Senator DOLE. It is a rather minor amendment and I understood that the Department is opposed to it.

Mr. PERSON. Of course we do have the authority, Mr. Chairman, as you know, at the present time. We just have not used it except in cases where back in 1971 when we were loaded with storage both in Commodity Credit Corporation hands and on the farm, we had commodities under extended loan for the previous 4 or 5 years on the farm. There was a need for all kinds of storage, so we opened the program up. Our needs are not the same at the present time. Most of these facilities are empty, both commercial storage and farm storage.

Senator DOLE. Is there not some indication that they might be filling up this year?

Mr. PERSON. It is possible, depending on the crop and the markets. Senator DOLE. So, there is not a total foreclosure that you could use the authorization you now have again.

Mr. PERSON. That is right. If a need should surface and it could serve a good purpose, I am sure we would take a good look at it.

Senator DOLE. I do not have any further questions. If the record will remain open, we may ask some additional questions after hearing some other witnesses.

Mr. Tom Knight and Mr. Wallace Macemon.

Mr. Knight, you have heard the USDA testimony and their opposition to the bill. You may comment on anything you wish with regard to your statement. The entire statement will be made a part of the record.

For the benefit of the committee and the staff, it would be helpful if you could indicate either some areas we might modify the amendment to satisfy the Department or, frankly, areas of disagreement of the Department so we could take a look at those.

STATEMENT OF TOM T. KNIGHT, ASSISTANT MANAGING DIRECTOR AND LEGAL COUNSEL, NATIONAL SILO ASSOCIATION, INC., CEDAR FALLS, IOWA

Mr. KNIGHT. I think first I would like to introduce Mr. Macemon, and he will respond to some of the points that were raised by the USDA.

I would like to introduce myself as the assistant managing director and legal counsel to the National Silo Association, headquartered in Cedar Falls, Iowa. The National Silo Association represents 122 concrete silo construction companies and feeding equipment suppliers throughout the United States and Canada.

It is my pleasure to introduce Mr. Macemon, who is very much interested in the progress of Senate bill 1331, to amend the Commodity Credit Corporation Charter Act by including storage structures suitable for the storage of high moisture forage, silage or grain-in addition to the current program of making loans for grain drying and storage bins.

Mr. Macemon is both president of Chromalloy Farm Systems Division of Chromalloy American Corp., headquartered in Madison, Wis., and also president of the National Silo Association. Mr. Macemon has 27 years of experience in the silo industry, and is familiar with the Agricultural Stabilization and Conservation Service and its background on granting loans on silos and storage equipment.

The membership of the National Silo Association is very much in favor of passage of Senate bill 1331. Our organization has for 63 years been dedicated to advancing and extending the production of beef and milk through education and research, and encouraging a free exchange of ideas with educational and research institutions and with the entire agricultural community to the end that there may be processed and preserved more quality high moisture feeds.

Mr. Macemon would like to give a more detailed report on behalf of the entire concrete silo industry.

STATEMENT OF WALLACE J. MACEMON, PRESIDENT, NATIONAL SILO ASSOCIATION, INC., AND PRESIDENT, CHROMALLOY FARM SYSTEMS DIVISION, CHROMALLOY AMERICAN CORP., MADISON, WIS.

Mr. MACEMON. Senator Dole, as chairman of the agricultural committee, it is a pleasure for me to address you as president of the National Silo Association and also president of the Chromalloy Farm Systems Division on Senate bill 1331 to amend the Commodity Credit Corporation Charter Act. This bill would expand the current ASCS Farm Facility Loan program to include silo structures suitable for the processing and storage of high moisture forages, silages and grains. I would first like to touch upon the history of the ASCS loan program as experienced by members of the National Silo Association and as a silo manufacturer when funds were available for concrete tower silos.

During the late 1950's and early 1960's, several appointed ASCS State chairmen interpreted coverage of the ASCS regulations as including silos so long as the structures were used to process and store eligible price support commodities. These structures had to provide conditioning, drying, and the related equipment involved in a dry grain and high moisture grain system. During this period of time, a few States included corn silage structures in the ASCS program; however, other States only included structures that served the dry grain markets.

Nevertheless, during this time our association members constructed over 5,000 concrete structures under the program. To the best of our knowledge and records, we know of only one case where default occurred and the structure was taken down and moved by the silo manufacturer. It may be of interest to you to know that manufacturers at that time were required to sign a statement which bound them to assist in repossession cases and obligated them to relocate the concrete structure at 80 percent of its origial cost-I bring this to your attention so that you are aware that our members would be aware of additional default cases had they taken place.

On July 1, 1971, concrete tower silos were included in the Farm Facility Loan program and they no longer were included by interpretation of individual State chairmen. During 1971 and 1972, approximately 2.000 structures were built through ASCS financing. During this period of time, there is no record from any of our members that a default occurred. Concrete tower silos have been utilized throughout our Nation's industry for the storage of dry, low moisture,

and high moisture materials. These structures have also been utilized for the free flowing, semifree flowing, and compactible materials.

Our industry has proven by performance that concrete tower silos are suitable for inclusion in the ASCS Farm Facility Storage program. I would also like to emphasize, however, that concrete silos and the equipment they utilize are repossessable. Every member of the National Silo Association was more than willing to sign the statement requiring him to assist in repossession and relocation of their structures. The county ASCS offices we contacted while preparing this presentation reported without exception that they had no more default experience granting loans on silos than they had on grain bins and drying equipment. It is to be expected in any borrowing situation that not every loan will be a good one.

The credit references and the checks made are the important issue. Silos are currently based upon a 25-year depreciation schedule. However, the figures show that the average concrete silo will pay for itself in 5 years and even less when good management practices are employed. Farmers around the country are still learning about the benefits of this type of storage, and virtually every land-grant agricultural college and institution encourages their use.

The prediction for the 1975 corn crop calls for a record production. It is likely to exceed 6 billion bushels and the USDA figure of 5.8 billion bushels which will be required to meet domestic and export needs represents a jump of 20 percent from 1974. Even some administration analysts admit that demand figures look overly optimistic at this point.

The end result of such record production is that the Nation's farmers are going to be faced with an inadequate number of storage structures. This kind of production will force the price of grain down, thus once again making beef, hog, and milk production look profitable at a time when livestock farmers throughout the country have taken a financial beating for the past 2 years.

My point is that high-moisture feeds are equally as important, if not more important, than mechanically dried grains suitable for human consumption and exportation, especially when large quantities of grain will not be needed to meet domestic and foreign uses. With the constantly improving production methods in the United States, prospects of home-grown grains not being sufficient to meet requirements is being reduced each year. Therefore, mechanically drying all this excess grain, as the present loan programs would seem to favor, would be a waste of our natural resources. Every agricultural institution, every feed magazine, and most importantly all livestock feeders agree on one thing: High-moisture grains and forages contain more feed value than dry grain. Mechanical drying of corn removes vitamin A, uses natural gas or propane in huge quantities, takes many more manhours to accomplish and results in double handling.

Having money available for the construction of silos to store these valuable feeds and eliminate spoilage would be an invaluable asset to today's agribusinessman. Financing for the erection of silos would mean drastically lower production costs through vastly increased efficiency.

Should we not encourage our farmers to progress, to produce grain as well as an end product of beef, pork, milk, and poultry on a leasecost-per-hundredweight basis?

Today we have heard a great deal about the world food shortage and the key role the United States will have to play in supplying food to the developing nations. We are also hearing that our society is encouraging waste in our feed grain supply by demanding poultry, red meat, and milk in our daily diets. There is no doubt in my mind that dried grain will have to be the commodity used to help feed the developing nations of the world. While some so-called food specialists ignore the byproducts of producing a dry grain crop and also ignore these byproducts as food producers, you, as members of the Senate Agriculture Committee, have to understand that we can produce poultry, meat, and milk by harvesting and feeding the plant and limited amounts of grain just as efficiently as we produce protein and carbohydrates in a grain crop.

A 150-bushel-per-acre corn crop stored as corn silage will produce approximately 62 percent more milk or meat than will the grain from the same acre which is mechanically dried. The point is, the farmer's crops are his most valuable asset, and it is only prudent management for him to harvest that crop in such a way as will result in the maximum production of grain, beef, milk, and pork. High-moisture feeds supply that management tool, and silos and the equipment they utilize increase his efficiency and reduce the labor required to do the job. A great many people not in agriculture believe all grains are fit for human consumption. The facts as reported by Marshall McCullough, director of dairy science, University of Georgia, are that in the case of a dairy farmer, 83 percent of the energy food in the ration is not consumable by humans, and 93 percent of the protein in the ration is not consumable by humans.

General beef feeding practices which incorporate large percentages of grain would not have as high a percentage of nonconsumable human foods, yet the beef ration can be changed to a high nonhuman consumable ration by feeding larger quantities of roughage. And we have seen evidence of this fact this year due to the fact that grain has been in short supply and expensive.

Each year the percentage of our grain crop fit for human consumption changes because of drought, early frost, poor storage and drying facilities, rodent contamination, plant diseases, and so forth. It should also be pointed out that some of the geographical areas of the United States cannot produce grains suitable for human consumption and are only suitable for cattle and livestock feeds. A good example of this is corn. When corn is harvested for human consumption, only 20 percent of the total weight of the grain harvested can be used; 80 percent of the corn is a byproduct which can only be utilized through animal consumption.

A vigorous livestock and dairy industry has done a great deal to aid the American economy over the years. This industry will only continue in its present form and size if it is based upon the most efficient and effective utilization of all its resources. There is absolutely no doubt that the preservation of livestock and dairy feeds in the form of silage and high-moisture feeds can and will play a major role in achieving this goal, both in the maximum conservation of nutrients and the efficient use of our energy.

In addition to being in very limited competition with humans for grain as food, the livestock and dairy industry utilizes a tremendous

amount of byproducts from other industries which are not used by humans. For example, in 1974, we used 4,350,000 tons of wheat meal, which is a byproduct of the flour industry. We recycled 2,047,000 tons of cottonseed meal, 3,760,000 tons of molasses, and approximately 9,600,000 tons of soybean byproduct after the oil had been removed. In addition, we had to recycle all of the byproducts of linseed oil, sunflower oil, and all of the beet pulp in this country.

The main reason why we can recycle these things, particularly in the dairy and beef industry, is the fact that corn silage is high energy, low protein feed. Because we are starting with the corn crop, it is ideal to recycle products such as bean pulp, citrus pulp, and molasses, which are very high in protein to balance the animal's ration. One of the first premises we must lock into our minds is that we must always balance the animal's ration in order to obtain top production.

This country needs a strong livestock program to pay for the recycling of byproducts. The consumer is still going to want corn oil, margarine, corn gluten foods, and so forth; therefore, the byproducts will continue to exist. If the livestock industry does not recycle these byproducts, the United States will return to the time when the brewers put brewers grain or the soybean manufacturers dumped soybean hulls in our rivers. It would not be long before we were up to our hips in waste products, if it were not for the livestock industry recycling.

Energy savings through a high moisture grain feeding program is also tremendous. For example, more fuel was used to dry 70 percent of the 1972 corn crop than was used to grow all of it. It takes 1 gallon of propane to dry 5.9 bushels of grain, while 8.85 gallons of propane are required to farm 1 acre of land. Taking the amount of propane gas required to mechanically dry 52.3 bushels of corn, we can farm 1 acre, which will produce approximately 100 bushels of corn.

In 1974, 4,651,167,000 bushels of corn grain were produced in the United States. Using an average figure of 8 cents per bushel direct costs for gas to dry this grain, we have a total cost of $372,093,360. If we would have converted only 25 percent of the 1974 corn grain acres into corn silage, it would have resulted in direct dollar energy savings of $93,023,000. This amount-$93,023,000-saved in energy is equivalent to 6,200 20- by 60-foot silos erected on farms equipped with automated feeding equipment which would reduce farm labor costs, enabling us to farm approximately 10 percent additional acres this year because of the energy savings alone. In terms of energy savings, in terms of increased production of beef and milk, our feeding high moisture silage and grain as an alternate to mechanical drying means more effective and more efficient use of our natural resources. Gentlemen, the program we are advocating, that was introduced by Senator Dole, stated on the floor of the Senate when we introduced this bill, is not a handout or Government subsidy. These agribusinesses are more than willing to borrow money and pay it back at a reasonable rate of interest, such as that recently announced by the Commodity Credit Corporation of 6% percent. Likewise, the program would cost little to administer since the ASCS network of State and county officers is already established. Most of these offices have had some past experience in approving loans on silos for the storage of high moisture forages, silages and grains.