MUTUAL SECURITY APPROPRIATIONS FOR 1960 WEDNESDAY, AUGUST 26, 1959 U.S. SENATE, COMMITTEE ON APPROPRIATIONS, Washington, D.C. The committee met, pursuant to recess, in room 1224, New Senate Office Building, at 10:30 a.m., Hon. Carl Hayden, chairman of the committee, presiding. Present: Chairman Hayden, Senators Chavez, Ellender, Robertson, Bible, Saltonstall, Young, Mundt, and Dworshak. Also present: Senator Schoeppel. DEPARTMENT OF AGRICULTURE SOIL BANK PROGRAM-CONSERVATION RESERVE STATEMENTS OF CLARENCE D. PALMBY, ASSOCIATE ADMINISTRATOR, COMMODITY STABILIZATION SERVICE; H. LAURENCE MANWARING, DEPUTY ADMINISTRATOR, PRODUCTION ADJUSTMENT, COMMODITY STABILIZATION SERVICE; CLAUDE T. COFFMAN, ASSISTANT FOR SOIL BANK AND FOREIGN AGRICULTURE, OFFICE OF THE GENERAL COUNSEL; CHARLES L. GRANT, DIRECTOR OF FINANCE AND BUDGET OFFICER GENERAL STATEMENT Chairman HAYDEN. The committee will please come to order. Senator MUNDT. Mr. Chairman, I have a very brief statement in connection with an amendment which I am offering on behalf of myself and Senator Schoeppel of Kansas, and Senator Young of North Dakota. It is proposed that this amendment be inserted at the proper place in the bill in order to make the soil bank program workable for 1960, I will explain briefly what has occurred which has given rise to the necessity for this amendment. LIMITATION ON RATE OF ANNUAL PAYMENTS At the insistence of the other branch of Congress, there was written into the Agricultural Appropriation Act of this year, a new limitation on the rate of annual payments of land put in the conservation reserve, a new formula which had never been tried before. In the original soil bank act which gave the Secretary of Agriculture certain guidelines to follow the established payment rates, but left him sufficient latitude within those guidelines to set rates which were fair and reasonable. The soil bank has just 1 more year in which to operate under the Authorization Act and that is the crop year of 1960. Heretofore we have said that the rates of annual payment to be provided for in the contract shall be established on such basis as the Secretary determines will provide producers with a fair and reasonable annual return on the land, taking into consideration the value of the land for production of commodities customarily grown on such kinds of land in the county or area, the prevailing rates for cash rentals for similar land in the county or area, the incentive necessary to obtain contracts for the coverage, for the substantial accomplishment of the purpose of the conservation reserve program and such other factors as he deems appropriate. You will notice we stated that the aims should be to provide producers with a fair and reasonable return on the land. On the other hand, another provision of the Soil Bank Act directed the Secretary to provide adequate safeguards to protect the interests of tenants and sharecroppers, including the reasons for sharing on an equitable basis of payments. The new limitations on payments which were written into the Agricultural Appropriations Act this year have proved to be unworkable and make it almost impossible to carry out these objectives. So we have a very emergent situation before us. The new limitation contained in the Appropriations Act provides: That in establishing annual rental rates for new contracts no such rental rates shall be established in excess of the local fair rental value of the acreage offered. Such fair rental value to be based on the average crop production harvested from such acreage during the past 5 years. Under this new limitation county committees are left with no discretion in determining the rate of payment other than to take the farmer's production of the last 5 years, divide it by 5 to get the average annual production, take the landlord's fourth or third or two-fifths, as the share may be, and have that to determine the rental value. A small amount may be added to reimburse the farmer for the special obligations which he assumes under the conservation reserve contract, such as the cost of controlling weeds, building fences, and maintaining the cover, all of which he is expected to do as a cooperator. If we take, as an example, land which has an annual gross return of $40 per acre, a landlord's one-fourth of that would be $10 per acre. If we add $2 to cover the cost of weed control, mowing the cover, building fences, and so forth, the maximum annual payment which could be paid would be $12 per acre. The owner will not even receive all of the $12 since it must be divided between him and the tenant. What owner who can rent his land to a private individual for $10 is going to put his land in the conservation reserve at $12 and have to share the $12 with the tenants? In such States such as my own, where there have been 1 or 2 dry years during the past 5 years, the amount of payment in many cases would be ridiculously low. So the impact of the amendment is virtually to make the soil bank inoperative for 1960 in those areas where they have had short crops or a drought during any one of the past 5 years. What this means, in other words, Mr. Chairman, is that in some States we will virtually be excluded from participation in the program and in nearly all States the 1960 rate will be much lower than the rates being paid under current contracts. PROPOSED SUBSTITUTE AMENDMENT The amendment which I propose is a substitute for the limitation in the original appropriating act, the provision that no annual rental will be established in excess of the 20 percent of the value of the land placed under contract, but in no event shall such payment be established in excess of the 1959 rate. This will give the local county committees sufficient discretion to set rates which are fair and reasonable and at the same time will afford adequate safeguards against the rates being too high. It would, Mr. Chairman, mean that under the terms of this amendment for the last year of the program they could not set their rates higher at any place than they were in 1959. You would not have an entire new set of rates confusing the whole program in its final year and in fact, eliminating certain States almost entirely and certain big areas of other States because of drought or other acts of nature which destroy such crop. I propose this amendment with Senator Schoeppel and Senator Young, each of whom has a statement he would like to make and I believe that Congressman Breeding, who is in the room, also would like to be heard. Chairman HAYDEN. We shall be pleased to hear from you, sir. Senator MUNDT. Mr. Chairman, I would like to have the amendment proposed by myself, Senator Schoeppel, and Senator Young, inserted in the record at this point, if that is agreeable. Chairman HAYDEN. The proposed amendment may be included in the record. (The amendment referred to follows:) PROPOSED AMENDMENT In lieu of the method for determining the fair rental value for conservation reserve contracts prescribed in clause (2) of the sixth proviso under the head "Conservation Reserve" in Public Law 86-80, such fair rental value shall be based upon the prevailing rental rate in the area for land of comparable productivity, or in the absence of prevailing rental rates the amount which the county committee estimates would be a fair rental rate for land of such productivity, making due allowance in either case for the obligations assumed by producers under conservation reserve contracts. SOIL BANK PROGRAM STATEMENT OF HON. J. FLOYD BREEDING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS GENERAL STATEMENT Mr. BREEDING. I am Congressman Breeding, of Kansas. I want to join in and subscribe to the statement made by the Honorable Karl Mundt, of South Dakota. I come from one of the largest wheat-producing districts in America. Yesterday and this morning, I have had calls from local ASC county committees in my area who are presently holding meetings on the interpretation of the soil bank for 1960 and they tell me that the farmers are walking out in disgust in regard to the rulings and limitations of the program for 1960. Mr. Chairman, it is an honor for me to be here this morning. I have a short prepared statement I would like to read to you, sir. Chairman HAYDEN. Proceed. Mr. BREEDING. Mr. Chairman, I appreciate the opportunity to appear here today in regard to a regulation in the 1960 conservation reserve program which I believe is unfair to many farmers of my part of the country. APPROPRIATION ACT PROVISION The regulation in question is based upon that part of the Agricultural Appropriations Act of 1960, which reads as follows: In establishing annual rental rates for new contracts, no such rental rate shall be established in excess of the local fair rental value of the acreage offered, such fair rental value would be based upon the average annual crop production harvested from such acreage during the past five crop years, including the current year. That sounds like a reasonable provision. But when it is interpreted to mean that the provision does cover years when production was ruined or drastically reduced by floods, droughts, or other abnormal conditions, it becomes decidedly unfair to farmers in dry land areas. LOW-YIELDING CROP YEARS Take my home county, Morton County, Kans., as an example. During the past 5 years we have had 2 years, 1955-56, of what I consider crop failures. Production averaged 4 to 6 bushels of wheat per acre, or less each year. Then in 1957, with approximately 10 bushels per acre yield. Then the years of 1958, 1959, with around 25 bushels per acre yield. That means that the annual crop production harvested would be drastically reduced by the three low-yielding years. The pay In practical terms, under the new ruling, this means the payments per acre for 1960 would be roughly $4 to $6 in some areas. ments in 1959 averaged about $10 per acre. From practical experience I know that a farmowner can rent out his land and receive better than $10 per acre in a normal year. This ruling leaves no incentive for farmers in some areas to partici pate in the program this next year. I do not believe Congress intended for the program to operate in this manner. When the appropriation bill was before the House, I checked with the House subcommittee chairman, the gentleman from Mississippi, Mr. Whitten. He assured me the intent of the committee was to exempt abnormal years from the production history. It was not until I read the regulations issued by the Department that I learned the matter had not been settled. LETTER FROM REPRESENTATIVE WHITTEN I am advised that Congressman Whitten has written to Secretary Benson in an effort to set the record straight. His letter, dated August 21, states: This provision (in the appropriations act) was not intended to prohibit the making of adjustments in production history for drought, flood, or other abnormal conditions. Where, because of drought, flood, or other abnormal conditions there is no normal 5-year history on such lands, it was intended that the rates should be based on the production for those years of the 5-year period where there was normal production. I hope this committee can correct this situation in such a manner that will permit Kansas wheat farmers and others to participate in the program. If years when production was adversely affected by drought or other natural disasters were exempted from the production history, I believe it would partially correct the situation. I am convinced such a change would give Kansas farmers a rental for land placed in the soil bank that is more in line with the rental value of the acreage. However, Mr. Chairman, I believe the amendment as offered by the Honorable Karl Mundt is more appropriate than the language that I have suggested. SUPPORT FROM GOVERNOR OF SOUTH DAKOTA Another statement I would like to make is that George McGovern, of the State of South Dakota, called me by telephone late yesterday evening and said he would like to be here this morning and testify on behalf of this amendment but would be unable to be here. However he stated that he subscribed to my statement, as well as the other statements in behalf of the amendment to this provision. Mr. Chairman, I believe that that concludes my statement, sir. I want to say it is an honor to be here and to testify. I join with my own Senator Schoeppel and with Senator Karl Mundt as well as Senator Young who invited me here to testify this morning in regard to this change. Thank you, sir. Chairman HAYDEN. I understand that Congressman Burdick is here, and he wants to associate himself with your statement. Mr. BREEDING. Yes, sir. STATEMENT OF HON. QUENTIN BURDICK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH DAKOTA GENERAL STATEMENT Mr. BURDICK. Mr. Chairman and members of the committee, in the interest of saving time I would like to say that I would like to |