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(Exhibit F is as follows:)
Exhibit F.-Prices received by farmers, parity prices and modernized parity prices
under alternative formulas, United States, February 15, 1948
1.Column (1) divided by 1938–47 average of the index of prices received by farmers (167.5). ? Prices in column (2) multiplied by the index of prices paid, interest and taxes for February 1948 (248).
3 Prices in column (2) multiplied by the index of prices paid, interest and taxes for February 1948 (248) weighted 92.2 and the current index of farm wage rates (408) weighted 7.8: (260).
Source U.S. Department of Agriculture.
Mr. Jones. Exhibit G: Average prices received by farmers. The average increase in prices for 23 principal agricultural commodities from the prewar period (Sept. 15, 1941) to January 15, 1948 amounted to 146 percent. The increase in the price of wool during the same period is 12.1 percent, which is included in this table.
(Exhibit G is as follows:)
EXHIBIT G.–Average prices received by farmers in the United States, Sept. 15,
1941, compared to Jan. 15, 1948 for 23 principal products
Mr. Jones. Exhibit H. Analysis of normal supply (excluding Government stock of wool), total supply percentage for domestic wool calculated under S. 2318. That will be referred to later.
(Exhibit H is as follows:)
EXHIBIT H.—Analysis of normal supply (CCC stocks out), total supply and
supply percentage for domestic wool calculated under s. 2318
Total supply for 1948 is 85 percent of normal supply. This is the supply percentage.
This would mean an 80-percent parity support or a support program at 42.7 cuts (parity January 15, 1948—53.4) per grease-pound average if the program had gone into effect as of January 15, 1948.
Present support is 42.3 cents per grease-pound.
Mr. JONES. Exhibit I: Analysis of normal supply, total supply and supply percentage for domestic wool calculated under S. 2318, which includes Government stocks of wool. That will be referred to later.
(Exhibit I is as follows:)
EXHIBIT I.-Analysis of normal supply, total supply, and supply percentage for
domestic wool calculated under S. 2318
1938. 1939 1940. 1941 1942 1943 1944 1945 1946. 1947
161, 724 198, 692 128, 475 120, 338 170, 170 208, 756 284, 522 406, 252 518, 525 636, 579
424, 400 426, 200 434, 000 453, 300 455,000 444, 000 411, 800 378, 400 341, 700 310, 100
586, 124 624, 892 562, 475 573, 638 625, 170 652, 756 696, 322 784, 652 860, 225 946, 679
Eighty percent of total average supply equal 552,903 pounds.
Ten percent of the difference between total supply for 1946 (860,225) and the total 10-year average supply 829,355 is 3,087,000 grease-pounds; 10 percent of the difference for 1947, 11,732,000 grease-pounds; total 14,819,000 grease-pounds.
Ten-year average total supply, 691,129 grease-pounds; less 10 percent of differences for 1946 and 1947, 14,819 grease-pounds; total normal supply 676,310 grease-pounds.
Nineteen hundred and forty-eight carry-over, 529,140,000; estimated production 290,000,000; total supply, 819,140,000. Total supply for 1948 is 121 percent of normal supply. This is the supply percentage. This would mean a 65 percent parity support or a support program at 34.1 cents per grease-pound (average).
Present support program 42.3 cents per grease-pound.
Mr. Jones. Exhibit J: Wool production stabilization formula. That will be discussed later.
(Exhibit J is as follows:)
EXHIBIT J.-Wood production stabilization formula (incentive formula) Normal domestic shorn wool (grease) production--- --pounds.- 360,000,000 Percentage of parity wool support or loan base--
Domestic Change in
Support or parity shorn wool shorn wool loan base 1 10-year
average (000) (000)
Loan or support amount 1
1930. 1931. 1932 1933. 1934. 1935. 1936. 1937 1938 1939. 1940 1941. 1942. 1943. 1944. 1945. 1946. 1947 1948.
-9.0 +14.2 +8.9 +1,5 -6.8 -3.9
-.1 +1.7 +12.0 +27.5 + 28.3 +-18.8 -21.7 -52.1 --80.1 -107. 2 -120.0
77 76 72 73 77 76 72 73 73 74 75 75 76 76 76 75 75 75 75 75 73 74 69 72 69 72 71 73 79 78 85 81 90 84 90 87 90 89
33.7 29.7 26.8 27.9 28.9 27.3 27.1 26.7 26.0 25.6 26.0 31.2 36.4 40.6 40.5 40.8 49.4 54. 9 53.5
Cents 25.9 25.6 21.4 22.6 20.6 20.4 20.1 20.4 21.1 21.4 20.5 20.5 20.6 20.6 20.3 20.0 19.5 19.5 19.2 19.2 19.0 19.2 21.5 22.5 25.1 26.2 28.8 29.6 32.0 31.6 34.7 33.0 44.5 41.5 49.4 47.8 48.2 47.6
8. 6 20.6 21.9 19.3 26.9 32.0 19.1 22.3 28. 3 35.5 40. 1 41.7 42.4 41.9 42.3 42.0
1 Figured on the basis of 1 percent change in support from 75 percent of parity, either up or down, for every 8,640,000 pounds of wool, or major fraction thereof, in normal supply (360,000,000). The 8,640,000 pounds would be in conformance with present formula in S. 2318.
With wool at 40 cents per pound 1 percent change in parity means four-tenths of a cent per pound. With wool at 40 cents per pound 5 percent change in parity means 2 cents per pound. Production of domestic shorn wool, 1930–39, inclusive, averaged 361,500,000 pounds. Prices of all wool 1920–39, inclusive, averaged 82 percent of modernized parity. Normal production of domestic shorn wool is taken at 360,000,000 pounds. Normal loan or support base is taken at 75 percent of parity, with a maximum of 90 percent and a minimum of 60 percent loan or support price.
For every 5,000,000 pounds of shorn wool variation in production 1 percent change is made in inverse proportion from the normal (75 percent) loan or support base.
Source: Basis data, V. S. Department of Agriculture, Apr. 15, 1948.
Mr. JONES. Information as to prices, production, supply, and so forth, is available to the committee on pages 13 and 14 of Data Pursuant to the Agricultural Act of 1948, S. 2318, as prepared by the Bureau of Agricultural Economics.
I just learned yesterday that those figures were not correct. The only reason that we delayed in preparing our tables was to be in conformance with the figures of the Bureau of Agricultural Economics and now they say they have made a mistake. Consequently, these figures that I have prepared here would not be exactly as they should
be, we now know, but the principle involved is the same and it would not make a great deal of difference.
RECOMMENDATIONS FOR LONG-RANGE AGRICULTURAL PROGRAM
Before referring to S. 2318, I should like to present our position and attitude:
(1) There is one proper solution of the situation confronting the domestic sheep industry and that is adequate tariff protection to compensate for the difference in the cost of production of wool here and abroad and that this tariff be made flexible, taking into account the fluctuations in currency exchange rates.
We recognize that proper tariff protection is not the primary consideration of this committee, but the reduction in duty on wool of 842 cents per clean pound, effective January 1, 1948, must receive consideration of all of Congress and the effect taken into consideration by this committee in planning for a long-range agricultural program if the domestic industry is to survive.
Briefly, our recommendations are: 1. Adequate tariff protection. 2. Modernization of parity. 3. Establishment of wool as a basic commodity. 4. Price support at 75 per cent of the modernized parity as a "disaster floor."
(2) In the development of a long-range program the sheep industry does not want nor expect more consideration for the products of this industry than is given to all of agriculture. We do expect equal treatment, but nothing more.
The Secretary of Agriculture told this committee on April 12 to the effect that support for wool was made a "guinea pig” last year; that he had the power to support wool, but that he wanted a mandate from Congress, which, thanks to you gentlemen, was accomplished by the Wool Act of 1947. We do not want to ask Congress to again pass special legislation for wool. Again, we appreciate the inclusion of wool in long-range agricultural legislation.
S. 2318 AS APPLIED TO WOOL
Much time was spent by the committee last meek in hearing the statements of the Secretary of Agriculture and farm organizations on titles I and II of S. 2318. With your permission I should like to proceed immediately to Title III, Amendments to the Agricultural Adjustment Act of 1938, and discuss this title as it is applied to wool.
We endorse the alternative parity price formula with the 10-yearmoving base provided for in the bill as far as the sheep industry is concerned. This will place wool and lambs in a fair and equitable price relationship with other agricultural commodities.
On the libit referred to a moment ago, which is exhibit F, it shows that a reduction in parity price has been made for sheep in the formula which we would like to see passed by the Senate; but we feel that that is justified because in our opinion the parity for sheep was higher than it should have been as far as the price relationship is concerned between wool and lambs.
SUPPLY FORMULA AND BASIS FOR PRICE SUPPORT
Before it is possible to arrive at a proper conclusion for a supply formula or a basis of price support for wool, one of two fundamental principles must be decided upon:
(1) A domestic sheep industry is essential and desirable; or
(2) A sheep industry in this country is uneconomic and should be liquidated as quickly and as painlessly as possible, which is the present position of our State Department. We, of course, hold to the first view expressed and are supported in this view by the Army and Navy Munitions Board, who has declared wool a critical and strategic commodity subject to stock piling.
Let us for purposes of discussion classify the above principles into (1) the incentive formula, (2) the liquidating formula.
If the principle is adopted that a domestic sheep industry is uneconomic and should be liquidated, and we are quite certain that this would not be the recommendation of this committee, an amendment should be added at the end of the definition of total supply on page 37 with the following words: “and stocks held by any agency of Government."
The CHAIRMAN. Who did you say was claiming that the sheep industry was uneconomic?
Mr. JONES. Our State Department has made that statement before the Senate Finance Committee that they felt it was uneconomic. It is not our position that it is.
This amendment would permit orderly liquidation.
The reason for this request is that producers have no control over the disposal of stocks of wool held by a Government agency, either as a result of a support program or of stock piling. Domestic wool is a deficit product. Only once in the past 30 years has domestic production exceeded consumption. It is our opinion that in normal times wool will never be a surplus commodity.
Exhibit H is an analysis of normal supply with Government stocks excluded from the definition “total supply_Government stocks excluded—and supply percentage for domestic wool as calculated under S. 2318, in order to show the operation of the formula if it were in operation this year.
The support price for wool would figure out to be 42.7 cents per grease-pound or four-tenths of a cent per pound higher than wool is supported this year. This in our opinion would permit a gradual liquidation of the industry without disastrous effects to the producer, but in our opinion would mean a loss to the Nation as a whole.
The formula as now used in the bill for wool would be ruinous. It would provide a support of 34.1 cents per grease-pound of 8.2 cents less than the present price-support program of 42.3 cents per greasepound, providing it was in operation this year. That is shown on exħibit I.
It appears to us that the present formula is more applicable to field crops and surplus commodities generally speaking, than it is to a deficit commodity produced from livestock, which cannot be turned on and off with the seasons.