under their marketing agreement and order. Under these regulations they would sort out and ship only those potatoes that met the highest standards of uniformity as to grade and size.

Maine's request to the Department was formalized in a letter from the Maine Potato Council on November 26, 1962. This request was endorsed in early December by potato industry representatives from the Pacific Northwest.

4. Determination regarding adoption of program.-On the basis of its continuing study of market conditions, the Fruit and Vegetable Division, AMS, was aware of the existence of the potato surplus. The diversion program was recommended by that Division and concurred in by the Administrator, AMS. Final determination as to the course of action to be taken was made in the Office of the Secretary after approval by the Board of Directors of the Commodity Credit Corporation.

5. Program provisions.—Under the program the diversion of potatoes to starch, flour and livestock feed is encouraged by making a payment available upon certification by a USDA inspector that the potatoes have been so utilized. In the case of diversion to starch and flour, a manufacturing plant is involved which customarily uses potatoes for this purpose and pays for them at a salvage price. The program's technique here is to contract with the manufacturer to continue paying his salvage price, but, in addition, to pay the amount of the diversion payment for that quantity of potatoes in the lot which are of U.S. No. 2 grade, 2 inches minimum diameter or better. The manufacturer then would periodically claim reimbursement from USDA for the diversion payments which he had advanced to vendors.

In the case of diversion to livestock feed the potatoes must be mutilated in the presence of a USDA inspector to render them unmarketable and then they are fed to livestock. Here again, the diversion payment is made on the basis of the inspector's certificate that diversion has taken place. The diverter may be a grower himself, or a feeder to whom the grower has sold the potatoes for use as feed. In the latter instance the price at which the potatoes are sold is not regulated but it is expected that the grower's own self-interest and his awareness of the program's benefits should assure his receipt of a fair price for his potatoes. Regardless of how diversion takes place, no diversion payment is available for culls or for those potatoes which fail to make U.S. No. 2 grade or better or are smaller than 2 inches in diameter. Any owner of potatoes in an area approved for program operations might participate in diversion during the period of time when the program is effective.

6. Program coverage.-Areas included in the program are Maine, Rhode Island, Colorado, Utah, northern California, Oregon, and Washington. After the program was announced the potato industry in these areas requested that the program be made available to them and, in consideration of the program, adopted a marketing plan to sell commercially only potatoes which met certain minimum specified grades and sizes. Areas not participating in the program have not applied for participation. Several factors or a combination of them are responsible for this in the nonparticipating areas:

(a) Facilities for manufacturing potatoes into starch or flour do not exist. (b) The practice of feeding potatoes to livestock has not been adopted. (c) Areas of large population nearly provide a ready market for low grades and hence, a higher return than through diversion.

(d) Normal marketing channels within the area does not make it seem to the group to be to their advantage to have this program available.

(e) Did not elect to participate.

The volume of potatoes diverted under the program through March 8, 1963, totaled 2.8 million hundredweight of which almost 1.5 million met the specifications for diversion payment. The remaining 1.3 million were culls. Program costs have amounted to $775,000 or an average cost of 27.7 cents per hundredweight for the total amount diverted. The volume diverted probably is less than might otherwise be expected because of an unusual and unexpected commercial export market of approximately 1 million hundredweight of potatoes to Europe where an unusually severe winter prevented the opening of pit storages to supply their markets.

7. Impact of program on the market.-Inasmuch as the program started in Maine, its immediate affect was a firming of prices to growers in Maine. The availability of an established minimum price at the starch plants in bulk lots tended to set a floor price for grower's sales to commercial channels. Surpluses

are not disposed of by a simple announcement of a program. Also, there is a limit on the daily rate at which diversion outlets can utilize potatoes. As the marketing season progressed, however, the average price received by growers has risen from $1.48 per hundredweight in December 1962, to $1.61 per hundredweight in February 1963. Even though the program has operated in comparatively few areas, the effect has been to stabilize or improve prices in all areas. The attached table shows a comparison of average prices received by growers and parity equivalents for selected areas.

1962 crop potatoes-Prices received in selected areas compared with parity equivalent through Feb. 28, 1963

Mr. WHITTEN. I say again for the record that through the years I have been on this committee, I don't believe anybody has been a stronger believer in the use of section 32 funds than I have. I have seen so many illustrations where buying up a surplus would strengthen the market and save money for all concerned. And for effectiveness we have had to use them quickly and fast. So my asking you these questions is not prejudging the soundness of the program, but I think we have to have information in the record so the Congress can tell whether this approach is working or not and, if so, how well.

Mr. SMITH. On potatoes, I can give it now, if you wish or later, if you prefer.

Mr. WHITTEN. Well, if you get down to concrete things, it means something to me. But this generality business, I have been familiar with the generalities for 15 years.

Mr. SMITH. I thought I had given some specifics earlier, as to specific price levels and when changes took place.

Mr. WHITTEN. Just go over the record and be sure that the detail is there.

TOBACCO EXPORT PROGRAM

Now we turn to exportation, which is another one of the means whereby this section 32 can be used to help our overall farm situation. In that instance, I notice up to March 2, you have used $1,409,148 to help export tobacco. How have you worked that program?

95910-63-pt. 3—31

Again, I want to repeat for the record, I am a strong believer in the section 32 program. But it is our job to develop in the record the facts concerning it.

DISPOSAL OF 1955-56 CROP TOBACCO

Mr. SMITH. This program is directed at helping dispose of inventories of 1955 and 1956 crop tobacco, which the Commodity Credit Corporation has in inventory.

Mr. WHITTEN. What type of tobacco?

Mr. SMITH. The inventories of those crop years is almost entirely of flue-cured type and there was at the inception of this program, about 120 million pounds.

Mr. WHITTEN. Is that a large carryover, or not?

Mr. SMITH. Actually for an inventory that old to be held, I would say is quite unusual. And to help facilitate removing that supply from the crops that far back, to make the announced price of the tobacco associations more attractive for export, this program calls for a 20 percent subsidy on the tobacco exported.

Mr. WHITTEN. Give us a copy of that announcement, and discuss full details as to how it is handled. Who has been paid and how much?

Mr. SMITII. The payment is made to the exporter.

Mr. WHITTEN. And knowing that he can get that much if he exports it, it enables him to pay a higher price if he sees fit. Or do you hold the tobacco in storage at a fixed price based on this 100 percent plus carrying charges? Tell us what happened in this case, how much was exported, how much was placed on the domestic market, what profits were made and who made them.

Mr. SMITH. There is an announced price at which the tobacco associations will sell this tobacco and if a dealer or exporter buys this tobacco and then decides to export it, he makes his application to us. We inspect it and then he proceeds to export. After he exports, he submits the appropriate documents and submits his claim to collect 20 percent of the price that he paid the association. (The information supplied is as follows:)

U.S. DEPARTMENT OF AGRICULTURE,
Washington, February 16, 1962.

USDA ANNOUNCES PROGRAM TO ENCOURAGE EXPORT OF LEAF TOBACCO The U.S. Department of Agriculture today announced an export payment program to aid tobacco growers by encouraging the export of Commodity Credit Corporation loan stocks of leaf tobacco from 1956 and earlier crops.

About 150 million pounds of tobacco of these corps are currently in inventory. While most of it is held as collateral for price support loans, small quantities have recently been acquired by dealer exporters from tobacco cooperatives and to the extent such stocks can be identified they will also be eligible for the program. About 85 percent of the inventory is of flue-cured tobacco, but includes all kinds of tobacco.

The program announced today is designed to encourage and develop new markets by providing for payments from funds authorized for this purpose in section 32 of Public Law 320. The rate of payment will be 20 percent of the announced sale prices of cooperative associations by grades, in the period immediately preceding the authorization of this program.

Full details of the operation of the program will be announced about March 1. The United States has been the chief supplier of leaf tobacco in world trade. But our share of world trade is dropping. The U.S. share of world tobacco exports in 1960 was 32.6 percent, compared with 37.9 percent for the 1950-54 period. Flve-cured tobacco accounts for over 80 percent of total exports.

Inquiries regarding program details should be directed to the Director, Tobacco Division, AMS, U.S. Department of Agriculture, Washington, D.C.

U.S. DEPARTMENT OF AGRICULTURE

AGRICULTURAL MARKETING SERVICE

[Reprinted from Federal Register of March 10, 1962]

NOTICE OF TERMS AND CONDITIONS FOR MAKING PAYMENTS UNDER SECTION 32 TOBACCO EXPORT PAYMENT PROGRAM, CMX 40a

AUTHORITY: Pars. 1 to 14 issued under sec. 32, 49 Stat. 774, as amended; 7 U.S.C. 612c.

TERMS AND CONDITIONS

1. General statement.

(a) In order to encourage the exportation of tobacco the Secretary of Agriculture, pursuant to the authority conferred by section 32 of Public Law 320, 74th Congress, as amended, offers to make payments to persons located in the United States who export or cause to be exported eligible tobacco subject to the terms and conditions set forth in this offer.

(b) Information pertaining to this offer and forms prescribed for use hereunder may be obtained from the following Representative of the Secretary: Stephen E. Wrather, Director, Tobacco Division, Agricultural Marketing Service, U.S. Department of Agriculture, Washington 25, D.C. (Phone Dudley 8-2567)

Forms and information pertaining to this offer may also be obtained from the following cooperative associations:

Flue-cured tobacco:

Flue-Cured Tobacco Cooperative Stabilization Corp., P.O. Box 2718, Raleigh, N.C.
Burley tobacco:

Burley Tobacco Growers Cooperative Association, P.O. Box 860, Lexington, Ky.
Virginia Burley Tobacco Growers Association, Inc., P.O. Box 549, Abingdon, Va.
Burley Stabilization Corp., 3919 Holston Drive N.E., Knoxville 14, Tenn.

Dark-fired and dark air-cured tobacco:

Eastern Dark-Fired Tobacco Growers Association, 1109-11 South Main Street, Springfield, Tenn. Stemming District Tobacco Association, 125 First Street, Henderson, Ky.

Western Dark-Fired Tobacco Growers Association, 202-206 East Maple Street, Murray, Ky. Dark Tobacco Sales Cooperative, P.O. Box 248, Farmville, Va.

Cigar binder tobacco:

Conn-Mass Tobacco Cooperative, Inc., P.O. Box 550, Holyoke, Mass.
Northern Wisconsin Cooperative Tobacco Pool, Inc., Viroqua, Wis.

2. Eligible tobacco. Eligible tobacco shall be unmanufactured tobacco of the 1956 and preceding crops (a) which has heretofore been or is hereafter acquired by the exporter, directly or indirectly, from stocks of tobacco which had been pledged by one of the above-listed producer cooperative associations (hereinafter referred to as the "association") to Commodity Credit Corporation as collateral for a price support loan, (b) which can be identified with respect to grade, type, kind, and crop year, and as having been acquired from such association, and (c) which has not been mixed or commingled with tobacco that was not acquired from Commodity Credit Corporation's price support loan collateral of the 1956 and preceding crops.

3. Payment. Payment will be made by the Secretary with respect to eligible tobacco covered by an export sales contract with a foreign buyer having a date of sale after the effective date hereof and on or before November 30, 1962, and exported to eligible countries in accordance with the provisions of this offer.

4. Rate of payment. The rate of payment will be 20 percent of the purchase price which would have been computed from the approved selling lists of the association from which the tobacco was acquired on the basis of base grade sales prices plus monthly carrying charges, for the year, grade, type and kind of tobacco exported, had such tobacco been acquired from the association on February 16, 1962: Provided, however, That if the tobacco exported was purchased at a special discount from the association's sales prices, which discount was not in effect on February 16, 1962, the payment under this offer will be reduced by the same percentage as the discount. An official list of prices as of February 16, 1962, will be made available to associations, dealers, and exporters, and additional copies may be obtained from the Representative of the Secretary named in paragraph 1 above.

5. Barter and foreign currency exports. Tobacco which is exported pursuant to barter arrangements with Commodity Credit Corporation or exported under Titles I and IV of the Agricultural Trade Development and Assistance Act of 1954, as amended (P.L. 480, 83d Congress, as amended), shall be eligible for the export payment provided hereunder, if by such exportation all of the terms and conditions of this offer are fully met.

6. Application for participation. Persons desiring to participate in this program shall file an Application for Participation in the Tobacco Export Program (Form TB-92) on or before November 30, 1962, with the Representative of the Secretary named in paragraph 1 above. A separate application shall be filed for each export sale.

The applicant shall indicate on the Application for Participation the type of export sale, namely, (a) barter export, or (b) Title I or Title IV, P.L. 480, export, or (c) other (including cash export). The export sales price for each sale shall be reported on the Application. The Application shall be accompanied by either (a) a copy of the invoice from the association showing evidence of purchase, or of the invoice to Commodity Credit Corporation for the account of the barter contractor, or (b) a copy of an agreement to purchase the tobacco represented in the Application. The invoice or agreement to purchase shall show the purchase price, kind of tobacco, crop year, number of hogsheads or units in U.S. grade, and identification numbers, gross weight, tare, and net weight for each hogshead or unit. If the invoice or agreement to purchase does not contain these data with respect to the tobacco represented in the Application, certified supplemental documentation shall be attached showing this information. Cigar leaf in bales may be identified by lots. Applicants shall submit any additional information requested by the Secretary incident to identification of tobacco represented in the Application.

The Secretary will approve applications meeting the requirements of this offer so long as funds which have been allocated therefor are available, in the order in which the applications are received and in which the eligibility of tobacco represented thereby is substantiated, and will give written notice of approval of disapproval to the applicants. No payment will be made in excess of the sum indicated in the approved Application for Participation.

7. Fair pricing. Applications will not be approved where, in the determination of the Secretary, the export sales price exceeds a fair and reasonable value, taking into account the payment which may be received for such sale under this offer.

8. Verification of tobacco to be exported. Payment will not be made under this offer unless the identification of the tobacco exported is verified to the satisfaction of the Secretary, or his designee. The exporter shall request verification by inspection or observation by representatives of the Tobacco Division, Agricultural Marketing Service. Any change in the markings placed by the association on each hogshead or unit of tobacco, or any change made in the form of the tobacco necessitating repacking, also must be made under the observation of a representation of the Tobacco Division, Agricultural Marketing Service. The exporter shall reimburse the Agricultural Marketing Service for any inspection or observation hereunder in accordance with regulations issued pursuant to the Tobacco Inspection Act. The Secretary may, at his discretion, accept other proof of the identification of the tobacco exported. If markings are changed, the exporter will be required to submit to the Secretary, or his designee, a certified listing of each hogshead or unit of tobacco showing kind of tobacco, crop year, and original grade, together with a certified listing showing for each hogshend or unit of tobacco the corresponding new or dealer grade marking. If the markings were changed on any tobacco before the effective date of this offer, or if any tobacco exported under this offer was converted from bundles to strips or the form changed in some other manner before the effective date of this offer, such tobacco must be identified to the satisfaction of the Secretary,