depending on how much money Congress makes available we can limit it by the number of new areas that we can accept. VALUE OF CROPS FOR WHICH SECTION 32 FUNDS ARE USED Mr. WHITTEN. In the use of section 32 funds, I think it would be well if you could show where they are significant the average annual gross value of the crop. The money you have spent means more when compared to the size of crop you are dealing with. Mr. LENNARTSON. Yes, sir; this we have. Gross value or income from total crop or production for selected farm commodities FOOD DONATIONS RELATED TO CUBAN RANSOM PAYMENTS Mr. WHITTEN. Could we have for the record all facts concerning any contribution by the Department, in milk, foods, et cetera, which went to the Cuban ransom payment, if any. (The information requested follows:) U.S. DEPARTMENT OF AGRICULTURE, Washington, January 8, 1963. USDA SUPPLIES DRIED MILK FOR CUBA DISTRIBUTION The U.S. Department of Agriculture today transferred 5 million pounds of nonfat dried milk solids to the American Red Cross for the benefit of the Cuban Families Committee. Transfer was made in response to a request by the American Red Cross pursuant to section 1431 of title 7 of the United States Code. Under this section, the Department is authorized to donate surplus commodities, such as milk, for distribution to needy persons in foreign countries. However, the Red Cross had indicated that the Cuban Families Committee expects to raise funds to reimburse the Department. The American Red Cross has informed the Department that its own representatives and those of the Cuban Red Cross will supervise distribution of the milk in Cuba to insure that it will reach children and other needy persons. The Department has over 500 million pounds of surplus nonfat dried milk solids in reserve acquired under the mandatory price support program. As a normal practice approximately 1 billion pounds of dried milk are disposed of each year on a gift basis to needy persons at home and abroad to avoid deterioration and possible spoilage. The Red Cross also has informed the Department that, in obtaining sufficient foodstuffs to complete the shipment of goods for the Cuban prisoners exchange, it does not appear that all of the baby food requested can be obtained. However, the Cuban Families Comittee has indicated that this initial shipment and an additional 15 million pounds of dried milk will be acceptable in lieu of baby food. In view of the need of this surplus milk to complete the prisoners exchange agreement, the Department is prepared to make the additional quantities of milk available as requested by the American Red Cross. The Department late in 1962 donated to the American Red Cross 5 million pounds of Commodity Credit Corporation surplus stocks of nonfat dry milk pursuant to title 7 of United States Code, section 1431. A request for an additional 5 million pounds was received on March 1, 1963. The bags of milk powder are marked in Spanish with the legend "Donated by the People of the United States of America" and will also bear the symbol of the American Red Cross. The milk will be distributed through noncommercial channels to needy persons in Cuba under the general supervision of the American Red Cross. At the time of the donation the Red Cross indicated that the Cuban Families Committee expected to raise funds to reimburse the Department. To date the Department has not received any reimbursement for the dry milk. However, the Red Cross has arranged for the transfer to the Agency for International Development, free of charge, for use of its programs abroad, insecticides valued at approximately $2 million which it has received as a gift in connection with the prisoner exchange. Mr. WHITTEN. If there are no further questions, this part of the hearings is concluded. MONDAY, MARCH 11, 1963. AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE WITNESSES JOHN P. DUNCAN, JR., ASSISTANT SECRETARY OF AGRICULTURE HORACE D. GODFREY, ADMINISTRATOR, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE EDWIN A. JAENKE, ASSOCIATE ADMINISTRATOR, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE CHARLES COX, ASSISTANT TO DEPUTY ADMINISTRATOR, STATE AND COUNTY OPERATIONS, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE ROBERT G. LEWIS, DEPUTY ADMINISTRATOR, COMMODITY OPERATIONS, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE ROBERT P. BEACH, DEPUTY ADMINISTRATOR, MANAGEMENT, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE FRED G. RITCHIE, DIRECTOR, CONSERVATION AND LAND USE POLICY STAFF, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE LAWRENCE MYERS, DIRECTOR, SUGAR POLICY STAFF, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE HARRY B. WIRIN, DIRECTOR, BUDGET DIVISION, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE CLARENCE R. ESKILDSEN, ASSOCIATE ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE CLAUDE TURNER, DIRECTOR, TOBACCO POLICY STAFF, AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE LESTER P. CONDON, INSPECTOR GENERAL, DEPARTMENT OF AGRICULTURE CHARLES L. GRANT, DIRECTOR OF FINANCE AND BUDGET OFFICER, DEPARTMENT OF AGRICULTURE WILLIAM A. CARLSON, ASSISTANT TO THE DIRECTOR OF FINANCE, DEPARTMENT OF AGRICULTURE Mr. WHITTEN. The committee will come to order. We are glad to have with us today Mr. John P. Duncan, Jr., Assistant Secretary of Agriculture, under whose jurisdiction the Agricultural Stabilization and Conservation Service comes. The committee intended at the outset to have the appropriate representatives of the Secretary's Office here and the testimony primarily presented by those who deal with the programs. I am going to vary the normal presentation here somewhat, because of the need to have some degree of continuity. SECTION 32 CITRUS TRANSACTIONS At the last day's hearings on the Agricultural Marketing Service, we had the officials in charge of the section 32 funds. It developed in connection with their presentation that an expenditure of considerable size was made for citrus juice for, I believe according to the testimony, the school lunch. However, subsequently it developed that such citrus as they retained was distributed to the needy. At this state of the record, it appears that, after the Government had completed its contract to purchase what was surplus from last year's citrus crop, damage occurred to this year's crop. As a result, the Department released back to the persons from whom the purchases were made most of the citrus juice contracted for. Also, a similar transaction was testified to involving a large quantity of grapefruit sections, which was from the current year's crop. SECTION 32 FLUE-CURED TOBACCO EXPORT FINANCING At the same time there was an item of $1,409,000 of section 32 funds which were used, according to their statement, to pay for a 20-percent subsidy to export tobacco. In the hearings it developed that this tobacco was placed on the domestic and foreign market at a fixed price. According to the witnesses before us, this was the first time we have ever had any such experience as that in all the operations of the Department. Now, when it came to the tobacco operation they said this was a matter that was handled by the CCC, and other than them financing the cost of exports, the decisions were made by those in charge of the Commodity Credit Corporation. Now, with that background I would like for you to present to the committee the full story on what tobacco was involved, who made the decision to sell it at a fixed price rather than offering it on a competitive bid, the occasion for the change of policy to place this on the domestic market, what depressing effect it may have had on the market, and what increase in tobacco going into Government loan might have resulted. We want the whole story. I am asking it here so it might be contiguous to and tied in with the earlier hearings which will just preface this discussion. Mr. Duncan, you might handle that any way you wish. SALE OF LOAN STOCK TOBACCO Mr. GODFREY. I would be glad to handle this. Mr. Chairman and members of the committee, I would like to give a little background on this if it is all right. Mr. WHITTEN. We want the full story, Mr. Godfrey. Mr. GODFREY. We will start back with the 1955-56 crops of tobacco, because these are the two crops that are involved. I have some prepared data which I can furnish for the record if you want it, but I would like to give that background. Mr. WHITTEN. You may go ahead and supply it to the committee. Mr. GODFREY. In 1955 we took a 5-percent cut in Flue-cured tobacco allotments from the previous year, but in spite of this cut we actually produced 1,483 million pounds of Flue-cured tobacco, which gave us at that time a record high yield of about 1,497 pounds per acre. was actually 236 pounds or a 19-percent increase per acre over the 1954 crop. This The price-support level on the 1955 crop was 48.3 cents per pound, which was 90 percent of parity, as required by law. A total of 299 million pounds, or about 20.2 percent of the crop, was placed under loan that year, taken over by the Flue-Cured Tobacco Cooperative Corporation that handles the loan program. In 1956 we took a further reduction in Flue-cured tobacco allotments of 12 percent, but per-acre yield again went up. It jumped from 1,497 to 1,625 per acre. The crop turned out to be a little bit less though because of the 12-percent cut, about 60 million pounds less. The price-support level, still under the mandatory 90 percent of parity, went up to 48.9 cents per pound. I might point out there that farmers received about 51.5 cents per pound actually, 2.6 cents over the price-support level. This year the stabilization co-op who has handled the loan program took over 320 million pounds, or about 2212 percent of the entire crop. For the 2 years then we had a total of 619 million pounds taken over by the co-op, or roughly about 21 percent of the 2 crops. Mr. WHITTEN. You refer to the co-op. We try to keep straight on this committee what you have reference to, but it is even difficult for us. For the record you might describe how comprehensive the co-op is. PRICE SUPPORT MECHANISM FOR TOBACCO Mr. GODFREY. Maybe I ought to explain the whole price-support mechanism for tobacco, which is entirely different from any other commodity. In the case of tobacco, the CCC enters into a contract with a co-opnormally it is a co-op of farmers to handle the price-support operation for CCC. In making price support available to producers of tobacco, with respect to any pile of tobacco, basket of tobacco, that does not bring the guaranteed price-support level for that particular grade which is assigned, the producer has an option of selling it at the bid price or turning it over to the co-op who is handling the price-support activity and receive in return the guaranteed price-support level. The co-op then handles all of the processing of that tobacco-the redrying and the sales of the tobacco. The sale prices are published once each year, and hold firm throughout the year except for the addition of storage charges as the year progresses. The sales prices are recommended by the board of directors for the co-op and approved by CCC, and as I say they hold firm throughout the year except for the addition of the storage charges. Now, all of the management policies as far as selling, storing, warehousing, and looking after the commodity fall within the realm of the co-op. Mr. WHITTEN. At that point I would like to interrupt and ask this. What is there that would cause the co-op under those conditions to include all producers in a given area, and what would make it to their interest to handle this in a practical way? At this point there is nothing to indicate that there would be any reason for them to try to look after the Government's interest. I do not mean there is not, but at this point in your statement there is nothing to indicate that they would have any financial interest or any other interest that might cause them to make every effort to try to protect the Government's investment. Mr. GODFREY. Well, the basic premise in setting up the co-op was to handle the tobacco for the Government and to make an additional return for the farmers if they could and distribute any additional profits that they might derive from the processing and selling of the tobacco. Mr. WHITTEN. Let me ask you one other question to clarify it. Is the average producer in that co-op in it to the extent of his production? Is there any difference, in other words, between the small producer and the big producer? Mr. GODFREY. None whatsoever. All of his production is eligible for support if he is a member of the co-op and if he has planted within his acreage allotment. Mr. WHITTEN. If he does not care to join the co-op, where is he? Mr. GODFREY. He is not eligible for price support in the case of Flue-cured and in the case of Burley, he does not have to join a co-op and pay a membership fee. Mr. WHITTEN. I believe the testimony in this case shows that this was altogether Flue-cured tobacco. Mr. GODFREY. This was all Flue-cured tobacco. In the case of Fluecured he pays a $5 membership fee, and that is good for life. Mr. WHITTEN. So it means all producers who do belong Mr. GODFREY. Generally, all producers do belong. All producers are eligible for price support if they plant within the acreage allotment. Mr. WHITTEN. All right. Continue. Mr. GODFREY. Now, after the 1955-56 takeover of about 619 million pounds of tobacco, it became apparent that, due to the introduction of some high-yielding varieties of tobacco which at that time had poor trade acceptance because they were lacking in flavor and aroma, we had to do something about it. |