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INVESTIGATION OF GRAIN STORAGE OPERATIONS OF

THE COMMODITY CREDIT CORPORATION

TUESDAY, JANUARY 12, 1960

U.S. SENATE,
SPECIAL INVESTIGATING SUBCOMMITTEE
OF THE COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D.C. The special subcommittee met, pursuant to call, at 10:05 a.m., in room 457, Old Senate Office Building, Senator Stuart Symington (chairman of the subcommittee) presiding.

Present: Senators Ellender, Symington, Proxmire, and Young of North Dakota.

Also present: Richard M. Schmidt, Jr., special counsel, and George M. Kopecky, professional staff member.

Senator SYMINGTON. The meeting will come to order.

This is a Special Investigating Subcommittee of the Senate Committee on Agriculture and Forestry, which has been directed to investigate certain activities of the Department of Agriculture.

(The committee resolution is as follows:)

RESOLUTION ADOPTED BY COMMITTEE, MAY 20, 1959 Resolved, That a subcommittee of six members of the committee, in addition to the chairman of the committee, who shall be an ex officio member of the subcommittee, shall be appointed by the chairman of the committee to make a full and complete study and investigation of

(1) All policies, activities, operations, and management of the Commodity Credit Corporation, and

(2) All policies, activities, operations, and management of the Department of Agriculture insofar as they relate to or affect either directly or indirectly (i) activities or operations of the Commodity Credit Corporation, (ii) activities or operations in connection with which any funds, assets, personnel, or authority of the Commodity Credit Corporation is utilized, or (iii) activities or operations relating to feed or seed emergency assistance, whether or not

participated in by the Commodity Credit Corporation. The subcommittee shall have authority to inquire into any matter within the jurisdiction of the committee.

Senator SYMINGTON. The primary purpose of these first hearings is to get

the facts about the grain storage operations of the Commodity Credit Corporation. The Department of Agriculture has repeatedly emphasized the high cost involved, pointing out that grain storage and handling costs are now running over $1.5 million a day. The spokesman for the Department says that 90 percent of these storage costs are for grain and that some 11,000 warehousemen are being paid this money to store approximately 3 billion bushels. These warehousemen store this grain under the Uniform Grain Storage Agree

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ment. The contract is negotiated with the warehouse industry by the Department of Agriculture. In addition to the Uniform Grain Storage Agreement, the CCC stores grain in its own bins; also in other governmental facilities, including empty ships in the reserve fleet.

We believe it timely that the storage question be reviewed by the Congress, as the Department of Agriculture has commenced negotiations with the warehouse industry for a new uniform grain storage agreement to become effective in July of 1960. During the past 7 years, the Department of Agriculture has spent more than $2,300 million for commodity storage and handling; therefore, it is well that a survey should now be started to determine how much it costs commercial warehousemen to store Government-owned grain.

Based upon Department of Agriculture estimates, each 1 cent of the annual storage rate set forth in the Uniform Grain Storage Agreement represents a total annual expenditure of over $25 million. The current expenditure of some billion dollars a year in storage and related charges is all charged to the farm program. One of the prime objectives of this subcommittee will be to find out if these expenditures are being made efficiently.

At the initial hearing, we shall hear from representatives of the trade and officials of the department responsible for administering the expenditures of these large sums.

Mr. Counsel.
Mr. SCHMIDT. The first witness is Dr. Richard Phillips.

Senator SYMINGTON. Dr. Phillips, will you raise your right hand, please?

Do you solemnly swear that the testimony you are about to give before this subcommittee of the Senate of the United States will be the truth, the whole truth, and nothing but the truth, so help you God?

Dr. PHILLIPS. I do.

TESTIMONY OF DR. RICHARD PHILLIPS, PROFESSOR OF AGRICUL

TURAL ECONOMICS, IOWA STATE UNIVERSITY, AMES, IOWA

Senator SYMINGTON. Dr. Phillips, will you state who you are, what your position is at this time?

Dr. Phillips. Yes. My name is Dr. Richard Phillips, professor of agricultural economics at Iowa State University, working in the field of grain marketing, research and extension in teaching

Senator SYMINGTON. At this point in the record, without objection, we will insert the details of Dr. Phillips' position and activities.

(The matter referred to is as follows:)

DR. RICHARD PHILLIPS, PROFESSOR, DEPARTMENT OF ECONOMICS AND SOCIOLOGY,

Iowa STATE UNIVERSITY, AMES, Iowa Attended Iowa State University, Purdue University and University of Hawaii. B.S. degree from Iowa State University with major in agricultural education in 1948.

Graduate work at Iowa State University with major in agricultural economics and minors in general economics and vocational education. Major professor Frank Robotka. Received the degrees of master of science in 1949 and doctor of philosophy in 1952.

U.S. Navy Air Corps 1943–46. Aerial navigator, Navy Air Transport Service, Pacific theater. Released to inactive duty with the rank of ensign.

1. County extension youth assistant, Mahaska County, Iowa 1946-47.

2. Vocational agriculture veterans instructor, Mingo, Iowa, 1947–48 (while doing course work at Iowa State University).

3. Joined the agricultural economics staff in 1949, first as teaching associate, then as extension economist in grain marketing, and in 1953 on present joint appointment of research, extension, and teaching. Date of ranks: assistant professor-July 1951; associate professor-July 1955; professor-January 1959.

Professor in agricultural marketing, Department of Economics and Sociology, Iowa State University. Member of the graduate faculty, the general faculty, and the faculties of the agricultural experiment station and agricultural extension service. Chief interest in agricultural business management and agricultural marketing, particularly of grain, feed, and farm supplies. Active in research, campus teaching and extension activities with trade groups in these fields.

Dr. Phillips is the author of numerous bulletins and articles and one book, “Managing for Greater Returns in Country Elevator and Retail Farm Supply Businesses,” published in 1957. 552 pages.

1. Member Chicago Board of Trade Educational Advisory Committee 1954–56, chairman 1956.

2. Land-grant college consultant. American Institute of Cooperation JanuaryJuly 1959.

3. Contributing editor, Farm Store Merchandising, Miller Publishing Co., June 1958 to present.

Phi Kappa Phi, Gamma Sigma Delta, American Farm Economics Association. Senator SYMINGTON. Mr. Counsel, will you proceed?

Mr. SCHMIDT. Dr. Phillips, before we undertake to have your statements concerning this grain storage problem, with the permission of the chairman, I would like to present for the record schedules which show the value of commodities pledged for outstanding loans and commodities in the inventory as of June 30, of the Commodity Credit Corporation during the fiscal years 1951 through 1959, which would be marked as “Schedule 1."

Schedule 2 will be the costs incurred for storage, handling, transportation, interest expense applicable to price support, inventory and Ioan operations and miscellaneous other carrying charges in the fiscal years 1952 through 1959 and estimated for 1960 and 1961.

And schedule No. 3 will be the Commodity Credit Corporation figures for storage and handling costs for all agricultural commodities and for grains specifically through the fiscal years 1952 through 1959 and 1960 on an estimated basis.

We would ask that these be included as part of the record.
Senator SYMINGTON. Without objection.

(The matter referred to is as follows:)

SCHEDULE 1.Commodity Credit Corporation value of commodities pledged for

outstanding loans and commodities in the inventory as of June 30, for each of the fiscal years 1951 through 1959

(In thousands of dollars]

[blocks in formation]

1 Estimated.

Source: Commodity Credit Corporation-Report on Financial and Operations, as of June 30, for each of the fiscal years 1951 through 1959. The 1960 estimated figures are taken from the 1960 Budget of the United States.

SCHEDULE 2.-Commodity Credit Corporation costs incurred for storage and

handling, transportation, interest expense applicable to price-support inventory and loan operations, and miscellaneous other carrying charges, fiscal years 1952 through 1959 actual, and estimated 1960 and 1961

[blocks in formation]

1952 1953 1954. 1955 1956 1957 1958 1959. 1960 (estimated) 1961 (estimated)

73. 3 120.2 236.9 332.9 374. 1 364.4 409.0 481.6 612.0 711.4

45. 4 69. 6 92. 3 138. 0 187.6 186.4 177.3 164.4 167.4 175.0

0.1

30.0 43.6 85.4 49.0 126.0 185.7 270.0 145.0 380.0 400.0

148.8 233.6 417.3 541.2 707.1 755. 5 870.3 1960 estimated

.2
2. 7
21.3
19.4
19.0
14.0

12.4
(1)
(1)

803.4 1, 159. 4 1, 286.4

1 Not available.
Source: Figures furnished by USDA.

SCHEDULE 3.-Commodity Credit Corporation storage and handling costs for all agricultural commodities and for grains during the fiscal years

1952 through 1959 and 1960 estimate

(In thousands of dollars)

1959

1958

1957

1956

1955

1954

1953

1952

$56, 300 16,959

$201, 586 $105, 483 31, 130

14, 539 4, 140 162 236, 856 120, 184

73, 259

[blocks in formation]

$547,000
58, 500
6, 500

$435, 274
40, 071
6, 314

$357, 709 $309, 603
45, 593

44, 792
5, 308 9, 996

$329, 452 $285, 447

33, 361 38, 129
11, 274 9, 354
374,087 332, 930

612,000

481, 659

408, 610

364, 391

Storage and handling costs, all commodities:

Commercial storage.
Bin sites (Government-owned).
Fleet storage (Government-owned).

Total storage and handling costs, all commodities
Storage and handling costs, grains only:

Commercial storage..
Bin sites (Government-owned)--
Fleet storage (Government-owned)-

Total storage and handling costs, grains only.

522,000
58, 500
6,500

411,014
40, 071
6, 314

322, 165
45, 593
5, 308

269, 095
44, 792
9, 996

264, 023
33, 361
11, 274

234, 716
38, 129
9, 354

165, 792
31, 130
4, 140

587,000

457, 399

373, 066

323, 883

308,658

282, 199

201,062

103, 196

65, 918

Source: Figures as furnished by USDA.

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