ficially high is shown by the action of the 1944 Agricultural Production Goals Committee in recommending that prices of peanuts be supported at 40 percent of the price of cotton in order to stimulate a greater production for oil. At that time (1943) farmers had increased the acreage planted to peanuts by 700,000, or one-sixth above 1942 in response to a price ratio of 32 percent and decreased their cotton acreage by a comparable amount. As an extreme emergency measure, that committee recommended the 40-percent ratio to meet a special wartime oil situation. Additional evidence of the response of peanut producers to the peanut-to-cotton price ratio is given by the changes in the acreages planted to peanuts. Over the past 30 years there has not been a single year in which a ratio of prices received per pound of peanuts to cotton of 30 percent did not result in an expansion of acreage in peanuts the following year. In fact there were only 3 years, 1920, 1934, and 1936, when a ratio of 25 percent did not yield an expansion the following year. During the period 1920-40 the net upward trend in peanut acreage was at an annual average rate of nearly 8 percent. During this period the average of the ratios of prices of peanuts to cotton was only 28 percent. The great expansion of acreage in 1942 followed a ratio of only 27 percent in 1941. A ratio of 30 percent for the prices of peanuts to cotton would put peanuts in sufficiently favorable position to assure adequate production. A reflection of this more realistic level in processes of legally defining and calculating parity for peanuts would result in a parity price for peanuts 23 percent less than present, assuming no change in cotton parity. In view of these considerations more fully amplified in the attached statement, the conclusion appears inescapable that the present base price for peanuts, which would be perpetuated under this bill, is artificially and unrealistically high, and should be brought in line with modern-day conditions of demand and of production if the peanut enterprise on American farms is not to be continually a special problem child for agriculture. It may be noted parenthetically that even though the growers and the Government apparently believe that the domestic edible trade cannot consume available supplies, farmers' planting intentions on March 1 indicated they intend to exceed USDA acreage goals by 15 percent. VIII. GRANT OF POWER IS EXCESSIVE Another weakness in the bill is that not only does it provide for the choice of the highest of the two alternative levels of parity for price-support purposes, but a third choice is presented by section 302 (a) (p. 38, lines 15 ff.) which gives to the proposed National Agricultural Council the power by majority vote to fix the support level anywhere between 60 and 90 percent of parity regardless of the formula in the bill. The bill's language surrounding this power says in effect that all that is required of such action is that it must appear to be in the interests of agriculture and the general public, and that the Secretary approve the findings. In view of what appear to be the political, possible log-rolling and regional horsetrading potentialities of the National Agricultural Council set-up, this appears to be too broad a grant of power. The question may also be raised with respect to this provision as to whether or not adequate safeguards are incorporated, even assuming that it is in accordance with a good public policy to grant the powers designated to the National Agricultural Council for the protection of the public interest. Does the bill provide, for instance, that the National Agricultural Council should support its findings by concrete and convincing evidence? To what extent and in what manner can individuals, if necessary, bring under review before impartial judicial agencies the determinations made by the National Agricultural Council? IX. MARKETING AND QUOTA PROVISIONS MAY BE QUESTIONED It is doubtful if there is public acceptance of the theory that quota and allocation restrictions are justified. In fact, according to your committee report, the farmers regard such restrictions as preventing the full use of land, equipment, and labor resources. Various objections might be taken to that part of section 302 (a) of the bill (p. 37, lines 25 ff.) which provides that the price of peanuts is required to be supported only during marketing years in which marketing quotas are in effect. This is a dangerous provision. It is dangerous because it invites the establishment of quotas lower than the quantities normal demand would absorb. We believe the base-period price and support level are relatively too high in relation to other farm prices. These high levels will in normal times stimulate à volume of production that it would be too costly, if not impossible, for Government to support at the prescribed levels of parity. The Secretary would then be forced in self-defense to proclaim relatively low quotas. Even though the law requires him to use a 5-year average as a base for such quotas it has already been evidenced by the quotas proclaimed (and later suspended) for the 1948 crop that wide latitude is permitted him by the provision in the law that he may adjust the quotas for prospective changes in demand and economic trends. Faced with an impossible task of supporting peanuts at artificially high price levels, he would have to resort to artificially low levels of production through the quota proclamations in order to minimize his task. This would be inconsistent with the purpose of this bill to assure abundant production and to assist consumers to obtain adequate and steady supplies. There are those who read into this proposal the acceptance of a philosophy of shortages in order to maintain prices. In presenting its program to the House and Senate, the Department of Agriculture said: "We know, however, that putting chief emphasis on maintaining high unit prices defeats our own ends. During hard times, even if we were able to keep prices up by cutting production, farmers would not get parity of income. But if we concentrate on cutting costs through volume production and increasing efficiency on the one hand, and on boosting consumption on the other, we will thereby achieve in maximum degree that which we originally sought-good farm income." 2 Is it possible to harmonize the restrictive quota and allocation provisions of the bill with the above-mentioned statement of the Department of Agriculture? X. ARE THE COMMODITY CREDIT CORPORATION'S PROVISIONS REGARDING SALES SOUND? The bill changes the provisions regarding CCC resale of commodities. CCC is required to sell at a price not less than the midpoint between the parity price and the support level, and at not less than 90 percent of parity if there is no support for price in the marketing year in which sold (sec. 302, (c) (1), p. 39). Among the exceptions to this minimum is peanuts sold for oil. Exceptions should be taken to this provision on three scores: (1) CCC selling minimum should be at the level supported, presuming it would be disposed to sell at something above the support level. The midpoint between support level and parity may prove, and will probably turn out to be, too high a minimum in some important situations. It could result in the burdensome accumulations of surpluses in Government hands and at public expense; (2) CCC should be required to sell at parity prices and not allowed to play commodity politics by holding for levels above parity; (3) the excluding of peanuts for oil from the required minimum price for resale is a continuation of subsidies to the oil industry not justified under normal conditions and as a part of a long-range farm program. Why, for in stance, should the manufacturers of soap, margarine or mayonnaise buy peanut oil which is produced under a subsidy whereas the processors of edible peanuts receive no subsidy? This subject is further amplified in connection with the next subject. XI. WHAT ARE PEANUTS? ARE DISTINCTIONS JUSTIFIABLE FOR PEANUTS, "EDIBLE PEANUTS," AND "PEANUTS FOR OIL"? Would it not be well to clarify the issues involved with respect to the extent to which controls are to be exercised and funds allocated for peanuts? By regulation, distinction has been made as to whether the peanuts are for so-called edible purposes or are produced for oil. In the Emergency Price Control Act of 1942, approved October 2, 1942 (Public Law 729, ch. 5278) which included peanuts as a -socalled basic crop, there was no distinction made between so-called edible peanuts and peanuts for oil. Under Public Law 147, chapter 270, enacted July 1, 1941, which was an act to extend the life and increase the credit resources of the Commodity Credit Corporation, peanuts were by inference classified as a "nonbasic" commodity. The last sentence in section 4 reads as follows: "For the purposes of this section, commodities other than cotton, corn, wheat, tobacco, and rice shall be deemed to be nonbasic commodities." As stated above, in the Emergency Price Control Act of 1942, approved October 2, 1942, the word "peanuts" was incorporated, thus classifing the product as a 2 Paper V entitled, "Price Policy and Production Adjustment," by Carl C. Farrington. basic commodity. In fact, section 8 (a) of Public Law 729, chapter 578, provided that "The Commodity Credit Corporation is authorized and directed to make available upon any crop of the commodities cotton, corn, wheat, rice, tobacco, and peanuts harvested after December 31, 1941 * * *, if producers have not disapproved marketing quotas for such commodity for the marketing year beginning in the calendar year in which such crop is harvested, loans as follows: * * * "" In Public Law 662, chapter 497, approved July 9, 1942 (amending the Agricultural Adjustment Act of 1938 with respect to marketing quotas for peanuts), section 359 (d) is amended to read as follows: "The word 'peanuts' for purposes of this Act shall mean all peanuts produced, excluding any peanuts which it is established by the producer or otherwise in accordance with regulations of the Secretary, were not picked or threshed either before or after marketing from the farm." Nothing in the Stabilization Act which withdrew peanuts as such from the purview of the Steagall amendment refers to any possible distinction in varieties. or ultimate uses of peanuts. There is no reason to believe any distinction can be drawn other than after the fact of actual use of peanuts as being either oil or edible peanuts. In fact, one may question the justification for even classifying peanuts as an "oil" crop on the basis of their utilization. For over a period of years a maximum value accruing to the farmer from the production of peanuts has been as they have been consumed as edible peanuts. Prices which have prevailed for peanuts as edible peanuts in comparison with the prices of commodities from which our edible oils are produced make it prohibitive to produce edible oil from peanuts. This is illustrated in the following table showing the approximate cost of oil from different products under 1947 prevailing prices of such products: Standard factors (Bureau of Agricultural Economics, Department of Agriculture): Peanuts: 100 pound farmer stock yields 29 pounds oil and 44 pounds meal. To establish a theory that the Commodity Credit Corporation should sell peanuts at the current market price when used for oil, but to prohibit the Commodity Credit Corporation from selling peanuts when classed as "edible peanuts" is unjustifiable; it places a burden upon the public who desire to consume this agricultural product directly, and from a practical standpoint grants to the peanut oil consumers a subsidy which in turn must be absorbed by the public, and which in turn forces the public to pay a commensurately higher price for the peanuts consumed as edible peanuts. Briefly we recommend that SUMMARY 1. The stated purposes incorporated in the declaration of policy should be reappraised. 2. Even if it is desirable to create legal distinctions of agricultural crops, which we doubt, there is no justification for including peanuts as a basic crop. 3. No distinction should be made between peanuts for oil and edible peanuts. 4. The period 1935-39 be used as a base period for the computation of any parity or support program established for peanuts. We are deeply appreciative of this privilege of presenting these suggestions to your committee, and are sincerely hopeful that your consideration of them will be helpful in drafting legislation which is helpful to the farmers and to the public, which we in turn must serve and satisfy. CANDY FACTS CANDY AND OTHER CONFECTIONERY PRODUCTS Number of establishments 1 I. Size of industry Number of industrial sugar users making candy (estimate of OPA allocations). Number of wage earners 1,252 7,500 79, 500 Comparison with other food manufacturing industries: Fourth largest in terms of employment; eighth largest in terms of dollar sales.1 Beet-sugar usage: 284,000,000 pounds, at cost $16,470,000; requiring production from over 95,000 acres of United States farmland. Corn-product usage: 792,000,000 pounds, at cost $27,200,000; requiring production from about 95,000 acres. Peanuts usage: 223,185,000 pounds, at cost $34,114,000 (yearly production about 525,000 acres of southern farmland). Peanuts-United States acreage, yield, production, average price per pound received by farmers Source: Agricultural Statistics, U. S. Department of Agriculture. Senator AIKEN. What are you paying for peanuts in today's market? Mr. FETTE. Approximately 161/2 cents a pound. Senator AIKEN. What would you consider a fair price? Mr. FETTE. As a start, we should try to change the trend of the consumption of peanuts into edible channels. Consumption through edible channels is now declining and at a very rapid rate. A report out this morning shows the consumption through edible channels is off 30 percent this year against last year. We would consider that a |