program at this level through fiscal year 1964 with financing through section 32 and direct appropriation.

Legislation is being proposed to the Congress to provide specific enabling authority to provide a permanent food stamp program, with financing by a direct appropriation. It is contemplated that a supplemental appropriation request will be submitted to provide for costs of the program upon enactment of such legislation.

In the interim, it is proposed that the costs of the present program continue to be financed from section 32 funds. Pages 126-128, of the justification, offered for the record at this point, explain the program in more detail.

FOOD STAMP PAYMENT PROGRAM

During fiscal year 1962 food stamp pilot projects were in operation in eight areas of chronic unemployment to test the effectiveness of this approach in improving the diets of low-income families and increasing use of farm commodities. A participating family's normal food expenditure is maintained by requiring that, based on family size and income, recipients will purchase a specific value of coupons. The supplemental or bonus coupons provided free of charge, again based on family size and income, permit the family to upgrade the diet. Participants, averaging about 142,800 a month, were issued over $35 million in food coupons. The Federal contribution amounted to a little over $13 million-37 percent of the total. On a per person basis, participants paid $12.76 a month and received a total of $20.43 in coupons.

The following table shows program operations by pilot area for fiscal year 1962:

Excellent cooperation has been received from State and local welfare authorities, wholesalers and retailers, banks, and the Treasury Department in the operation of this program. A State or local welfare agency determines, based on income, food needs, and other factors, the allotment of cupons for each household unit and the cash to be paid. Coupons are issued by a non-Federal issuing office. Cash received is deposited daily in a designated Federal depository. Food stores received cash or credit for the coupons from any commercial bank which must accept them at face value. These coupons then flow through regular banking channels to the Federal Reserve banks where they are redeemed and subsequently destroyed. Evaluation studies were carried on prior to and after installation of the program to determine the effectiveness in encouraging domestic consumption of agricultural food commodities. The special household food consumption studies indicated that each Federal dollar increased participant's retail food purchases by 95 cents in Detroit and by 85 cents in rural Fayette County. In both areas participating families showed increases in the money value of all foods consumed after their entrance into the program. Most of the increased value of food consumed was for meat and other animal products and fruits and vegetables. Almost 50 percent of the participating families in Detroit and 39 percent in Fayette County had good diets in September and October of 1961 compared with slightly more than 25 percent of the low-income, nonparticipating families in both areas in those months.

Participants in the pilot programs spent substantially more money for food in retail stores. The dollar volume of retail food store sales in the eight areas increased 8 percent, on a seasonally adjusted basis, after inauguration of the pilot program. The survey also showed that the smaller size retail stores were able to attract a reasonable proportion of the food coupon business.

The program is being continued on a pilot basis with some expansion in 1963. It has been offered to an additional 39 areas. As of November 26, 1962, Mendocino County, Calif., was the only area which had declined. An estimated 398,000 needy persons are expected to be eligible to participate if all of the other areas accept the offer. Pilot programs expected to be carried on in 1963 are as follows:

(Pp. 125 and 126, and 129-139 and the two maps of the justification, contain additional information on other programs financed from sec. 32:)

Current activities

STATUS OF PROGRAM

Under section 32 of the act of August 24, 1935, as amended (7 U.S.C. 612C), an amount equal to 30 percent of customs receipts during each preceding calendar year and unused balances up to $300 million are available for encouraging the exportation and domestic consumption of agricultural commodities. Current activities for removing from the market surplus agricultural commodities include:

A. Purchases for distribution through State distributing agencies to school lunch programs, and to needy persons and institutions eligible to receive such purchases.

B. Expansion of outlets for agricultural commodities by helping needy families improve their diets through pilot food stamp projects.

C. Encouragement of exports through payments which will permit the sale of surplus commodities in foreign markets.

D. Encouragement of domestic consumption by diversion from normal channels of trade to byproducts and new uses.

E. Reestablishment of farmers' purchasing power through payments in connection with normal production.

The basic authority also provides that these funds shall be devoted principally to perishable nonbasic agricultural commodities and their products, other than those receiving price support under title II of the Agricultural Act of 1949, as amended. These title II commodities are: tung nuts, honey, milk, butterfat, and the products of milk and butterfat. It has been determined that this provision is legally satisfied by setting aside or reserving the principal portion of section 32 funds for the use of perishable nonbasic agricultural commodities when the occasion arises warranting their use for such purpose. Not to exceed 25 percent of funds available under the act may be used for any one commodity or product thereof. Section 32 funds are also used for:

A. Surplus removal operating expenses which include administrative costs for direct removal of surpluses from the market, and distribution by the Agricultural Marketing Service of section 32 and CCC commodities to eligible outlets. These funds are also used to encourage food preservation and marketing of abundant foods through the food trades.

B. The administration of marketing agreements and orders which aim to establish and maintain orderly marketing conditions for certain commodities and their products.

SELECTED EXAMPLES OF RECENT PROGRESS AND TRENDS

Commodity program payments (see table I for program operations during the last 2 years)

1. Direct purchases. During the fiscal year 1962, approximately 525.9 million pounds of agricultural commodities at a cost of approximately $131.2 million were purchased for distribution through authorized agencies. Distribution was made by 83 agencies to an estimated 77,700 outlets.

Purchases of foods donated to needy persons comprised a major portion of the acquisitions made in 1962. The retail value of food available was about $6 per person per month.

2. Diversion payment programs. To ease potato marketing difficulties 2.9 billion pounds of potatoes were diverted to starch, flour, and livestock feed in the 14 primary producing States. Due to unforeseen acreage reductions hybrid corn and sorghum seed producers received payment to divert their seed to other than planting purposes, such as crushing, grinding, cracking, or commingling with nonseed commercial stocks. The development of a cotton bagging produced from low quality cotton for cotton bales was encouraged by benefit payments to users of this bale covering.

3. Export payment program.—To broaden tobacco outlets overseas and to relieve downward pressure on domestic prices, payments were made to dealers selling 1956 and preceding year crop tobacco to their foreign customers.

The following table shows the use made of section 32 funds for program operations during the past 2 years:

1 Liquidation and disposition of prior year programs. Includes distribution costs of $16,131 for 12 commodities for needy families. Includes $279,288 and $209,418 in fiscal years 1961 and 1962 respectively for the cost of printing stamps and such contractual costs as necessary to issue and redeem the stamps.

Surplus removal operating expenses

1. Planning surplus removal programs and distributing commodities.—In addition to planning surplus removal programs under section 32, Agricultural Marketing Service distributes surplus food commodities (sec. 32 and sec. 416CCC) to eligible domestic outlets and, in cooperation with AID, distributes CCC (sec. 416) surplus food commodities to eligible foreign agencies. Over 4.7 billion pounds of surplus foods were donated by the U.S. Department of Agriculture during fiscal year 1962, for use in school lunch programs and by charitable institutions in this country and by needy persons both here and abroad.

(a) Domestic donations: Commodities are shipped at the request of State agencies, with the Federal Government paying all costs to central State receiving points. These costs may include processing and packaging as well as transportation. The State agencies accept the commodities at their central receiving points and are responsible for distribution to the final users. State agencies approve eligible recipients according to USDA standards. For example, to participate in the program, school lunch programs must be operated on a nonprofit basis, institutions and hospitals must be nonprofit and exempt from Federal income tax, and persons in family units receiving commodities must be certified as needy by a public welfare agency. State agencies are responsible for overall supervision of the program to insure that the commodities are effectively used and that waste or resale is avoided.

Over 2 billion pounds of surplus commodities were distributed to domestic outlets and benefited some 16 million school children taking part in the school lunch program; nearly 1.4 million persons in charitable institutions and 7.4 million needy persons in this country. The tremendous impetus given the distribution to needy persons in 1961 carried full force into 1962 with an average of 6.6 million receiving donated foods as compared with 4.4 million in 1961. Approximately 60 percent more food was donated through an expanded distribution system. The addition of 129 counties and cities in fiscal 1962 makes the program now available in over half of the political subdivisions of the Nation. This expansion has created various administrative problems at the Federal, State, and local levels. The recommendations of a Department task force are being instituted to provide strong Federal leadership to encourage cooperating agencies to provide better direction, better supervision and strengthen controls over handling and use of donated foods.

Surplus foods were also supplied to over 510,000 in 16 States and Puerto Rico who were victims of floods, snow and ice storms, tornado and hurricane winds, tidal waves and fire.

(b) Foreign donations: CCC commodities (section 416) are processed and packaged as necessary and shipped to U.S. voluntary agencies who accept title to the commodities at a U.S. port for delivery to needy persons in foreign countries. In most cases, agencies are reimbursed for ocean freight charges. The voluntary agencies are responsible for overall supervision of the program to insure that the commodities will not be sold or exchanged and will be distributed to needy persons without regard to race, creed, or color.

Section 416 surplus foods are donated for oversea relief only after sufficient stocks have been made available to meet the needs of eligible recipients in this country. Donations for foreign distribution to 111 foreign countries increased 15 percent to a total of 2,704.1 million pounds in fiscal year 1962.

The administrative costs in AMS in connection with the foreign donation program are financed from section 32 funds. The quantity and cost of commodities donated to domestic and foreign outlets in fiscal years 1961 and 1962 are shown in the following tables II and III.

2. Food trades program.-Under this program the consumption of plentiful foods is encouraged by focusing consumer attention on agricultural commodities in abundant supply so as to expand domestic consumption by increasing their utilization by low-income groups. This is done by enlisting the cooperation of food distributors in obtaining merchandising emphasis on foods available in plentiful supply and by supporting industry food promotion and merchandising campaigns. The workload under this activity is shown in the following table:

Special food drives were conducted during 1962 on apples, potatoes, eggs, cranberries, turkeys, and dairy products. The August sandwich month, to stimulate consumption of grain supplies, was fully supported. A special food guide is distributed each month to retailers and wholesalers who are approved to accept food stamp coupons. This guide gives information not only on plentiful foods but also on foods especially suitable for use in economy budgets. Major food drives are planned in 1963 on cranberries, peaches, dairy products, potatoes, turkeys, apples, cheese, broiler-fryers, tart cherries, frozen orange juice, and wheat flour during August sandwich month.