AGRICULTURAL ACT OF 1949

JULY 7, 1949.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. COOLEY, from the Committee on Agriculture, submitted the

following

REPORT

(To accompany H. R. 5345]

The Committee on Agriculture, to whom was referred the bill (H. R. 5345) to amend the Agricultural Adjustment Act of 1938, as amended, and for other purposes, having considered the same, report favorably thereon without amendment and recommend that the bill do pass.

A copy of the bill is hereto appended, marked "Exhibit A." Titles II and III of the Agricultural Act of 1948 (the Aiken Act) are hereto appended, marked "Exhibit B."

STATEMENT

Almost continuously during the past 2 years the Committee on Agriculture has carried on investigations and studies and conducted hearings with regard to a sound program for agriculture for the future. During the present session of the Congress these hearings started in January and are still in progress. We have heard from farmers in every part of the country, producing crops of every kind, character, and description. We have also given careful attention to the views and recommendations of every other type or class of business-those who prepare the crops for markets, those who haul or transport the crops, the processors, the bankers, the brokers, the workers in the processing plants, and, in good number, the housewives and wage earners who provide the market for the products of the farm.

From all this the committee has become convinced, among other things, that no single plan, no one method of supporting prices, no one program for producing enough but not too much, can bring about the desired results of assuring producers a fair return for their labor and investment and all the people abundant food at reasonable

prices. There are so many kinds of farms, there are so many different commodities produced, and there are so many kinds of markets and middlemen, that several plans and programs should be made available. And those who work in the sun in the fields, those who produce the crops, should have some choice of the program they work under. Several methods of supporting prices should be authorized. Different plans for keeping production within reasonable limits should be provided.

For example, the only methods now authorized by law for supporting prices is through loans or purchases. Sometimes, with potatoes, for example, loans cannot be used and purchases have proved to be impracticable or too expensive. That is the reason why, in this bill, the committee has provided for an experimental program or trial of the use of production payments-to find out the things no man can tell us: (1) The probable cost, (2) the administrative problems and difficulties, and (3) whether in fact the consumers-the people who must provide the funds for these payments-will receive benefits in keeping with the costs.

On the other hand, for keeping production in line with need and demand, the law now authorizes only (1) acreage controls, (2) marketing quotas, and (3) marketing agreements and orders, and each of these is limited to only a few commodities. Before the end of this Congress the committee plans to give consideration to legislation to authorize a two-price or domestic allotment plan, a price-support insurance plan, a greatly expanded marketing agreement act, and other measures to complete a sound, safe, and sensible farm program.

THE BILL

The bill recommended by the committee does three major things: (1) It provides a new and modernized method for the calculation of parity, to be known as the income-support standard;

(2) It continues to provide price support for agricultural commodities at about the present levels;

(3) It authorizes the Secretary of Agriculture to make a test or trial, on three commodities, of the production payment method of supporting prices. With the exception of shorn wool, these commodities must be perishable, nonstorable. Wool was authorized as one of three in order that domestic wool may move into domestic consumption in competition with foreign wool.

It should be added that, before employing the production payment plan with respect to any commodity the Secretary must find and determine

(1) That production payments are the most effective and practicable method of providing price support;

(2) That the use of production payments will not substantially reduce the market price of, or the demand for, any other agricultural commodity;

(3) That the Congress has approved the annual budget programs setting up funds for such payments.

Later in this report will be found a section-by-section analysis of the bill, explaining in detail the other provisions.

THE ISSUE

This bill presents an issue which the Congress should settle before adjournment. It is one of the most important issues ever to face the farmers of the Nation, and, judging from the testimony presented to the committee, they await with serious concern the outcome.

The issue is: Will the type of program set out in this bill become effective on January 1, 1950, or will the Agricultural Act of 1948 (commonly and hereinafter referred to as the Aiken Act) become effective on that date?

In deciding that issue the Congress must determine

(1) Unrestricted direct payments.-Will the Secretary of Agriculture be given general, unlimited, unrestricted, and unrestrained authority to use the production payment method in supporting prices? The Aiken Act, section 202 (a), provides as follows:

The Secretary, through the Commodity Credit Corporation and other means available to him, is authorized to support prices of agricultural commodities to producers through loans, purchases, payments, and other operations.

Hon. Carroll Hunter, Solicitor of the Department of Agriculture, testified as follows before the committee:

The Aiken bill provides a wider choice of the means of price support, since it authorizes the Department to support the price of agricultural commodities to producers through loans, purchases, payments, and other operations, thus expressly recognizing that it is possible to extend price support to producers by means of direct payments to the producers, a type of operation which the Department has not yet undertaken for price-support purposes.

Unlike the bill which the committee now recommends, the Aiken Act does not place any restrictions, conditions, or limitations on the authority of the Secretary of Agriculture in the use of production payments. That act does not provide (as does the committee bill) that payments may be used on only three commodities at one time; nor that (except as to shorn wool) those three must be perishable, nonstorable commodities; nor that before using payments the Secretary must find that the use of payments is the most effective and practicable method of providing price support; nor that the use of payments will not substantially reduce the market price of, or the demand for, any other agricultural commodity.

None of these conditions and limitations, nor any other, are placed on the Secretary in the Aiken Act. He is left fancy-free and all he needs is the money. He can use payments on the basic commoditieseven on cotton, which can be stored without damage for 50 years. He could use the payment plan on wheat, and thereby wreck the price of corn, oats, and barley. He could use it on soybeans, and wreck the price of lard, cottonseed, flax, and other commodities.

Under the Aiken Act the Secretary could use the payment plan with no limitation on costs. The committee bill requires the Secretary, before using the payment plan on not more than three commodities, to find that it is the most practicable method of providing price support. This certainly means that he must judge the cost of the payment method as compared with the cost of supporting prices by loans or purchases, and to find that it will not reduce the demand for or the price of any other agricultural commodity. The latter finding is designed to afford protection for competing commodities which do not receive similar support.

The committee does not intend to indicate to the slightest extent that Secretary Brannan would use the broad and unlimited authority given him in the Aiken Act without regard to costs or without careful and sound selection of the commodities. But who knows how long he wishes to serve as Secretary of Agriculture or who his successor will be?

The Aiken Act, in granting this unlimited authority for the use of the payment plan, authorizes the Secretary to establish a support price for a commodity, or any number of commodities, to make no effort to maintain the market price at the support level, to let the market price break to any level established by supply and demand, and then pay the producers the difference between the price they get in the market and the support price. But in granting this authority the Aiken Act does not contain one word as to how these payments shall be determined, limited, and paid. The committee bill attempts to do this in section 302 (1), page 9.

And, it must be added, in granting this unlimited authority to the Secretary to use the payment plan on an unlimited number of commodities, the Aiken Act does not contain one word of assurance to the consumers, to the housewives, to the wage earners, or to all the others who through taxes must provide the payment money, that they will be able to buy their food more cheaply in the market place. The millions or billions for payments could result in only more profits for the middleman, in an even greater spread between the farm and the table. The fact that reduced market prices at the farm level do not necessarily mean lower prices to the consumer is illustrated by the drop in the farm price of wheat by more than one-third since January 1948. In spite of this, the price of bread remains near an all-time high. Neither does H. R. 5345 contain any assurance in this respect and that is one of the reasons why the committee has limited the use of the payment plan to an experimental basis on three commoditiesthat it may be determined whether, in fact, the consumers, as well as the farmers receive benefits in keeping with the cost and what the cost will be.

(2) Control through bankruptcy. Secondly, in determining that issue, the Congress must decide whether it wishes to permit a law to go into effect (the Aiken Act) which may be used to control the production of agricultural commodities through the means of bankruptcy.

One theory of the Aiken Act is that you can drive the farmer out of the production of a surplus commodity by reducing his price, to as low as 60 percent of the parity price, which will not cover his cost of production and will force him into bankruptcy should he persist in the production of such commodity.

Another theory of the Aiken Act is that the lower the price the less the farmer will produce. And a third theory is that by reducing the price you can force a shift from the production of a surplus commodity into the production of some other commodity in short supply.

The committee is ready to admit that there is reasonable basis for the first theory, that is, that you can reduce the price of farm products to the point where the return will not cover the cost of production, will not provide the farmer with the funds to support his family and pay his bills, and will take the farmer out of production by causing him to lose his farm. But the committee submits that this would be a cruel and inhuman way to control production.

The committee considers the second theory as being without merit. The records show that there is no certainty of a decrease in production when prices go down, and this is one of the great fallacies of the "lowprice" policy. Specific examples in the case of potatoes and wheat are cited later in this report.

There is good reason why a farmer cannot reduce production wher the price he receives goes down and in fact he is often required to produce even more. He still must meet the payments on his mortgage, support his family, educate his children, pay his doctor, pay his taxes, and meet his operating expenses. If he receives less per bushel or per pound, certainly he must produce more bushels and more pounds to meet the same obligations.

The third theory of the Aiken Act of forcing shifts in production by the starving-out process--is also false. Suddenly shifting from one crop to another is impractical, if not impossible. Where is the farmer to get the money to buy a new outfit of planting, cultivating, and harvesting implements and machines? Where is he to get the labor that is trained for the production of a new crop? Where is he to get the land adapted to this new crop, the know-how, the weather, etc.? It was mentioned to the committee that Minnesota shifted out of wheat, but it was recalled that it required 40 years to do so. It is feared that those advancing this theory were influenced by conditions on the farms operated by some of our great agricultural colleges, where they have an ample supply of every kind of farm implement and machine and a full staff of trained experts-where shifts and experiments are routine. The average farmer is not so equipped and his capabilities should not be measured by any such test.

(3) Forward pricing.-Thirdly, in determining the issue the Congress must decide whether producers should be told before planting time what the support level will be or must wait until harvest time to find out.

The committee believes the farmer is entitled to know before he plants whether the commodity will have a support price and what the level of support will be. How otherwise can he plant intelligently?

Under the Aiken Act there is no provision requiring forward pricing or the announcement of the level of support before planting time. Under that act the support price level for the basic commodities is to be determined by the supply of the commodity, to be estimated after the crop is mature and ready for harvest and then-let us repeat-and then, if the total supply shows a surplus, the farmer, by the use of some magic wand, is expected to shift or change the crop in the field ready for harvest, into some other crop which may be in short supply. The committee feels strongly that if the price of a commodity is to be supported, the producers are entitled to know it and to know at what level the support will be, before they plant or complete their plans.

Producers will have this information under the provisions of H. R. 5345. The support level for the ten commodities listed in section 302 (b), page 4, is fixed by law and producers will know what it is before making their plans, subject only to such slight change as may result from adjustment in the parity index between planting time and the beginning of the inarketing period. Not only will such change be small, but it will not operate to the disadvantage of the producer, for if the parity price should drop slightly it will mean that the