Government surpluses. A total of 73 materials are covered in the program, including the critical metals, natural rubber, and fibers.

Our total stockpile requirements, computed on the basis of estimated wartime needs less estimated supplies available during the war period, amount to $9.7 billion measured in February prices. On March 1, approximately $3.2 billion of these requirements were on hand.

While materials now stored in the stockpile are not being drawn upon for defense production, the amount of new deliveries has had to be weighed against the new needs of the defense program as well as other essential needs. As a consequence, deliveries have in some instances been suspended or reduced, The over-all procurement rate, nevertheless, has increased sharply. Contracts were placed during the January-March quarter for nearly $1 billion in stockpile materials, against $430 million during all of the preceding 6 months. Expenditures for materials delivered during the January-March quarter were double those of the corresponding period last year.

POWER GENERATION CONTINUES TO EXPAND

The Defense Electric Power Administration estimates that within the next 3 years, electric power capacity needs to be increased by more than 30 percentby 22,000,000 kilowatts above the present 67,500,000 capacity. Major phases of the defense program, including atomic energy, aluminum, other light metals, steel and alloys, heavy chemicals, rubber, aviation gasoline, and munitions, all require increased power generation.

Expansion of power resources is under way, but the problem is magnified by the time required. From 2 to 3 years are required to construct a large power plant, and longer periods for major projects and hydroelectric developments. The projects which will be completed in 1951 and 1952, for instance, were begun in 1948 and 1949; those started now will not be in service before 1954.

OIL PRODUCTION NEEDS TO BE INCREASED

Estimates prepared by the Petroleum Administration for Defense indicate that the country's crude-oil refining capacity needs to be stepped up by 1 million barrels a day, bringing total capacity to 8 million barrels. This would mean expansion all along the line-in the rate of well drilling, in basic and specialized refining capacity, in transportation and distribution facilities.

Total demand for petroleum, including military requirements, now amounts to 7.7 million barrels a day-one-third more than the World War II peak and nearly two-thirds higher than at the time of Pearl Harbor. Refineries are running at close to effective capacity and nearly 1 million barrels a day of crude oil and petroleum products are being imported.

To bring oil to the surface requires large quantities of steel-in the form of drill pipe tubing and casing.

Steel is currently being allocated on the basis of an objective of 43,400 new domestic wells during 1951-the number estimated as needed to maintain oil and gas supplies at levels adequate for military and civilian demands. The distribution of oil-country tubular goods and other materials within the pe troleum and gas industries is being controlled.

In addition to an expansion of basic crude refining capacity, new catalytic cracking and reforming facilities are needed to manufacture high-octane gasoline. Additional plants are needed also to produce alkylate and other com ponents used wholly or primarily in aircraft fuels, and new facilities are re quired to produce chemicals such as benzene and toluene from petroleum. Substantially increased facilities for producing, transporting, and distributing gas would be needed to meet demands which by 1955 are expected to reach 8.1 trillion cubit feet annually, compared to 6.1 trillion in 1950.

Coal reserves are ample, and present productive capacity is adequate to meet foreseeable demands, providing adequate manpower, transportation, and operat ing materials and supplies are available. All available coking facilities, however, are being fully utilized and additional capacity will have to be installed to meet the increasing demand for coke.

During 1950, 72 million tons of coke were produced. During the year, slot-type ovens were placed in operation, but 571 went out of operation due to obsolescence, and the net gain in by-product coke capacity for the year was only

133,000 tons. The extent to which new capacity can be added is limited by the shortage of capacity for producing silica brick.

ELECTRONICS INDUSTRY HAS NOT FELT FULL IMPACT OF DEFENSE PROGRAM

The electronics industry is producing at near capacity levels although the heavy military demand for electronics equipment has scarcely yet been felt. The full impact will come when the heavy end products of war-tanks, planes, automatically controlled weapons-reach the mass-production stage.

The current near capacity production level of the industry is approximately $4.5 billion. To meet the new requirements, we hope to be able to expand capacity further this year.

To aid in the program an interagency Electronics Production Board for overall coordination of electronic production was established by DPA on March 21. The committee's objective is to make certain that no electronics bottleneck stymies any element of the defense effort. This requires attention to research and development, facilities expansion, production engineering, and standardization in order that the required equipment will be available when needed for incorporation into the manufacture of the combat weapons.

INCREASING RAIL FREIGHT CAPACITY IS THE MAJOR TRANSPORT PROBLEM

High production and activity are placing a strain on our transportation system. In an attempt to ease the strain on the rail system, we are now increasing freightcar production to 10,000 new cars a month. Particular attention is being given tank cars, which are in shortest supply. During January and February we produced only 6,000 cars but the rate will rise in coming months.

Some, but not enough, progress has been made in increasing the efficiency of freight cars now available. Toward this end the Defense Transport Administration has issued orders calling for penalty demurrage charges on cars held beyond a certain time, for improved handling of cars by rail lines, and for heavier loading by shippers of grain products. To assure rapid movement of military supplies the railroads have been requested to give priority to military traffic. The shortage in freight cars cannot be solved by construction of new cars alone more drastic measures to improve the use of existing cars is required.

The rising volume of highway traffic, both passenger and freight, means we must pay particular attention to the maintenance of the capacity of our highway system. Only scattered shortages affect the trucking industry.

A program for building additional ore cargo vessels for Great Lakes shiping is under way, and a bill was enacted on March 29 to permit Canadian vessels to carry iron ore between United States ports on the Great Lakes during the 1951 season.

A National Shipping Authority has been activated under the Secretary of Commerce to help in relieving the current shortage of shipping for the transportation of vital cargoes at reasonable rates. Should the need arise, authority exists for the requisitioning of ships and cargo space.

To maintain and expand the capacity of our civil aviation resources, priority assistance is planned for the production of 272 new transport aircraft.

CONSTRUCTION IS STILL AT RECORD HEIGHTS

A new winter record was established in the volume of new construction during the January-March quarter when a large-scale industrial plant expansion program was added to the continued boom in housing construction.

Total private investment in new construction amounted to almost $5 billions-about one-fourth more than during the first quarter of 1950. Industrial plants accounted for 9 percent of the total, compared with 5 percent a year ago. New plants to produce basic metals, chemicals, and textiles made up a considerable portion of the industrial expansion.

Shortages of practically all metallic building materials are causing some delays in construction. Delivery schedules were much longer than usual on structural steel, plumbing and heating supplies and equipment, wiring devices and supplies, and many other items made of steel or nonferrous metals. Distribution problems on gypsum products and millwork were still causing construction delays in some areas during the first quarter of 1951.

The home-building rate now appears to be easing off as a result of credit restrictions imposed in the summer and fall of 1950.

Construction of entertainment and recreational facilities costing over $5,000 without specific authorization by NPA has been prohibited, and on January 15 all commercial construction over $5,000 was made subject to NPA approval. Many less essential uses of metals in building materials have been prohibited or restricted by orders to conserve critical materials needed for defense. Efforts also are being made to promote the conservation of critical materials through substitution and changes in design.

If required materials were available, there are indications that more private building would be done in 1951 than in any previous year in our history.

THE RESOURCES OF SMALL BUSINESS MUST BE EFFICIENTLY USED

Over 90 percent of all American businesses are small. The success of our mobilization program requires efficient use of the facilities and resources of these businesses.

Small and medium-sized manufacturing firms tend to feel first the dislocations and displacements involved in the conversion of production from less essential civilian goods to military items. Their inventories, their financial resources. and their sources of supply are all less extensive than those of their larger competitors. At the present time they are caught between restrictions on materials and a low volume of subcontracting by the large companies.

To give specialized attention to the problems of small business and serve as its general advocate within the Government structure, an Office of Small Business has been established in the National Production Authority.

The Munitions Board and the Departments of the Army, Navy, and Air Force have also taken a number of steps designed to make it easier for all businessmen to find out what products are being bought, the locations of the offices that are buying them, and how to go about obtaining military contracts and subcontracts.

During the last half of 1950, over 21 percent of the dollar volume of all prime contracts awarded by the Department of Defense went to firms employing fewer than 500 persons.

Moreover, to meet the accelerated production schedules which have been and are being established, prime contractors are increasing sharply the extent of subcontracting. This development will be particularly marked in the aircraft industry.

A certain time lag between the award of a prime contract and the negotiations between the prime contractor and prospective subcontractors is inevitable. Detailed specifications must be prepared, multiple copies of blueprints must be run off, and invitations to bid prepared and disseminated to prospective subcontractors and suppliers. Before executing a subcontract, particularly for a key part or subassembly, a prudent prime contractor will wish to satisfy himself as to the subcontractor's equipment, facilities, inspection standards, and responsibility.

Information on procurement and subcontracting needs is being provided daily to businessmen through 6,000 outlets in the 48 States including chambers of commerce, banks, and other local organizations.

Orders restricting the use of materials have generally applied the same percentage reductions to all businesses, large and small, but in nearly all of these orders a basic exemption has been included for small quantities used by smaller manufacturers. In addition, the orders set forth a general policy that materials not required for the defense program be distributed through normal channels, which take account of the requirements of new and small businesses.

Given all the assistance that Government can provide, the role small business will play in the defense program will still necessarily require the same aggressive salesmanship that has been vital to their continued survival in competitive peacetime markets. They must themselves take the initiative in selling their products, not only to military contracting officers, but also to the military prime contractors who assemble finished products from subcontracted parts and components.

ALL-OUT PRODUCTION IS THE 1951 GOAL FOR AGRICULTURE

The basic contribution of the farmer to the defense program is adequate production. He must feed and clothe 150 million Americans, must produce materials for military supplies, and must furnish food to friendly nations standing beside us in the fight against Communist aggression. To help meet our economic needs, farmers must produce the quantities and kinds of products necessary to help stabilize prices and minimize the disruption to our civilian economy caused by the defense program.

To encourage more agricultural production, decisions were made after the Korean crisis to remove crop-allotment provisions from wheat and rice and to establish no allotments for corn and cotton.

These important moves preceded formulation of a comprehensive production guides program by the Department of Agriculture to assist farmers in planning all-out production in 1951. This program as it affected the major food, feed, and fiber crops was announced February 2, well in advance of planting time. The program calls for a total agricultural production larger than ever before3 percent higher than the previous record.

The production guides seek the highest level of production for those crops which will be needed most. The program calls for the highest practicable increases for corn and wheat, the major food and feed grains. About 60 percent more cotton is sought than was produced in 1950-16,000,000 bales-or about the same amount as the high output of 1949. An increase of 22 percent in production

of vegetable crops for canning and freezing is asked, along with greater output of seeds for hay and forage crops essential to greater livestock production and for conservation of soil resources for insuring adequate production in the future. Large production of livestock, dairy, and poultry products is also needed. The current trend of farmers to produce more meat should be continued to the extent that feed supplies are available. Through all its available facilities, the Department is shaping plans to assist farmers in increasing livestock production.