on agriculture, and trade statistics and analysis. The research emphasizes the appraisal and evaluation of the economic implications of policies and programs of the United States and other countries on our foreign trade in farm products and the efficient use of our excess food production and other resources in economic development abroad. The information thus gained will be employed in improved formulations of national policies, positions, and programs in the area of foreign agricultural marketing, foreign economic development, and foreign agricultural trade.

C. Foreign regional analysis is concerned with research on food and agriculture in more than 100 foreign countries in the Western Hemisphere, Europe, including the Soviet Union, Asia, Africa, and Oceania. For each country, the research is centered on economic analysis and interpretation of conditions, forces, and developments affecting supply, demand, and trade in farm products, and their impact on current and prospective U.S. agricultural exports.

Selected examples of recent progress

1. Examples of current situation and outlook reports issued throughout the year.-Major developments affecting the farmers' economic situation included in the regular commodity situation reports issued during the year:

(a) Farm income: The realized net income of farm operators in 1961 will be about a billion dollars higher than the $11.7 billion received last year. It is expected that the income gains registered this year will be maintained in 1962, with little overall change in the realized net income of farm operators, total volume of farm marketings, or average prices received by farmers.

(b) Marketing costs: Charges for marketing food products from U.S. farms will average about 2 percent higher this year than last, continuing the long-term upward trend that began during World War II. The prospect for 1962 is similar, with marketing charges expected to average 1 or 2 percent higher per unit of product than in 1961. Retail costs are again expected to rise slightly. (c) Feed grains: The total supply of feed grains and other concentrates for 1961-62 is down 7 million tons from the record supply of last year. This is the first interruption of the steady upward trend in feed concentrate supplies that began in 1952. Total utilization and exports are expected to exceed the 1961 crop for the first time in 10 years, reducing carryover into 1962-63 by around 5 million tons below the record carryover of 84 million tons for 1961-62 (fig. 15).

(d) Livestock and meat: A record output of red meat is expected in 1962, accompanied by a small increase in per capita consumption. Increases are expected in the production of both beef and pork, but the production of lamb and mutton is expected to be down. The outlook for 1962 is for hog prices somewhat below the 1961 level; lamb prices improved over 1961; and an average farm price for all cattle and calves about the same as this year.

(e) Milk: Milk production in 1962 again is expected to register another significant increase as it did in 1961. Not much change is anticipated in aggregate consumption of dairy products. CCC purchases in 1962 will exceed the large purchases in 1961.

(f) Poultry and eggs: Production of eggs next year is expected to be a little above the 170 million cases in prospect for 1961, and egg prices to producers are likely to average below the 36 cents per dozen indicated for 1961. Heavy broiler production appears to be in prospect for 1962 despite record low prices in 1961, and the turkey crop in 1962 is again likely to be large.

(g) Fats and oils: Total supply of edible fats, oils, and oilseeds during the 1961-62 marketing year is forecast at a record 16.1 billion pounds. Even though exports and domestic use are expected to be record large, the carryover of around 75 million bushels of soybeans is likely next October 1. Due to the price-support program, the season average price received by farmers for 1961 crop soybeans is forecast at $2.30 a bushel, about 5 percent above the year before.

(h) Cotton: With the 1961 crop now estimated at 14.5 million bales and 1961-62 exports expected to be around a million bales less than in 1960-61, the carryover of cotton on August 1, 1962 will likely be about 400,000 bales higher than the 7.2 million bales on hand August 1 of this year. This will be equal to the 1960 carryover, but well below the very high carryovers of 1954 to 1959 (fig. 15).

2. Economic factors affecting price, supply and utilization of potatoes, identified and measured.-This research indicates a significant change in supply-price relationship between pre-World War II and post-World War II. The greater

supply response in the past war period primarily reflects the increased importance of the production of earlier crops which appear to have a higher supply response. Although supply response was shown to be low-only 2-percent reduction change following a 10-percent change in price significant year-to-year acreage and production changes occur mainly because of substantial year-toyear changes in potato prices.

3. Analysis of supply and consumption of food show continued high level.— "The National Food Situation" reported by quarters the food situation and outlook. The general level of food consumption has remained high over the past year. Pork supply is increasing from a cyclical low, and weather conditions have been favorable for crop output. Postwar changes in consumption of food in the United States were described and some of the major underlying factors identified. The articles related to vegetables, breakfast food cereals, food fats and oils, and poultry.

4. Farm manpower, employment and wages analyzed.-Nearly 3.7 million persons averaged $6.25 in cash daily earnings from farmwork in 1961. A year earlier the average daily wage was $5.95. Of the 2.2 million farm wage workers doing 25 days or more farm wage work in 1959, 27 percent worked primarily with machines; 16 percent worked primarily with livestock; while the remaining workers did hand labor for the most part. Farm operators employing wage workers spent an average of $1,358 in 1959 for farm wages. Only 9 percent of the farm employers had wage expenditures exceeding $2,500. Over onethird of the employers hired six or more workers during 1959.

5. Increase shown in availability and use of health services and facilities in rural upstate New York. The restudy of six New York counties has shown that in all instances there is greater use of preventive health services and a substantial increase in the proportion of farmers with health insurance. In two counties the ratio of total population per physician and hospital bed in 1957 was less favorable than in 1949, but the number of dentists and registered nurses per capita improved. In two other counties the ratios remained relatively constant. In Cortland and Oswego counties the proportion of rural people using medical specialists and hospital services increased significantly.

6. Exports for fiscal year 1961-62 expected to set a new record.-U.S. agricultural exports are expected to total $5.1 billion in fiscal year 1962 compared with the record of $4.9 billion last year. Volume also will be at a new high. Gains are expected in wheat and flour, soybeans, vegetable oils, fruits, vegetables, and animal products. Exports of feed grains will probably show little change, and moderate declines are expected in cotton, rice, and tobacco (fig. 18). Western Europe will have to import substantially more wheat in the current season to make up for its reduced production. Continued relatively smaller exports of soybeans from Communist China will be a principal factor in the increased demand for U.S. soybeans and meal. Edible oil exports will be helped by smaller olive oil crops in the key countries of Spain and Italy as well as by reduced exports of copra. A limiting factor on any further gain in feed grain exports this year is the substantial increase in European production, particularly in France.

Increased dependence on previously accumulated inventories abroad constitutes the main factor in the expected decline in U.S. cotton exports. For rice, this year's decline in exports will reflect mainly the continued reduction in U.S. carryover stocks, which have been going down since 1956. The decline in tobacco exports will reflect increased competition from expanding production abroad, improved foreign stock position, and the continued existence of trade barriers (fig. 20).

7. World food budget developed.—A survey of food supplies and requirements throughout the world was undertaken early in 1961. First results of such a study were given in "The World Food Deficit, a First Approximation," a preliminary report published in March 1961, which disclosed the food deficits by nutrients and commodity tonnages by regions and for the world.

A more thorough study was published in October 1961, entitled "The World Food Budget, 1962-66," which presents the following conclusions: Food balances for the world's nations present sharp contrasts. Diets are nutritionally adequate in the 30 industrialized nations in the temperate regions which account for a third of mankind-more than 900 million people. Their production of food and things they can trade for food assures their food supply, now and

for the foreseeable future. For most of the 70 less-developed countries in the semitropical and tropical regions, diets are nutritionally inadequate, with shortages in proteins, fat, and calories. These countries contain over 1.9 billion people. In most of them, population is expanding rapidly; malnutrition is widespread and persistent; and there is little likelihood that the food problem soon will be solved.

8. The 1962 world agricultural situation appraised.-A publication, "The 1962 World Agricultural Situation," shows minor but significant shift in 1961 production pattern and indications of a better balance in 1962 between supply and demand for wheat than has existed for several years. Stock adjustments and the demand situation indicate improved world prices for several major farm products. This is an annual up-to-date appraisal of the worldwide state of food and agriculture for calendar year 1961, and outlook for calendar year 1962, with indices showing total and per capita production trends for individual countries, regions, and the world.

9. Supply and demand of farm products abroad projected, 1965 and 1975.— The following studies assess the future import demand for agricultural products in view of the long-term trends in demand for agricultural products and in domestic agricultural production:

United Kingdom. This study includes a comprehensive analysis of the consumption and supplies of agricultural products in the United Kingdom. Consumption, production, and import demand estimates are shown for major agricultural commodities of interest to the United States under different price, income, and population projections. Production estimates are made for different price levels, and trends in yield and economies of scale, as well as the effect of changes in inputs of factors of production. This study provides materials for evaluating the potential effect on United States exports of United Kingdom joining the European Common Market.

Philippines: This study concludes that the projected import demand to 1965 and 1975 in the Philippines indicates significant shifts in the forms of some of the commodities. There will be little import demand for rice, corn, and tobacco. There will be a shift in the imports of wheat from flour to grain; of meat and meat products from canned products to fresh and frozen meat and live animals. 10. British Commonwealth's agricultural economy assessed.-A major study was completed in 1961 entitled "New British Commonwealth, Economic and Commercial Policies as Related to Agricultural Production and Trade.” It describes overall Commonwealth policies and policies of members with respect to agriculture and economic development affecting agriculture.

Present day Commonwealth members, including the new ones in Asia and Africa, are asserting their independence in the area of agriculture and trade as well as in political matters. They are seeking markets outside the Commonwealth and are showing a strong desire to protect their trade interests in the European Common Market. Their attention to procurement of capital for economic development, and their promotion of trade outside the Commonwealth, are causing them to reduce their dependence on the imperial tariff preferences and other special trade advantages within the Commonwealth.

11. United States and Soviet agriculture compared.-A series of indicators for the United States and Soviet agriculture was developed to reflect agricultural resources, the organization of farming, crop acreages, yields per acre and production, livestock numbers and production of livestock commodities.

The farm economy of the United States uses much less labor and land, but substantially more capital than the collectivized agriculture of the Soviet Union to produce on the average approximately 60 percent more annual output. Soviet farm labor force is 6%1⁄2 times, and sown cropland more than 50 percent larger than those of the United States. But the numbers of tractors on farms in the Soviet Union is about one-forth of those in the United States.

12. Market potential and competition of U.S. farm products in Venezuela reported. The publication, "Foreign Agricultural Economic Report No. I," is a comprehensive competition study of Venezuela as a major market for U.S. agricultural products. Venezuela ranked first in Latin America and eighth in the world in 1960 as a dollar market for U.S. farm products.

Venezuela ranked first or second in most recent years for such important export items as dried whole milk, wheat flour, cigarettes, oatmeal, eggs in the shell, infant and dietetic foods, and barley malt.

Competition from both domestic sources and third suppliers has been growing in recent years and, although the value of U.S. exports has been expanding, our share of the market has been steadily declining. Economic factors contributing to this declining share of the market were analyzed and measures for the retention of our present share of the market and to regain at least a portion of what we have lost in recent years, were outlined.

13. Agricultural economy of India studied. This is a comprehensive study of India's agricultural economy. It includes information about the characteristics of the agricultural economy, 5-year plans, agricultural production, marketing, transportation, consumption, international trade in farm products, and other information relating to the agricultural economy.

14. Japanese agricultural economy reported.-Japanese agriculture has made remarkable advances in the postwar period. A document has been prepared describing the physical, economic, and institutional setting within which Japanese farmers operate. It points out factors that hinder agricultural development and highlights the means Japan is using in overcoming such difficulties and making possible continued increases in yield per acre and total output. For the decade of the 1950's as a whole, Japan ranked as the largest foreign outlet for U.S. farm products.

15. Agricultural and trade development in 20 Latin American countries revicwed.—A comprehensive bulletin reviewed agricultural and trade development for the independent countries of Latin America. Factors analyzed included population and land use, agricultural production, consumption and self-sufficiency, agricultural policies, and trade and outlook. Particular attention was paid to trade, with agricultural trade with the United States being stressed.

With agriculture the dominant industry, almost 60 percent of the region's 198 million people live on farms. Average per capita gross national product increased from $256 in 1950 to $307 in 1959, an average annual growth of less than 2 percent. However, since 1955, there are signs of increased economic growth. Average per capita food consumption was about 2,600 calories per day in 1958, but variations ranged from a low of 1,900 calories in Bolivia and Haiti to a high of over 3,000 for Argentina. Although greater emphasis has been placed upon increased domestic agricultural production, U.S. exports of farm products to the region totaled almost one-half billion dollars in 1959, and increases are expected in future years resulting from increased requirements and economic development. 16. Effects of Public Law 480 programs being analyzed. The first of a series of country studies on the effects of Public Law 480 shipments on economic development and trade is being completed for Israel. Contracts are now being negotiated in three additional countries. The research is financed with local currency funds. These studies represent a part of an overall program to provide a comprehensive analsyis of Public Law 480 and other export programs, and their relation to commercial dollar sales and their impacts on domestic farm programs. 17. Monetary and financial aspects of trade and development programs weighed. Continuing analyses of changing financial positions of foreign countries involve the tabulation and evaluation of balance of payments, gold and foreign exchange reserves and related economic factors, both external and internal, that affect a foreign country's ability to buy U.S. farm products with dollars or qualify for special U.S. concessional sales. This requires constant review and use of economic data supplied by U.S. foreign service reports, international institutions, such as the International Monetary Fund, the International Bank for Reconstruction and Development, and the Inter-American Development Bank; and other domestic and foreign sources. This provides a basis for determining appropriate U.S. export programs applicable to the financial position of the importing country.

18. Studies of agriculture in foreign economic development programs begun.Available information about the role of agriculture in general economic development is being compiled and evaluated. This information is needed to establish a general classification of countries with respect to stages of economic development so that the types and nature of agriculture's contributions to total development can be identified. Current information about agriculture's role in economic development suggests that its role changes with the level and rate of economic growth. Knowledge of the relationship of agriculture in economic development in underdeveloped countries is needed to establish priorities for program efforts designed to promote economic growth and to appraise the impact of economic growth on U.S. trade in farm products.

80035-62-pt. 3-2

Mr. WHITTEN. I notice that you have a request for a $1,030,000 increase over the 1962 appropriation. We will be glad to have you make any general statements or handle this in any way you like.

GENERAL STATEMENT

Mr. KOFFSKY. Thank you.

Mr. Chairman and members of the committee, I welcome the opportunity to discuss with you the 1963 budget increases for the Economic Research Service. Also, because we are a new agency, I would like to review briefly its organization and functions.

In April of last year, the major economic research programs in the Department were brought together into a single agency, the Economic Research Service. The aim was to provide for more effective coordination and to improve the capability to deal with the many complex economic problems facing American agriculture. The Economic Research Service and the Statistical Reporting Service report to the Director of Agricultural Economics.

Economic research functions were transferred to the Economic. Research Service from the Agricultural Research Service, the Agricultural Marketing Service, and the Foreign Agricultural Service. From ARS came the economic research on the use of resources in agriculture, the adjustments farmers make to changing conditions, and the costs and returns in farming. From AMS were transferred the research on the economics of the marketing system for farm products, the market potential for new products and new uses, and the research designed to expand market outlets in this country. Also from AMS came the economic analyses relating to the supply and demand for farm commodities which has an important outlet in the commodity situation and outlook reports as well as the work on farm income and farm population estimates.

From FAS were transferred economic analyses of supply and demand for farm products in foreign countries, foreign economic developments and their relation to export opportunities for U.S. farm products, assembly and analysis of agricultural trade statistics, and analysis of international financial and monetary programs and policies on U.S. agriculture.

One illustration of the kind of work we do is the set of charts and tables used in Dr. Cochrane's presentation of the agricultural outlook to this committee earlier this month.

PROGRAM ORGANIZATION

The Economic Research Service is organized under an Administrator, a Deputy Administrator for Agricultural Economics, and that is Mr. Heisig on my right; and a Deputy Administrator for Foreign Economics, Dr. Johnson.

Under the Deputy Administrator for Agricultural Economics are the Farm Economics Division, the Marketing Economics Division,