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HEARINGS

BEFORE THE Ikr

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A.GRICULTIME AND FORESTRY

UNITED STATES SENATE

EIGHTY-NINTH CONGRESS

SECOND SESSION

ON

S. 2785

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A BILL TO INCREASE THE MINIMUM PRICE AT WHICH WHEAT

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XI

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COMMITTEE ON AGRICULTURE AND FORESTRY

ALLEN J. ELLENDER, Louisiana, Chairman

SPESSARD L. HOLLAND, Florida

JAMES 0. EASTLAND, Mississippi

HERMAN E. TALMADGE, Georgia

B. EVERETT JORDAN, North Carolina

GEORGE McGOVERN, South Dakota

ROSS BASS, Tennessee

JOSEPH M. MONTOYA, New Mexico

WALTER F. MONDALE, Minnesota

DONALD RUSSELL, South Carolina

COTYS M. MOUSER, Chief Clerk

II

GEORGE D. AIKEN, Vermont

MILTON R. YOUNG, North Dakota

JOHN SHERMAN COOPER, Kentucky3. CALEB BOGGS, Delaware

JACK MILLER, Iowa
CONTENTS

Statement of— Page

Bagley, Ralph C., president, Minneapolis Grain Exchange 68

Ballou, Roland F., Deputy Administrator for Commodity Operations,

Agricultural Stabilization and Conservation Service, U.S. Department of Agriculture 85

Burdick, Hon. Quentin N., a U.S. Senator from the State of North

Dakota 89

Byrne, Martin J., president, Kansas Farmers Union 61

Carlson, Hon. Frank, a U.S. Senator from the State of Kansas 59

Carpenter, L. C., vice president, Midcontinent Farmers Association,

Columbia, Mo 93

Curtis, Hon. Carl T., a U.S. Senator from the State of Nebraska_ _ _ _ 89

Graham Harry L., legislative representative, National Grange 14

Gregg,

Graham, 

B., Board of Trade of Kansas City, Mo 29

Hendrickson, Roy F., executive secretary, National Federation of

Grain Cooperatives 48

Hruska, Hon. Roman L., a U.S. Senator from the State of Nebraska 64

Jaenke, Edwin A., Associate Administrator, Agricultural Stabilization

and Conservation Service U.S. Department of Agriculture 72

Johnson, Reuben L., director, legislative services, National Farmers

Union_ 42

Kendrick, Ken, executive vice president, National Association of

Wheat Growers 68

McLain, Marvin L., assistant legislative director, American Farm

Bureau Federation 20

Mundt, Hon. Karl E., a U.S. Senator from the State of South Dakota_ 1

Nelsen, Hon. Ancher, Representative in Congress from the Second

Congressional District of Minnesota 90

Odegaard, George, manager, Scranton Equity Exchange Elevator,

Scranton, N.Dak 32

Peirce, Walter C., president, Kansas Farm Bureau 61

Ramsland, Royce, manager, domestic merchandising and marketing,

Farmers Union Grain Terminal Association, St. Paul, Minn. 55

Rice, Sam L. Jr., president, Grain and Feed Dealers National Association, Toledo, Ohio 43

Searles, Robert L., chairman, National Grain Trade Council, Minneapolis, Minn 61

Sickels, Harvey, national secretary, National Farmers Organization,

Corning, Iowa 91

Miscellaneous documents:

S. 2785, 89th Congress 1

Tables, grain export prices, December 16, 1965, and January 27, 1966 11

Chart, cumulative weekly CCC sales of corn for domestic use 22

Table, closing prices for cash wheat 23

Table, weekly sales of wheat by CCC for domestic use and export_ 23

Table, Duluth spring wheat prices 33

Letter to Senator Young from the Department of Agriculture on

CCC sales of high-protein wheat 34

Table, margin over wheat loan provided by 105 percent resale

minimum 56

Table

'

cash closing prices, Minneapolis Grain Exchange, November

22, 1965 57

Statement by Department of Agriculture on computation of wheat

parity price 83

Price support premium on 16-percent-protein Spring wheat 86

Statement by Department of Agriculture on marketing of wheat_ _ _ _ 88

Table, wheat held by farmers and under loan and reseal in North

Dakota 88

III

MINIMUM RESALE PRICE OF COMMODITY CREDIT

CORPORATION WHEAT

TUESDAY, FEBRUARY 1, 1966

U.S. SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D .0 .

The committee met, pursuant to notice, at 10:10 a.m., in room 324

Old Senate Office Building, Senator Allen J. Ellender (chairman)

presiding.

Present: Senators Ellender, Aiken, and Young of North Dakota.

The CHAIRMAN. The committee will please come to order.

During the debate last year on the 1965 Agriculture Act I agreed

to hold hearings on S. 2785 by Senator Mundt and about 2 weeks ago

I notified him that I would be ready to start this morning. So we are

here, Senator Mundt. You may proceed.

(S. 2785 follows:)

[S. 2785, 89th Cong., 1st sess.]

A BILL To increase the minimum price at which wheat may be sold by the Commodity

Credit Corporation

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

of America in Congress assembled, That section 407 of the Agricultural Act of

1949, as amended, is amended by changing the period at the end of the third

sentence to a colon and adding the following: "Provided, That, notwithstanding

any other provision of law, the Commodity Credit Corporation shall not make

any sales of wheat at less than 115 per centum of the current support price for

wheat, plus reasonable carrying charges."

STATEMENT OF HON. KARL E. MUNDT, A U.S. SENATOR FROM THE

STATE OF SOUTH DAKOTA

Senator MUNDT. Thank you very much. I have a prepared statement. I will skip over a part of it in the interest of saving time, with

the hope that it may appear fully in the record.

The CHAIRMAN. It will appear in the record as though you had

presented it in full.

Senator MUNDT. I would like to express my appreciation to the

chairman and to the committee for holding these hearings. It was

on September 14 last year, during the floor discussion of the Food and

Agriculture Act of 1965 that I called up my amendment, No. 444,

which was generally sponsored by Senators Young and Carlson. And

we had a little colloquy and the chairman suggested that this controversial question might better be decided through committee hearings instead of taking it up on the floor and getting a vote on it, and

if we would withdraw it he promised to hold hearings early in February, and being the sterling character and man of his word as the

chairman is, he has done that. I appreciate it.

1
2 MINIMUM RESALE PRICE OF CCC WHEAT

We are fortunate in the Farm Belt in having a chairman like Senator

Ellender who has a real genuine interest in agriculture, not only in rice

and cotton and tobacco or southern crops where he lives, but all over

the country as a whole and he has traveled extensively in our agricultural areas, including an area where he had an experience as a boy, I

believe, in the wheat industry in Edmunds County, S. Dak., which I

hope has left him with a nostalgic sympathy with the problems that

we now are confronted with, and which ought to influence him directly

in favor of our amendment.

There are many issues involved with respect to the resale power now

held all too tightly in the hands of the Secretary of Agriculture.

However, if we are to appraise this issue so that we can understand

all of its implications, I believe it only fair to present the position of

some of the eminent people who are directly involved in this basic issue.

First, I should like to quote from recent statements of the President

of the United States. In the farm message submitted to the Congress

on February 4, 1965, President Lyndon Johnson made one of the most

forward-looking farm policy statements with respect to the vital force

and income-generating thrust provided by the free market,. The President said something which I think is a good background for what we

are trying to do here today through our amendment, S. 2785.

In that historic message the President stated:

The bounty of the earth is the foundation of our economy.

The farm people of this Nation have made, and are continuing to make, a lasting contribution to our national prosperity. As a matter of simple justice they

should share equitably in this prosperity. They deserve a place of dignity and

opportunity.

The President sets forth his objectives as follows:

1. An abundance of food and fiber at reasonable and stable prices for the

people of the United States.

2. Effective use of our agricultural resources to promote the interests of the

United States and world peace through trade and aid.

3. A workable balance between supply and demand at lower cost to the

Government.

4. Opportunity for the efficient family farmer to earn parity of income from

farming operations.

5. Parity of opportunity for all rural people, including new opportunity for

small farmers.

There must not be overlooked the one fundamental fact which the

President recognized if we are to attain the goal of parity of income—

the vital force of the free market. He declared as follows:

Our objectives must be for the farmer to get improved income out of the

marketplace with less cost to the Government.

To do this I am asking the Secretary of Agriculture to so utilize the Commodity Credit Corporation as to make the free market system work more effectively for the farmer. We must encourage the private segment of our economy to carry its own inventories, bought from farmers rather than depending on the Government as a source of supply. We must urge the private sector

to perform as many services as possible now performed by Government agencies.

Fundamentally, this was not a new thought of President Johnson's

for in December of 1963, in a public letter to the president of the

American Farm Bureau Federation, he asked:

How can we use the pricing mechanism of the free market with more vitality

than presently? In this endeavor, how can we better coordinate the role of

Government with the area of the private sector, including farmers' own institutions in the marketing of farm products. In this endeavor how can our ef-
MINIMUM RESALE PRICE OF CCC WHEAT 3

ficiency in producing and marketing be reflected in fair and open competition in the world markets?

Our amendment, S. 2785, moves directly, Mr. Chairman, along the

path which was set up by the President in that statement.

In making a public statement regarding his request of the Secretary of Agriculture, this is a definite expression by the President that

there be a changed course in Commodity Credit Corporation's sales

policy. Unless the present sales policy is changed, we cannot achieve

the objective of parity of income for efficient family farmers. Nor

can we move as rapidly as we should in the direction of the free economy that the President spoke about. The only way that we can

attain this goal is by farmers getting a greater share of the free market. This cannot be achieved if the current minimum sales formulas

for wheat and feed grains are continued. Raising the minimum sales

price is one way to achieve this objective. On February 18, 1964,

the Vice President of the United States, Hubert H. Humphrey, ad-

.dressed his then fellow Members of the Senate with respect to the

important issue of Commodity Credit Corporation sales of wheat.

Let me quote from that statement, because it is as strong in support of

my position as any man could make:

Any measure that we pass should contain a provision that the Commodity

Credit Corporation be not permitted to sell Government-owned wheat for unrestricted use for less than 115 percent of the loan rate plus reasonable carrying

charges.

As Americans begin to respond to the demand for wheat and as the price to the

farmer begins to rise, the Commodity Credit Corporation can establish a price

ceiling by selling its Government-owned stocks at 105 percent of the loan rate.

Mr. President, again I point out that the law sets the minimum, not the

maximum.

By requiring the Commodity Credit Corporation to sell at not less than 115

Percent of the loan rate—which I recommend—the wheat farmer could receive

from 10 cents a bushel to 15 cents a bushel more for his wheat. At the same

time, the value of the inventory held by the Commodity Credit Corporation

would increase. So, Mr. President, from both points of view, including the

Government's investment in its own inventory of wheat stocks, a provision of

115 percent of the loan rate as the minimum sales price for the Commodity

Credit Corporation would be desirable. To the farmer it would be very desirable, because it would mean the market price would be affected in a beneficial

manner by increasing that price by anywhere from 10 to 15 cents a bushel.

Also, the Government could realize a higher price for its wheat, due to strong

world demand, and the free market could operate to provide realistic differences

between grades and types.

This, of course, is precisely what our amendment provides, in that

when it says, "Notwithstanding any other provision of law, the Commodity Credit Corporation shall not make any sales of wheat at less

than 115 per centum of the current support price for wheat, plus

reasonable carrying charges."

So I bring in this morning, in absentia, as cowitnesses in support

of our amendment, the President of the United States and the Vice

President of the United States. I wish that I could also bring in

the Secretary of Agriculture as an articulate advocate of it, but I

am not sure that I can. I suspect that he will be here to speak for

himself.

The CHAIRMAN. Let me ask you to comment, on this: As I understand it, the law provides for not less than 105-percent plus charges,

and here recently the Secretary of Agriculture stated he would sell
4 MINIMUM RESALE PRICE OF CCC WHEAT

at 108 plus. Would it not be possible for the Secretary of Agriculture

to do exactly what your amendment does, if he saw fit to do so?

Senator MUNDT. It would be entirely possible. And we would like

to feel that the discussion that we have had and the arguments we have presented and the colloquies on the floor of the Senate helped result in that desirable movement from 105 to 108. He could go to

115, but I suspect that he sort of wants some congressional guidance, and we would hope that the adoption of this amendment would provide him with that guidance and with that encouragement. You and I

do not believe in having the executive branch operate without some consultation.

The CHAIRMAN. I am just asking the question, since the President is so much for what you say—since the Vice President is, too—and I

imagine that they would have a great deal of influence on Secretary Orville Freeman.

Senator MUNDT. I would hope so.

The CHAIRMAN. And under the law as it is now written, he could do the very thing that you would suggest we do, and the only objection

that I can see at the moment is that you would make it a rigid 115

percent, when I feel that there must and should be some flexibility.

Senator MUNDT. Even if there is a concept of flexibility, psychologically it has bad impact on the cash market price and it is disturbing

to the farmer. I believe that the Vice President of the United States has exercised whatever influence he has on the Secretary of Agriculture. I do not know about the President. I grant that he has a lot

of other problems in Vietnam and elsewhere and he might not have

gotten around to talking to the Secretary of Agriculture about bring- ing his policies in line with the President's pronouncement to the Congress, but we can understand that. I believe that the policy, however,

does have the complete support of the President and the Vice

President.

In a speech to the American Farm Bureau Federation in 1964, the

distinguished gentleman who is now Vice President said:

The Commodity Credit Corporation was established and I quote from its

charter:

"For the purpose of stabilizing, supporting, and protecting farm income and

prices, of assisting in the maintenance of balanced and adequate supplies of agricultural commodities, products thereof, foods, feeds, and fibers, and of

facilitating the orderly distribution of agricultural commodities."

I do not want my remarks to be interpreted as indicating that I am opposed

to the Commodity Credit Corporation for I do not know what the American

farmer would do without it. But the Commodity Credit Corporation was established with limited responsibilities. It was established to supplement farm

income, not depress it. It was established to put a floor under prices, not a ceiling. It was established to aid the farm producer to supplement the normal

channels of trade and not to supplant them. And let me add, it was also established to cooperate with farmer-built, farmer-owned, and farmer-operated

organizations.

At times I've heard disturbing evidence that the mandate of the Commodity Credit Corporation charter has not always been followed. There's a tendency on

the part of some to want to make it a going business concern. The Commodity

Credit Corporation was not organized to do the business of the grain trade or

of the farm cooperatives. It was established to make the marketplace more

orderly, not more disorderly. It was created to help improve the price structure

for the farm producer and not to lower it. It was established to promote

orderly marketing and not to engage in dumping.

Therefore, it is the responsibility of the Congress to see that the Commodity

Credit Corporation operates within the framework under which it was designed.
MINIMUM RESALE PRICE OF CCC WHEAT 5

Thus, the President of the United States and the Vice President

have both spoken in ringing terms on this issue. Let us consider now

the great farm organizations, and their position, who have also supported this.

Senator YOUNG of North Dakota. I think that at this point it would

be well to point out that rather than raising the resale price of the

Commodity Credit Corporation stocks that Secretary Freeman in his

1964 announcement issued an order halting all sales of Commodity

Credit Corporation of Hard Red Spring wheat and then this was followed in March 1965, halting all sales of other classes of wheat. This

placed the Secretary of Agriculture in a very untenable position. He

could not forever refuse to sell Commodity Credit Corporation-held

wheat at any price, so that eventually he had to establish a resale price,

and when he did this did have a rather severe reaction on the market.

The higher protein wheat dropped from 15 to 20 cents a bushel almost

immediately and the drop in the cash price would have been far more

drastic if boxcars had been available—it was almost impossible to get

boxcars out there. So that there was not much Commodity Credit

Corporation wheat moving to the terminal markets from that area,

but if there had been a drop in the cash price of the high-protein

wheats they could well have dropped 30 or 40 cents a bushel, but, as

I pointed out, he placed himself in the untenable position of not selling

at any price. He would have been far better off if he had said that he

would sell for 115 or 110 or 120, because then the trade and the farmers

would have known where they were at, but refusing to sell at all for a

full year did place a terrific amount of uncertainty on what he would

do in the future.

The CHAIRMAN. I suggest to the Secretary of Agriculture that he

send somebody here to listen to these hearings, to look them over, and

I promise to listen to their side.

Senator MUNDT. That is perfectly appropriate. And what the Senator from North Dakota has said is certainly a historic fact. It

had this impact.

In addition to the President and the Vice President who spoke in

categorical terms as to the type of policy they support, and which

policy S. 2785 fits just like the hand fits the glove, let me bring in the

testimony, the statements of the three largest farm organizations in

our country.

The president of the largest farm organization in the United States,

Mr. Charles Shuman, the American Farm Federation, stated it most

succinctly as follows:

To protect farmers against competition from the release of Commodity Credit

Corporation surplus stocks of wheat and feed grains, sale of these stocks at less

than 125 percent of prevailing support levels, plus reasonable carrying charges,

would be prohibited except for sales that are offset by open market purchases.

(This exception is designed to provide needed flexibility for the maintenance of

good inventory management practice.)

Farmers' experience with the Commodity Credit Corporation dumping of both

feed grains and wheat under the "emergency" programs of recent years has been

highly unsatisfactory. The isolation of Commodity Credit Corporation stocks

from the market would reinstate immediately the traditional functions of the

market system in establishing farm commodity prices and guiding agricultural

production. Farmers should not be handicapped by ceilings put on current commodity prices through the dumping of Commodity Credit Corporation stocks,

which have been built up under unsound programs of the past.
6 MINIMUM RESALE PRICE OF CCC WHEAT

And I can interpolate that there have been some recent problems in

South Dakota because the Commodity Credit Corporation has been dumping corn into the market.

Now, the president of the National Farmers Union, James G. Patton, stated as follows:

The policy of the Farmers Union as stated by our delegates is that "no Com- modity Credit Corporation inventory of wheat could be disposed of at less than 120 percent of the support price and other policies concerning Commodity Credit Corporation raarketings (including feed grains) should be directed toward strengthening the regular market structure."

We consider the spread between the support level now set at $1.25 and $2.50 (basic support rates plus $1.25 certificates) proposed for domestic wheat under

the provisions of the new farm bill to be wide enough to permit increasing the Commodity Credit Corporation's sale price of wheat to the level we recommend. This matter was fully debated at our convention and by decisive action of the delegates is the policy of Farmers Union.

It is our sincere hope that the subcommittees as well as the full House Agriculture Committee will see fit to approve recommendations of our organization

in this regard.

I call attention to the fact that these two great organizations, that

one says 125 percent and the other says 120 percent. Senator Young

and Senator Carlson in our amendment of a year ago, and Senator

Young and I, in this bill today, S. 2785, have taken a somewhat more

moderate effort to go at least to 115 percent.

The largest grain marketing cooperative in the world, the Farmers

Union Grain Terminal Association, of St. Paul, Minn., stated as follows in a recent radio broadcast:

It must also be pointed out that the Government now owns unrestricted less

than 600 millon bushels of wheat, an adequate but not overlarge national reserve. Farmers and the private and cooperative grain industries are perfectly

capable of storing and handling commercial supplies. The Government does

not have to load up its inventories with more wheat and is not forced to do so.

For example, right now a good many farmers have 1964 wheat stored under

the loan program. They are intelligent and capable people, and they work

with sharp pencils to determine how to market that wheat to their best advantage. Should they turn it over to the Government or market it at their

elevators and pay back the loan?

If they desire to pay back the loan, they must pay interest for the period

they have used the Government loan money. They were forced at the time

they took out the loan to pay the first year's storage. So, they must realize

in the marketplace at least 10 cents more per bushel than the loan value to

come out even. That means the market price would have to be at least 110

percent of loan. We figured the market price one day last week, and it was

at 107 percent of loan, approaching the point where farmers could redeem

without loss.

These redemptions keep grain out of Government bins which is considered to

be desirable at this time. Thus the Government saves money. Farmers benefit.

Farmers' cooperatives are able to market and merchandise grain and use their

arsenal of facilities to improve returns to farmers. It also gives the co-ops a

chance to bargain for better protein premiums, which they obtained for farmers

in the first place. When grain goes into Government hands CCC enforces rigid

control of protein premiums with its own schedule of values.

But if CCC resumes wheat sales at only 105 percent of loan, you know from

experience that market prices will hover at just about that level. The lower

CCC schedule of protein premiums will prevail. Farmers will have little or no

incentive to redeem their grain. They are almost forced to turn it over to the

Government. Then the whole round robin of putting wheat into and selling it

out of Government bins goes on. USDA is put on the defensive, forced to try

to defend itself against its critics in and out of Government. Farmers get a

bad name with taxptiyers. They get lower prices for their grain. Their cooperatives are hamstrung in the marketplaces.
MINIMUM RESALE PRICE OF CCC WHEAT 7

So you see the value in simply raising the CCC grain resale price to allow

the CCC to operate within the charter given to it by Congress—and in full

recognition of farm program goals as outlined by President Johnson himself.

This is a program which our chairman has approached many times,

to have the Government move into private trading, that the private

trading can take up.

The CHAIRMAN. I express the hope that either you or some other

witnesses will discuss this matter further in the light of the fact that

all domestic wheat yields parity to producers in other words, if all

of the wheat were of the same category as the wheat that was sold

abroad, your argument might be even stronger than otherwise it would

be if we did not have the domestic market at parity as is provided in

this.

Senator MUNDT. This would, of course be true. If all of the wheat

that were grown was being sold at parity, we would not be in this

kind of problem, but under the two-price system as the Senator so well

knows, this is not the case. This just deals with the wheat that is sold

locally.

The CHAIRMAN. I am telling you that, since the farmer is receiving

the full parity on the domestic use wheat that he produces. And it

would seem to me that the arguments that have been advanced by you

and others would be tempered somewhat because it affects only the

wheat to be sold abroad.

In any event I would like to have it in the record.

Senator MUNDT. We have a very distinguished farmer here present

with us, a very distinguished Senator, too, so let us have Senator Young

talk on this.

Senator YOUNG of North Dakota. Under the new program, of

course, the loan price is $1.25 a bushel, and since it is tied to a corn

loan value which has been dropped 5 cents a bushel, I imagine that

next year the wheat loan price will drop by 5 cents a bushel or to $1.20

a bushel. This means that cash wheat prices for all of the wheat

that the farmer produces not just that portion consumed in the United

States, are governed by the resale price of Commodity Credit Corporation held stocks or forein, exports and the marketplace itself. So

you cannot expect the cash price to get far above this level except for

the higher protein wheat.

The CHAIRMAN. What I had in mind, Senator Young and Senator

Mundt, was simply this, that we are striving here to assist the farmer,

the producer of this commodity, and it seems to me that since the

Government more or less guarantees all wheat that is consumed locally,

that is, domestically, it will receive $2.67.

Senator YOUNG of North Dakota. That is not the cash price, Mr.

Chairman. That is the loan price, plus the wheat certificate payment.

The CHAIRMAN. Yes, but still that augments the guarantees, more or

less the returns at parity, and the point that I was trying to make was

that if all wheat were fixed, that is, the sale of it were fixed at so much

a bushel, a better case could be made than can now be made, so far

as the terms of the producer are concerned.

Senator MUNDT. From the standpoint of the producer, Mr. Chairman, a very direct help that accrues to him from S. 2785 is because,

frequently the market prices are working up above this present 105 percent or the new price that the Secretary set of 108 percent, but a 3 soon
8 MINIMUM RESALE PRICE OF CCC WHEAT

as they tend to work up and the farmers can get a better cash price

for his grain, of course the Commoditity Credit Corporation dumping

in from its great stacks of grain, wheat, on the open market, inevitably

forces down the price, and even if it does not, so long as they have the

power and the authority and the historical pattern of dumping it in,

it tends to hold prices down, because people are buying on speculation

in anticipation of what the price is going to be.

The Food and Agriculture Act of 1965 is a 4-year legislative vehicle

which offers the opportunity for administration for the benefit not

only of our farm people, but also for the consumer, the taxpayer and

the private channels of trade.

It puts this Nation well along the road toward a basic change in

farm policies, for, despite similarities in appearance and purpose with

previous legislation the new program provides a new approach to

farm policy.

Specifically, the provisions of the act of 1965 represent a shift in

policy away from price supports for the major commodities at levels

above world prices, to a policy which properly administered, permits

the using of the market, both domestic and foreign, by setting price

supports as close to the market level as possible.

At the same time, farm income will be strengthened through provisions for direct payments to farmers who cooperate by diverting

productive acres to other uses.

For as Secretary Freeman recently stated:

Increased reliance will be placed on market demand as a key factor in market pricing. This means that the farmer will be able to price his products competitively in both domestic and world markets, and that the daily business of acquiring and disposing of surpluses through Government channels will be greatly

diminished.

This new approach will encourage maximum domestic use of farm commodities—and slow the development of substitutes, and it will also enable the farmer

to gain a stronger position in world trade. These programs, for example, take a

big step toward fulfilling obligation under the General Agreement of Tariffs and Trade, to use export subsidies as sparingly as possible in gaining a fair share of

world markets.

However, the fact that this legislation is not being properly administered to maximize returns to farmers—farmers who are still a long

way from parity of income. We must raise the minimum, the Credit Corporation resale levels. We must amend the Food and Agriculture

Act of 1965. We must do this as a matter of simple justice. We must

do this to bring farmers closer to parity of income levels. We can achieve that goal by writing S. 2785 into the law.

You have pointed out the fact that the Secretary has increased to

108 percent the minimum price, but it is also true that using the legis- lative authority which the Secretary has, there have come shock wave

after shock wave that has been directed at the farmers' markets by

announcement after announcement emanating from the Secretary's

Office of the U.S. Department of Agriculture. Each announcement

provided for broadened offerings of Commodity Credit Corporation

owned wheat in an effort to place a damper on recent market strength in grains.

One day it is an offering to break the market in high protein wheat.

Shortly thereafter the U.S. Department of Agriculture announced

that all qualities of wheat from Commodity Credit Corporation stocks
MINIMUM RESALE PRICE OF CCC WHEAT 9

are being offered for sale for unrestricted use "to assure adequate

market supplies."

Suddenly, in spite of the fact that there was about 112 million

bushels of wheat in the 1965 crop still under loan, the Secretary announced he would sell unrestricted quantities at price-depressing levels.

It is most significant that the very Secretary of Agriculture who presented the Congress with legislation which would have resulted in

wheat costs to the mills, including domestic certificates in excess of

$2.55 per bushel, now takes the position that wheat which costs the

mills some 40 to 50 cents less than this should be attacked and by means

of the heavy armament of Commodity Credit Corporation sales "price

stabilized." This is really a fast shifting of gears into reverse. The

Secretary has used the English language to make a complete U-turn.

In this process he has reduced wheat growers' income.

Actually, the Secretary of Agriculture has admitted in testimony on

April 6, 1965, before the House Committee on Agriculture that he has

been using and would continue the sales of Commodity Credit Corporation owned stocks to hold down prices in order to force participation with the "voluntary" program.

The U.S. Department of Agriculture claims it needs the lower resale

price to force participation in the program. Let us examine this.

The noncooperator is not eligible for the loan or payments. He is

most likely to be forced to sell in the early part of the marketing year,

when prices are seasonally lowest. The cooperator can use the loan

and practice orderly marketing—a long-term objective of all farm

programs. The average price received by the cooperators will be

higher than for noncooperators.

You do not need these pressure tactics. Incidentally, I just happen

to be one who does not believe that when you establish a voluntary,

program that you should provide a whip in the hands of the administrator to force those who do not want to voluntarily join to have to

join under coercion for fear of going into bankruptcy.

Secondly, the cooperator is eligible for reseal payments on farmstored grain.

Third, the cooperator gets payment whether or not he makes a crop.

This is an important insurance feature.

Fourth, the diverted acreage put into conserving crops is more

productive the following year.

Fifth, the farmers' own marketing organizations lose if the Government dominates the market system; so do other private marketing

entities.

Another reason sometimes advanced for lower retail prices involves

budgetary costs—specifically, for the wheat export subsidy. If we

assume that the world wheat price will be below the U.S. market level,

there is some validity in this point. The difference between 105 percent of loan and 115 percent of loan for 1965 will be 10 percent or

about 13 cents per bushel. However, the proponents of the lower

resale level state mistakenly that the increase in budget costs will

apply to the entire quantity exported. Students of markets recognize

that with a wheat crop of 1.3 *billion bushels it would only be late in

the marketing season, if at all, that the market price would rise to the

$1.44 level plus carrying charges. For the first few months of the

marketing year wheat would sell below the current minimum resale

level. The increased direct costs would be about $40 million—not $84
10, MINIMUM RESALE PRICE OF CCC WHEAT

million. The increased income would be about $100 million-21/2

times the higher costs. Income tax receipts from farmers would be

higher—much higher. Government handling costs would be down

sharply. It would go all of the way in recapturing for the Government the $40 million costs which it has to generate this increase in

prosperity among the wheat producers.

• As a matter of fact, the U.S. Department of Agriculture admits

this, as is revealed on page 2293 of the September 14, 1965, issue of

the Congressional Record, where the following is found:

In the past 4 years approximately 46 percent of the entire wheat crop was

sold by producers during the first quarter of the marketing year. Fifteen percent was sold in the second quarter, 19 percent was sold in the third quarter.

and only 20 percent in the last quarter. It is reasonable to assume that higher

markets resulting from the resale policies of Commodity Credit Corporation

would not occur until well into the third quarter of the marketing year.

There is a basic advantage to the cooperator for the market to be

at or above the loan level. This is due to the fact that most wheat

that goes under loan is warehouse stored so the farmer must pay for

the storage. Thus, taking the heavy pressure of Government sales

off the farmer's back enables him to realize more in the market when

he wants to use the market. If, on the other hand, he wants to

use the loan for orderly marketing, this alternative is available to

him.

It should be noted that, for a cooperator who puts his wheat under warehouse loan to net $1.25 per bushel, the market must rise

to about $1.38 per bushel. The 13 cents covers storage costs, interest, and fees. If the farmer is forced to turn the wheat over to the

Government, he nets only about $1.14 per bushel. This is just too

little. It is too high a price to pay to pursue a punitive policy.

Also, the average wheat allotment for noncooperators in the wheat

program is about 10 acres—for cooperators it is five or six times as

much. It ill behooves any administration to use the pressure of a $14

billion Government corporation to force down the income of these

small producers. There are some 700,000 nonparticipators in the wheat

program and about 1.7 million in the feed grain program.

It was never the intention of Congress that the Commodity Credit Corporation stocks be used to reduce farm income. With the threat

that all the Government-owned wheat is available at the legal minimum, there is very little reason for any private firm to own wheat.

The Commodity Credit Corporation is handling millions of bushels

which otherwise would be carried by the trade. This is expensive

to Commodity Credit Corporation in increased costs, to the farmer

in reduced income, to the trade in reduced income, to the trade in reduced profits, and to the Federal Treasury in reduced income taxes.

I have sat around this table for many years as a member of this

committee, and it was never intended that the farm program would

be a ceiling. It was to be a floor to keep farmers from running into

economic disaster, not either to provide a substitute for a market and,

certainly, not a ceiling.

I believe that there is an exceedingly stronger case to be made in

favor of amending the present legislation by S. 2785. I think

this is necessary in order to meet the President's objectives, plus increasing the vitality of the entire marketing system, plus reducing net

Government costs, plus bringing the farm program into harmony
MINIMUM RESALE PRICE OF CCC. WHEAT 11

with the public expressions of both the President and the Vice President of the United States. Our amendment to increase the minimum

resale price of wheat to 115 percent of the loan, plus reasonable carrying charges, will accomplish these objectives.

I thank you very much, Mr. Chairman.

Senator YOUNG of North Dakota. Mr. Chairman, if the Department of Agriculture and the Commodity Credit Corporation, to be

'specific would use this stock to hold cash prices at or near the loan

level the free market would not fluctuate at all. Most farmers then

would be taking loans and the Federal Government would continue

to take over much of this wheat. There is a vast difference in whether

the CCC is selling wheat at 105 percent of the price support or 115 or

120 percent of the price support. If cash wheat were selling at 115

percent of the price support or better, the Federal Government would

acquire very little wheat, and the only cost that it would have then

would be the payment of the wheat certificates. If they decide to

use this program as a price ceiling and hold the price at about the

Joan level, then they can expect to continue to acquire large stocks

of wheat.

Senator M-crisrDT. And you perpetuate the need for expensive farm

programs which might some day not be required if we return to a place

where you can give the farmer a fair price for a full crop in the

marketplaces.

The CHAIRMAN. I just asked for the world price on wheat, and I

was given that information just now. The gulf price, December 16

of last year, the world price was $1.56, U.S. price $1.77. That is Hard

Winter wheat.

. And as of January 27, the most recent figures, the gulf price, U.S.

price, was $1.82 and the world price $1.60, for Hard Winter wheat.

I thought that I would put that into the record.

Senator YOUNG of North Dakota. What quality was that?

The CHAIRMAN. We might put in the record the other costs, the

other prices. It was average protein. We will put in the record

here these prices.

(The information referred tc follows:)

Grains: Export prices basis prompt or 30-day shipment, Dec. 16, 1965

[All prices per bushel except grain sorghum per hundredweight f.o.b. vessel]

Wheat 1 Corn Soybeans Barley

Port markets No. 2

Yellow

No. 2

Yellow

or grain

sorghum 2

Grade Price

Duluth No. 1 Heavy Northern $1.87 

Spring, 14 percent protein.

Baltimore No. 2 Soft Red Winter 1.82 $1.40 $2.77 $1.45

Gulf No. 1 Hard Winter:

Ordinary protein 1.77 1.40 2.74 2.16

14 percent protein 1.81 

Pacific Northwest No. 2 Western White 1.60 1.32

1 The export payment rate for wheat on Dec. 16, was 51 cents per bushel for Spring wheat from Duluth,

52 cents for Soft Red Winter from Baltimore, 51 cents for Hard Winter from the gulf, and 29 cents for White

wheat from the west coast. To compute indicated net price to foreign buyer, add 30 cents (export certificate) to above price and subtract appropriate export payment rate.

2 No. 3 barley at Baltimore, and No. 2 barley in the Pacific Northwest; No. 2 yellow grain sorghum at

Houston or Galveston.

Source: From Grain Market News, USDA, Dec. 17,1965.
1

12 MINIMUM RESALE PRICE OF CCC WHEAT

Grains: Ezport prices prompt or 30-day shipment, Jan. 27, 1966

[All prices per bushel except grain sorghum per hundredweight f.o.b. vessel]

Wheat I Corn Soybeans Barley

Port markets No. 2

Yellow

No. 2

Yellow

or grain

sorghum 2

Grade Price

Duluth No. 1 Heavy Northern $1.90 

Spring, 14 percent protein.

Baltimore No. 2 Soft Red Winter 1. 85 $1. 47 $2. 98 81. 46 Gulf No. 1 Hard Winter:

Ordinary protein 1.82 1.45 2.99 2. 16

14 percent protein 1.88 Pacific Northwest No. 2 Western White _ 1.64 1. 39

1 The export payment rate for wheat on Jan. 27, was 50 cents per bushel for Spring wheat from Duluth 53 cents for Soft Red Winter from Baltimore, 52 cents for Hard Winter from the gulf, and 30 cents for White wheat from the west coast. To compute indicated net price to foreign buyer, add 30 cents (export certifi- cate) to above price and subtract appropriate export payment rate.

2 No. 3 barley at Baltimore, and No. 2 barley in the Pacific Northwest; No. 2 yellow grain sorghum at Houston or Galveston.

Source: From Grain Market News, UDSA, Jan. 28, 1966.

Senator YOUNG of North Dakota. What date are those prices for?

The CHAIRMAN. The last one was January 27. That is ordinary

protein wheat, No. 1.

Senator YOUNG of North Dakota. The cash price is up quite well

now, largely because the Commodity Credit Corporation did not sell at

all until about 2 months ago. Also, the shortage of shipping—it is

just impossible in most areas of the Hard Red Winter and Hard Red

Spring wheat-producing States to get boxcars to get this wheat to market—which has had an effect in holding up prices.

The CHAIRMAN. As I understand it, if the amendment were adopted

the 115 percent of the support price of $1.25 would make the wheat

sell for $1.43 or $1.437, and to that you would have to add the storage

charges which would amount to a cent and a half per month, plus the

carrying charges for the freight which is about 50 cents per truck and

134 cents by rail per bushel.

Senator YOUNG of North Dakota. They start recomputing these

charges each year. They cancel out the previous years costs on July 1.

With the cash wheat selling at present prices the 115 percent resale

level would not be effective, because prices are over the 115 percent

now. We are trying to protect against future drops. The market

price quoted here for export is above what we are advocating.

The CHAIRMAN. As I said a moment ago, the Secretary still has the

right to increase that if he sees fit to do so.

Senator MUNDT. He would still have the right under our legislation, Mr. Chairman, to increase it, if he sees fit, to the recommended

120 percent by the National Farmers Union or the 125 percent by

the American Farm Bureau Federation, but he would not have the

right to drop it so precipitously as to create losses for the farmers and

to prevent them from getting what would otherwise be a profitable

price to help get the farm problem off from the backs of the American

taxpayer.

The CHAIRMAN. He would not have the right to have it below that.

Senator MUNDT. That is right. He would still have the right to

increase it if he wanted to do so.

The CHAIRMAN. Yes, sir.
MINIMUM RESALE PRICE OF CCC WHEAT 13

Senator AIKEN. The President sent up a message today on foreign

aid and he is sending up one on Public Law 480. He is also sending;

up three different propositions tomorrow and the next day, I understand. One of those messages will relate to the amount of reserve

which we should keep on hand for our own security reasons.

I am wondering how that may be tied in with this proposed legislation of yours. I have not seen the message as yet.

Senator MUND'r. I have not, either, but I cannot see how it will run

contrary to our concept, because we are trying to prevent them from

dumping the reserves into the market at sweatshop prices. I do not

know what the program is, however.

Senator AIKEN. He is going to recommend, I expect, maintaining a.

real sizable reserve in this country in our own elevators. And I just

wondered what that amount is and if it is already on hand.

Senator Murayr. I do not have the figures that he arrived at.

Senator AIKEN. I agree that we ought to keep a year's supply on

hand for our own good. And we have increased demands from other

countries, all buying at less than cost, if they can get it.

Senator MUNDT. I think, generally, the whole story on this whole

area of feed grains is reaching a point where we no longer have the

amounts of unmanageable surpluses that we used to talk about here.

Senator AIKEN. I think that the Secretary agrees we do not have

any surpluses of wheat to speak of. He seems to think we have a surplus of feed grains. I would question that, too.

Senator MUNDT. We are reaching a point where we do not have the

stupendous surpluses of earlier years. We are, certainly, reaching a

point then where the wheat producer ought to be entitled to get a fair

price.

Senator YOUNG of North Dakota. I understand a proposal will be

made to tie the resale price for wheat to the amount of carryover. If,

for example, the Government's determination is that 500 million

bushels is a minimum which should be carried, then you could graduate

the resale price to 115 to 125 percent, when you reach this lower level.

I think that a proposal such as this has considerable merit. On the

other hand, if you have a 1,500 million bushel carryover, then the resale

price should be lower.

Senator AIKEN. I do not know what the recommended carryover

figures are. I think that we have got to watch one thing, that we

do not transfer this authority to handle agricultural commodities to

some other agency of Government which would, probably, do worse.

We used to say that "too many cooks spoil the broth," and sometimes

nowadays I get the idea that we have too many broths for one cook.

The CHAIRMAN. I had one occasion to discuss the extension of Public

Law 480 with the Secretary of Agriculture, and we both hope that

he can present something we can agree on. I believe that this will

come, probably, this week or next week.

Senator AIKEN. It is due this week.

The CHAIRMAN. Are there any further questions of Senator Mundt?

If not, we are very glad to have had you here.

Senator MUNDT. Thank you. It has been good to come back to my

old surroundings.

59-108-66--2
14 MINIMUM RESALE PRICE OF CCC WHEAT

The CHAIRMAN. Is Senator Pearson present? If not, the Senator

will have the opportunity to file his statement in the record, if he so

desires.

Our next witness is Mr. Harry L. Graham of the National Grange.

We have heard from you quite a few times, and I hope that whatever

you present will not be repetitive.

STATEMENT OF HARRY L. GRAHAM, LEGISLATIVE

REPRESENTATIVE, NATIONAL GRANGE

Mr. GRAHAM. Mr. Chairman, we appreciate the opportunity of appearing again. In the context of this legislation we have presented

our position before and we want to reaffirm in general the position

which we have previously taken which was in opposition to the increase in the resale price.

Instead of reading my testimony, I want to just pick out some of

the main points, which procedure I am sure will meet with the approval of the chairman of the committee because of the time element

that is involved here.

The arguments which have been advanced in favor of the resale percentage being increased could not appear to us to be as valid as they

do to some of the proponents of this.

The wheat program which we have, which has been developed by

this committee and the Congress is working. We have seen a reduction of Government taxes. We have had a saving on storage costs.

We have gotten the wheat market price in about as good a situation,

all in all, as it has been for a long time. It is not perfect, by any

means, but in the light of the total world situation and the world market situation we do not see that it is going to be improved by this

legislation.

The Grange, I think, would point out—and I am doing this rather

quickly; if I had more time I would put it in nicer words—that we do

not have any elevators. We have no particular interest at that point.

We do have the conviction that a great deal of the pressure to change

existing law comes from organizations that have very much of an interest in elevators and elevator storage.

I point out at this point that the Commodity Credit Corporation

owns bins with a capacity of about 855 million bushels, part of a 4-billion storage capacity. At the present time we are about 40 percent

full. The fact is that the commercial warehouses on December 31,

1964, were operating at only 36.37 percent of capacity; on March 31,

1965, at 31 percent of capacity; on September 30, 1965, at 20.11 percent

of capacity; and on December 31, 1965, at 26.41 percent of capacity.

There is another consideration in this situation which cannot be

disregarded as a reason for the proposed change in our basic agriculture act. We are convinced that this change would slow down, stop,

and, probably, reverse the trend toward the reduction of Government

stocks, and, consequently, elevator space utilization.

The general line of attack on the resale prices is the assumption that

the resale prices would raise the income of the farmers which would go

up in proportion.

In the case of feed grains and wheat, the price has been at the

loan rate or about at the loan rate for many years. There have
MINIMUM RESALE PRICE OF CCC WHEAT 15

been times when most of the people that sell their crop will sell it

at harvest, and a great many of them are not in any position at all to

take advantage of the time that is necessary to wait to get the maximum benefit from the storage program that is a part of the Commodity Credit Corporation program.

We point out, also, that the grain trade, of course, is very much

interested in this. We understand why they would be, but the fluctuation of 7 to 10 cents at the present would be allowed to become 15

to 20 cents in the future, and this fluctuation would be money going to

them, instead of to the farmers.

The other problem that I think that we have is in terms of the budget.

The increased holdings in storage and the increase in costs of the

program would have to come from the loan level. It is at precisely

this level that the smaller farmer would suffer. A decline in the

loan level would be felt more stringently, and that would be where

the results would be more serious. Even at this level, the net effect

would not be to increase the net income for most farmers.

The resale being increased on wheat and remaining on corn at

the present level would present a problem, because both wheat and

feed grain resale levels were determined after lengthy consultation

among the wheat- and feed-grain-producing organizations.

The relative equality of the value of free wheat and that which

is not eligible for domestic or export certificates, and the value of

wheat grains are fairly equal. If this is destroyed, then, in our judgment, it would preclude the use of the substitution clause, and, again

in our judgment, the substitution clause is very much desired.

In the case of international trade, the point has already been made

by the Senator from North Dakota and the information which you

have inserted into the record, Mr. Chairman, in terms of the prices

that we have at the present time. I would point out in relationship

to this that even at the present level we have extreme difficulty in

selling for cash during the last half of the marketing year.

We are selling wheat, of course, under concessional programs where

other things are involved besides cash. However, the cash market

has declined, and I think will continue to decline, unless we can keep

the flexibility which we built into the program in last year's legislation,

allowing us to become competitive in the world markets with variable

export certificates.

Frankly, after spending more than a little time with some of our

international friends, some in Europe and other conferences, we believe

that the legislation which was passed covering this point in the omnibus bill of 1965 has done more to strengthen our trading position and

to strengthen the hands of our negotiators in GATT, in the cereals

group, which has been talking in terms of international wheat agreements, than anything we have done in a long time. This is true because

we have served notice on the world that we can be competitive in world

market prices if we have to be competitive. If the only way we can

gain markets is through competition, then we are in a position where

we can gain markets through competition. Apparently, it scares the

heck out of our Canadian and Australian and New Zealand friends and

even the French. One French leader last fall, in a conversation said

after a certain amount of preparation that the time had come when the

wheat-exporting companies will have to get together on some kind of
16 MINIMUM RESALE PRICE OF CCC WHEAT

sharing markets and the like. At the meeting in Rome, in the sugges- tions for the improvement of the international wheat agreements, if there is a new agreement there to be negotiated, there was the American suggestion of sharing the markets, the surplus, the food aid load. This

was accepted by the farm organizations of all major wheat-producing countries, and is a major shift and quite an accomplishment. We were able to tell them—the Canadians, Australians, the French, and the New Zealanders—that because of our present legislation we were in a

position now, if we wanted to, if we had to, if they forced us to—and

we hope that they do not force us since we do not want low prices for American farmers any more than they do for their own people—but

we are in a position to compete in the world market on prices. If that is the only basis that they want it, then we are ready to do that.

I think anything at the present time that indicates that we are un- willing to compete on the world markets for a price, that we are going to hedge our prices upward at this point, tends to weaken the negoti- ating situation in both GATT and the cereals group in GATT and in whatever talk is being done on the international wheat agreement. This, in our judgment, is an extremely critical part of the consideration

of this legislation.

The fact is that we would simply become noncompetitive after about the first of the year. This is the time, we must remember, when America can do a better job of exporting than at a number of other times, because it is when the Canadian ports freeze up, and this is what created the market for the Russian wheat a couple of years ago. We fiddled around with the Russians until the Canadian ports opened up,

before we got around to doing anything. Consequently, we lost a

goodly share of that market due to this situation and other factors.

It, also, comes at a time when the Australians, New Zealanders,

and the Argentinians are putting their crop on the markets because

they are harvesting their crops.

So it is a very competitive position because of the steady increase

in our prices due to the addition of carrying charges. We are in a

position where we cannot sell in the world market for cash. We are

moving wheat now. There is no question about that, but you all know

where we are moving it and how we are moving it. Ordinarily we give

one-fifth or 20 percent of our wheat to India. This year, probably,

35 percent of our wheat will end up in India, and it is not being sold for

dollars.

We can continue that kind of a disposal program, but this is about

all we are going to have in the last 6 months of the year if we substantially increase this resale level.

Senator YOUNG of North Dakota. Will you yield there?

Mr. GRAHAM. Yes.

Senator YOUNG of North Dakota. Do you not think that sometimewe are going to have to set up some guidelines for the Secretary to follow in the retailing of this wheat?

Mr. GRAHAM. Yes, sir.

Senator YOUNG of North Dakota. I pointed out a while ago that for

an entire year the Secretary followed a policy of refusing to sell any

Hard Red Spring wheat, and for 6 months any class of wheat. As a

result, wheat, in my own hometown, sold for as high as $2 a bushel.

I sold mine for $1.96 a bushel. I am not complaining, but you presently have this wide range between not selling at all or at 105 percent.
MINIMUM RESALE PRICE OF CCC WHEAT 17

And I think that sometime Congress is going to have to set up some

kind of guidelines.

Mr. GRAHAM. I am virtually in agreement with this general concept, Senator Young. I want to say, also, that I think another thing

that we have got to cover, that makes a great deal more of an impact or

could make more of an impact, is the concept of the strategic reserve,

one that is set aside, so that the relief fund for the strategic reserve is

not triggered by price, but rather by the reliability of the situation.

It is perfectly possible that in an international situation it could

develop when price could be very high, and yet our strategic reserves

could be drained out because of the price demand in the world. Consequently we need a different trigger than that of prices. If we had an

adequate strategic reserve at the present level we would almost eliminate this problem in wheat. I much prefer going in that direction,

triggering that with national welfare, national protection of the country, and all of the various things that would come from a strategic

reserve. We could place it in the hands of a competent commission

of experts, representing various areas, including the military and all

of the rest of them, and let them decide when it was necessary to draw

on that reserve. We could keep that reserve out of the way. Then the

depressing effect of the Commodity Credit Corporation stocks would

largely be removed, and we could begin, I think, to stimulate world

market prices on that basis. We simply take ourselves out of the

business this way.

(The prepared statement of Harry L. Graham follows:)

Mr. Chairman and members of the committee, it was inevitable that because

of inadequacies and shortcomings, our farm policy, which was based on a depression, salvaged by a war, and nourished in a postwar prosperity, would break

down under the weight of its own inner contradictions. This occurred at the

beginning of this decade when the economic and political pressures caused by

the dead weight of 1,400 million bushels of wheat and 85 million tons of feed

grains depressed the market, sent Government storage and holding costs skyrocketing, and caused abuse and scorn to be heaped upon the farm program

by friend and foe alike.

The options available to alleviate this situation were neither numerous nor

easy. President Eisenhower remarked that the cheapest way of disposing of the

surplus was to dump it in the ocean, but that was inconceivable in a hungry

world. Since there was no effective way of isolating domestic and international

markets from the depressing effects of these surpluses, the only alternative was

to reduce them in order to stabilize and improve prices and cut Government

costs. There was no painless way to do this. Sacrifices were required by farmers,

taxpayers—yes, and even warehousemen.

It fell to the lot of the 87th Congress, in which many of the members of this

committee served with distinction, to develop an emergency program for feed

grains. The National Grange, working in cooperation with the commodity groups

representing this great industry, proposed the fundamentals of the legislation

which became the feed grains program. The Congress, in its wisdom, further

defined and delineated the program, adopted it, saw it signed into law by the

President, and administered, we believe, wisely and well in the best interests of

agriculture and the general welfare, by the Department of Agriculture.

In terms of producer participation, it certainly has proved to be a most popular

program. It has met the major objectives of the legislation by maintaining farm

income at the highest possible level under the circumstances, and reducing Government stocks and costs at the same time. Without this reduction in Government stocks, the savings on storage costs would not have been available for

payments to farmers to stabilize farm income.

In 1964, Congress showed the stature and statesmanship which we have come

to expect and passed legislation to prevent a disastrous collapse of the whole

wheat production and marketing system. The 50 percent of parity level and the

105-percent release price were retained. This program was acceptable to the
•

18 MINIMUM RESALE PRICE OF CCC WHEAT

farmers; it had more participation in 196.5 than in 1964; it helped to reduce

Government stocks; it improved our trade relationships with the rest of the world; it did not increase costs to the consumer, but it was short on farm income, and it presented some problems in terms of international trade.

The 1st session of the 89th Congress passed the omnibus farm bill of 1965, the

most comprehensive farm legislation since 1938. The programs included cleared

up some administrative problems, they improved the income of the producers,

they strengthened our international trading position, they continued to reduce the

cost of Government storage programs, and they strengthened and protected the

family size farm.

It is no secret, however, that the direction of these programs has not been pleasing to those who are determined to oppose any kind of a program. It is

also no secret that the programs to reduce Government costs, by reducing the

Government storage, has met the strenuous opposition of those whose primary

business is in the storage of grain. This kind of opposition came from warehousemen who mistakenly believed that the acquisition programs would never

be abandoned and, consequently, gambled some of their money in the expansion

of their storage facilities and lost on the gamble when Government stocks were

reduced.

It is not stated in the proposals to increase the release price level for Commodity Credit Corporation stocks that this would be a way of reversing the trend

toward emptying the bins and storage elevators that have been used for storage

purposes in the past. The Commodity Credit Corporation owns bins with a capacity of about 965 million bushels, and these are at present about 50 percent

full. However, there is no complaint from this source. The fact that commercial warehouses on December 31, 1964, were operating at only 36.37 percent of

capacity; on March 31, 1965, at 31 percent of capacity: on September 31, 196.1,

at 28.11 per cent of capacity and on December 31, 1965, at 26.41 percent of

capacity, cannot be disregarded as a reason for a proposed change in our basic

agricultural law, which would slow down, stop, and probably reverse the trend

toward the reduction of Government stocks and, consequently, elevator space

utilization.

Practically all of our society is aware of our surplus agricultural commodities:

very little of it is aware of the surplus in storage facilities. The inevitable conflict results from the fact that the development and execution of programs to

relieve either problem will automatically increase the problems of the other.

It may, indeed, be necessary to develop programs to alleviate the difficulty faced

by the warehouse companies, both privately and cooperatively owned. This,

however, should be honestly labeled as a program to do just that, and should not

be disguised as a part of a farm program.

The general attack on the release price level is on the assumption that if the

release price were raised, the income of farmers would go up in proportion. Let

us take a look at that assumption.

In the case of feed grains, the price has been at the loan rate or under, at the

time of harvesting for many years. This is the time when the farmer who sells

his corn for cash usually has to sell. The exception is the farmer with sufficient

capital to hold the corn, not only in terms of the invested value of the corn, but

also capital in terms of the delay in payment for the fixed and variable expenses

of the farming operation. The only other group which would benefit from this

would be the so-called grain trade, since this would allow for a greater fluctuation in the market price. Instead of a 7- to 10-cent fluctuation as at present,

it would be about a 16- to 20-cent fluctuation.

We have been advised by the Department of Agriculture that the only way

to cover the increased costs of this program, which would come from increased

holdings in storage, would be to take it from the loan level. It is precisely at

this level that the smaller farmer and family farmer are most helped by the

present program, where a decline in the loan values would be felt most quickly.

and where the results would be the most serious. Even at this level, the net

effect would not be to increase the net income of most of the farmers.

The suggestion has been raised to increase the resale level on wheat and allow

the present resale level on corn to remain at 105 percent. We would point out

that the wheat and feed grains legislation was determined after lengthy consultation among the wheat and feed grains producing organizations. The relative equality of value of free wheat and the wheat that is not eligible for either

domestic or export certificates and the value of feed grains, are fairly equal.

If the request for the increase to be applied to wheat were granted, this

equality would be destroyed, making it impossible to attain the necessary adjustments in production which can be accomplished by the use of a substitution
MINIMUM RESALE PRICE OF CCC WHEAT 19

clause. This action would, therefore, preclude the use of the substitution clause.

In our judgment, the substitution clause is very much desirable.

We would also point out that in the case of international trade, if we were

to start the loan level at $1.25 and add carrying charges of 11/2 cents per month

for a maximum of 13 cents at the end of the marketing year, we would have a

value of $1.38 in terms of Government investment; 105 percent of $1.25 plus 13

cents would, therefore, be $1.45 per bushel. This is just about the price level for

exports at the present time, and well within the International Wheat Agreement

price level. It is a level that other exporting countries have shown a perfect

willingness to use as a sales price for their offerings on the international

market.

If the 115 percent feature were adopted, the release price in April would be

$1.38. If 25 cents per bushel were added for handling and delivery to dockside,

even at present release price levels you would have a cost of $1.50 on July 1 and

$1.63 by April 1, which would make our wheat noncompetitive or necessitate an

undesirable Government subsidy. The amazing thing about this is that some of

the people who talk so freely about free international trade would support a

program which would increase the difficulty of using any Government stocks in

international trade for dollars. This is the reason that even at the present time

and with present price support and release levels, there is relatively little cash

export during the final months of the year.

The whole argument might be likened to the proverbial dog chasing his tail.

If the supply is greater than the demand, it is relatively unimportant, so far as

the farmer is concerned, where the resale price is placed, because it will not add

to his income. The only time there will be an increase in the farmer's income

is when the supply is less than the demand. This is also the only time when

Government stocks can be reduced. If we adopt programs making it impossible

to reduce the supply, or damaging the existing programs that are succeeding in

doing this, we only delay into perpetuity the time when we can have some

competitive influences returning to the market.

It is, therefore, the position of the National Grange that farm income can be

maintained at its present level only by the continuation of the present program

to reduce Government stocks and bring them into some relationship with the

demands of the market and the requirements of our relief programs. There does,

however, in our judgment, seem to be one acceptable alternative to this proposal,

and that is the isolating of these commodities from the market in the quantity

that is necessary for strategic reserves of food. We would, therefore, urge this

committee to seriously consider the adoption of a program to establish a national food reserve in the interest of the general welfare and as an integral

part of our total concept of emergency and defense planning. If a 1-year supply

for our domestic and present export markets were set aside as a reserve which

could not be moved onto the market—except under certain specified circumstances as Congress might determine—then the marketable supplies, which are

currently being held by the Commodity Credit Corporation, would be reduced

and the depressing effect of these surplus commodities on the market would be

substantially less. A wise and judicious surplus disposal program at that time

would have the possible effect of further increasing income.

It should, however, be pointed out that the concept of increasing the market

price substantially while, at the same time, we are using the domestic wheat

certificates, would necessitate the adjustment in the value of the certificates so

they would not be permitted to exceed by any substantial amount 100 percent of

parity. It is extremely important that we give our consumer groups the assurance that they are not going to be asked to pay through a certificate program an

amount sufficient to bring the domestically consumed wheat, which is used for

human food purposes, up to 100 percent of parity and, at the same time, pursue

policies to substantially increase the price of this wheat in the marketplace.

Furthermore, it should be pointed out that the Secretary does have some discretionary authority to increase the resale price when all pertinent facts indicate

it is desirable. In fact, he has done just that in the case of wheat at this time.

There is nothing to indicate that the Secretary is unwilling to take advantage

of opportunities to improve farm income when the action is not confronted with

other overriding considerations.

The Grange believes that this administrative flexibility is both desirable and

necessary. The proposed legislation would, in our judgment, by fixing at the

proposed rate the minimum percentage of the loan level, destroy the basis for

the administrative action which has until now been wisely used to substantially

eliminate the market depressing effects to previous purchase and loan programs.

In summary, WE would say to the committee that in our considered judgment,
20 MINIMUM RESALE PRICE OF CCC WHEAT

based on the study of the economic facts involved, the increasing of the release

price would serve no useful purpose to the producers of agricultural commodities.

On the contrary, it would imperil our present programs to reduce Government

stocks and Government holdings; it would seriously interfer with our international trade; it would not increase net farm income but could, in fact, jeop- ardize the present levels by forcing a reduction in support levels. It would

add greater burdens to those who feed as well as produce agricultural commodities; it would interject a factor of instability into the market which does not exist at present; and it would place an umbrella over the noncomplier which

he has not earned and which would be at the expense of the producer who complies with the programs.

The Grange, therefore, urges this committee to return the present minimum

resale levels which are used to determine the sale price of Commodity Credit Corporation stocks.

The CHAIRMAN. Thank you very much, Mr. Graham.

Mr. GRAHAM. Thank you.

The CHAIRMAN. We will next hear from Mr. Marvin L. McLain,

representing the American Farm Bureau Federation. We will be glad to hear from you now.

STATEMENT OF MARVIN L. McLAIN, ASSISTANT LEGISLATIVE

DIRECTOR, AMERICAN FARM BUREAU FEDERATION

Mr. McLAIN. Mr. Chairman and members of the committee, we appreciate the opportunity to present our views with regard to S. 2785,

which would raise the resale price of Commodity Credit Corporation

stocks of wheat to not less than 115 percent of the current support

price, plus reasonable carrying charges.

In the context of the current wheat program, the "current support

price" means the support price for noncertificate wheat. Since this is now $1.25 per bushel, the enactment of S. 2785 would raise the

minimum CCC release price to $1.44 per bushel, plus carrying charges

on a national average basis.

It is our observation that the current USDA policy of releasing

CCC stocks of both wheat and feed grains, in order to hold down

market prices to farmers, is contrary to what farmers want and is

actually preventing the market price system from performing its

function. The dumping of CCC stocks of feed grains in the first

years of the feed grain program led directly to a disastrous situation

in the livestock industry in 1963 and 1964. We have a chart, which

shows that, which is attached to the paper.

As a consequence of a prolonged period of low prices, farmers made

an unusually sharp cut in livestock production in 1965. Thus, the

effect of the OCC's dumping policy has been to seriously aggravate

the normal livestock price and production cycles. The current policy

of dumping both wheat and feed grains could well lead to more trouble

for the livestock industry in a year or so. Farm Bureau firmly believes that the CCC's stocks of wheat, feed grains, or any other commodity it holds, should not be used to beat down farm prices in order

to prevent the market price from working on a supply and demand

basis.

The members of this committee are familiar with the policy of Farm

Bureau with regard to the Food and Agriculture Act of 1965. We

vigorously opposed its enactment into law. We do not believe that

farmers want, nor can they longer expect, to get most of their net farm

income in checks from the U.S. Treasury. The USDA is currently

estimating that payments direct to farmers from the Treasury will
MINIMUM RESALE PRICE OF CCC WHEAT 21

amount to about $3.4 billion in 1966. This is approximately 24 percent of the realized net farm income of all U.S. farmers for 1965, which

you know this last year was $14 billion. Farmers know and we know

this cannot last.

The dumping of CCC stocks, in order to hold down market prices

to farmers, is part and parcel of the compensatory payment approach.

Stocks are dumped to force compliance with the program, and also to

prevent increases in consumer prices. This will soon create an artificially low market price image in the eyes of consumers, to the ultimate detriment of all farmers.

It is absurd for the Government to use its stocks to depress market

prices and thereby force farmers to depend on the direct payments

from the Treasury for a large part of their income. In many cases

today the check the farmer receives directly from the Government is

more than his realized net farm income. This compensatory payment

program will ultimately collapse and farmers will be caught with

artificially low prices caused by the dumping of CCC stocks.

It should not be assumed that the adverse effects of the COC's dumping policies are confined to noncooperators as long as the present program remains in effect. In announcing its current sales policy for

high-quality bread wheat on November 23, 1965, the USDA "noted

that the 1965 wheat crop is somewhat lower than average in protein content," and that, "as a result, higher quality bread wheat is

attracting abnormally high market premiums which could be reflected in higher flour and bread prices." And then we have an attachment that shows the prices for the last several months, showing

what happened at the time of the two announcements.

In other words, it apparently is the policy of the USDA to make

certain that neither compliers nor noncompliers receive a higher price

for the smaller quantity of high-protein wheat products in 1965.

Incidentally, the Department's concern with regard to the possible

effect of higher wheat prices on flour and bread prices is somewhat

inconsistent with its previous arguments that an increase of 50 cents

per bushel in the amount charged processors for wheat certificates

would not be an imposition on consumers.

Farm Bureau has long advocated an increase in the release price of

CCC stocks of both wheat and feed grains to 125 percent of the

applicable loan rate. However, it must be made clear that this recommendation was made in the context of our other recommendations

for farm program changes. In the case of wheat these changes had

as their salient parts the elimination of acreage allotments and

marketing certificates; the establishment of support prices based on

the previous 3-year average world price of wheat; and the enactment

of an effective cropland-retirement program. We simply want to point

out that we are now dealing with the release price in an entirely different setting and under different circumstances than would have been

applicable had our recommendations been adopted as proposed in

S. 891 last year.

This is not to indicate any lack of eagerness on our part for action

to prevent CCC stocks from being indiscriminately dumped to wreck

market prices. We merely wish to make it clear that the ills created

by the implementation of the current law will not be cured by the

enactment of S. 2785. We would support legislation to increase the
22 MINIMUM RESALE PRICE OF CCC WHEAT

release price to 125 percent of the loan level for both wheat and feed grains but we would hope that the committee would recognize the need to use this occasion to start moving in a direction that will strengthen the market price system instead of continuing to tear this system down with a dangerous compensatory payment program and CCC dumping practices which eternally depress producers' prices.

We are attaching for the information of the committee tables show- ing the weekly sales of wheat for both domestic use and export. In looking at the cumulative figures one might conclude that the amounts involved are negligible and perhaps are less than sales in similar periods 2 or 3 years ago. However, we would like to point out that with the depressed wheat prices currently in effect, due to the opera- tions of the certificate plan, any dumping of CCC stocks has a more devastating effect on market prices than was true when the loan level

was much higher. The threat to dump CCC wheat at a low price is all that is necessary to depress wheat prices. The USDA has made this threat in an effort to keep wheat cheap in order to avoid increases

• in bread prices and, of course, the market price reacted downward instantly.

In evaluating the present release policy, it should be remembered that the formula of setting release prices at not less than 105 percent of the loan rate was adopted at a time when loan rates were 90 percent of parity. Under current law, as it is now administered, the loan

rate is less than 50 percent of parity. If the loan rate on wheat were 90

percent of parity the minimum release price based on 105 percent of the loan rate would be around $2.40. Under the present program 105

percent of the loan rate is only $1.31, and 125 percent is only $1.56.

We do not think it at all unreasonable to ask that the Government be prohibited from using its stocks to depress the price of wheat below $1.56 per bushel.

We appreciate this opportunity to present our views on this very important matter.

(The tables and charts referred to follow:)

Million

bushels

900 

800 -

700

600

500

400

300

200 -

100 -

Cumulative Weekly CCC Sales of Corn for Domestic Use,

Marketing Years, 1960-64.

Oct. Nov. Dec.

1961-62—)

/

./*

/.,." 1964-65-D

C-1962-63

1960-61.•

- 1963-641

... . 

A A 

Jan. Feb. Mar. Apr. May. June July Aug. Sept.

Adjusted

year-end

total

(Mn. bu.)

873

656

341

233

129
MINIMUM RESALE PRICE OF CCC WHEAT 23

Oct. 7

Oct. 14 _

Oct. 2L

Oct. 28 _

Nov. 4 

Nov. 10

Nov. 18

Nov. 24 1

Dec. 2 

Dec. 9 

Dec. 16 2

Dec. 23_

Dec. 29_

Jan. 6 

Jan. 13_

Jan. 20_

Closing prices for cash wheat

[Dollars per bushel]

Period

No. 1 Hard

Winter,

ordinary

protein, at

Kansas City

No. 1 Dark

Northern

Spring,

ordinary

protein, at

Minneapolis

No. 2 Soft

Red Winter,

at Chicago

No. 1 Hard

Winter (13

percent protein) at

Kansas City

No. 1 Dark

Northern

Spring, (15

percent protein) at

Minneapolis

1965

1. 57-1.61 1.71 1.57 1.72-1.82 1.79-1. 82

1.16-1.59 1.73 1.55 1.71-1. 81 1.81-1. 84

1. 59-1.61 1.74 1.61-1. 62 1.73-1. 83 1.82-1. 85

1.61-1.63 1.76 1.63 1.75-1. 85 1.85-1. 88

• 1. 63-1.65 1.75 1.66 1.76-1. 85 1.85-1. 88

1. 61-1.63 1.72 1.66 1.74-1. 83 1.83-1. 86

1. 58-1.61 1.77 1.66 1.72-1. 81 1.88-1. 91

1. 57-1.59 1.69 ' 1.65-1. 67 1.70-1. 79 1.80-1. 83

1. 59-1.62 1.76 1.67 1.72-1. 81 1.88-1. 91

1. 60-1.63 1.72 1.70 1.73-1. 82 1.83-1. 86

1. 58-1.61 1.72 1.67 1.71-1. 79 1.83-1. 86

1. 61-1.65 1.74 1.70 1.73-1. 79 1.85-1. 88

1. 60-1.63 1.73 1.69-1. 70 1.70-1. 74 1.85-1. 87

1966

1. 63-1.66 1.72 1.71 1.72-1. 76 1.84-1. 85

1. 63-1.65 1.75 1.72 1.69-1. 73 1.87-1. 88

1. 62-1.65 1.76 1.71-1. 72 1.68-1. 72 1.88-1. 89

1 The USDA announced on Nov. 23, 1965, that it would sell "Hard Red Spring wheat of 15-percent

protein and above and Hard Red Winter wheat of 13 percent and above * * * at market prices but not

below 108 percent of the current support price plus carrying charges." (From Nov. 23, 1965, release.)

2 The Department announced on Dec. 15, 1965, that it was offering all qualities of wheat for sale for

unrestricted use at the higher of market prices or 108 percent of the support price plus carrying charges.

Weekly sales of wheat by Commodity Credit Corporation for domestic use and

export, marketing year 1965-66

[In thousands of bushels]

Week endingDomestic use Export

Total,

cumulative

Weekly sales Cumulative Weekly sales Cumulative

July 2 109 109 7, 653 7, 653 7, 762

July 9 105 214 6, 081 13, 734 13,948

July 16 113 326 7, 039 20, 772 21,098

July 23__ 127 453 10,082 30,855 31,308

July 30 69 523 2, 579 33, 433 33,956

Aug. 6 108 631 8,564 41,997 42,628

Aug. 13 154 785 12, 191 54. 188 54,973

Aug. 20 175 960 2,679 56,867 57,827

Aug. 27 229 1, 189 18, 655 75, 521 76, 710

Sept. 3 250 1,435 5,729 81,250 82,665

Sept. 10_ 354 1,789 6,772 88,022 89,811

Sept. 17_ 269 2, 058 4,322 92,344 94,402

Sept. 24_ 213 2,272 4, 128 96,472 98,744

Oct. 1.. 106 2,377 6,966 103,438 105,815

Oct. 8 128 2,505 3,635 107, 073 109,578

Oct. 15 111 2,616 3,878 110,951 113,567

Oct. 22 76 2,692 1,509 112,460 115, 152

Oct. 29.. 133 2,825 7, 136 119,596 122,421

Nov. 5 83 2,908 7,921 127, 517 130,425

Nov. 12 93 3,001 460 127,977 130,978

Nov. 19 38 3, 039 2,823 130,800 133,839

Nov. 26 31 3, 070 3, 737 134, 537 137, 607

Dec. 3 126 3, 196 5,355 139,892 143,088

Dec. 10 55 3,251 8,218 148, 110 151,361

Dec. 17 509 3,761 14,833 162, 042 165,803

Dec. 24 359 4, 120 16, 108 178, 150 182,270

Dec. 31 693 4,813 4, 053 182, 203 187,016

Jan. 7 421 5,234 14,482 196, 665 201,899

Jan. 14_ 354 5,588 5,767 202,432 208,020

Note.-The weekly sales figures are preliminary and therefore do not always add to the cumulative totals.

Source: Grain Market News Weekly Summary and Statistics, USDA.
24 MINIMUM RESALE PRICE OF CCC WHEAT

Weekly sales of wheat by Commodity Credit Corporation for domestic use and

export, marketing year 1964-65

[In thousands of bushels]

Week endingDomestic use Export

Total,

cumulative Weekly sales Cumulative Weekly sales Cumulative

July 3 7,363 7,363 853 853 8, 216

July 

July 

17 

10 5,658 12, 223 923 2, 574 14, 797

July 

2,084 14,307 937 3,511 17,818 24 1,479 15,786 499 4,010 19,796 July 31 

Aug. 7 

1,608 17,394 4,938 8,948 26,342

Aug. 

471 17, 866 3,896 12,844 30,710 14 

Aug. 

1,672 19,538 1,596 14,440 33,978 21 1,423 20,961 14,090 28,530 49,491 Aug. 28 4,466 25,428 30,497 59,027 84,454 Sept. 4 (I) 27,190 (I) 63, 109 90,299 Sept. 11 2,804 29, 994 1,230 64,339 94,333 Sept. 18 5,092 35, 086 4,907 69, 247 104,333 Sept. 25_ 5,165 40, 251 21,453 90, 700 130,951 Oct. 

Oct. 9 

2 3,776 44, 027 1,456 92, 156 136, 183 1,580 45, 608 7, 236 99,392 145,000 Oct. 16 1,204 46,811 17,064 116,456 163,267 Oct. 23 

Oct. 30 

628 47, 439 7,446 124, 177 171, 616 303 47, 740 250 124,427 172,167

Nov. 

Nov. 6 272 48, 012 2,837 127, 263 175, 276 13 503 48„515 37 127,301 175,816

Nov 

Nov. 20 187 48, 702 895 128, 195 176,897 27 177 48,879 955 129, 150 178,029 Dec. 4 221 49, 100 9, 141 138,291 187,391 Dec. 11 271 49,371 689 138,980 188,351 Dec. 18 410 49,781 2,525 141,505 191,286 Dec. 24 288 50. 069 1,144 142,649 192, 718 Dec. 31 266 50.335 891 143, 540 193,875 Jan. 8 200 50,534 6,907 150,448 200,982 Jan. 15 _ 181 50, 715 3,223 153, 671 204,386 Jan. 22 77 50, 792 6,201 159, 872 210,664 Jan. 29_ 138 50,931 14,167 174,039 224,970 Feb. 5 97 51, 027 2,401 176,440 227,467 Feb. 12 121 51,148 744 177,184 228,332 Feb. 19 78 51,226 244 177,428 228,654 Feb. 26 125 51,351 526 177,954 229,305 Mar. 5 135 51,487 413 178,367 229,854 Mar. 12 151 51,638 2,571 180,938 232,576 Mar. 19 72 51,710 435 181,373 233,083 Mar. 26 178 51,888 3,209 184,582 236,470 Apr. 2 207 52,094 1,284 185,866 237,960 Apr. 9 146 52, 241 3,992 189,858 242, 099 Apr. 16 224 52,465 3, 108 192,966 245,431 Apr. 23 411 52,875 2,539 195,505 248,380 Apr. 30 387 53,262 1,493 196,998 250,260 May 7 500 53,762 1,641 198,639 252,401 May 14 550 54,312 3,620 202, 259 256, 571 May 21 755 55,067 6, 206 208,465 263,532 May 28 528 55, 595 7,844 216,309 271,904 June 4 280 55, 875 7, 083 223,392 279,267 June 11 218 56,093 19, 049 242, 442 298, 535 June 18 206 56,299 4,142 246, 583 302,882 June 25 177 56,476 7,697 254,281 310,757

1 Not available.
MINIMUM RESALE PRICE OF CCC WHEAT 25

Weekly sales of wheat by Commodity Credit Corporation for domestic use and

export, marketing year 1963-64

[In thousands of bushels]

Week endingDomestic use Export

Weekly sales Cumulative Weekly sales Cumulative

July 5 1,913 1,913 1,803 1,803

July 12 2,882 4,795 3,680 5,482

July 19 4,844 9, 639 1, 239 6, 721

July 26 1,420 11,059 3, 436 10, 157

Aug. 2 1, 146 12,205 3, 594 13, 751

Aug. 9 675 12,881 5,306 19, 057

Aug. 16 251 13, 131 886 19,943

Aug. 23 327 13,458 2,441 22,384

Aug. 30 931 14,389 834 23,218

Sept. 6 172 14, 561 1.972 25, 190

Sept. 13_ 96 14, 658 10,822 36, 011

Sept. 20.. 3,908 18, 566 11, 136 47, 147

Sept. 27 6,516 25, 097 6, 732 53,879

Oct. 4 6,886 32, 164 4,613 58, 492

Oct. 11 6, 227 38,390 18,800 77, 292

Oct. 18 2,321 40,707 2,874 80,166

Oct. 25 741 41,448 867 81, 033

Nov. 1 2,846 44,293 9, 144 90, 177

Nov. 8_ 1,269 45,563 2, 455 92, 632

Nov. 15 721 46,284 997 93, 629

Nov. 22 823 47, 106 3, 442 97, 072

Nov. 29 1,662 48, 769 380 97, 452

Dec. 6 1, 120 49, 889 1,645 99, 097

Dec. 13 3,087 52, 976 2,477 101,573

Dec. 20 1, 799 54,775 5, 171 106,745

Dec. 27 799 55, 574 3,277 110,022

Jan. 3 1,219 56,793 21,349 131,371

Jan. 10 1, 043 57, 836 7, 265 138,636

Jan. 17 640 58, 475 6, 178 144, 814

Jan. 24 261 58,736 9,339 154,153

Jan. 31 411 59, 147 14,779 168, 932

Feb. 7 222 59, 370 10,474 179,406

Feb. 14 365 59,734 4, 197 183,603

Feb. 21 588 60,322 3,719 187,321

Feb. 28 672 60,993 4,219 191, 540

Mar. 6 381 61,375 8,025 199,565

Mar. 13 432 61,807 11,583 211,148

Mar. 20 619 62,426 3,882 215, 031

Mar. 27 267 62, 694 2,383 217,413

Apr. 3 397 63,091 981 218,394

Apr. 10 1, 048 64, 139 1,752 220, 146

Apr. 17 2,695 66,834 2, 788 222,934

Apr. 24 2,341 69, 176 1, 521 224,455

May 1 2, 520 71, 695 4,964 229,419

May 8 914 72,609 7,077 236,496

May 15 1,181 73,789 4,901 241,397

May 22 631 74,420 7,029 248,426

May 29 1, 026 75, 447 2, 152 250, 578

June 5 806 76,252 3, 764 254, 342

June 12 731 76,983 3,151 257,493

June 19 531 77,514 1,712 259,205

June 26. 459 77,973 4,493 263,698

Total,

cumulative

3,716

10,247

16,360

21,216

25,956

31,938

33,074

35, 842

37,607

39,751

50, 669

65,713

78, 976

90,656

115,682

120, 873

122,481

134, 470

138, 195

139,913

144, 178

146, 221

148,986

154,549

161, 520

165, 596

188, 164

196,472

203,289

212,889

228, 079

238, 776

243, 337

247, 643

252, 533

260, 940

272, 955

277,457

280, 107

281, 485

284,285

289, 768

293, 631

301, 114

309, 105

315, 186

322,846

326, 025

330, 594

334, 476

336, 719

341,671
26 MINIMUM RESALE PRICE OF CCC WHEAT

Weekly sales of wheat by Commodity Credit Corporation for domestic use and

export, marketing year 1962-63

[In thousands of bushels]

Week endingDomestic use Export

Total,

cumulative Weekly sales Cumulative Weekly sales Cumulative

8 

m =, tOMO 

,Bzwzzoz„,,,„,,,,,,..00000..wwgggciwwww„„4aaaaoctmopl,9F, 

618 618 1,681 1,681 2.299

159 777 1,821 3,502 4,279 148 925 1,381 4, 883 5, 808 195 1, 120 2. 141 7, 024 8. 144 188 1,308 1,116 8,140 9,448 120 1,428 4, 334 12, 475 13, 903 51 1,479 6. 731 19, 206 20, 685 329 1,809 1,920 21,140 22,949

78 1,887 24,981 26, 868 63 1,950 1,336 26,310 28,260 97 2, 047 9, 720 36, 239 38, 286 224 2,271 874 37, 113 39,384 110 2,381 1,388 38,518 40,899 144 2,525 232 38,750 41,275 106 2, 631 560 39,310 41,941

91 2, 723 473 39, 783 42, 506 25 2,748 1,881 41,664 44,412

8 2, 756 2, 073 43, 737 46, 493 325 2.826 12, 166 44, 122 46,948 256 2, 905 47, 120 50, 025 36 2. 941 2,328 49, 448 52,389 129 3,070 2,152 51,600 54,670 195 3, 265 8, 753 60,353 63, 618 252 3,517 4,952 65,305 68,822 174 3,691 2,448 67, 753 71,444 153 3,844 (0 (I) 80 3,923 9,960 77, 243 81, 166 254 4,177 3,617 80,860 85,037 203 4,380 82,441 86,821 450 4,830 1,261 83,703 88,533 624 5,454 6, 745 90,447 95, 901 300 5, 754 4,271 94, 719 100,473

67 5,821 3,092 97, 811 103,632

106 6,104 4.618 102,428 108,532 107 6,211 5,394 107,802 114,013 1,244 7,455 2,717 110,520 117,975

625 8, 080 11,953 122,473 130,553

221 8,301 2, 056 124, 529 132, 830 312 8,613 6, 152 130,681 139,294

899 9,512 11,358 142,039 151,551 4,230 13,742 5,141 147,200 160,942

904 14, 646 8, 122 155,322 169, 968 460 15,106 3,390 158,712 173,818

605 15,711 215 158,928 174,637

559 16,269 2,642 161,568 177,837 848 17,117 706 162,274 179,391

678 17,796 167,131 184,927

281 18, 076 3,200 170,331 188, 407 365 18,441 3,871 174,202 192,643

500 18,941 3,296 177, 498 196,439

261 19,202 5, 383 182,881 202, 083 307 19,509 5,392 188,273 207, 782

1 Not available.
MINIMUM RESALE PRICE OF CCC WHEAT 27

Weekly sales of wheat by Commodity Credit Corporation for domestic use and

export, marketing year 1961-62

[In thousands of bushels]

Week endingDomestic use Export

Total,

cumulative

Weekly sales Cumulative Weekly sales Cumulative

July 7 4,407 4,407-10,703 10,703 15,110

July 14 4,554 8,960 5,218 15,921 24,881

July 21 3, 500 12,460 3,042 18,963 31,423

July 28 5,058 17, 518 3, 702 22,665 40, 183

Aug. 4 2,025 19, 543 1,587 24,267 43,810

Aug. 11 1,972 21,515 3,350 27,617 49,132

Aug. 18 1,014 22,529 1,676 29,376 51,905

Aug. 25 1,279 23,803 2,436 31,821 55,629

Sept. 1 748 24, 557 4,031 35, 852 60,409

Sept. 8 539 25,095 781 36,633 61,728

Spet. 15 326 25, 421 942 37,596 63,017

Sept. 22 1,090 26, 511 3,229 40,841 67,352

Sept. 29 477 26,988 1, 196 42,036 69,024

Oct. 6 507 27,495 1,837 43,921 71, 416

Oct. 13 700 28, 195 1,826 45,850 74,045

Oct. 20 659 28,854 5, 110 50,965 79, 819

Oct. 27_ 795 29,649 3,997 54,970 84,619

Nov. 3 568 30,217 6,244 61,214 91,431

Nov. 10 339 30,558 5,491 66,705 97,261

Nov. 17 407 30,964 6,811 73,534 104,498

Nov. 24 230 31,194 1,088 74,622 105,816

Dec. 1 354 31,546 7,473 82,096 113,644

Dec. 8 227 31, 775 1, 709 83,804 115, 579

Dec. 15 150 31,924 686 84,495 116,419

Dec. 22 627 32,551 36 84,544 117,095

Dec. 29 45 32,596 1,704 86,253 118,849

Jan 5 135 32,730 2,599 88,839 121,569

Jan 12 70 32,801 6,624 95,474 128,275

Jan 19 106 32,906 2, 022 97,496 130,402

Jan 26 401 33,307 3, 170 100,665 133,972

Feb. 2 267 33,575 3, 529 104, 189 137, 764

Feb. 9 296 33,870 6,962 111, 167 145,037

Feb. 16 216 34,086 7,521 118,688 152,774

Feb. 23 249 34,335 6,131 124,819 159, 154

Mar. 2 301 34,636 3,560 128,380 163,016

Mar. 9 223 34,859 1,589 129,968 164,827

Mar. 16. 1,210 36,069 1,179 131, 147 167, 216

Mar. 23 197 36,265 2,129 133,291 169,556

Mar. 30. 276 36,542 1,770 135,063 171,605

Apr. 6 2,151 38,62 12,973 148,035 186,727

Apr. 13 1,049 39,741 240 146,266 188,007

Apr. 20 1, 129 40,870 2, 515 150, 792 191,662

Apr. 27 807 41,678 2,533 153,332 195, 010

May 4 2,477 44, 155 846 154, 178 198,333

May 11 2,034 46, 188 4,640 158,817 205, 005

May 18 1,441 47,630 9,598 168,415 216, 045

May 25 1, 754 49, 384 171,370 220, 754

June 1 2,719 52, 097 1, 711 173,085 225, 182

June 8 5, 981 58,078 3,304 176,402 234, 480

June 15 7,641 65, 719 829 177,250 242, 969

June 22 4, 434 69,582 1,998 179,252 248, 834

June 29 3,411 72,993 181,645 254,638
28 MINIMUM RESALE PRICE OF CCC WHEAT

Weekly sales of wheat by Commodity Credit Corporation for domestic use and

export, marketing year 1960-61

[In thousands of bushels]

Week endingJuly 8 July 15 July 22 July 29 Aug. 5 Aug. 12 Aug. 19 Aug. 26 Sept. 2 Sept. 9 Sept. 16 Sept. 23 Sept. 30 Oct. 7 Oct. 14 _ Oct. 21 Oct. 28 Nov. 4 Nov. 11 Nov. 18 Nov. 25 Dec. 2 Dec. 8 Dec. 16 Dec. 23 Dec. 30 Jan. 6 Jan. 13 Jan. 20 Jan. 27 Feb. 3 Feb. 10 Feb. 17 Feb. 24 Mar. 3 Mar. 10 Mar. 17 Mar. 24 Mar. 31 Apr. 7 Apr. 14 Apr. 21 Apr. 28 May 5 May 12 May 19 May 26 June 2 June 9 June 16 June 23 June 30 

Domestic use, cumulative Export, cumulative Total, cumulative

261 6,869 7,130 673 11,584 12,257 871 15,447 16,318 1,161 16,480 17,641 1,458 18,225 19,683 2,318 21,789 24,107 2,418 24,097 26,515 2, 668 27,408 30, 076 2, 771 29, 532 32,303 2,894 30, 159 33, 053 3, 177 32,362 35, 539 3,379 33,753 37,132 3,662 35, 534 39, 196 3,900 43, 054 46, 954 4, 079 44, 619 48,698 4,138 47,288 51,426 4, 232 49,976 54,208 4,300 57, 438 61, 738 4,379 61,467 65,846 4,439 62,218 66,657 4,527 63, 540 68, 067 4,764 66,697 71,461 4,859 68,335 73,194 4,906 73,360 78,266 5,114 77,281 82,395 5,197 80,568 85,765 5,406 84,131 89,537 5, 537 87, 101 92,638 5, 758 90,877 96,635 7. 739 97,444 105;183 8,349 102,011 110,360 9,016 111,558 120,574 9,313 112,242 121,555 9,455 118,479 127,934 9,697 121,655 131,352 10,225 128,249 138,474 10,588 131,449 142,037 10,874 133,954 144,828 11,052 136,541 147,593 11,220 137,998 149,218 11,397 139,802 151,199 11,462 142,237 153,599 11,648 145,846 157,494 11,926 150,272 162,198 12,405 162,055 174,460 12,811 170,925 183,736 13, 140 174,705 187, 845 13,393 178,365 191,758 13,601 185,274 198,875 13,756 193,609 207,365 14,998 199,285 214,283 19,041 206,970 226, 011

The CHAIRMAN. Thank you very much. Are there any questions'?

Senator YOUNG of North Dakota. None.

The CHAIRMAN. Thank you very much for your statement.

MT. McLAIN. Thank you.

The CHAIRMAN. Our next witness is Mr. George Odegaard. Has

he come in yet'?

Senator YOUNG of North Dakota. He is still in my office.

The CHAIRMAN. Very well, we will next hear then from Mr. Joseph

B. Gregg of the Kansas City Board of Trade.
MINIMUM RESALE PRICE OF CCC WHEAT 29

STATEMENT OF JOSEPH B. GREGG, BOARD OF TRADE OF KANSAS

CITY, MO.

Mr. GREGG. Mr. Chairman and members of the committee, my name

is Joseph B. Gregg, and I appeax in behalf of the Board of Trade of

Kansas City, Mo., to respectfully submit the views of our association

on the important subject of Commodity Credit sellout price.

On February 4, 1965, President Johnson's message to Congress relating to our agricultural economy expressed the following points:

Our objective must be for the farmer to get improved income out of the marketplace with less cost to the Government.

To so utilize Commodity Credit Corporation as to make the free market system

work more effectively for the farmer.

We must encourage the private segment of our economy to carry its own

inventories bought from the farmers rather than depending on the Government

as a source of supply.

We must urge the private sector to perform as many services as possible now

performed by Government agencies.

We could not agree more with the principles set forth in the President's message and stand ready and able to perform the services referred to, carry the inventories needed, and maintain an efficient marketing system for the benefit of the producer. In so doing, the return

to the farmer would be improved, which is one of the President's prime

objectives.

In order to permit the market to function as it should by letting

the law of supply and demand establish the prices for agricultural

commodities, there cannot be artificial ceilings so low as to render

ineffective the influence of the demand factor. At the present time,

the established markets are laboring under a price ceiling system

maintained by Commodity Credit Corporation, which not only is unduly low but fluctuates at will. We refer to 'CCC's resale program

when sales are made at 105 percent of the loan rate plus carrying

charges, which is so low as to limit price movements to the detriment

of the producer and the private segment of our agricultural economyto which the President referred. Many instances could be cited where

farm prices were on the rise in response to a natural economic demand

but stopped dead by a CCC announcement that a sellout of millions

of bushels of Government stocks would be made immediately. These

announcements are issued without advance notice and establish a wall

through which the normal market price cannot penetrate.

This is not to say that the U.S. Department of Agriculture should

not have any opportunity to dispose of its stocks under any system,

but it does suggest that the ceiling at which their sellout program

begins to operate should not be so low as to curtail the natural movement of prices. In our opinion, a sellout program based on 115 percent of the loan rate, plus charges, is far more realistic and would

give the private segment of our economy an opportunity to perform

as many services as possible and 'to improve the producer's income

materially. Further, in suggesting 115 percent in order to permit the

markets to function in a normal manner, it still does not preclude ex

parte consideration of a modification sellout percentage should a crisis

or a national emergency arise. Special consideration can be given

to those situations as they come into- being, but in times when they

are not present, the 115 percent sellout to which we refer will give

59-108-66--3
30 MINIMUM RESALE PRICE OF CCC WHEAT

the markets an opportunity "to make the free market system work more

effectively for the farmer.'

We question whether or not it was the intent of Congress to establish a minimum sellout price for the purpose of price control. When

Congress wrote the Commodity Credit Charter in 1948, that agency

was charged with "stabilizing, supporting, and protecting the farmer's

income and price." This, we believe was done for the purpose of placing a floor under which the farmer would not have to dispose of his

products and not for the purpose of placing a low ceiling above which

the price of commodities could not exceed. In the last referendum,

farmers gave convincing evidence by their vote that they did not want

mandatory farm controls, yet when the Secretary of Agriculture was

questioned last year before the House Agriculture Committee pertaining to a large sale of Commodity Credit stocks of corn, he said:

We purposely sold, in order to move our prices down far enough so that they

would be away below the support level, the loan level, so that we could thereby get compliance. That was the whole intent and purpose and thrust of the

program.

Senator YOUNG of North Dakota. Would you yield at that point?

Mr. GREGG. Yes.

Senator YOUNG of North Dakota. Do you know of any previous

incidents where the Commodity Credit Corporation sold wheat or

feed grains for the stated purpose of lowering cash prices?

Mr. GREGG. Well, I never know what their intent is, sir, really, when

they make these sales.

Senator YOUNG of North Dakota. Do you know of any time when

they stated their purpose was to lower cash prices?

Mr. GREGG. I know only these times that I recall that I have seen

and these instances.

Senator YOUNG of North Dakota. I thought that being in the grain

trade that you would be familiar with former acts of the Commodity

Credit Corporation.

Mr. GREGG. I am not familiar with the statements made by the

Secretary, and I would not want to quote him if I had not exactly

-read them.

The CHAIRMAN. How would this change affect the market in the

light of that when the U.S. prices are way above world prices today?

Mr. GREGG. Well, Senator, I think that what we are saying here is

that actually, at harvesttime the market cannot go up more than 7

cents above the support price before the Commodity Credit Corporaaion stocks become available. Now it is true that they have been operating on 108 percent, instead of 105 percent, but no one knows today

whether that is going to change down to 105 percent again or whether

it is going up to 10percent. Markets cannot operate on speculation

of what a Government agency might do with reference to their sellout

of their stocks.

" The CHAIRMAN. The traders do operate on speculation, do they not?

Mr. GREGG. Yes, the market—we do.

Senator YOUNG of North Dakota. Do you have a shortage of boxcars?

Mr. GREGG. Yes.

Senator YOUNG of North Dakota. Has this acted to hold up the

prices higher than they would otherwise have been?
I

MINIMUM RESALE PRICE OF CCC WHEAT 31

Mr. GREGG. Oh, yes. There is a great deal of wheat that is in the

country that should be shipped, and wants to be shipped, and cannot

be shipped.

Senator YOUNG of North Dakota. Commodity Credit Corporation

loading orders cannot be filled because of the boxcar shortage?

Mr. GREGG. Yes, sir.

This to us would be making a voluntary program mandatory by

sellout policies of the Commodity Credit Corporation, but we certainly

do not feel that this was the original intent of Congress. The present

law only states that the Commodity Credit Corporation may not sell

their stock of wheat at less than 105 percent of the support price, plus

charges. This figure of 105 percent of the support price plus charges.

This figure of 105 percent of the support rate for wheal would mean

that their sellout price could be as low as 7 cents above the support

level, which certainly allows very little increase in the price paid to

the producer.

Once again

'

I refer to President Johnson's message of February 4,

1965, as listed on page 1 of this testimony. I have stated we could not

agree more with the principles set forth in this message. We all know

that if the industry is to carry these stocks that they purchased from

the farmer, financing must be obtained at very low rates of interest

from the banking institutions. This is now done but only possible,

because of the existence of our free markets furnished by the commodity exchanges and because of the ability of the industry to use these

commodity exchanges in their hedging operations satisfying the banks

as to the protection on their loans.

Recently there has been considerable conversation pertaining to a

strategic reserve of wheat stocks in the United States. It is obvious,

from present figures, we are now approaching the levels that have

been projected as to what stocks this country should maintain in a

strategic reserve. Now that we are approaching such a level, it would

appear that now would be an excellent time to increase the sellout

price of Commodity Credit stocks. It would allow a movement in

the market above the support price of approximately 21 cents a

bushel, plus charges, instead of 7 cents. We feel this would permit

the producer to get higher income out of the marketplace. It would

prevent additional contributions by the farmer to Commodity Credit

stocks under defaulted loans and this, in itself, would 

the 

the

operations of the Department's program at less cost to the Government and also would assist in preventing another increase in Commodity Credit stocks to a burdensome figure such as they have been

in the past.

We respectfully urge this committe to recommend an increase in

the Commodity Credit sellout price to not less than 115 percent of

the loan price, plus charges, and we feel this will aid greatly in

accomplishing the principles laid down by our President and also

make stronger the great free and open market with which we are now

blessed in this country.

The CHAIRMAN. Are there any further questions?

Senator YOUNG of North Dakota. No.

The CHAIRMAN. Thank you very much.

Mr. GREGG. Thank you.
32 MINIMUM RESALE PRICE OF CCC WHEAT

Senator YOUNG of North Dakota. Mr. Odegaard is here now, Mr.

Chairman. I would like to introduce Mr. George Odegaard. He

is manager of the biggest grain cooperative in North Dakota. It is

:not affiliated with any farm organization. Is that correct?

Mr. ODEGAARD. That is correct.

Senator YOUNG of North Dakota. Do you want to read your statement ?

Mr. ODEGAARD. Yes.

The CHAIRMAN. This is your full statement?

Mr. ODEGAARD. Yes.

The CHAIRMAN. Please proceed.

STATEMENT OF GEORGE ODEGAARD, MANAGER, SCRANTON

EQUITY EXCHANGE ELEVATOR, SCRANTON, N. DAIL

Mr. ODEGAARD. Mr. Chairman and members of the committee. My

flame is George Odegaard. I am manager of the Scranton Equity

Exchange Elevator of Scranton, N. Dak. My firm represents about

1,200 wheatgrowers in southwestern North Dakota and northwestern

South Dakota and we market between 1 and 1.5 million bushels of

Dark Northern Spring wheat each year.

The primary area for producing Hard Red Spring wheat is North

Dakota, parts of eastern Montana

'

northwestern South Dakota and

Minnesota. Our principal market is Minneapolis-Duluth and some

of our wheat does go into southern markets. It is needed in these

markets for use for mixing because of the high protein and excellent

milling qualities.

. The recent announcement by the Secretary of Agriculture offering

• for sale high-protein wheat held by the Commodity Credit Corporation at 108 percent of current price support plus carrying charges has

'resulted in the loss of much-needed income for wheatgrowers in North

Dakota. These growers derive the bulk of their income from the sale

of high-quality, high-protein Dark Northern Spring wheat. The

major source of farm income in North Dakota is the raising of wheat.

This action has had a disastrous effect on the marketing of grain by

North Dakota producers. The effect this has had on the market can

readily be seen by observing the drop in the Minneapolis-Duluth

market as shown in the attached table.

- This table will be distributed to you very shortly, and I would like

to call your attention to the price in effect on the day before the an-

'llotincement and the price in effect about 10 days hence.

On November 23, the price of 16-percent-protein ,wheat was $1.98.

'At the same time 17 protein wheat was worth $2.08. This was the

'price in the Minneapolis-Duluth market.

If you will read down the chart you will find that on December 7, the

14-p6rcent protein wheat then was selling at $1.94 and the 17-percent

protein was selling at $1.99. This is a reduction in the price to the

producer of about 9 cents on the 17-percent protein, and a considerable amount on the 16-percent protein. '
MINIMUM RESALE PRICE OF CCC. WHEAT 33

(The table is as follows:)

Duluth Spring wheat prices

1965 date

December

future

Premium

15-percent

protein protein

Total

Premium

16-percent

protein

Total

Premium

17-percent

protein

Total'

Nov. 18 $1. 6734 +23 $1. 9034 +40 $2. 0734 +50 $2. 1734

Nov. 19 1.67%5 +23 1.9034 +38 2.05% +48 2. 159

Nov. 22 1.6734 +22 1.8934 +34 2. 0134 +44 2. 1178

Nov. 23 1.6534 +21 1.86% +33 1.9834 +43 2.08%

Nov. 24 1.63% +19 1.8234 +28 1.91%7 +36 1.99%

Nov. 26 1.6434 +19 1.83% +27 1.9134 +35 1.9954

Nov. 29 1.6534 +19 1. 84% +27 1.9234 +35 2.0094

Nov. 30 1. 6634 +20 1.8634 +28 1.9434 +36 2.0234

Dec. 1 1. 6934 +20 1.8934 +28 1. 9731 +36 2.0534

Dec. 2 1. 7034 +20 1.90%8 +28 1.9834 +36 2.0634

Dec. 3 1.7034 +20 1.9034 +28 1.9834 +36 2.06%

Dec. 6 1.7034 +20 L9034 +28 1.9834 +36 2.06%

Dec. 7 1. 7034 +18 1.88%8 +24 1.9434 +29 1. 9948

Dec. 8 1.68%8 +17 1.858% +24 1.92%3 +29 1.97,34

Dec. 9 1.6934 +17 1.86% +24 1.9334 +29 1.98%

Dec. 16 1. 6934 +17 1.86% +25 1.9434 +30 1.99%

Senator YOUNG of North Dakota. May I ask you a question here!

The CHAIRMAN. Surely.

Senator YOUNG of North Dakota. We have a severe shortage of boxcars in that area, as you know. If there was an adequate supply of

boxcars, more of the Commodity Credit Corporation grain could have,

been shipped to the terminal markets, is this correct? You would'

have had many more loadings?

Mr. ODEGAARD. Yes.

Senator YOUNG of North Dakota. Would that not have further

adversely affected the market?

Mr. ODEGAARD. This is covered in my report, but this, naturally,

would have aggravated the situation by causing a much more disastrous drop in the price of wheat, if the actual wheat would have been

put on the market in larger quantities, such as we anticipated. The,

price could, conceivably, have dropped another 20 cents-it could'

have gone down to the loan value.

Senator YOUNG of North Dakota. The Commodity Credit Corpora-,

tion said that they would sell wheat for that price. Actually, the

wheat is out in the country, under their control but where the buyers

can't get at it.

Mr. ODEGAARD. Much of it is not available to the market. In conjunction with the prices I just read to you, showing the drop in the

price in the Minneapolis-Duluth market, I would like to read the final

statement, from a letter that was sent to Senator Young by John A.

Schnittker, Under Secretary of Agriculture, regarding our concern

about this drop in the price of wheat. The closing paragraph in this.

letter says this:

We are returning herewith letters and telegrams which you had received from

a number of constituents concerning the action of Commodity Credit Corporation in which you transmitted to us with your letter of December 6. We are

puzzled by references in one or two of these letters to a 15-cent drop in the price

of wheat.
34 MINIMUM RESALE PRICE OF CCC WHEAT

Probably one of these letters was mine. You can refer to the chart

here and you will see what the drop in the price of ,wheat actually

amounted to. That closing statement is surely a puzzle to us:

Certainly no such drop occurred at the terminal markets and if any such drop

occurred at country points it was unjustified and must have lasted for only a

day or two at most.

(The letter referred to is as follows:)

DEPARTMENT OF AGRICULTURE,

Washington, D.C., December 27, 1965.

Hon. MILTON R. YOUNG,

U.S. Senator,

La Moure, N. Dak.

DEAR SENATOR YOUNG: This is in reply to your telegram of November 24, 1965,

regarding the announcement to offer high-protein wheat at the market but not

below 108 percent of the current support price, plus carrying charges and your

letter of December 6, 1965, on the same subject.

This action to return to the marketplace some of the high-protein wheat removed under past support programs was taken to moderate recent tendencies to

price extremes for such wheat and to unevenness in its being offered from other

sources for domestic needs.

We did not expect the announcement to have a material effect on the market

price for high-protein wheat for two reasons. In the first place, our announced

sales price protected the existing market premiums. In the second place, for

some time we have had in effect an exchange program under which millers could

exchange ordinary Hard Winter wheat for high-protein Hard Winter wheat at

existing market premiums and only a Moderate volume of wheat has been

exchanged.

Our assumptions have been borne out to date as evidenced by the very small

volume of high-protein wheat we have sold. Through December 21 we had sold

only about 59,000 bushels of Hard Red high-protein Spring wheat. Since our

announcement was made on November 23 market premiums have fluctuated both

above and below the rates which prevailed on that date and are now very little

different from those of November 23.

On December 15 as you know we also announced the availability of stocks of

ordinary wheat in CCC inventory for sale at not less than the higher of the market price or 108 percent of support price plus carrying charges. Here again as

we expected sales of CCC stocks of Hard Red Spring wheat have been light, and

the effect on the market price of wheat small. In the period from December 15

through December 21, we sold 20,000 bushels of Spring wheat and 82,313 bushels

of Durum. A copy of the December 15 press release is enclosed for your convenience.

Making limited supplies of CCC stocks available on this basis to avert extreme

market developments is in the long-run interests of producers and consumers in

the same way that CCC acquisitions of wheat in settlement of price-support loans

in periods of low prices has been in the producers' interest. It is a policy in line

with the traditional ever-normal-granary concept.

We appreciate your interest in the Department's action, and we wish to assure you that these releases of CCC wheat will be kept within reasonable bounds

of actual supplemental needs for domestic use.

We are returning herewith letters and telegrams which you had received from

a number of constituents concerning the action of CCC and which you transmitted to us with your letter of December 6. We are puzzled by references in

one or two of these letters to a 15-cent drop in the price of wheat. Certainly no

such drop occurred at the terminal markets and if any such drop occurred at

country points it was unjustified and must have lasted for only a day or two

at most.

Sincerely yours,

JOHN A. SCHNITTKER, Under Secretary.

Mr. ODEGAARD. I have carried these price comparisons into December to show that the average loss in the 16- and 17-percent protein

wheat was not a cent or two, that prices did not come back, that there

has continued to be a 17-cent loss in the 17-percent protein and losses
MINIMUM RESALE PRICE OF CCC WHEAT 35

as high as 25 cents a bushel along with a drop to $1.95 from $2.07,

which is a 13-cent decline on the 16-percent protein wheat. We are

puzzled by this statement by Mr. Schnittker in saying that we at the

country level had dropped these prices. We merely followed the

Minneapolis-Duluth market.

Senator YOUNG of North Dakota. What is the range of protein

content of most of the wheat produced in your particular area?

Mr. ODEGAARD. Our wheat this year and for the past 3 years will

range from 14, generally, to 17 percent.

Senator YOUNG of North Dakota. What percent of your wheat

would be 16-percent protein?

Mr. ODEGAARD. In our area we raise a lot of Justin wheat, which is

a high-protein wheat, and I would say that a high percentage of our

wheat now would run between 15 and 16 percent that is, during the

last year.

The CHAIRMAN. Of what you produce?

Mr. ODEGAARD. Of what we produce, a lot of it does.

Senator YOUNG of North Dakota. What percent would run between

15 and 16 percent?

Mr. ODEGAARD. I would say that 42 to 60 percent of our shipments

are 15- and 16-percent protein.

Senator YOUNG of North Dakota. Does it run in that range of

protein?

Mr. ODEGAARD. Yes.

Senator YOUNG of North Dakota. Some will run higher and some

lower?

Mr. ODEGAARD. Yes.

Senator YOUNG of North Dakota. What is the highest protein wheat

produced in your area this year?

Mr. ODEGAARD. The highest protein that I have sent to the Minneapolis market this year is 16.40. I have some 17.40, but I have not

accumulated a carload of the 17.40. I do have a lot of wheat that

has run right in the 16-percent protein bracket.

Senator YOUNG of North Dakota. We had some in my area, Mr.

Chairman, that ran better than 18 percent. We do produce a very

high protein wheat. We have a top quality wheat, but our freight

rates are so high that unless you produce top high quality wheat you

do not wind up with much of a point at the terminal market.

Mr. ODEGAARD. That is correct.

There would ordinarily have been a slight drop in premium price

at this time but the situation was further aggravated and a much

sharper price decline took place in light of the Secretary's action.

This action came at a time when the water shipping channels serving our area were closed and the area was faced with a serious shortage of boxcars with which to move grain. This shortage resulted

in much grain being held on farms and in country elevators which

would normally have already gone on the market. In many cases we

were unable to take in a farmer's grain. This had the result that

much grain which would have been marketed earlier was still in producers' hands when the announcement was made.

When I buy wheat from a farmer I can go into the futures exchange

and sell the futures to protect my cash purchases of wheat. As incli-

'cated by the enclosed table, we must also sell premiums in order to
36 MINIMUM RESALE PRICE OF CCC WHEAT

protect the final price we receive for our grain. In other words, I

could have sold wheat on November 23 on the futures market at

$1.655/8, but if you add the commission of freight charges onto that

you must have about 38 cents more than this, plus the protein premiums. Therefore, in order for me to pay that, I would have to have

$1.65 for the 16-percent protein wheat and I would have to have $1.65

plus 33 cents, which would be my final market price in the marketplace,. I could sell futures to protect my purchases, but I, also, would

have to protect myself on the premiums above the futures to protect

the final price of the wheat.

Ordinarily we can sell wheat to arrive. In this instance, however,

the only way we could do this was by giving a specific date on which

these cars would arrive at the marketplace. With the shortage of

boxcars this was impossible with the result that many elevators and

many farmers had to take a loss of from 12 to 20 cents a bushel on

grain they held.

North Dakota has consistently worked through the Cooperative

Extension Service and the agricultural experiment stations to raise a, high-quality, high-protein wheat. Because of breeding for this quality our yields are normally rather low compared with other wheatproducing States in the Union. We have done this to enable us to

compete in the domestic as well as the foreign market. The class of wheat produced in this area is sought in the markets of Western

Europe and Japan to blend with weaker, lower quality wheats. This

wheat is comparable in quality to that offered in the world market by

the Canadian producer.

When the market supply of this wheat becomes short we feel the

producer should be given the opportunity to benefit from the resulting

better prices. In making sales this fall we had to advise the buyer

that we would have a particular carload of wheat sitting in Minneapolis, probably, 5 days hence.

The CHAIRMAN. Is that unusual?

Mr. ODEGAARD. It is fairly common at this time of year, but here

we could not buy a boxcar—we could not get boxcars—we were

plugged, sir; naturally, we sat there without a sale. I sold futures

to protect myself, but I could not sell my premiums.

The CHAIRMAN. Do you not believe, though, that the trouble

stemmed from the fact that you had a shortage of boxcars rather than

this 105 or 115 or 120 percent that the Commodity Credit Corporation

was selling for?

Mr. ODEGAARD. Yes; but they made this announcement just at the

time when we could not get the boxcars, and the effect of the price

in Minneapolis-Duluth was staggering. These buyers just backed up

•from this. I tried to sell wheat. I tried to sell wheat as much as

7 cents below the Minneapolis-Duluth market, so that I could cover

myself.

The CHAIRMAN. When was that statement made that you speak of?

Mr. ODEGAARD. On November 23. I believe you will find that I am

right on that.

The CHAIRMAN. November 23?

Senator YOUNG of North Dakota. This was a shift from the previous policy of not selling any wheat at all. It was not at 105 or
MINIMUM RESALE PRICE OF CCC WHEAT 37

120 or 125—there was no sale at all. Now the resale level is clear

clown to 108 percent of price support.

Mr. ODEGAARD. They had stayed off the cash market altogether.

Before this announcement came, the buyer for General Mills, for instance, had been paying a high price for wheat. But if you were a

buyer for General Mills, or for any one else, and you were responsible

for buying this wheat at a competitive price, what would you have done

in the situation—would you not have backed away from this market

very rapidly? You would not have backed down to 5 cents or 10

cents, but to 15 cents or more because you would expect the Government to put all of the wheat 

more,

they want on the market. You could

then have purchased it much cheaper. We have no quarrel with the

millers.

Senator YOUNG of North Dakota. If the boxcars had been available in sufficient numbers the cash price would have probably dropped

20 cents a bushel more.

Mr. ODEGAARD. If they could have gotten more of this wheat to the

market; yes.

The CHAIRMAN. I notice in your table here that on November 23

that wheat was at 2.08%?

Mr. ODEGAARD. Yes.

The CHAIRMAN. And the next day, which is the 24th, it was 1.99/7s;

the next day it was 1.991/8 and the next day, the 29th, it was at 2.00%;

and on the 30th it was 2.021/4.

Mr. ODEGAARD. That is correct.

The CHAIRMAN. And on December 1, it was 2.051/4; on December 2,

it was 2.063/4—almost what it was on the 23d of November. What

caused that to rise?

Mr. ODEGAARD. Well, you have to go back to November 18. There

are some of these things that aren't readily apparent.

The CHAIRMAN. But you said the statement was made on 

Mr. ODEGAARD. This is when the formal announcement appeared in

the paper. This is the first that we saw of it in our daily market reports. I am sure that many were aware of this action back on the

18th. That is when it was 2.17, and then if you will compare 2.17 to

the $1.99 on the 24th, this is where the big drop came.

The CHAIRMAN. I have in my hand a statement to which you refer,

dated November 23, 1965. And the question that I want to ask you is,

in view of the fact that this statement was made, it seems to me that

the next day the price of wheat went down, and then rose thereafter

to almost the same price that it was on the 23d of November. What

caused that?

It should have continued going down, as I see it, unless there was

something else.

Mr. ODEGAARD. I will make this statement: The effect on the people

of North Dakota was such that they contacted their Senators and

Representatives and begged them to prevent the Commodity Credit

Corporation from dumping a lot of wheat on the market. I think that

our Congressmen, through their efforts, in going to the Department

of Agriculture, and asking them not to put too much grain on the

market helped, because that would have further depressed the market.

The CHAIRMAN. We will find out if that was done or not.

Mr. ODEGAARD. I hope so.
38 MINIMUM RESALE PRICE OF CCC WHEAT

The CHAIRMAN. We will find that out tomorrow. I do not know

what it was, but I would like to find out. I have been hearing about

these dumping charges—that is, charges made of dumping wheat,

dumping corn, dumping other grains on the market and I would like

to try to go into that tomorrow when the Department comes up here.

I think I follow your argument here

'

Mr. Odegaard, but with all

due respect, as to the statement made that on November 23, when

the wheat, as I said, was selling for $2.085/8 and then 4 or 5 days later

thereafter it was $2.0634, almost up to the point where it was on November 23, there must have been something else there. I would not

attribute it so much to dumping if what you give us is the truth.

Mr. ODEGAARD. Then, of course, it went back down to $1.99 again.

The CHAIRMAN. I noticed that but the thing that attracts my attention is that in the space of about 7 days the price almost caught up with

the price that it was on the 23d when the announcement was made.

Mr. ODEGAARD. That is the natural swing of the market.

The CHAIRMAN. I think that the swing would be downward, instead of upward.

Senator YOUNG of North Dakota. Mr. Odegaard, I was concerned

about the same thing that the chairman is thinking about. If the

Commodity Credit Corporation had its wheat in the terminal markets and it was readily available to the millers at this reduced price,

the cash price would have dropped way down, ,but the fact that they

offered to sell it for this was not too effective, because they had no

wheat at the terminal markets and could not get it there because of

the shortage of boxcars.

Mr. ODEGAARD. That is the point. I appreciate that.

Senator YOUNG of North Dakota. What I am trying to say is that

this Order would have been far more disastrous had their wheat been

available for sale and delivery.

The CHAIRMAN. Proceed.

Mr. ODEGAARD. The Secretary's announcement put a ceiling price

on wheat which has had a very detrimental effect on the income of

wheat farmers.

There is a big demand for soybeans and they have received a price

considerably over the loan price of soybeans. We feel that the same

should apply to the growers of Dark Northern Spring. If the demand warrants it our price should be free to rise somewhat but still

not so much interfere with the working of the Government program.

The CHAIRMAN. The difference between that and wheat is that you

have no soybean surplus on hand dangling over the markets. That

is what caused that.

Mr. ODEGAARD. That is why we do not feel that this surplus should

be used in competition with the cash market but that wheat should

be shipped to foreign countries rather than competing on our cash

market.

The CHAIRMAN. As I pointed out a little while ago, the difference

between the world price and America is $1.82 January 27. U.S. wheat

and the world price is $1.60. Why is that? Are we selling wheat on

the world market outside of the United States today when the world

prices are $1.60?

Mr. ODEGAARD. I suppose that the Government is; yes.

The CHAIRMAN. We will find that out tomorrow.
MINIMUM RESALE PRICE OF CCC WHEAT 39

Mr. ODEGAARD. But what we want is for the Secretary of Agriculture

to try and get his wheat into the foreign market, not to compete with

our cash market. This cash market is necessary to us in the grain

business.

The CHAIRMAN. How would fixing the market at 115 instead of

105 for resale affect the market?

Mr. ODEGAARD. It would tend to let the market rise for those classes

of wheat that are in short supply, any class of wheat that the domestic

or foreign market needs. We feel it should have a little more range

in price flexibility than this absolute ceiling.

The CHAIRMAN. This rise occurred under the present law—it occurred under the present law.

Mr. ODEGAARD. It did up to the point that they made the announcement and then it worked otherwise. That will continue for the next

4 years. This could be a permanent ceiling. We do not feel that this

is justified in view of the need for wheat in the domestic and foreign

markets. And, in light of a generally inflationary trend and we do

not feel that our farmers should be held to a ceiling.

The CHAIRMAN. As I pointed out a while ago to one of the witnesses, if this dumping would apply to all of the crops you might have

a good argument but one-half of your wheat that is produced, let us

say, whatever is produced for the domestic consumption you would

b

have to do it with that $2.67 that the farmer gets for it. We are trying

to protect the farmer and the average price that he will get, as I understand it, under the present law will not be less than $1.821/2.

Senator YOUNG of North Dakota. That would be the blended price.

The CHAIRMAN. That is what I mean.

Mr. ODEGAARD. $2.67. You mean $1.67.

The CHAIRMAN. No I did not.

Senator YOUNG of North Dakota. This is the blended price. The

cash price received or the loan price plus the wheat certificate.

Mr. ODEGAARD. 1965?

Senator YOUNG of North Dakota. Plus the certificate value.

Mr. ODEGAARD. If we sell for $1.50 it comes to a total of what, with

the certificate?

Senator YOUNG of North Dakota. That portion consumed in the

United States would receive full parity which right now is about $2.53

a bushel. Of course, this would be the loan price plus the wheat certificate payment.

Mr. ODEGAARD. That was in 1965. This was the price in 1965.

The CHAIRMAN. In 1966.

Mr. ODEGAARD. This would be in 1966, but not in 1965, as I understand it.

The CHAIRMAN. I was trying to point that out to the previous witness. I could well understand the effect on the income of the farmer

if this dumping and the fluctuation of prices was to apply to the whole

crop, but it does not-50 percent, which is about what we consume, I

think, of the wheat produced, the farmer would be paid at the rate of

full parity.

Mr. ODEGAARD. For about 45 percent; is it not?

The CHAIRMAN. Whatever it is, 45 or 47 or 50 percent—he would

get full payment for that.
40 MINIMUM RESALE PRICE OF CCC WHEAT

' Mr. ODEGAARD. On that portion going into domestic human conStunption.

The CHAIRMAN. Full parity on that, yes, that is right.

Mr. ODEGAARD. On that portion?

The CHAIRMAN. Yes. And for the rest of it he gets a guarantee of

at least $1.25, but it cannot go lower than the blend price of $1.81 for

all of the wheat he produces.

Senator YOUNG of North Dakota. That is the program for this year.

The CHAIRMAN. And the next 4 years.

Senator YOUNG of North Dakota. This last year the lended price

support was $1.69.

The CHAIRMAN. I thought that we had done pretty well for the

wheatgrowers. Senator Young has worked very much, has done a

trojan job in getting what we have obtained in this bill. I k-now that

because I have worked with him. I know how stubborn he is.

Mr. ODEGAARD. We appreciate that. We appreciate his efforts. We

would still much prefer to work under the free market as much as we

possibly can.

The CHAIRMAN. You cannot have your cake and eat it, too. If we

Were to give you a free market now you would not want it, just like

everything else sells for what you can get for it—no.

Mr. ODEGAARD. We hope that we will in the very near future.

The CHAIRMAN. With the world market being S1.60 how could you

sell the wheat at a profit at $1.60? You know that you could not—you

have got to protect it. And that is what the world market was on

January 27.

Mr. ODEGAARD. Yes, sir.

The CHAIRMAN. $1.60. •

Senator YOUNG of North Dakota. That price backed off to the farm

in North Dakota would be about $1.30.

The CHAIRMAN. Yes. It would be much worse.

Mr. ODEGAARD. If the domestic market needs our wheat to the extent

that they will offer more than this, should anyone stand in the way of

letting our price rise, so that we can enjoy a little prosperity and keep

more people on the farm? This is what concerns me.

, The CHAIRMAN. And me, too, but we have done the best we could.

Mr. ODEGAARD. You have done an excellent job.

The CHAIRMAN. Thank you. And you want us to do better?

Mr. ODEGAARD. No, we are not asking the Government to do more.

We are just asking the Government to let the free market work, so

that if we have a product that is needed and the market is willing to

pay for it, that the Government should not put a ceiling on this for us.

We feel that it should go along like soybeans. With soybeans you do

not try to stop the price of soybeans going up.

The CHAIRMAN. No matter what you do for the farmer, he always

rants more. I do not blame him.

Mr. ODEGAARD. Don't we all? • The CHAIRMAN. It strikes me that the act which was passed did

very well for the wheatgrower, considering the surplus that we had

on hand at the time. The fortunate thing is that this surplus is

gradually dwindling.

MT. ODEGAARD. Thank goodness.
MINIMUM RESALE PRICE OF CCC WHEAT 41

The CHAIRMAN. And as the farmers expand and produce more

wheat, why, I am in hopes that by the end of the 4 years you will have

that free market that you desire.

Mr. ODEGAARD. We hope so.

The CHAIRMAN. And I hope so, too.

Mr. ODEGAARD. We are limited on the acreage we can produce on.

We have to fallow one-half of our land. We cannot raise much more

wheat in North Dakota in the future than we are raising right now.

We have to fallow one-half of our land in order to conserve moisture.

Despite the bread tax charges at that time it was generally concluded that wheat prices have little, if any, effect on the price of bread.

This market depressing action, however, does have a very serious impact on the income of the already hard-pressed wheat producer. A

single producer holding 5-,000 bushels of 16- and 17-percent protein

wheat lost $600 to $1,000 through the Secretary's action. I have one

such producer in my elevator. This loss was suffered through no fault

of his own. Taken as a whole, this represents a tremendous loss to the

farmers, businessmen, and other segments of the economy of our area.

I would like to see the law of supply and demand work in the marketplace rather than have a controlled price system. Much of the surplus should go onto the foreign market, not to compete with cars of

cash wheat. If the price is less, we will take that. Presently, within

a very narrow range, USDA has the power to determine what prices

will be received by wheat farmers. I feel that the law of supply and

demand should continue to operate in the marketplace. In many instances, this would have an advantageous effect on the price of wheat

to producers, particularly in light of the present need for wheat in both

the domestic and foreign markets for our type of wheat.

It is with this in mind that I would like to urge the adoption of

legislation increasing the minimum resale price of CCC wheat to

120 percent of price support plus carrying charges.

Such an increase in resale price would provide considerable additional income to the wheat producers of my area. It would also better

enable these producers and other segments of the grain industry to

plan orderly marketing and to better manage inventories.

The present price declines have come in the face of limited CCC

stocks actually being available for the market. If large quantities

were to become available—as they undoubtedly will—further depressed prices must be expected. It is with this in mind that I urgently request the approval of legislation increasing the minimum resale price of these wheat stocks to 120 percent of price support.

I want to thank you for the opportunity to appear before your committee.

The CHAIRMAN. We are glad to have had you here. Are there any

further questions? We thank you.

Mr. ODEGAARD. Thank you.

The CHAIRMAN. I understand that Mr. Johnson would like to appear this morning, and we will next hear from him.
42 MINIMUM RESALE PRICE OF CCC WHEAT

STATEMENT OF REUBEN L. JOHNSON, DIRECTOR, LEGISLATIVE

SERVICES, NATIONAL FARMERS UNION

Mr. JOHNSON. Mr. Chairman and Senator Young, I have asked for

the opportunity to appear this morning, because my statement will be

very brief. First let me thank you and Senator Young for the outstanding leadership and work in putting together the kind of farm

bill that Congress passed last year—the Food and Agriculture Act of

1965.

Our position last year, in regard to the resale of wheat from Commodity Credit Corporation, you may recall, was to ask for a resale

level of 120 percent of the support price for wheat.

I would just like to quote from our statement that was filed in part

I of the hearings last year, page 263. Our delegate to the 1965 convention of Farmers Union adopted the following statement:

No Commodity Credit Corporation inventory of wheat should be disposed of

at less than 120 percent of the support price and other policies concerning Commodity Credit Corporation marketing should be directed toward strengthening

the regular market structure.

At that time, as you will recall, we were attempting to win congres-

'sional approval of the wheat program. We were at that time, also, interested in an export certificate. We did not get the assurance we

wanted that there would be an export certificate.

The effect of our recommendation last year and here today would

be to provide a 25-cent increase in the price of a bushel of wheat in

round figures.

You are exactly right, Mr. Chairman, farmers want more income,

and our organization has always fought for those things that would

'give them more income, and that is the reason that we are here

today.

We, of course, realize that farmers are in much better economic

position than they were last year. We are very proud of the fact

that we have been able to arrive at 100 percent of parity on the domestic

consumption of wheat. We would like to have the committee, however, examine every feasible way, including the bill under discussion

today, to further increase the income of wheat farmers, because like

the previous witness we want to see as many farmers maintain rural

America as possible.

I would like to 'say that while we are for this increase in resale on

.wheat, we 'do not think that it is feasible for feed grains. Our position is that any 'such increase should be worked in the context of the

existing program not a subsitute for the existing program.

Mr. Chairman, that is all I have to say. Thank you.

The CHAIRMAN. Thank you. Are there any questions?

Senator YOUNG of North Dakota. None.

The CHAIRMAN. If not, we thank you. The committee will stand

in recess'until tomorrow morning at 9 a.m.

(Whereupon, the committee recessed at 11 :55 a.m., to reconvene at

9 a.m., on Wednesday, February 2, 1966.)
MINIMUM RESALE PRICE OF COMMODITY CREDIT

CORPORATION WHEAT

WEDNESDAY, FEBRUARY 2, 1966

U.S. SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D .0 .

The committee met, pursuant to notice, at 9 a.m., in room 324, Old

Senate Office Building, Senator Allen J. Ellender (chairman)

presiding.

Present: Senators Ellender, McGovern, Aiken, and Young of North

Dakota.

The CHAIRMAN. The committee will please come to order. The first

witness is Mr. Rice.

STATEMENT OF SAM L. RICE, JR., PRESIDENT, GRAIN 86 FEED

DEALERS NATIONAL ASSOCIATION, TOLEDO, OHIO

Mr. RICE. I have a short prepared statement here.

I am Sam L. Rice, Jr., president of the Rice Grain Co., Toledo, Ohio.

Our company is a family-owned business engaged in grain merchandising, in northwestern Ohio. I am appearing today on behalf of the

Grain & Feed Dealers National Association of which I am president.

This national association has 1,800 dues-paying members which

range in size from the smallest country elevators to the largest feed and

grain marketing complexes. In addition, we have 53 State and regional grain and feed associations which are closely affiliated with the

national association. These affiliated associations have membership

in excess of 17,000 business firms. This statement was prepared within

the framework of the policy objectives of the national association.

We appreciate this opportunity to appear before the Committee on

Agriculture and Forestry and express our views on the proposed legislation to increase the resale price of Commodity Credit Corporation

wheat stocks.

In assessing proposals to alter the Commodity Credit Corporation

resale formula price, it is important to keep in mind certain characteristics of the minimum sales price and its effect on the voluntary acreage

diversion programs.

Gaierally speaking, when farmers produce less of a commodity than

the market will absorb at the support price, as they have quite consistently under recent programs, market prices will rise above the

support level. In these circumstances, when Commodity Credit Corporation attempts to limit the price increase by sale of its own stocks 

at the formula price, as it has in recent years, its resale price tends to

establish the market price.

43
44 MINIMUM RESALE PRICE OF CCC WHEAT

Against this background, one important advantage of increasing the

formula price is readily apparent. Both farmers and. Commodity

Credit Corporation would receive higher prices for commodities they

offer for sale.

Another important but less obvious advantage of a higher resale

price is that the marketplace overrides the Commodity Credit Corporation in guiding the production and disposition of basic farm commodities. Secretary Freeman referred to the importance of this in his

testimony to the House Agriculture Committee on April 6, 1965.

An aspect of this which the Secretary did not discuss in detail seems

worth comment here. This involves the impact of proposed changes

on futures trading. A widening of the differences between price support and statutory loan resale prices will tend to increase the usefulness of futures markets.

Those who rely upon futures prices to guide their stocks acquisitions and dispositions, and buy or sell futures contracts as temporary

substitutes for these planned acquisitions and dispositions, do so in

terms of their own evaluations of price prospects. When the prospect

of price change is severely limited, these firms have little incentive to

appraise the prospect or to use the futures markets. The range over

which prices can change is inherently limited by the 105-percent requirement, which is the chief deterrent to the use of the futures markets. A second deterrent is that the authority which the Commodity

Credit Corporation has to sell is not a mandate to sell. The authority

which the Commodity Credit Corporation has discourages risk capital

from entering the market and the lack of mandate prevents Commodity Credit Corporation from being a reliable supplier. Hence,

the trade is confronted by an uncertainty for which there is no effective protection. With a wider range, the trade would not only have

more scope for decisionmaking related to market forces, but could

view with greater certainty the prospect of Government sales at the

statutory level.

For two reasons, then, futures markets would be better used if the

statutory resale price were to be increased: first, because the range of

possible price change subject to the usual supply and demand forces

would be widened secondly, because the unpredictability of an unusual supply force—Government sales—would be reduced.

A further consideration is that, if price programs in the future are

to allow more scope to the marketplace, it is important to maintain

the institutional framework under present programs. It is too much

to expect markets to perform adequately at some future date if they

are permitted to wither away under present programs.

In my business, the ability to hedge gives me price protection for

my grain inventory. This price protection not only allows me to

work on a closer margin of profit but also affords price protection

which facilitates the borrowing of money necessary to finance grain

inventories.

There is still another advantage in increasing the statutory resale

price. This involves reducing unnecessary price-support activity

and, therefore, the costs to the Government of price-support programs.

At present, producers who have placed commodities under loan often

forgo the privilege of redeeming them even though the price rises

above the loan level to the Commodity Credit Corporation's resale
MINIMUM RESALE PRICE OF CCC WHEAT 45

price, because the difference between the loan and resale price is not

great enough to make the grain redemption attractive.

The cost to the Government and the disruption of the market system caused when the price at which !CCC can buy grain from farmers—

price support loan level—and the price which they can sell—resale

level—is too close together can be seen most clearly in a review of

1961-62 corn situation. In 1961 U.S. farmers produced 3.6 billion

bushels of corn. Corn consumption that year , was 4 billion bushels.

Four hundred million bushels were needed from CCC stocks. But

because the loan level was too near the resale level, COO incurred the

expense of acquiring 637 million bushels of corn because farmers did

not have the incentive to redeem their corn loans. COC then sold 975

million bushels instead of 400 million to balance yearly needs. This

975 million bushels represented over one-half the total off-farm movement of corn in that year.

A spread between the price which CCC buys and the price which

they sell is needed to prevent such needless and costly operations. We

believe 5 percent is not a sufficient spread.

I would like to turn now to disadvantages involved in increasing the

resale price. First, voluntary acreage diversion programs are expensive. Their costs are directly related to anticipated market prices.

Producers weighing the relative merits of compliance and noncompliance are influenced by the price they expect to get if they forgo

acreage diversion and attempt to maximize production. We have already noted that when these programs are effective in adjusting production to disappearance, the Commodity Credit Corporation resale

price in effect establishes the market price. It would seem, therefore,

that if the resale price is increased substantially, then additional payments must be offered compliers to offset higher market prices !anticipated by noncompliers in order to achieve the same program results.

Because of recent world food developments, this concern for insufficient or high-cost diversion may no longer be appropriate. In fact,

USDA, on January 25, announced that because of concern for insufficient wheat stock payments for Spring wheat diversion would not be

paid in 1966.

A second important disadvantage of increasing the Commodity

Credit Corporation resale price and therefore the effective market

price involves disposition of the commodities involved. In the case of

wheat, an increase in price resulting from an increase in the Commodity

Credit Corporation resale price might require an increase in export

subsidies to avoid the loss of export sales. Again, this consideration

should be weighed in light of recent world developments. If unusual

world demand develops, a low sale price might hold down farm prices

and farmers may fail to respond to anticipated increased demand. If

resale prices were higher, the market prices may rise at least to the

resale level reflecting the anticipated larger world demand. This may

assist in heading off a short supply condition from developing because

of too much diversion caused by the failure of the market price to reflect accurately supply-demand conditions.

The important role expanding exports can play in easing the burdens

of agricultural adjustment is well recognized. Both Government and

private agencies are involved in extensive efforts to increase foreign

59-108-66---4
46 MINIMUM RESALE PRICE OF CCC WHEAT

sales. The effect of an increase in Commodity Credit Corporation resale price upon these efforts should be carefully weighed.

Giving full consideration both to advantages and disadvantages it

is our judgment and recommendation that the statutory resale price

of 105 percent is detrimental to our agricultural industry and agricultural programs in general. We also believe there are disadvantages of

raising the resale price too high as long as acreage diversion programs

are required to curtail U.S. cereal production.

This association is on record as favoring a resale policy of 110 percent of the price-support loan plus reasonable carrying charges.

As world supply-demand conditions change and as the need for control programs are reduced, we favor increasing the resale level in order

that the market price reflects more clearly supply-demand conditions.

This would increase the effectiveness of the private marketing system

in fulfilling its role, it would reduce unnecessary activity in the price

support programs—and, therefore, Government costs—and it would

provide a moderate price increase in returns both to producers and to

Commodity Credit Corporation on the sale of their stocks.

The CHAIRMAN. Who, in your opinion, suffers more by leaving it at

105—the farmers or the speculators?

Mr. RICE. I feel that the 105 is detrimental both to the farmer and

to the Government or to the taxpayer, because, as I pointed out here

in one of the examples, I thought the corn example clearly shows what

happens when the spread difference between where the Government becomes a buyer and where the Government becomes a seller. If this

spread is too close, then the grain 

The CHAIRMAN. Well, the spread is 5 percent plus carrying charges,

and those carrying charges, 1% cents per bushel per month plus freight,

which makes it about, as I recall, 14 or 15 cents a bushel.

Mr. RICE. I do not believe—it is a cent a month, isn't it?

The CHAIRMAN. Well, whatever it is. But it is a carrying charge—

mean the freight. And as I pointed out yesterday, if this amount

is raised and the wheat is offered for a price greater than the world

price, the tendency would be to let the Government take it over. And

the difference in the world price on wheat as of January 27 was this:

The U.S. price was $1.82 world price, $1.60.

So, if you make the carrying charge, as I see it, greater so that the

wheat will sell for some higher than the world price, the tendency

would be to have the Government purchase this wheat, corn, whatever

commodity it is, and increase the burden of the Government and the

taxpayer.

You see, what we did in the act of 1965—and I think it was within

the keeping of the duty of this committee—was to try and take care of

the producer. We have provided for domestic consumption parity

price for that wheat, and we more or less guarantee the price of wheat

produced for foreign consumption at $1.25. But the blended price of

what the farmer sells for. his domestic consumption, plus what he produces for foreign use, will give him an average of about $1.81 per

bushel. And that is what the Congress tried to do—protect the

producer.

Now, if you raise this, you can readily see that the cost will go up for the Government, and, of course, it will be a bigger protection in

my opinion, for the speculators than it would be for the farmer,
MINIMUM RESALE PRICE OF CCC WHEAT 47

cause most of the farmers—a good many of them—dispose of their

wheat as they gather it, unless, of course, they belong to a cooperative

which in some way protects them.

Mr. RICE. Well, the problem here, with the resale level too close to

the support level—you have two things: Each year a certain amount

of wheat goes into the Government loan—in this case, corn. Corn

actually goes into the loan. If the market price rises sufficiently, the

farmer will redeem his loan and move the grain into the normal marketing channels. However, the problem we are facing now, and I

think the figures show, even in years when we raise less than we need,

the farmer puts his grain in the loan but the resale program puts a

lid on the price level where it does not become attractive to redeem

his loan, and the Government ends up becoming the buyer of the

farmer's grain and the seller of the farmer's grain out of Government

stocks. This increases the cost to the Government. It does not increase the farmer's income. But it also has one other disadvantage,

and that is, as the farmer moves his grain to market, someone has to

assume the risk of price ownership. The narrowing of the spread

makes it unattractive for risk capital to move in and assume this price

risk, which someone has to hold.

So, in a sense, I would say that actually it is the farmer who suffers, and the overall marketing system suffers because of it.

Senator YOUNG. Mr. Chairman, when you have a situation such as

we have had for the past 3 years or more, where disappearance is

greater than production, a higher resale price will tend to hold the

oash price above the loan, and less grain will go under loan and more

will be sold on the free market. Also, more loans will be redeemed

by the owner and the grain put on the market.

You are right, though, when the cash price goes up, it does mean a

higher export subsidy. I think there is a greater saving, though, on

the other side. The CCC acquires less wheat and the farmer gets

more money, and the free market operates a little better.

The CHAIRMAN. Well, as I understand, your purpose here was to

try to make it possible through proper administration of the law so

that the Secretary, who has the authority to raise it from 105 to as high

as he desires, make it such that grain produced in this country can

be competitive—if that is one of the purposes, and not to store it.

If you increase from 105 to 108, 110, or if you freeze it at 115, that

means, in my opinion, that the Government will have to remain in the

business and buy it if you cannot sell it on the foreign markets at the

going rates, and that, to me, is going to be simply more expensive for

the Government.

Mr. RICE. Well, the problem we are facing here—actually, we have

gone through a period of adjustment, when we have been actually

producing less than the demand for the grains. And there has been,

a constant withdrawal from Government inventory. But the problem is, if you get the spread too narrow—again, I would like to refer

back to the 1961-62 corn situation, when we actually raised in this

country 400 million less corn than we needed.

Now, if the market had had a wider range to move it, I think you can

safely assume that it would have been more profitable for the farmer

to redeem his loan and take care of this deficit rather than—

The CHAIRMAN. And more costly to the Government.
48 MINIMUM RESALE PRICE OF CCC WHEAT

Mr. RICE. At less cost to the Government.

The CHAIRMAN. No, no; more cost, because they would have to pay

the differential between the support price, if you raise it, and what it

sells for.

Mr. RICE. No. The Government—if you had raised the resale

price 

The CHAIRMAN. You are speaking of corn. We are now considering

wheat, of course.

Mr. RICE. Yes. But I think it is the principle that I want to point

out here, and I thought that corn was an unusually good example in

that particular year.

If the market price had been allowed to go higher, two things would

have happened: No. 1, the Government would have received more

money for the 400 million bushels than was needed from Government

inventory to take care of the shortage, but the other thing, it would

not have had the expense of acquiring 600 million bushels of corn, taking it into Government inventory and then turning around to resell it.

The CHAIRMAN. Well, I have the most recent prices for wheat, and

the action taken by the Secretary in raising it from 105 to 108 has put

the price of wheat at or about or near world prices, so that there can

be competition there.

Senator YOUNG. Mr. Chairman, he did not raise it from 105 to 108

percent. He changed it from no sale at all, which would be the same

as a $2 resale price or any other figure you want to put it. The

Government did not sell a bushel of wheat for unrestricted domestic

use for a whole year.

The CHAIRMAN. He raised from 105 percent at which it could be

sold, to 108.

Senator YOUNG. You did not sell it at 105 percent for the last year.

He has now put it at 108 percent which is 3 percent higher than the

legal minimum. There was no sale at all for a year.

The CHAIRMAN. In any event, the difference, as I pointed out, is:

Last December, the world price on wheat was $1.56 per bushel at the

port, and the U.S. price was $1.77. In January of this year, the U.S.

price was $1.82 at the ports, and the world price $1.60.

Are there any further questions?

If not, we thank you very much, Mr. Rice.

Mr. RICE. Thank you, sir.

The CHAIRMAN. Mr. Hendrickson.

STATEMENT OF ROY F. HENDRICKSON, EXECUTIVE SECRETARY,

NATIONAL FEDERATION OF GRAIN COOPERATIVES

Mr. HENDRICKSON. I would like to bring Mr. Ramsland up here

with me.

The CHAIRMAN. Very well. Mr. Ramsland. All right.

Mr. HENDRICKSON. Mr. Chairman, I am Roy F. Hendrickson, executive secretary of the National Federation of Grain Cooperatives,

Washington, D.C.

With me is Mr. Royce Ramsland, vice president, in charge of domestic marketing and merchandising for the Farmers Union Grain

Terminal Association, St. Paul, Minn. This large cooperative, serving the farmers of the States of North and South Dakota, Montana,
MINIMUM RESALE PRICE OF CCC WHEAT 49

and Minnesota, is one of 25 members of this federation engaged in

marketing grains and oilseeds here and overseas for producers in most

States.

These cooperatives have as their chief mission to market grain so

as to yield to producers the largest possible return with the least

waste and at the lowest unit cost.

It is a highly specialized business; margins are narrow, and the

fewest possible speculative risks are taken. This reflects the role

of the cooperatives as agents and trustees of the farmer in his offfarm business enterprises. Farmers have invested very large sums

in elevator facilities, in transportation and other equipment, and in

the employment of staffs of specialists to serve them in the markets—local, terminal, and export.

It has been brought out in these hearings that the President in

his farm message of last February, the Vice President in a notable

speech quoted by Senator Mundt, and the Secretary of Agriculture

on a number of occasions have indicated their desire to have an efficient and viable marketing system. They have stated that it is

their desire that the private segment of our economy should carry

grain inventories bought from farmers, rather than depending on

the Government as the source of supply. There is no issue on that.

I listened to witnesses here yesterday and also to many who testified before the House Committee on Agriculture last spring, on the

matter of the provision of law specifying the minimum CCC resale

price for wheat at 105 percent of the support price. Here there is

an issue, or at least a vast difference of opinion.

I have tried hard to get to the heart of the issue. The need, I think

we can agree, is to encourage and not to discourage those who can

carry inventories of grains and oilseeds, thus reducing the burden of

the Government, cutting its costs and helping the marketing system

to function efficiently.

I am very glad that Senators Mundt and Young, in introducing

S. 2785 which would establish the minimum resale price at 115 percent plus reasonable carrying charges, have provided a concrete proposal so that you, Mr. Chairman, and your committee can examine

the elements which deserve study.

In listening to the various witnesses, most fail to take into account

the role of risk which uncertain Government policies of resale introduce into grain marketing. There are routine risks involved in the

collection or amassment of grains and oilseeds from a large number

of farms, proceeding through the local, subterminal, terminal, and

other market gateways, using every mode of transportation and involving a considerable period of time, costly financing and handling.

In most markets it is possible through hedging to insure against

certain risks such as major swings in prices. It is possible to insure

against the risks of loss involved in transportation, in storage and

handling.

But no one has devised a system of hedges, a system of insurance,

which will protect against changes affecting inventory flow and values

arising out of changes in Government policies and programs.

It is true that the Government's 

in 

with respect to the sale

of grain has changed many times m the last 15 months. Consider

these:
50 MINIMUM RESALE PRICE OF CCC WHEAT

1. On October 16, 1964, USDA announced suspension of Hard

Red Spring wheat sales.

2. On March 19, 1965, USDA announced suspension of CCC wheat

sales for domestic use.

3. On November 23, 1965, USDA announced that it would offer

high-quality bread wheat from its own stocks, specifically Hard Red

Spring wheat of 15-percent protein and above and Hard Red Winter

wheat of 13 percent and above.

4. Then on December 15, 1965, USDA announced that it would offer

for sale CCC wheat of all qualities "at market prices or at 108 percent

of the current support price plus carrying charges, whichever is

higher."

ow, I believe that Secretary Freeman and his associates deserve

credit and appreciation for having raised the resale minimum by administrative action, from 105 percent to 108 percent. This was most

helpful. This proved also that testimony presented last spring indicating that any increase in the resale price above 105 percent of the

support price would wreck or weaken the wheat certificate program

was mistaken, to say the least.

The resale figure of 108 percent of the support price or the market,

whichever is higher, still means that the range between the support

price and the resale price is much too narrow to provide the most efficient performance by the marketing system. For example, no one is

likely to build an inventory unless there is hope of gain—call it speculation, if you wish; I call it gain. No one is going to buy it with the

idea of trying to entertain a hope for loss.

The simple fact is that with the Government prepared to sell wheat

of every class and quality at 108 percent of the support price, and this

means a tremendous variety of prices at different places and for different qualities—ready to do this—it means that the merchandisers,

processors, exporters, and others are not likely to run the risk of competition from the Government by bidding grain prices up much beyond

106 percent of the support price.

Only the improvident, the most reckless risk taker would proceed to

acquire wheat at some point far distant from a market or in a terminal

market or anywhere else at 106 percent of the support price or at some

figure fractionally higher, in the face of a possibility that with no further notice whatever the eovernment might sell a substantial quantity

to others who sought the same market outlets.

This is the heart of this problem. It is the uncertainty, the factor

of competition from the Government that you cannot anticipate or

know about, and which really is not wise or fair.

The CHAIRMAN. Won't that remain as long as the Government has

this big stock, or big stocks, of any commodity?

Mr. HENDRICKSON. No, I don't think it needs to, because I think you

can have rules with respect to those stocks—fair, open, clear rules, just

as well as you have rules on lots of other things that are clear and open.

The thing about it is that this is a temptation for sudden, precipitant

selling, without announcement, for reasons that we cannot always

learn. They are not always explained.

I have been in this town for a long while. I have sought, after some

effort, to find out precisely what was the motivating factors that entered into this decision in November to sell high-protein wheat. I
MINIMUM RESALE PRICE OF CCC WHEAT 51

will say that I get a great many different explanations. One is that,

well, the bread prices were about to rise in Brooklyn or in Texas, that

protein simply was too high.

Now, when is the price too high or too low? That is a subjective

matter. Sure, the answer depeonds up how the fellow wakes up in

the morning, how he feels.

I will not say this of Secretary Freeman. I have tremendous respect

for him, and I have respect for the people around him, but there are

some rules that we should have, it seems to me.

Thus, if the resale price was advanced to 115 percent of the support,

or even 112 percent, or even 110 percent, the range between floor and

ceiling would be such as to facilitate more efficient functioning of the

marketing system.

Unless the market prices are permitted to advance to a somewhat

higher level, the takeover of wheat placed under loan by farmers and

not redeemed will be higher than otherwise.

The CHAIRMAN. Well, take the case of wheat, where would you expect this wheat to be sold?

As you know, the farmer is guaranteed, producing for the domestic

market, full parity. The only outlet we have for the wheat, of course,

is export, outside of what is consumed domestically.

Mr. HENDRICKSON. That is right.

The CHAIRMAN. And if you raise the export price higher than the

world price, what is going to happen? Won't the Government have

to pick up the diffeernce ?

Mr. HENDRICKSON. When Mr. Ramsland testifies, we will be happy

to get into the availability of wheat from other sources over the world

today. The world price today of wheat is what the United States says

it will be. That is the world price of wheat today, because we are the

only ones really with a substantial stock that is available to sell.

Canada is sold out, to Russia, to China, and to other places. And

the others are largely sold out.

We could raise the world price. We do not want to do it, I am sure;

and I am sure it would be bad policy to do so but actually this world

price of wheat at the moment could be raised by action of the Government of the United States. I do not think it is desirable; I would not

encourage it.

But remember that we have a very fine market, export demand is

strong for wheat today. Some of it is concessional selling, to be sure.

India and Pakistan demand is terrific.

The CHAIRMAN. Terrific? You mean by way of donation.

Mr. HENDRICKSON. It is a terrific demand.

The CHAIRMAN. You could dump it all there if you desire, at the

Government's expense. I do not want to do that.

Mr. HENDRICKSON. I don't favor it, either.

The CHAIRMAN. My friend, Senator McGovern, wants to do it, but I

don't.

Mr. HENDRICKSON. Well, you and Senator McGovern can argue that

point.

Senator MCGOVERN. I do not say dump it indiscriminately, Mr.

Chairman.

The CHAIRMAN. No, no, but let's produce for the whole world. We

have given them all our gold, and now we want to transfer abroad our

soil, and I don't want to do that.
52 MINIMUM RESALE PRICE OF CCC WHEAT

Mr. HENDRICKSON. You were saying, Mr. Chairman, that the world price was substantially below our price. The point is that we could actually increase our price—the price which we are asking, because

at the moment we are in the position of being not only the major but

almost the only supplier of any consequence for this particular period.

The CHAIRMAN. Well, aren't we fools not to sell for as much as we

can, for dollars, in the light of our shortage of gold?

Mr. HENDRICKSON. Well, you spoke of India and Pakistan. In that

case, it becomes merely bookkeeping, doesn't it?

The CHAIRMAN. No I am talking about—you say we can flux the price.

Mr. HENDRICKSON. Well 

The CHAIRMAN. For dollars?

Mr. HENDRICKSON. Well, it will be certainly—

The CHAIRMAN. And if we give it away, it is to our advantage to

keep it low, because we will lose that much less.

Mr. HENDRICKSON. We have dollar customers for wheat today,

pretty good customers, West Germany, United Kingdom Norway—

others who are paying dollars. With respect to those customers, it is

not advisable to raise the level of prices compared to what they have

been used to paying. They are quality buyers to a very large extent.

But that is not the issue that I am trying to bring to your attention

here. The issue I am trying to bring is the need for a viable, efficient marketing system, to have a reasonable range between the floor and the ceiling, if it is going to function. In so doing, it really saves the Government money, because, it makes possible the redemption of a great

deal of wheat that is placed under loan by farmers who, if the ceiling is down at a low point, certainly are not going to find it to their advantage to redeem.

As far as I am concerned, the loan program is a failure to the extent

possession has to be taken by the Government of these stocks, if it is possible for them to be absorbed into and used by the trade and sold.

The CHAIRMAN. I would be willing to wager all I have got that you raise this to 115 percent, the Government is going to acquire more and

more of the wheat.

Mr. HENDRICKSON. You mean 115 percent of the resale?

The CHAIRMAN. Certainly, because you will not find cash sales

abroad. The Government, on the contrary, will have to give it away

to Pakistan, to India, to southeast Asia, and Korea, and other places

where we get these lousy soft currencies that are not worth anything

to us.

Mr. HENDRICKSON. Well, I am not a betting man, but I could not

agree with you on that.

The CHAIRMAN. Well, I do not expect you to.

Senator YOUNG. It would mean a higher export subsidy.

The CHAIRMAN. Certainly, it would.

Senator YOUNG. At the same time CCC would take over less wheat.

Mr. HENDRICKSON. That is right.

The CHAIRMAN. What is it you do not agree with me about?

About the stability of these foreign—

Mr. HENDRICKSON. I do not think, by raising the resale price to

115 percent, that it increases the overall net cost to Government—if
MINIMUM RESALE PRICE OF CCC WHEAT 53

YOU take into account all costs, subsidy as well as the takeover of wheat.

The CHAIRMAN. Who is going to get the difference?

Somebody is going to get it here.

Mr. HENDRICKSON. Well, I think those producers Ira

enjoy a price somewhere above 106, 107, 108 percent o resale p

are those who benefit.

The CHAIRMAN. Sure. But we have provided

fairly and sufficiently, for the next 4 years.

Mr. HENDRICKSON. Well, really, Mr. Chairman ou say we have

provided for them.

The CHAIRMAN. That is right. 0'6

Mr. HENDRICKSON. The thing is the real problem hei.e.ak 379

basically, to try to have a governmental program which has been needed

and found necessary over the years and try to marry that with a marketing system that is based on the functioning of supply and demand.

It makes a kind of an uneasy marriage. But if you are going to have

a marriage, you are going to have to have some rules that everybody

understands to apply to this particular relationship.

What I am protesting—and I am protesting with some humility because I really feel that the Department of Agriculture is trying to do,

and has done, a better job with inventory management in recent

years. I think, though, that this off-again, on-again, gone-again kind

of policy is not needed, or healthy or desirable.

Senator YOUNG. Would you yield for a question?

I would agree with you that we should have some guidelines. This

does give too much power to the Secretary of Agriculture. Just what

guidelines would you propose?

I understand that some elements of the grain trade think the resale

price should be geared to the amount of carryover. I think this should

be given some study by you people in the trade who know the business. I think if you had some guidelines attached to our resale policy

rather than the present wide-open situation. It would be helpful.

Mr. HENDRICKSON. I think you are exactly right, Senator.

Well, I will try to complete my statement, because you have a limit

on time, and then turn it over to Mr. Ramsland here. I will proceed

to the top of page 5.

From the standpoint of cost to the Government, it is desirable that

to the extent it is possible for farmers to redeem loan grain to their

advantage financially, they should be encouraged to do so because the

purpose of the loan is not to acquire inventory by the Government, but,

rather, to place a floor under the prices, assisting the process of

orderly marketing.

In many respects the Commodity Credit Corporation has been doing

a better job in recent years in the management of inventories

'

and the

decline in the volume of its holdings has greatly reduced the financial

costs.

Cooperatives expanded grain storage at the request of the Government during the long period of the stalemate over governmental pricesupport policies. These cooperatives responded to earnest and frequent pleas from two Secretaries of Agriculture to expand storage

space.

We were well aware of the fact that we did not have a long-term

storage contract, and I should like to have the record show—because

thwil4 I think,%
54 MINIMUM RESALE PRICE OF CCC WHEAT

one witness, at least, has indicated some lack of good faith on the part

of those advocating a higher resale price—that we are not advocating

storage by the Government, if such storage requirements are not

consonant with the policies and needs of the Government.

We are not trying to fashion or adjust or change policies with the

idea of restraining and piling up grain in order to earn storage. I

think that this should be made absolutely and abundantly clear.

In that regard, we are aware of the periodic need to review policies

and programs bearing on strategic reserves in this difficult period of

our Nation's history.

Ordinarily, on the basis of my experience and observation, I tend to

favor considerable discretionary authority vested in the executive

branch on such matters as resale price levels. There are times when

a firm requirement in law in specific percentage terms can prove to be

difficult to administer in the light of rapidly changing conditions.

All in all, however, if this committee could succeed in indicating to

the Department of Agriculture its desire for a higher resale level, for

less frequent changes in policy, and for the development of a greater

sensitivity to the risks involved in inventory accumulation, it would

be helpful.

Thank you very much.

Senator MCGOVERN. Mr. Chairman, could I just ask one question

here about this phrase near the bottom of page 5, "strategic reserve?"

Mr. Hendrickson, do you have any idea how big that ought to be,

in terms of our own needs?

I have never been able to find anywhere in the Government where

we have ever really decided what the difference is between a surplus

and a reserve.

Mr. HENDRICKSON. Yes. There have been two outstanding studies.

I was a member of the Grain Research Advisory Committee some years

ago when we arranged for a contract study by Prof. Theodore Schultz,

of the University of Chicago. However, this was couched in terms of

the military and defense needs. Schultz went off on a tangent. He

came to the conclusion that reserves should largely be set up overseas so as to assist allies in case of trouble. Nothing has ever been

done on that. It has not been practical.

About 2 years, the National Advisory Committee that was set up

to advise the Secretary of Agriculture—appointed by the President—

made a study, and I have only recently looked at that. It proposed a

range of around 600 to 650 million bushels, in the case of wheat, as

I remember it.

Now, I have felt that that study was somewhat incomplete.

I might say that I am a member of this new commission, the National

Advisory Commission on Food and Fiber2 and it recently met for the

first time, and I encouraged—which I believe was consonant with the

assignment that the President had given us—that a very great effort

should be given to dig much more deeply into reasons with respect to

these reserves.

I will tell you why.

If you take just one criterion, which is defense, purely defense, you

come up with a lot of different ideas—it is a lot of guesswork. But

then you add another criterion, or another purpose for such a stockpile,

which is price stabilization within this country, and you bring in other

points entirely.
MINIMUM RESALE PRICE OF CCC WHEAT 55

For instance, the justification of this resale of protein and the opening up of sale of wheat entirely here in December was justified partly

as a step toward the stabilization of prices to prevent the cost of living from advancing, and so on. This had a sort of relationship to the

release of manganese, release of aluminum, and things of that sort.

It seems to me that that was never really contemplated, that the idea

of price stabilization as a function was never really thought through

and contemplated by Congress. Congress has stayed away from a

price control law so far, so far as I can see. You have not been enacting anything like a price control act. Still, if USDA brings

price stabilization in as a criterion in reselling grain it changes the

whole thing, the whole rulebook.

I agree there is not a satisfactory set of directives on this subject.

The CHAIRMAN. Well, are you able to answer his question as to how

much the reserve should be?

Mr. HENDRICKSON. I think, in wheat, it ought to be at least 650 million bushels.

Senator MCGOVERN. Isn't that about what we have now?

Mr. HENDRICKSON. We are not down to that yet. The last official

carryover estimate I have seen is somewhere in the magnitude of 700

to 725 million for wheat. My own figures indicate 650 million.

What is the last figure you have in the official USDA report?

The CHAIRMAN. 750 million, as of October 1965.

Senator YOUNG. That is the estimated carryover as of next July 1.

Mr. HENDRICKSON. As of next July 1.

The rate at which wheat is moving out of this country now, it is very

likely to be 650 or 675 million next July 1, which is certainly within the

range of a proper stockpile.

Senator YOUNG. May I ask a question?

The announced purpose of the resumption of the resale of wheat

by the Department of Agriculture was to stabilize wheat prices, it was

argued that the price of bread may go too high.

I cannot remember a time, in the history of farm price support programs, that they were ever used for the purpose of lowering prices.

Can you?

Mr. HENDRICKSON. That has been true; that was true of feed grain

sales, of course, in 1961 and 1962. They were used to lower prices

then in order to try to get more participation in and compliance with

the program.

But I think we should not reason from the feed-grain program precisely as to wheat. I think they are two different things, entirely.

Senator YOUNG. I agree with you.

The CHAIRMAN. All right.

Mr. Ramsland.

STATEMENT OF ROYCE RAMSLAND, MANAGER, DOMESTIC MERCHANDISING AND MARKETING, FARMERS UNION GRAIN TERMINAL ASSOCIATION, ST. PAUL, MINN.

Mr. RAMSLAND. Mr. Chairm.an and gentlemen, first of all, I want to

thank you very much for the opportunity to appear before you and

discuss the resale policies of the Commodity Credit Corporation. My

name is Royce Ramsland. I live in Hopkins, Minn. I am domestic
9

56 MINIMUM RESALE PRICE OF CCC WHEAT

manager of merchandising and marketing for Farmers Union Grain

Terminal Association located at St. Paul, Minn.

The legal minimum CCC resale price was set 17 years ago in the

Agricultural Act of 1949, after initial restrictions on CCC sales had

been written into the Agricultural Act of 1948. Section 407 reads, in

part: "The Corporation shall not sell any basic agricultural commodity

or storable nonbasic commodity at less than 5 per centum above the

current support price for such commodity, plus reasonable carrying

charges. The foregoing shall not apply to * * * sales for ex- port * * *2)

When Congress passed this provision in 1949, supports were 90 percent of the old parity formula. By this and later laws the loan levels

have been drastically lowered, while the 105-percent provision has been

untouched. For wheat, 90 percent of the old parity formula would

now be around $2.80, with 5 percent being 14 cents margin for market

fluctuation. Today, with the support at $1.25, 5 percent is only 6

cents, a very narrow margin for market operations. In connection

with this, I refer you to a table I have prepared on the annual support prices and 5-percent margin, 1949 to date.

(The table referred to is as follows:)

Margin over wheat loan provided by 105 percent resale minimum

Crop year

Crop support price (loan

rate-national

average)

Resale margin at 5 percent of loan Crop year

Crop support price (loan rate-national

average)

Resale margin at 5 percent of loan

1949 

1950 _ 1951 

1952 

1953 1954_ 

1955 

1956 1957_ 

1958 

$1. 95

1. 99

2. 18 2.20 2.21 2.24

2. 08 2.00 2.00

1.82

Cents9. 75 9. 95 10. 90 11.00 11.05 11.20

10. 40 10.00 10.00

9.10

1959 

1960 1961 1962 

1963 1964 

1965 1966 

1967 

1. 81 1. 78 1. 79

2. 00 1.82

1.30 1. 25

1.25

(9

Cents

9. 05 8.90 8.95

10.00 9. 10 6.50

6. 25 6.25

(1)

I Probably same.

The CHAIRMAN. As I remember, that does not apply to all wheat;

it is only the wheat produced over and above that which is used for

foreign shipment. You understand that-in the present law.

Mr. RAMSLAND. Yes, in the present law.

Since 1949, costs of farming have gone up greatly, so that this

smaller margain is no longer sufficient to do what Congress intended

when it was passed. In addition, as the margin has come down,

higher incentives have been offered farmers to reseal their grain on the

farm, thereby earning 13 cents per year payments. This is far more

attractive than the reduced 5 percent margain, if the producer has

sufficient storage space and adequate quality grain.

This results in grain being turned over to the ,CCC which could

have been sold in the open market, had there been a higher resale.

When CCC sells at 105 percent or 108 percent, this becomes

the market ceiling, and all buyers and sellers must govern themselves

accordingly.
MINIMUM RESALE PRICE OF CCC WHEAT 57

In the fall of 1964, Commodity Credit Corporation discontinued

selling Spring wheat for unrestricted use. The grain markets immediately responded whereby the producer-farmer, for approximately

1 year, received a premium price for his grain. To give you an idea

as to the importance of the Commodity Credit resale price, I will cite

some market quotations, on November 23, 1965, Commodity Credit

Corporation started offering 15 percent protein and higher spring

wheat at 108 percent of the loan:

Cash closing prices, Minneapolis Grain Exchange for week of November 22, 1965

Protein

15 percent

Protein

16 percent

Protein

17 percent

\Tovember 22, 1965 $1. 89,47 $2. 01743 $2. 11%

Srovember 23, 1965 1. 864 1. 984 2. 084

N'ovember 24, 1965 1. 8274 1. 9174 1.98,47

\Tovember 26, 1965 1.8334 1.9134 1. 99 Yi

Vlaximum decline in prices. —.07 —. 10/34 —.13

Any merchandiser, miller, farmer, or country elevator operator that

owned wheat in this protein bracket suffered a large financial loss.

I think the problem before us today is simply one to determine to

what extent Commodity Credit Corporation should influence prices

in the marketplace. With the carryover stocks as of July 1, 1966, being somewhat under 600 million bushels, I am of the opinion they

should go no lower. Certainly, with our present export markets, we

will more than utilize the indicated 1966 production of all wheats.

If we establish the resale price of Commodity Credit grain to at least

115 percent, then we will eliminate the in-and-out action of Government stocks that have plagued the market for the past several years.

The CHAIRMAN. I would like for you to explain that.

As I pointed out here, your world price would then become much

lower than the price that would result from raising it to the point

you say there. It would simply mean, in my opinion, that the Federal

Government would be that much more out of pocket.

Mr. RAMSLAND. What I am simply saying is this, Senator: If you

get the resale price to 115 percent, there is no incentive for the farmer

to put his grain under the loan.

The CHAIRMAN. Under what?

Mr. RAMSLAND. Under the loan.

The CHAIRMAN. Well, you do not want him to put it under the loan.

Mr. RAMSLAND. He is going to have the protection of it, but he is

not going to default on his loan. He is going to repay his loan and

market the grain.

The CHAIRMAN. Not if you make it at 115 percent.

I do not see how it will go much higher than that. In other words,

if it is within the world price, where would we sell it—if our price is

higher than the world price?

Mr. RAMSLAND. Well, I am going to talk about this world price if

I can.

Yesterday, you threw out a figure of $1.60, and, I believe, and $1.82.

The CHAIRMAN. $1.82, that is right.

Mr. RAMSLAND. I do not know where these figures came from. I

assume they are Department of Agriculture figures.
58 MINIMUM RESALE PRICE OF CCC WHEAT

The CHAIRMAN. That is right.

Mr. RAMSLAND. I know today that we are making the world price.

I don't know what kind of wheat you could buy from anyplace in the

world at $1.60.

The CHAIRMAN. That was in November, I guess, during the harvest,

or December. Usually, the price is a little lower during the harvest.

You know that.

Mr. RAMSLAND. As an example, today, our only competition in

spring wheat, which is the area that I represent, is Canadian. Canadian 2CW is being offered today on a nominal basis, because they have

not any to sell, at $2.115 per bushel, and our price, either the Government price or the private grain trade, is $1.96.

The CHAIRMAN. Who offers that to Canada? China? We will not

sell to China, you know.

Mr. RAMSLAND. This Canadian price is being offered in Western

Europe but at a purely nominal quotation, because they have committed all their stocks.

We are in a unique position today in the United States, in that you 

have a crop failure in Argentina, you have a crop failure in Australia,

you have Canadian—all their shipping and transportation is tied up

completely.

Senator YOUNG. If you will yield there? This is the case with

Canada: They do have additional wheat, but they do not have transportation for it.

Mr. RAMSLAND. That is right, they cannot handle it.

The CHAIRMAN. If we had a bit of sense we probably could charge

off a lot of our huge debt by selling some of our surpluses abroad.

Mr. RAMSLAND. Well, the Department has done 

TheCHAIRMAN. Instead of giving it away.

Mr. RAMSLAND. I think they have done an excellent job, particularly in the last 3 months. They have programs going now for

Western Europe in the next 6 months that are going to dispose of a

great amount of spring wheat that they own.

You want to remember one other thing: When you talk about the

subsidy, increase the subsidy, when they are selling out of their

stocks, their inventory value is going up at the same time as the

price goes up, their inventory goes up, inventory value.

Senator MCGOVERN. Mr. Chairman, you mean if we were not so

concerned about the politics of the buyer we could sell more wheat

overseas? Is that what you are suggesting?

The CHAIRMAN. Yes, that is right exactly right.

Senator MCGOVERN. That is the way I feel.

The CHAIRMAN. We are just trying to take care of everybody, trying to keep some back to feed the poor starving Indians. I sympathize with them, but the Indians have starving for a hundred

years. They have never been able to produce. The same way with

China. We could not produce enough food here to supply the needs

of those people.

As Senator McGovern states, if we leave the politics out and just

go there and sell them on the open market and get our dollars back

that we have been losing all these years, that is the thing that ought

to be done.
MINIMUM RESALE PRICE OF CCC WHEAT 59

Mr. RAMSLAND. I think the Department is really doing that right

now.

The CHAIRMAN. I doubt it, to the extent that I would like to see it

done.

Mr. RAMSLAND. Not with China and Russia but with Western

Europe.

Senator YOUNG. Western Europe is a dollar market.

Mr. RAMSLAND. This is a dollar market.

The CHAIRMAN. Proceed.

Mr. RAMSLAND. The loan program was set up as a floor on grain

prices to protect the producer. However, with the very small premium at 105 percent or 108 percent, there has been a continual flow

of producer grain into Commodity Credit Corporation's hands each

year, and a continual flow of grain from Commodity Credit to the

domestic and export trade. If the resale price is set at 115 percent

or higher and the supply-and-demand situation justifies prices near

this level, then the Government would take over very little wheat

each year and would sell very little wheat each year. Certainly,

there is a tremendous cost factor to the Government in taking over

100 to 300 million bushels each year under defaulted loans and merchandising in competition with the producer and the private trade

an equal amount of grain.

I am hopeful this committee will see fit to establish the resale value

of at least 115 percent which will be binding upon the CCC so that

the processor, merchandiser, cooperatives, and producers will once

again be in a position to assume the risk of owning grain.

The CHAIRMAN. Thank you very much.

Senator Carlson, we are very glad to have you here at this time.

STATEMENT OF HON. FRANK CARLSON, A U.S. SENATOR FROM THE

STATE OF KANSAS

Senator CARLSON. Mr. Chairman, gentlemen of the committee, I

would like at this time to submit a statement in regard to support for

S. 2785.

As the chairman will remember, I had a bill for 110 percent. This

is 115. I shall not read the statement, but I want to submit for the

record, as a part of my statement, a signed letter from the president

of the Kansas Farm Bureau, Walter Peirce, and the president of the

Kansas Farmers Union, Martin Byrne, both favoring 125. So, I

feel I am modest in my request.

If the chairman will permit, I will be happy to have this made a

part of the record at this time.

The CHAIRMAN. Without objection, that will be done.

(The prepared statement submitted by Senator Carlson, together

with the communication referred to, follows:)

Mr. Chairman, I appear before the committee in support of S. 2785, introduced

by my colleagues, the Senator from South Dakota, Mr. Mundt, and the Senator

from North Dakota, Mr. Young.

This bill, if approved, would amend section 407 of the Agricultural Act of

1949, as amended, and would prohibit the Commodity Credit Corporation from

making sales of wheat at less than 115 percent of current support prices plus

reasonable carrying charges.
60 MINIMUM RESALE PRICE OF CCC WHEAT

During the debate on the Food and Agricultural Act of 1965, the distinguished

chairman of this committee, the Senator from Louisiana, Mr. Ellender, stated

that he would hold hearings on this and similar amendments.

As one who had an amendment pending at that time I want to commend the

for holding this hearing.

The amendment that I offered at that time provided that the Commodity

Credit Corporation should not make any sales of wheat at less than 110 percent

of current support prices plus reasonable carrying charges.

It is generally agreed that the present release price of Commodity Credit Corporation stocks of wheat at 105 percent of the loan rate, plus carrying charges,

is unrealistic and unfair to the wheatgrowers of the Nation.

The stocks of wheat in our own Nation and in the world should justify at

least the 115 percent in the pending proposal and I fully support it.

Presently, we are applying ceiling prices on our wheat producers at levels

which penalize in a most drastic manner the wheat farmer when he takes his

production to market.

Price supports for wheat have been drastically reduced from an average at

$2 per bushel just a few years back to approximately $1.25 per bushel this year.

I do not believe it is fair to wheat farmers, nor that it is a sound national

policy to prevent the market price from operating above these support levels

if the market system indicates that it should.

Under the existing law, the Secretary of Agriculture is authorized to move

Government-owned wheat into the market when the cash price reaches a level

equal to 105 percent of the support price, plus carrying charges.

The Secretary has exercised this authority, and by so doing, has placed

a ceiling price on wheat in the marketplace at this level, and in fact, in many

instances has purposely sold wheat at these levels in order to hold down the

price. In simple language, the Secretary has used the weight and size of

Government stocks of wheat to break the market price. This, of course, reduces the income of the Nation's producers.

Government manipulation of prices impairs the market system and can

ultimately destroy it.

The principle of securing an increase in the sale of this Government-owned

wheat is approved by most of the farm organizations in our State, and while

they favor a much higher release price than 115 percent, they all agree on the

principle.

There is no doubt that the world needs more of our wheat, but the problem,

of course, is to get it into the world markets through Public Law 480 and

cash sales.

We need to get more wheat into the private trade channels of our Nation

and under the 105 percent sales policy, the Government will own 90 percent of

our wheat. This policy has a way of nationalizing the wheat business.

What we need is a system which will permit—which will make it attractive

to people with capital to invest in wheat, so that the Government does not

have to carry all of the wheat. One way to do this is to keep up a progressive

program of reducing our stocks as rapidly as possible, but at the same time

increase the Government sales to at least 115 percent of loan.

There is only one way that the Government can own less wheat, and that

is for somebody else to own some wheat and the only way we are going to

make it interesting for anybody with money to own wheat is to up the sale

price.

, The sale of Government-owned wheat at 115 percent of loan would raise farm

income, reduce Government costs, and help restore a healthy grain market

system.

I wish to submit for the record a copy of a letter dated July 27, 1965, jointly

signed by Walter C. Peirce, president of the Kansas Farm Bureau, and

Martin J. Byrne, president of the Kansas Farmers Union.

This letter states that resolutions • adopted by both of these State farm

organizations call for the release of CCC wheat stocks at not less than 125

percent of the loan rate, plus carrying charges.
•

MINIMUM RESALE PRICE OF CCC, WHEAT 61

KANSAS FARM BUREAU,

Manhattan, Kans., July 27, 1965.

Senator FRANK CARLSON,

New. Senate Office Building,

Washington, D.C.

DEAR SENATOR CARLSON : This is a joint statement from Kansas Farm

Bureau and Kansas Farmers Union on the release price of CCC stocks of

wheat.

The section in the present law which governs the sale of wheat owned by

the Federal Government authorizes the Secretary of Agriculture to move

Government-owned wheat into the market when the cash price reaches a

level equal to 105 percent of the support prize plus the carrying charges. The

Secretary of Agriculture has exercised this authority and, by so doing, has

placed a ceiling price on wheat in the marketplace at this level and, in effect,

created a needlessly low cash price for wheat received by producers.

In other words, this practice results in the unusual and absurd situation of

using the weight and size of the Government stocks of wheat to break the

market price. In addition the normal price relationship for high-quality wheat

is disturbed and large quantities of high-quality wheat which are needed for

our domestic and export markets are now being fed to livestock. This reduces

the income of a segment of the Government's own citizens—the wheat

producers.

If this section of the law covering the Secretary of Agriculture's authority to

release wheat was changed so that wheat could only be released at a higher

level, it would tend to give the cash market an opportunity to rise and the

increased cash price of wheat would result in greater income to wheat

producers.

At the present time, it appears to us that the legislation being considered by

Congress affords an ideal opportunity to correct this situation by including

a provision which would authorize the Secretary of Agriculture to sell Government-owned wheat at a price higher than the present authorization of 105

percent of support price plus carrying charges.

We urge you to exert your best effort to include in the current legislation

a provision which will substantially raise the level at which the Secretary

of Agriculture is authorized to move Government-owned wheat into the

market.

Resolutions of both farm organizations call for release of CCC wheat stocks

at not less than 125 percent of the loan rate plus carrying charges.

Sincerely,

WALTER C. PEIRCE,

President, Kansas Farm Bureau.

MARTIN J. 13.1-RINE,

President, Kansas Farmers Union.

The CHAIRMAN. Our next witness is Mr. Robert L. Searles.

STATEMENT OF ROBERT L. SEARLES, CHAIRMAN, NATIONAL GRAIN

TRADE COUNCIL, MINNEAPOLIS, MINN.

Mr. SEARLES. Thank you, Mr. Chairman. Gentlemen of the committee, I know you are pressed for time, so I will move ahead rapidly,

with your permission. Thank you very much for allowing me to

testify here.

My name is Robert L. Searles. I live in Orono, Minn., am a grain

broker and trader, and appear before you representing the National

Grain Trade Council as chairman of that organization.

It was my privilege to appear before this committee last June,

testifying on the same subject during hearings on the farm bill under

consideration at that time. I will not try to restate our position in

detail. It will probably suffice to remind you that the many grain

59-108-66 5
62 MINIMUM RESALE PRICE OF CCC WHEAT

markets, large and small, that make up the council felt that the

minimum resale price for CCC wheat stocks should be raised from

the current 105 percent of loan levels to a higher level. We recommended 120 percent of loan levels plus reasonable carrying charges.

The objectives of the President's 1965 farm message would all be

advanced by such a change. Increased income in the marketplace

for farmers, a decrease in unnecessary and expensive CCC market activities, commercial interests carrying more of their inventory needs

rather than leaning on CCC stocks, all these are still goals to be

achieved.

What is new at this time is that we can review the CCC wheat

resale record for the past several months and try to learn what

national policy has been in the recent past.

Briefly, the Commodity Credit Corporation was an aggressive

seller of wheat up to October 1964 when it changed its spring wheat

resale policy from 105 percent to infinity by removing its stocks

from the market at any price. • The same action was taken for winter

wheat in the spring of 1965. The Corporation has now reversed

itself again. On December 15, 1965, it again offered wheat for unrestricted use, this time at 108 percent plus carrying charges.

The most obvious question in this zig-zag performance is: Has the

wheat supply and demand situation so changed as to justify these

fluctuating CC decisions?

Most people in the grain marketing business can point to overall

basic trends in production and disappearance of wheat, but no set

of facts can justify such an erratic record.

If the public competitive wheat markets were to gyrate in such

headlong price moves, I am sure that a public investigation would

be held to see if such violent pricing action were in the national

interest. Is it in the national interest for the CCC, managing such

a vast stock of wheat, to be so unpredictable and undependable? Just

what purpose lies behind these various headlong sales policy changes,

changes which are arrived at secretly and then exploded without

notice on the agricultural markets?

Since farmers are marketers as well as producers, I would think

that such uncertainty would make prudent marketing decisions diffipult at best. The wheat farmer who sells his grain just prior to the

removal of a CCC ceiling probably feels he has been deceived by

his own • Government. So does the one who has held his wheat for

better market return later on, only to find that the ground rules were

changed overnight and his market has been summarily preempted by

a • new CCC selling policy. In either case a wheat producer can

easily end up shortchanged by CCC vacillation. What marketing

guidelines can he depend on? What is Government policy in this

area?

• I referred th national interest a 'moment ago. Reserve stocks

of wheat have been advocated by the National Grain Trade Council

and many other organizations concerned with national agricultural

policy. Many consider this of prime national interest. I would like

to call your attention to the reserve problem because resale policy

is intimately related to such reserves:

Over a year ago we recommended establishing an adequate wheat

reserve. The Department of Agriculture then asked that the matter
MINIMUM RESALE PRICE OF CCC WHEAT 63

be deferred until the farm bill had been passed. A separate proposal was to be made to cover reserve requirements. None was

forthcoming. Now, the forecast of the supply and demand situation

for wheat is taking on the following appearance; these are estimates made by reputable trade people. As estimates, obviously,

they are not exact, and nobody contends they are. These are

projections: Millions of

bushels

Carryover, July 1, 1965 

Production 

819

1,327

Total supplies 2,146

Total estimated disapperance 1,507

Carryover, July 1, 1966 579

Estimated production 1,174

Total supplies 1,753

Estimated total disappearance 1,467

Estimated carryover, July 1, 1967 286

It would seem that the maintenance of an adequate reserve is a,

vital national need. It would also seem that the unpredictable reselling of U.S. wheat stocks, with no plan for conserving a basic

reserve and with no plan for meeting today's needs with a possible

increase in acreage constitutes no policy at all. What national need

is met by meaningless market intervention through a vacillating

resale program while long-range considerations are ignored?

Other parts of the world have suffered crop failures. Are we

immune to a failure? Can we offer wheat stocks to control markets

when the need is to encourage greater production and to establish

and protect a national reserve?

I bring this up here because the reserve question has to be considered along with resale policy. This committee is far better

equipped to set down these basic guidelines than is the operating

office, bureau, or department carrying out the policy.

We in the grain marketing business wholeheartedly support this

bill under consideration. We think that Congress should set such a

broad policy for the protection of everyone, whether a buyer or a

seller. There are too many diverse interests in this country with

a stake in reasonable Government policies to allow the present

vacillating, secretive, and unpredictable policymaking to continue.

Thank you, Mr. Chairman..

The CHAIRMAN. Any questions?

Senator YOUNG. You would have the resale price set in relationship to the expected carryover of wheat each year?

Mr. SEARLES. I think this is a reasonable way to look at it. Actually, Government policies, I believe, should be set on a lOng-range

projection, not on, say, week-to-week, or month-to-month situations.

I believe a carryover at the end of each year, estimated production, could easily constitute the guideline which I refer to here.

Senator YOUNG. I really think something like this has to be done.

Mr. Chairman, I thought - that the Department of - Agriculture

policy of not selling any wheat at all was wrong—it put them in an
64 MINIMUM RESALE PRICE OF CCC WHEAT

untenable position. Sometimes they would have had to sell. If

they had set this resale level at 115, 120, or 125 percent, you would

not have had this extreme shift from no sales at all down to 108

percent. This is too wide a range. No one can guess what the future

is going to be under circumstances such as that.

I think there is merit in your proposal.

I remember when I first came to the Senate, I think the first

day--I served in the Appropriations Committee, a rider was put

on a bill to prohibit the issuance of export licenses for any wheat

when stocks reached a minimum of 175 million bushels. At that

time we recognized that we did not want to export any more wheat

when our stocks reached this minimum.

I think now we really should establish a reserve of some kind.

Mr. SEARLES. We would have to determine what level that should

be.

Senator YOUNG. It was the Appropriations Committee that determined it at that time.

The CHAIRMAN. Well, I presume if you would do that and hold

the wheat back, with the shortages abroad, that your wheat price

would go up; would it not?

Speculators would make a bunch of money.

Mr. SEARLES. I think the farmers would start making more

money.

The CHAIRMAN'. We are protecting them now pretty well. We are

giving them, as I said on many occasions here, full parity on what

they produce for domestic consumption.

Mr. SEARLES. I realize the Government program is paying them a

lot.

• The CHAIRMAN. Certainly, the only people suffering a little bit

now may be the speculators.

Senator YOUNG. Mr. Chairman, there are two advantages: As the

price goes up, there is very little that goes under Government storage,

and as there becomes a shortness of supply and you need an increase

of production, you do not need diversion payments anymore. So,

the Government does save money. Of course, you do have the problem of increased export subsidies. That is one cost that goes up.

The CHAIRMAN. I am very much in hope that by the end of the

next 4 years—that's the length of time the bill we have on the statute

books has to run—that we will have both corn and other feed grains

and wheat out of the support program. Let them go on their own

after that.

Mr. SEARLES. This would be an ideal situation.

The CHAIRMAN. Well I know.

At this point I desire to place in the record a statement by Senator

Roman Hruska from Nebraska.

(The statement referred to follows:)

STATEMENT OF HON. ROMAN L. HRUSKA, A U.S. SENATOR FROM THE STATE OF

NEBRASKA

Mr. Chairman, members of the committee, I appreciate the opportunity to

present my views on S. 2785.

I wholeheartedly support the bill and urge its favorable consideration by

this committee and the Senate.
MINIMUM RESALE PRICE OF CCC WHEAT 65

S. 2785 has a clear purpose: it would revoke the present authority of the

Commodity Credit Corporation to dispose of its stocks of wheat at 105 percent

of the current support price plus carrying charges and establish a new resale

level of 115 percent plus charges.

The proposal under consideration is not new. It has been advocated by

major farm organizations, farm State Congressmen and others for several

years. Only by determined opposition of the Secretary of Agriculture and the

administration has the present provision been retained.

Mr. Chairman, the Secretary of Agriculture, by his continued abuse of the

present authority, has made passage of this bill imperative.

Let us consider the facts. We are currently witnessing the most recent

attempt by Secretary Freeman to depress wheat prices by dumping CCC stocks

on the open market for unrestricted use. This policy, announced in midDecember, is having its desired effect: it is forcing our wheat farmers to

join the "voluntary wheat program"; it is stabilizing or depressing wheat

prices. But, most important, it will mean our wheat farmers will enjoy increased earnings only by reliance on the subsidy check from Washington.

The present sales policy brings bitter memories to mind. In the fall of

1964—the presidential campaign-50 million bushels of wheat were dumped on

the market by the CCC. The result: Secretary Freeman got his sign-up and

wheat prices were stagnated—but at what cost? Our wheat farmer—a hardpressed group to begin with—lost about a quarter billion dollars in net income

from the 1964 crop, according to conservative estimates.

In all, more than 500 million bushels of wheat have been sold by the CCC

from its stocks over the past 5 years.

In his testimony before the House and Senate Agriculture Committees last

spring on the Food and Agriculture Act of 1965, Secretary Freeman referred

to the wheat dumping of the fall of 1964 as an "abnormal situation" which

"vvill not occur again, and we expect that in future years, Commodity Credit

Corporation sales will be relatively small."

The current MC sales program is a clear breach of this pledge. It is the

overriding reason this bill should be enacted.

Mr. Chairman, recently I have written Secretary Freeman concerning this

deplorable situation. I ask unanimous consent that my letter, along with the

reply, be made a part of your record.

You will note that Under Secretary Schnittker in replying for Secretary

Freeman said there was no commitment by the Department to Congress that

would prevent wheat sales when conditions justify such action.

This response indicates that Secretary Freeman does not feel obligated by

his statement to this committee last spring to refrain from further wheat

dumping practices.

In view of this, in view of the current dumping, I urge this committee to

act favorably on S. 2785 without delay.

U.S. SENATE,

Washington, D.C., December 22, 1965.

Hon. ORVILLE L. FREEMAN,

Secretary of Agriculture,

Washington., D.C.

DEAR Mn. SECRETARY: Your recent decision to dump stocks of Governmentowned wheat onto the domestic market for unrestricted use was not only

bitter news for the wheat growers of Nebraska and the Nation, but a direct

contradiction of testimony you gave the Congress earlier this year.

The purpose of this letter is to urge that you reconsider this unfortunate

decision. You could have no better Christmas present for American agriculture than to modify or, better yet, rescind your dumping order.

The effect of this order will depress the price of wheat. It will reduce the

income of our wheat farmers. The decision will aggravate the critical shortage

of boxcars. Already more than 100 elevator operators storing Governmentowned wheat have been suspended by your Department because of their inability to obtain boxcars to ship wheat on your order for export to India and

other nations under the food-and-peace program. Further shipping orders

now will mean more suspensions for elevator operators. These businessmen,

many of whom are in dire financial difficulties because of drastic reductions

of commodity inventories can ill afford further financial blows.

59-108-66-6
66 MINIMUM RESALE PRICE OF CCC WHEAT

One is reminded of similar action taken last year when 50 million bushels

of wheat were sold by the Commodity Credit Corporation during the presidential campaign. Those sales were advertised as preventing a price increase

in the cost of bread to the voting public. They also served to insure substantial

compliance with your so-called voluntary wheat program. But they cost our

hard-pressed farmers about a quarter of a billion dollars of income, according

to conservative estimates.

In all, more than 500 million bushels of wheat have been disposed of by the

CCC in the past 4 years.

This year Congress considered an effort supported by the major farm organizations to increase the price floor under which the CCC could dispose of its

stocks. In your testimony to Congress on the farm bill last April, you referred

to the CCC wheat dumping of a year ago as an "abnormal situation" and said, "it

will not occur again." You urged the Congress not to remove your present

authority to dispose of CCC stocks at 105 percent of loan value plus costs. Your

plea was acceded to and the authority was retained in the Food and Agriculture

Act of 1965.

Mr. Secretary, improvements have been made in farm income this year, a

situation we can all be thankful for. The latest estimates of your Department

indicate realized net farm income will be up a billion dollars over last year.

However, the same source attributes this rise "mainly from a very favorable

price situation for livestock." Gains were also registered from marketings of

vegetables and oil-bearing crops which are primarily soybeans. It is notable

that in none of these areas are there any of your support programs.

Quite frankly, Mr. Secretary, I am thankful that your Department doesn't

have large stocks of these products• to engage in price-wrecking dumping

practices.

In Lincoln last week you described your decision to dump CCC wheat as

representing the concept of the "ever-normal granary into action," and resulting

in "price and income stability."

It seems your idea of stability for the wheat farmer means stagnation of

income.

It would be appreciated if you could advise me why you have felt it necessary

to dispose of CCC wheat stocks at this time, how long you expect this present

policy to continue, and how you reconcile your current dumping decision with

your pledge to Congress earlier this year.

With kind regards.

Sincerely yours,

ROMAN 'L. ITRUSKA,

U.S. Senator, Nebraska.

Hon. ROMAN L. FIRUSKA,

U.S. Senate.

DEAR SENATOR HRUSKA : This is a further reply to your letter of December 22,

1965, concerning wheat sales policies of Commodity Credit Corporation. First,

I will cover the announcement made on November 23 that CCC would sell high

protein wheat at the market but not below 108 percent of the current support

price, plus carrying charges.

This action to return to the marketplace some of the high-protein wheat removed under past support programs was taken to moderate recent tendencies to

price extremes for such wheat and to unevenness in its being offered from other

sources for domestic needs.

We did not expect the announcement to have a material effect on the market

price for high protein wheat for two reasons. In the first place, our announced

sales price protected the existing market premiums. In the second place, for

some time we have had In effect an exchange program under which millers

could exchange ordinary Hard Winter wheat for High Protein Hard Winter

wheat at existing market premiums and only a moderate volume of wheat has

been exchanged.

Our assumptions have been borne out to date as evidenced by the very small

volume of High Protein wheat we have sold. Through January 6, 1966, we had

sold less than 60,000 bushels of Hard Red Winter wheat (13 percent and higher

protein). Since our announcement was made on November 23, market premiums

DEPARTMENT OF AGRICULTURE,

Washington, January 14, 1966.
MINIMUM RESALE PRICE OF CCC WHEAT 67

have fluctuated both above and below the rates which prevailed on that date and

are now very little different from those of November 23.

In like manner the announcement on December 15 that we would sell ordinary

wheat has had little effect on the market, and sales of ordinary Hard Red Winter

wheat have been in relatively small volume amounting to 677,432 bushels through

January 6, 1966.

Far from breaking the market, our action has stabilized it. On January 6 on

the principal kind of wheat produced in Nebraska, the price in Kansas City (No.

1 Hard Winter) was 4 cents over the price of November 23 and 2 cents over the

price of December 15.

Making limited supplies of CCC stocks available on this basis to avert extreme

market developments is in the long-run interests of producers and consumers

in the same way that CCC acquisitions of wheat in settlement of price support

loans in periods of low prices has been in the producers' interest. This is the

traditional ever-normal-granary concept.

Wheat sales in the fall of 1964 were related to the transition to the certificate

type wheat program. It was necessary for the Department to take unusual

actions to insure on the one hand that no group received a windfall, and on

the other that no group was faced with a hardship. CCC sales policy following

passage of the Food and Agriculture Act of 1965 is not comparable to that of

the earlier transition period. There has been no commitment by the Department that would prevent wheat sales when conditions justify such action.

I share, of course, your own appreciation for the improvements recorded in

farm income last year. I believe our farmers can look with confidence toward

further gains in 1966.

I believe our CCC sales policy must be conducted consistently in ways that

serve the best interests of producers, consumers, and taxpayers. Consequently,

the policy muSt be flexible enough to permit quick response to new conditions,

new national needs, within the framework which the Congress has provided.

Sincerely yours,

JOHN A. SCHNITTKER,

Under Secretary.

Senator MCGOVERN. Mr. Chairman, may I direct a question here to

Mr. Searles?

Your table here shows next year we will be down to 286 million

bushels. Do you think that is a big enough reserve, even for our

own security?

Mr. SEARLES. Under the circumstances that exist today, I would

hesitate, if I were in a policymakin.g position in the executive branch

of this Government, to allow the U.S. reserves to drop to that level.

Senator MCGOVERN. If they get rid of this silly restriction that

is making it hard for us to sell wheat to the Soviet Union, they

might come in here with an order of several million tons of wheat.

That would take the whole thing, would it not? .

Mr. SEARLES. Actually, at some point, whether the policy is set

up either by the executive branch or the Congress, one will have to

be set up by just the disappearance of the reserve itself. You will

run out of wheat before you have a policy, or the policy will be almost

forced on us by the fact that the supply will disappear.

As a matter of fact, the very lowering of these projected carryovers is leading to the decision which was just made by the Department on spring wheat acreage—not to pay for additional retirement

of acreage this year. .

In other words, there is a sort of reluctant moving toward recognizing that you need a reserve policy by stopping the cutting back on

production in some respect now.

Senator YOUNG. This would mean further cutting back, if producers still have to take a 15-percent mandatory reduction.
68 MINIMUM RESALE PRICE OF CCC WHEAT

Senator MCGOVERN. I agree with Senator Young. I think it would

be helpful to have some guidelines. I think this formula you have

suggested here makes a lot of sense.

Mr. SEARLES. I think, in essence it is a sensible way to go at it. It

does not pretend to be an exact scale. It is not alleged to be.

The CHAIRMAN. Thank you very much.

Mr. SEARLES. Sir, may I introduce a statement for the record of

Ralph Bagley, my successor as president of the Grain Exchange of

Minneapolis.

(The statement follows:)

STATEMENT OF RALPH C. BAGLEY, PRESIDENT, MINNEAPOLIS GRAIN EXCHANGE

The Minneapolis Grain Exchange has long been recognized as one of the

largest cash grain markets in the world. It Is also a market in which grain

futures contracts have been traded for a great many years.

In our opinion the buying and selling activities of the Commodity Oredit

Corporation have seriously impaired the efficiency with which grain normally

would flow through the market from producer to consumer.

As a consequence of G-overnment-owned grain being offered for resale at

prices so close to loan value or cost, the competition that is an integral feature

of a free market is endangered.

li is the recommendation of the board of directors of the Minneapolis Grain

Exchange that a resale formula higher than presently exists be required as

to CCC inventories.

Only by so doing does it seem that producers and consumers alike can be

benefited by the forces of competition and free enterprise which historically

have made our marketing system the most efficient in the world.

The CHAIRMAN. Our next witness is Mr. Ken Kendrick.

STATEMENT OF KEN KENDRICK, EXECUTIVE VICE PRESIDENT,

NATIONAL ASSOCIATION OF WHEAT GROWERS

Mr. KENDRICK. Mr. Chairman, my testimony is still not officially

prepared, but I want to make a short statement.

The CHAIRMAN. If you desire, you may cover the points and then

present a full statement which will be incorporated into the record..

Mr. KENDRICK. I want to speak in behalf of the National Association of Wheat Growers. I represent wheat farmers. The only interest we have is the interest of wheat producers.

No. 1—First of all my association would like to thank the committee for supporting the wheat bill last year. In the last 3 months I have

attended 10 State wheat conventions, and the new wheat program is

very well received by the wheat producers of the country. They like

it. It is increasing farm income this year.

I would like to say, Mr. Chairman, that while I was at these various

State wheat conventions, I made it a point to ask farmers: "What is

the market price for your wheat at your elevator today?" And it

ranged from 10, 15, 20, and in a case or two, 25 cents above the loan

price.

It is our judgment the cooperating producer this year, if his market

price has averaged 10 to 15 cents above the loan, the blended price

cooperating producers receive will be in the neighborhood of $2 per

bushel.

Now, this does improve farm income. Just how much, we will not

know until the marketing year is over.
MINIMUM RESALE PRICE OF CCC WHEAT 69

But I would like to say that our association believes that the present

105 percent of resale should remain at this level. The Secretary has

demonstrated already that this is the minimum and not the maximum

for he is presently using 108 percent for resale and can go up to 110,

115 percent, or higher.

I want to emphasize two points only. No. 1, that our farmers like the

substitution clause. It tends to get wheat grown on traditional wheat

acres and corn and feed grain grown on traditional feed grain acres.

Some have testified—I have not had an opportunity to read any of

the testimony. I finally got to the office about 9 o'clock this morning,

and I do not know what time I am going to get home. The snow

problem is rough out in northern Virginia.

But as far as the substitution clause is concerned, some have testified, "We should raise the resale price on wheat and leave feed grain

at present levels." We think this would endanger the continuing use

of the substitution clause.

I just want to report to you that most of the wheat and feed grain

farmers that I know of, and most wheat farmers are also feed grain

farmers, think a great deal of the substitution privilege, because it

allows them to farm the land the way they want to and it tends to

get wheat back on wheat acres and feed grain on feed grain acres, and

they like it very, very much.

To disturb the price relationship between these two would tend to

lessen the utilization of wheat and could endanger the Secretary

using it, and this we do not want to see happen.

The only other point I want to make is that if you increase the

resale price of wheat to 115 percent of the loan rate plus carrying

charges and 13 protein, the resale price would equal, on January 1,

about $1.57 or $1.58.

Wheat stocks are going down, and this will work when stocks are

in short supply.

The _ point I want to make—and many do not understand, Mr.

Chairman—is that in great areas of the commercial wheatgrowing

country, the farmer's present alloment compared to his land available

to plant wheat on is only one-third of his crop] and, and in a few areas

it is only one-fourth of his cropland. And, farmers are historically

famous for taking chances and gambling.

Once the price at the elevator to the farmer gets in the range of

$1.60 or $1.65, he is going to get to thinking about it, he is going to

get his pencil out and figure: "If I increase my wheat allotment 50

percent, multiply it by this potential $1.60 per bushel, or increase it a

hundred percent"—and they can increase 100 percent in many areas.

In my own area, it would be no problem for me, if conditions were

right at seeding time next year, to increase my plantings by a

hundred percent, and still have land left over to summer fallow.

This is true in a good many areas of the commercial wheat-producing

country.

So, farmers get their pencils out and figure, and if that price gets

up to within the range of $1.60 to $1.65 at the elevator, and we have a

tremendous overseeding, he might be helped for 1 year, and we

would get millions of bushels on the market. He does not have a

loan, if he seeds outside the program, and we are fearful this can

happen, and if it does—the market price will drop and farm income is
70 MINIMUM RESALE PRICE OF CCC WHEAT

cut. We just do not agree that the time is here when we do not

need farm programs.

We think that wheatgrowers have surplus-producing capacity to

produce 1.8 to 2 billion bushels any year there is no program, and I just

do not see a market for this much wheat.

I think we could produce 200 or 300 million more than the market

will take.

This is the position of our association, gentlemen, the present program which you gentlemen supported is increasing farm income.

We urge the committee not to change the resale price but to give the

4-year voluntary wheat program an opportunity to operate for the

benefit of both producers and consumers.

Thank you, sir.

The CHAIRMAN. Thank you very much, sir.

(Mr. Kendrick's prepared statement is as follows:)

Mr. Chairman and members of the committee, my name is Ken Kendrick

and I am executive vice president of the National Association of Wheat

Growers. We appreciate this opportunity to present our views with regard to

the release of CCC stocks at the minimum of 105 percent of the loan rate—as

opposed to a higher resale price.

We would like to take this opportunity to express to the members of this

committee our very great appreciation for your support of the Food and

Agriculture Act of 1965. Having attended 10 State wheat conventions in

the past 3 months, I can report to you that the new wheat program is very

well received by growers. They believe the program will provide opportunities to further improve income and maximize our exports. During the term

of the Food and Agriculture Act of 1965, we believe efficient producers will

have an opportunity to earn parity of income.

Indications are that income for wheatgrowers will be up about $250 million

in 1966 compared to 1964-65. In most wheat areas the market price for wheat

is averaging 15 cents or 20 cents above the support level thus cooperating

producers should average about $2 per bushel for their wheat in 1966. The

National Association of Wheat Growers believes it is in the long-range interest

of farmers to operate our program in a manner to provide reasonable profits

for efficient producers year after year. That once our stocks are down to

meet national reserve needs we should produce for the needs of the marketplace

and keep our stocks down to within a range somewhere between 400 and 600

million bushels. In the long ran, basic market prices for wheat are largely

determined by the visible supply of wheat. We favor adequate reserves but

not high enough to force market prices down to or below loan levels.

We believe that wheatgrowers have the capacity to produce in excess of our

domestic needs, commercial exports, and concessional sales under Public Law

480. We have the land, the know-how and the ability to produce in the range

of 1.8 to 2 billion bushels of wheat. Even with increased concessional sales

to feed the hungry, we do not see potential markets of this magnitude in the

near future. If potential markets plus increased concessional sales indicate,

we should relax our acreage allotments and produce for the needs of the

marketplace maintaining a reasonable reserve for emergencies. To produce for

our needs brings stability of income to producers year by year. This we

need.

The National Association of Wheat Growers favors maintaining the present

minimum of 105 percent of the loan rate for resale of CCC stocks. Many

have said that we should substantially increase the resale price of wheat and

leave feed grain at present levels. We oppose doing this because it could

jeopardize the use of the substitution privilege.

IMPORTANCE OF SUBSTITUTION CLAUSE TO WHEAT AND FEED GRAIN PRODUCERS

In the voluntary wheat and feed grain program of 1964-65, cooperating wheat

and feed grain producers were afforded the opportunity to seed wheat on feed

grain acres and feed grain on wheat acres. This provision in the bill proved

to be very popular in both wheat and feed grain areas for several reasons:

1. This allowed both wheat and feed grain producers an opportunity to

seed those crops best suited for the land.
MINIMUM RESALE PRICE OF CCC WHEAT 71

2. It maximized freedom of operation for the farmer and tended to reduce

outlay of capital expenditures for operating the farm.

The 4-year voluntary Food and Agriculture Act of 1965 continues the substitution privilege for wheat and feed grain producers. For the past several years,

only about 35 to 40 million bushels of wheat was fed. Under this new program

estimates indicate that 90 to 100 million bushels of wheat will be fed. Estimates indicate too that use of the substitution privilege will result in a net

increase of 2 to 21/2 million acres of wheat seeded which indicates reduced

feed grain production. This extra wheat is grown on feed grain acres and is

entering the feed grain market ; thus, the present price relationship between

wheat and feed grain appears to be about right. To substantially increase

the resale of CCC stocks of wheat without a corresponding increase in the

resale price of feed grains could mean less utilization of wheat and result

in forcing the Secretary to abandon the use of the substitution privilege.

Farmers do not want to jeopardize the use of the substitution privilege.

May we point out that the present requirement of 105 percent of the loan rate

is the minimum and not the maximum. On November 23, the Secretary announced the unrestricted sale of CCC stocks of wheat at 108 percent of the loan

rate plus carrying charges. Thus USDA did not use the minimum of 105 percent of the loan rate. Since the announcement, sales of wheat from CCC stocks

have been rather light—from November 23 until January 25—under this provision sales from CCC stocks have amounted to only 1.3 million bushels. The

market price has remained strong.

It should be noted that 108 percent of $1.25 provides a minimum margin for

the trade of 10 cents per bushel. Whereas, for a number of years when the price

support of wheat was about $2 per bushel, and wheat was released at 105 percent

of the loan rate * * * this provided the same 10 cents per bushel margin for

trading purposes. The trade successfully used this 10 cent minimum margin

for many years.

If the resale price is substantially increased and stocks are down—and it

appears now that our stocks of wheat will be perhaps below 700 million by next

July—this could improve farm income for 1 year—but it could also encourage

many farmers to stay out of the program and produce more wheat than the

market will take. Thus, a substantial increase in the resale price of wheat

could result in some increased income one year and a lowering of income in succeeding years.

In our judgment, farmers will not be able to take full advantage of an increase in resale price. Suppose the resale price is increased to 115 percent of

the loan price—because most farmers need cash at harvest time when prices are

usually lower and many smaller or medium size farmers do not have sufficient

storage or capital to hold their wheat—some sell when prices reach 108 percent

of the loan price; some sell when prices are 112 percent and very few would be

able to sell at the top price of 115 percent of the loan value. The average would

more likely be 108 percent in this case. There are those who maintain that if

we increase the resale price of CCC stocks to 115 percent of the loan rate,

this results in improved income for both the complier and noncomplier, that it

will not result in less program participation by farmers. We believe that many

farmers will take a chance on market prices staying up and seed outside the

program. Let us examine this approach in depth.

My figures indicate that 115 percent of the loan price equals $1.43% per bushel.

This is the minimum price. Add in-and-out charges for July, $0.01%, then add

monthly carrying charges of 0.01% cents per month for 5 months; then add

0.04/12 cents premium for 13 protein; this takes us to January 1, the midpoint of the marketing year so the average resale price for the marketing year

would be $1.571/2 per bushel.

Most of our wheat is grown on summer fallow ground; in these areas present

wheat allotments average about one-third of the cropland—some areas as low

as one-fourth of the cropland. Surpluses are down about right for needed reserves; market price is about $1.60. Potential markets look good; the rains

came at seeding time. Many, many farmers in the summer-fallow area will not

seed just up to one-half of their cropland as they normslly did when acreage

allotments were not in effect. Many areas will increase their seeding by 50

percent, some areas will double their seeding, and a few will seed three times

their allotment. The cropland is available. They will not do this every year, but

one bumper crop is all that is needed to break the market price. He is not

eligible for a loan, he has greatly increased his cropping expenses, millions of
72 MINIMUM RESALE PRICE OF CCC WHEAT

bushels of wheat are placed on the market, down goes the market price, and the

net income of all wheat producers—both compliers and noncompliers—and the

voluntary wheat program is placed in jeopardy.

Gentlemen, this is the main reason the National Association of Wheat Growers

opposes a substantial increase in the resale price of CCC stocks. In the long

run, with the surplus producing capacity we now have, it will result in less

income to producers, not more.

We believe the present 4-year voluntary wheat program is a good program

and that if given a chance to operate it will maximize the utilization of

wheat both at home and abroad. It is improving wheat farm income. We

urge the committee not to make this change, but give the program a chance to

operate for the benefit of both producers and consumers.

The CHAIRMAN. Our next witness is Mr. Jaenke.

STATEMENT OF EDWIN A. JAENKE, ASSOCIATE ADMINISTRATOR,

AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE,

U.S. DEPARTMENT OF AGRICULTURE

Mr. JAENKE. Mr. Chairman, we appreciate the opportunity to appear before your committee to summarize the presentation and present

the Department's views on this matter.

I must apologize to you and the other members that we do not have

a copy of our statement. It is being reproduced right now. We have

been bothered with a shortage of people, too, as the result of the snowstorm. I would appreciate having the complete statement inserted

at this point in the record. I will summarize it.

(The statement is as follows:)

The Department of Agriculture appreciates the opportunity to appear before

this committee and to present our views on proposals to change the CCC sales

price authority.

The Department is in general accord with the objectives of this legislation.

However, we believe these objectives have largely been accomplished or can

be accomplished without any radical changes in section 407 of the Agricultural

Act of 1949 as it relates to CCC sales authority. Furthermore, Mr. Chairman,

we believe there are serious disadvantages to our agricultural economy and

to farm programs should the flexibility now inherent in the act be destroyed.

It has been argued that this legislation would strengthen farm income, but

let us not lose sight of the fact that the Food and Agriculture Act of 1965 is

already proving to be effective in raising farm income. Income from the

1966 crop will probably be $200 million higher than that from the 1965 crop,

and this is on top of the $400 million a year added by the legislation enacted

in April of 1964. Producers will receive full parity for their 1966 crop wheat

for domestic use.

It has been argued that the proposed legislation would reduce Government

takeover and handling of wheat, but let us note that the volume of Government

involvement in the wheat business has already gone down substantially. In

the 4 years 1962-65 an average of about 235 million bushels a year were put

under price support, while in the previous 4 years the average was around 405

million. Takeover of wheat by the Government after loan maturity date will

average only about 100 million bushels for the past 4 years, compared with

around 270 million the previous 4 years. In the last 2 years, it has been 70-75

million bushels and will probably be down further this year.

It has been argued that the proposed legislation would increase market

activity, but information from the Commodity Exchange Authority indicates

that the volume of futures trading in wheat in 1965-66, judging by the first half

of the year, will probably be the largest in the past 10 years.

My point is that recent and current programs are already accomplishing the

results toward which the proposed legislation was originally directed, and it

is now behind the times.

The major objectives of wheat legislation are being met and can be met

increasingly well. Income is being increased, stocks are being reduced, Gov-
MINIMUM RESALE PRICE OF CCC WHEAT 73

ernment inventories and costs are being cut, wheat is competing for export and

feed markets.

But aside from the fact that the objectives of the bill are being met, our

analysis indicates the legislation, if enacted and if effective, would lead to

some undesirable results.

Let us explore these prospective results in some detail. One conclusion

about the bill is this: It would increase Government program costs.

An objective of the wheat program is to hold down Government costs by

holding down costs of storing and handling inventories and of subsidizing

exports. Currently, U.S. wheat market prices are above world price levels, so

any rise in wheat prices would push Government export costs higher.

Wheat subsidy payments are only a part of Government wheat export costs.

More than 50 percent—in some years as high as 77 percent—of wheat exports

are made possible by Government-financed foreign assistance programs. The

nations in need of substantially greater amounts of wheat have little, if any,

opportunity to broaden their purchases except under U.S. foreign assistance

programs.

Every 1-cent-per-bushel increase in wheat prices boosts Government export

costs about $8 million at current export levels. The proposed increase in the

legal minimum to 115 percent of the wheat loan rate would increase the minimum selling price 13 cents per bushel from the current 105 percent legal

minimum and 8 cents per bushel above the minimum level now in effect. If

market prices followed, Government export costs would be increased in a range

of $65 to $100 million yearly.

The only alternative to an increase in Government costs would be a reduction

in the loan rate. This would defeat other purposes of the program.

Here is another major point: The bill, if effective, would kill off the wheatfeed grain substitution provision.

Under this provision, participants in the wheat and feed grain programs

are able to interchange acres of wheat and feed grains. This provision is

widely accepted and acclaimed by producers. It provides them the opportunity

to operate their farming units in a more efficient manner.

For this provision to be continued, wheat and feed grain prices must be in

a competitive relationship. In the 1966 programs the spread in loan rates

between $1 for corn and $1.25 for wheat will be wide enough to strain the

price relationship without raising the wheat resale price. But raising the

resale price without dropping the loan rate by a corresponding amount would

bring an out-of-line relationship between wheat and feed grain prices and

would force the Secretary of Agriculture to rescind this provision.

A related conclusion about the bill is this: It would adversely affect the expanding use of wheat for feed.

Higher wheat prices would reverse the current trend toward broader domestic

consumption of wheat. This would hit hardest in the feed-deficit areas of New

England, the Middle Atlantic, and the Southeastern States where dairy and

poultry producers use feeds with wheat as an ingredient. Livestockmen in the

Pacific Northwest would also feel the effect. From the standpoint of the wheat

producer, the feed market is related to the acreage allotment. It would appear

that 100 million bushels of wheat will be fed this year. This is equal to 4 million

acres extra allotment.

The bill, if effective, would make wheat less competitive in world markets.

A keystone of the Food and Agriculture Act of 1965 is pricing to bring U.S.

market prices into line with world commodity prices. Higher U.S. wheat prices

would destroy this effort.

In relation to general economic policy, the bill has another unfortunate

aspect: An increase in the legal minimum CCC sales price would work against

President Johnson's policy of maintaining prosperity without inflation. In his

economic message to the Congress, the President stated: "One of the problems

of prosperity we face in 1966 is that of achieving stability of prices and costs at

full employment. * * * Where available, surplus Federal stockpiles will be

used to prevent unnecessary shortages of materials and commodities. * * *

Defense procurement, agricultural, and other policies will be adjusted where

necessary to avoid contributing to instability of prices * *

Whether an increase in the CCC minimum sales price would be an effective

way to increase farm income is open to question.

The freezing of CCC stocks—and this is one of the effects of increasing the

minimum sales price—would not automatically bring with it higher prices to
74 MINIMUM RESALE PRICE OF CCC WHEAT

farmers. The effect of this would not necessarily come when farmers market

most heavily. Only those persons who hold wheat for several months would

realize any price increase. Some of the holders are farmers, others are not.

Those in strong financial position might be able to reap windfall profits at the

expense of both the Government and farmers.

Now let us see how the present legislation is operating. Is any change

necessary at this time?

Under existing legislation, CCC sales policy has been aimed at maintaining

reasonable market stability—to avert wide swings in prices, supplies and

utilization. CCC has not placed grain on the market as soon as the market

price reached legal minimum sales prices. A glance at the season average price

received by farmers disproves such a charge.

During the last 5 years when the wheat surplus has been worked down substantially through Government dispositions, the season average received by farmers has average 3 to 8 cents per bushel above support prices. In contrast,

during the preceding 5 years, these average prices ranged from 3 to 10 cents per

bushel below support prices.

Obviously, the prices received would not have exceeded the loan rates in these

recent years if CCC sales policy had not been judiciously exercised.

A case in point is the current situation. Even now, the market price for most

wheats is above the legal minimum of 105 percent of the current loan and

around the minimum established for current sales of 108 percent of the current

loan. The 108-percent level was adopted to keep CCC minimum prices at the

current market price when domestic-use offerings were resumed. In addition,

the 108-percent level reflects an upward adjustment of 10 cents per bushel on

the average, which is the same as the margin reflected by 105 percent of the total

support of $2 per bushel for domestically used wheat.

As I noted previously, futures trading in wheat is active. Advocates of a

higher resale price for CCC wheat maintain that Government sales hamper

market and trade activity. Obviously, Government sales of wheat are a factor in

the market. Just as obviously, however, they are but one factor, if the volume of

futures trading is any measure of market activity. During the July—December

1965 period, Government dispositions of wheat amounted to 187 million bushels,

only slightly less than the 194 million bushels disposed of during the same period

in 1964. Yet, wheat futures trading volume during July—December 1965 soared

to 3,225.4 million bushels, in contrast to a volume of 1,911.3 million bushels in

same period of 1964. So, while futures trading volume was increasing substantially over the previous year, Government wheat dispositions remained about

the same.

This is duplicated during the 12-month period from July 1964 through June

1965 as compared to the previous year. Futures volume dropped in the 1964-65

period to 2,825.9 from 5,354.9 in the 1963-64 period. What about Government

wheat dispositions? They were 341.7 million bushels in the 1964-65 period when

trading volume was high and 310.8 million bushels in the 1963-64 period when

volume was lower.

In looking back over the past 5 years, the stability maintained in the wheat

sector of agriculture offers substantial evidence as to the soundness of the current method of moving CCC wheat stocks into use. Since 1961, the wheat surplus

has been cut in half with substantial reductions in Government costs for storing,

handling, and carrying the wheat inventory. Production has been kept in check

and pricing has been such as to promote the rising disappearance which permitted

a yearly average reduction of 150 million bushels in the Government wheat surplus since 1961 with a minimum effect on markets.

Some may argue that with the decline in the wheat surplus, a change is

needed. However, a longtime and integral part of farm programs has been the

concept of the ever-normal granary. Secretary of Agriculture Freeman has

referred to the Government's wheat selling policy as the "ever-normal granary

in action." The Congress in successive acts from 1933 to 1965, has reaffirmed

the complementary purposes of maintaining farm income and safeguarding consumers' needs by adding to stocks when production exceeds needs and using

reserve supplies when demand is strong.

It would not be in the best interests of agriculture if this is only a highsounding statement to be pointed to as justification for reserve supplies when

surpluses are building and to be ignored when stocks are needed. Yet, this in

effect is what the proposed increase in resale price would signal.
MINIMUM RESALE PRICE OF CCC WHEAT 75

The implications of this proposed amendment are clear. To the extent it

might give wheat farmers false hopes as to future prospects, an unwarranted

production rise could easily take place. Couple this with potential implications of reduced wheat consumption and the strong probability of upsetting the

progress made in pulling wheat stocks down to manageable levels begins to

emerge. If this should happen, the goal of reducing Government wheat costs

would become more and more distant and the future of farm programs could

thereby be endangered.

The Department opposes any change in legislation to increase the COO minimum sales price for unrestricted use. It would not be in the best interests of

the farmers, consumers, or taxpayers. It would not hasten a rise in the income

level nor bring any other objective that cannot be realized under existing

legislation.

The administration's position on farm income is crystal clear. And the

position of this committee appears to be equally clear. Under the leadership

of Chairman Ellender, you have acted decisively and repeatedly to put effective

farm program legislation on the books. Determined efforts since 1961 have

paid off in substantially increased farm income. Realized net farm income

in 1965 exceeded $14 billion for the first time since the early 1950's. There is

no inclination to backslide from a continuing effort for further income

improvement. But there are sound ways to pursue this course. The Food

and Agriculture Act of 1965 which the Congress passed last summer charts the

way toward a much needed increase in wheat farmers' incomes.

The act does more for wheat farmers. It offers the opportunity to broaden

their markets both at home and abroad. It will accomplish this through

provisions aimed at stabilizing wheat prices at levels in delicate balance with

prices of other competing grains and with wheat prices in foreign producing

areas. Injudicious Government pricing of wheat could easily upset this

balance and negate the act's objectives of working toward increased use of

U.S. wheat and lower Government costs.

WHEAT' 

AMOUNTS BY WHICH SEASON AVERAGE PRICES RECEIVED

• BY FARMERS DIFFER FROM NATIONAL AVERAGE LOAN RATE

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 !965

Marketing Year

Mr. JAENKE. The Department is generally in accord with the

principles and objectives embodied in this legislation. But we

think that by and large these objectives have already been achieved.

The witnesses of yesterday and the ones this morning have referred
76 MINIMUM RESALE PRICE OF CCC WHEAT

to several different purposes for this legislative proposal. No. 1,

farmer income. The act of 1965, which will take effect this year,

will raise wheat farmers' income in the range of $200 million, will

give the cooperator 100 percent of parity guarantee for their domestic share. Together with the $400 million increase in wheat

income from the 1964 act, farm income, as we look into 1966, is very,

very good, and I think approaching parity income in many cases.

The second point was made that this would reduce Government

takeover and activity, loan takeover, and so forth.

Here again, I think the facts are pretty clear that this has already

taken place.

In the 4 years from 1958 through 1961, the average loan activity

for wheat was 405 million bushels. The average since, beginning

with the 1962 crop and including estimates for this year, is 2352 or

roughly half. In other words, the amount of wheat coming into

Government hands under the loan program has been cut almost in

half in the last 3 or 4 years.

Now, secondly 

The CHAIRMAN. To what do you attribute that?

Mr. JAENKE. The administration's programs that have reduced

production and increased exports, so that supply was reduced and

demand was increased to the extent there was less coming into or

staying in Government hands.

The CHAIRMAN. But suppose you raise this to 125, as some are

promoting. Would that not have the tendency of having the Government back in the business?

Mr. JAENKE. We think it would lead in that direction.

In the case of takeover, which is the actual amount that the Government receives and has in its stocks, the average from 1958 to 1961 was

270 million bushels, and the average for the last 4 years is 100-millionbushels-plus—just a little over a hundred million. This includes

again an estimate for 1965.

The figures show that Government activity in grain markets is down

sharply.

I heard the statement of one of the previous witnesses that we are

taking over several hundred million bushels of wheat each year. Let

me read the figures.

In 1962, which was before the new world price program, the certificate program, became 

operative, 

we took over 227 million bushels.

Then, in 1963, this dropped to 70 million bushels. In 1964, it was 75

million. This year, it is estimated even lower than that. So that this

continuous talk about Government handling and Government takeover seems to be about 3 or 4 years out of date. It does not take into

account the actual figures and what is happening in these recent years.

The Government activity in the wheat market has been reduced very,

very substantially.

Lastly, the argument is made that by raising the resale price, it

would provide a greater spread and therefore allow more free market

activity, more speculation, more trading.

I checked this out the other day with our Commodity Exchange

Authority, which has the responsibility for this area, and if I might

just read the first sentence of the memo from this agency:

Indicatitms from the volume of futures trading in wheat in the first half of

1965-66 are that the annual volume will be the largest in the past 10 years.
MINIMUM RESALE PRICE OF CCC WHEAT 77

So, there is more free market activity; there is more futures trading

here.

Senator YOUNG. If you will yield there. Of course, there had to be,

because CCC was not selling any wheat at all.

Mr. JAENKE. This statement covered the first half of the 1965-66

year, the current year. Since November CCC has been selling certain type wheats, if you recall. To summarize then, the objectives of

an increase in the resale price have already been met and will in all

probability continue to be met. I was particularly interested in the

testimony of Bob Searles, and the questions as to where our carryover

level should be, and the fact that we are very, very closely approaching

a desirable carryover level. The surplus situation in wheat is just

about past—it is almost out of the picture.

Now, we need, I think, to look at the other implications of this sort

of legislation and what it might mean in terms of the overall farm

activity and Government programs, costs, and so forth.

I think the first point that we have to bring forth here, and I think

it is undeniable, is that a higher resale level is going to increase Government costs. Every cent that the wheat price goes up under current conditions increases the cost for subsidy operations by $8 million.

So, if we talk in terms of 115 percent, that is 13 cents increase over

what we now have, with the minimum at 105—and this means an increase cost of something in excess of $100 million. The subsidy on a

bushel of wheat today—that moves into dollar markets or into Public

Law 480, either way, because it operates in the free market channel—

is 21 cents. That is a net subsidy after the certificate operation is

taken into account.

Senator YOUNG. I would agree with you there, the higher the cash

market goes the higher the export subsidy has to be. I think this

is offset in large measure by less grain going into CCC. If the cash

price of wheat is 10 or 15 cents a bushel above the loan price, any

farmer would be foolish to put it under loan except for a short

period, maybe, for income tax purposes or financial purposes. I think

every farmer I know would, if he could gain a little money by redeeming his wheat loan and selling on the market, follow such a

course. Of course, there are some who like to hold it longer now

for storage purposes.

But if you have a cash price of 15, 20 cents a bushel, or even 10

cents a bushel above the loan price, I think you can say for certain

that less wheat would go under the loan.

Mr. JAENKE. I think this point is borne out, sir, just by one chart

that I wanted to show here. I think this illustrates this.

(NoTE.—For chart referred to above, see p. 75.)

Mr. JAENKE. If you recall, I just gave the figures here as to what

has happened in terms of Government takeover. It has been 70

million bushels in the last 2 or 3 years.

Look here, beginning in 1955—this shows the average price received

by farmers for their wheat. This is the loan level.

The CHAIRMAN. Would you give that for the record? What is

the average price?

Mr. JAENKE. The average price received by farmers was 10 cents

below the loan level.
78 MINIMUM RESALE PRICE OF CCC WHEAT

In 1956, it was 3 cents below; in 1957, it was 7 cents; 1958, 7 cents;

1959, 5 cents; in 1960, about 4 cents below.

So, all these years, from 1955 to 1961, we had a market price, a

price received by farmers, below the loan and we had Government

loan activity and takeover very high.

Then, in recent years here, with effective programs—while they

have been expensive, they also have been reducing stocks, by encouraging diversion of acreage and have put our wheat on a roughly competitive basis in world markets, and now recently moving it into

feed uses—you can see that the price received by farmers has been

as high as 8 cents above the loan level.

So, I think this bears out just what you were saying, Senator

Young, and this is what is happening.

In this year—this is 1965—there will 'probably be something in

the nature of 50 million to 60 million bushels takeover by theGovernment, down from 500 million bushels back in this year [indicating]. So, again I say, the objectives of the proponents have

already, generally speaking, been accomplished.

The CHAIRMAN. Well, would you venture to tell the committee who

would be the beneficiary in the event we raise this to $1.20, $1.15?

Mr. JAENKE. I think the holder of wheat, whoever he might be.

To the extent that a farmer was able to hold his wheat and wait until

the last 2 or 3 months of the marketing year, when these prices would

begin to get up to these very high levels, then he would be the beneficiary. But, generally speaking, the bulk of the wheat is sold in the

first 3 months of the activity. So, whoever is buying this wheat from

the farmers would be the beneficiary of a higher resale level, if it were

effective.

The CHAIRMAN. Be it an individual dealer or the cooperative.

Mr. JAENKE. Yes, co-ops would take a lot of wheat on hand. They

would be the beneficiaries of it. And the trade, domestic users, millers,

to the extent they buy their supplies ahead; exporters, who would

take a position, knowing that the price was going to go up, as the

result of the Government programs.

The CHAIRMAN. Well, would you say that if we followed the proposal suggested, that it might keep the Government long in business,

to interfere with the trade?

Mr. JAENKE. I think that the cost question is a clear-cut one. As

long as our prices are above world prices, there is going to have to be a

subsidy to make our wheat competitive.

The CHAIRMAN. It would keep the Government in business, and, of

course, when I say "in business I mean really having to contribute.

Mr. JAENKE. The only way to avoid increasing this cost, if you raise

the resale, would be to cut the loan level.

If you took the loan level from $1.25 to $1.10, then you could raise

the resale to 115 percent of the loan, and you would not add any

Government cost. But here again, this would hurt the very people

that I think this committee over the years has tried to help, the small

farmer with no holding capacity, who has to market his wheat. He

would get 10 or 15 cents less, and somebody else with a lot of capital

who was able to hold the wheat until the price went up would benefit

from it.
MINIMUM RESALE PRICE OF CCC WHEAT 79

The second major objection to any change in the resale price in our

judgment is that it would kill off the substitution provision. Behind

and inherent in the substitution is the fact that the wheat and feed

grains must be priced competitive to the feed user. If you jump

wheat prices way out of line like might occur under this legislation,

you cannot have a substitution provision. Congress wisely wrote into

the law and gave this authority to the Secretary to provide for the

substitution, because they felt it was good from the standpoint of farm

management, and gave the farmer an opportunity to make the most

efficient use of his land and increase his returns. But they also said

whenever it will not disrupt the effectiveness of the program.

Senator YOUNG. How much is that substitution provision being

used?

Mr. JAENKE. Very much. It is a very popular feature among

farmers. It is having two effects, as we can tell from our statistics,

and these are on the basis of reports from around the country and

are not complete as yet. In the Corn Belt States, a lot of farmers

who have 220 acres of corn and 100 acres of beans and 15 acres of

wheat, find it is not worth their time to fiddle around with the wheat.

So, they are getting out of the wheat production and substituting

corn.

Contrariwise, farmers in your country, and in the Southwest, where

they have moved into barley or oats or some other substitute feed

grain, are going back into wheat.

So, generally speaking, it is putting wheat back in its traditional

producing area and letting corn be grown in its traditional producing

area.

Senator YOUNG. In which area is it being used most?

Mr. JAENKE. In terms of numbers, in the Midwest. Quite a few

farmers are not using the 15-acre wheat allotment. Instead, they

are putting it over to their feed grains.

Senator YOUNG. Let me ask this—it is a little off the subject.

Under the farm program passed last year a provision got into it

that I was not fully aware of. Under this, as I understnad it, a wheat

farmer only has to plant 45 percent of his allotted acres in order

to qualify for wheat certificates?

Mr. JAENKE. Yes.

Senator YOUNG. Now, over and above this, he can plant soybeans

or some other nonsurplus noncontrolled crop.

Mr. JAENKE. That is right—or flax, or strawberries, or avocados,

or anything he wants.

Senator YOUNG. This provision is mandatory and not optional

with the Secretary.

Mr. JAENKE. No, sir.

Senator YOUNG. Was that the intent of the Department? I am

trying to find out how that got in there. I thought it should be

optional with the Secretary. I do not know how it got in there.

Mr. JAENKE. I just do not recall either. Here's how it would work.

Let's take a hundred-acre wheat base. He must divert 15 acres.

This leaves him 85 acres. Certificates apply on 45 percent and the

remainder goes at the loan of $1.25. The 45-percent certificate earns

full parity.
80 MINIMUM RESALE PRICE OF CCC WHEAT

Now, if he wants to plant only the certificated part he is free to

plant anything he wants on that remaining land, as long as it is not

a price-supported commodity and does not involve any other programs. But he is free to put, as you say, soybeans on it, or is free

to put strawberries on it, or anything else.

Senator YOUNG. He can plant soybeans, even though soybeans may

be in surplus?

Mr. JAENKE. No. If they would be in surplus, I think, the Secretary could prevent such action under another legal provision.

Senator YOUNG. You are not sure how this got to be a mandatory

provision rather than optional?

Mr. JAENKE. No; I don't happen to recall at the moment.

Senator YOUNG. I do not, either.

The CHAIRMAN. Will you expand further on this—the use of wheat

in lieu of corn and corn in lieu of wheat?

How would it throw it out of balance? What is it now?

Mr. JAENKE. It is $1.25 in the last year, related to $1.05 on corn.

Our technicians in the Department say that this 20-cent spread is

about the limit of the difference, based on feeding value between the

two for the substitution provision to work properly.

Now, if you had a resale price that, in effect, added another 15 cents

on top of that, I think you can see what would happen.

Another disadvantage, we think, to changing the resale level has

to do with this new feed use of wheat.

Our wheats now are priced generally competitive for feed purposes,

and we are finding a considerable use of wheat in the feed market. An

estimated figure of around a hundred million bushels are going to

be fed this year. This is occurring in the New England area, the

Middle Atlantic, the poultry areas; it is occurring out in the Northwest. It is generally in the areas distant from the basic corn producing areas, where, of course the prices are influenced by transportation. So that if you raise the resale price of wheat, you would have

two effects: No. 1, you would choke off and stop the use of wheat as a

feed. Feeders will not use wheat, if the price is going to be higher.

And this would have particularly significant impact, I think, in the

feed-deficit areas, the dairy and poultry areas of New England? the

Middle Atlantic and the Southeastern United States where considerable wheat is used.

In addition to that, in the Pacific Northwest, a considerable quantity

of wheat is being fed this year in lieu of barley and oats, and, again,

it ties in with the substitution provision.

So, in general, if you are going to have the substitution, if you are

going to have wheat used as a feed, you have to have it priced competitively.

And, this bill, which would raise wheat alone, would have adverse

effects on this.

Senator McGovERN. - Well, Mr. Jaenke, on that point, haven't we

got a larger supply of feed grains on hand than we do wheat, in terms

of the demand for the two grains?

Mr. JAENKE. Yes, the official estimate is for 750 million bushels

carryover this June 30. It might be a little below that but still 150 to

200 million above what is generally considered a desirable carryover or
MINIMUM RESALE PRICE OF CCC WHEAT 81

normal reserve. In the case of feed grains we are about 10 million

tons over the 45 million tons figure.

Senator MCGOVERN. Well, if that is the case what is wrong with

stopping some of the use of this wheat for feed purposes and letting

the demand build up on feed grains and get the two more in balance

in terms of the reserves?

Mr. JAENKE. This year, it would have meant 4 million acres less

acreage allotment to the producers. The acreage allotment would have

had to be reduced by 4 million acres more if it had not been for the

100 million bushels feeding. We tend to think the wheat allotments

are just as low as they can be—the rubber band is stretched to the point

where it cannot go much further. The wheat producers are producing on 47.8 million acres, when about a decade and a half ago they

were producing 72, 73 million acres. If it were not for feed use of

that 100 million bushels, it would have to be 4 million less.

Continuing here the world market situation—increase in the resale

price would have done one of two things, either it would make us noncompetitive in world market, or else Uncle Sam would have to pick

up another cent for every cent that the price goes up.

Senator YOUNG. You are not competitive now.

Mr. JAENKE. We are paying 21 cents per bushel as of today.

The CHAIRMAN. And this would aggravate it, make it higher.

Mr. JAENKE. Each cent the market went up would be another cent

in the subsidy cost unless world prices went up.

The CHAIRMAN. That is the position I took yesterday and today.

Mr. JAENKE. I think the other objective relates to the statement of

the President in his economic report on price stability. If I may

quote just briefly:

One of the problems of prosperity we face in 1956 is in achieving stability of

prices and costs at full employment. Where available, surplus Federal stockpiles will be used to prevent unnecessary shortage of materials and commodities, and our defense procurement, agriculture, and other policies will be adjusted

where necessary to avoid contributing to instability of price and inflation.

Part of the overall governmental effort is to try to stop inflation

and to maintain this full-employment economy, and this prosperity

that we have, without eroding from it by higher prices. And certainly, this will have to be considered as one of the disadvantages of

increase in the resale level.

Senator YOUNG. You are touching on a very touchy point, as far as

the farmers are concerned. In announcing this resale of a high protein

wheat and changing your :position froin no sale at all to 108 percent

of price support plus carrying charges, as I recall, the Secretary stated

the intent was to stabilize wheat prices and prevent increases in bread

prices.

I cannot recall of an agricultural price support operation ever being

used before to lower farm prices.

Do you know of any Government program to lower wages for labor?

Mr. JAENKE. I do not think the November 23 action has lowered

wheat prices. But later on, I would like to touch on the point and

comment on your point, that this is a change all of a sudden, frotn no.

sale to sales and plunging down the market.

First of all, I think the ever-normal granary concept has been in

every farm law from 1930 on and is still on the books. We have

59-108-66 7
82 MINIMTJM RESALE PRICE OF CCC WHEAT

checked into it, and I read recently some of the legislative history—

some of the debate on the floor. This was, in effect, a compact between

consumers and farmers, taxpayers, and farmers, in which the public

agreed to help farmers to hold prices, and to have a price-support

program. In turn, they asked for, under the ever-normal granary

concept, some protection against runaway prices and tremendous in- flation.

Now, we just cannot expect the ever-normal granary concept to

apply just when it was working to agriculture's advantage and then.

try to forget about it when the time comes for it to work to the advantage of others.

Senator YOUNG. Even with the better wheat prices that we enjoyed.

at the time, wheat farmers were not getting parity for all their production they were only getting parity for part of it.

Mr. JAENKE. That is right. Actually, they are getting a little

more than parity on their domestic production, because the price they receive for their wheat is above the loan.

Senator YOUNG. This is the first time that I can ever recall that a

program was announced to decrease it.

Let me ask you another question, while we are talking about parity. Parity, as of January 1966 was $2.53 a bushel. In December 1965, it was $2.58 a bushel. That is a drop of 5 cents a bushel.

When I was at home, I noticed all the prices of farm machinery were increasing, and almost everything the farmer has to buy.

How does it happen that the parity price goes down when the cost

of operation goes up?

Mr. JAENKE. I cannot answer you precisely, because, as you know, this parity formula is very, very complicated. I believe it relates to the base period years used in the formula.

Senator YOUNG. The parity formula used to mean something.

Former Secretary Benson rigged it once, and I think it has been rigged twice since then, to the point where it is meaningless. When the parity price drops 5 cents a bushel, it means farmers, under the present price

support program will get about 5 cents a bushel less than they would have.

Senator MCGOVERN. Under that formula, it is going to keep going down, because each year you drop a few points. That reduces the overall average, does it not?

Mr. JAENKE. Unless the formula picks up enough years where prices have been a little higher, prices including the certificates have been higher.

Senator MCGOVERN. But you will agree that the dip which was made this year is going to figure, have a dampening effect, on the overall

average next year?

Mr. JAENKE. If I might, Mr. Chairman, I would like to have our Economic Research Service provide a memo that we can insert in the record at this point to give you the exact answer.

The CHAIRMAN. Very well. I have been wrestling with that myself for a long time. One day I called the statistician himself, and he

got kind of fuzzy about the answers. He, himself, could not explain it, so we understand your position.

Mr. JAENKE. Thank you.
MINIMUM RESALE PRICE OF CCC WHEAT 83

(The information subsequently furnished is as follows:)

RECENT CHANGES IN PARITY PRICES FOR WHEAT

The parity price for wheat in January 1966 was $2.53 per bushel, down 5

cents a bushel from the parity price of $2.58 for December 1965. This reduction

is a result of the methods for calculating parity specified in title III, subtitle A,

section 301(a) of the Agricultural Adjustment Act of 1938, as amended by the

Agricultural Acts of 1948, 1949, 1954, and 1956.

The parity price calculation is based on a 10-year moving average ending each

December 31. Thus, in making the computation for the present parity price,

average prices of wheat for 1955 were omitted and average prices of wheat for

1965 were added. It so happens that the price received by farmers for wheat

was $2.02 a bushel in 1955 compared with $1.35 per bushel in 1965 (by law

certificate payments are added to prices received for purposes of calculating

parity). Thus, the 10-year average price for purposes of calculating parity was

reduced from $1.91 last year to $1.87 for the current year. The law provides that

the parity price also be adjusted to changes in the parity index. The parity index increased 3 points last year which prevented the parity price for wheat from

going as low as it might otherwise have been. These calculations follow strictly

the formula prescribed by law.

The CHAIRMAN. You can put the whole statement in the record.

Mr. JAENKE. Thank you, Mr. Chairman. One point was covered

a few minutes ago, and that is the relationship between 105 percent of

$2-1 believe Mr. Ramsland had this comment—and 105 percent of

$1.25 or $1.30. Of course, he is exactly right. This was one of the

considerations involved in out decision when we resumed sales this

fall, in using the 108 formula in lieu of the 105 formula. So, I think

the point that Mr. Ramsland made here is no longer valid in view of

the resale at the 108 level right now. This about equalizes—not exactly—the margin that the trade—and I think rightly so—needs and

has to have in order to handle the grain.

Now, if I might 

Senator YOUNG. May I ask a question at this point?

Just why did the Secretary of Agriculture change the resale from

105 percent plus carrying charges to no sale at all, and then drop way

back to 108 percent?

It always seemed to me a rather unwise decision.

Mr. JAENKE. If you recall, in the wheat bill that we passed in 1964,

to apply to the 1965 crop year, we were going from a market price, a

market price to the millers, of around $2 a bushel to a market price

related to the world market of $1.25. There was a great deal of concern in the trade about the inventory position. In fact, I believe you

had some of us from USDA meet with you and some of the trade

people about this problem.

Millers were going to be in a tough position for about a 2- or 3-

month period, until a new crop came on here, in terms of getting

their supply. Nobody wanted to hold an inventory when the value

•of the stocks were going to drop.

So, consequently, the Congress, in the legislative history, told the

Secretary of Agriculture to make sure that during this transition period that there were available supplies of wheat on hand for domestic

milling purposes.

So, beginning in August of 1964 when the winter wheat crop had

come in but the spring wheat crop had not come in yet and there were

some severe shortages beginning to appear and mills were threatening

to have to close down, the trade came to us and asked that the transition
84 MINIMUM RESALE PRICE OF CCC WHEAT

authority be used. So, in line with the legislation we made available

CCC stocks of wheat.

Then, coming along to October or thereabouts, the need had disappeared. Our sales were dribbled down to where we would sell

nothing for 2 or 3 days, and then only sell a few bushels here and a few

bushels there.

Looking at the overall supply situation at that time, we did not

believe there was any further need for CCC wheat. This follows the

ever-normal granary approach. The stocks were balanced out here,

and there was no further need for the Government to be selling wheat

back into the market. So, we pulled out.

I think the stability of prices and the adequate supply of different

qualities and classes of wheat throughout the remainder of that marketing year proved that decision a wise one.

Senator YOUNG. It helped the market, but you had this terrific.

transition from no sale at all down to 108 percent.

Mr. JAENKE. Down, sir? I don't follow you. The 108 percent

was above, except for some very high-quality protein the current price

of wheat. Except for the higher quality proteins—the 108 resale

level was above current prices. It caused some psychological reaction

but the market came right back up in a few days. Our action did not

break markets.

Senator YOUNG. I disagree with you completely. From no sale

at all, this means you would not even sell at $5 a bushel, and all of a

sudden you go down to 108 percent of price support. This is a terrific

drop.

I knew sometime you had to change, but it would have been more

understandable to most farmers if in place of no sale you had gone

to some other level, say 115 or 120.

I sold my wheat this fall for $1.96 a bushel. It was 171/2 protein. I

tried to tell farmers around the State last fall that the Secretary was in an untenable position and would have to sell sometime, but I did

not want to create a selling wave and be blamed for dropping the.

price.

Mr. JAENKE. Well, I respect your suggestion and your judgment

that perhaps we should have started sales at a different level. Sometimes it is awfully difficult to please everybody in these decisions. A

lot of people felt that if we got out of the market, it would be a much

more desirable position, and this was the ultimate judgment that we made on it.

As I say, I think the reactions of the market and the reactions of the prices through the years show that there was an available supply

sufficient to cover the need. Prices did not go skyrocketing, and we did not have wild price fluctuation up or down after we pulled out,

but we had to go through, according to the law itself and the legislative history, this transition and make our stocks available in order to meet the situation. After that, we had no need to sell.

I think that our policy now and for the future is in accord with the

ever-normal-granary concept—when there is a situation where adequate supplies are coming onto the market from framers, from holders of wheat whoever they may be and there is sufficient, quantity

of all qualities, to meet the market need, then there is no reason for the Government to be making sales.
MINIMUM RESALE PRICE OF CCC WHEAT 85

Incidently, since November 23, when we came back into the market,

we have only sold 1.8 million bushels of wheat. This is just a dribble;

this is about one ten-thousandth of last year's crop.

Senator YOUNG. Of course, to one who does not know market conditions, that is an impressive statement. But the problem is that in my

State, at least, and I think in most States, you cannot get boxcars now.

The CCC holds the wheat out in the country under a reseal program..

The millers cannot buy that wheat unless you can haul it to Minneapolis or Duluth, and there is no way of getting it there now, because

of the shortage of boxcars. You can get a little there.

Mr. JAENKE. We are very much concerned about the boxcar situation, too.

Senator YOUNG. If all the wheat CCC held was available in Minneapolis or Duluth at 108 percent of price support plus carrying

charges, the cash price would certainly be way below what it is now.

Mr. JAENKE. Are we short of supplies in Minneapolis or Duluth

for market needs?

STATEMENT OF ROLAND F. BALLOU, DEPUTY ADMINISTRATOR,

AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE,

U.S. DEPARTMENT OF AGRICULTURE

Mr. BALLOU. On Spring wheat, no, sir; we have adequate supplies

of spring wheat.

Senator YOUNG. At 108 percent of price support? I know something about this wheat business, too. If you had adequate supplies in

Minneapolis at 108 percent of price support plus carrying charges,

why would cash wheat be selling at 15 or 20 cents per bushel above

that?

Mr. BALLOU. Let's review the record as to exactly what happened

with respect to price since our announcement on November 23.

Take 16 protein, No. 2, Northern Spring wheat, Minneapolis. The

cash market price on November 23 was $1.945/8. Yesterday, it was

$1.995/8.

Senator YOUNG. What was 108 percent of price support plus carrying charges?

Mr. BALLOT/. Today it is $1.98/14.

Senator YOUNG. In Minneapolis?

Mr. BALLOU. Right.

Mr. JAENKE. So, apparently it is pretty close.

Mr. BALLOT/. Very, very close.

Mr. JAENKE. If we would have stocks available, you would expect

this to be the case.

Senator YOUNG. What is your price support there? What is the

price support level in Minneapolis?

Mr. BALLOU. I do not have that figure available. I have the 108

percent. I have not figured out what the price support level was in

Minneapolis. The 108 percent is $1.98/14for February.

Senator YOUNG. That is including premium?

Mr. BALLOU. That is including the premium for 16 protein wheat.

Senator YOUNG. How much premium do you put on?

Mr. BALLOU. I do not know.

Senator YOUNG. Can you get it for the record?
86 MINIMUM RESALE PRICE OF CCC WHEAT

Mr. BALLou. Certainly.

(The information is as follows:)

The basic loan rate for No. 2 Northern Spring wheat in Minneapolis is $1.58

and the premium for 16 percent protein is 131/2 cents.

Mr. JAENKE. In advocating a higher resale price for CCC, many

proponents maintain that Government sales hamper market and trade

activity. Obviously, Government sales are a factor in the market,

just as obviously, however, they are but one factor. If the volume

of futures trading is any measure of marketing activity, during the

July—December of 1965 period Government dispositions of wheat

amounted to 187 million bushels, only slightly less than the 194 million

disposed of in the same in 1964, yet wheat futures trading volume

during the July—December 1965 period soared to 3.225 million bushels

of trading activity in contrast to a volume of 1.9 million bushels in the

same period of 1964.

So, while the futures trading volume was increasing substantially

over the previous year, Government dispositions remained about constant.

Some may argue with the decline in the wheat surplus a change is

needed in this resale price. However, a long time and integral part

of the farm program has been the concept of the ever-normal granary.

Secretary of Agriculture Freeman has referred to the Government's wheat-selling policy as the "ever-normal granary in action."

The Congress in successive acts from 1933 to 1965, has reaffirmed the

complementary purposes of maintaining farm income and safeguard-fl 

consumers' needs by adding to stocks when production exceeds

needs and using reserve supplies when demand is strong.

It would not be in the best interests of agriculture if this is only a, high-sounding statement to be pointed to as justification for reserve

supplies when surpluses are building and to be ignored when stocks

are needed. Yet, this in effect is what the proposed increased in resale

price would signal.

The implications of this proposed amendment are clear. To the

extent it might give wheat farmers false hopes as to future prospects,

an unwarranted production rise could easily take place. Couple this with potential implications of reduced wheat consumption and the

strong probability of upsetting the progress made in pulling wheat

stocks down to manageable levels begins to emerge. If this should

happen, the goal of reducing Government wheat costs would become

more and more distant and the future of farm programs would

thereby be endangered.

For these reasons, the Department opposes any change in legislation to increase the CCC minimum sales price for unrestricted use.

It would not be in the best interests of the farmers, the consumers, or

taxpayers. It would not hasten a rise in the income level nor bring

any other objective that cannot be realized under existing legislation.

The administration's position on farm income is crystal clear.

And the position of this committee appears to be equally clear. Under the leadership of Chairman Ellender, you have acted decisively

and repeatedly to put effective farm program legislation on the

books. Determined efforts since 1961 have paid off in substantially

increased farm income. Realized net farm income in 1965 exceeds

$14 billion, for the first time since the early 1950's. There is no in-
MINIMTJM RESALE PRICE OF CCC WHEAT 87

clination to backslide from a continuing effort for further income

improvement. But there are sound ways to pursue this course.

The Food and Agriculture Act of 1965 which the Congress passed

last summer charts the way toward a much needed increase in wheat

farmers' incomes.

The act does more for wheat farmers. It offers the opportunity to

broaden their markets both at home and abroad. It will accomplish

this through provisions aimed at stabilizing wheat prices at levels in

delicate balance with prices of other competing grains and with

wheat prices in foreign producing areas. Injudicious Government

pricing of wheat could easily upset this balance and negate the act's

objectives of working toward increased use of U.S. wheat and lower

Government costs.

The CHAIRMAN. Now, Mr. Jaenke, with respect to this transition

you spoke about a while ago. You mention the year 1964. You

meant 1965, did you not?

Mr. JAENKE. No • it was the act passed in the year 1964 to apply to

the 1964 crop. And the transition occurred in the summer months.

August, September, and October of 1964.

The CHAIRMAN. Specifically—I may not have followed you—why

did you make this announcement on November 23?

Mr. JAENKE. Of this year?

The CHAIRMAN. No; last year.

Mr. JAENKE. You mean in 1965—this marketing year?

The CHAIRMAN. Yes.

Mr. JAENKE. Well, it was apparent that with the new demands

that were coming into the market—at that time mainly commercial

demands, although we could begin to see some developments insofar

as the food-for-peace program and India was concerned—it was

apparent, therefore, that the production from the 1965 crop of

wheat, plus whatever small amounts were in the private hands at that

time, was not going to be sufficient to meet the needs in this marketing year. Already, by November 23, there was short supply of

certain high protein wheat especially in certain locations. There

were no supplies available from private lands because the crop was

such last year that protein was down.

Under the application of the ever-normal granary concept, we

began offering high quality stocks and then as the situation tightened, made available CCC wheat of all qualities and at all locations.

The CHAIRMAN. What would have happened, in your estimation,

to the marekt had you not come in on November 23? Would it

have continued to go up and up?

Mr. JAENKE. Yes sir.

The CHAIRMAN. 

Yes,

would that have benefited?

Mr. JAENKE. Whoever held the wheat.

The CHAIRMAN. That would not have been the farmers, would it?

Mr. JAENKE. As I indicated, generally the bulk of the wheat crop

is sold in the first 3 months.

Senator YOUNG. Mr. Chairman, I would say that roughly twothirds or maybe three-fourths of the wheat held in North Dakota is

under loan, and the farmer can redeem it and sell it. Isn't that

right?

Mr. JAENKE. I do not believe it is that high.
88 MINIMUM RESALE PRICE OF CCC WHEAT

Senator YOUNG. This includes reseal wheat.

The CHAIRMAN. Will you put the exact figures in the

who would have benefited? The question is: Who

benefited?

If you can indicate that by means of a memorandum

record at this point, I would like to see it.

(The information requested is as follows:)

Approximately 40 percent of the wheat crop is sold by farmers in the first

quarter after harvest. About 60 percent of the grain is sold during the first 6

months. Only about 20 percent of the crop is marketed by farmers in the last

quarter of the marketing year. As a result, increases in price during the last

half of the year would be obtained by farmers on no more than 40 percent of the

crop sold. The maximum gain would be obtained by farmers on only about 20

percent of farm sales.

1965 crop:

record, to see

would have

to put in the

Thousand Wheat, North Dakota bushels

(rounded)

Production 179,706

Put under support:

At Dec. 31, 1965:

Warehouse stored 2,900

Farm stored 24,121

Total 27, 021

At Jan. 31, 1966:

Warehouse stored 3,758

Farm stored 30,880

Total 34, 638

Loan repayments:

Total, through Dec. 31, 1965 2, 390

Total, through Jan. 31, 1966 3, 979

Stocks in North Dakota at Jan. 1, 1966:

On farms, including grain under loan 140, 171

Off farm:

CCC :

Warehouse 40,417

Bin sites 4, 756

Other warehouse, etc 30, 711

Grand total 216,055

1964 crop:

Production 150,842

Put under support 51, 295

Repayments 10,767

Deliveries 27, 275

Under reseal at Jan. 31, 1966 18, 696

1963 crop:

Production- 125,608

Put under support 50,810

Repayments 7,298

Deliveries 34, 696

Under reseal at Jan. 31, 1966 5, 434

Senator YOUNG. According to the latest figures I have, we have

about 140 million bushels of wheat on North Dakota farms. Most

all of this is either owned by the farmers or they could redeem it

and sell it in the market.
MINIMUM RESALE PRICE OF CCC WHEAT 89

The CHAIRMAN. Any further questions?

Thank you.

At this time, we will stand in recess until 9 a.m. tomorrow.

(Whereupon, at 11:05 a.m., a recess was taken until 9 a.m.,

Thursday, February 3, 1966.)

(Additional statements filed for the record are as follows:)

STATEMENT OF HON. QUENTIN N. BURDICK, A U.S. SENATOR FROM THE STATE OF

NORTH DAKOTA

Mr. Chairman, I want to thank both my distinguished colleagues, Senator

Young of North Dakota and Senator Karl Mundt of South Dakota, for scheduling these important hearings on the Government sales of Commodity Credit

Corporation grain stocks. In doing so I believe both of you are performing

a valuable public service, one that will surely throw light on a problem that

has plagued wheat farmers for years.

I believe most of us agree that the Commodity Credit Corporation has done

an essential job in stabilizing farm income. However, one of the disadvantages

of the price support program carried out by the CCC is that the accumulated

stocks of farm commodities have a depressing effect on market prices. Another

disadvantage is the huge cost of storing MC stocks, at one time running well

over $1 million a day. I might add that this is no longer true—the cost of

storage has been reduced along with the amount of the surplus and I believe

this to be a result of the policies pursued by Secretary Freeman since he became

director of the Nation's agriculture program. In that effort, the Secretary

deserves the respect and commendation of us all.

There is one policy in regard to CCC stocks on which I must disagree with

the Secretary, however, and that is the price level at which CCC stocks, and I

am referring specifically to wheat here, should be released on the open market.

The present level allows the USDA to release CCC wheat at no less than 105

percent of support price and the recent sales of wheat by USDA beginning in

late November were at a rate of 108 percent.

Mr. Chairman, I would like to add my voice to that of those who believe

this level too low; 105, or 108, or even 110 percent of support price does not allow

a large enough difference between basic support level and resale level to continue

a large volume of private sales once the Government offers CCC stocks for sale

on the open market. Present policy in effect establishes a ceiling on grain

prices that interferes with the natural tendencies of the market to seek a

higher price level. The effect of this situation has been to depress grain prices

whenever the CCC has offered grain for sale. This, of course, results in the loss

of thousands of dollars to farmers in areas such as my home State of North

Dakota.

I believe that if the law were amended to establish a minimum resale level of

115 percent of support price with a flexibility allowing the Secretary to go

higher if he believed it necessary, it would strengthen the position of wheat

farmers in competing with CCC sales.

It would be my hope that these hearings will prove to justify the desirability

of a higher resale policy.

STATEMENT OF HON. CARL T. CURTIS, A U.S. SENATOR FROM THE STATE OF

NEBRASKA

Mr. Chairman, when the last agricultural bill was before the Senate, I joined

with others in an amendment which would have required the Commodity Credit

Corporation in disposing of wheat to sell it for not less than 115 percent of

the current price support plus carrying charges. That amendment did not prevail but I want to urge the same principle before this committee. The reasons

are many, but I will cite a few:

1. Farm programs were brought into being to raise the price of the farmers'

products in the marketplace. The Congress never enacted farm programs with

any intent of having them used to depress prices.

2. The adoption of this principle would raise the price received by the farmer

in the marketplace. I believe that this is desired by the overwhelming majority of farnfers. Farmers would rather receive a good price in the market-
90 MINIMUM RESALE PRICE OF CCC WHEAT

place than be dependent upon appropriations of the Treasury of the United

States.

3. Insofar as this objective would be realized, it would lessen the cost to the

Government in reference to any commodity so involved.

4. It would increase the value of the Government stocks of any commodity involved that happened to be on hand.

5. The object of farm legislation should not only be to raise the prices to the farmer in the marketplace, but it should be to make unnecessary Government participation to the fullest extent. Low prices and dependence upon direct appropriations from the Treasury Department work in the opposite direc- tion and are burdensome to both farmers and taxpayers. All taxpayers and

all farmers are also consumers.

6. In the recent past, the power and authority of the Federal Government

has been used to lower farm prices. This is not sound. It was never intended by the Congress and this proposed legislation should so be written that it would terminate such Government practice.

STATEMENT OF HON. ANCHER NELSEN, REPRESENTATIVE IN CONGRESS FROM THE

SECOND CONGRESSIONAL DISTRICT OF MINNESOTA

Mr. Chairman and members of the Senate Agriculture Committee, I am most pleased to submit a statement in support of proposals to raise the resale price of Commodity Credit Corporation wheat to not less than 115 percent of current

support price plus reasonable carrying charges.

Frankly, the bills some of us have proposed would go even a bit further in attempting to prevent the Government from dumping food and feed grains

on the marketplace to the detriment of family farmers, taxpayers, and the grain trade. For example, my own bill, H.R. 2265, would raise the release price

on CCC grains to at least 120 percent of the loan support rate.

However, I feel the increasingly blatant efforts of the Government to control farm prices have got so completely out of hand, it 'is solidly in the best interest

of the Nation's farmers to testify in support of the proposals under consideration.

We need look back only a few weeks to see two good examples why. Just weeks ago the Government announced the CCC was moving 25 to 30 million bushels of corn from country to terminal points where it could be readily offered for sale. About the same time, it was announced the Government's stock of wheat, some 500 million bushels, would be offered for unrestricted use "to assure adequate market supplies," even though wheat stocks are below what many consider to be a prudent reserve. It was put on the market at 108 percent of loan value plus carrying charges which, in effect, established a price ceiling on wheat.

The immediate effect of these actions was to drop market prices of corn

and wheat by several cents a bushel.

This is an old story for the farmer, of course. It was pointed out by the

House Republican Task Force on Agriculture last year, for example, that farmers

would have received $370 million more from corn sales alone during the 1961-62 marketing year had it not been for the competitive dumping of nearly a billion bushels of Government-owned corn.

Mr. Chairman, the possible argument that these actions were taken to put

a lid on inflation is not justified. The farmer is presently getting 80 percent of parity, which means he is far behind the rest of the country incomewise.

While farm prices are currently 2 points above what they were in the 1957-59

base period, prices farmers have had to pay are up 10 points. Meanwhile,

hourly earnings of workers in manufacturing industries are up 20 points.

The argument that these actions were taken in accordance with the will

of Congress is not justified. In establishing the CCC in 1948, Congress charged it with "stabilizing, supporting, and protecting farm income and prices." The

term "stabilize" was never intended to mean putting a ceiling on the prices

a farmer might receive in the marketplace.

Nor can the argument be justified that grain dumping has ultimately helped raise farm income. It has been recently stated that farm income is up 40 percent in the last 5 years. This ridiculous statement, however, refers to income per

farm, and there are now 670,000 fewer farms than there were in 1960. Ob- viously, the fewer the farms, the larger the income of surviving farms will

appear to be.
MINIMUM RESALE PRICE OF CCC WHEAT 91

Why then, have American farmers had to contend with these ruinous graindumping policies? Secretary of Agriculture Orville Freeman, in testimony last

year before the House Agriculture Committee, explained it this way: "* * * We

purposely sold in order to move our prices down far enough so that they

would be way below the support level, the loan level, so that we could thereby

get compliance." In short, the real reason for the dumping has been to depress

market prices, thereby forcing farmers into the farm program whether they

want in or not.

Mr. Chairman, this is the crux of the problem. The price managers in

Washington are so sure they have all the answers, they are deliberately breaking

the grain market and crushing individual farmers to exercise control. Their

cynical misuse of the vast power of the Federal Government has brought

economic distress to farm program complier and noncomplier alike and is

destroying the private grain trade.

It is time Congress put a stop to this injudicious grain dumping or it may

well result in further attempts by the Washington price fixers to set price

ceilings on other farm products.

I have reason to believe that the Government may try using the same economic

rolling pin on other farmers with which it has been beating the wheat and feed

grain growers. Talk coming out of the Department of Agriculture is that the

price controllers want to "stabilize" the price of oils. All this word "stabilize"

means to such people is to adjust prices downward by some means at their disposal. But any reduction in the price of soybean oil, for example, would increase

the price of soybean meal to the livestock industry, and the irony is that livestock prices are one of the few bright spots in agriculture today.

Furthermore, I take the liberty of quoting part of a Grain Terminal Association Radio Roundup, St. Paul, Minn., for December 21, 1965. "* * * Will the

Government put price ceilings on other farm products, including livestock?

These questions are in almost every farmer's mind these days. A good economist

friend had some observations about this situation the other day. He talked

about the long years of low farm prices and how most farmers worked faithfully

with the farm programs toward a better day when prices could regain some of

that long-lost ground. Now that such a day is approaching this economist said

he is disturbed to see price ceilings established at low levels on wheat. He

showed us a newsletter, a confidential paper, that hints at other farm price

ceilings * *

Mr. Chairman, the Second Congressional District of Minnesota which I am

privileged to represent had in 1964 a total harvested wheat acreage of 71,100

acres on which was grown 1,820,100 bushels of wheat. Our production of feed

grains, of course, is far more sizable and important. The overwhelming feeling

of these growers, and of most farmers in the Second District, is that the Government has no business pegging prices and setting income ceilings, because that

is the task of the marketplace in a free society. They would favor the proposed

legislation and strongly oppose any further attempts to impose price controls

on American agriculture.

STATEMENT OF HARVEY SICKELS, NATIONAL SECRETARY, NATIONAL FARMERS

ORGANIZATION, CORNING, IOWA

Thank you, gentlemen, for giving us this opportunity to present our views.

Your committee is concerned with legislation which would change the longaccepted policy Congress gave USDA for CCC sales pricing.

Speaking in behalf of my organization—which is truly representative of farmers since farmers only are eligible for membership—I am testifying against the

legislation pending here today. We favor continuing the 105 percent resale

policy of CCC which has worked out so well. This has been especially true during the last several years that Congress has provided farmers with legislation

for highly effective wheat and feed grain programs.

We don't want you to upset the applecart now by changing this CCC sales price

policy. The farm bill you passed at the last session gave a lot of flexibility to

our farm programs, and gave USDA a chance to be flexible, too. The 1965 act

put the United States in the position of being better able to bargain in the

world. Wheat prices at their support level were made internationally competitive, the first time in many, many years.
92 MINIMUM RESALE PRICE OF CCC WHEAT

And consumer prices for grains are relatively fair and reasonable. I don't

mean only for human consumption. I mean also for livestock growers. We in

the National Farmers Organization don't want our livestock feed costs to increase because of unreasonable high CCC resale prices. To increase the resale

sales policy would serve only to slash our returns from livestock growing, which

now are beginning to recover after a disastrous downswing in recent years.

I have been much encouraged by reports from Washington concerning the success of the wheat and feed grain programs since Mr. Freeman became Secretary of Agriculture. He's doing a grand job. I'd hate to see you try to hobble

his effectiveness in dealing with wheat and feed grain overproduction by trying

to impose higher, unreasonable pricing levels for resale of CCC commodities.

The 5-percent margin which has been in effect these many years has worked

out OK as a minimum. Under certain cirdumstances, the Secretary has discretion, as I understand it, to increase that sales minimum. He did it a while

back in order to resume CCC wheat sales after a lapse of several months.

resuming it at 108 percent, he didn't upset the marketplace.

It's pretty plain to see that farmers who move their grain within a few months

after harvest aren't in the wealthy class. Speculators in the markets aren't

particularly interested in the level of returns to farmers.

So any money that is made by grain market operators by and large doesn't

get back to the dirt farmers who try to get a decent price for their harvest.

That's why we all are so glad to have the farm programs. They are the only

thing that stands between the individual farmer and desperately low prices under

conditions of overproduction. The programs stabilize prices and tend to assure

a farmer a reasonable return for his hard work.

Like most farmers, I would like to see every farm produce to its fullest capability. A high quality, bountiful crop is a wonderful thing for a farmer's peace

and happiness. It is like parents feel in the golden years of their life when

they have a large, close-knit family of happy, healthy, and successful sons and

daughters.

But bountiful crops need to be moved into markets, just like youngsters must

grow up and take their share of responsibilities in the world.

So farmers as a group are happy when they see that their Government is

helping make more world markets available for the major commodities like wheat

and feed grains. Wheat loan levels are down to about world price levels so this

Nation can be more competitive. More wheat is moving into normal export than

ever before. But if you jack up the resale price of CCC wheat, you are in effect

sticking Uncle Sam, and in turn all of us taxpayers, for a lot more costs. The

more you add on to resale prices of CCC, the greater must be the subsidy payment

to wheat exporters in order to bring the price back down to world market levels.

It seems to me that is a pretty thoughtless thing to do.

Price stabilization at fair and reasonable levels of return to producers is a

constant goal, not only to farmers, but also to consumers. I think it is the Government's duty to its citizens to seek this stabilization. Farmers don't want

prices to drop disastrously. And consumers don't want food prices to skyrocket.

The CCC sales policy at 105 percent is a good one, and if it is raised permanently

to an arbitrarily higher level, it ties the hands of USDA so that it can never

move much of its large stocks of commodities. We believe in safe reserves.

but we don't want a big surplus hanging over the market. To boost the sales

level much higher also will cripple the wheat-feed grain program interchangeability. There is a lot of substitution in these programs. and a great deal of feed

wheat is being raised. The feed value relationship between corn and wheat

relative to price support loan levels is reasonably close. Jack up that wheat

resale level, and right away there's trouble because the gap will widen, and no

more wheat can be profitably grown for feed.

Yes, gentlemen, it seems clear to me and to the working farmers in our organization that you shouldn't tamper with success of the long-established CCC sales

policy.

NFO is not in favor of fighting success. The country is making pretty fair

progress on wheat. We are getting surpluses down and income up. We are about

to get full parity on the domestic part of our wheat production. We are competing for markets and are going to compete even better. Let's keep the program about like it is.
MINIMUM RESALE PRICE OF CCC WHEAT 93

COLUMBIA, MO., February 7, 1966.

Hon. ALLEN J. ELLENDER,

Chairman, Senate Committee on Agriculture and Forestry,

Senate Office Building,

Washington, D.C.

DEAR MR. CHAIRMAN: Due to adverse weather conditions, we of Midcontinent

Farmers Association were not able to be present at your recent hearings on

Senate bill 2785, Commodity Credit Corporation resale level on wheat. We

called Mr. Henry Casso, economist, and asked permission to file a short statement. Mr. Casso advised such a statement would be accepted for the record.

It was our pleasure to work with you and the other distinguished members of

your committee in the development of the Agricultural Act of 1965. Mr. Heinkel,

our president, was Chairman of the first Committee appointed by the President

in 1961 to help work out the fundamental principles of this program, and we have

supported those principles since 1961 and will continue to do so.

These programs to date have been quite popular with farmers, and the producer participation has attained the desired results. It is our confirmed belief

that cooperators in these various programs must be rewarded for their cutback

in production and their participation in the program. The level at which the

Commodity Credit Corporation sells commodities on the market is today the

only effective device to assure cooperators in these programs of receiving the

desired benefits to which they are justly entitled.

For this reason alone we urge that no change be made for the resale level of

wheat. The basic principle in the Agricultural Act of 1965 is to provide increased income for farmers, reduce Government costs, increase foreign exports,

and to make available farm programs with all commodities having entitlement

to their fair share of income possibilities. If the 115-percent feature were

adopted for wheat, it would immediately create an imbalance between wheat and

feed grains, thereby creating a major problem for all commodities. As a matter

of fact, this concession which would be beneficial as we see it only to trade

interests could well jeopardize all of our existing farm legislation as it pertains

to production adjustment and price supports.

We in the Midcontinent Farmers Association would like to join others in

urging you and your committee to retain the present sales levels which are today

being used to determine the sale price of Commodity Credit Corporation stocks.

Yours very truly,

MIDCONTINENT FARMERS ASSOCIATION,

L. C. (CLELL) CARPENTER, Vice President.