equipment and handling methods and transportation and packaging techniques.

These types of activity, from their inauguration, represented something of a pioneering effort on our part in that we were exploring the extent to which studies of this nature could reveal to public agencies, management, and others the degree to which opportunities prevailed for creating efficiencies in handling food. The studies have been quite successful in doing so.

As a result of our work, two significant overall contributions have been made. First, we have developed a substantial body of facts, principles, and procedural information which can be readily used by private industry and State and local government agencies to facilitate their work in these fields. Second, private agencies and business are now much more aware of the need for analyzing their operations and are showing increasing evidence of doing something about it.

It is our judgment that, in view of such progress, the reduction in funds proposed and the cutback in departmental activities in this area can be made without seriously disrupting overall progress in this field and, in turn, contribute to reducing expenditures and personnel. From a practical standpoint, the effect of this reduction will be to shift the cost of performing such work from the Federal Government to the specific segment of private industry or the local governmental agency being served. Our experience leads us to believe that the type of technical services required to get the job done should be available in industry, universities, or private research organizations. Dr. Herrmann will contribute the more detailed presentation on the budget for his program area of marketing research.

MARKET NEWS, INSPECTION, GRADING, AND CLASSING

Mr. George Grange will discuss more fully the budget covering this area of activity and the needed increases for market news and poultry inspection. However, I should like to comment on a number of significant legislative proposals which the Department will submit to the Congress.

PROPOSED REPEAL OF U.S. GRAIN STANDARDS ACT

A legislative proposal will be made to repeal the U.S. Grain Standards Act, primarily for the purpose of relieving the grain industry of the act's mandatory inspection requirement and to permit the Department to perform whatever inspection services are demanded by producers and market agencies under the Agricultural Marketing Act of 1946. This will place the grain inspection service on a basis comparable with that for most other commodities, will limit inspections to only those demanded by the owners or buyers of the grain, and will permit a fuller assessment of inspection costs on the user of the service and thus decrease appropriation needs.

Mr. WHITTEN. Let me interrupt momentarily. Who in your shop has charge of that inspection? I know it is all under you but who is in charge of the actual inspection?

Mr. SMITH. In my immediate office, Mr. Grange as deputy has charge, but the program operation falls in the Grain Division under Walter Davidson.

Mr. WHITTEN. We will go into that later. I am interested in just what effect the proposed legislation will have.

Mr. SMITH. We will be very glad to discuss it.

Mr. WHITTEN. I am not an expert on any of this particularly in the trade field. I do know that warehouse receipts for cotton, grain and all of the rest, is used as a medium of exchange. I also know that the receipts move in trade with the Government behind them to a great degree by reason of inspections and certifications.

I wonder what the effect of this might be on the orderly movements of trade. I don't know, offhand, who is qualified to issue warehouse receipts or who guarantees them, but at a proper time I would like to go into that.

Mr. SMITH. All right, Mr. Chairman.

Mr. WHITTEN. All right. Now you may proceed.

PROPOSED AMENDMENT OF POULTRY PRODUCTS INSPECTION ACT

Mr. SMITH. Legislation will also be proposed to place the mandatory inspection services performed under the Poultry Products Inspection Act on a self-supporting basis through the assessment of fees in a manner comparable to that provided for other commodities under the Agricultural Marketing Act of 1946.

PROPOSED REPEAL OF CERTAIN OTHER LAWS

The Department will also submit legislation to repeal a series of acts passed some 40 years ago to correct marketing conditions which no longer prevail or are not as significant as they were. The Naval Stores Act and the Wool Standards Act, which are financed from this appropriation, will be included in this legislative package. The standardization and inspection authorities contained in these acts can be provided under the Agricultural Marketing Act of 1946.

When these legislative proposals are enacted, certain reductions in the 1965 appropriations can then be made.

Mr. WHITTEN. Mr. Smith, I believe Mr. Lennartson had something to do with writing that sentence. The reason I say that is because he was here when we had that kind of action some years ago and it lasted 1 year. It lasted 12 months, I believe.

Mr. LENNARTSON. At that time, it only applied to Federal meat inspection.

Mr. WHITTEN. That is right. Now it will be across the board. But this sentence that I said you must have had something to do with provides for us to appropriate the money so you can keep going in case the proposal doesn't become law.

Mr. LENNARTSON. That is correct, sir.
Mr. WHITTEN. All right.

Go ahead.

REGULATORY PROGRAMS

Mr. SMITH. The budget proposes no change in the level of activity for the regulatory programs financed under the "Marketing research and service" appropriation.

Except for pay act costs, the funds requested are the same as for this year.

The budget reflects, however, that legislative proposals are being submitted separately which will affect the work under the Standard Container Acts, the Tobacco Plant and Seed Exportation Act, and the Naval Stores Act. When enacted, these legislative proposals will also permit certain reductions to be made in the annual appropriation. Except for the amendatory legislation just mentioned, the budget proposes no substantive changes for our regulatory functions.

There are certain regulatory activities such as the Packers and Stockyards and U.S. Warehouse Acts in which the committee has previously expressed considerable interest. Mr. Clarence Girard, Deputy Administrator for Regulatory Programs, will report more fully on these regulatory programs, including the Perishable Agricultural Commodities Act, and on the progress being made in attaining greater effectiveness in their administration. Our marketing agreement and order work will be discussed under activities financed with section 32 funds.

PAYMENTS TO STATES AND POSSESSIONS

The last item under the "Marketing research and service" appropriation is titled "Administration and Coordination of State Payments." This item relates to the appropriation "Payments to States and possessions."

The latter funds consist of matching funds utilized under section 204(b) of the Agricultural Marketing Act of 1946 for carrying out marketing services projects by State departments of agriculture.

A reduction of $75,000 is proposed in the budget to return to the fiscal year 1963 level of expenditures. The proposed reduction would be accomplished by terminating projects that are nearing completion and are of a type that should be supported by regular State funds, if continued.

The program and proposed budget are discussed quite fully on pages 99 through 105 of the budget justification. I don't recall, Mr. Chairman, if you placed those in the record or not.

Mr. WHITTEN. We shall be glad to have them included. (The pages referred to follow:)

STATUS OF PROGRAM

This activity seeks to improve the marketing of agricultural products by assisting State marketing agencies in carrying on more adequate marketing service programs. It enables States to put into practical application, improved marketing practices which research work has developed. These methods and practices aid in maintaining quality, expanding outlets, and reducing deterioration and spoilage of farm products. The program also helps move seasonal commodity surpluses to their best market, reduce marketing costs, and increase returns to farmers from the marketing of their products.

The Federal payments, authorized by section 204(b) of the Agricultural Marketing Act of 1946, are made under cooperative agreements between the U.S. Department of Agriculture and State departments of agriculture, bureaus of markets, and similar State agencies for the conduct of eligible marketing service activities on a matching fund basis. The States contribute at least half of the cost and perform the work with State personnel.

The amount of the Federal payment to a State is based upon an evaluation of the relative urgency of the marketing service problem confronting the State, the probable effectiveness of the proposed plan for solving or alleviating the problem, the ability of the State to carry out the program proposed, and the availability of matching funds.

Current activities

As a result of the increase of $75,000 in the 1964 appropriation, urgently needed new work is underway in Florida, Hawaii, Illinois, Louisiana, Maryland, Minnesota, Missouri, New Jersey, Ohio, South Carolina, and West Virginia. Approximately an equal amount is being applied to accelerating those existing State marketing service projects that are most needed or productive in the following States: Alaska, California, Connecticut, Kansas, Mississippi, New York, North Carolina, Pennsylvania, Tennessee, and Virginia. Small increases aggregating $5,000 were allotted to Arkansas, Colorado, Vermont, and Washington to help meet increased costs of present programs.

In the past year, increased emphasis has been placed on joint effort by States to solve common problems and their response has been encouraging. For example, at the September 1963 annual conference of the National Association of State Departments of Agriculture, a resolution entitled "Regional Marketing Service Work" was passed which set forth the States' support of this concept and urged the Agricultural Marketing Service to help in the development of regional work through the matching fund program. Since that time positive steps have been taken by the States with the help of AMS to activate multi-State work in transportation, market development, standardization, and market news. Reducing causes of downgraded poultry

By working with and observing broiler catching and loading crews and then following the birds through the processing plant, Alabama State Department of Agriculture employees working under a matching fund project were able to identify a number of factors that cause processed poultry to be downgraded and to assist producers and packers in making adjustments to correct these problems. After several months of following recommended practices of procurement and processing, 10 poultry plants were able to reduce the number of downgraded broilers by about 9 percent.

Forecasting almond production

The May 1, 1963, almond forecast was the first time objective measurement data were available for improving the reliability of the forecast of the size and other characteristics of the crop. The greater accuracy being developed through this work is aiding producers in making marketing decisions, and in establishing a more equitable and efficient surplus program and early season contracts. Improved broccoli processing

In Washington a mechanical splitter was designed to process a new variety of broccoli which is particularly adapted to machine handling and which requires fewer field cuttings. Results of tests to date are positive enough for a processor to consider establishing a packing plant in an area of the State where other agricultural enterprises are no longer profitable.

Improving quality of fruits and vegetables

The Mississippi department assisted producers, handlers, and buyers of fruits and vegetables in installing and using the proper equipment and in applying improved techniques to keep losses from bruising and spoilage to a minimum. In one instance nine small sweet potato producers who joined together in preparing their potatoes for market were able to net $45,000 above anticipated returns largely because of technical assistance in quality maintenance received under the matching fund project.

Maturity tests and average yield data for oranges

In Florida, a series of three reports issued in February and March on late orange maturity tests and average yield proved to be of tremendous value to the industry in planning the harvesting and processing operations. The reports help industry determine the progress of the crop and the optimum time of harvest of fruit for processing. Requests were received for the inauguration of regular survey reports on maturity and yield of citrus to start just prior to maturity and last until harvest is completed. Forty-two States conducted 127 projects under this program during fiscal year 1963. To redirect work under this program to respond to changes in marketing, a fifth activity has been added in fiscal year 1964. Under this new field of work, 15 States have initiated projects aimed at helping producer groups to organize selling efforts to deal effectively with the mass buying power and product needs of chainstores, discount houses, and regional processors.

SELECTED EXAMPLES OF RECENT PROGRESS

Some examples of the work performed and results accomplished in representative States under the program in 1963 follow:

Reducing costs of dairy cooperatives

Wisconsin and Minnesota dairy processing and marketing cooperatives participating in the service program to develop efficiencies in management and operation have been successful in reducing costs an average 11.3 cents per hundredweight of milk. These plants handled about 900 million pounds of milk in 1962. Assistance was rendered in effecting a merger of two cooperatives which resulted in savings of 17 cents per hundredweight,

Successful testing of specific gravity separated potatoes

Oregon reports satisfactory results with its pilot market testing of specific gravity separated potatoes. Using the specific gravity separator machine, the potatoes were separated into bakers and boilers, packed in 10-pound polyethylene bags, and distributed to two retail food stores where displays were erected for each type. Results of the pilot test indicated that (1) the SGS machine does a creditable job of separating potatoes for desired end use, (2) the trade is willing to give SGS potatoes a fair trial on the market, and (3) consumers like SGS potatoes and are willing to pay a premium for them. The results were sufficiently encouraging to suggest that a large-scale market test of SGS potatoes be undertaken.

Improved livestock sales

Virginia established a new type of sales outlet for slaughter hogs which was patterned after the successful feeder pig sales. Weight breaks within grade were changed from three to two to increase the size of lots offered and for the first time buyers were able to bid on trailer-load lots. To further increase buyer participation a tel-o-auction system was set up whereby buyers unable to attend the sale could bid by telephone.

The growth of highly specialized shell egg operations in Kansas resulted in industry requests to explore grading programs other than the traditional candling method. To meet the need, four producer-packers are being provided firsthand assistance in adapting their operations to qualify for the USDA fresh fancy quality control program.

Food specifications for State institutions

The Maryland Department of Markets assisted in developing and preparing food specifications for the procurement needs of 40 Maryland State institutions. Specifications were especially designed for institutional needs for large purchases in bulk and pallet boxes directly from local growers and shippers, as well as wholesale terminal markets.

State participation by fields of work

This work falls into five general fields; the number of States conducting projects and the distribution of payments under each category is shown below: