section 32 of the amendments to the Agricultural Adjustment Act, related to wheat from the Pacific Northwest, dark fire-cured and aircured tobacco, Pacific coast walnuts, papershell pecans, substandard prunes, and certain varieties of winter pears. Exports of these commodities have been encouraged by direct payments in connection with the exports of the commodities themselves. All of these commodities except walnuts and pecans have long been dependent upon export outlets.

EXPORTING PACIFIC NORTHWEST FLOUR TO THE PHILIPPINE

ISLANDS

The program for exporting to the Philippine Islands flour milled from Pacific Northwest wheat was a continuation, in part, of the program in effect during the 1933-34 marketing season under which the equivalent of some 28,400,000 bushels of wheat was exported. The earlier program was designed to meet a special situation in the Pacific Northwest caused by the restriction of export outlets for a type of wheat not customarily used for milling purposes in other sections of this country. Under the flour-exporting program of 1936 the equivalent of some 863,000 bushels of wheat was sold for export during the 1935-36 fiscal year, with an average subsidy of 18.5 cents per bushel. During the first half of the 1936-37 fiscal year sales for export, under the program, were the equivalent of 1,114,000 bushels of wheat, with an average payment of 15.7 cents per bushel.

Although the importance of the Philippine market has temporarily been lessened because of the 1936 drought, this small volume of exports aided in keeping flour from the Pacific Northwest in these markets and enabled exporters to maintain their foreign selling organizations pending the time when wheat and flour from the Pacific Northwest may find expanded foreign outlets.

PROGRAMS FOR WALNUTS AND PAPERSHELL PECANS

The export program for walnuts and papershell pecans in the shell have been in effect for both the 1935 and 1936 crops. Combined production of these two commodities in 1935 was the largest in the history of the industries. Because of the low price level resulting from this fact and because of certain difficulties in administering the walnut marketing agreement, funds authorized in section 32 of the amendments to the Agricultural Adjustment Act were used to indemnify the walnut control board which administered the program, for a considerable part of the difference between the price it received for walnuts from the surplus pool sold for export or shelling, and the price for nonsurplus walnuts sold in the shell. These funds were, in turn, paid by the control board directly to walnut growers.

PROGRAMS FOR OTHER AGRICULTURAL COMMODITIES Payments were made in connection with the exportation of certain varieties of winter pears to a limited number of export markets where neither local production nor trade agreements with other countries were likely to influence the importing countries to take retaliatory

measures.

Payments in connection with the exportation of substandard prunes were incidental to the diversion of such prunes from the regular

commercial pack into byproducts for either domestic or foreign utilization.

A number of other programs for encouraging exports were considered by the Agricultural Adjustment Administration during 1936. In most instances a careful analysis of these proposals in conference with their proponents indicated that export subsidies would not be effective in regaining lost foreign markets or expanding existing or new outlets, and that in some instances such subsidies might seriously endanger existing foreign outlets, some of which have been expanding as a result of the trade-agreements program.

II. PROGRAMS FOR DIVERTING FARM PRODUCTS INTO NEW USES

Programs for removing surpluses by finding and developing new foreign and domestic outlets and uses were operated for the most part through agreements between industry groups and the Secretary of Agriculture, under which agreements the industry groups were authorized to acquire specified quantities of surplus commodities at stipulated prices, and to divert these supplies to new outlets or uses. The difference between the cost of the commodity to the industry group, plus incidental handling costs, and the selling price for diversion uses, was paid by the Secretary of Agriculture.

Surplus diversion programs of this type in operation during 1936 included measures for finding new uses for cotton; diverting substandard dates, figs, and prunes to byproduct outlets; diverting fresh fall and winter pears to new domestic markets; diverting walnuts from the unshelled to the shelled trade; diverting peanuts into crushing for oil and meal; and diverting tobacco into nicotine for use in industry and agriculture. In the cases of Puerto Rican coffee and of winter pears, payments were made for the geographical diversion of surpluses-coffee from Puerto Rico to the continental United States, and winter pears from the Pacific coast to markets in the Southern and Midwestern States to which they have not heretofore moved in commercial quantities.

EXPERIMENTAL PROJECT FOR USE OF COTTON IN ROAD BUILDING

In a program for developing new outlets for surplus cotton, several thousand bales in the form of fabric binders for bituminous-surfaced roads and of mats for use in curing concrete, were made available in 1936 to State highway departments, for experimental road-building projects.

More than 6,166,500 square yards of cotton fabric, or nearly 4,000 bales, enough for building 578 miles of new road, were used by 24 States in the fabric-reinforcement project. Between 4,000 and 4,500 bales were used to construct 89,500 mats for concrete-curing projects in 23 States.

The binders are designed to reinforce secondary or farm-to-market roads where heavy trucking and severe climatic conditions have run up an enormous seasonal repair bill.

The mat project was developed on the basis of tests made by the Bureau of Public Roads and the State highway departments of Texas and Pennsylvania. The use of mats or bats on concrete simplifies the curing problem by helping to maintain proper moisture and temper

ature conditions. Highway engineers and contractors have heretofore hesitated to use mats for curing concrete because of their cost. Largequantity buying has reduced the cost of the mats considerably and they can be used from 50 to 75 times.

Each year 20,000 miles of bituminous-surfaced roads are constructed in the United States and 45,000 miles of such roads are repaired. These figures suggest the market for cotton that may be developed through the use of this fabric as binders in such roads.

III. PROGRAMS FOR PURCHASING SURPLUSES FOR RELIEF DISTRIBUTION

In 1936 a wide variety of surplus products, including fruits, vegetables, grains, eggs, dairy products, and cotton goods, were bought by the Commodities Purchase Section of the Agricultural Adjustment Administration and distributed for relief use, through the Federal Surplus Commodities Corporation. This corporation is the principal agency through which such surplus commodities, bought by the Agricultural Adjustment Administration in order to relieve price-depressing effects on the market, are distributed under programs designed to increase returns to producers, prevent waste, and encourage domestic consumption of farm goods.

DISTRIBUTION THROUGH FEDERAL SURPLUS COMMODITIES

CORPORATION

The Federal Surplus Commodities Corporation was chartered October 4, 1933, under the laws of Delaware, as the Federal Surplus Relief Corporation, a nonprofit corporation without capital. On November 18, 1935, the charter was amended to change the name of the corporation and to transfer its direction from the Federal Emergency Relief Administration to the United States Department of Agriculture. With this change, emphasis shifted from relief aspects to the agricultural aspects of the corporation's functions.

Surplus farm products purchased in 1936 came from practically every major producing area in the United States and were distributed for relief use in all States. It is estimated that up to the end of 1936, approximately 7 billion pounds of price-depressing foodstuffs, with an estimated total value of more than 45 million dollars, had thus been made available for relief distribution. Some of the commodities bought for relief distribution during 1936 required processing before they were distributed. These commodities included Governmentpurchased cattle from drought areas converted into edible meat products, and surplus wheat milled into flour and feed for relief distribution.

During 1936 a large proportion of the surplus farm products bought for relief use was purchased with funds made available under the provisions of section 32 of the amendments to the Agricultural Adjustment Act. Funds from this source were also used during the 1936 drought to buy surplus cattle and prevent severe price breaks which otherwise might have resulted from the rush of droughtdistressed cattle to market.

Furthermore, the Jones-Connally Act of April 1934 authorizes surplus-removal programs for the dairy and beef cattle industries and contains specific authorization for the purchase of dairy and beef

products for relief distribution. The Jones-Costigan Sugar Act of May 1934 authorizes purchase of surplus sugar produced in the United States beet-sugar area for disposal by sale or otherwise, including distribution for relief of the unemployed, and the Soil Conservation and Domestic Allotment Act authorizes the use of funds for expanding domestic and foreign markets, for seeking new and additional markets for agricultural commodities, and for the removal of surpluses of such commodities.

The purchases served to reduce excessive stocks of the various products that were seriously depressing prices.

Payments for removal of surpluses and quantities of commodities purchased during the calendar year 1936 are shown in table 6.

TABLE 6.—Statement of commodities procured by commodity purchase section, 1936

1 Transportation costs, in a few instances, borne by Federal Surplus Commodities Corporation. All transportation costs borne by Federal Surplus Commodities Corporation.

Surplus-removal programs have been so administered that even small but properly timed purchases of certain surplus may have beneficial results far outweighing the actual operations involved.

Purchases and relief distribution of farm products have been carried out under programs that were designed to increase domestic or foreign demand for the product concerned, by introducing it to new consumers who, when their purchasing power is restored, will remain in the market for the commodity as buyers.

PURCHASE OF SURPLUS DAIRY PRODUCTS

Purchases of surplus dairy products that were exerting a pricedepressing influence in commercial channels, and distribution of these products through relief channels, were continued in 1936. These purchases were made by the Agricultural Adjustment Administration through the Commodities Purchase Section.

Under these programs cheese, dry skim milk, and evaporated milk were acquired entirely on the basis of competitive bids: butter was purchased partly on the bid basis and partly through organized mercantile exchanges. Funds for these purchases were obtained from reappropriations of funds authorized by the Jones-Connally Act approved April 7, 1934. All purchases were donated to the Federal Surplus Commodities Corporation for distribution among families on relief.

Quantities of dairy products purchased during 1936 were small as compared with quantities purchased in 1935. The surplus problem was less pressing because drought in 1936 reduced supplies and because the consumers' economic position was better than in 1935.

Approximately 2,951,000 pounds of butter, 932,000 pounds of cheese, 3,595,000 pounds of dry skim milk, and 6,160,000 pounds of evaporated milk were purchased at a cost of $1,629,616.25. Total expenditures in the purchase of dairy products from August 1933 through December 31, 1936, amounted to $24,541,818.86. (See table 7.) Although no effort was made to peg prices at any particular level, purchases were made when it appeared that the market was in an unstable position, and thus had the effect of bolstering up sagging prices.

TABLE 7-Quantity and cost, exclusive of administration, of dairy products purchased with Agricultural Adjustment Administration funds, by storage years, August 1933-December 1936.