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PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

GOVERNMENT

Storage

HEARING

BEFORE THE

SUBCOMMITTEE ON LIVESTOCK AND GRAINS

OF THE

COMMITTEE ON AGRICULTURE

HOUSE OF REPRESENTATIVES

NINETIETH CONGRESS

FIRST SESSION

ON

H.R. 6437, H.R. 6438, H.R. 6439,

H.R. 6440, and H.R. 7574

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JULY 11, 1967

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11111VERSITI 03111*P:15

Printed for thtjeaaeUdfifthittee on Agriculture

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U.S. GOVERNMENT PRINTING OFFICE

II WASHINGTON : 1907
COMMITTEE ON AGRICULTURE

W. R. POAGE, Texas, Chairman

E. C. GATHINGS, Arkansas,

Vice Chairman

JOHN L. McMILLAN, South Carolina

THOMAS G. ABERNETHY, Mississippi

WATKINS M. ABBITT, Virginia

PAUL C. JONES, Missouri

FRANK A. STUBBLEFIELD, Kentucky

GRAHAM PURCELL, Texas

MASTON O'NEAL, Georgia

THOMAS S. FOLEY, Washington

JOSEPH Y. RESNICK, New York

ELIGIO DE LA GARZA, Texas

JOSEPH P. VIGORITO, Pennsylvania

WALTER B. JONES, North Carolina

JOHN G. DOW, New York

BILL NICHOLS, Alabama

G. V. MONTGOMERY, Mississippi

FRANK J. BRASCO, New York

JOHN R. RARICK, Louisiana

PAGE BELCHER, Oklahoma,

Ranking Minority Member

CHARLES M. TEAGUE, California

CATHERINE MAY, Washington

ROBERT DOLE, Kansas

GEORGE V. HANSEN, Idaho

WILLIAM C. WAMPLER, Virginia

GEORGE A. GOODLING,. Pennsylvania

CLARENCE E. MILLER, Ohio

J. HERBERT BURKE, Florida

ROBERT B. MATHIAS, California

WILEY MAYNE, Iowa

JOHN M. ZWACH, Minnesota

THOMAS S. KLEPPE, North Dakota

ROBERT PRICE, Texas

JOHN T. MYERS, Indiana

RESIDENT COMMISSIONER

SANTIAGO POLANCO-ABREU, Puerto Rico

CHRISTINE S. GALLAGHER, Clerk

HYDE H. MURRAY, A.83i8taRt Counsel

L. T. EASLEY, Jr., Staff Consultant

SUBCOMMITTEE ON LIVESTOCK AND GRAINS

GRAHAM PURCELL, Texas, 'Chairman

PAUL C. JONES, Missouri

FRANK A. STUBBLEFIELD, Kentucky

THOMAS S. FOLEY, Washington

BILL NICHOLS, Alabama

G. V. MONTGOMERY. Mississippi

JOHN R. RARICK, Louisiana

MRS. CATHERINE MAY, Washington

ROBERT DOLE, Kansas

WILEY MAYNE, Iowa

JOHN M. ZWACH, Minnesota

THOMAS S. KLEPPE, North Dakota

ROBERT PRICE, Texas
CONTENTS

Page

H.R. 6437, a bill to amend the Agricultural Adjustment Act of 1938, as

amended, to permit advance payments to wheat producers 1

H.R. 7574, a bill to amend the Agricultural Act of 1949, as amended, to

authorize the Secretary of Agriculture to make payments in advance

of determination of performance to producers participating in the

wheat program 2

Statement of:

Battin Hon. James F., a Representative in Congress from the State

of Montana 8

Brotzman, Hon. Donald G., a Representative in Congress from the

State of Colorado 12

Dole, Hon. Robert, a Representative in Congress from the State of

Kansas 6

Evans, Hon. Frank E., a Representative in Congress from the State

of Colorado 13

Fitzgerald, Ray, Deputy Administrator, State and County Operations, Agricultural Stabilization and Conservation Service, U.S.

Department of Agriculture 2

Graham, Harry L. legislative representative, the National Grange_ 17

Hofer, Glen, executive vice president, National Association of Wheat

Growers 14

Johnson, Reuben, director of legislation, National Farmers Union_ 20

Kleppe, Hon. Thomas S., a Representative in Congress from the State

of North Dakota 14

Sickels, Harvey N., secretary and legislative representative, National

Farmers Organization 16

Correspondence submitted to the subcommittee:

Obrecht, Ray, master, Colorado State Grange, letter 13

Schnittker, John A. Acting Secretary of Agriculture, letter of June 28,

1967, report on H.R. 6437 1

PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

TUESDAY, JULY 11, 1967

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON LIVESTOCK AND GRAINS,

OF THE COMMITTEE ON AGRICULTURE,

Washington, D.C.

The subcommittee met pursuant to notice, at 10:10 a.m., in room

1301, Longworth House office Building, Hon. Paul C. Jones, of Missouri, presiding.

Present: Representatives Jones of Missouri, Stubblefield, Nichols,

Mrs. May, Kleppe, Zwach, and Price.

Also present: Martha Hannah, subcommittee clerk; and Hyde

H. Murray, assistant counsel.

Mr. JONES of Missouri. The subcommittee will come to order.

This is a meeting of the Livestock and Grains Subcommittee of the

House Committee on Agriculture to consider a bill that has been

introduced by Mr. Dole, of 

Kansas, 

H.R. 6437; one by Mr. Brotzman,

H.R. 6438; one by Mr. Kleppe, H.R. 6439; one by Mr. Battin, H.R.

6440; and one by Mr. Evans of Colorado, H.R. 6574.

At this point, H.R. 6437, together with the report from the Department dated June 28, 1967, and H.R. 7574 will be made a part of the

record.

(H.R. 6437, the report from the Department of Agriculture, and

H.R. 7574 follow)

[H.R. 8437, 90th Cong. 1st Sess.]

A BILL To amend the Agricultural Adjustment Act 011938, as amended, to permit advance payments

to wheat producers

Be it enacted by the Senate and House of Representatives of the United States of

America in Congress assembled, That section 379(a) of the Agricultural Adjustment Act of 1938, as amended, is amended by adding at the end thereof the

following new sentence:

"The Secretary shall make not to exceed 50 per centum of the payments represented by domestic marketing certificates issued pursuant to this Act to producers

in advance of determination of performance and the balance of such payments

shall be made at such times as the Secretary may prescribe."

DEPARTMENT OF AGRICULTURE,

Washington, D.C., June 28, 1967.

Hon. W. R. POAGE,

Chairman, Committee on Agriculture,

House of Representatives.

DEAR MR. CHAIRMAN: This is in reply to your request of March 4, 1967, for a

report on H.R. 6437, a bill "To amend the Agricultural Adjustment Act of 1938,

as amended, to permit advance payments to wheat producers."

This bill proposes to add a new sentence at the end of section 379(a) of the

Agricultural Adjustment Act of 1938, as amended, and will require beginning with

the 1967 crop of wheat, for making payments not to exceed 50 percent of the

estimated value of domestic certificates earned by wheat program cooperators,

in advance of the determination of performance.

1
2 PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

The Department recommends against enactment of this bill.

The period for enrollment in the wheat program is generally conducted during

February and March of the year, well after winter wheat has been planted.

Wheat certificates are issued immediately after July 1, at the beginning of the

marketing year. The time period between signup and final payment is relatively

short and, consequently, there appears to be no need for making advance payment.

' Doinestic wheat certificates are Considered an integral part of the support price

for the portion of a cooperator's wheat production which represents his proportionate share of the estimated quantity of wheat which will be utilized for domestic

food during the marketing year.

It would appear to be in keeping with the intent of current legislation for wheat

farmers to receive payment for wheat certificates after the current wheat crop

has been harvested and is available for market.

The Bureau of the Budget advises that there is no objection to the presentation of this report from the standpoint of the Administration's program.

Sincerely yours,

[H.R. 7574, 90th Cong., first seas.]

A BILL To amend the Agricultural Act of 1949, as amended, to authorize the Secretary of Agriculture to

make payments in advance of determination of performance to producers participating in the wheat

program

' Be it enacted by the Senate and House of Representatives of the United States of

America in Congress assembled, That paragraph (2) of section 107 of the Agricultural Act of 1949, as amended, is amended by adding at the end thereof a new

sentence as follows: "The Secretary may make not to exceed 50 per centum of

the value of any marketing certificates and other 'payments hereunder to producers in advance of determination of performance. 

Mr. JONES of Missouri. We have with us this morning representatives from the Department of Agriculture

'

Ray Fitzgerald, the Deputy

Administrator for State and County Operations, ASCS; who is

accompanied by Claude Coffman, Office of the General Counsel; and

Everett Felber, Director of Farmer Program Division, ASCS, U.S.

Department of Agriculture.

I presume you will speak for the Department?

Mr. FITZGERALD. Yes, Mr. Chairman.

Mr. JONES of Missouri. I see you have a prepared statement. We

will be glad to have you either read it or give us the gist of it.

STATEMENT OF RAY FITZGERALD, DEPUTY ADMINISTRATOR,

STATE AND COUNTY OPERATIONS, ASCS; ACCOMPANIED BY

EVERETT FELBER, DIRECTOR, FARMER PROGRAM DIVISION,

ASCS; AND CLAUDE COFFMAN, OFFICE OF THE GENERAL

COUNSEL, U.S. DEPARTMENT OF AGRICULTURE

Mr. FITZGERALD. Mr. Chairman and members of the subcommittee,

it is a pleasure to again appear before this subcommittee that has been

SO concerned and done so much for the farmers. I understand we are

here today to consider H.R. 6437 which provides that the Secretary

shall make advance payments of not, to exceed 50 percent of the

payments represented by domestic marketing certificates for wheat.

The primary reason we are not in favor of this proposed legislation

is the matter of timing. The period for enrollment in the wheat program

is generally during February and March. The issuance of wheat certificate payments start immediately after July 1, a the same year.

Therefore, about 3 months elapse between the signup period and the

issuance' of the certificates. Since advance payments would require

some processing time after the signup, perhaps the only time gained by

JOHN A. ScHNITTKER,

Acting Secretary.
PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS 3

advance payment would be 1% to 2 months at best. We have not

considered this short period of time important enought to varrant the

additional time and effort on the part of the producer to apply for art

advance. In addition, an early payment provision would result in some

slight additional expense and program complexity.

We do make advance payments in both the cotton and feed ()rain

programs. For feed grains, the advance payments Nv ere about $300

million in the 1966 program and are estimated to be about $356 inillion

for the 1967 program. For cotton, the advance payments in the 196G

program were about $116 million and are estimated to amount to

about $135 million in the 1967 program.

With the exception of the 1967 feed grain program the advance

payment has not been from the producers price-support payment.

Generally the advance has been limited to not more than 50 percent

of the land diversion payment. In the 1967 feed grain program, with

land diversion payments limited to small farms, we did provide for

an advance payment from the producer's price-support payment.

Our reason was to provide producers with funds at the earliest

feasible date—in the feed grain program the time between program

enrollment and final payment is several months longer than in the

case of the wheat program.

We must also recognize that wheat marketing certificates are of a

somewhat different nature than the price-support payments under

the feed grain program. In the case of wheat certificates part of the

value is recouped through the sale of wheat processing certificates

for wheat used for domestic food purposes. Furthermore, part Of the

confusion referred to earlier would result from the fact that the value

of the wheat certificate cannot be determined until July 1—as you

know the certificate value is the difference between the national

average loan level and the July 1 wheat parity price.

In summary while we agree wholeheartedly with the need to make

funds available to farmers as early as practicable, we do not feel that

the time gained through the provisions of this bill would be of significant advantage.

Mr. JONES of Missouri. Thank you, Mr. Fitzgerald.

I think Mr. Kleppe has some questions.

Mr. KLEPPE. Mr. Chairman and Mr. Fitzgerald. Actually, the

diversion payment, is it not, and is it not true that for all intents and

purposes, it could be considered as a payment, an advance payment

for the wheat certificates? After all, it is Money to the farmer.

Mr. FITZGERALD. Yes. In both terms, it could be considered the

same. The fact, however, is that we have not considered the certificate

payments the same as diversion payments. The diversion payment is

paying the farmer for taking particular land out of production. The

certificate is a payment on wheat the farmer produces.

Mr. KLEPPE. I understand that very well. The concern I have

about this is having dollars in the hands of the farmers. We have among

farmers a term called "interest." They pay a lot of interest, the

farmers do, and even though your testimony indicates that maybe it

would mean 1% to 2 months at best in time saved in the'r receiving

this, it could be utilized under the provisions of this bill, and I wonder

if you would explain a little more clearly as to the timing versus the

length of time that the actual advance payments could be made.

Could you explain this more fully?
4 PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

Mr. FITZGERALD. Yes, sir. The time for signup for both wheat and

feed grains is February and March. So that in the case of feed grains,

for instance, we harvest the grain in the fall while the winter wheat

will be harvested in the summer, starting in early July. The time,

therefore, which elapses between the signup in our program and the

time in which I receive the income as a farmer from my feed grains is

much greater than the time elapsing between the time of signup and

the time of receiving payment for my wheat, because the harvest time

is different.

Mr. KLEPPE. On all wheat payments, we expect to begin the final

payment shortly after July 1, m the case of wheat.

Mr. FITZGERALD. That is after compliance is completed.

Mr. KLEPPE. As I understand your statement then, the reason that

you object to it, you do state here that the primary reason you are not

in favor of this legislation is this?

Mr. FITZGERALD. Yes.

Mr. KLEPPE. You contend that there is not enough to be gained

from it, and for that reason you are against the legislation?

MT. FITZGERALD. NO.

Mr. KLEPPE. There are no other reasons from the standpoint of

administrative action in the Department of Agriculture in handling

this particular advance payment, are there?

Mr. FITZGERALD. Not particularly. The complexities that could

develop would be very minor in nature.

Mr. JONES of Missouri. Will you yield there?

Mr. KLEPPE. Yes.

Mr. JONES of Missouri. I think you made the statement that there

would be some additional expense in handling the program also.

Mr. KLEPPE. As I understand it.

Mr. FITZGERALD. Yes, there would be, but it would be of minor

consideration.

Mr. KLEPPE. As I understand it, you do not particularly object

to that?

Mr. FITZGERALD. No..

Mr. KLEPPE. You are objecting to the timing not being sufficient

to really warrant the passage of this legislation.

Mr. FITZGERALD. That is the primary consideration, yes.

Mr. KLEPPE. I think that completes my questioning. Thank you.

Mr. JONES of Missouri. I should have indicated before we started

the testimony, that the chairman of the full committee has received a

letter under date of June 28, from the Acting Secretary of Agriculture

recommending against the enactment of the bill, setting forth, I

think, most of the information that has been given in Mr. Fitzgerald's

testimony.

Mr. KLEPPE. Is this the letter that we have before us?

Mr. JONES of Missouri. Yes, sir.

It has already been made a part of the record.

Mr. Stubblefield?

Mr. STUBBLEFIELD. What does this amount to, the handling of

these payments, in the amount of money and personnel?

Mr. FITZGERALD. I cannot tell you in figures. The cost would be

whatever would be involved in computing the amount due and

preparing and issuing the sight draft.
PERMIT ADVANCE PAYMENTS TO WHEAT. PRODUCERS' 5

(The committee was later furnished with an. estimated ,administrative cost of $900,000 for making advance payments against wheat

certificates) • ,

Mr. STUBBLEFIELD. Would additional personnel be needed?

Mr. FITZGERALD. At least additional time would be needed, yes,.

sir, and in some cases additional personnel.

Mr. STTIBBLEFIELD. That is all. Thank you. •

Mr. JONES of Missouri. What you are saying, Mr. Fitzgerald, is

that as a minimum there would have to be, an additional check issued

to each farmer who had a contract for wheat?

Mr. FITZGERALD. Yes, sir, and we would have to figure what the

total would be and what one-half of that would be.

Mr. JONES of Missouri. In other words, it would take as much time

to write a check for a dime as it would to write a check,for $10,000.

Mrs. MAY. Will you yield?

Mr. JONES Of Missouri. Yes.

Mrs. MAY. You make advance payments in feed grains and cotton?

Mr. FITZGERALD. Yes.

Mrs. MAY. Do you have extra cost in those advance payments?

Mr. FITZGERALD. Yes; there certainly is. I explained that we have,

generally, made these advance payments only on diversion, where

we pay the farmer for the land that he does not produce on; except

for this year in the case of feed grains being the first year that we have

not made a diversion payment for feed grains, except that, under

the small farm provision, a man can produce no feed grains and get a

payment.

Mrs. MAY. If advance payments are made and are necessary in

both those fields, why is that not true in the proposition that is before

us?

Mr. FITZGERALD. Because the time elapsing would not be much

between the enrollment or sign-up time and the harvesting time for

wheat.

Mrs. MAY. That is all. Thank you.

Mr. JONES of Missouri. Mr. Zwach, any questions?

Mr. ZWACH. No questions.

Mr. JONES of Missouri. Mr. Price, any questions?

Mr. PRICE. No questions.

Mr. JONES of Missouri. Mr. Kleppe?

Mr. KLEPPE. May I ask another question of you, Mr. Fitzgerald?

Mr. FITZGERALD. Yes.

Mr. KLEPPE. What we are trying to do, of course, is to alleviate the

economic problem that exists for the farmer today under the present

rules and regulations as they exist by allowing the Secretary to do this.

Now, my question may be a little bit leading onto something else,

but in the absence of being able to provide additional income or to

provide a man with help insofar as some of his costs are concerned,

have you any suggestion that might be used to do this so that we

might put money in the hands of the farmer earlier than under the

present programs, without additional cost let us say?

I feel that this is the intent behind this, in putting in a bill on this

subject, anyway.

What have you got that might be better than this?

Mr. FITZGERALD. In answer to your question, I suppose that if we

were able some months earlier than we do now to estimate what the

85-410-67-2
6 PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

parity would be, that this probably could be done earlier than we

do now.

Mr. KLEPPE. I do not suppose that anybody could estimate the

parity, because this is a fluctuating thing every month, as you and I

know.

Mr. FITZGERALD. Yes.

Mr. KLEPPE. This is the real consideration: How we can improve

the lot of the farmer under present legislation, by just getting the

Department to perform under the present rules and regulations, and,

in this instance, a little bit earlier so the farmer would get money in

his hands and thereby be in a better position and could spend it a little

earlier.

Mr. FITZGERALD. I understand that.

Mr. KLEPPE. So, really, what I am trying to find out from you is

if you have any suggestion we might use to improve that situation.

Mr. FITZGERALD. This is one that I think of offhand, under present

legislation.

Mr. KLEPPE. I realize that this is not a very good question, but I

am just trying to probe the area a little bit so that maybe we could

find our way to an agreement so that we can do something of a positive

nature in helping the farmer, because you and I know what his economic situation is today.

Mr. FITZGERALD. Yes, sir. This, of course, is the primary consideration of the Department.

Mr. KLEPPE. Thank you.

Thank you, Mr. Chairman.

Mr. JONES of Missouri. Are there any further questions?

If not, we thank you for being with us this morning.

Mr. FITZGERALD. Thank you, Mr. Chairman.

STATEMENT OF HON. ROBERT DOLE, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF KANSAS

Mr. Chairman and members of the Committee: I appreciate this opportunity to

appear before this Committee in support of H. R. 6437, which I introduced on

March 1. The bill would amend the Agricultural Adjustment Act of 1938, as

amended, to permit advance payments to wheat producers who participate in the

current wheat program. The bill would permit payment of up to 50% of the payments represented by domestic marketing certificates to participating producers

in advance of determination of performance.

A similar provision has been included in the cotton and feed grains programs for

a number of years. H. R. 6437 would essentially put the wheat program and wheat

producers on a par with these other programs.

Under the feed grains program, farmers indicate in the Spring, at the time of

sign up, which usually starts about February 1, their intent to participate in the

feed grains program. The feed grain producer may receive his diversion payments

shortly after sign up and often before the crop is actually planted. Cotton growers

are also entitled to advance payments in the Spring, even though their crop is

harvested in late summer. Kansas wheat is a Fall-planted crop, but under the

present program, the wheat farmer cannot receive payment on his wheat certificates until after harvest and compliance has been determined-5 to 6 months

later than advance payments to growers of feed grains and cotton. Present procedures for issuing wheat certificates provide that farmers declare their intent

to participate in the wheat program at the time of Spring sign up—usually starting

about February 1. Payments on the wheat certificates are made starting about

July 1 after compliance has been determined. Participants in a single program,

wheat for example, usually will receive payment sometime in July. Those participating in both the wheat and feed grains program normally receive their payments

in August. I believe advance payments on wheat certificates made soon after

Spring sign up are justified to an even greater degree than advance payments on
PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS 7

feed grains and cotton, which, as I have pointed out, for the most part are Springplanted crops.

In 1964 a Fall sign up was conducted for the 1965 wheat crop. Sign up began

on August 24 and continued through October 2. Farmers were permitted to change

their intent at the time of Spring sign up if any change was necessary. If a Fall

sign up (similar to 1964 procedure) were followed now, farmers could receive

advance payments on wheat certificates in September—some 10 months earlier

than under present procedures. In my opinion, we could and should support the

farmer through advance payments on wheat certificates because of his key role

in the overall national economy and as guardian of our food supplies—a strategic

weapon for national security.

The Department, in its official report on this legislation, presents two reasons

for opposing my bill. First, they say the bill is not needed; and second, they say

the theory of the present program is better implemented without advance payments. These do not seem to be valid objections. I would point out that the

wheat program should be designed to benefit the wheat producer to the maximum extent possible. It should also give the wheat farmer the maximum number

of options. Under my bill, the individual wheat farmer would decide whether

advance payments were needed, not the U.S. Department of Agriculture. Certainly the Department does not advocate a repeal of advance payments for cotton

and feed grains producers on the grounds that these payments are not needed.

Conversely, I can see no legitimate objection to extending the same option to

wheat farmers.

Furthermore, I see no complication or violation of the theory of the present

wheat program. The advance payments under my bill would be based on an

estimate of what the full parity price for wheat would be in July. If the parity

price in July were different than the estimate, the second payment could easily

be adjusted for the change.

I need not remind any of you of the importance of a strong agricultural economy

to the nation as a whole. Agriculture's first responsibility is to provide an abundant supply of quality food and other farm products at reasonable prices for both

domestic and export needs. If the farmer is to produce adequately, then he should

be compensated adequately for his labor and investment. An efficient producer is

entitled to a level of income which will enable him to earn returns such as are

realized on similar resources outside of agriculture. "Comparable returns" are to

be understood to take differences in rural and urban costs of living into account.

Kansas produces on the average some 200,000,000 bushels of wheat per year.

Participation in the wheat certificate program averages about $140 million per

year. A 50% advance payment would inject $70 million into the agricultural

economy 5 to 6 months sooner than under present procedures.

Also, advance payments on wheat certificates would materially assist the farmer in financing his investment in both Fall- and Spring-planted crops. He has a

considerable investment in seed, fertilizer, as well as the cost of seed bed preparation and operating costs in planting the crop. Many of the wheat farmers now

must secure high interest loans to finance their Spring planting operations.

It should be borne in mind that the hard winter wheat producing area of Kansas,

Oklahoma, Texas, Colorado and Nebraska is one where drought, wind, hail and

insects pose an ever present threat to wheat. These natural hazards frequently

take a heavy toll of the standing wheat crop, resulting in heavy economic losses.

Furthermore, this is an area where farmers are virtually compelled to employ

summer fallow practices if their chances for a good crop each year are to he realized.

This naturally adds greatly to their operating overhead, and since fallow land

1-nust be tilled frequently commencing early in the year, it is another reason why

advanced payments are justified and necessary.

Even though the producer's investment in one wheat crop may be lost, he must

reinvest almost immediately for the next year's crop. I would like to review briefly the situation relative to the current wheat crop in Kansas. There was heavy

frost damage in wide areas. In early spring drought and high winds destroyed

thousands of acres of growing wheat, and producers waited almost by the hour

in hope of rain to save what was left. Rain finally came and a good crop appeared

to be in prospect. As harvest was about to start, heavy rains and above normal

rainfall again threatened the crop. Harvest has been delayed and weeds have come

up through the flattened grain. The final outcome will be reduced yields as well as

poor quality and, of course, sharply reduced income.

The net farm income picture is not encouraging, and the farmer needs whatever

help we can offer. In April of this year the parity'ratio drOpped to, a low of 72—

on May 15 the ratio was at 74. Parity ratio is a comparison of farm income using
S PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

the years 1910-1914 base of 100. Although gross farm income prospects show an

upward trend, the probability that farm production expenses will rise again this

year indicates a decline in realized net farm income of possibly 5% ,or more, from

1966 totals.

Providing for advance payments on wheat certificates would be extremely helpful to the wheat producer, and I urge the Committee to give favorable consideration of H.R. 6437.

Mr. JoNes of Missouri. Our next witness is one of our colleagues,

Mr. Battin, who is one of the cosponsors of legislation we have before

us. We will be glad to hear from you now, Mr. Battin.

STATEMENT OF HON. JAMES F. BATTIN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MONTANA

Mr. BA TriN. Mr. Chairman and members of the subcommittee,

I appreciate the opportunity to appear on behalf of H.R. 6437 and

other identical bills, one of which I introduced, H.R. 6440.

I have in my hand—and I am sure a copy of the letter is before

the committee, dated June 28, 1967, addressed to Mr. Poage, chairman of the full committee—an opposition to the bills which were

referred to the Department for comment. I have had the opportunity

to listen to the testimony of the Department and to some of the

questions that have been propounded by members of the subcommittee

to the administration witness.

I cannot think of any piece of legislation that does not have some

administrative difficulties. I feel that the Department of Agriculture

or any other agency of Government could overcome those difficulties

if they, in fact, happened to be for the legislation that was being

offered.

My primary reason in sponsoring and cosponsoring this legislation

is the very realistic fact that the American farmer today, particularly

in the wheat areas, has a difficult problem of economics. Certainly,

the cost of borrowing money is just as realistic as the cost of purchasing seed or buying equipment to produce a crop, and it has to

be figured into what his end result will be so far as his earnings are

concerned from the sale of the wheat at the end of the year.

I notice in the letter that the Department sent to the committee,

that they talk about winter wheat. That is true; certainly, winter

wheat is planted actually the year before, but there is a great deal

of spring wheat grown in the country. It is not planted, actually,

until the spring of the year in which it is harvested, and where we

are limiting the payment to 50 percent of the estimated value of the

domestic certificate, I see no insurmountable difficulty in making that

estimate without the Government losing any money. Certainly, those

engaged in agriculture today have a long history of production. You

can, pretty well within reasonable bounds_, estimate the amount of

the crop that they are going to have from the history of the land, and

it becomes, with today's modern computers, very easily accomplished.

I am certain that the Department of Agriculture either uses computers or has access to them, and, thereby, it becomes a rather simple

procedure.

Being a member of the Ways and Means Committee, we deal with

the social security legislation which is intricate; and, certainly, the

administration of the agriculture programs today is such that the
PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS 9

computers do most of the work, including the writing of the checks

which makes much of this very simple.

So, I am here hoping that the committee will look favorably upon

the proposed legislation as a means of not ending what seems to be

the bigger problem in agriculture but certainly making a step in the

direction of giving advance payments from which a man will receive

a total payment at the end of the harvest when he sells his wheat and

is automatically entitled to 100 percent of the certificate. It seems to

me that it is just a step in the right direction that is going to be beneficial. I do not think the argument made by the Department in their

presentation—at least, what I heard of it—or by the letter which I have

before me really is sufficient reason to overcome the advantages of the

proposed legislation.

Mr. Chairman, I thank you for the opportunity of being able to

present my views before the subcommittee.

I will be very happy to answer any questions that I can.

Mr. JONES of Missouri. Thank you, Mr. Battin.

Are there any questions?

Mrs. May?

Mrs. MAY. Congressman Battin, you heard the statement, I am

sure, that the representative of the Department of Agriculture made,

which indicated that their main opposition was the matter of timing

and the time involved in the proposed advance payment would be

about 1A 1 to 2 months at best and, he went on to say, that they did

not consider this short period of time important or sufficient enough

for the additional time and effort on the part of the producer to apply

for it.

Would you comment on that particular point?

Do you agree with that?

Do you think that 2 months is not enough, that it is not an important time factor in financing?

Mr. BATTIN. I think that it would be for two reasons: The fact

that the payments should be made is: No. 1, the person who finds it

necessary to borrow money would be in a much better position with

the lending institutions, because he can make payments on his loan

within a shorter period of time which, again, with interest computed

by the day and not by a quarter or by 6 months or by 1 year, even

though it is based on a yearly rate, would help; and it also puts him

in a position of borrowing on a short-term basis which usually has

the effect of bearing less interest than in borrowing on a long-term

basis for working capital particularly where, by law, he would be

entitled to a 50 percent payment on the estimated production of his

crop and would be in a position to say, "Yes, I can pay this loan

within a given period of time."

It would give him a stronger position when it comes to borrowing

money.

I can show from my files, and I am sure every member of this subcommittee can, instances within the last 2 years where lending

institutions have been turning thumbs down on agricultural loans

because of the instability of the market and the probability of what

they were going to receive for their product, whether it was wheat or

cattle, or whatever it might be.
10 PERMIT: ADVANCE PAYMENTS TO WHEAT 'PRODUCERS

I think this gives him a better bargaining position and it certainly

makes the lending institutions more apt to supply the necessary

capital in order to accomplish the objectives of the individual.

Mrs. MAY. Then, for the reasons you just stated, you do believe

that the producer would be willing to go to the trouble of providing

the time and effort to apply for the advance payments, even if it

would only be for a few months?

Mr. BATTIN. Yes. I believe it would work. I believe there would be

a greater effort. I do not think there is any situation in the bill where

the dates could not be changed or a better formula be developed to

get the payments sooner on a different estimating basis—maybe last

year's crop or whatever it might be, but what I think should be

established is the necessity by law that this payment be made, and I

think it would help a great deal.

Mrs. MAY. If I understand you correctly, Mr. Battin, this 1% to

2-month period might be made a longer advance time under a certain

formula 

Mr. BATTIN. I would hope so.

Mrs. MAY (continuing). For the payments?

Mr. BATTIN. Yes.

Mrs. MAY. That is all.

Mr. JONES of Missouri. Mr. Kleppe?

Mr. KLEPPE. I do not have a question, but I do have a comment.

And that is: I would like to compliment Congressman Battin for

his statement and for his answers to the questions.

I suspect the reason I feel this way is because I agree with him

completely.

Personally, Mr. Battin, I am delighted that you came down here

this morning on what I think is a very serious matter, as to the importance of this bill and how it would help to some degree the farmer

situation today.

Thank you.

Mr. BATTIN. Thank you.

Mr. JONES of Missouri. Are there further questions?

Mr. Zwach?

Mr. ZWACH. I cooperate with the feed grain program and I also

have advance payments and find them very, very helpful.

I am not in the wheatgrowing business any more.

My neighbors, to the north and the northwest, are in that same

situation.

I am sure the farmer would welcome advance payments.

I see no reason why this would not work in, wheat as well as in the

other feed grain and cotton programs.

Mr. JONES of Missouri. Mr. Price?

Mr. PRICE. Mr. Battin, have you figured what the advance interest

would be or what it would cost the Government by advancing this

money for 1 or 2 months?

Mr. BATTIN. No, I have not, but I would compare this with the

overall data—that it would be a very minimal portion of the $14 billion

that we pay in interest on our national debt each year. If you will

follow my logic for just a minute: First of all; the debt in proportion to

the gross national product, the usual figure that is used to make comparisons of our position today versus our position of years past—One

of the ideas, of course, is to eliminate not only as much as possible of
PERM-IT ADVANCE PAYMENTS TO WHEAT PRODUCERS

the public debt but also as much of the private debt as possible, because both of them have :a weighting down on the general economy.

Where a person is going to get a payment at the end of the year,

to pay him in advance and have him put that money back into the

economy, it becomes a spendable part of that economy and it would

have a salutary effect rather than a devastating effect, so far as the

national debt and the gross national product is concerned.

In the financial end of it, I could see an advantage not only to the

farmer but also to the economy. I do not consider money paid in interest as being productive, as far as the expansion of our economy is

concerned, but I do feel that money that is made available by way of

payment that is then spent in the economy is productive.

For that reason, I think that it would have a good effect.

Mr. PRICE. Well, I might say that I do a little farming myself.

I have never participated in any of these programs. I have gotten

along very satisfactory. I sometimes wonder, with all due respect to

you, if these programs have not created a psychology of "Give me

more and more."

If we can get our money in the spring

'

naturally we are in a better

position to go to the banker and say "I have one-half of my payment;

loan me the money for the seed, and so forth." But once you do this,

what next?

Mr. BATTIN. I would not consider this, in any way, a new program.

It is a question of making a payment on an existing program. There

are many people in my State who do not participate in any type of

farm program. They would, of course, in no way be affected.

The question is—and I again look at what exists and I am not

talking about the creation of a new program but what exists under

present programs: How can payments be made to those who do

cooperate in the program, to give them the best possible situation

without any tremendous increase or any increase in the basic costs.

Mr. PRICE. I can see that this could put the farmers in a better

position. If we are going to have the program, I see no reason for their

not advancing the money 2 or 3 months ahead of time.

Mr. BATTIN. That is my point.

Thank you.

Mr. PRICE. Thank you.

Mr. JONES of Missouri. May I just inte_rject this?

I understood you to say that they could make these payments on

the basis of a previous planting?

Mr. BATTIN. Yes; I would think so, with this stipulation, Mr.

Chairman. There has been, since the inception of the agriculture program, a pretty good record kept at the county and State and National

levels, what the land will produce on the average. Each county has

an average upon which payment is made on wheat, even though one

producer might get a yield of 30 bushels to the acre and his county

average might be 20 bushels per acre. And this is what, as I, understand it, the payment is based upon. We can. pretty well anticipate

ahead of time—and I would hope that we could more than a few

months in advance—what the Department thinks is going to be

necessary, by way of production. We have had recently the situation

of increased acreage, and now it is cut back in acreage. This is well

known to the Department long prior to the time that it is known to

the producers.
12 PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

Now, we, again, are not talking about a 100-percent advance payment but a partial payment of 50 percent. Maybe it should be 35

percent. I do not know what that figure should be, but the idea is

whatever it is necessary to establish, as is done in other commodities.

We seem to be singled out here as not being entitled to it.

Mr. JONES of Missouri. In some of these commodities, in cotton,

they pay on the diversion payment basis which is payment for not

planting and is something else. So, this is a new program in respect

to wheat.

Mr. BATTIN. How about feed grains?

Mr. JONES of Missouri. I am not as familiar with that as I am with

cotton. It is on diversion that that is paid. You do have a contract,

based on actual performance.

Mr. BATTIN. Yes.

Mr. JONES of Missouri. I bring this up, because it seems to me in

this instance you are getting into a guaranteed annual wage, that

type of program.

Mr. BATTIN. I can assure you, if I felt that way I would not be

here, nor would my name be on the bill.

Mr. JONES of Missouri. Thank you.

Are there any further questions?

If not, we thank you again.

Mr. BATTIN. Thank you, Mr. Chairman.

Mr. JONES of Missouri. At this point, I shall insert into the record,

without objection, statements by the Honorable Donald G. Brotzm an,

Ray Obrecht, master, Colorado State Grange, and the Honorable

Frank E. Evans, who cannot be here this morning.

(The statements referred to follow:)

STATEMENT OF HON. DONALD G. BROTZMAN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF COLORADO

Mr. Chairman and Members of the Committee: It is a real pleasure for me to

appear before this committee in support of H.R. 6437. I introduced an identical

measure, H.R. 6438, on March 1, and am pleased that the committee is holding

these hearings.

This bill would amend the Agricultural Adjustment Act of 1938, as amended,

to require advance payments of up to 50 per cent to wheat producers who participate in the current wheat program.

Mr. Chairman, on February 1, 1967, Mr. bald Harbo, President of the Rocky

Mountain Farmers Union, wrote to me with the suggestion that wheat producers

be given the privilege of drawing one-half of their 1967 wheat certificate payments in advance. Mr. Harbo explained the need for this legislation, and I quote

from his letter:

I think in most cases it could be determined right now, and most of our

producers will soon be needing additional operating capital which because of

the tight money policy may not be available in the amounts they need. If

available, interest rates, as you know, on farm loans are the highest in 40.

years.

Not being a member of the Agriculture Committee, I decided to visit with our

distinguished colleague and my good friend, the gentleman from Kansas, Mr.

Dole, regarding this matter, and on March 1, 1967, he introduced H.R. 6437.

I joined him in introducing an identical bill, H.R. 6438, at the same time.

H.R. 6437 will treat wheat producers the same as farmers who participate in

the feed grains and cotton programs.

Mr. Chairman, in Colorado we produce both Spring and Winter wheat. Under

this bill, Winter wheat producers would receive the first half of their payments

in the Fall, and Spring wheat producers would receive theirs in the Spring. It is

true that Spring wheat producers could conceivably receive a payment before the

crop is actually in the ground. However, in the case of the feed grains program,
PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS 13

a participating farmer receives payment before the crop is planted or shortly

thereafter. It seems that advance payments on wheat certificates can be justified

on the same basis as advance payments on feed grains and cotton.

As Mr. Harbo pointed out in his letter to me, advance payments on wheat

certificates would be an added economic incentive to the farmer, and in turn,

would assist in stimulating a sluggish national economy.

The Department of Agriculture has estimated for my own State of Colorado

that $29,100,000 will be paid under the Wheat Certificate Program in 1967. If

advance payments of 50 percent were available, this would mean an injection of

$14,550,000 into the State economy up to four or five months ahead of schedule.

Mr. Chairman, advance payments would be of the greatest assistance to the

wheat producer in financing both his Fall and Spring crops. Often the farmer is

forced to take out high interest-bearing loans to finance his crop investment and

to purchase additional machinery. Advance payments would assist in relieving

him of this burden.

I am including as a part of this statement a letter from Mr. Ray Obrecht,

Master of the Colorado State Grange, expressing his organization's support of

this measure.

Mr. Chairman, I ask that you give favorable consideration to H.R. 6437.

COLORADO STATE GRANGE,

Denver, Colo.

MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE: The Colorado State Grange

wishes to make the following statement on HR 6438.

If we are going to continue the present wheat program, which we feel is very

inadequate in many respects, it would be a definite improvement to allow the

producer who signs up to comply to receive an advance payment of 50 percent of

his domestic certificates (at his option).

Therefore we urge your consideration of HR 6438 to go into effect at this fall

1967 sign up.

This principal has been in effect on feed grains and we urge this equalization

among producers.

RAY OBRECHT, Master.

STATEMENT OF HON. FRANK E. EVANS, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF COLORADO

Mr. Chairman and members of the committee, I appreciate this opportunity

to testify before you in behalf of my bill, H.R. 7574, which provides for the advance

payment of up to 50 percent of the value of domestic wheat certificates to farmers

when they sign up under the wheat program each year.

The reason for this bill is simple: it gets money, which will be his anyway

in 4, 5 or 6 months, into the farmer's hands when his needs for capital are greatest.

Under the current wheat program the payments for the certificates are not made

until the wheat is marketed which may be up to six months after the farmer has

signed up under the program. Allowing him to take an advance on his certificate

payments reduces the amount of money he has to borrow in the spring and thereby

reduces his total credit costs.

The high interest rates which prevail now have been a real factor in the costprice squeeze the farmer finds himself in these days, and this adjustment will have

a meaningful effect on his net income. Furthermore, it will ease the pressure on the

various lending agencies who are already overburdened by the demand for

agricultural loans.

Partial advance payments are already a feature of the cotton and feed grain

programs, and although the gap between sign-up and payment under the wheat

program may be shorter than for these other commodities, it is still a significant

amount of time.

The wheat farmers in my part of the country need some relief for their financial

difficulties. I hope that you will consider this bill favorably.

Mr. KLEPPE. I would like to ash unanimous consent to insert a

statement into the record at this point.

Mr. JONES of Missouri. Without objection, it is so ordered.

(The statement of Mr. Kleppe follows:)
14 PERMIT ADVANCE PAYMENTS TO WHEAt PRODUCERS

STATEMENT OF HON. THOMAS S. KLEPPE, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF NORTH DAKOTA

Thirteen of the 30 counties in North Dakota's Second Congressiona District

are currently suffering from severe drought and have been declared disaster

areas to permit emergency haying and grazing on retired acres. Eight additional

counties have made application for similar consideration.

This drought situation is a calamity for thousands of wheat producers and livestock men in the affected areas. Already hit by low prices and high production

costs, these farmers and ranchers are now facing the prospect of losing their crops

and the necessity of liquidating a part of their herds.

They are going to need credit to remain in business during the year ahead and in today's money market credit is neither easily available nor cheap.

The bills we have under consideration here offer no solution to these problems but they would provide some assistance. I believe that if the advance payments

on wheat certificates were approved, many farmers next year could get by without

having to make costly production loans. Advance payments are permitted for some

other commodities. Under today's emergency circumstances, I believe the same

consideration should be extended to wheat growers.

Mr. JONES of Missouri. I will make a statement later: If Mr. Dole,

who is en route by air and who has sent word he will be late, has

not made an appearance by the time we get through, his statement will

be included, and will appear immediately after the statement of Mr.

Fitzgerald of the USDA.

The next witness we have is Mr. Glen Hofer, the executive vice

president of the National Association of Wheat Growers.

We will be. glad to hear from you now, Mr. Hofer.

STATEMENT OF GLEN HOFER, EXECUTIVE VICE PRESIDENT,

NATIONAL ASSOCIATION OF WHEAT GROWERS

Mr. HOFER. Mr. Chairman and members of the subcommittee, my

name is Glen Hofer, and I am the executive vice president of the

National Association of Wheat Growers.

We appreciate the opportunity to express to your subcommittee

our views concerning H.R. 6437, which would provide that the Secretary of Agriculture shall make up to 50-percent payment of the

domestic marketing certificates to producers in advance of determination of performance.

The National Association of Wheat Growers favors early partial

payment of certificates for several reasons:

It is generally agreed that an adjusted parity ratio of 80 is not

furnishing agriculture with adequate financing in many cases. The

cost-price squeeze is not a myth out on the wheat farm, and an annual

trip to the bank to arrange for a loan to provide for spring operating

expenses has become a hard reality for many of our producers. When

winter breaks and the growing season begins, a whole series of farming

costs is faced by the wheat producer within a relatively short period.

As soon as the fields are dry enough for the operation of machinery,

there is weed control and top dressing to be done in the winter wheat

areas, and seedbed preparation, fertilizing, and seeding to be done in

the spring wheat areas. In many areas the first steps of summer fallow

preparation must be undertaken. All of this when payment of winter

overhaul bills and the property and income taxes have greatly reduced

the farmer's cash assets. Thus the necessity of a loan carrying from 6 to

7 percent interest charges. Calculations have been made that slightly

more than $700 million will be earned through domestic marketing

certificates by wheat farmers in 1967, and a similar figure can be esti-
PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS 15

mated for 1968. If early payment were made on 50 percent of $700

million, it would amount to $350 million. If, in turn, the early payment

would make unnecessary the borrowing of that sum from the banks for

4 months at 6 percent, it could save our farmers $7 million in interest

charges alone.

Of course, not all of our producers are equally hard pressed, and it is

not likely that there would be a 100-percent request for early payment

by complying farms. However, it is our conviction that there is a real

need for such an option for the wheat community as well as for cotton

and feed grains.

By testifying in favor of the amendment proposed in H.R. 6437, the

National Association of Wheat Growers does not wish to imply a lack

of support for our present wheat program, which we feel has taken a

long stride toward relieving the desperate situation our commodity was

in a few years ago. We simply feel that the addition of this financial

tool will help many of our wheat producers weather this transitional

period between the years of surplus-depressed prices and the hoped-for

time when world demand for wheat and an aggressive marketing program will allow the marketplace to return a price more appropriate

to our needs.

In summary, it is our association's opinion the amendment proposed

by H.R. 6437 would offer a significant measure of financial assistance

to our producers during that period of the year when their solvency

is at a low ebb while at the same time the seasonal demands for operating capital intensify.

Mr. JONES of Missouri. Thank you Mr. Hofer.

The only comment I have is: At the top of page 2, you estimated a

4 months' interest saving. The Department said it was 13 to 2 months.

Where did you get the figure of 4 months?

Mr. HOFER. The Department has indicated that payments were

being made earlier, but I know that last year up in the Dakotas and

in Montana quite often the payments on the certificates were not

made until early fall, and in many cases it would be more than 4

months. I do not know how the program payments will be made this

year. It may be that their plans are for narrowing that down. The 4

months was arithmetic that was easy for me.

Mr. JONES of Missouri. Mrs. May, any questions?

Mrs. MAY. I have no questions. I think that the statement was

made by the Department, in the statement submitted, that the period

of time would be 13/2 to 2 months.

Do you think that under the provisions of the bills being sponsored

here for this advance payment, that the farmers would apply for it?

Mr. HOFER. I think they would, since you know they are hard

pressed. You must remember, for instance, that this year in Texas

and in other areas, those people, by next spring, are going to be

needing money. They are borrowing money already. One and one-half

to 2 months will help pretty much.

Mrs. MAY. Do you think, based on last year's payments and

previous experience, that the 1/1 2 to 2 months' period is not necessarily

something that is definite, so far as to how this program might work—

that it might be longer than that under certain conditions?

Mr. HOFER. That is right. I certainly do agree with that. I think

we could easily have a 4 months' period.
16 PERMIT ADVAI4CE PAYMENT'S TO 'WlitAT P:ItODUCtrig

Mrs. MAY. I ' am in 'no position at this time to 'argue with the Department on-this,,but. I have soine question on how they arrived .at

the 14 1 to 2 months mentioned.

Thank'Yon. That is all.

Mr. JONES of Missouri. Any questions, Mr. Nichols?

Mr: - NicitiAs.' No. questions.

Mr. joiiEs. Of Missouri. Any questions, Mr. -Kleppe?

KLEPP. No • question '• •

JONES of Missouri. Mr. Price, any 'questions?

PRICE. q see a question I asked Mr. Battin has been answered.

He said by a 4 months' 'advance of this 'money it would save $7

million in interest charges alone to the farmer .but would cost the

Government to Offset the advance.

Mr. JONES of Missouri. Thank you.

Mr. HOFER. Thank you.

Mr. JONES of Missouri. Our next witness is Mr. Harvey N. Sickels,

secretary and legislative representative, National Farmers Organization.

We will be glad to hear from you now, Mr. Sickels.

STATEMENT OF HARVEY N. SICKELS, SECRETARY AND LEGISLATIVE

REPRESENTATIVE, NATIONAL FARMERS ORGANIZATION

Mr. SICKELS. Mr. Chairman and gentlemen of the subcommittee,

my name is Harvey N. Sickels, and I am secretary and legislative

representative for the National Farmers Organization.

We are here today to offer testimony in support of H.R. 6437 introduced by Congressman Dole, of Kansas, to provide necessary legislation to permit advance payments to wheat producers.

Tile wheat producers are like the rest of the agricultural producers

in that they are producing food for this Nation and the world at much

less than a parity price for their product. They are actually much

worse off financially than they have been for some time.

Department of Agriculture figures show that the wheatgrowers

produced 1.358 billion bushels of wheat at $2.29 per bushel in 1947.

In 1955 they produced 1.457 billion bushels of wheat, the highest of

record, for $1.75 per bushel, and in 1965 they produced 1.315 billion

bushels for $1.35 per bushel. Some people are predicting that the yield

for 1967 is to be 1.5 billion bushels, a new alltime record. The wheat

farmers are now guaranteed $1.25 per bushel. As production has

remained somewhere near the same with production cost rising and

the wheat price falling there is a continuing squeeze on the farmers in

the middle.

We believe that the advance payments would be a source of ready

cash and would help to some degree in relieving the farmer from the

immediate effects of the cost price squeeze.

We also believe it would be of advantage to the Government, as

we feel farmers who have received advance payments are more likely

to fulfill their performance requirement than those who have overplanted with the intent of destroying in time to prove performance.

This would, we feel, give the Secretary of Agriculture more definite

knowledge of the wheat farmers' intentions than he has at the present time. It would increase the cost to the Government only nominally and would be of some benefit to the wheat farmer. For this reason
PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS 17

we urge the committee to take prompt and immediate action on this

proposal.

We appreciate the opportunity to appear here today and thank

you for listening.

Mr. JONES of Missouri. Are there any questions?

If not, thank you.

Mr. SICKELS. Thank you.

Mr. JONES of Missouri. Our next witness will be Mr. Harry L.

Graham, legislative representative of the National Grange.

We will be pleased to hear from you now, Mr. Graham.

STATEMENT OF HARRY L. GRAHAM, LEGISLATIVE REPRESENTATIVE, THE NATIONAL GRANGE

Mr. GRAHAM. Mr. Chairman and members of the subcommittee,

the National Grange appreciates this opportunity to appear before this

subcommittee in support of the bill introduced by the distinguished

Congressman from Kansas, the Honorable Bob Dole, to permit an

advance payment to wheat producers who participate in the current

wheat program.

Incidentally, I understand that Congressman Evans has a similar bill

introduced, so that it becomes a bipartisan approach to this problem

which is facing our wheat people.

Our reasons for supporting H.R. 6437 briefly are:

First, it would bring the wheat program into conformity with the

cotton and feed grains programs in which advance payments are made

a considerable time before the harvesting and the final compliance

with the programs.

Second, if this bill is passed, the payments would be received at a

time of relatively great need as far as the farmers' production expenses

are concerned. If the payments were made after the spring signup and

preceding the market receipts for the wheat by several months, this

would be an economic advantage of no small consequence to the farmer,

who generally finds himself in a hard-pressed credit situation at this

time.

May I add, in connection with this statement, that with the size of

the wheat that is being predicted this year and with the decline in

exports partly because of the exclusion of Yugoslavia from Public

Law 480 and Egypt which took 100 million bushes out of our market,

and because of the situation in the Near East to which we ship no

wheat, the only wheat that is going to India and Pakistan going from

the west coast, we are in a situation where it appears to be to the

advantage of the farmer to hold his wheat and to place it under a loan

for a period of time rather than to sell it, and this was the basis 013

which the Department issued its reseal in commercial storage regulations a couple of months ago so that in a year such as this the advance

payment is more pertinent than it would be in years when the market

price was steadily rising and when the opportunity of realizing from

the market at a relatively high price would be available. So, this adds

a different dimension to this bill this year than it would in some other

years.

Frankly, the Grange would support an advance payment for the

fall wheat considerably before the spring signup and the advance

payment for the spring wheat after the spring signup.
18 PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

The farmer's investment in the crop for the fall-planted wheat has

already been made by the last of October, and the necessity of waiting

until March for any payment at all is putting a little extra strain on

the already sore back of the camel.

Since these payments are basically made as a reward for compliance

in the programs, it does not seem to us to be particularly reasonable

to assume that the farmer has not complied at the time he has planted

his acreage within his allotment. The change in the departmental

procedures to permit certification of compliance with only spot

checking to determine whether or not the farmers were in compliance

indicates that the Department itself is convinced that, in general, the

farmer is to be trusted when he certifies that he has complied with

his acreage allotments.

The argument that the parity ratio might change certainly does

not appear to be a very strong one in that adjustments that might,

need to be made, either upward or downward, in the remaining payment due farmers could easily be made at the time of the final payment for program participation.

Our third reason for supporting this bill is that we believe it would

be an additional factor to strengthen the program and to increase

compliance in the program. We also are convinced that the larger the

number of wheat growers complying in the program, the better the.

program will be and the easier to administer. The planning that is a

part of the programing would be simplified considerably as well.

In this latter connection, we would point out that it was the lack

of compliance on the part of the soft wheat growers this last year,

which is rather traditional since they are mostly farmers with small

acreages, that has been a major factor in the extra-large production

of soft wheat already entering the market. The prediction of the size

of the soft wheat crop which will be available has carried the price of

the soft wheat down 15 cents, more or less, under the price for hard,

wheat. Therefore, it seems that anything which can be done reasonably, legitimately, and within the sphere of the legislation to increase

compliance in these programs, would be helpful to the total rural

economy, with the influx of money into these communities far ahead

of the harvest time. This could be of particular interest to the lady

from Washington, because in her area there is pretty general compliance in the soft wheat growing, but beginning with Mississippi and

coming northward, up the Mississippi Valley, this year, there was a

fairly large lack of compliance, and an extremely heavy crop that

depressed the soft wheat market all across the board.

Therefore, Mr. Chairman and members of the subcommittee, the

Grange respectfully urges that you give swift and favorable consideration to this legislation in this distinguished subcommittee and refer

it promptly to the full committee with a request for prompt action

by them.

The Grange assures you that we shall support this action of the

subcommittee, both before the full committee of the House and before

the full body of the House of Representatives. We believe the legislation is wisely conceived, is timely, and is needed to help stabilize the

rural economies which have already been shaken by declining wheat

prices this year.

We would point out that we do not believe this is the only legislation

necessary to stabilize the wheat market, but we believe that this
PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS 19

legislation will have a good effect, and consequently we are giving it

our most vigorous support.

And I might add one additional comment, and that is: On the arithmetic that has already been bandied around here a bit, the statement of

Mr. Hofer that this would save the farmers $7 million does not equate

with the cost to the Government, because the Government does not

pay 6 percent for their money.

Mr. JONES of Missouri. What are they paying now?

Mr. GRAHAM. 4.25 and 4.30, according to the terms of the loan.

Mr. JONES of Missouri. Are there any questions?

Mrs. MAY. Would you comment on the Department's statement

about the timing factor being their main reason for opposition to this

bill?

Mr. GRAHAM. To move their payments up faster than had been

traditional, the timing it seems to me is pretty optimistic in terms

of when the farmer would get his money. Maybe they are going to be

ready to pay at the time that their crop is harvested. I do not know.

The latest they are expected to pay is the time when they certify

compliance and that is done fairly early in the spring and considerably before the crop is harvested. If they are going to go out,

and measure the land, if they are going to spot check, once the compliance is there the farmer has really earned his money by complying.

If they are going to accept the certification• of the compliance

by the farmer within the ASCS rules, the administrative rules, they

are in general agreement, with no more than about 10 percent of the

people who are out—and they can spot check it every year, and the

rest of them would be planting if they said so 150 acres and not 107

acres. The farmer is basically honest. He has earned his payment

at that time and he ought to get it and not at some later date. This

is what we do in feed grains and in cotton. I cannot see any reason

why ,we should not have the same treatment.

Mrs. MAY. The result of the passage of this bill would only give

the farmer the advantage of getting .the money 1% to 2 months

earlier. Do you think that would bo worth it to the wheat producers?

Mr. GRAHAM. I have seen times when I would be glad to haveliit

is days ahead of time.

I think one suggestion I have for changinc,the bill is to make the

fall payments, that is, the payments for the fallwheat, considerably

earlier. The man has invested his money to seed and fall plant and

some of them sooner than that would summer-fallow, and I do not see

any reason why he should have to wait until those in Kentucky, for

example, have planted their spring wheat. It just does not make sense.

We have two different crops here that are involved, just like cotton

and corn and wheat are different crops, and if the spring wheat man

could earn it' in, say, 60 days from the time of planting, why should

not the fall wheat man earn it in 60 days, too, that is, a certain percentage of it, anyway.

Mrs. MAY. Do you see any cause for objection to payments based

on the types of wheat as you have suggested?

Mr. GRAHAM. I do not see any objection. If he took his options,

I do not see any great administrative difficulty, one way or the other,

any more than they are paying for corn and cotton. They are different

crops, of course.

Mrs. MAY. Thank you very much, Mr. Graham.
20 PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

That is all, Mr. Chairman.

Mr. JONES of Missouri. Are there any further questions?

If not, thank you, Mr. Graham.

Mr. GRAHAM. Thank you.

Mr. JONES of Missouri. Our next witness is Mr. Reuben Johnson,

representing the National Farmers Union.

We shall be pleased to hear from you now.

Mr. PRICE. Do you have any figures on how many employees the

Department of Agriculture would have to employ to administer this

bill?

Mr. JONES of Missouri. They did not have that figure this morning

when they testified. It is just a matter of writing additional checks

for the people who receive them.

Mr. PRICE. In order to have the farmers to comply, would there

be additional costs?

Mr. JONES of Missouri. I do not know there would be additional

expense. That is what they said; but it would be small, they said.

They did not say how much it would be.1

Mr. KLEPPE. He also indicated that that was not part of the

reason for objecting to this legislation when I questioned him.

Mr. PRICE. My understanding of the reason for their objecting to

it is that it would cost the Government some interest. The Department wants to support it, but a part of the administration feels that

it will cost extra money.

Mr. KLEPPE. That is not what they said. The only reason they

objected to it was the timing element. The question of the administrative costs, additional administrative costs, would not be the reason

for their objection.

I wanted to get that clear, and that is why I asked them.

Mr. JONES of Missouri. They did make the statement, in addition

to the early payments, that it would result in some slight additional

expense.

Mr. KLEPPE. They admitted that, yes.

Mr. JONES of Missouri. We will now hear from you.

STATEMENT OF REUBEN JOHNSON, DIRECTOR OF LEGISLATION,

NATIONAL FARMERS UNION

Mr. JOHNSON. Mr. Chairman and members of the Livestock and

Feed Grains Subcommittee, I am pleased to be here.

The National Farmers Union is a strong advocate of making onehalf of the payment available to wheat farmers at the time they have

signed up in the program.

We would like to urge this subcommittee to approve it.

I would like to point out what are relatively slight differences in the

bill introduced by Congressman Dole and other members of the subcommittee and the one introduced by Congressman Evans of Colorado.

Congressman Evans' would amend the Agriculture Act of 1949; Mr.

Dole's would amend the Agricultural Adjustment Act of 1938. I have

wracked my brains trying to figure out just which of these would be

best. We will have no objection either way and urge the subcommittee

to make that determination.

I See p. 5.
PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS 21

I think the point was well made by Harry Graham that this is not a

partisan measure. I would like to say offhand here that I am delighted

to have the support from all the Republican members of the subcommittee.

I would like to compliment those from the Republican side who

support this bill. It is a proposal that has widespread support on both

sides of the aisle, and I hope that it will be looked upon as a strictly

nonpartisan measure.

Our delegates at the convention in Oklahoma City in March adopted

a proposal consistent with the bill, and I would like to ask, Mr. Chairman, that this little four-point statement, out of the target program,

adopted by the delegates, be made a part of the record at this point.

Mr. JONES of Missouri. Without objection, it will be made a part

of tlw record.

(The statement referred to follows:)

WHEAT

1. We reaffirm the objective of full parity price for all the wheat produced

in the United States. We urge the Congress to provide a special export certificate

or payment at not less than 65 cents per bushel. We recommend that all wheat

utilized in our Food for Peace Program be eel tificated.

2. We urge that one-half of wheat certificate-payment be made at time of signup.

3. We reaffirm our support for the International Wheat Agreement with an

increase in the minimum-maximum price range and urge its extension when it

expires on July 31. We recommend that a bona fide wheat producer be appointed

to the United States delegation to GATT and TWA negotiations.

4. We urge extension of Commodity Credit Corporation loan reseal plivileges

on farmer-owned wheat on farms and in commercial storage.

Mr. JOHNSON. One other point having to do with fall payments:

Some of the earlier witnesses were thinking, I am sure, for good reason, about spring wheat areas, because that is the area they represent.

It would appear to make the program work better by providing

payments in the fall-seeded wheat areas, too.

I agree fully with the statement made by an earlier witness here

that farmers could use the advance. When a farmer seeds his wheat

in the fall he ought to be entitled to a payment at that time, and that

might be 10 months ahead of the time that he receives the payment

under present procedure. I just do not see any mechanical problem

or administrative problem about putting this into motion. It is already

being done in feed grains and in cotton.

We have, as an earlier witness pointed out, all the modern machines

that can bill and do those kinds of things with very little effort.

I think that when you get right down to it, Congressman Price,

that you put your finger on it. Sometody around the Budget Bureau

does not want to spend the extra interest on the money. I will be very

frank, I become very frustrated when I come up against these kinds

of opposition. Although it may not be so clearly stated for the record,

the underlying current of opposition is in increasing the cost of the

program. I feel that as long as the parity ratio is at the level that it is

at the present, 74 I believe, that we ought not to fuss around about

$6 or $7 million in interest if we can give the farmer a little advance

operating capital, which would mean, essentially, that he would not

have to borrow as much money as he normally would have to borrow,

and thereby can save interest. It is a relatively small thing when you

look at it from one standpoint, and yet it would be a tremendous asset

to the producers who would receive this advance payment.
22 PERMIT ADVANCE PAYMENTS TO WHEAT PRODUCERS

I hope that the subcommittee will approve the bill.

Thank you very much.

Mr. JONES- of Missouri. Thank you.

Are there any questions?

Is there anyone else here who would like to testify on this legislation?

Is there any other business to come before the subcommittee?

If not, without objection, the subcommittee will stand adjourned,

(Whereupon, at 11:10 a.m., the subcommittee adjourned.)

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