some very significant progress in that direction, in both wheat and feed grains, that were the real big problems. We have had some explosions in tobacco and cotton production, and so the stocks have gone down significantly in one and they have gone up in some of the others. The overall productivity of agriculture itself has continued unabated, with enormous increases each year, and the magnitude of this is something that I quite frankly did not expect, nor do I know anyone who would have predicted with any real accuracy-the main prophet in this area has been Dr. Cochrane, who has been predicting this technology thing more accurately than anybody in the country. But even his predictions were significantly short of what actually has taken place. And this is our problem, and it is particularly our problem, as you well know, and we are operating under laws that have minimums in acreage and minimums in support levels. And if it wasn't for the effectiveness of this committee in interpreting this to the Congress as a whole, we would have had in American agriculture much worse problems than we have.

I also would say, looking down the road, that the voluntary programs that we have pioneered here, like the feed grain program, are not infallible. They are costly, more costly that we would like. I think the same programs operating as they were submitted by the administration, in feed grains for example, would have gotten the surpluses down with less cost and I think more efficiently, but that ran into some political roadblocks, and so the problem is one in which I am sure, Congressman Michel, you would not expect President Kennedy to have predicted with precise accuracy any more than the Secretary of Agriculture could do it.

Mr. MICHEL. Now, the figure for the upcoming fiscal year 1965, the total figure is $5,815 million. Do you think, Mr. Secretary, seriously, you can really hold to that figure?

Secretary FREEMAN. Well, I surely hope so, and we have every intention to do so. Again, we are going to be effected by developments over which we have no control, vis-a-vis weather, production, and other things.

But the predictions upon which these figures of production rest are not doctored figures. They are the predictions of the experts within the Department, the people who have made systematically, as they have for many years, the judgments as to what their forecasts are and our figures rest on those forecasts.

The level of the replenishments of the Commodity Credit Corporation is one that is set pursuant to our estimates of the need above operating costs for the coming year, and we have made some recommendations in terms of programs which are harsh and which have been the product of the stern economy program of the President.

But these are not just figures. I can't say they will be completely attained, but we honestly seek to operate at that level. May I add also, there is some legislation involved in this.

MEAT AND POULTRY INSPECTION

Mr. MICHEL. This is what I would really like to address myself to on several specific items here. For example, on meat inspection, the budget presented to us would not reflect, would it, the $30.8 million that you would hope to have picked up with a system of fees?

Secretary FREEMAN. Yes.

Mr. GRANT. The estimate for the appropriation is in the budget. There is a reduction which would take place when the legislation is enacted. So, on an expenditure basis, it does reflect the reduction. The estimate of appropriation does carry the estimate required to finance meat inspection in 1965.

Mr. MICHEL. Would the same hold true for the $16.6 million for poultry inspection?

Mr. GRANT. Yes.

RURAL ELECTRIFICATION PROGRAM

Mr. MICHEL. Then in the field of REA, does the budget figure reflect enactment of the Congress of a revolving fund, so receipts for 1964 and 1965 would actually be used to cut down the figure that we would have to appropriate to meet the needs of REA?

Mr. GRANT. After legislation is enacted, it would. Pending enactment of the legislation, there has been no change as to the basis for providing loan funds for REA. But when the legislation is enacted, then there could be a reduction. There would be a proposal made to amend the budget to reduce the amount of the new loan authorization required.

Mr. MICHEL. What is the level of expenditure contemplated for REA this coming fiscal year?

Mr. GRANT. Do you want expenditures or do you want loan authorizations? The estimate of expenditures for 1965 is $383 million. Mr. MICHEL. What would loan authorizations be? You can supply that for the record.

(The information follows:)

The total electric and telephone loan authorizations requested for fiscal year 1965 are $428 million of which $65 million is to be placed in reserve to be used for either the electric or telephone program.

AUTHORIZATION FOR ACP PROGRAM

Mr. MICHEL. Now, this ACP figure is roughly $100 million under what the Congress appropriated last year, is it not?

Secretary FREEMAN. Yes, sir.

Mr. MICHEL. And would you, Mr. Secretary, back me up in any effort I might make to hold that at that figure?

Secretary FREEMAN. Well, the Secretary of Agriculture

Mr. MICHEL. Could we have a unique proposal, where a member of the opposition party might be speaking for the administration, or is that an unfair question to ask, Mr. Secretary?

Secretary FREEMAN. Yes; but you are not

Mr. MICHEL. Let the record show there was raucous laughter at this point.

Secretary FREEMAN. Might I add I am aware of the fact, Mr. Congressman, that you are not held to any standard of fairness in dealing with an administration witness, so I come here with no illusions. I think we all recognize

Mr. WHITTEN. I thought the best answer the present Secretary of Agriculture ever gave was the first year he was here, when somebody inquiring about a controversial subject said, "Mr. Secretary, do you care to comment on that?" and he said, "No."

RESTORATION OF CCC LOSSES

Mr. MICHEL. Well, in this area, Mr. Secretary, of restoration of capital impairment of CCC, here we find, I think, probably an abnormal anticipated reduction, and as I read this budget through, I think I would just have to say that this reimbursement is being requested for only a portion of the 1963 realized losses, are they not?

Secretary FREEMAN. That is right.

Mr. MICHEL. And if we really wanted to be realistic and match those losses perfectly, how much additional would we be talking about? Secretary FREEMAN. At present, the unreimbursed losses for the fiscal year 1963 would be $930 million.

Mr. MICHEL. Now, if we don't meet that obligation this year, when are we going to meet it?

Secretary FREEMAN. We have projected this, we hope accurately, conscientiously, in terms of what will be required in the Commodity Credit Corporation to operate in the coming fiscal year, and we hope and believe that is accurate and have operated on the premise that restoration beyond that was not essential.

Mr. MICHEL. In other words, you are saying that if we don't go ahead and appropriate the additional amount of $930 million, that there will still be ample flexibility and room for maneuver in disposing of stocks of CCC? Well, acquiring and disposing?

Secretary FREEMAN. We hope we can operate under the programs which are related to our estimates of what the situation will be and the laws under which we will operate, with that amount of capital restoration; yes.

I hasten to add, as I have already said, that these are necessarily predictions and they are based on premises that sometimes change, both because legislation is not forthcoming and because of unlookedfor developments in world markets, weather, and things of that kind.

Mr. MICHEL. And the proposed reduction in spending authority also reflects a proposal to relieve the Commodity Credit Corporation of the obligation to pay interest on Treasury borrowings which represent "past years realized losses." This would not affect the overall financial position of the Government as it would reduce both receipts and expenditures but it helps to hold down spending authority for price support programs, isn't that right?

Mr. GRANT. That is right, sir.

Mr. MICHEL. If the proposal with respect to interest for borrowings should be approved, the CCC borrowings of non-interest-bearing capital would amount, according to my figures, to $3.8 billion at the end of fiscal year 1964. Is that correct, Mr. Grant?

Mr. GRANT. That is right, sir.

Mr. MICHEL. And this total would rise to $4.9 billion at the end of the fiscal year 1965?

Mr. GRANT. That is correct.

PAYMENT OF INTEREST ON REALIZED LOSSES

Mr. MICHEL. Now, assuming an interest rate of 312 percent, the proposed change in Commodity Credit Corporation's obligation to pay interest would save that agency well over $125 million in fiscal 1965 at the expense of Treasury receipts, according to our calculations. Any comment, Mr. Grant?

Mr. GRANT. The only question I have, you say at the expense of Treasury receipts. The losses incurred by the Corporation, expenditures were made in prior years and the proposal, with respect to interest on Commodity Credit Corporation, has to do only with those losses which have already been incurred, making it unnecessary for the Corporation to continue to pay interest.

Actually, it doesn't have any effect on Treasury interest at all, or Treasury costs. It does reduce the costs of the farm program, though, or it reduces it because we would not be paying interest on realized losses, on which we have not requested reimbursement for appropriations.

PROPOSED LEGISLATION FOR COTTON AND DAIRY PRODUCTS

Mr. MICHEL. The budget indicates that proposed legislation for new programs for cotton-dairy products will reduce expenditures $230 million in the fiscal year 1965. But details of the proposed new legislation haven't been available.

But it is my understanding that both the bills under consideration in both bodies would, as a matter of fact, increase the cost of the cotton program. Is that true?

Secretary FREEMAN. No; that is not correct. One of the reasons I was a little tardy at the beginning of this meeting was because we were working on these figures. The cotton program that was considered by the Senate committee yesterday was altered somewhat in its passage, and we were revising figures.

The initial program, as envisaged and discussed, would have involved a $200 million saving. The program reported by the Senate committee would be somewhat less than that, but it would be a substantial savings in the cotton program. The dairy figure is a final one, as best we can make it, and that bill is pending before the House Agriculture Committee now.

Mr. MICHEL. Do you want to hazard a guess on the so-called savings on this version of the bill passed by the Senate?

Secretary FREEMAN. It would be just a guess, because the figures were being revised because some of the specifications of the bill were changed. I would hazard a guess in the neighborhood of $150 million. But this would be counteracted in coming years because it would involve a cutback in the carryover of 2 million bales, instead of an addition in the carryover of 11 million bales, which, as we have to carry this over a period of years projected into the future, involves additional costs which we will incur.

Mr. MICHEL. Now, in your guess on the estimates here of so-called savings, you are projecting this over how long a period?

Secretary FREEMAN. When I used the $150 million figure, I was referring to the difference in the cost in the coming fiscal year between the program

Mr. MICHEL. You mean fiscal 1965?

Secretary FREEMAN. That is correct, between the law on the books now for cotton and if what has been passed by the Senate becomes law.

May I make this adjustment? I was thinking in terms of this as a crop year now, as distinguished from a fiscal year, which sometimes overlap, because this is a guess estimate as you have properly noted.

EXPORT PAYMENTS ON WHEAT

Mr. MICHEL. The budget says

Export payments on wheat flour are not anticipated in 1965 as it is estimated that the domestic market price will fall below the competitive world price.

However, the Department has currently offered to pay a subsidy of 16 cents per bushel on Hard Red Winter wheat exported after July 1, 1964, and since we could export 600 million to a billion bushels of wheat, an average export subsidy of 10 to 15 cents per bushel would cost $60 million to $150 million, according to our figures.

Any payments that might be made on export wheat under the socalled voluntary certificate plan would represent an additional expenditure, would they not?

Secretary FREEMAN. No, I don't think so. This matter will balance itself out under the wheat program, again referring to the one that passed the Senate. Wheat would move, we think, in the market at roughly $1.30. It would move into world markets in some instances at the world price, it might be in some instances a bit above the world price, depending on the quality, and it might be in some instances below the world price. And this would be balanced out with the exporter through the medium of the combination of the export certificate and the export subsidy. Under the Senate or House bills any export subsidy would be small and would be offset by receipts from surplus reduction. Additional budget expenditures on balance would be small, in fact budget receipts could result.

It is going to vary a great deal with the quality of the wheat in question, at a given time and place.

EFFECT OF AID PROGRAM ON AMERICAN AGRICULTURE

Mr. MICHEL. Mr. Secretary, the chairman made mention, too, earlier in his line of interrogation, of what is happening in our foreign aid program, with respect to particularly the granting of money for surveys as to the feasibility of farming operations in foreign countries producing commodities which are in direct competition with our own.

I might say that a group of Illinois people have gotten together and called themselves Farm Agriculture Research & Marketing, Inc., which reads, FARM, and they have applied to AID for survey money in the amount of $20,700 and their purpose is to explore the possibility of raising pork and corn in Costa Rica, Nicaragua, and Guatemala. Mr. Secretary, did you know that this kind of thing was really going on?

Secretary FREEMAN. I hadn't heard of this particular enterprise. In a number of places, this kind of thing is going on, one that went across my desk recently that was very interesting, involving Vietnam. In this instance an organization which involved the application of the cooperative principle, was taking place in which corn was being used to stimulate hog production.

This was in no way competitive with American agriculture. But it was having a significant effect on those producers and the economy of that area, and is one of the ways where we might well look to meaningful future markets for corn.