the indicated downward adjustment from 1,565 pounds per acre for abnormal conditions affecting production will be entirely offset by an indicated upward adjustment for trends in yields. Hence, we are back to the figure of 1,565 pounds per acre.

(c) “At prices at which the CCC might sell for such purposes peanuts owned or controlled by it." This particular phrase of the act is difficult to pinpoint and it is our interpretation this means a minimum of 9412 percent of parity. We submit that the best and most reliable information upon which the Secretary can make this determination is the fact that our crop moved at and above this level in 1954.

(a) "As to the actual increase indicated.” In 1953 the Virginia-Carolina area produced 245,755 tons, in 1954 the Virginia-Carolina area produced 235,237 tons, in 1953 less than 0.5 of 1 percent of the Virginia-type production was diverted by CCC for crushing. This was occasioned entirely by faulty CCC storage structures, in which loan peanuts went out of condition and were not usable by the edible trade. In 1954 not the first Virginia-Carolina area peanut was diverted by CCC for crushing. With the foregoing in mind it appears reasonable and conservative to figure a minimum supply of 245,755 tons of Virginia-type peanuts indicated as necessary in order to assure an adequate supply of this type and thus comply with section 358 (c) (2) of the act. This does not take into consideration the fact our population increase is at a rate which indicates the need for approximately 8,000 additional tons of peanuts each year for the edible trade. Of this 8,000 tons for edible purposes, the Virginia-type pro rata part would be approximately 60 percent or 4,800 tons per year, for a period of 3 years (1954–56) nor does it take into consideration the depletion of pipelines in 1955 and the resulting necessity for additional production in 1955, in order to restock the pipelines to a normal level. If we figure 245,755 tons at a 5-year average yield of 1,560 pounds per acre it would indicate an acreage increase of 13.3 percent over the present allotted acreage.

If, on the other hand, we use the 1954 production of 235.237 tons, a supply that we know was inadequate, it would require an indicated minimum increase of 8 percent above our allotted acreage.

Still in the interest of being conservative and taking each figure on the low side we submit that an absolute minimum increase in Virginia-type allotments of 10 percent, based upon an average of the 2 methods above outlined, is the absolute minimum increase we can go into this crop with and do justice to the intent and provisions of section 304 and section 358 (c) (2) of the Agricultural Adjustment Act of 1938 as amended.

We concur with the thoughts expressed in the past by some in the industry, that No. 1 and No. 2 Virginias are or may be reasonably sustitutable for and with No. 1 and No. 2 Runners and Spanish peanuts except in the case of certain candy manufacturers. Their equipment is set up to handle only the small Spanish peanut. In other words a shortage of Runners or a shortage of Spanish can be completely supplied if there are ample Virginias, with the one exception noted. Realizing this is a question where there exists honest differences of opinion, it is our position that even though one or more grades are or may be reasonably substitutable in their end use, the intent and language of section 358 (c) (2) is to the effect the Secretary will allocate sufficient acreage to insure an adequate supply of each type of peanuts; thus avoiding situations where end users and consumers are forced to use, merchandise and/or consume a type other than their preference merely because there may be an overall adequate supply of peanuts. However, and this is most important, a shortage of Virginias in the grades of mediums, extra large, fancies, and jumbos cannot be supplied by either of the other types regardless of how ample their supply is. These four grades are premium peanuts and found only in the Virginia type.

3. ADDITIONAL

Some skepticism has been indicated about this approach due to the fact we received an increase in Virginia type in 1951 of 81,800 acres and from the 1951 crop approximately 20 percent was diverted by CCC. Three factors contributed and were responsible for any diversion of Virginia-type peanuts from the 1951 crop and these factors should be known and understood by all. First, there was no diversion by CCC of No. 2's in the Virginia-Carolina area from the 1951 crop and this threw approximately 12 percent, farmers stock basis, more Virginia-type peanuts on the market than was anticipated at the time the allotments were made. Second, the 1951 crop was the first big step-up in yield per acre for our area. Our average yield per acre increased 209 pounds in 1951 as compared to 1950. The difference between a 209-pound yield increase per acre and the average of the preceding 3 years accounted for approximately 38,000 tons more peanuts than was reasonably indicated at the time the allotments were issued. The combination of this fact together with the discontinuance of a No. 2 program in the area resulted in approximately 232 percent more Virginia-type peanuts being available in 1951 than was indicated at the time the allotments were increased. Third, in the price-support schedules for the 1951 crop the differential for Virginia type over other types was increased by — This factor also had material effect upon the movement of the 1951 crop.

This minimum request takes no recognition of the fact Virginia-type allotments were reduced approximately 9 percent in 1953 from the 1952 level, despite the fact only 4 percent of the total Virginia-type production from the 1952 crop was diverted by CCC; and in 1954 Virginia-type allotments were reduced approximately 5 percent from the 1953 level, despite the fact less than 0.5 of 1 percent of the total Virginia-type production from the 1953 crop was diverted by CCC (this minute quantity was diverted because of previously referred to faulty CCC warehouses). The reduction of 14 percent in Virgina-type allotments during this period without any type increases exceeds by 10 percent the percentage of the Virginia-type crop diverted during a like period and is further justification for our minimum request.

4. CONCLUSION

Time is of the essence in this matter. The lateness will cause some inconvenience, however, this is completely negligible compared to the ruinous and disastrous consequences of a second year of short supply of peanuts or an inadequate supply of any type or types of peanuts.

It is our request and hope that the Department will give this matter expeditious action and we wish to make it clear that we do not have factual information relating to possible needs for other type increases. We ask, and are confident the USDA will give, careful consideration not only to our factual request, which request is based upon and within the scope of and intent of the provisions of the act before referred to, but to any other factual requests based upon pertinent provisions of the act, which may be made by representatives of other areas. We have to the best of our ability sought to factually present current data, together with the recommendation of all segments directly concerned with the Virginia type in order that the Department might evaluate such data and recommendation in the light of section 304 and section 358 (c) (2) of the Agricultural Adjustment Act of 1938 as amended.

ASSOCIATION OF VIRGINIA PEANUT & HOG GROWERS, INC.,

Franklin, Va., April 14, 1955. Mr. EARL M. HUGHES, Administrator, Commodity Stabilization Service,

Department of Agriculture, Washington, D. C. DEAR MR. HUGHES : We have been informed that the United States Department of Agriculture has decided not to give public notice by publication in the Federal Register of its intent to carefully consider the need for increasing the national

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