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purchase in Canada, the wheat there purchased at $2 a bushel where under the international wheat agreement there could have been a price of $1.80. On top of that American wheat producers have to reduce their acreage on the average 17 percent.
Canadians have no acreage reduction program whatever, and may increase their acreage next year. Where will we be here? It seems as if we are getting one bad deal after another.
There is nothing to stop them from increasing their acreage next year unless the Department of Agriculture entered into such an agreement, and I doubt if they have. I have not seen any publicity. It is probably a question I should direct to Secretary Brannan himself, but I think he is going to have a hard time explaining that to the American wheat producers.
Mr. Trigg. Did I understand you to mean there that nothing could stop the Canadian wheat grower from increasing his acreage, or our wheat growers?
Senator Young. No, the Canadians. They have no wheat acreage control program, as far as I know, and nothing is contemplated for next year, while we have to reduce our acreage 17 percent on wheat, and maybe a few other products, too.
Mr. Trigg. Well, as you point out, the Department did, according to the law, issue acreage allotments on wheat this year, and there is some reduction in acreage as compared with previous years. That is true.
Senator Young. That is right.
Mr. Trigg. This purchase that you referred to recently will mean that there will be a benefit to some extent of $30,000,000 or thereabouts, which approximates 50,000,000 bushels of wheat, which is a shift from one of the other countries that did not normally get its wheat from the United States. They will purchase that much wheat here, so to some extent there is that gain on this recent purchase transaction you speak of.
Senator Young. Well, supposing the Canadian farmers increase their wheat acreage say 20 percent next year and come up with a 20 percent increase in production. Are we obligated to help them get rid of their surplus again with United States dollars and cut down some more ourselves?
Mr. TRIGG. Well, of course, that is a question, Senator Young, that is really for high Government policy.
Senator YOUNG. Yes, I realize that.
Mr. TRIGG. I could not answer it categorically one way or the other, as far as that is concerned.
Mr. Johnston. The reason I imagine the Senator is asking that question, is because the Congress of the United States must appropriate the money, and they will be held responsible for what is done in that field as much so as probably the administrative body that carries it out.
Senator Young. That is right.
Mr. Trigg. I might add there, as long as we are talking about that wheat purchase that has been referred to, that in the opinion of the Department of Agriculture the wheat exports this year from the United States will not be materially reduced as a result of Great Britain purchasing the amount of wheat that has been approved for purchase in Canada.
In other words, in some respects it is the opinion of the Department that some benefit, if not great deal of benefit, will accrue to the American wheat producer because of the fact if this purchase was not committed in Canada, and Canada had no other place to get rid of this wheat except to dump it at a reduced price on the world markets, it might replace some of the markets that the United States now has and is shipping to, and then too, we have been exporting at a pretty high rate during the past several years wheat and other grains, and it will tax about all the facilities that we have to get out as much as we would get out anyway, so the Department is of the opinion that wheat exports, as a result of this, will not be materially reduced this next year in the United States.
Senator Young. Of course, Britain has always had a protected trade area where they can very effectively cut out imports from other nations, including the United States. If the Canadians next year increase their wheat acreage and come up with another big surplus far above this year's, I am wondering if it would be good Government policy to use hundreds of millions of dollars of United States money to subsidize their exports, leaving us holding the sack here, supporting wheat prices at a large cost to the Government.
Mr. TRIGG. It seems to me, Senator Young, that any position that the Government would take on such a proposition would have to be reexamined rather carefully periodically. As to what time, I do not know exactly, but I do not see how any decision made today on something like that could be indefinite. I think it would have to be reexamined from time to time.
Senator HOLLAND. Is Canada one of the signators to the international wheat agreement?
Mr. Trigg. Yes, she is one of the exporting countries.
Senator HOLLAND. What is her exportable guaranteed amount compared with our 168,000,000 bushels?
Mr. Trigg. 203,000,000 bushels.
Senator HOLLAND. 168,000,000 for this country and 203,000,000 for Canada?
Mr. TRIGG. That is correct.
Senator Young. How do the wheat exports in the United States this year, since July 1, compare with a year ago?
Mr. Trigg. They are less. As a matter of fact we have exported only a little over 7,000,000 bushels this year beginning July 1 to ECA countries, and of course there are quite a few exports to other countries, but it is less than what it was a year ago.
Senator YOUNG. Far less, is it not?
Mr. Trigg. One of the reasons, I frankly feel, is the holdup on the implementing legislation to the wheat agreement. As soon as that is out and it is clear what the Government's policy is insofar as the financing of it is concerned, I feel that these exports will move right on out.
Senator JOHNSTON. What about the other countries that have not entered into the agreement yet? Are they in the same situation we are?
Mr. Trigg. I believe all of the exporting countries have ratified it except Uruguay.
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. Senator HOLLAND. I have none. Senator JOHNSTON. Thank you, Mr. Trigg. 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.
In 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.