Senator TALMADGE. Because they got rich and retired or because they couldn't make a living?

Mr. HEALY. No, sir; it is because more and more of them are grouping their herds into bigger units and as units become bigger the farmer becomes a businessman who knows how much it is costing him to produce milk. He looks at his operating statement and discovers he is losing money and he gets out before he dissipates his assets to the point he has nothing.

Senator TALMADGE. What would be an economic unit now, as a grade A dairy?

Mr. HEALY. A grade A dairy, it depends on part of the country, but certainly the minimum unit would be 65 milking cows, which would mean somewhat in excess of 100 animals altogether.

Senator TALMADGE. I agree, as an old dairyman, that would be an absolute minimum. What would be the average cost of investment per cow to go in the dairy business-animals, equipment, land?

Mr. HEALY. For animals, equipment, land, it would cost about I would say, counting the dry animals and replacement stock, it would cost about $2,000 an animal.

Senator TALMADGE. You are talking about approximately $130,000? Mr. HEALY. I am talking about an investment of close to a quarter of a million dollars to develop an efficient unit where you are milking 65 cows, you have to have about 120.

Senator TALMADGE. What would be the average return on that investment?

Mr. HEALY. The average return today is a minus figure with today's cost of feed and other costs taken into account. It is not only the cost of feed. When the farmer steps outside his economy and buys a roll of wire or buys a tractor or pays his taxes he is in a whole different economic unit.

Senator TALMADGE. Is that a minus figure on his capital investment alone?

Mr. HEALY. It is a minus figure on his capital investment alone. Senator TALMADGE. No return for his labor?

Mr. HEALY. No return for his labor; that is correct.

Senator TALMADGE. A pretty hard way to make a living, isn't it? Mr. HEALY. Senator, in your part of the country today, the dairy farmers who were paying from $85 to $90 a ton for soybean oil meal last year are paying as high as $240 a ton for it. When you do that, you do not make money.

Senator TALMADGE. I daresay most farmers don't keep it a secret, may I add.

Mr. HEALY. I am sure they do not.

Senator TALMADGE. When I grew up in Telfair County, we had only one dairy farm in the county. In those days we produced cotton, turpentine; that was about it in my home county. This dairy farmer was somewhat of a wit and philosopher. He made the statement that the man who dairy farmed didn't need any Sunday clothes and damned few everyday ones. I found out some 20-30 years later how right he was when I was operating two dairies.

Mr. HEALY. You know, for the last 6 or 8 years we have always heard some price talk, but a lot of it was made talk. Today we are hearing real price talk and, strangely enough, it is coming from the high-priced

areas where these farmers know in detail what it is costing them to produce milk.

In the areas where milk prices are seemingly high, of course milk prices are high there because of the cost of production. These farmers buy most of their inputs, and it is from those areas that people are telling me that big substantial, well-financed farms are going to get out of the milk business unless we do something.

We have legislation before the Congress to raise price supports. We are also going to submit legislation to this committee to provide more marketing tools for the dairy farmer.

But unless we do something and do it quickly we are going to be producing milk in deficit to our needs. Then consumer prices will begin to reflect what milk really costs to produce.

Senator TALMADGE. Senator Curtis.

Senator CURTIS. I won't take much time, but how much dry milk is imported, in pounds?

Mr. HEALY. 25 million pounds.

Senator CURTIS. Where did it come from?

Mr. HEALY. It came from Canada, Belgium, the Netherlands, and Australia. Most of it came from Canada and Belgium.

Senator CURTIS. How many pounds of fluid milk does it take to make a pound of dry milk?

Mr. HEALY. About 12. You get about eight and a quarter pounds of dry milk, nonfat dry milk, out of 100 pounds of milk. About 12 pounds. Senator CURTIS. So that is a sizable amount.

Mr. HEALY. Yes, sir. It was enough to put more into the market than was needed at a time when the market had begun to balance out and farmers were beginning to get some return from the price in the market place. This is why it was so disastrous.

Senator CURTIS. That is all.

Senator TALMADGE. Senator Dole, any questions?

Senator DOLE. No questions.

Senator TALMADGE. Thank you very much, Mr. Healy.

Mr. Clay Cochran. Mr. Cochran is the director of the Legislative Committee of the National Rural Housing Coalition.

Mr. Cochran, we are expecting to vote in about 60 seconds. Senator Curtis has to go to another subcommittee hearing that he, himself initiated. Suppose we suspend the hearing and I will be back immediately after the vote.

Senator Curtis, we will excuse you.

(Short recess.)

The CHAIRMAN. The hearing will please come to order.

Mr. Cochran, you may proceed, sir.

STATEMENT OF CLAY L. COCHRAN, CHAIRMAN, LEGISLATIVE COMMITTEE, NATIONAL RURAL HOUSING COALITION

Mr. COCHRAN. Mr. Chairman, if you would insert my prepared

statement.

The CHAIRMAN. Without objection the entire statement will be inserted in the record and you may summarize.

Mr. COCHRAN. I will highlight it for you as quickly as possible.

We greatly appreciate what the home builders said here today because for a long time there was so little rural housing, there weren't even any legitimate vested interest there to champion the programs. I would make one reference to their testimony which I think is significant. Mr. Martin referred to the failure of the administration to activate the above moderate income program which you had approved last year. He apparently overlooked the fact that in the first year of Mr. Nixon's administration he suspended Farmers Homes above moderate income housing program. We were the only ones who objected and as Brer Rabbit said in one of his stories, our "onfluence was powerful lackin'." It is still suspended, 3 years later.

I won't review the figures on need. You have them before you in both their statement and ours, but it is significant to remind the committee and the Congress that the Congress got around to a rural housing program very late in the day and has financed it somewhat moderately, too. And under the administration's present program all of the lower income part just vanishes except for the self-help housing program and if interest credit loans are not available to the self-help housing people that program will fail, too. We have been proceeding even last year at about a quarter of what would have been required in the way of a credit effort to have met the rural housing need within a 10-year goal and now we are down the drain.

We have included some letters for the committee from contractors to supplement Mr. Martin's statement, and the most serious immediate thing is that this moratorium will really virtually kill the housing delivery system in rural areas that has been developing very slowly. It was just getting to the point where it could take off and help that problem. It is not a faucet that can be turned on and off, so time is very serious.

There is an additional point on which Mr. Martin didn't touch and that is we wrote Mr. Butz last week pointing out that even the moratorium is discriminatory. In the hearings on Mr. Lynn, the Senate hearings, he assured them that aided housing in the cities would not be cut below the level of last year. No such assurance has been made in the rural areas which are dependent upon Farmers Home and some public housing and the result is that that pipeline is going to dry up very quickly because there was no pledge there to loosen up and enable that program to continue.

We find the arguments Mr. Butz advanced unpersuasive and I hope the committee does on inflation, if the interest credit program ran full blast next year would cost about $27 million in subsidies at the going rate of 412 percent.

Over the weekend one of the TV stations had a program showing that cost of personal servants for the high military brass, just their salaries cost $17 million a year. It is an odd system of priorities that would shut off essential shelter to low-income people when it costs a little more than twice the cost of a total social luxury. We hope you can do something about this, Senator.

The CHAIRMAN. What is the National Rural Housing Coalition?

Mr. COCHRAN. It was an outgrowth of the first National Rural Housing Conference held here in 1969 which the Ford Foundation funded. We pooled about 100 people together from all over the country to talk about rural housing. It was there that we undraped that census fig

ure-using 1960 figures-two-thirds of the bad housing was in rural areas. HUD was very disturbed at this. They had the figures, but no one ever paid attention to them, and one of the final resolutions of that conference was that we set up some kind of continuing committee to push the circulation and action on the resolutions that had been passed. The coalition is that continuing committee.

It has members in most of the States. Most of its money comes from church groups and rural electric cooperatives.

(The prepared statement of Mr. Cochran is as follows:)

Mr. COCHRAN. Mr. Chairman and members of the committee, my name is Clay Cochran and I am appearing here today on behalf of the National Rural Housing Coalition. The coalition is a voluntary membership organization with members in all 50 States, whose dues and contributions support our efforts to improve housing in rural America. We have no illusions about how much we have accomplished in the 3 years since our formation, save this: There has been an awakening in the country and in the Congress to the desperate need for adequate housing in small towns and rural areas.

I want to thank the committee for this opportunity to discuss with you the effect the administration's actions are having on this awakening, and of the consequences on lives and livelihoods of rural Americans. I will talk specifically about its import on housing programs, and more generally about its effect on other aspects of rural life.

HOUSING AND RELATED NEED IN RURAL AREAS

I will not dwell in any detail on the scope and depth of the need for housing and related facilities in small towns and rural areas. Suffice it to recall to your attention that (based on 1970 census figures) there are roughly 31 percent of our citizens living in nonmetropolitan areas, with 58 percent of all substandard housing in the Nation— either lacking essential plumbing, or overcrowded. In nonmetropolitan areas, roughly 1 house in 8 is substandard, while the comparable figure for metropolitan areas is 1 in 25.

At the same time, more than 30,000 rural communities do not have modern water facilities and 40,000 such communities do not have modern sanitation facilities. Debate on the 1972 Rural Development Act in the Senate less than a year ago indicated that $12 billion was needed to provide water and waste disposal systems to rural America. We have reason to believe that comparable need could be demonstrated for community facilities for meetings, day care, community functions and other socially essential purposes.

HAS THE RESPONSE TO THE NEED BEEN ADEQUATE?

It was widely assumed for years that HUD and its predecessor agencies were providing whatever housing was necessary in rural areas, and no one, except the rural poor who knew better, questioned the implementation of the Housing Act of 1949.

Any examination of the facts would have revealed that the public housing program would have to function differently in rural areas because of the cost of administration, the level of welfare payments, and the skimpiness of Federal subsidy. At the same time, facts would have revealed that a middle-income program like FHA, created as

much to serve the industry and private lending institutions as homeowners, could not function adequately in rural areas. There simply were not, and are not, sufficient private lending institutions in those

areas.

It was not until 1961 that a modest homeownership program for nonfarm rural families was authorized for the Farmers Home Administration (FHA). The program was initially financed out of direct appropriations, a tacit admission that the private credit institutions were not out there. This was later amended to enable FHA to make insured loans, but again the machinery was provided for FHA to sell its paper in the cities and lend the money in rural areas. It was another admission that the FHA/HUD housing business complex did not function in small towns and rural areas.

THERE IS NOTHING WRONG WITH BASIC FHA STRUCTURE

In a sense, FHA was ideally suited to the operation of a direct lending program in rural areas. It has 1,700 offices, generally available to rural people and (given the money) can provide the missing ingredient in rural housing a source of credit at reasonable rates. But congressional appropriations starved the direct loan program, and when FHA undertook insured loans, the strictures on selling the paper, along with a starvation budget on administrative funds, prevented rational planning and adequate growth.

AND WHAT IS FHA NOW?

Over the past years, the National Rural Housing Coalition and other rural housing groups have railed at FHA for its timidity in administering programs; for operating like a financial agency and not a housing agency; for its failure to fight for staff and appropriations; for its reluctance to work with the poorest of the poor; and for a dozen other things. We have always sought to improve the programs. In testimony last year before the Congress, we urged 24 changes and amendments to the rural housing programs.

I mention this only to indicate that we are not unaware of FHA's shortcomings and inadequacies. But neither are we blind to its successes. The changes we proposed would have made the programs more responsive-not shut them down. Our suggestions would permit more direct service to the poor-not deny service of any kind to those most in need. They would have assisted the Congress and the Nation in redeeming its pledge to decently house all our citizens-not slough off that responsibility on others. For indeed the Farmers Home Administration is the only effective agency in the country, except for funds, equipped to bring housing to many low-income rural families. We felt the program was moving, but after June 30, except for a reduced program for middle-income families, it is virtually`liquidated.

THE IMPACT OF THE HOUSING MORATORIUM ON RURAL AMERICA

Appended to my statement is a table showing the potential losses, State by State, in both revenue and man-years of employment. Our national projections show an 18-month loss of revenue to the States of