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in force until modified or suspended or terminated after the Commission has advised the President, after another investigation * * *."
Nowhere does the statue or Executive order make any reference to or authorize "continuing investigations" after the investigation directed by the President has been made and he has acted thereon. Neither do the rules of the Commission make any reference to continuing investigations. On the contrary, paragraph (4) of the Executive order makes it plain that no such authority exists.
Even the General Counsel of the Commission recognizes that a "continuing investigation" in instances where the President has acted after prior investigation and report of the Commission, actually amounts to "another investigation." It is clear that such is the fact and that there is, as in the instant proposed investigation, nothing continuing about it. It would be in truth and in fact “another investigation” and one which had not been ordered by the President in conformity with the statue.
The next question and answer clearly shows the lack of certainty in the mind of the Commission's General Counsel as to the authority for the theory of "continuing investigations."
"The CHAIRMAN. Is it another investigation or another chapter of the same investigation ?
*Mr. KAPLOWITZ. Well, actually the statue in effect makes it a continuing investigation, once the President imposes a restriction, the law contemplates that we keep the matter under review so as to be able to advise the President, for example, that the quota that we recommended originally should be reduced or should be increased. So that each time action is taken under section 22, the law itself requires a continuing review of what has been done or needs to be done in the future."
We appreciate that the Commission's counsel was called upon unexpectedly to state some legal basis for the prior action alluded to by the Commission Chairman. Nevertheless, his answer, we believe, clearly demonstrates that he was groping for a legal basis which simply does not exist.
In other words, counsel did not cite any express statutory authority to support the proposition of "continuing investigation.” That he could not do so is implicit in his strategic retreat to what the law “in effect * * * contemplates."
We suggest that the theory of "continuing investigation" is totally inapplicable to the present situation, and that it flys directly into the face of the clear language of the statute and the Executive order of the President.
To take the position that once the President has directed an investigation which has served as the basis for the imposition of a quota, he has thereby lost his power of direction over the Commission and that the Commission may thereafter for all time to come conduct subsequent investigations and hearings on that subject on its own motion or upon the request of interested third persons is in complete derogation of the spirit as well as the letter of the statute. Such a position would necessarily constitute an usurpation by the Commission of the authority vested in the President and the Secretary of Agriculture. It could also subject domestic agriculture to grave and irreparable injury since investigation on the part of the Commission upon requests by persons seeking to have quotas terminated could easily depress producer prices by threatening to augment the total supply through imports.
Furthermore, such a position might place the Commission in the unhappy predicament of inadvertently causing embarrassment to the President and his Secretary of Agriculture through the conduct of unwarranted and undesired investigations.
All of the foregoing undoubtedly accounts for the fact that section 22, unlike other statutes did not give the Commission any direct or independent power of investigation and clearly made its action subject to the direction of the President.
CONCLUSION In view of the foregoing, it is respectfully submitted that the Commission should dismiss the application filed by certain peanut end users. Respectfully submitted.
SOUTHEASTERN PEANUT ASSOCIATION,
ASSOCIATION OF VIRGINIA PEANUT AND HOG GROWERS, INC. By their attorneys:
Washington, 5, D. C. Dated November 2. 1954.
Mr. RAWLINGS. The Virginia peanut growers are deeply appreciative of the efforts of this committee to get a broad cross-section, grassroots thinking of those of us concerned about some of the problems in agriculture.
We are deeply concerned that at a time when the national prosperity is unequaled in our history that the farmers of our Nation are not participating in this prosperity.
Virginia peanut growers have consistently sought and backed a price-support program of not less than 90 percent of parity with growers voting for marketing quotas and acreage allotments, as contrasted to flexible supports.
We still do so. However, we do not want to be misundertood as selfishly wanting a 90-percent program for peanuts and at the same time saying to producers of other commodities, your price should flex down and at the same time we don't want to be misunderstood on the other hand by others as saying that because we peanut growers want a 90-percent program, they should have one just because we want one.
With that in mind we feel that it is mighty near basically impossible to have one broad farm program with the variances in imports, responsiveness of consumption to price, varying marketing conditions and things of that nature to have one basic program that will do all of the jobs for a great multitude of commodities.
We think it is nearly as impractical as taking one piece of farm equipment and doing every job to be done on the farm. That leads to a recommendation from our group that the committee consider the feasibility of having permissive legislation which, for example, would permit the peanut growers and producers of other commodities in a referendum themselves to decide whether they want a 90-percent program or a flexible program. There may be some groups that want that.
I think we are pretty sure what we want in order not to be misunderstood, we have no hesitancy in a true grower referendum deciding what type program we will have. In other words, it is more of a commodity-by-commodity approach than we have had in the past. In other words, under this proposal we suggest a means by which producers of other commodities who are willing to submit to marketing quotas and acreage allotments, as prescribed by the Congress, can have the same benefits we have and at the same time not, you might say, impose on them a 90-percent program if they should prefer to have no program at all, or a flexible program.
The CHAIRMAN. Suppose you put to the farmers of the country a 90-percent price support in contrast to 75 percent flexible. Which would win?
Mr. RAWLINGS. I know about the peanut-producing area of Virginia. It would be overwhelmingly 90 percent.
The CHAIRMAN. The idea of leting them choose flexible against rigid they would naturally vote for their own interests. That is human nature.
Mr. RAWLINGS. That is it. Peanuts are-consumption is very unresponsive to price. That is not true with other commodities. Unquestionably the one most disturbing economic matter to Virginia peanut growers in this era of continuing decline in farm income is à severe and permanent, and we feel unjustified, consequence of the so-called modernized parity formula.
The new formula starting in 1956, unless corrective legislation is promptly enacted, will reduce 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.
The CHAIRMAN. What suggestions have you to make to change this formula? What would you add to it or take away from it?
Mr. RAWLINGS. What we are suggesting, sir, if I could make a few more comments on the formula
The CHAIRMAN. You have it there? Mr. RAWLINGS. Yes, sir; we have a recommendation as to what we think the solution is.
The CHAIRMAN. All right. Mr. RAWLINGS. In other words, we will siphon off approximately $41,120,000 annually from the current income of peanut growers alone when the full operation of this modernized parity formula becomes effective. If you couple that with the flexible supports of 75 percent of parity-and it is not only possible today but it is mighty near imminent unless there is some rapid movement or some diversion on the part of the Department of Agriculture—it will siphon off approximately $70 million per year from the current income level of peanut growers alone. You must take into consideration the producing areas not just in Virginia but generally throughout the United States occupy a relatively small area within the State. It is not just the peanut growers but the whole economic structure which will feel it in the producing areas and the treasuries of the localities and State and Federal Governments will know something happened to them.
Now, there is very little basis that we can find for theorists to assume that growers are going to recoup any substantial amount of this $70 million by increased consumption because of this lower price that is being legislated.
First, I think we all know that for there to be any response in increased consumption that cut to the farmer has to be passed on to the consumer and that just doesn't happen but very seldom.
Second, the only authoritative study we know of recent date dealing with this subject was a marketing research report No. 16, USDA, BAE, 1952, Peanuts and Uses for Food. The study concludes that peanuts are an inelastic commodity and for each 1 percent variation in price the most you can expect to affect consumption is four-tenths of 1 percent.
At the time this new formula was adopted it is our understanding experts in the Bureau of Agricultural Economics testified before this committee that in a period of 4 years it would not make any difference which of these 2 formulas is used because over 4 years they would move together and coincide.
The CHAIRMAN. In order to test that out, I am glad to say I offered an amendment so as to leave the old formula there and let the one that gives the best returns be the one used. Mr. RAWLINGS. We are sorry it didn't prevail. The CHAIRMAN. It did prevail. Mr. RAWLINGS. The last one?
The CHAIRMAN. We will try to improve and continue that next time we meet.
Mr. RAWLINGS. At a later date, it was in June 1952, I believe, Congress passed Public Law 585, which was a 2-year extension of dual parity, because the predictions upon which the original so-called formula was passed were not borne out, they had not moved together, so Congress said they have moved together and we will extend it 2 more years. At that time-it is still our understanding, if they didn't move together at that time, we would take it up and see what could be done with it and we are rapidly approaching that hour, because come January 1, 1956, unless there is a further legislation on this subject we have the so-called modernized parity formula in operation.
We feel that results so far from the predicted results which served as at least a part of the basis on which the so-called modernized formula was enacted indicates very clearly that there is something basically wrong with it.
As contrasted to the previous concepts of parity, as we have understood them, the so-called modernized formula does two things we would like to comment on. First, it uses the last 10-year period in arriving at the average prices received for a commodity without any regard whatsoever as to whether that last 10-year period represents a period of time in which there was a healthy balance between the economy of agriculture and the economy of the rest of the country. It may be the most abnormal period some 10-year period hence, or this 10-year period we have experienced, or it could be one of the best.
The last 10-year period for peanuts is, in our opinion, one of the most abnormal 10-year periods experienced by peanut growers. It involved gradually reduction from wartime production for oil to peacetime production for edible.
It was reasonably gradual to avoid serious ecnomic repercussions but inherent, or I would like to insert there that to us it was not anything materially different from the reconversion efforts of big business from manufacturing ships, guns, tanks, ammunition, planes, et cetera, back to their normal peacetime production.
But inherent with that readjustment that has gone on since the war period was a surplus in every year up until 1954. And those surpluses that were tied in with this reconversion served to depress the market right down to bear not support price, but loan price.
In several years there, although we had 90 percent programs, the loan price was 83 percent and in such years as that that makeup our entire average, is one of the reasons we are cut more severely than any other of the major row-crop commodities.
Next, the new formula brings into being entirely new concepts, so far as we can find out, of parity by requiring that the base period after you have your 10-year period there, that that be further adjusted by dividing into it an index of prices received by farmers. Of course in that index there is everything from grapes, strawberries, cauliflower, onions, snapbeans, et cetera. We can't see what in the world the price of onions, strawberries, carrots, et cetera, has to do with parity for peanut farmers. To us it is inconsistent with the previous concepts of parity.
The result is so-called modernized parity, and it siphons even under the 90-percent program $41,200,000 a year from peanut growers. In effect, what the new formula does to peanut growers in 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.
When you get into the thing it gets worse and worse and worse. We point out that peanut growers will receive a lower support price at 90 percent of the so-called modernized parity than they will at even 75 percent of the old parity.
We are mindful of the complexity of this problem; we appreciate that the so-called modernized formula results in a higher parity for some commodities. We are not familiar with the need for upward adjustments, perhaps some are merited, all may be merited, but we are familiar with what it does to peanut growers in the producing areas. We recommend the following:
Permanently extend dual parity retroactive to January 1, 1956, and as soon as practicable
The CHAIRMAN. Old or new formula ? Mr. RAWLINGS. Permanently extend dual parity instead of a 1-year or 2-year extension, and I would like to comment on why we recommend that. We find right now it is very disturbing to marketing. I understand it is happening in other commodities in anticipation of flexible price supports next year on cotton, but on peanuts right now the users of peanuts are sitting back and it is clear they are buying on a very limited hand-to-mouth basis to insure that at the end of the year they have a minimum supply on hand in anticipation of a 5 percent lower price they know they will get if it is nothing but transitional parity next year.
If we don't have a firm extension of dual parity we will have that demoralized marketing situation for 4 years ahead of us. We also recommend that the Congress undertake a thorough study of the parity formula question with a view to eventually devising a formula which will be fair to all consistent with fundamental concepts of parity and will work as intended.
The CHAIRMAN. That is what some thought of this new parity. Have you any specific recommendations? Just to criticize won't help. If you have specific recommendations, let us have it.
Mr. RAWLINGS. The specific one is a permanent extension of dual parity, sir.
The CHAIRMAN. What do you mean by that? Mr. RAWLINGS. Instead of a 1-year extension of dual parity, or 2 years, permanently extend dual parity.
The CHAIRMAN. What do you mean by dual parity? Mr. RAWLINGS. Dual parity is a continuation of what we had up through this year, as I understand it, whichever formula gives the better.
The CHAIRMAN. That is what I suggested a while ago, that the old formula together with the new one be extended under the law. Mr. RAWLINGS. Yes, sir. The CHAIRMAN. You understand ?
Mr. COOLEY. You make one other recommendation which is permanent extension of the 90 percent price-support program for peanuts.
Mr. RAWLINGS. Yes, sir; but we are saying at the same time we don't mind anybody voting on it. We know what we want.
Mr. COOLEY. They have to vote on it anyway.
Mr. COOLEY. You would not be willing to support at a high level the unlimited production of any particular commodity; would you?