activities, services performed by the Foreign Agricultural Service and other agencies of the Department, costs of audit, and payments to the General Services Administration for space in the District of Columbia and rent of field office space. Estimates for 1966 include a limitation of $36.7 million for costs of administration including a reserve of not less than 7% for contingencies. The requested authorization excludes administrative expenses in connection with the supply program, the wool and mohair program under the National Wool Act of 1954, the International Wheat Agreement, and the sale of long-staple cotton transferred from the national stockpile. It is contemplated that full reimbursement for these expenses will be obtained and used in 1966 in the same manner as in prior years. Expenses of acquisition, operation, maintenance, improvement, or disposition of property which the Corporation owns or in which it has an interest have been treated as program rather than administrative expenses. Such expenses include inspection, classing, and grading work performed on a fee basis by Federal employees or Federal or State licensed inspectors and work performed on a contract or fee basis by Agricultural Stabilization and Conservation County Committees. Capital funds of the Corporation are transferred to the appropriation, Expenses, Agricultural Stabilization and Conservation Service as indicated under that appropriation item for operating expenses relating to the Corporation's programs. Also, expenses of other Federal agencies whose services are used in the handling of Corporation property are treated as program expenses, such as the services of the General Services Administration in connection with the strategic, critical, and other materials acquired by the Corporation. SPECIAL ACTIVITIES These activities are carried out under authority of section 5(g) of the Corporation's charter and specific statutory authorizations or directives with respect thereto which are currently in effect or which may subsequently be enacted. A summary of current activities will be found on pages 159 and 160. The Corporation receives appropriations or reimbursement for costs of these activities as described under each. Activities currently being carried out are as follows: (See Foreign assistance programs and special export programs for details of items (1)-(5).) currencies. (1) Sale of surplus agricultural commodities for foreign (2) Commodities disposed of for emergency famine relief to friendly peoples. (3) Long-term credit and supply contracts. (4) International Wheat Agreement. (5) Bartered materials for supplemental stockpile. (6) Military housing (barter and exchange).-During 1957 a contract was completed for the disposition of Corporation-owned commodities valued at $50 million for the construction of military housing in France with foreign currencies obtained from this transaction. Section 2681 (b) of title 10 U.S.C., as amended, provides for payannually until liquidation of the amounts due for such ment to the Corporation of not to exceed $6 million foreign currencies used in the housing construction and for additional foreign currencies obtained under Public Law 480 for military housing. It is estimated that $2 million of this will be applied against the amounts due under the Commodity Credit Corporation French housing transaction in each of 1965 and 1966. (7) National Wool Act.-Under the National Wool Act of 1954, as amended, incentive payments are being used to encourage the annual domestic production of about 300 million pounds of shorn wool. Support of prices of wool and mohair is mandatory. Incentive payments are made to eligible producers in order to bring the national average price received by all producers up to the announced incentive level. The incentive level cannot exceed 110% of parity. For the purpose of reimbursing the Corporation, section 705 of the act appropriates each fiscal year an amount equal to amounts expended by the Corporation during the preceding year but not to exceed 70% of the gross receipts of duties on wool and certain wool products imported during the preceding calendar year. În a referendum conducted in September 1962, wool and lamb producers voted to continue the deduction from their incentive payment of an amount not to exceed 1 cent per pound of wool and 5 cents per hundredweight of unshorn lambs marketed. These funds finance promotional advertising, and related market-development activities by the American Sheep Producers' Council, Inc., under an agreement with the Secretary of Agriculture. In order to simplify program and financing operations, the marketing year under this program was placed on a calendar year basis on January 1, 1964. COST OF THE NATIONAL WOOL ACT (8) Grain for migratory waterfowl feed. To prevent damage of crops by migratory waterfowl, the Corporation is directed to furnish to the Secretary of the Interior (7 U.S.C. 442-445) such grain acquired through pricesupport operations and certified by Commodity Credit Corporation as available for such purposes or in such condition as to be undesirable for human consumption, as the Secretary of the Interior shall requisition. This appropriation item is included under that Department. (9) Surplus grain for migratory birds.-Under Public Law 87-152, approved August 17, 1961 (17 U.S.C. 448), the Secretary of the Interior may requisition grain of the Corporation to feed starving migratory birds. This appropriation item is included under that Department. (10) Surplus grain for resident game birds.-Any State, under Public Law 87-152, upon the finding of the Secretary of the Interior that resident game birds and other resident wildlife are threatened with starvation, may requisition grain from Corporation stocks (7 U.S.C. 447). Recovery of costs of grain furnished to the States is included in the appropriation Reimbursement for net realized losses. (11) Grading and classing activities.-The Corporation may make advances to the Agricultural Marketing Service for classing and grading of agricultural commodities without charge to producers (7 U.S.C. 414a, 440). Such advances used for classing cotton and grading tobacco not placed under price-support loan are repaid from an appropriation of the Agricultural Marketing Service. (12) Research to increase domestic consumption of farm commodities.-The Department of Agriculture and Re88-250, approved December 30, 1963, authorized the lated Agencies Appropriation Act of 1964, Public Law transfer of not more than $16 million from the appropriation, Removal of surplus agricultural commodities (sec. 32) to the Corporation to be used to increase domestic consumption of surplus farm commodities, and provided for the transfer for such purposes of such sums, not in excess of $25 million in any one year, as may be approved by Congress. The 1965 appropriation act authorized the transfer of $12,175 thousand of section 32 funds for this purpose. The Corporation transfers such funds to the Agricultural Research Service and Cooperative State Research Service to conduct the required research. For comparability, all transactions under this item are shown in the budget schedules for these two agencies. COMMODITY CREDIT CORPORATION-Continued Public enterprise funds-Continued SPECIAL ACTIVITIES-Continued (13) Research to reduce surplus commodities.-The Department of Agriculture and Related Agencies Appropriation Act of 1964 authorized Commodity Credit Corporation to transfer not to exceed $15 million to the Agricultural Research Service for utilization research and development, cost of production research, and other related research designed to reduce surplus commodities held or to be held by the Corporation. The recovery of costs of this research is included in the appropriation Reimbursement for net realized losses. (14) Soil bank program.-Under section 120 of the Agricultural Act of 1956 (7 U.S.C. 1808) the Secretary of Agriculture uses the facilities of the Corporation to make payments to farmers under this program. (15) Cropland conversion, agricultural conservation and emergency conservation measures programs.-Under section 101 of the Food and Agriculture Act of 1962, Public Law 87-703, approved September 27, 1962 (16 U.S.C. 590h(f)), the Secretary uses the services, facilities, and authorities of the Corporation to make payments to producers under programs formulated pursuant to sections 8 and 16(e) of the Soil Conservation and Domestic Allotment Act, as amended. (16) Transfer of long-staple cotton from national stockpile for sale by Commodity Credit Corporation. The act of July 10, 1957 (71 Stat. 290), authorized the transfer of 50,000 bales of domestically grown extra long-staple cotton from the national stockpile to the Corporation for sale. Also, about 219,000 bales of extra long-staple cotton, both American-Egyptian and foreign grown, remaining in the stockpile were made available to the Corporation for disposition under Public Law 87-548, approved July 25, 1962. Proceeds less costs incurred, including administrative expenses, are covered into the Treasury as miscellaneous receipts. (17) Loans for agricultural conservation.-Under section 391(c) of the Agricultural Adjustment Act of 1938, as amended (7 U.S.C. 1391), the Corporation advances funds to the Secretary in amounts not to exceed $50 million annually to purchase conservation materials and services. Repayments of the loans plus interest are made in the succeeding fiscal year from funds appropriated for the agricultural conservation program. - Financing. The programs of the Corporation are financed by capital stock, borrowings, guarantees to purchase notes or other obligations evidencing loans held by financial institutions, issuance of certificates of interest in loans held by the Corporation, appropriations to reimburse the Corporation for net realized losses, appropriations to reimburse the Corporation for costs of the National Wool Act, advances and reimbursements from appropriations for foreign assistance programs and special export programs, and receipts from operations. Borrowing Authority. The Corporation has an authorized capital stock of $100 million held by the United States and authority to borrow up to $14.5 billion. Funds are borrowed from Treasury and may also be borrowed from private lendings agencies. In connection. with loan guarantees, the Corporation reserves a sufficient amount of its borrowing authority to purchase at any time all notes and other obligations evidencing loans made or held by lending agencies or other financial institutions or certificates of interest issued in connection with the financing of price-support operations. All bonds, notes, debentures, and similar obligations issued by the Corporation are subject to approval by the Secretary of the Treasury as required by the act of March 8, 1938 (15 U.S.C. 713a-4). Interest on borrowings from the Treasury (and on capital stock) is paid in accordance with a policy of the Treasury that the rate shall be based upon the average interest rate on all outstanding marketable obligations (of comparable maturity date) of the United States as of the preceding month. Interest is also paid on certificates the agencies have their funds invested. of interest and lending agency obligations for the period It is proposed to add a proviso to section 4 of the terminating at the close of 1965 and each succeeding fiscal act of March 8, 1938, which will have the effect of (1) year, interest on borrowings from the Treasury in an amount equivalent to the realized losses sustained by the Corporation during 1965 and succeeding fiscal years, and (2) terminating at the close of 1964 interest on unreimbursed losses of 1964 and prior fiscal years, for which the Corporation has not been reimbursed by appropriation. Interest would continue to be charged on borrowings for losses sustained during a particular fiscal year but not after the end of that fiscal year. This would limit interest expenses to borrowings for current operations and would avoid increasing future appropriation requests by interest charges resulting solely from deferral of reimbursement to the Corporation for realized costs and losses applicable to past operations. On the basis of the budgetary assumptions described, including proposed legislation, the consequent estimated program requirements currently indicate no need for an increase in borrowing authority. Since there are so many uncontrollable factors affecting the programs of the Corporation involving crops which have not even been planted, it must be recognized that estimates of the use of borrowing authority are highly tentative. Should program developments occur which would indicate a need for funds in excess of those contained in these estimates, or if proposals for farm legislation and interest relief are not enacted, additional appropriations may need to be requested. POSITION WITH RESPECT TO BORROWING AUTHORITY AS OF JUNE 30 Reimbursement for net realized losses.-Under Public Law 87-155 (15 U.S.C. 713a11, 12), annual appropriations are authorized for each fiscal year commencing with fiscal year ending June 30, 1961, to reimburse the Commodity Credit Corporation for net realized losses incurred during such fiscal year as reflected in its accounts and shown in its report of financial condition as of the close of each fiscal year. The realized losses reflected in the accounts of the Corporation and in its report of financial condition as of June 30, 1964, was $3,226.8 million. However, it is estimated that an appropriation of $2,300 million would provide sufficient funds for the operations described and for prior year commitments and contract authorizations. It would also leave a desirable operating margin so necessary to assure flexibility of operations in view of the tremendous volume of transactions handled by the Corporation. A change in appropriation language is also being proposed regarding the interest-free borrowings on unreimbursed realized losses as discussed under borrowing authority, above. The net realized losses of the Corporation have previously been reimbursed as follows (in thousands of dollars): PRICE SUPPORT, EXPORT, SUPPLY, AND RELATED PROGRAMS AND Deficit as of June 30, 1964, special activities.. Proposed for separate transmittal (under existing legislation).-Projections of the demands on the Corporation's $14.5 billion borrowing power indicate that it will be exhausted during January 1965. A supplemental appropriation of $1,180,853 thousand is proposed to enable the Corporation to finance its operations during the remainder of 1965. This amount is the unreimbursed realized loss incurred in 1962 and 1963. |