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Senator Young. I think it does. Do you anticipate any reduced amount of authorizations for purposes of wheat in the United States by ECA countries this year as against last year?
Dr. FITZGERALD. As a result of devaluation or just as a matter of historical comparison?
Senator Young. Historical comparison.
Dr. FitzGERALD. Probably some small percentage decrease in the participating countries' purchases of United States as compared to last year. I think the percentage decline will be very small as far as United States exports, total United States exports, are concerned.
I would like to have the Department of Agriculture comment if it cares to do so. We are carrying now, as a matter of planning, exports of United States wheat in the neighborhood of 450,000,000 bushels, and last year's exports, as you know, wer3 503,000,000, I believe.
Senator Young. And you are planning 450,000,000 bushels total exports?
Dr. FitzGERALD. That is all total exports, sir, of which we anticipate that about 325,000,000 will be to ECA countries, which is within 5 percent, I should say, of the shipments to those same countries last year as a group.
Senator Young. Do you contemplate any more big purchases in Canada?
Dr. FitzGERALD. No, sir; we do not.
Senator YOUNG. Did you take into consideration when you purchased in Canada, the fact that they have no control over their production at all, and we are required to reduce our wheat acreage 17 percent here?
Dr. FITZGERALD. Well, that is a consideration, Senator Young, as far as the authorization for the use of ECA funds in Canada is concerned.
As Mr. Trigg indicated earlier, that authorization does not either reduce United States exports or increase Canadian exports. The Canadian axports would have been made in any event because the United Kingdom had a firm obligation to buy 140,000,000 bushels of Canadian wheat, which they would not have bought with free dollars if that had been necessary.
Senator YOUNG. Let us put it this way then. Supposing Canada increases its wheat production, say, 20 percent next year and has a big surplus hanging over their heads. That wheat somehow is going to move into the United Kingdom market, will it not, to the detriment of the American farmer?
What I am trying to get at is the more wheat they produce with no controls, the more it is going to hurt us, at least so long as ECA furnishes United States dollars to get them out of a hole.
Dr. FitzGERALD. Well, the situation of course next year, Senator Young, will be different in this respect; that Canada will not have a bilateral agreement with the United Kingdom under which the United Kingdom is under obligation to buy.
Senator Young. I am afraid they will fix up another one, though.
Dr. FitzGERALD. Well, I do not believe I would worry too much about that if I were you, Senator.
Senator Young. What I am really concerned about is this increasing surplus in the United States, this year about 300,000,000 bushels. If we do not get rid of this wheat even with a reduced acreage, we may wind up with 400,000,000 next year, and that places a tremendous extra cost on the Commodity Credit Corporation in supporting wheat prices.
If we allow that to happen on all farm commodities, the Commodity Credit Corporation is going to run out of funds, and other crops besides wheat are going to suffer.
Dr. FitzGERALD. On your point, Senator Young, if United States exports—and I underline the word "if”—this fiscal year do approach or approximate 450,000,000 bushels the carry-over a year from now should be approximately the same as it was this year.
Senator Young. May I ask this question of Mr. Trigg then. Do you think that we will reach this 450,000,000-bushel export goal with this lag we have had now in the last 2 months? Are not these last 2 months the biggest export months of the year?
Mr. TRIGG. That is correct, Senator, and it is doubtful whether we will reach any 450,000,000 bushels. I expect a more realistic figure would be 400,000,000 bushels in view of the fact that already 3 months of this year have elapsed, and that is 3 months in which we have normally made heavy shipments in our export program.
Senator Young. That is what I was afraid of.
Dr. FitzGERALD. To the extent that United States exports fall below 450,000,000 bushels, your carry-over will of course be correspondingly higher on July 1 of 1950.
Senator HOLLAND. Dr. FitzGerald, do I understand that in this small purchase of wheat made by the ECA countries since July 1st, which you say is about one-third of the authorizations to purchase of last year, that 7,000,000 bushels as I recall you saying, are they paying for that at the $1.80 figure or at the market figure?
Dr. FITZGERALD. No; they are paying that at the cost to CCC, sir.
Senator HOLLAND. The cost to CCC, and CCC having no right to the subsidies out of section 32 funds, that means at the market figure, does it not?
Dr. FITZGERALD. Yes, sir. I should like to elaborate on the statement I made that these purchases by the participating countries were only a third of last year. That is the purchases on which they have asked for ECA financing.
Now in addition to that, they have been purchasing, with what free dollars they could scrape up, additional quantities direct from CCC in order to get advantage of the $1.80 price. The quantities would not be very large.
Senator HOLLAND. To make it clear for the record, as I understand it, the purchases which they have been financing out of free dollars, which they got somewhere else, they have been entitled to receive at $1.80, and in order to so receive it, CCC has had to pay market price, and the subsidy being the difference between the market price and $1.80 has come out of section 32 funds.
Mr. TRIGG. That is correct insofar as sales of commercial wheat and commercial flour are concerned. When CCC furnishes the wheat, the loss is absorbed out of CCC funds.
Senator HOLLAND. Do you have any statement of the amount of wheat that has moved in these months since July 1 under that latter program that you have just described?
Dr. FitzGERALD. We could get it for you.
Senator HOLLAND. I wish you would, please, for the record.
(The information is as follows:) Procurement with free dollars by ECA-financed countries of wheat and wheat flour
under the International Wheat Agreement, Aug. 1 through Sept. 15, 1949
WHEAT (PROCURED FROM CCC)
Belgium Ireland.. Portugal 1
3, 453, 333
746, 667 672, 000
4, 872, 000
WHEAT FLOUR (PROCURED COMMERCIALLY)
[Bushels wheat equivalent]
11, 305 310, 459 307, 900
34, 697 361, 873
1, 026, 234
Total.--1 ECA financing had not been requested prior to time of purchase.
5, 898, 234
Senator JOHNSTON. What about other commodities? How do you handle other commodities?
Dr. FITZGERALD. In connection with the purchases, Senator Johnston?
Senator JOHNSTON. Yes, purchases.
Dr. FITZGERALD. Well, the question being here considered, Senator Johnston, does not come up on other commodities because the international wheat agreement is the only international commodity agreement so far in effect.
In the case of other commodities, if they are purchased from CCC stocks—and we do purchase them from CCC when they advise us they have such stocks—the prices charged us by CCC are in turn charged by us to the participating country.
In some instances where it is considered desirable to assist in the export of commodities that are patently in very long supply and burdensome in this market, the Department has assisted that disposition by making some contribution of section 32 funds as they are authorized to do under the ECA legislation.
Senator HOLLAND. Might we have for the record, please, a breakdown of the purchases with free dollars of ECA countries from the Commodity Credit Corporation in the period since July 1?
Mr. TRIGG. Yes.
Dr. FITZGERALD. Germany has rye requirements. Germany and Austria I believe are the only two. Now in the case of Germany, as you know, sir, the grains are financed not by ECA funds.
Senator Young. That is a situation which I have not been able to understand at all. I understand the Army has been trying to buy, through the Commodity Credit Corporation, for a long while. Our production is so small here that probably even a 5,000,000-bushel purchase, or at least not to exceed 10,000,000 bushels, would bring the price up above support levels and it would relieve the Commodity Credit Corporation entirely of the responsibility of supporting rye. I have contacted the Army many times. In fact North Dakota is the principal rye-producing State.
Rye is below support levels and these countries want to buy rye. Again I am trying to help my farmers and am trying to save money for the Commodity Credit Corporation. Are any rye purchases anticipated by ECA, I mean authorizations to purchase?
Dr. FitzGERALD. As far as ECA countries are concerned, I think we do not have any in prospect, any requirements or authorizations for rye at the present time.
Senator Young. Rye is about half the price of wheat, and I understand they used to eat a lot of rye bread over there, but probably they are used to this white bread and do not like rye any more.
Dr. FITZGERALD. There is still a good demand for rye bread in those countries which have traditionally eaten it.
Senator Young. Have you authorized any purchases. of rye in countries back of the iron curtain?
Dr. FitzGERALD. No, sir; we have not.
Dr. FitzGERALD. Austria bought a small quantity of rye from Hungary last year. It was not paid for with ECA dollars, and Germany has bought some small quantities of rye from iron curtain countries paid for with exports from Germany.
Senator YOUNG. That is a question I will never be able to understand. Mr. Trigg, if you can answer that for me, I would be happy.
Mr. Trigg. Senator, I might say this. Of course we in the case of rye have procured for supply purposes only at such times when we have requests from the Army or ECA to procure it.
Senator Young. The Army tells me they have been asking you to buy rye for them for months, and you do not get it for them.
Mr. TRIGG. We are in the market to buy rye in quantities that are offered to us up to the full extent of the Army authorization, but it just is not offered.
I think one of the difficulties, Senator Young, with this rye situation is that the price on rye went down considerably to the producer after such time as the loan date, the closing date for application for loans had closed from last year, and there was not too much of this rye under loan.
I think that was one of the primary difficulties in it, but we have been in there trying to buy rye on the market the same as we buy wheat and take all offers up to, as I say, the extent of the authorizations we have.
Senator Young. At what price do you offer to buy it?
Senator Young. In the case of wheat, do you not raise your bid from day to day if you do not get what you want?
Mr. TRIGG. No. We are following the market in buying wheat, just the same as anyone else. We are not jacking the market up on it or anything of that nature. We are buying right in the market along with other buyers. We would buy at the market price in the case of rye.
Senator YOUNG. What makes a difference between wheat and rye? You are able to get wheat on the market but you cannot get rye.
Mr. TRIGG. Senator, the only answer that I believe for that would be that the price of wheat in the market place is such that there is wheat moving, there is an ample quantity of it being offered at that price, whereas in the case of rye the price could be depressed to the extent that it is not being offered. Maybe the producer is holding it, maybe it just is not available.
Senator Young. If the Army was allowed to buy their own rye over here independent of the Commodity Credit Corporation, they would be getting their rye, would they not?
Mr. Trigg. I do not believe they would, Senator. They may have a unique device of squeezing it out some place, but I do not think they would have any better system of getting it than we do. I do not think that it is available to them.
Senator Young. They could contract with commission firms to buy their rye for them. If it costs them 5 cents more than the market price, they would get the rye for them, would they not?
Mr. TRIGG. I do not know if their authority would permit them to pay 5 cents above the market price. We have to pay the market price for it, and that is all we are reimbursed for is the market price, so I do not know whether they have the authority to do that.
Senator Young. Would you not agree that there is something wrong with our purchase program when rye is below support levels, the Government has to support rye, the Army wants to buy it for Germany, and we cannot get it to them?
Mr. Trigg. I do not believe there is anything basically wrong, Senator, that I know of. There may be something here that is causing this rye to be held off the market and not offered for sale.
That presumably could happen in the case of any commodity if the market is not such that a producer would offer it, but I do not know of anything that is basically wrong. I think it is probably hard to understand why we do not get it when we are in there trying to buy it.
Senator Young. Well, here is a case where the Army wants rye for Germany. It is a far cheaper food. The price is below support levels because there is not demand enough for it, apparently, otherwise the price would go up, and in the meantime we have a low price.
It is costing the Commodity Credit Corporation money, and we are losing a market in Germany and forcing them to buy in iron curtain countries.
Senator HOLLAND. I understood him to say that farmers did apply for loans on rye.
Senator Young. Well, you have several million dollars loaned out to rye producers and you are going to acquire that rye eventually, are you not?
Mr. Trigg. I do not know just what the extent of our loans are on rye, but it is very small in comparison with the crop. As I say, the farmers apparently do not feel the necessity for taking out loans on last year's crop.
Senator Young. Of course, the price has been so low that most farmers are discontinuing raising rye because they cannot afford to