CIVIL DEFENSE AND DEFENSE MOBILIZATION ACTIVITIES

Funds advanced by Department of Defense to USDA agencies, fiscal years 1963 and

1964

Estimated cost of civil defense and defense mobilization activities charged to regular funds or absorbed in directly related regular program costs, fiscal years 1963 and 1964

Mr. WHITTEN. Would you also insert a table showing end-of-year employment targets for 1964 and 1965?

(The table follows:)

Department of Agriculture: End-of-year employment

[As reflected in the 1965 budget under all funds, including appropriations, transfers, trust funds, and fees collected for services performed, and including employment under proposed supplemental appropriations and proposed legislation]

Represents limitations on total employment for the Department as a whole, as of June 30, 1964, and 1965. The figures shown for individual agencies, and those shown for "Permanent positions" and "Other," represent current estimates and are subject to shifts to meet changing conditions as the year progresses.

Mr. WHITTEN. Mr. Grant, we appreciate your appearance here. I thought you were especially good when you described that grain inspection as being voluntary, but for all practical purposes, being compulsory. I thought you reached your peak in that answer. May I say I also agree with you.

Mr. GRANT. Thank you very much, Mr. Chairman.

If we can be of any help to the committee in your deliberations, feel free to call on us.

Mr. WHITTEN. Thank you, sir.

Mr. GRANT. Thank you very much.

30-080-64-pt. 1-21

MONDAY, FEBRUARY 24, 1964.

GENERAL AGRICULTURAL OUTLOOK

WITNESSES

DR. WILLARD W. COCHRANE, DIRECTOR, AGRICULTURAL ECONOMICS

C. KYLE RANDALL, CHIEF, FARM INCOME BRANCH, ECONOMIC AND STATISTICAL ANALYSIS DIVISION, ECONOMIC RESEARCH SERVICE

NATHAN M. KOFFSKY, ADMINISTRATOR, ECONOMIC RESEARCH SERVICE

CHARLES L. GRANT, DIRECTOR OF FINANCE AND BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

Mr. WHITTEN. Gentlemen, we are glad to have with us Dr. Cochrane, Director of Agricultural Economics, U.S. Department of Agriculture.

Dr. Cochrane, we always look forward to having you here, and we also look forward to having your presentation of the facts and figures concerning the operations of the Department of Agriculture and the situation in agriculture.

As a result of the Supreme Court decision a few days ago, we are going to have fewer farm members in the Congress, that is, folks who have an understanding of agriculture. So our problems will probably get worse in the Congress instead of better.

I hope you will proceed in your own way, Dr. Cochrane.

CURRENT TRENDS IN AMERICAN AGRICULTURE

Dr. COCHRANE. With your permission, I would like to read a brief statement which summarizes the price-income situation for 1963 and a little of the outlook for 1964.

Mr. Chairman and members of the committee, I would like to present a number of charts which show some of the trends affecting the economic situation in American agriculture and highlight a number of the problem areas. Each chart has a legend which explains the economic significance of the statistical data in the charts themselves. With your permission, I would like to place the charts and accompanying legends in the record of these hearings.

As background for the charts, I think the committee will be interested in a summary of the farm price and income situation during 1963 and our current appraisal of the outlook during the present year.

In 1963, prices received by farmers averaged a shade below 1962 as higher prices received for crops were more than offset by a drop of about 4 percent in prices of livestock and products. Total farm output was up about 4 percent, with a somewhat greater rise in crops than in the livestock sector.

The marketings from this larger production more than compensated for the small decline in average prices, so that both cash receipts from farm marketings and realized gross farm income increased by about $300 million during 1963.

However, the cost of production items purchased by farmers increased by about $600 million, and total realized net income dropped from $12.6 billion in 1962 to an estimated $12.3 billion last year.

The situation was somewhat alleviated by the continued decline in the number of farms. Realized net income per farm in 1963 was about $3,430, fractionally above the record high of $3,414 reached in 1962. This is a national figure, and there are wide differences by regions and States.

For example, net income continues to be relatively higher than the national average in the Pacific States of Washington, Oregon, and California; and relatively lower on farms in the East South Central States of Kentucky, Tennessee, Alabama, and Mississippi.

But there has been an upward trend in per farm income in each region during recent years, with some narrowing of variations relative to the U.S. average.

Of course, many farmers have some nonfarm income, and when we look at the per capita personal income of the farm population from all sources, the picture is a little bit better. In 1962 this reached a record high of $1,436, and a further increase of 3 percent to about $1,480 is now estimated for 1963.

But despite this absolute gain, personal income per capita of farm people from all sources relative to that of nonfarm people remained at the 1962 level of 59 percent.

Exports of U.S. farm products have continued high. They totaled $5.1 billion in fiscal year 1963, equal to the record high level achieved in the previous fiscal year, despite a 10-percent contraction in sales to the Common Market countries. The stock situation has improved for wheat, feed grains, and dairy products, but the cotton carryover rose sharply.

During the current year, appreciable increases are expected both in the domestic demand for farm products and in exports. With prospects for continued expansion in the general level of economic activity, consumer incomes after taxes are expected to rise 5 percent or more above last year, while total population can be expected to increase by at least 11⁄2 percent.

Exports may well reach a new record of around $6 billion in this fiscal year. This will be largely accounted for by larger sales of wheat, cotton, soybeans, and dairy products. Most of the overall gain is likely to be in dollar sales, which will make a real contribution to the balance-of-payments problem.

Unfortunately, this expansion of domestic demands and foreign outlets will not be accompanied by a rise in farm income under existing legislation. Realized net farm income in 1964 is expected to be as much as 5 percent below 1963, largely as a result of sharply reduced income from wheat and a continued rise in farm production expenditures which have increased an average of nearly three-fourths of a billion dollars annually during the past decade.

Again, the decline in the number of farms will be an offsetting factor, but will probably be insufficient to prevent a small drop in average net income per farm. Farms in the wheat areas will bear the

brunt of the decline.

Total farm population will continue to shrink and per capita income from nonfarm sources will rise, so that per capita personal income of people living on farms from all sources may be about as high as the 1963 record.

This appraisal is necessarily based on the programs as they existed at the turn of the year.

assumption of farm Legislation affecting

the various farm commodities, especially wheat, cotton, and dairy products, could alter the farm income situation appreciably.

Mr. WHITTEN. Thank you, Doctor. You might proceed with the charts, if you will, and take the liberty that we always accord you of putting the record in such form as may make it most understandable. Dr. COCHRANE. I will be talking extemporaneously and it will help me if I can correct the record.

FARMER'S PRICES

The first chart dealing with farmer's prices is a familiar one that the committee has seen many times.

(The chart referred to follows:)

Prices received by farmers in 1963 averaged 241 (1910-14 equals 100) nearly 1 percent below 1962 but otherwise the highest since 1958. Prices received for crops at 238 were up over 3 percent from 1962. Prices for livestock and products at 244 were down 4 percent.

On the crop side, prices received were higher for feed grains, oil-bearing crops, fruit, and the potato, sweetpotato, dry bean group. Prices for food grains, tobacco, and commercial vegetables were lower.

Lower prices for meat animals accounted for nearly all the decline in prices received for livestock and products. Prices for the dairy products and poultry and egg groups were about unchanged from a year earlier.

The parity index-prices paid by farmers, interest, taxes, and wages-averaged 311, up nearly 2 percent. All major components contributed to the rise. Interest, at 14 and taxes at 5 percent, were the largest percentage increases.

The parity ratio averaged 78, slightly lower than the average for the last 3 years. Adjusting the ratio to take account of Government payments would raise it to 81, the same as in 1960.

Since the midfifties, prices received by farmers have varied within a rather narrow range. For the last 10 years the average of the index is 240. The parity index on the other hand increased steadily during the last decade, and it was 12 percent higher in 1963 than in 1954. This, then, is a concrete illustration of cost-price squeeze.