Dr. PAARLBERG. Drought and typhoons damaged the Philippine rice and corn crops.

Peru's anchovy catch failed, thus cutting high protein fishmeal production.

The African Sahelian countries of Mauritania, Mali, Chad, Senegal, Upper Volta, and Niger suffered their fifth consecutive year of severe drought.

These events together with changes in currency values generated large purchases on the world grain market and placed a severe strain on world grain and oilseed supplies. They also were largely responsible for the fantastic increase in U.S. agricultural exports from $8.1 billion is fiscal year 1972 to $12.9 billion in fiscal year 1973. Grains accounted for over half the total value increase and soybeans for a fourth.

The Soviet Union bought about 28 million tons of grain, including about 18 million from the United States. Not all of that grain was delivered some is being shipped this fiscal year and some was delivered to other centrally-planned nations. But at least 20 million tons were shipped to the U.S.S.R., and the value of the grain purchased from the United States and delivered in fiscal year 1973 totaled about $800 million.

The magnitude of these purchases reflected a major reversal in the traditional Soviet policy of belt-tightening when crops were bad. Although the Soviets imported wheat in 1963 and 1965 following poor crops, they still slaughtered large numbers of livestock in 1963. But in 1972 a decision apparently was made for large scale imports to maintain diets and expand livestock numbers in the face of domestic grain shortages.

Senator HUMPHREY. I guess we just must face the fact that this is a political decision. You never can be sure what kind of policy decisions will be made in these more tightly controlled economies.

Dr. PAARLBERG. That is quite correct, Senator, and a very important observation. We were able to learn fairly well about the magnitude of a shortfall in the Russian grain production and we were aware of this and published information on it, but what we were not able to predict was the political response that the Russian leaders made. Instead of tightening their belts, they went out into the markets and made the purchase and that we could not predict.

Senator HUMPHREY. I think this is an important point for the record because I happen to believe that the Department has taken some undue abuse over the Russian wheat deal.

In two other instances there were, as you have indicated, shortfalls in the Soviet crop, very serious ones, but the decision was made not to buy but rather to tighten their belts and kill off the livestock. Dr. PAARLBERG. That is quite correct.

Senator HUMPHREY. This time, the third time around, the decision. was made to spend hard currency, and go after the credits to make the necessary purchases. I happen to believe that that decision was based upon the fact that Mr. Brezhnev and others had seen what happened to Mr. Khrushchev in the Soviet Union. You don't have the privilege of recycling after a political defeat in the Soviet Union.

In other words, once you are out you are out. It isn't like myself, for example. In this country you can go home and go to pasture for a couple of years and come back. There you are finished. So they made the poli

tical decision for whatever reasons, to spend the hard currency, to purchase the soft goods, a decision which twice before had not been entered into.

Dr. PAARLBERG. Very true.

The Soviet purchases, of which you have spoken, combined with the opening of our trade with the People's Republic of China-$207 million in fiscal year 1973-and trade expansion with Eastern Europe, pushed United States total farm sales to Communist countries in fiscal year 1973 to around $1.5 billion, a five-fold increase over fiscal year 1972.

United States sales to the U.S.S.R. accounted for about 16 percent of the $4.8 billion increase in U.S. agricultural exports in fiscal year 1973 compared with the previous year. At the same time, however, our sales to Western Europe accounted for 30 percent of the increase and Japan for 22 percent.

Devaluation of the dollar has been one of the factors spurring foreign demand for our agricultural products, since it has the effect of lowering the price of our exports in terms of foreign currencies. Two formal currency realinements and a downward float by the dollar since March 1973, have caused about a 17 to 18 percent devaluation of the dollar in the last 2 years relative to the currencies of our major markets. That's an average figure. The devaluation relative to the Japanese yen was some 26 percent. Japan is the single largest importer of U.S. farm goods- $2.3 billion in fiscal year 1973. The dollar has devalued by 34 percent relative to the German mark, by 24 percent relative to the French franc, and 30 percent relative to the Dutch guilder.

I noted earlier that the effect of devaluation has been to lower the price of U.S. farm exports in terms of some foreign currencies. However, 47 nations devalued with the United States and no price changes for U.S. commodities occurred in these nations. About one-third of our exports go to such nations. But almost two-thirds of our exports go to nations that permitted the dollar to devalue.

However, there are barriers to some of our exports to some of those nations. One-third of our exports are hampered by nontariff barriers. We estimate that some 40 percent of our exports go to nations that did not devalue with us. In those countries, lower prices of our exports could be passed on to foreign consumers and generate demand for more of our exports.

Devaluation even stimulates farm exports to countries where imports are controlled by State trading agencies, as in Japan and India. Although the savings may not be passed on to the ultimate consumer, they nonetheless affect the costs seen by the finance minister and the import monopolies.

The net result of short crops, devaluation and expanded trade with major economic powers was about a one-fifth increase in world grain exports in fiscal year 1973. U.S. exports alone increased more than the worldwide increase, meaning that we not only covered the total jump in exports but also the large shortfalls experienced by other exporting nations. The United States ended the fiscal year with the lowest stocks of wheat since 1952.

I might insert here, Senator Humphrey, that when this worldwide shortfall in food production came about, we had an existing stock of grain which we committed to export. We also had a reserve of acres that had been held out of production and we committed that to production.

We now have both these reserves committed and that means that, as Dr. Borlaug said, we are on thin ice and our capabilities to meet a world food crisis should one develop, our reserves are now less important than before because they have been committed.

Now, looking to the immediate future, world grain and oilseed prospects point to record crops this year, for that we are exceedingly grateful. It appears that supplies of grain and oilseed meal will be adequate to allow total and per capita consumption to increase. Rice supplies are the tightest among major commodities and will remain so, at least until the Asian harvests late in 1973. Wheat is next in line while coarse grains have the most breathing room. However, conditions are likely to remain tight at least through 1973–74.

Our estimate of 1973-74 consumption exceeds the record world grain production in prospect.

Now, by that I mean, I should say consumption really means, the movement into place. A part of this is likely to appear in the form of reserves built up in the importing countries. So, it disappears out of the exporting countries but it does not all disappear into the digestive tract in the consuming countries. Some of it will appear there in the form of built-up reserves.

The projected deficit is small, however, and there were well over 100 million tons of wheat and feed grain stocks on July 1 of this year in the United States, Canada, Australia, and Argentina to make up for it. This analysis, however, assumes individual countries will not build unusually large stockpiles of grain during 1973-74. Even without stockpiling, a drawdown in stocks of the exporting countries may be necessary. On July 1 of this year, wheat stocks in the four major exporting countries were at the lowest level in two decades, which is what I think you said in your opening remarks.

Grain stocks in many other countries such as Brazil, Thailand, India, and South Africa also have been drawn down. Thus, stocks to protect against major crop failures are thin. Nonetheless, these stock levels, combined with projected record world production, are more than adequate to meet estimated consumption.

Senator HUMPHREY. That is for this coming year?

Dr. PAARLBERG. That is right.

Import demand for wheat in the current fiscal year looks substantially smaller than last year's record level but still above any earlier year. The large import need is due to many factors including: (1) Lower grain production in North and Central Africa and West Asia which will require larger imports to fill domestic needs.

(2) A growing demand for wheat in Japan, South Korea, and in many Latin American countries where higher incomes and desire to substitute wheat for rice or corn may be coupled with an inability to produce wheat.

(3) Immediate needs of India and Bangladesh for wheat to fill consumption gaps following last season's rice and coarse grain crop shortfalls and before harvest of this year's fall crops

Senator HUMPHREY. I notice you do not include Pakistan there. Dr. PAARLBERG. No. I do not. Dr. West, have you any comment on the situation in Pakistan?

Dr. WEST. Since the flooding there we have not had an assessment of their total import needs. We are talking about, of course, what was

West Pakistan. Of course, Bangladesh which was a part of East Pakistan where the greatest import requirements had previously been, of course, there is still a great import requirement.

Senator HUMPHREY. The Prime Minister was here and spoke to the President about the necessity of 1 million tons. Since then we have had, before the Foreign Relations Committee, some hearings on this situation and I have met with the Ambassador from Pakistan and with others from the AID Administration. They estimate 600.000 tons urgently needed somewhere between now and the middle of next year. So, that would have to be added to your demand projections. I would just like to make note of that.

Senator HUDDLESTON. Is it going to be our policy to supply that request?

Dr. PAARLBERG. I am sorry. I didn't hear.

Senator HUDDLESTON. If Pakistan is making a request for 600,000 to 1 million tons of wheat, are we going to try to supply that from this country or are we out of the picture?

Dr. PAARLBERG. Our reserves are very far down and additional demands on us are going to have to be scrutinized with very great care. Senator HUDDLESTON. It would be very doubtful, then, that we could in the immediate future supply that kind of request, is that correct? Dr. PAARLBERG. Dr. West indicates this would have to be a Public Law 480 shipment and we are almost totally obligated with regard to our Public Law 480 commitments if indeed there is any room left at all.

Senator HUMPHREY. Well, I think we ought to note for the record, that when you talk about the immediate needs of India and Bangledesh for wheat to fill consumption gaps following last season's rice and coarse grain crop shortfalls, you must also consider the needs of Pakistan.

The administration came to me when we were working on the foreign assistance bill and asked me to put in a special request for $150 million of disaster relief which included $95 million for Pakistan and $40 million for the Sahel and $50 million for Nicaragua. I didn't do it because we never could have passed it as an amendment to the foreign assistance bill on the floor of the Senate. Instead, I introduced it as a separate bill.

My point is, that the Department of State and AID Administration have already presented, before the Foreign Relations Committee of the Congress, the need of a minimum of 600.000 tons of wheat under a Public Law 480 type operation, and the President, the OMB, and the AID Administration have asked me, as floor manager for the foreign assistance bill, to try to get $150 million disaster relief funds for immediate assistance to the three areas I mentioned; Pakistan, the Sahel, the six countries of Western Africa, and Nicaragua.

I am concerned then about the lack of communication in such cases because it is my understanding that the Department is not asking for additional funds for Public Law 480; is that correct?

Dr. PAARLBERG. Senator, it is my understanding that the Department of Agriculture considers Public Law 480 to be what it was legislated to be, namely, a trade development and surplus disposal operation. Senator HUMPHREY. Yes.