commodities would be available to those programs which had made use of them in the past.

In addition to the School Lunch Program, there are summer feeding programs, nursing homes, breakfast programs, nonprofit institutions who have their own food programs, supplemental food programs, and disaster relief efforts. All of these rely, in one degree or another, on the use of federally donated commodities.

My position, and I assume the position of the 17 Senators who have joined in cosponsoring my bill, S. 2871,' is simply this. Both the beneficiaries of these feeding programs and the taxpayer are entitled to a continuation of the commodity program until a better and cheaper mechanism is available.

If someone can convince me there is a better way to do it, I am not wedded to the commodity program forever. If we can come up with a better solution, I would like to hear what it is.

Discontinuation Of Commodities—Irresponsible

But, to allow the use of commodities to discontinue at this time— without at least a very careful and thorough investigation of the alternatives—would be irresponsible. In my opinion, irresponsible both to the recipient and to the taxpayer. I expect the debate on this issue to be a rather long one and a rather heated one. I would have it no other way.

I think the point of our legislation is well taken. I am glad that proposal is pending before the Congress as it can provide us a focal point of debate and discussion. I hope, today, to hear from the witnesses how commodities in the School Lunch Program are utilized, and to what extent, if any, their loss would damage the program overall.

One of the suggestions often mentioned by members of the Department of Agriculture and, in particular, by Mr. Butz, is that of getting out of the commodity business altogether and using cash instead. While this is a superficial solution that has attractive qualities, I think there are several problems with it.

Equal Purchasing Power Lost

For example, one of the most basic problems is how much purchasing power does a local unit have as compared to the Federal Government? If the Federal Government buys 100 pounds of beans for X amount of money, how much additional money will the local government have to spend to purchase the same amount? In all the feeding programs—from the supplemental to the school lunch, from the disaster relief to elderly feeding—I'm going to make certain that if we do cash-out commodities then the cash given to the local governments and schools must provide equal purchasing power in the marketplace. To do anything else would be suicidal; as we have already seen time and again, local units of government just cannot afford another financial crisis. So until a formula is devised which will guarantee the local units equal purchasing power, I think we need to pass Senate Bill 2871 and ensure a supply of commodities to those programs. I'd like to stress that I do not see a need to perpetuate commodities forever, but I do see a need to keep it intact until we come up with a fair alternative.

Another thing that bothers me about completely dropping the commodity program at this time is that our farm economy has grown accustomed to have a mechanism for stabilizing its markets. Mr. Butz is suggesting that this year—the first year without surpluses in many decades—we scrap the entire mechanism of surplus removal and go to a cash system. The recurring question that comes to mind is: What are we going to do if we have surpluses in 2 years? If we let the commodity program—which developed expertise in thousands of people, built warehouses, developed lines of distribution, and has existed for decades with the farmer and the consumer in mind—go by the boards, isn't it a precipitous action? I don't know the answers to all these questions, but I believe a thorough approach is the best approach.

There are still more potential problems in store if we drop the Federal commodity removal and delivery structure. For example, how can the States develop the expertise for inspection and supervision that the Department of Agriculture has developed over all these years? Right now, those products purchased by the Federal Government are of the highest quality. There are paid professionals who are responsible for inspecting food and designating its quality. Are we going to expect the States and individual schools to pay for and develop the kind of manpower necessary to do this high quality screening and grading? Or are we going to refuse the States any money to do this and leave the quality of food served to our schoolchildren up to chance? I think this is a very serious issue and one that Mr. Butz would do well to consider. How can a school district monitor the quality of all the food it's getting? For each individual school district, county, or State, to have to do this seems to be a duplication and a waste, when the initial purchase of all these goods done by the Federal Government would save much manpower and serve to economize the entire structure.

Also, another important consideration is that the USDA has developed a mechanism for timely buying. They know crop sizes, can study demand curves and know when is the best time to buy. With their huge purchasing power, they can purchase at the propitious time and store commodities and trickle them out to all the different programs, including the School Lunch Program, as they are needed. If we do away with the Federal commodity structure, are we going to expect the school districts to develop this same mechanism for timely buying? Are we going to ask them to build huge storage facilities? Are we going to require development of mechanisms for inspection and supervision? And, most important, are we going to pay for it or are we going to leave it up to the already overburdened State and local tax structure? Can any local unit purchase and warehouse commodities at the same cost as the Federal Government and with the same health safeguards? I think not. Who will suffer if they don't, or can't? The schoolchildren of our Nation!

Federal Versus Local Purchasing Power

The Federal Government can store huge amounts of food purchased at low prices. Then, if the prices continue to go up, the schools can be assured of a ready supply of commodities at the lowest price during that year. Will they have the same expertise to do that at the local level, will they have, the same size warehouses, will they have the same financial clout to purchase the huge amounts? For example, today USDA can buy flour at 11.5 cents a pound. Earlier in the year USDA bought a great deal of it and stockpiled it. Now, even in New York City purchased by the carload, flour has gone up to 15 cents per pound. If we had destroyed the Commodity Distribution Program at the Federal level, States and local units would be paying 15 cents minimum for the same flour—and passing the price along to the schoolchildren. I think we all have to do some serious thinking as to how to equalize that kind of purchasing power problem before we can destroy the Federal system.

The same problem that is true for flour is also true for dry beans, rice, salad oil, and nonfat dry milk. They've all been going up tremendously, and those goods purchased by the Federal Government are comparable to those goods purchased at local level. In each case, if local governments were doing the buying they would be paying much more now than the Federal Government has to pay under its structure.

The Department of Agriculture and the Department of Defense have both developed tremendous expertise in the purchase of single commodities. For example, there are men and women within both departments who have spent years studying the quality and quantity of, say, canned peaches. If we were to scrap this program at the end of this fiscal year, we would be losing that expertise. And certainly, even the most well-intentioned of State and local officials are not going to be able to develop the same expertise except over years of trial and error. I am very curious as to how any State or region within the United States which is given money to purchase its own commodities is going to develop a statewide system of purchase. I understand from the committee staff that one of the suggestions being talked about is cash-out to regions within the United States. My understanding is that only one very small State at this point—Rhode Island—has a statewide system of purchase. Are we going to ask State legislators to devise plans and spend money to make sure that system works? Are we going to leave the schoolchildren of America—not to mention all the other recipients of these programs—vulnerable to the loss of money, expertise, and experience?

Loss To Emergency Disaster Relief

Finally, there is the problem of food needed during emergencies, such as floods and hurricanes. What good is cash going to do in a region hard hit by disaster? Obviously, those supermarkets and wholesale warehouses in the area are going to be equally stricken, and people are going to have to go outside the area to purchase and have the commodities shipped in. This would obviously defeat the purpose of providing quick emergency disaster relief.

All of this is not to say the problems are insurmountable. I'm merely stating, and restating for emphasis, that all the problems at this point that are so obvious must be met before we can phase out the commodity program.

This leaves completely aside, of course, the question of whether or not, as a matter of practical economics within the farm market structure, we can afford to let the system go.

I understand the points of view of those who wish to dump the commodity program, although I am slightly puzzled and alarmed at the sudden way they have begun to talk about dismantling this timehonored structure. I hope today we can get a good close look at the value commodities play in the health of the School Lunch Programboth this year and in general-how the entire matter relates to the commodity problem. I'd like to begin a dialogue that I hope will take us part of the way toward ensuring the on-going nutritional levels of the School Lunch Program and protect the children of middle-income homes from losing the benefits of this great program.

Senator Bellmon, do you have an opening statement before we call Mr. Hekman? Senator BELLMON. Mr. Chairman, a very brief statement.

STATEMENT OF SENATOR BELLMON Senator BELLMON. First, I would like to commend the Chairman for scheduling these hearings and say that these hearings are coming at a very opportune time.

We have made remarkable progress in meeting the food needs of the Nation's children and needy persons in recent years, and I believe it is in order that we continue our activity to make certain that we don't now begin to lose ground.

We continually need to improve our system and to make certain that we don't let our inattention to other matters allow us to fall back into the conditions that may have existed earlier.

There is something I think the committee needs to keep in mind. It is that we now have new conditions in the world so far as food supplies are concerned. Food has been to us, for the last two decades, a surplus commodity. It is now scarce in many parts of the world, and the supplies in this country are lower than they have ever been, and perhaps tighter than is convenient, or even perhaps safe.

It may be that before this year is over—due largely to the shortage of fertilizer in Asia and other parts of the world, including to some extent right here at home—that we are going to face the greatest food scarcities that the world has ever seen.

So we believe that—in addition to the other facts that we are going into—the committee needs to make certain that the needs of America's children and poor people will be met. That we will not allow the food that we are going to have in abundance in this country to, perhaps, be purchased and taken away from those who may need it; and, then not be in a competitive position to get it when it is available and in plentiful supply.

I am looking forward to hearing from our witnesses; and, Mr. Chairman, to take whatever action is necessary to see that America's poor people and children are properly cared for.

Senator McGOVERN. Thank you very much, Senator Bellmon. I think your points are well taken.

Our leadoff witness this morning is the very able and distinguished representative of the Department of Agriculture, Mr. Edward Hekman. He is the administrator of the Food and Nutrition Service of the Department of Agriculture.

Mr. Hekman, we are pleased to welcome you to this Select Committee and to hear your testimony.

STATEMENT OF EDWARD J. HERMAN, ADMINISTRATOR, FOOD AND NUTRITION SERVICE, USDA; ACCOMPANIED BY JAMES R. SPRINGFIELD, DEPUTY ADMINISTRATOR FOR PROGRAMS; HARRY McLEAN, DEPUTY DIRECTOR, FOOD DISTRIBUTION DIVISION; AND WILLIAM G. BOLING, ASSOCIATE DIRECTOR, CHILD NUTRITION DIVISION

Mr. Herman. Thank you very much, Mr. Chairman, for inviting us to participate before this committee. We appreciate the opportunity to greet so many of our friends also in the audience.

If I may, Mr. Chairman, I would like to introduce those who are with me at the table.

To my left is Mr. James Springfield, deputy administrator for Programs; to Mr. Springfield's left is Mr. Harry McLean, who is the deputy director of the Food Distribution Division; and, to my right is Mr. Jerry Boling, who is the associate director of the Child Nutrition Division of the office of FNS.

Mr. Chairman and members of the committee, we do welcome this opportunity to meet with you today to discuss, first of all, participation in the Federal-State child nutrition program, and secondly, our proposals for extending support and assistance to the food programs in consideration of the current food market conditions.

We appreciate the committee's concern regarding participation trends in the National School Lunch Program this year. We collect and report program data on a monthly basis and have been keeping a particularly close watch on the month-to-month changes in school lunch participation.

May I call your attention, Mr. Chairman, to the next chart which graphically illustrates the trend in school lunch participation in recent months. Preliminary figures, and we would like to stress the word "preliminary," show that there was a small decrease in the number of children participating in the program during the first few months of this year. However, the preliminary figures for January show a slight increase in participation over last January, thus indicating the decline may have been reversed.

We believe the decline at the beginning of the year was due to a number of factors, some of which apparently had a temporary effect, and others of which will continue to exert downward pressures on participation.

The factors we feel had basically a temporary effect were the increases in lunch prices in many schools and general concern about the economy which altered family buying habits and caused considerable uneasiness among school food service personnel.

P.L. 93-150, enacted last November, increased Federal assistance for the lunch program and authorized an escalator clause and cash payments to make up for commodity shortfalls. The escalator clause is particularly significant to school lunch leaders who can now plan ahead based on predictable and dependable adjustments in the rates of Federal payment they will receive.

Understandably then, this legislation is helping calm the uneasiness of food service personnel, and families are adjusting to the price increases. As a result, participation appears to be picking up again.