SALE OF CCC STOCK

THURSDAY, JULY 14, 1955

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COTTON OF THE COMMITTEE ON AGRICULTURE, Washington, D. C.

The subcommittee met at 3:50 p. m., pursuant to call, in room 1308, New House Office Building, Hon. E. C. Gathings (chairman of the subcommittee) presiding.

Mr. GATHINGS. The committee will come to order. We can start and Mr. Poage and Mr. Abernethy will be in shortly.

I would like Mr. Rhodes, to have a seat and give us the benefit of his thinking on H. R. 7252, recently introduced, commonly called the substitute bill.

(The substitute bill referred to follows:)

[H. R. 7252, 84th Cong., 1st sess.]

A BILL To permit sale of Commodity Credit Corporation stock of basic and storable nonbasic agricultural commodities without restriction where similar commodities are exported in raw or processed form

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 407 of the Agricultural Act of 1949, as amended, is amended by adding at the end of such section the following: "For the purpose of this section, sales for export shall not only include sales made on condition that the identical commodities sold be exported, but shall also include sales made on condition that commodities of the same kind and of comparable value or quantity be exported, either in raw or processed form.”

STATEMENT OF F. MARION RHODES, DIRECTOR, COTTON DIVISION, COMMODITY STABILIZATION SERVICE, DEPARTMENT OF

AGRICULTURE

Mr. RHODES. Mr. Chairman, I have not actually seen the print of that bill but I understand it is verbatim with 7120.

Mr. GATHINGS. It is the identical companion bill.

Mr. RHODES. The Department does not have any prepared statement due to shortage of time in appearing before the committee.

Mr. GATHINGS. I would like to suggest at this time that Mr. McConnell called me shortly after noon and said he would like to be here but that he thought that you were so thoroughly familiar with the subject and that you could answer anything that may be raised on any point. He said that he had so many appointments that he would prefer not to come unless it was necessary.

Mr. RHODES. I knew that he originally intended to get here but some other things came up.

I am very glad to have the opportunity to appear on this bill because the Department not only thinks that it would be of material advantage but we think it is practically a necessity to have this clarifying and amending legislation to make any cotton sales program effective.

H. R. 7252 would amend section 407 of the Agricultural Act of 1949, as amended, by providing that for purposes of section 407 sales for export may include not only sales on condition that the identical commodity sold be exported but also include sales made on condition that commodities of the same kind and of comparable value or quantity be exported either in raw or processed form.

Section 407, as presently in the law, does not provide a specific minimum price standard applicable to export sales.

Adoption of H. R. 7252 would provide the Department with additional latitude in this export sales operation and would be of assistance in the disposition of our surpluses abroad.

Experience has shown that those grades or qualities of commodities frequently most desired by our foreign customers are not always those which the Department has in its inventories. The adoption of this provision would permit the substitution by the private trade of those grades or qualities which are desired and which they may have in their inventories.

This bill would also make it possible to permit exporters to make immediate sales of commodities from private stocks and later purchase commodities of the same kind and of comparable value or quantity from the Commodity Credit Corporation. This would permit the sale of commodities already stored at a port or in a position to move in a hurry whereas commodities in Government stocks of the desired quantities or qualities might not be in such favorable position or location.

Use of the additional authority which the bill would provide would, of course, be discretionary with the Secretary and the Secretary would be free to require as appears appropriate for any commodity the export of the identical commodity or the export of the same kind of commodity either on the basis of comparable value or of comparable quantity.

Mr. GATHINGS. I wonder whether or not your Solicitor has passed on that point as to whether or not it is necessary under the present law that you export the identical commodity?

Mr. RHODES. In response to that, Mr. Chairman, I would have to say that the Solicitor has not been formally requested to issue what we call an opinion, but in informal discussions where we have discussed this matter among the officials of the Department as well as with members of the trade, they have left the impression quite definitely that their present interpretation would be that it was intended. by Congress that they would have to ship the identical commodity.

There is a technical difference between the formal opinion issued by the Solicitor, as you know, and informal opinions which they issue to us when we ask for an answer right off the bat. But in view of all of these matters, these points that have been raised, we feel it is highly desirable and we think it is a necessity to get this point cleared up in this session of Congress so that we will be able to carry on an effective export program.

That, in short, is our position on the bill.

I would be glad to try and answer any questions if there are any. Mr. GATHINGS. I would just like to ask you whether or not there is a written report on this legislation.

Mr. RHODES. Yes, sir, I am under the impression that a written report came up to the committee this morning.

Mr. GATHINGS. I wish you would go into a little more detail as to the actual value of this legislation in moving our stocks of cotton into export. You touched on it, but not fully.

Mr. RHODES. I think we could probably make the point clearer by assuming that, for instance, we instituted a cotton export program where you had maybe a different price for export purposes than the price which was required to use for domestic sales under the present legislation, which is 105 percent plus reasonable carrying charges. If that kind of a program is put into effect and we put our cotton on sale, the American shippers could come in and buy cotton from us to fill their export demand but they would be required, as we presently interpret the law, to ship the identical bales which they bought from Commodity Credit Corporation.

I think it is generally recognized by everyone that cotton classing is not an exact science, that if any shipper came in and bought a thousand bales of cotton from Commodity Credit Corporation that that identical thousand bales would probably not fit into the exact sale which he was to make. Depending on the given group of cotton, maybe 500, 600, 700 of those bales would be the exact type that his buyer wanted, but in most any purchase of cotton, there would be some cotton in there that would not quite fit into that particular sale. That would then mean that the shipper would have that cotton left on his own hands and would have to try to work it off on some future sale. Mr. GATHINGS. Mr. Hagen.

Mr. HAGEN. Those future sales would have to be export sales?

Mr. RHODES. Yes, sir, which would make it very difficult for an average or small shipper to put enough money into this cotton and hold it until he found someone else wanting to buy the particular type of cotton that he had there. That is the reason that the big shippers could do it better than the smaller shippers because they have more sales and they can put these various odd bales off into another group until they get what they call an even running lot, and then sell that lot.

Mr. Chairman, it would also complicate the keeping of records and that type of thing if you had to follow each individual bale and see that that individual bale was sold.

If we had H. R. 7252 passed, all we would have to do is see that the American buyer that bought cotton from Commodity Credit Corporation exported the same number of bales. If he bought 1,000 bales from us and could prove that he exported 1,000 bales, that would be all that was required.

He would not have to prove that he exported the individual bale in each instance.

Mr. GATHINGS. Would that assist you in disposing of the various classes and staples of cotton that you have any one in particular or across the board?

Mr. RHODES. We feel that it is essential across the board. We think that in order to operate an efficient, effective export sales program that, where you have a different price for export purposes from what you have for domestic purposes, this type of legislation is absolutely

essential.

Mr. GATHINGS. Are there any questions?

Mr. HAGEN. Just take the 1 case where the shipper purchased from you 1,000 bales and it turned out that, we will say, 100 of them were not the quality that his buyer desired. As I understand it, presently he cannot turn those bales back to you. Nor can he sell them in the domestic market.

Mr. RHODES. He could not sell them in the domestic market.

Mr. HAGEN. Under this proposal, he would be permitted to sell them in the domestic market?

Mr. RHODES. He would be permitted to sell them in the domestic market after he had shipped 1,000 bales. He might have 100 bales in his own stock that he could substitute for the 100 that do not fit, and he would have 100 which he bought from us to go into his own stock. Mr. BELCHER. That is, the same quality.

Mr. HAGEN. These bales which we will call inferior, does he have to sell them at the export price?

Mr. RHODES. He could sell them at any price because he has substituted an equal number of bales. All we would be requiring is that the same quantity, which we have interpreted to be the number of bales, and not pounds, moved into the export market.

Mr. HAGEN. Could he start out without buying any bales of cotton from you? Would this first example be the only one involved? Could he ever start out buying free-market cotton and shipping it abroad, and then buying a quantity of cotton from you subsequently at the export price and selling it at any price in the domestic market; could he?

Mr. RHODES. From a practical standpoint, I do not think that would be apt to happen, because we are starting off with the assumption that the export price is below the domestic price.

I think it is conceivable that he might have an urgent call where he can move a small amount of cotton and happen to have a small amount on hand that he could even do that.

Mr. BELCHER. He would have to pay more for it if he went out and bought it. He might ship 50 bales if he had it and turn around and buy 50 bales at the export price, but it is to his advantage to not ever buy it on the open market if he can buy it from the Commodity Credit Corporation.

Mr. HAGEN. That is all.

Mr. GATHINGS. Mr. Abernethy.

Mr. ABERNETHY. I have no questions.

Mr. GATHINGS. Thank you very much, Mr. Rhodes.

At this point in the record, I would like to ask that the report of the Department of Agriculture, dated July 14, directed to Harold D. Cooley, chairman of the Committee on Agriculture, be put in the record.

(The report referred to follows:)