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Senator Young. A similar bill to this has not even been introduced in the House, has it?
Mr. Trigg. I do not believe it has, Senator Young, but I am not certain. What we have submitted to the Senate has been submitted, of course, to the House, but I do not believe it has yet been introduced.
Senator YOUNG. It seems to me that would be of tremendous importance to the House Agriculture Committee too, especially if it is as you say, that this has been largely the cause of exports lagging behind a year ago
Mr. TRIGG. Well, we are anxious of course that action be taken to clarify just what the Government's policy is on this, and if the implementing legislation is to be passed, that it be done at the earliest possible time in order that we can export as much wheat as we can during these months, and particularly before some of the other countries begin to come into production.
We are not anxious to cut them off, but we are anxious to do our job first. We are anxious to get as much of this wheat out as we can in a favorable period of the United States.
Senator JOHNSTON. How would it affect it if we decided to let the ECA funds pay the subsidy?
Mr. Trigg. I do not know, Senator, that I quite understand your question.
Senator JOHNSTON. Instead of being paid out of the CCC funds, we would pay it out of the funds that have been appropriated to ECA.
Mr. TRIGG. If I understand you correctly, what it would mean is that ECA would out of its present appropriation absorb the subsidy on any wheat going out to the agreement countries.
Senator HOLLAND. The subsidy being the amount between the $1.80 and the prevailing market price.
Senator JOHNSTON. $2.20, $2.30, whatever that would be.
Senator Young. I do not believe I have any other questions right now.
Senator JOHNSTON. I have no further questions myself.
Dr. D. A. FitzGerald, Director of Food and Agriculture Division, ECA.
Senator Young. Mr. Chairman, may I have the record corrected to show that the House Banking and Currency Committee is the committee that is concerned with this bill, instead of the House Agricultural Committee, because I understand in the House the Banking and Currency Committee handles this type of legislation.
Senator JOHNSTON. You may proceed, Mr. FitzGerald. It might be well to tell who you are, for the record. STATEMENT OF DR. D. A. FitzGERALD, DIRECTOR, FOOD AND
AGRICULTURE DIVISION, ECONOMIC COOPERATION ADMINISTRATION, WASHINGTON, D. C.
Dr. FITZGERALD. My name is D. A. FitzGerald, and I am Director of the Food and Agriculture Division of the Economic Cooperation Administration.
Mr. Chairman, I have no prepared statement. We are most interested in expeditious consideration by the Congress of the legislation implementing the wheat agreement because, as Mr. Trigg has just indicated, the uncertainty as to the position is slowing down the shipments of American wheat and flour. Pending clarification of the present position with respect to the way in which the cost will be borne, the participating countries are delaying insofar as they can, the ordering and lifting of American wheat.
Since July 1 of this year our authorization for wheat purchases by the participating countries have amounted to only about a third of the authorizations for a corresponding period a year ago.
Senator Young. Was that because of the lack of this implementing legislation.
Dr. FITZGERALD. Yes, it is, Senator Young.
Senator HOLLAND. We had better hold up for a good long time, had we not, Doctor, if we want to get the benefit of the payments out of ECA appropriations?
Dr. FITZGERALD. Well, there are two results I think that will grow out of any such delay, Senator Holland. In the first instance to the extent that the participating countries can redirect their programs so that they make available free dollars, they are and will continue to purchase wheat under the international wheat agreement. Under those circumstances of course they do get the benefit of the $1.80 price.
When they do that, of course the Department of Agriculture supplies the wheat at the wheat-agreement price, and absorbs the subsidy from section 32 funds, so that there is no net gain to the United States.
The other difficulty of course is that already the wheat movement from the United States has been slowed down for this reason, and the longer that reduced flow is continued, the more difficulty there will be in moving the projected supplies out of the United States.
Senator Young. May I interrupt to ask this question of Mr. Trigg. Has any of this cost been charged to section 32 funds as of now?
Mr. TRIGG. The subsidy cost?
Mr. TRIGG. Just on flour; flour purchased and commercial wheat have been charged.
Senator Young. About how much?
Mr. TRIGG. One million six of commercial flour. That is in terms of wheat; 654,000 of wheat itself; that is in bushels. You can multiply that by 38 cents and it will give you the dollar figure.
Senator Young. Under what law are you authorized to do that? Mr. TRIGG. We have the authority under section 32.
Senator Young. Under the Agricultural Act of 1948, is it required that all section 32 funds be used for the support of perishables
Mr. TRIGG. No.
Mr. TRIGG. I might say as a policy, Senator, we try to do that very thing, make use of section 32 funds on perishable commodities.
Senator HOLLAND. In other words, if I understand it, Mr. Trigg, even before the passage of this legislation suggested here to implement the international wheat agreement, ECA has paid itself only
$1.80. The rest of it is coming out of one pocket or another of the Department of Agriculture funds.
Dr. FitzGERALD. Might I answer that, Senator?
Senator HOLLAND. Well, my understanding of his statement is that the subsidy was being paid out of section 32 funds, and the subsidy is the difference between the $1.80 and the market price, is it not?
Mr. Borton. This is not on ECA purchases. It is excluded, and it is on all subsidy payments for commercial sale of flour and wheat, and we cannot, under the present program we are operating, pay anything to ECA.
Senator JOHNSTON. That being so, when the amount was appropriated to ECA by the Appropriations Committee under the present existing law, ECA then was to take care of the difference if there was to be any difference paid.
Dr. FitzGERALD. Senator Johnston, that is, I do not believe, entirely the results of the deliberations by the Appropriations Committees. In the subcommittee of the House Appropriations Committee, which considered the legislation, that subcommittee made three specific reductions in the ECA appropriation request.
One was for a prospective decline in prices, United States prices generally. Another one was for the decline that had taken place prior to their hearings, and the third one was a $60,000,000 item because of the saving to ECA as the result of the expected lower prices that ECA countries would get wheat for under the wheat agreement.
Now as you may remember, Senator, the full committee made a further cut in the ECA appropriation request, so that the specific item was not carried in the report that came up to the House for direct consideration. It is indirectly included in the hearings on the House side, and directly included in the hearings on the Senate Appropriations Committee. Reference is made from time to time of savings to ECA that would grow out of the lower prices that are expected to pertain on sales to participating countries who are also signators to the wheat agreement. I can give you those references if you want them, Senator Johnston.
Senator YOUNG. How will this devaluation of the pound sterling affect our exports? Will it react in this way, that it will cost them more to buy wheat in the United States than it would in sterlingcountry areas? Is that so?
Dr. FITZGERALD, Yes, it will, Senator Young; that is, the sterling cost of United States wheat will be increased by some 35 or 40 percent.
Senator YOUNG. Does that mean that ECA will be authorizing greater purchases or a larger percentage of purchases in sterling-area countries, rather than in the United States in the future?
Dr. FITZGERALD. We have not authorized any use of ECA funds for the purchases of wheat in sterling-area countries at all at any time. The effect of the devaluation will be wholly on the local currency cost of the imported wheat, and not on the dollar prices of imported wheat, Senator Young.
În other words, the price of United States wheat in sterling in the United Kingdom in terms of pounds, shillings, and pence, will be increased in proportion to the devaluation of sterling. The presumption is that the cost of Australian wheat, which is the principal sterling source of wheat, will not be changed in sterling. I do not know whether that answers your question.
Senator Young. I think it does. Do you anticipate any reduced amount of authorizations for purposes of wheat in the United States by ECA countries this year as against last year?
Dr. FITZGERALD. As a result of devaluation or just as a matter of historical comparison?
Senator YOUNG. Historical comparison.
Dr. FITZGERALD. Probably some small percentage decrease in the participating countries' purchases of United States as compared to last year. I think the percentage decline will be very small as far as United States exports, total United States exports, are concerned.
I would like to have the Department of Agriculture comment if it cares to do so. We are carrying now, as a matter of planning, exports of United States wheat in the neighborhood of 450,000,000 bushels, and last year's exports, as you know, were 503,000,000, I believe.
Senator Young. And you are planning 450,000,000 bushels total exports?
Dr. FitzGERALD. That is all total exports, sir, of which we anticipate that about 325,000,000 will be to ECA countries, which is within 5 percent, I should say, of the shipments to those same countries last year as a group.
Senator Young. Do you contemplate any more big purchases in Canada?
Dr. FITZGERALD. No, sir; we do not.
Senator Young. Did you take into consideration when you purchased in Canada, the fact that they have no control over their production at all, and we are required to reduce our wheat acreage 17 percent here?
Dr. FITZGERALD. Well, that is a consideration, Senator Young, as far as the authorization for the use of ECA funds in Canada is concerned.
As Mr. Trigg indicated earlier, that authorization does not either reduce United States exports or increase Canadian exports. The Canadian exports would have been made in any event because the United Kingdom had a firm obligation to buy 140,000,000 bushels of Canadian wheat, which they would not have bought with free dollars if that had been necessary.
Senator Young. Let us put it this way. then. Supposing Canada increases its wheat production, say, 20 percent next year and has a big surplus hanging over their heads. That wheat somehow is going to move into the United Kingdom market, will it not, to the detriment of the American farmer?
What I am trying to get at is the more wheat they produce with no controls, the more it is going to hurt us, at least so long as ECA furnishes United States dollars to get them out of a hole.
Dr. FITZGERALD. Well, the situation of course next year, Senator Young, will be different in this respect; that Canada will not have a bilateral agreement with the United Kingdom under which the United Kingdom is under obligation to buy.
Senator Young. I am afraid they will fix up another one, though.
Dr. FITZGERALD. Well, I do not believe I would worry too much about that if I were you, Senator.
Senator Young. What I am really concerned about is this increasing surplus in the United States, this year about 300,000,000 bushels.
If we do not get rid of this wheat even with a reduced acreage, we may wind up with 400,000,000 next year, and that places a tremendous extra cost on the Commodity Credit Corporation in supporting wheat prices.
If we allow that to happen on all farm commodities, the Commodity Credit Corporation is going to run out of funds, and other crops besides wheat are going to suffer.
Dr. FITZGERALD. On your point, Senator Young, if United States exports-and I underline the word "if"—this fiscal year do approach or approximate 450,000,000 bushels the carry-over a year from now should be approximately the same as it was this year.
Senator YOUNG. May I ask this question of Mr. Trigg then. Do you think that we will reach this 450,000,000-bushel export goal with this lag we have had now in the last 2 months? Are not these last 2 months the biggest export months of the year?
Mr. Trigg. That is correct, Senator, and it is doubtful whether we will reach any 450,000,000 bushels. I expect a more realistic figure would be 400,000,000 bushels in view of the fact that already 3 months of this year have elapsed, and that is 3 months in which we have normally made heavy shipments in our export program.
Senator YOUNG. That is what I was afraid of.
Dr. FITZGERALD. To the extent that United States exports fall below 450,000,000 bushels, your carry-over will of course be correspondingly higher on July 1 of 1950.
Senator HOLLAND. Dr. FitzGerald, do I understand that in this small purchase of wheat made by the ECA countries since July 1st, which you say is about one-third of the authorizations to purchase of last year, that 7,000,000 bushels as I recall you saying, are they paying for that at the $1.80 figure or at the market figure?
Dr. FITZGERALD. No; they are paying that at the cost to CCC, sir.
Senator HOLLAND. The cost to CCC, and CCC having no right to the subsidies out of section 32 funds, that means at the market figure, does it not?
Dr. FitzGERALD. Yes, sir. I should like to elaborate on the statement I made that these purchases by the participating countries were only a third of last year. That is the purchases on which they have asked for ECA financing.
Now in addition to that, they have been purchasing, with what free dollars they could scrape up, additional quantities direct from CCC in order to get advantage of the $1.80 price. The quantities would not be very large.
Senator HOLLAND. To make it clear for the record, as I understand it, the purchases which they have been financing out of free dollars, which they got somewhere else, they have been entitled to receive at $1.80, and in order to so receive it, ČCC has had to pay market price, and the subsidy being the difference between the market price and $1.80 has come out of section 32 funds.
Mr. TRIGG. That is correct insofar as sales of commercial wheat and commercial flour are concerned. When CCC furnishes the wheat, the loss is absorbed out of CCC funds.
Senator HOLLAND. Do you have any statement of the amount of wheat that has moved in these months since July 1 under that latter program that you have just described?
Dr. FITZGERALD. We could get it for you.