Mr. ADKINS. Talking about supply and demand.

Mr. OLSEN. I know it is a case of supply and demand, but, in case of future and cash wheat prices you have world influences determining what the price is going to be; that is, account is taken of what is going on in Argentina, Australia, and other countries to a large

extent.

Now, with regard to the protein proposition, these high protein wheats are consumed right here in the United States and it is largely local forces here that determine what premiums are going to be paid. So the protein premiuns do not vary directly with cash prices. Mr. ADKINS. The value depends on the supply?

Mr. OLSEN. Exactly, and also with the demand.

Mr. ADKINS. If it is a high protein year, the protein premium is not so high?

CARLOT SALES OF HARD SPRING WHEAT BY MONTHS. 1924 TO 1927
(About 90 farmers' elevators in Minn.. N.Dak, S. Dak. and Mont.)

PER CENT OF

SEASON

JULY SEPT NOV JAN MAR MAY JULY SEPT NOV JAN. MAR MAY JULY SEPT.
AUG OCT DEC FEB APR. JUNE AUG OCT DEC. FEB. APR JUNE AUG. OCT.
1924-25

US DEPARTMENT OF AGRICULTURE

1925-26

NOV. JAN, MAR. MAY
DEC. FEB. APR. JUNE
1926-27

BUREAU OF AGRICULTURAL ECONOMICS

Mr. OLSEN. Quite right. But it is largely a supply and demand situation in the United States which governs protein premiums.

Now, if adequate information were available at harvest time buyers and sellers would arrive at pretty near the right premiums at the outset of the season. We do not have to have this sort of thing happening; these wide fluctuations would not occur if the facts are brought out in the open early in the season.

Mr. HOPE. It depends very largely on what the trade thinks the supply is rather than what the supply really is?

Mr. OLSEN. Exactly, and the trade does not always know what the supply is since they do not have adequate information regarding it. Mr. KETCHAM. Taking that chart as an illustration and for the period of time it covers, is it your conclusion that there was a great loss to the producer?

Mr. OLSEN. Absolutely. In some years there was an enormous loss to the producer simply from the fact that the premiums were not properly established at the outset of the season.

Mr. ADKINS. These premiums are usually discovered after the goods get into the hands of the speculators in cash grain?

Mr. OLSEN. It often happens.

Mr. ANDRESEN. The low price seems to be in November, 1924, and the peak in April, 1925?

Mr. OLSEN. Yes.

Mr. ANDRESEN. Of course, most of the crop was out of the grower's hands at that time.

Mr. OLSEN. Yes.. As I stated a moment ago.

Mr. ANDRESEN. But there was also a relative difference in the future price in April, 1925, as it was in the protein premium,, was

there not?

Mr. OLSEN. I do not remember for that given year. I think we have charted premiums and future prices, and we did not find that premiums follow future prices closely. They will vary. Premiums reflect forces in this country whereas futures reflect both domestic and world forces.

Mr. ANDRESEN. The charts you have here deal solely with the protein and the price paid over the prevailing future.

Mr. OLSEN. Quite right.

Mr. FULMER. The prices you have there fluctuate up and down. How does that compare with the prices on wheat, as a whole?

Mr. OLSEN. They would not correspond. I am sorry we did not superimpose the futures price upon this chart. We could have done that very nicely. But premiums do not generally follow future prices. Premiums for protein will deviate very widely from the cash price or future price. That is the point I am making. Premiums are determined pretty much by domestic competitive forces, whereas futures and cash prices may be determined and are influenced to a very great degree by outside forces.

Mr. FULMER. After this wheat passes out of the hands of the producer, does the party higher up get the advantage of the value of the protein?

Mr. OLSEN. I did not understand that.

Mr. FULMER. After the wheat passes out of the hands of the producer into the hands of the elevator man or the man higher up, does he get the advantage of the higher protein value?

Mr. OLSEN. Certainly; the producer does not get it after it has passed out of his hands, and furthermore I know that millers complain very bitterly that oftentimes when the premiums for protein start out too high, and if they put in their stock at those levels, they stand to take very heavy losses on the business. They are just as anxious as anybody else to get the premiums properly established.

Mr. MENGES. Doctor, is there ever an over supply of this highprotein wheat?

Mr. OLSEN. Well, oversupply is a relative thing; sometimes when there is a large supply, premiums will be relatively low.

Mr. HOPE. There is never more of it than we consume in this country?

Mr. OLSEN. No; we consume practically all of the high-protein wheat grown here and import some from Canada, even.

Mr. MENGES. But there is not an oversupply?

Mr. OLSEN. On chart 6, as shown for 1926 and 1927, the supply of high-protein wheat was probably at its maximum, and yet we have

premiums of 4 to 6 cents over the prevailing future. There are times when perhaps high-protein wheat might sell at a discount. There have been a few periods of that kind, when test weight or some other quality factor in the wheat is of more importance than protein content. Mr. MENGES. That is very occasionally?

Mr. OLSEN. Yes, you are quite right.

Mr. MENGES. I understood you to say that the domestic supply and demand determines the price?

Mr. OLSEN. As far as protein premiums go, the domestic supply and demand are the significant factors.

Mr. MENGES. What about imports of the commodity?

Mr. OLSEN. I suppose you would have to recognize the influence of the tariff and, as a matter of fact, such charts as we have prepared upon the influence of the tariff upon wheat prices would indicate that wheat that contains high protein is apt to be benefited by the tariff much more than other classes of wheat.

Mr. ANDRESEN. To what extent is protein taken into account by the Canadians?

Mr. BESLEY. Protein testing has been the subject of a lot of discussion in Canada in the last two or three years.

Mr. ANDRESEN. I mean as to the protein content. Do they pay so much premium for the protein up there over and above the futures? Mr. BESLEY. They do not, for the very good reason that the great bulk of the Canadian wheat is exported and a very small portion of it is required to meet the limited domestic demand.

Mr. ANDRESEN. Then our tariff is effective as to the wheat sold up there where no premium is paid for the protein content.

Mr. CLARKE. How much wheat did we import from Canada last year?

Mr. BOOTH. We had occasion to look up the figures yesterday, and I believe it was about 13,000,000 bushels for 1926 and 15,000,000 the year before. But there was some discussion about what is meant by "import." I am not certain what definition could be placed upon "import," but I feel certain that only a small part of the 15,000,000 bushels was actually consumed in the United States.

Mr. CLARKE. What was the ostensible reason for importing that wheat?

Mr. BоOтн. That depends upon the definition placed upon the word "import." There is some question as to whether "imports include wheat milled in bond and wheat milled in the country but later exported under the drawback privilege of the tariff act.

Mr. CLARKE. I refer to the wheat brought in here to blend with our own wheat for the production of a particular brand of flour. Mr. BOOTH. I believe that the tariff provides for that, does it not? The CHAIRMAN. They import the high protein wheat, and export an equal amount of other domestic wheat. The identical wheat is not exported or the flour from the identical wheat is not exported.

Mr. BOOTH. It is my understanding of the tariff provisions that if the wheat is retained in this country the drawback is not paid on it. That, however, is a tariff matter and I do not profess to be an expert on that.

The CHAIRMAN. But in case a thousand bushels of high protein wheat is imported and sold here, and a thousand bushels of domestic wheat ground into flour in place of the imported high protein wheat?

Mr. BOOTH. It is my understanding they would have, in that case, to pay duty on the Canadian wheat imported. If the Canadian wheat came into this country and American wheat replaced it, the duty on the Canadian wheat would not be refunded, if I understand the rules of the tariff.

Mr. HOPE. It would have to be the identical wheat that goes out, would it not?

Mr. OLSEN. Under the tariff I think it would.

The CHAIRMAN. Flour from that particular wheat

Mr. ANDRESEN. I might say that that is a law providing that when they ship wheat in here from Canada for milling in bond they are supposed to ship the identical flour out as export. They can keep the by-products, but they have to pay duty on by-products sold in this country. But where they have the drawback provision, then the duty is paid upon the wheat when it comes into this country, and they have the right to mix 30 per cent of domestic wheat with that Canadian wheat, and then supply the drawback and get a refund of a certain percentage of the tariff paid upon that wheat coming in. The CHAIRMAN. Can those regulations be had conveniently? Mr. ANDRESEN. I think I can.

The CHAIRMAN. There has been a good deal of discussion about it. Let us have the act.

Mr. CLARKE. There certainly has.

The CHAIRMAN. And let that portion of the act be incorporated, and also regulations or rulings also be incorporated.

Mr. ANDRESEN. I can get that from the Department of Commerce. The CHAIRMAN. Very well, if it can be obtained, we will have it inserted in the record so there will be no further dispute about it.

(The act referred to and regulations or rulings are as follows:)

The section of the tariff act of 1922, H. R. 7456, under which wheat may be imported in bond for milling purposes, is as follows:

"SEC. 311. That all articles manufactured in whole or in part of imported materials, or of materials subject to internal-revenue tax, and intended for exportation without being charged with duty, and without having an internalrevenue stamp affixed thereto, shall, under such regulations as the Secretary of the Treasury may prescribe, in order to be so manufactured and exported, be made and manufactured in bonded warehouses similar to those known and designated in Treasury Regulations as bonded warehouses, class 6: Provided, That the manufacturer of such articles shall first give satisfactory bonds for the faithful observance of all the provisions of law and of such regulations as shall be prescribed by the Secretary of the Treasury: Provided further, That the manufacture of distilled spirits from grain, starch, molasses, or sugar, including all dilutions or mixtures of them or either of them, shall not be permitted in such manufacturing warehouses.

"Whenever goods manufactured in any bonded warehouse established under the provisions of the preceding paragraph shall be exported directly therefrom or shall be duly laden for transportation and immediate exportation under the supervision of the proper officer who shall be duly designated for that purpose, such goods shall be exempt from duty and from the requirements relating to revenue stamps.

"Any materials used in the manufacture of such goods, and any packages, coverings, vessels, brands, and labels used in putting up the same may, under the regulations of the Secretary of the Treasury, be conveyed without the payment of revenue tax or duty into any bonded manufacturing warehouse, and imported goods may, under the aforesaid regulations, be transferred without the exaction of duty from any bonded warehouse into any bonded manufacturing warehouse; but this privilege shall not be held to apply to implements, machinery, or apparatus to be used in the construction or repair of any bonded manufacturing warehouse or for the prosecution of the business carried on therein.

"Articles or materials received into such bonded manufacturing warehouse or articles manufactured therefrom may be withdrawn or removed therefrom for direct shipment and exportation or for transportation and immediate exportation in bond to foreign countries or to the Philippine Islands under the supervision of the officer duly designated therefor by the collector of the port, who shall certify to such shipment and exportation, or ladening for transportation, as the case may be, describing the articles by their mark or otherwise, the quantity, the date of exportation, and the name of the vessel: Provided, That the by-products incident to the processes of manufacture, including waste derived from cleaning rice in bonded warehouses under the act of March 24, 1874, in said bonded warehouses may be withdrawn for domestic consumption on the payment of duty equal to the duty which would be assessed and collected by law if such waste or byproducts were imported from a foreign country: Provided, That all waste material may be destroyed under Government supervision. All labor performed and services rendered under these provisions shall be under the supervision of a duly designated officer of the customs and at the expense of the manufacturer.

"A careful account shall be kept by the collector of all merchandise delivered by him to any bonded manufacturing warehouse, and a sworn monthly return verified by the customs officers in charge, shall be made by the manufacturers containing a detailed statement of all imported merchandise used by him in the manufacture of exported articles.

"Before commencing business the proprietor of any manufacturing warehouse shall file with the Secretary of the Treasury a list of all the articles intended to be manufactured in such warehouse, and state the formula of manufacture and the names and quantities of the ingredients to be used therein.

"Articles manufactured under these provisions may be withdrawn under such regulations as the Secretary of the Treasury may prescribe for transportation and delivery into any bonded warehouse at an exterior port for the sole purpose of immediate export therefrom: Provided, That cigars manufactured in whole of tobacco imported from any one country, made and manufactured in such bonded manufacturing warehouses, may be withdrawn for home consumption upon the payment of the duties on such tobacco in its condition as imported under such regulations as the Secretary of the Treasury may prescribe; and the payment of the internal-revenue tax accruing on such cigars in their condition as withdrawn, and the boxes or packages containing such cigars shall be stamped to indicate their character, origin of tobacco from which made, and place of manufacture.

"The provisions of section 3433 of the Revised Statutes shall, so far as may be practicable, apply to any bonded manufacturing warehouse established under this act and to the merchandise conveyed therein."

That portion of section 313 of the tariff act of 1922, H. R. 7456, that deals specifically with the refunding of duty on imported wheat milled in the United States and later exported is as follows:

"SEC. 313. That upon the exportation of articles manufactured or produced in the United States with the use of imported merchandise, the full amount of the duties paid upon the merchandise so used shall be refunded as drawback, less 1 per cent of such duties, except that such duties shall not be so refunded upon the exportation of flour or by-products produced from imported wheat unless an amount of wheat grown in the United States equal to not less than 30 per cent of the amount of such imported wheat has been mixed with such imported wheat. Where two or more products result from the manipulation of imported merchandise, the drawback shall be distributed to the several products in accordance with their relative values at the time of separation. When the articles exported are manufactured or produced in part from domestic materials, the imported merchandise shall so appear in the completed articles that the quantity or measure thereof may be ascertained. The drawback on any article allowed under existing law shall be continued at the rate herein provided. The imported merchandise used in the manufacture or production of articles entitled to drawback of customs duties when exported shall, in all cases where drawback of duties paid on such merchandise is claimed, be identified, the quantity of such merchandise used and the amount of duties paid thereon shall be ascertained, the facts of the manufacture or production of such articles in the United States and their exportation therefrom shall be determined, and the drawback due thereon shall be paid to the manufacturer, producer, or exporter, the agent of either, or to the person to whom such manufacturer, producer, exporter, or agent shall in writing order such drawback paid, under such regulations as the Secretary of the Treasury shall prescribe."