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Then you move right along and say:
To write into law, however, at this time that price supports are mandatory for all agricultural commodities, would, we believe, be a serious mistake. It could involve tremendous administrative problems and result in an outlay of billions of dollars in times of depression.
What I fear, and I repeat it again, is that if we try to take in too much territory in this bill and cover every commodity regardless of what it is, over which the Department of Agriculture can have no control whatsoever, we are ultimately going to lose the confidence of the American people in the basic farm program as it was written in the beginning and in my judgment operated very well. That is what I fear.
I am attempting to look far down the mountainside and not just for the moment.
What I want to do is to see a long-range program that will work. I do not want to see it cluttered up with a lot of commodities over which we have no control and this may mean the ultimate repeal of a great portion of this farm program. That is especially true if we should ever get to a depression.
Also, I believe what you say is true, that it would cost the Treasury billions of dollars. Your farm program would just go out of the window if that happens. The American people will not stand for it.
Senator THYE. Senator Lucas, do you think there would be some hope that the basic carry-over in a commodity could in some sense govern the plantings or amount of production in that commodity?
Senator Lucas. It is possible. I certainly would like to see every avenue developed and explored to the end that we might find the right formula, but I am unwilling to continue this bill as it is unless we make some amendments even for another year.
I do not believe we should.
Mr. Davis. I think, Senator Lucas, that what you say is true. On the other hand, right now about all our basic commodities are in fairly good shape. I was at a series of six meetings with farmers in Florida about a month ago and most of their important commodities that were moving at that time were moving at prices way below parity. They told me that actually the growers were netting about 5 cents a box for grapefruit on the trees.
Farmers had attempted in one area to divert some of the land this year from potatoes which they thought would be in trouble, to cabbage. Well, the cabbage season in Texas and Florida did not have the staggered maturity that it ordinarily has and it all ripened at one time and they were giving cabbage away down there. They could not market it.
It is our perishable products that in 1948 are in trouble and not our basic commodities.
Senator LUCAS. I do not want to be misunderstood. I know that agriculture is the most hazardous industry of all. I have always been willing since I have been in Congress to try to go along with legislative programs that would help remove many of those hazards but I do not want to go to the extent of removing so many of them that we may lose it all in the final analysis.
Mr. Davis. Certainly we do not want to lose that.
Senator LUCAS. I would like to ask one question. Senator Hoey and I were talking about it a moment ago. You said that in 1946 the seven basic commodities accounted for only 20.5 percent of the total
farm cash receipts in the United States. Where did you get these figures ? Mr. Davis. From the Bureau of Agricultural Economics.
Senator HOEY. In that connection, Mr. Davis, I know you mentioned the seven basic commodities which are of course covered by the act. What assistance does the Government give with reference to these other commodities now?
Mr. DAVIS. Well, none outside of Steagall commodities.
Mr. Davis. Citrus fruits are not under the Steagall amendment and fruits and vegetables in general are not.
Senator HOEY. You are speaking here just under this bill?
Mr. Davis. That is right. I have here the figures from which I worked this out if you want them for the record.
Senator Lucas. We will put them in the record. (The information is as follows:)
Comparison of cash receipts from all agricultural products and from basic
commodities, 1946 Livestock and products.
$13, 668, 370, 000 Crops_--
10, 854, 657, 000
24, 523, 027,000
1, 286, 640,000 1, 519, 120,000
859, 221, 000 954, 244, 000 132, 601, 000 172, 401, 000 118, 395, 000
5, 042, 622, 000 Basic are 2012 percent of total. (It should be recognized that if farm value were used instead of cash receipts the percentage would be higher because of the corn used on the farm. It would also increase the livestock figure.)
Senator Young. I think the problem with potatoes was that they were supporting the price too much by purchases rather than by loans and allowed those who did not restrict their acreage to actually increase their acreage to get the benefits that were brought about by reductions in other producing areas.
Mr. Davis. And your 90 percent of parity in other areas still made potatoes more profitable than anything else.
Senator AIKEN. One reason that potatoes cost more 2 years ago is that Senator Hoey's North Carolina potatoes failed to grow fast enough and they came on the market with the New Jersey potatoes and there was an oversupply of early potatoes which could not be used fast enough.
Senator THYE. That is a hazard of farming.
may have a slow season in one part of the Nation upon which you are normally depending to supply a certain consumers' market and then the crop from that area comes on the market later to compete with that from another area.
You cannot overcome that, but that is the reason why we are attempting to seek a formula to help the highly perishable products and provide a balance on the more stable and broader aspects of agricultural production.
Mr. Davis. We are not ready at this time to recommend that there be anything put in the bill that is mandatory, because we do not believe we have any formula worked out. We do recommend that there be studies given to it and the farm organizations we think should study it, too. Senator LUCAS. That is exactly what I was going to suggest.
It seems to me that any growers of commodities who desire to obtain benefits under proper legislation, with the full realization of the trouble that the Congress has had in trying to lay down a formula, ought to work overtime to try to bring in something constructive in the next year if they can, and you will find a very generous greeting if any one of these agencies can work out a formula that will protect the Treasury and at the same time protect the whole program.
Senator Young. There has been some cost in the case of potatoes and I think some of the criticism which has been directed against the program is justified, but I wonder how much worse off the consumer would have been if there had been no support program at all. The very fact that there was a very high support level encouraged sufficient production. If it had not been for that, production would have been far lower this year and the consumers would have been paying far more than they pay now.
Potatoes on the west coast have been selling far over the support price and if you had not had some encouragement of heavy seedings last year, in my opinion, potato prices would have been far higher than they are now,
and the consumers would have been worse off if we had not had such a program.
Senator Lucas. That is why we need something that is basic and static.
Senator AIKEN. It seems to me we have to write something in the bill authorizing the Secretary to support the price of the nonbasic commodities and lay down the policy of the Congress that they should be supported, but the Commodity Credit Corporation which would be the agency to carry out the support program would like to have us be as specific as possible.
They have the authority now in their bill which will come up right away but it is an over-all authority and would subject them to criticism if they did not buy and criticism if they did buy.
In other words, they would be under constant criticism by somebody unless we spell into the bill, as far as it is possible, the instructions for carrying out this part of the program.
Senator YOUNG. I think some of these programs are a little bit too rigid. I can give an example in the case of potatoes. My potato growers in the Red River Valley called me shortly after the 1st of January. At that time the market price was $2.30 a hundred pounds. The support level was $2.65 a hundred ponnds. They were wondering whether the Department of Agriculture would be asked in to buy. I advised them yes, that really the Department would be required to support the price.
It was not long afterward that the situation reversed itself and potatoes were higher than the support level. If you have a program too rigid, the Department has to get in there sometimes when it is not advisable, when they know for themselves that the market situation will correct itself within a short while. I think there should be a
little more discretion with the Department of Agriculture Advisory Board.
The CHAIRMAN. I did not get that:
Senator YOUNG. I think there should be more discretion with the Department of Agriculture, or at least with an advisory group in supporting prices.
Senator BUSHFIELD. I agree with what Senator Lucas has said. We must recognize the fact that the seasons are going to control.
Senator AIKEN. I do not understand, Mr. Davis, that you recommend anything different for the basic commodities, putting them in the same class with the nonbasics?
Mr. Davis. We are not recommending it at all.
Senator AIKEN. You mentioned hogs down here, and corn. As a matter of fact, when you support the price of corn you pretty nearly support the price of hogs, because a very small percent of the corn leaves the farm anyway.
Mr. Davis. That is true. Senator LUCAS. Do you contend the price of corn follows the price of hogs or does the price of hogs follow the price of corn?
Mr. Davis. The prices of corn and hogs are closely related accord -ing to a long series of economic studies.
Senator AIKEN. If you examine the effects of the parity formula which we provide for in the bill, you will find that the parity price of hogs is raised and corn drops slightly, the purpose being to encourage marketing that corn in the form of hogs when you have too much of it.
Mr. Davis. We strongly support the principle of the automatic carry-over provisions of section 32 funds as outlined in the bill.
This fund can be of great help in relieving distressed conditions of commodities not covered by mandatory price supports. The need for section 32 funds varies from year to year which necessitates a carryover of funds.
We believe also that a revision of section 22 of the Agricultural Marketing Agreement Act of 1937 should be included in S. 2318. We urge the inclusion of language such as the following:
Whenever the Secretary of Agriculture certifies that the volume of competitive imports of any commodity or group of commodities, the domestic production of which is equal to domestic consumption, or to a substantial part thereof, or necessary to the national defense, places or threatens to place a disproportionate burden upon domestic producers of such commodities, such imports should be limited to such definite quantities in relation to prewar imports and domestic supplies as will enable American producers to maintain a position of economic equality with other American social groups.
Senator AIKEN. How much does that differ from the recommendation of the Department of Agriculture? I believe the Secretary recommended something of that nature.
Mr. Davis. I am not sure.
Senator AIKEN. And also the Farm Bureau's testimony, I think,. recommended this.
Mr. Davis. I have not checked them against this to know.
Senator Lucas. Let me ask you about that language you want to include.
Mr. DAVIS. Yes.
Senator LUCAS. You would do that on any crop, regardless of what it is?
Mr. Davis. That is right.
Senator Young. If that principle were applied, you would not need any program for wool.
Mr. Davis. That is right. The wool people helped to draft this. Senator Young. They are smart. It is a good program. Senator Lucas. Well, now, I am not so sure. That is all. Mr. Davis. Some of the members of the National Council of Farmer Cooperatives are interested in securing more information on supplemental-income or compensatory-payment plans for perishable commodities. We suggest that the Department of Agriculture make a thorough study of these plans and present definite information on them, and report to this committee the feasibility of such programs.
With respect to building better farm markets or improving quality or reducing the cost of farm supplies, we believe that farmer cooppratives provide the most effective tools.
We were indeed pleased to see the many sound references to farmer cooperatives which this committee included in the report on the hearings on the long-range program.
Through their cooperatives, farmers can help themselves by injecting into the farm supply or marketing fields competitive service which they own and control. This they had to do of their own initiative without direct Government assistance or regulation. In order to increase their income or profits from farming, farmers operate their cooperatives on a nonprofit basis, refunding the savings back to themselves in proportion to patronage.
Senator LUCAS. That is not true with respect to all cooperatives, is it?
Mr. Davis. Well, it is generally true with farmer cooperatives.
Senator Lucas. What do you mean by "generally true"? There is a big attack in Congress about taxing cooperatives. You know about that.
Mr. Davis. I would say it is almost universally true with farmer cooperatives.
Senator LUCAS. That has been my understanding, too; and I have been wondering why there was this severe attack by Fulton Lewis, for instance, on the radio, on cooperatives. We have a committee over in the House of Representatives that is out after cooperatives.
Mr. Davis. Their program is not one of taxing any money that is not untaxed, either to the farmer or the cooperative, but these people want to define all net savings as profits and tax them before patronage refunds are paid out to the farmer, even though it is the farmer's income. We are opposed to that.
Senator LUCAS. Will you restate that, please?
Mr. Davis. The issue raised by the National Tax Equality Association is not one of trying to tax money that is escaping taxation because of any exemption under 101.12. They say that is not important, that is insignificant. It is in their testimony before the Ways and Means Committee.
They would like to arbitrarily define by law all net savings of a cooperative as corporate profits and require the total amount to be