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Has there been any change that you know of, Mr. Secretary, in the change of that percentage of tolerance or would you supply that for the record?

Secretary FREEMAN. You are talking now about deterioration in storage?

Mr. MICHEL. Right.

Secretary FREEMAN. I can't answer that. I will have to supply it for the record.

(The information referred to follows:)

When warehouse examiners employed by the Department find evidence of deterioration of quality of grain in storage, such as spoilage from heating, insect infestation, etc., commonly referred to as “grain out of condition," they call the warehouseman's attention to the condition and recommend remedial action. The degree of deterioration somewhat governs the kind of action required. Aerating or turning will suffice in some cases; fumigation is prescribed in others; and if the spoilage has progressed beyond cure by these methods, steps to remove the grain from the warehouse are necessary. The problem is handled as the conditions warrant, on a bin-by-bin basis. Efforts are made to prevent the spread of spoilage to sound grain and to hold down losses arising from deterioration. Warehousemen are held accountable for the grade of the grain stored in the warehouse as described on the warehouse receipts, without any tolerance.

Mr. HORAN. I am prone to believe that wheat as it leaves the average commercial production area in my district, and I am talking now about those who have been wheat farmers for 80 years and we have been producing wheat commercially for that long in the Fifth District of the State of Washington, long before we were a State, while we were still a territory, that the wheat as it leaves the farm tends to be as per the variety pretty high-class stuff.

WHEAT QUALITY AT TERMINAL MARKETS

Now against that I had the privilege of being with Mr. Pope and with other members of the subcommittee, in Egypt and didn't see too much there. My primary objective was to see the effect of Public Law 480 shipments as they came from my area, and in Bombay and New Delhi, or Hoppur, and elsewhere in India, I say wheat as it arrived at its destination.

I have heard stories also of wheat arriving in other terminal markets or terminals, rather, that was as high as 15 percent corn and I just wondered. I don't condone that practice nor those findings.

What steps are you taking to try to clear that up?

Secretary FREEMAN. Well, the tightening of these standards, you see, will have that automatic effect, because grain is sold according to given standards and has to live up to those standards. We will simply be shipping cleaner wheat. I suppose there are instances where someone makes a substitution of the magnitude you just described. When this happens, inasmuch as the grain is handled by our private trade and by someone purchasing on the other side, the failure to live up to contract specifications is called to the attention of parties at interest immediately and the appropriate redress is demanded. We would not have any particular part to play in what is essentially a private trading matter.

Mr. HORAN. Do your grade standards revisions take into consideration whether the grain is produced under what might be called dryland farming conditions or irrigation?

Secretary FREEMAN. No. The standards are set, of course, according to the end product that comes in from the combine, when it hits the line elevator, and it is then graded and evaluated according to the amount of dockage there would be in it.

Whether wheat is produced by dryland farming or through irrigation, the end product is usually a different kind of wheat. Your harder wheats are usually the product of your dryland farming, and your softer wheats are the product of the irrigated wheat growing. Mr. HORAN. That was very interesting, Mr. Secretary, because I believe quality is a huge factor in our present situation.

TOBACCO PROGRAM

We are going to spend a little time with tobacco now. In the article I was reading from the Nation's Business, which is the organ of the National Chamber of Commerce, which deals with farm subsidies and the crises that this writer sees ahead, he takes up tobacco and he had this to say, and I quote from the Nation's Business article:

Tobacco's current ills demonstrate how support causes U.S. farmers to lose sales by lowering quality. Superior quality has made U.S. tobacco a much sought commodity in foreign as well as domestic markets over the years, so says Raymond Ioanes, Administrator of the Agriculture Department's Foreign Agricultural Service.

The U.S. quality advantage over foreign tobacco is, however, slipping and export sales are suffering as a consequence. I quote Mr. Ioanes: "We must pay attention to the question of the quality of our tobacco."

In Southern Rhodesia, hardy migrants from Britain, South Africa, and even the United States are spending additional amounts of money to boost the quality of their tobacco and cut into U.S. sales in Europe and Japan.

Now quoting Mr. Ioanes again: “Any additional narrowing in the quality gap between U.S. and foreign Flue-cured tobacco entering world trade would further impair the competitive position of U.S. leaf."

Again quoting: "The U.S. share of the world market is declining," warned Agricultural Chief Economist Willard Cochrane, in mid-November. "Since world tobacco trade is growing more rapidly than U.S. exports, high-price supports are encouraging large production of mediocre leaf."

And then he goes on to express that since we have reduced our per capita acreage from a little over 6 acres of tobacco production to about 3.5 acres, that the farmers are trying to produce more per acre as we see in the picture on the wall there. It says here, in parentheses:

In the attempts to bolster price by cutting production, the Government has sliced the average acreage allotment for Flue-cured tobacco to 3.5 acres a farm compared to 6.1 acres in 1947, one of the first normal years after World War II. On that, I was wrong on the total acreage there, Bill, that says "per farm average here." Then it tells about a favorite boosting method in Flue-cured tobacco of spraying with a chemical to reduce the suckers or shoots on the lower part?

Secretary FREEMAN. MH 30.

Mr. HORAN. And that reduces the quality of the tobacco, according to this article.

Then Don Paarlberg gets back into the act. I quote now from Dr. Paarlberg: "Wherever you have a support program, you automatically reduce quality."

Mr. WHITTEN. If I may interrupt, Dr. Paarlberg and I didn't agree about things when he was here and I am not going to change my viewpoint now. But I hold him in the highest personal regard. Mr. HORAN. Well, how about it?

Secretary FREEMAN. Well, like many things, there are some statements there that are accurate and there are some conclusions that are drawn from them that I think are inaccurate. Quality is always a problem. The use of MH 30 has been a serious problem. We recently thoroughly revised the tobacco grades to take into consideration the importance of maintaining high quality and the appropriate inducements thereto by adjusting support levels to favor the production of high quality tobaccos, and to significantly discount the production of low quality tobaccos. These recent grade standards have proved to be quite successful.

Last year the quality of our crop was significantly improved.

Mr. WHITTEN. In view of my statement about Dr. Paarlberg, as I said, I hold him in the highest regard, but I think I should enlarge on it to this degree: Price support based on volume is conducive to lower quality normally, since farmers grow that which produces more in weight or in size. But you do have to qualify the statement, because price supports could be set so that you had practically no support unless the commodity was top quality, in which case the producer's practice would be directly opposite.

Now that is not what actually happens, but it could happen.

Secretary FREEMAN. Right; the chairman's statement is very appropriate. It does happen. In tobacco we have set the standards to discourage the cultural practices that would produce large volume and low quality. This is not only MH 30, it is general cultural practices, the amount of fertilizer, the amount of water, the spacing in planting, and the general practices followed.

And we seek to grade so that higher qualities are appropriately rewarded. In wheat the same thing exists. We have premiums for certain levels of protein-sedimentation rate to encourage the production of high quality wheat and to discourage the production of just volume low-quality wheat. But this is a problem, and as the chairman said, if we paid the same support rate in terms of anything that could meet the classification of tobacco or wheat, whatever it may be, with no regard to quality, you would have the result that Mr. Paarlberg describes, but that does not necessarily follow at all. It depends on the standards, and how they are administered.

COTTON PROGRAM

Mr. HORAN. Let's go back to cotton. Now you support Upland cotton at 32.5 cents a pound.

Now we support standard Upland cotton at 32.5 cents a pound. Parenthetically it says "More extensive extra long staple cotton is supported under a separate program."

Would you comment on that?

Secretary FREEMAN. It is a different kind of cotton.

Mr. WHITTEN. That is the Egyptian type cotton.
Secretary FREEMAN. Yes.

Mr. HORAN. However, your differentiation, that is the point I am getting at, is in this case a clear case of recognizing quality. Is that it?

Secretary FREEMAN. It is a case of recognizing two different things, just like apples and oranges. I mean this is a different kind of cot

ton altogether. Within that we have certain quality standards of cotton and it again is graded and the support rates vary according to the quality of the given cotton, measured from the basic Middling beginning point in relation to the value and the resulting support

rate.

Mr. WHITTEN. Would the gentleman from Washington yield?
Mr. HORAN. Sure.

Mr.WHITTEN. I saw this article that the gentleman read on cotton. I had not read the one on tobacco, but I have written the magazine several times to point out things that were in my opinion incorrect, where I could document the reason for it.

I have yet to have them correct anything.

I am a strong believer in the Chamber of Commerce. I recognize it for what it is and whom it represents. But in this cotton area, or farm area, they have taken views that were completely warped, in my opinion, and from writers who were anything but objective. That has been my experience back through the years in dealing with the chamber of commerce.

Now in the business area or other areas, I am not in a position to differ with them, but sitting on this committee, I can on agricultural matters. And on these two types of cotton, the so-called Egyptian type cotton, it has a different use entirely. For most of the period, it had no price supports at all, because it produces relatively little length for the amount of investment, et cetera, so that few people went into it. We had a short period when the situation changed; it is grown in Arizona, maybe a little in New Mexico, but it doesn't grow elsewhere, and it is used for parachutes, and certain specialized uses, which dosen't make it in any way compete qualitywise with other cotton. It is a much more expensive type and it is limited to a small area in Arizona and New Mexico, and maybe California has a little of it.

APPLE PRODUCTION

Mr. HORAN. You mentioned something about apples. We had a peculiar year as far as apples were concerned. We had a prolonged drought in the East which required the bulk of the apples produced from the Midwest to the Atlantic coast to be forced on the early part of the market and it had a depressing effect. At the same time out in the Pacific Northwest we had the biggest apple crop we have had in years and years. Some of that couldn't find a roof and was stored in the orchards and elsewhere, and it too had to find a home and the net result was that tremendous backup of stored apples in the Pacific Northwest and much at the instance and the urging of myself and others who are close to the Farmers Home Administration who do have loan programs out there under section 32 funds have now been applied to the removal of surplus apples out there.

However, I am happy to say that the element of quality entered into this, the purchases were made and they are being made at what I would regard as below the going price. But they are for export standard "with tolerance" which means that the inspector has some leeway that he would not have under export standards, export standards being very strict standards that we have developed, designed to meet the most demanding inspections that we sometimes find upon the arrival of our fruit in foreign countries.

30-080-64-pt. 1-13

Among the inspectors they call that "working them French," because the French have always been very strict about what fruit arrives, the shape, condition, freeness of defects or pest damage.

So the bulk of these are tray packed in cartons and the price is quite low. However, I think this will do a lot of good. They are going at a price which will I think reflect next year in an increase in the Nation's appetite for apples through school lunches. As we promise that the apples that are bought in the Western States will be distributed west of the Mississippi River, according to your announcement of February 19, except for one lot of Michigan apples which will be distributed in that State.

I assume that locally here up to now at least the school lunches have been favored by locally produced apples, which are good food for growing children and schoolchildren.

MARKETING OF FARM PRODUCTS

Now the President, Mr. Secretary, made quite a play and attack on monopolistic conditions in the food distribution system, and I believe with your blessing.

Secretary FREEMAN. I don't recall that language or that phraseology.

Mr. HORAN. Let me get a copy of it.

Secretary FREEMAN. Paragraph 9, on page 5, I think, is what you are referring to.

Mr. HORAN. Yes. In raising this question, Mr. Secretary, I don't challenge the power of the marketing outlets, but I will point out "market power" as the President included it in his message on agriculture.

There is one more pressing need of American agriculture to be strengthened. The recent changes in the marketing structure for distribution of food are as revolutionary as those in production. There are some 200,000 retail grocery stores but we know that $1 out of very $2 spent for groceries goes to fewer than 100 corporate voluntary or cooperative chains. Our information about how this greatly increased concentration of power is affecting farmers, handlers, and consumers is inadequate. The implications of other changes that take place as vertical integration and contract farming have not been fully explored. I urge that the Congress establish a bipartisan commission to study and appraise these changes so that farmers and business people may make appropriate adjustments and our Government may properly discharge its responsibility to

consumers.

Secretary FREEMAN. Well, by this the President urges on the Congress the establishment of a broadly based bipartisan commission to review these facts which are revolutionizing marketing and to draw from them conclusions in connection with policies that ought to be followed.

I think these very facts are rather dramatically set forth in the realization that $75 billion a year is spent by American consumers for food, spend through 200,000 grocery stores, but one out of every two of those food dollars goes through fewer than 100 corporate or cooperative entities, which is a concentration of the retail marketing power. Related to that is the well-known vertical integration that perhaps is most dramatically shown in the field of poultry, and which takes place in other fields, the whole development of contract farming, some of the big retail establishments today are dealing directly

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