Subsequently, in a press statement issued on April 14, 1960, in referring to rates under the Uniform Grain Storage Agreement (UGSA) you stated in the fourth paragraph:

The establishment of those rates obviously is the proper function of the executive branch, through agreements between the Secretary of Agriculture and the warehousemen who store Government grain.

I agree fully. This paragraph then concluded with this sentence: "Neither the farmers nor the Congress is a party to these negotiations." This is not true in the case of approximately 1.5 million farmers who are parties deeply involved with this agreement, as will be developed here. As for Congress, at least four subcommittees have dealt with this subject in the last year, and this has profoundly affected what have become very one-sided negotiations, if they are negotiations in the dictionary sense at all.

Senator SYMINGTON. I would like to make a comment on that statement, too. I believe you said that you misunderstood the statement that was made.

First, I would like to put into the record a list of the individuals who were selected by the grain storage industry to conduct negotiations of uniform rate storage agreements with the Department of Agriculture. This was furnished to our subcommittee by the Department of Agriculture on April 18, 1960. And with the committee's approval I would like to put those names in the record. And since there is no objection that will be done.

(The letter dated April 18, 1960, follows:)

Mr. RICHARD M. SCHMIDT, Jr.,

U.S. DEPARTMENT OF AGRICULTURE,
COMMODITY STABILIZATION SERVICE,
Washington, D.C., April 18, 1960.

Counsel, Special Agriculture Investigating Subcommittee,
U.S. Senate, Washington, D.C.

DEAR MR. SCHMIDT: Confirming your verbal request to the Grain Division of this agency, we are listing below the names of the individuals who were selected by the grain storage industry to conduct negotiations of the uniform grain storage agreement with the Department of Agriculture:

COMMITTEE REPRESENTING NATIONAL FEDERATION OF GRAIN COOPERATIVES

Roy F. Hendrickson, National Federation of Grain Cooperatives, Washington, D.C.

M.D. Guild, Indiana Grain Cooperative, Indianapolis, Ind.

Frank M. Phariss, Producers Grain Corporation, Amarillo, Tex.

Fred Maywald, Farmers Grain Dealers Association, Des Moines, Iowa.

E. J. Barry, Farmers Union Grain Terminal Association, St. Paul, Minn.

A. W. Nielsen, West Central Grain Cooperative Co., Omaha, Nebr.

COMMITTEE REPRESENTING TERMINAL ELEVATOR ASSOCIATION

R. C. Woodworth, Cargill, Inc., Minneapolis, Minn.

Frank A. Theis, Simonds-Shields Grain Co., Kansas City, Mo.
Lee H. Wagner, Norris Grain Co., Chicago, Ill.

H. E. Sanford, Continental Grain Co., Portland, Oreg.

A. Price Feuquay, Feuquay Elevator Co., Enid, Okla.

W. J. Brooks, National Grain Trade Council, Washington, D.C.

COMMITTEE REPRESENTING GRAIN AND FEED DEALERS NATIONAL ASSOCIATION

C. L. McMillan, Osborne-McMillan Elevator Co., Minneapolis, Minn.

S. Dean Evans, Sr., Evans Grain Co., Salina, Kans.

W. H. Blanton, Blanton Grain Co., Carrollton, Tex.

Leland C. Miller, Federal North Iowa Grain Co., Cedar Rapids, Iowa.

J. D. Urquhart, Union Elevator & Warehouse Co., Lind, Wash.

Alvin E. Oliver, Grain & Feed Dealers National Association, Washington, D.C. Sincerely yours,

CLARENCE D. PALMBY, Acting Administrator.

Senator SYMINGTON. And second, the full text of my statement on the floor of the Senate under date of April 14, 1960, entitled "The Need for Cost Knowledge in Setting Fair Grain Storage Rates." I should like to quote some of the parts pertaining to farm storage as follows: Second. Is the Department conducting an adequate cost study survey to determine the cost of on-the-farm grain storage?

Third. Does the Department recognize that the farmer does not receive a handling rate for his on-the-farm storage as is paid the commercial warehouseman?

Fourth. Has the Department considered the fact that any proposed new rate will proportionately add to or subtract from the income of the individual farmer, since the latter is charged for the initial storage payments paid when crops are taken to the elevator for storage under the loan program?

Those are parts of my statement.

In connection with that last point, the effect of the grain storage rates on farmers' income, our committee staff asked the Department of Agriculture to compile data setting forth the dollar results of the Department's proposed storage rates announced by them on March 16, 1960. May I add that this subcommittee had nothing whatever to do with that rate decision. It was an executive function and beyond any legislative prerogative of the subcommittee, or, at least, as far as the subcommittee chairman is concerned.

These figures submitted by the Department of Agriculture show that if such rates had been in effect during the 1958 program year, which is the most recent full program year for which figures are available, the farmers of this country would have received an additional $7,125,000 in income during that year.

The Department based this on the fact that the farmers who store their grain with commercial warehouses during the loan period prior to Commodity Credit Corporation takeover are charged for the initial period of storage based on prevailing rates. Hence, they would have received during this year, approximately, $11,561,000 more under the price suport program because of lower storage charges being deducted from their loan proceeds.

An offset against this $11,561,00 saving would be the reduction of storage payments to farmers under the resealed program after Commodity Credit Corporation takeover. This would have amounted to, approximately, $4,436,000, leaving a net gain to the farmers of $7,125,000.

This is the reason that I made the statement that any proposed new rate "would proportionately add to or subtract from the income of the individual farmer."

Nowhere on the list of negotiators do I see the name of anyone who has represented the farmer who stores grain on the farm.

My statement, also, had reference to the fact that the present cost study of the grain storage costs by the Department of Agriculture is being used by them as the basis for their new rate proposal and does not cover on-the-farm storage.

The farmers, in my opinion, have not been represented in the current negotiations, even though they are vitally affected. I would say that the list of the people involved would verify my statement.

Would you like to comment on that before you proceed?

(The article from the Congressional Record dated Apr. 14, 1960, follows:)

[From the Congressional Record, Apr. 14, 1960]

THE NEED FOR COST KNOWLEDGE IN SETTING FAIR GRAIN STORAGE RATES'. Speech of Hon. Stuart Symington, of Missouri, in the Senate of the United States, Thursday, April 14, 1960

Mr. SYMINGTON. Mr. President, recently the Secretary of Agriculture announced that he planned to negotiate new and lower grain storage rates with the grain trade.

It has now come to my attention that certain Members of the Senate have requested the Secretary of Agriculture to suspend these negotiations until a report is filed by the Special Senate Agriculture Investigating Subcommittee, of which I have the honor to be chairman.

Any report from the Special Agriculture Investigating Subcommittee should not and would not contain any specific recommendations as to the rates to be paid under the uniform grain storage agreement.

The establishment of those rates obviously is the proper function of the executive branch, through agreements between the Secretary of Agriculture and the warehousemen who store Government grain. Neither the farmers nor the Congress is a party to these negotiations.

Upon direction from the full committee, this subcommittee was directed to de termine the facts concerning the administration of the Commodity Credit Corporation, of which the negotiation of the uniform grain storage agreement is a segment.

In this work we have had the wise and constructive cooperation of the General Accounting Office and its able head, Comptroller General Joseph Campbell. According to testimony before the subcommittee, in the last 7 years the Department of Agriculture has spent $22 billion for commodity storage; and the Secretary of Agriculture repeatedly refers to the high cost of this program.

In recent years the Department has negotiated the grain storage agreement twice; and, according to the testimony of the Director of the Grain Division itself, it has done so without any actual knowledge of the cost of storing grain. Such action--reaching rate decisions without knowledge of costs-violates the basic concept of good business management under sound accounting principles. Any businessman, whether in a city or on a farm, knows you cannot operate efficiently unless you have knowledge of your costs.

Unless and until, therefore, the Department of Agriculture has the same type and character of cost information about grain storage that any businessman has about his costs, the grain storage program can never be handled with fairness and efficiency.

If the Department continues to try to operate without a proper knowledge of costs, it can only continue to set storage rates which result in excessive profits to some operators, but denies others the opportunity to earn a fair profit.

All the waste which results from this kind of "management in the dark" procedure is charged to the overall farm program-and therefore to the farmers themselves.

The subcommittee has invited the National Grain Trade Council, the Grain and Feed Dealers National Association, the National Federation of Grain cooperatives, as well as any others interested, to testify before the subcommittee. The subcommittee will thereupon see to it that any such testimony is forwarded promptly to the Secretary of Agriculture, in the hope that the testimony will be of assistance to the Department.

The subcommittee will continue its review of the management of the Department of Agriculture, and will ask the same type and character of questions that are being asked by farmers, members of the trade, and all citizens interested in a sound farm program. As an example, we shall ask :

First. Is the Department of Agriculture undertaking an adequate cost study to negotiate rates so as to prevent some excessive profits at the expense of farmers and other taxpayers-but so as also to give opportunity for a fair profit to those who are providing needed storage service to the farm communities of this country?

Second. Is the Department conducting an adequate cost study survey to determine the cost of on-the-farm grain storage?

Third. Does the Department recognize that the farmer does not receive a handling rate for his on-the-farm storage as is paid the commercial warehouseman? Fourth. Has the Department considered the fact that any proposed new rate will proportionately add to or subtract from the income of the individual farmer, since the latter is charged for the initial storage payments paid when crops are taken to the elevator for storage under the loan program?

Fifth. Is the Department taking the necessary steps to find out the differences in costs between storing grain in certain parts of the country as against others?

Sixth. Is the Department considering a "renegotiation clause" to prevent excessive profits? Its own recent survey shows the differences in the cost of storage to be as much as 50 cents per bushel.

Seventh. In the Department considering the plight of the operators who, while providing necessary services to the farmers in their communities, are losing on every bushel of Government grain stored?

These conditions can be corrected only if the Department has a proper knowledge of the costs involved.

The Secretary of Agriculture often talks about the huge cost of storing Government grain. Only now, however, is any real effort being made to obtain normal data about the cost of doing this business.

If there is anyone who believes the Federal Government should allow some to make tremendously excessive profits on grain storage, while at the same time denying others a fair and reasonable profit, let him come forward and say so. We urge the Secretary of Agriculture to hurry up and get the facts. Only with the facts can he make decisions in this matter which are based on good business. practice under sound accounting principles.

Mr. HENDRICKSON. You made a considerable statement there in terms of length, and I would like very much the opportunity of looking at it and submitting for the record a statement, because this is not entirely true with respect to one segment of the representatives on that negotiating group, that is, the representatives of the grain cooperatives.

We have the complete interest of the farmers at heart throughout with respect to farm storage, also, and resealed rates. I can assure you of that, sir.

Senator SYMINGTON. Without objection, you can put into the record any statement you want to make with respect to my comments.

Mr. HENDRICKSON. I would appreciate that very much.

Senator SYMINGTON. Let the record show that I came back here, because this was the date that was most convenient to you to have this hearing.

Mr. HENDRICKSON. And I appreciate that very much.

Senator SYMINGTON. And I will be back in Nevada tomorrow afternoon, so that I could accommodate myself to your wishes. Mr. HENDRICKSON. Thank you.

(The statement by Mr. Hendrickson inserted after the hearing at this point reads:)

The National Federation of Grain Cooperatives is represented by six persons in these negotiations. I am one of them.

Our group of 6 represents the interests of approximately 1.5 million farmers who own and control 2,800 farm cooperatives engaged in marketing grain and providing related services. It is our responsibility to represent, as best we can, the interests of these farmers in local and regional cooperatives and the interest of farmers in general. For example, we have and will continue to urge fair and reasonable rates to farmers who build farm storage in response to the urging of the U.S. Department of Agriculture so as to reseal grain. We regard ourselves as trustees of the farmers' investment in cooperative facilities. We have no interest whatever to serve except those of farmers who produce grain and oilseeds for the market.

Senator SYMINGTON. I would like the record to show, too, that I have not seen the list of those people who were negotiating. I am simply taking the statement given to me by counsel. I have not had a chance to review those names, which I will do, as I will review the record very carefully.

Mr. HENDRICKSON. Mr. Chairman, I am a member of that group, and I am quite familiar with it. May I proceed? Senator SYMINGTON. Please do.

BACKGROUND OF GRAIN COOPERATIVES

Mr. HENDRICKSON. The simple fact is that grain marketing cooperatives, about 2,800 of them, are owned and controlled by approximately 1.5 million farmers in all of the principal grain and oilseed producing areas. They own from 33 to 35 percent of the Nation's commercial grain warehouse space. They had a marketing volume of grain and oilseeds in fiscal 1958 of $2.62 billion gross value. It has grown since, but figures are not yet available.

These farmers market all or a part of their grain and oilseed crops through their own cooperative marketing associations. They like to do business that way because whatever the business operations yield above actual expenses is refunded to them under a preexisting contract in proportion to the patronage or business they contribute to the volume of the cooperative. These take the form of refunds of savingssometimes called "patronage dividends,” which I will explain more fully later on.

These grain marketing associations of farmers are a substantial part of about 9,716 farm cooperatives who market farm commodities or procure for farmers supplies essential to their farm operations at cost. In your State, Mr. Chairman, the Missouri Farmers Association-MFA-sponsors a large number of successful cooperatives, and its grain and feed division is a member of this federation.

Since Tama Jim Wilson of Iowa served as Secretary of Agriculture under McKinley, Theodore Roosevelt, and Taft, every Secretary of Agriculture and every President has supported the principle of cooperative organization of farmers to facilitate private business enterprise by them. We prize this consistent bipartisan support.

Senator SYMINGTON. Is there a feeling on your part that this committee is opposed to cooperatives?

Mr. HENDRICKSON. No, Mr. Chairman, but I was puzzled by the fact that three warehousemen have appeared here, and two of them were managers of cooperatives who were, in fact, agents for farmers and trustees for the investments the farmers had in these cooperatives. That seemed disproportionate to me.

However, I am not saying that in criticism.