Senator DOLE. I do not quarrel with his testimony. I just suggest that if you have any additional comments Mr. WELTON. I might add also that these structures are capable of being removed, torn down and removed. The only part that remains, of course, is the foundation, which is concrete. We normally get fixtures disclaimers on any loans that are given for the structures, and they stand on their own. They can be removed, resold, and probably somewhere in the neighborhood of 70 percent is recoverable. Senator DOLE. What about your own default experience? Do you handle the financing on loans? Mr. WELTON. We handle about 12 percent of our total paper, and that falls under 1 percent default. We figure we are not getting all of the business if we would have a perfect record. Senator DOLE. The Department indicates that loans for 1972 represent only 6.1 percent of the dollar amount total outstanding loans, whereas such structures represent 16 percent of the dollar amount of defaulted loans transferred to "claims" in the current fiscal year. Then you get into the dollar amount. He said somewhere around $50,000, so the percentages appear to be substantial. Mr. WELTON. Well, if you take it over a longer period of time I think it would vary somewhat also, because if you take just a short period of time, it becomes distorted. It could be high, but over a period of 5 years, it might not be quite so high. Senator DOLE. But a bookkeeping transaction to transfer it to claims, in itself, does not mean it is lost. Mr. WELTON. That is right. Senator DOLE. I would hope that the Department will supply for the record some specific examples of repossession or foreclosures, either that, or amend their statement to indicate that it is in error. Mr. WELTON. I would like to make available to the subcommittee a copy of our default from our own financing organization if that would be helpful to you. I can give you our actual experience over the last 5 to 10 years. Senator DOLE. I think that would be helpful. [The following information was subsequently received for the record:] Hon. ROBERT DOLE, AGRISTOR CREDIT CORPORATION, Senate Committee on Agriculture and Forestry, DEAR SENATOR DOLE: Frank Welton of A. O. Smith Harvestore Products, Inc. asked me to provide you with some information regarding our experience in Harvestore financing. By way of background; AgriStor Credit Corporation was organized in July, 1967, and has been financing the purchase of Harvestore structures and related equipment throughout the United States and Canada since that date. We believe we are the single largest source of such financing on the North American Continent. In recent years we have provided approximately 12.5% of the total of such financing. Our most recent 5-year loss to liquidation ratio is 0.8% or slightly less than 1%. Losses are net of all recoveries and liquidation is the sum total of all payments received. Measuring losses another way, our net loss to average loans outstandings ratio for the same period is 0.38%. Last year we made a detailed review of our repossession experience. With respect to repossession situations involving the removal of the structure from its original location and its subsequent reinstallation at a new location and all of the costs attendant thereto, we found that on average our net realization on repossessions equaled 60% of the original installed cash price of the product. I will be away from the office for the next two weeks, however, should your staff require additional information, please feel free to contact Mr. Marv Manninen, Controller, or Mr. G. Mitchell Kane, Vice President Operations, at the phone number shown above. They will be pleased to provide you with whatever information we may have that would be helpful. I appreciate the opportunity to provide this information and hope that it is of value to your committee's review. Sincerely, D. L. DUNAWAY, President. Senator DOLE. It would be helpful if we had from the Department a copy of any loan agreement, see if there is any difference between the wet and dry storage, if there is a difference. Is there a difference between the Department's loan requirements on wet and dry? Mr. MACEMON. Well, now there is, but, because they are not including it, there was, there may be a difference in other things, but they do not really specify what is adequate for dry and what is adequate for wet. It is left kind of in limbo. Senator DOLE. I appreciate it very much. Anything else you want to add? Mr. WELTON. No, that will be all. Thank you for the opportunity of testifying. [The following letter was referred to on p. 18.] Hon. HERMAN E. TALMADGE, A. O. SMITH HARVESTORE PRODUCTS, INC., Chairman, Senate Committee on Agriculture and Forestry, DEAR SIR: This letter will serve to state the position of A. O. Smith Harvestore Products on a bill which is currently under discussion by the Senate Committee on Agriculture and Forestry, and will also introduce Mr. Frank H. Welton, Regional Manager of A. O. Smith Harvestore Products, who will deliver this letter to your committee by hand and will attend the meeting of your committee on Monday, June 9, 1975. Mr. Welton will be available to testify, at that time, in the event that you wish to have him do so. We understand that Senators Humphrey and Dole have introduced Senate Bill No. 1331, which would allow the Agricultural Stabilization and Conservation Service to provide loans on tower silos for the storage of forages. We ask that your committee report favorably on this Bill to the Senate. We have three principal reasons for this request: 1. For the past several years, the ASCS has been granting loans to farmers for the purchase of bins for storage of dried grain, but it has not granted such loans for silos or Harvestores, both of which are capable of storing wet forages such as silage and haylage. The Harvestore is also capable of storing high moisture grain. We consider this distinction by the ASCS to be highly discriminatory and contrary to the interests of both the silo manufacturers and A. O. Smith Harvestore Products, Inc. 2. Drying grain requires the use of scarce energy-usually natural gas or propane-in order to preserve it in storage. We consider this to be contrary to the national interest in conserving these fuels. It is our understanding that more fuel was used to dry 70% of the 1972 United States corn crop than was used to grow all of it, and this is obviously terribly wasteful when that grain could be preserved as feed without the use of that energy. 3. The feeding of forages to ruminant animals makes it possible for the characteristic bodily functions of such animals to convert these crops into protein in a way which is not possible for the human body nor is this process possible for either hogs or chickens. Because of this characteristic, it is possible to use marginal crop lands to grow protein for human consumption through feeding forages to these ruminant animals. I hope it will be possible for your committee to support Senate Bill No. 1331 and, in this way, correct an inequity which happens to be contrary to both public policy and benefit. Very truly yours, JOHN H. BRINKER. Senator DOLE. Are there any other witnesses? The record will remain open for 10 days to take care of the statements that anyone may wish to file, or any additional comments that the Department may have, or any members of the committee. There is considerable interest in this legislation, and I would hope that we can, as I said at the outset, resolve any differences with the Department; if not, pursue an independent course and either pass the legislation or otherwise have it disposed of. We should act on it one way or the other. Thank you very much. [Whereupon, at 10:55 a.m., the subcommittee adjourned subject to call of the Chair.] ADDITIONAL STATEMENTS FOR THE RECORD RED ANGUS ASSOCIATION OF AMERICA, Denton, Tex., June 13, 1975. SENATE COMMITTEE ON AGRICULTURE AND FORESTRY, Washington, D.C. DEAR SENATORS: We urge you to approve the Senate bill S. 1331, introduced by Senator Dole of Kansas. Thanks in advance for your consideration on this matter. JULIUS C. TODD, THE AMERICAN GUERNSEY CATTLE CLUB, SENATE COMMITTEE ON AGRICULTURE AND FORESTRY, Washington, D.C. GENTLEMEN: On behalf of the organization representing registered Guernsey dairy cattle, we would like to urge support of S. 1331 to provide for amendments of section 4(h) of the Commodity Credit Corporation Charter Act. The challenge facing agriculture, particularly in the United States, relative to future food supplies becomes more defined each day. The final assessment by time will be independent of bias. Unless animal agriculture in the United States can be kept strong-American Agriculture will not be able to fill its commitments-nor will the United States be able to keep its world food commitment. One of the great assets of animal agriculture is to utilize land for forages that would not be feasible for production of grains converted to human foods. Utilization of this forage requires proper storage. This is why amending legislation to provide financing to farmers to erect suitable storage structures for dry and high moisture forage, silage or grain as provided in S. 1331 is critical to our future total food supply and deserves full support by your Committee and the Congress. Thank you. Sincerely yours, MAX DAWDY, Executive Secretary. (22) |