AGRICULTURAL ADJUSTMENT ACT AMENDMENTS

MAY 15, 1935.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. JONES, from the Committee on Agriculture, submitted the following

REPORT

[To accompany H. R. 8052]

The Committee on Agriculture, to whom was referred the bill (H. R. 8052) to amend the Agricultural Adjustment Act, and for other purposes, having had the same under consideration, report it back to the House without amendment and recommend that the bill do pass.

GENERAL STATEMENT

The proposed amendments to the Agricultural Adjustment Act are needed primarily in order to supplement the present act in such a way as to permit the Agricultural Adjustment program to be made more effective. The primary objective set forth in the declaration of policy in the Agricultural Adjustment Act is to secure parity prices for farm products through balancing production with consumption. This goal is obviously of vital importance in the recovery program. The restoration of farm-buying power to its pre-war level will substantially assist in bringing about general improvement in business conditions. These amendments will permit a more flexible program by permitting the use of different plans with reference to different commodities and thus enabling the plan to be fitted to the particular commodity. The word "adjustment" has been substituted for the word "reduction" so that the production of a crop hereafter may be adjusted to our domestic and foreign market demand rather than being based on the question of reduction alone. It may mean a decrease or an increase, or neither, depending upon the supply necessary to fit the general market demand. Further desirable flexibility in the agricultural program is furnished in those provisions of the present bill which propose to add to the powers of the Secretary of Agriculture to make rental or benefit payments in connection with production or acreage adjustment the power to provide for payments

for expansion of markets, removal of surpluses, and payments on the domestically consumed part of production. Any one or more of these plans may be carried out independently or in combination with acreage or production adjustment.

Of real importance in the agricultural program which the proposed amendmen ́s are intended to make possible are those which will enable the Secretary of Agriculture to put into operation the plan which has been described and is generally known as the "ever normal granary." The Government is authorized to acquire basic agricultural commodities which have been pledged as security for Government loans, and with them to make payments "in kind" to producers who cooperate in the adjustment programs. Adequate reserves of food and fiber can in this manner be maintained, and fluctuations in price can be smoothed out.

Of importance to 2,000,000 or more farmers are the sections of the bill which relate to marketing agreements and licenses. The producers of fruits and vegetables and other commodities which have not been named in the act as "basic" commodities are forced to rely for the most part upon marketing agreements and licenses in order to achieve the goal set forth in the declaration of policy. The operations of cooperative marketing associations will be reenforced by these sections, which will assure the cooperation of processors and distributors in programs intended to raise farm prices. The marketing agreements and licenses which have been issued and entered into pursuant to the Agricultural Adjustment Act have contained a great variety of provisions in order to adapt each particular program to the peculiar problems and circumstances presented in a given area by a particular commodity. The essential purpose of these agreements and licenses has, however, always been to raise producer prices.

The proposed amendments, insofar as they relate to marketing agreements and licenses, are primarily intended to implement and spell out in more detail and with greater freedom from ambiguity the powers which were intended to be conferred in the original act. The present language of the statute is unfortunately subject to rious misconstruction. This has given rise to obstacles in connection with the enforcement of marketing agreements and licenses which have seriously endangered their successful operation. Furthermore, the amendments contain provisions intended to safeguard the exercise of and prevent abuses in the application of the licensing power conferred upon the Secretary. Specific exemption of producers from the licensing power has been provided for, and the imposition of licenses in order to enforce a marketing agreement to which the asset of 50 percent by volume of the processors and handlers cannot be obtained has been limited to those cases in which the Secretary can find that two-thirds of the producers of the commodity specified in the license favor its imposition. A congressional policy that licenses shall be limited in their application to the smallest practicable region, and that they shall contain different terms applicable to different areas, has been carefully spelled out. These and other restrictive provisions are, in the opinion of the committee, adequately drawn to guard against any fear that the licensing powers are so broad as to subject their exercise to the risk of abuse.

The bill gives recognition to the necessity of insuring that, so far as possible, adjustment of production and consequent price increases

within the United States shall not operate to deprive American farmers of their share of foreign trade in agricultural commodities. Authorization is given for the appropriation of 30 percent of the annual receipts from customs duties to be available, among other purposes, to encourage exportation of basic commodities by paying benefits or indemnifying losses in connection with such exportation and by payments in connection with the part of production for domestic consumption. Since the farm population of the United States is roughly 30 percent of the total population, this provision will make available for the benefit of the farmer a sum equivalent to his fair share of the tariff receipts. Upon the basis of the total customs receipts during the past 3 years, it is anticipated that in the neighborhood of $100,000,000 can annually be made available for the purposes described in the bill. These purposes include, in addition to the encouragement of exportation, the retirement of submarginal agricultural and grazing lands by purchasing or leasing them on behalf of the United States, and the making of payments to farmers in connection with the acreage or production adjustment of basic agricultural commodities.

Further recognition of the desirability of stimulating the export trade in agricultural commodities is afforded by the provision authorizing the imposition of a processing tax not only in order to finance the making of rental and benefit payments to producers for engaging in adjustment programs but also for financing payments for the expansion of domestic and foreign markets. Expansion of domestic markets is in the interest of a fuller utilization of our agricultural resources. The current depression has revealed more than ever the existence of areas of substandard consumption of farm products in this country. Even in normal times, the low-income groups could consume more of farm products than has been the case in the past. An expansion of the domestic markets will serve to build up the lowconsuming areas within our own population to a level adequate for the maintenance of health, and to bring about a permanently larger volume of consumption so as to require a minimum of restriction of our agricultural resources.

ANALYSIS OF THE BILL

Section 1 (a) amends the declaration of policy in the Agricultural Adjustment Act, which has as its objective the reestablishment of prices paid to farmers at a level that will give agricultural commodities a current purchasing power equivalent to that of the base period. The amendment proposes that, in the case of all commodities for which the base period is the pre-war period (August 1909 to July 1914), such prices will also reflect current interest payments per acre on farm indebtedness secured by real estate and tax payments per acre on farm real estate as contrasted with such payments during the base period. This section is intended to give the Agricultural Adjustment Administration a somewhat more adequate standard for determining parity prices. The present method of calculation is composed of an index of prices of goods which farmers buy in relation to the pre-war level, and does not cover expenditures for taxes and for debt service. At the present time, taxes per acre and mortgage interest per acre are probably about 160 to 170 percent of the pre-war level. The

combination of these two items together with the index of prices paid by farmers may be expected to give parity standards approximately 5 percent higher than at present.

Subsection (b) of section 1 makes the base period in the case of wool and mohair the post-war period (August 1919 to July 1929) instead of the pre-war period (August 1909 to July 1914).

Section 2 amends subsection (1) of section 8.

Subsection (a) inserts a paragraph letter made necessary by the addition of the new paragraph proposed in subsection (d) of this section.

Subsection (b) of section 2 substitutes for the existing general power of the Secretary to provide for reduction in the acreage or production for market, or both, of any basic agricultural commodity the power to provide for adjustment in acreage or production, or both.

Subsection (c) of section 2 authorizes the Secretary to make rental or benefit payments in quantities of one or more agricultural commodities acquired by him under the Agricultural Adjustment Act. This provision authorizes payments in kind, either in whole or in part, in lieu of payments in cash which are required under the present law. The amendment made by this subsection, together with the corresponding provision found in subsection (d) authorizing payments in kind in the case of payments authorized by that subsection, and the provisions of section 3 permitting the acquisition of commodities pledged with the Federal Government, are designed to carry out the "ever normal granary" plan outlined in the previous portions of this report.

Subsection (d) inserts a new provision which specifically gives the Secretary the power, in carrying out the declared policy of the Agricultural Adjustment Act, to make payments for the expansion of domestic or foreign markets of a basic agricultural commodity, payments for the removal of surpluses of or surplus products of a basic agricultural commodity, or payments in connection with the production of that part of a basic agricultural commodity required for domestic consumption. Such payments may be made with respect to a commodity whether or not an adjustment program is in effect on that commodity but the payments may be made in combination with rental or benefit payments. Any one or more of such payments may be made and the payments may be made in kind. This paragraph also contains a provision which applies generally throughout the Agricultural Adjustment Act to payments in kind the effect of which is to prohibit the payment for the program on one commodity from being made in another commodity. Thus, wheat may not be used to make rental or benefit payments or payments for expansion of markets, removal of surpluses, or domestic production payments in carrying out the cotton or tobacco program but may be used in connection with the wheat program.

Section 3 makes important changes in section 12 (b) of the Agricultural Adjustment Act which sets forth the purposes for which the proceeds of processing taxes may be used. First, a technical amendment is made to make certain that the payments made under such section 12 (b) are for the purpose of effectuating the policy of the Agricultural Adjustment Act. Second, the funds available under section 12 (b) may be used for the acquisition of any agricultural commodity pledged as security for a loan made by any Federal

agency, which loan was conditioned upon the borrower agreeing to cooperate with a program of production or marketing adjustment adopted under the act. (See also sec. 2 (b).) Third, the provisions of the present law authorizing the use of processing tax proceeds for expansion of markets and removal of surpluses have been grouped together with the other purposes relating to basic commodities for which processing tax proceeds may be used, namely, rental and benefit payments, expansion of domestic and foreign markets, removal of surpluses, and payments on production of that part required for domestic consumption. All these purposes have been treated generally as payments authorized under section 8 (e). In the case of the expansion of markets and removal of surpluses, it is incidentally made clear that payments may be made for expansion of both domestic and foreign markets and that surplus removal includes removal of a surplus product of a basic commodity even if there is no surplus of the commodity itself. The authority to use tax proceeds for administrative expenses and refunds of taxes is not disturbed.

Section 4 of the bill strikes out the provision of the Agricultural Adjustment Act which authorizes the Secretary to license processors, associations of producers, and others handling agricultural commodities and products thereof, and substitutes therefor a new subsection dealing with licensing.

The proposed provisions differ from the present law in several respects and add several new powers and limitations. A comparison of the proposed provisions and the present law and a detailed discussion of the proposed provisions are set forth in the numbered paragraphs below:

First. Specific provision is made that there must be due notice and opportunity for hearing prior to the issuance of a license. No such requirement is stated in the present law.

Second. The definition of those whose dealings may be licensed because such dealings relate to interstate or foreign commerce has been broadened to include not only those engaged in handling agricultural commodities and products thereof in the current of interstate or foreign commerce but also those whose dealings are in competition with or burden, obstruct, or in any way affect such commerce. It is, of course, not intended to authorize the licensing of persons handling goods only in intrastate commerce except where such handling burdens, obstructs, or affects interstate commerce. The language contained in the amendments will, however, make it clear that the full extent of the Federal power over interstate commerce is intended to be vested in the Secretary in connection with the issuance of licenses to processors, associations of producers, and handlers.

Third. The provision of the present law authorizing licenses to eliminate unfair practices and charges is retained, subject to the provisions applicable to all licenses set forth hereinafter. These licenses are called "clause (1) licenses" herein. These licenses may be issued without regard to the provisions which are applicable solely to other licenses, such as the provision requiring a signed marketing agreement in the case of clause (2) licenses and the provision requiring farmer approval in the case of clause (3) licenses.

Fourth. The new provision adds to the present law a new class of licenses, herein called "clause (2) licenses." These licenses are to be issued to make effective a marketing plan set forth in a marketing

H. Repts., 74-1, vol. 2-57