verse effect on the domestic dairy program as required by law. That may no longer be the case. We are purchasing rather heavily now, and so we are in a position perhaps to take section 22 action. That is under very active review and study right now. Or you can pass legislation along the lines that has been introduced.

Senator MILLER. Will you be able to furnish for the record an analysis of the section 22 possibility on this?

Secretary FREEMAN. Yes, sir. I would like to——

Senator MILLER. Mr. Chairman, would it be all right to have that statement or that analysis put in the record? The Secretary said he would furnish it.

The CHAIRMAN. Yes, surely.

(The material referred to follows:)

DAIRY PRODUCT IMPORT CONTROL PROBLEMS

Import quotas authorized under Section 22 of the Agricultural Adjustment Act, as amended, are in effect for many dairy products. Included are butter,

certain cheeses, including Cheddar, Edam and Gouda, Blue-mold, and Italian type made from cow's milk and powdered milk. Products not controlled by quota are casein, cheeses such as Swiss, Colby, etc., and some mixtures of butterfat and sugar used primarily in the ice cream industry. Imports of fluid milk and cream and canned milk, while not subject to quota, must meet certain sanitary regulations set by Flood and Drug Administration.

With the Section 22 quotas and through arrangements of countries to limit their exports to the United States of certain non-quota products, dairy products imported into the United States in recent years have been relatively stable, averaging below 1 billion pounds milk equivalent. At this level imports have been less than 1 percent of total domestic requirements. During the year just ended-1966-however, imports both in terms of product weight and milk equivalent rose sharply. Preliminary figures indicate that in 1966 the equivalent of 2.7 billion pounds of whole milk were imported, nearly 2.1 percent of total domestic requirement.

The

Calendar year 1966 imports of dairy products amounting to 2.7 billion pounds of milk equivalent were triple the .9 billion pounds imported in 1965. tripling of dairy product imports in 1966 compared with earlier years is due almost entirely to increases in non-quota products. Imports of non-quota dairy products totaled 2.3 billion pounds in 1966 compared with .7 billion pounds in 1965.

Imports of Colby cheese-a non-quota product-rose rapidly during 1966. Imports of Colby in 1966 totaled 46 million pounds compared with 14 million pounds one year earlier. Prior to 1966 Australia and New Zealand were the principal suppliers of Colby cheese. In 1966 several Western European countries, France, Denmark, Belgium and Austria, began exporting large quantities to the United States.

The largest part of the increase has been accounted for by butterfat/sugar mixtures, generally known as "Junex." Imports of such mixtures were previously limited by an arrangement under which the main supplying country held its shipments to 1,000 tons annually, and were confined to products containing approximately 44 percent of butterfat and 56 percent of sugar. The arrangements expired at about the same time domestic milk production took its precipitous downward turn; and the supplying country was unwilling to continue to limit its exports on the grounds that our market now could absorb more and that, if the limitations were continued, other countries would supply the product. Imports of these mixtures rose from 4 million pounds-less than 50 million pounds milk equivalent-in 1965 to 105 million pounds-1.2 billion pounds milk equivalent in 1966. Since this type of product contained 56 percent sugar, the increase in imports also affected the Department's responsibilities under the Sugar Act. Consequently, the Department, in July 1966, moved under Section 206 of the Sugar Act, as amended, to curtail such imports by setting limits on

items containing over 25 percent sugar (sucrose) in the solids. These quotas apply only to mixtures in which the sugar is in excess of 25 percent of the solids.

There are already indications that mixtures of less than 25 percent sugar in the solids are being entered and are commercially feasible.

Larger than usual imports were encouraged by reduced domestic milk supplies-down 3 percent in 1966-and generally stronger prices. In addition, many Western European dairying countries were faced with large butter surpluses which they were willing to export at nearly any price. Dairy imports in 1967 will depend to a large extent on the level of domestic milk production and the world dairy supply situation.

The main question in regard to these imports is whether the conditions required by Section 22 of the Agricultural Adjustment Act, as amended, are present and, therefore, enable a limitation to be placed on these imports.

Section 22 of the Agricultural Adjustment Act, as amended, directs the Secretary of Agriculture to advise the President whenever he has reason to believe that any article or articles are being imported under such conditions and in such quantities as to render or tend to render ineffective or materially interfere with any price support or other program, relating to agricultural commodities, undertaken by the Department of Agriculture, or to reduce substantially the amount of any product processed in the United States from any agricultural commodity or product thereof with respect to which any such program or operation is being undertaken. If the President agrees there is reason for such belief, he directs the Tariff Commission to conduct an investigation including a public hearing, and to submit a report to him of its findings and recommendations. The President is authorized, based on such findings to impose such fees or quotas in addition to the basic duty as he shall determine necessary. The additional fees may not exceed 50 percent ad valorem and the quotas proclaimed may not be less than 50 percent of the quantity import during a previous representative period, as determined by the President.

The downward trend in domestic milk production has been halted. Production during November, December and January shows small gains from output in the corresponding period of 1965/66, the first such months in which production has exceeded 1965/66. Milk production for marketing year 1967/68 is expected to be somewhat above the production recorded in 1966/67. Even under current production, the Commodity Credit Corporation had to initiate purchases of dairy products in October 1966. Since then through February 28, 1967, the Commodity Credit Corporation has purchased, on a contract basis, 88.8 million pounds of butter (9.7 million pounds under Section 709); 36.4 million pounds of cheese (15.3 million pounds under Section 709); and 525.0 million pounds of nonfat dry milk since April 1, 1966.

With imports for 1967/68 projected at 3.5 billion pounds of milk equivalent, unless some restrictive action is taken, purchases by the Commodity Credit Corporation will rise substantially.

Senator MILLER. Now, Mr. Secretary, this ties in with Senator Holland's concern.

I have submitted a question which you will have, but perhaps I ought to bring it to your attention now.

You mentioned that in 1966, $3.27 billion was the amount of money used for payments to farmers in connection with the compliancecoming into these programs.

I was wondering how much more the market price for wheat and for corn would have had to be to enable these farmers to receive the same equivalent amount of net income. In other words, I am wondering if you have made a study on the relationship between the increase and the market price they would have had to have had in lieu of these payments and in turn what kind of an impact that would have had on food prices.

Secretary FREEMAN. Well, the first question we can answer. (The information is as follows:)

Question. If wheat and corn farmers had been without federal government compensatory payments during 1966, how much more would they have had to receive per bushel of wheat and corn in order to have achieved the same net income?

3. Price increase needed to equal value of payments (dollars per bushel). 4. 1966 season average price (estimate) (dollais per bushel)..

1,028 4,103.3

0.52

0.25

5. Total price needed to provide returns equal to actual value of the crop plus payments (dollais per bushel)....

1 Updated from budget estimates to reflect latest information.

Secretary FREEMAN. The second question, as to what effect it would have on consumer prices, I do not think can be answered accurately. So we will include our best response to that question. But I want to forewarn you that we cannot give a very precise one.

Senator MILLER. I recognize that. But I don't know where we can get a good estimate unless we come to you. I hope that you can give us some kind of ball park figure on it.

Secretary FREEMAN. I am afraid it will be a ball park figure. (The information is as follows:)

Question. Without compensatory payments, what would be the effect on the portion of the consumer dollar paid for food?

Answer. Wheat: Assuming that processors would continue to buy a 75-cent certificate their wheat cost would be 52 cents more. Further, assuming that a bushel of wheat will yield 70 loaves of bread, the higher wheat price would increase the price of a 1-pound loaf of bread about three-quarters of a cent. At the beginning of this year the average price of bread as 22.9 cents per loaf.

If the requirement that processors purchase a 75-cent certificate were eliminated, then the cost of wheat to processors would be less and the price of bread could also be less.

Feed Grains: Most corn is fed to livestock, rather than used directly as human food. Thus consumer prices would be affected to the extent of the higher corn price affected the price of livestock and poultry products. In turn, these prices are affected by livestock and poultry numbers. Animal numbers-particularly cattle cannot increase or decrease rapidly, so the price effect in a single year is hard to determine.

If the increased price of corn did not affect supply of these products, there would be no change in prices paid by consumers-but the farmer's cost of producing livestock and poultry products would be greater.

Normally, however, increased corn prices mean less grain fed and consequently less meat produced. A 25-cent-per-bushel increase in corn prices could be expected to result in about 10 percent less corn fed. To the extent the quantity of meat produced was less, prices to consumers would certainly be higher.

Senator MILLER. Now, this ties in with that chicken war you were talking about.

As I understand it, the chicken war is continuing. Do you have any figures on the effects of the EEC trade barriers on our U.S. exports of poultry for last year and what the forecast is for this year?

Secretary FREEMAN. Well, let's say for all practical purposes where broilers are concerned we have been forced out of the market totally. If there was ever an example of how the variable fee system can make a mess, it is in poultry-because today they are subsidizing their own exports and dumping poultry into Switzerland and Austria out of

Germany and Denmark and have created a mess. any market for our broilers at all.

There is hardly

However, there has been a continuing strong market for turkeys and poultry parts.

The broiler picture is not a very bright one, and I see little likelihood that it will improve.

Senator MILLER. Do you think there is any prospect in the Kennedy round of negotiations in having that problem improved?

Secretary FREEMAN. Frankly, no.

Senator MILLER. Now, one more question.

I would like to get the picture on the chart that you had here, on the carryover stock.

As of what date would that last item for wheat and feed grains be? Secretary FREEMAN. At the end of this crop year. July 1 for wheat and October 1 for feed grain.

Senator MILLER. July 1, 1966 ?

Secretary FREEMAN. 1967.

Senator MILLER. July 1, 1967-and the other one for feed grainsSecretary FREEMAN. October 1, 1967.

Senator MILLER. Now, how does that compare with the level that you believe to be a reasonable reserve?

Secretary FREEMAN. I would feel uncomfortable today if it were lower than that in either one of these grains, since at this time we are months away from knowing with certainty what the overall situation could be.

Senator MILLER. You measure that reasonable reserve in terms of carryover point of July 1 for wheat and October 30 for feed grains; is that right?

Secretary FREEMAN. That's correct. You see, this is the time when the new crop is coming in to harvest.

Senator MILLER. Looking forward, now-what would be your estimate of the point of the stocks of wheat, say, on October 1, 1967, or November 1, 1967? Have you projected this forward?

Secretary FREEMAN. Well, not here, because this will depend upon information on the new crops that we do not have yet. We don't know that. But I can project it backwards and say that on January 1, 1967, that we had 1.05 billion bushels of wheat and 143.2 million tons of feed grains. That is not in Government hands. That's total stock. Senator MILLER. I understand.

Now, what is the figure in bushels on July 1, 1967?

Secretary FREEMAN. In wheat, 390 million bushels-July 1.

Senator MILLER. In other words, it drops from January 1, 1 billion. Secretary FREEMAN. Right.

Senator MILLER. Down to 390 million.

Secretary FREEMAN. Correct.

Senator MILLER. And then the comparable figure for October 1, 1967, the carryover.

Secretary FREEMAN. 25 million tons-from 143.2.

Senator MILLER. I have no further questions, thank you.

The CHAIRMAN. Any further questions?

Senator JORDAN. May I make just one comment. I won't take but a minute.

On the meat that you have been discussing, the lamb and pork and beef coming into this country-you speak of the trigger point. I would earnestly suggest that you check your trigger point and see if you have not got yourself maybe too high. What I mean by that is the damage is done before your trigger takes effect. In other words, you have too much in here, and then you are in trouble. Particularly that is true and I am sure that cooked food ought to be considered in that, because that is much more profitable to the country than is the raw meat. They have cheap labor to do it with. A pound of meat is a pound of meat whether it comes out of the can or whether you buy it in a grocery store. I think that ought to be seriously considered as a part of this import problem.

Secretary FREEMAN. I would just like to say I will certainly do that and consider it very soberly and carefully.

But one of the things I think we have to face in agriculture, and I want the record to show, is that we have got to buy if we expect to sell. We sold last year $1.3 billion worth of feed grain. We brought into this country in meat imports $500 million to $600 million. Now, I just make this comparison.

We sold for dollars last year $5.3 billion worth of farm products. We imported, in competitive agricultural products, less than half that much. And so I urge that those people in agriculture who concentrate sometimes on our imports should consider our exports. We do not want to get shut out of some of the markets that are important. Exports are more important to the American farmer than they are to any other segment of our economy.

Senator JORDAN. That's quite true, of course. You take the imports of finished textiles out of Mexico. They said that was a one-shot deal. They brought no cotton in. And they used to bring in cotton. It doesn't take much of a memory to go back-we lost a President with one shot, too. After you kill an industry-it doesn't take but one shot. It's a dangerous situation to allow them to come in with the tremendous tonnages-a new country.

Secretary FREEMAN. Obviously you cannot go crazy on this. You have to protect your own producers. You cannot open the gates, for example, and permit an increase of 300 percent of dairy imports when you have a heavy surplus situation in Europe and a tight situation here.

Now, that's not reasonable. We have to do something. The textile import thing has shot up very high. We ought to take a very hard look at it.

We did pass a law, after very careful consideration, on the matter. I think we need to have that one operate awhile to see how it works. I only say that you cannot afford to open all the doors and go crazy, so to speak, and subject our producers to all kinds of unreasonable pressures. But we have to have a sensible, prudent, and effective policy here, which recognizes we have to buy some things if we expect to sell some things.

Senator MILLER. Let me say I am sure all of us on the committee recognize we have to accept imports if we want to have exports. But I am concerned about what your policy might be, taking a broad look at this, on the relationship between our imports and our increased domestic consumption.