SALES OF COMMODITY CREDIT CORPORATION FEED GRAINS MONDAY, JULY 25, 1955 HOUSE OF REPRESENTATIVES, The committee met at 10 a. m., Hon. Harold D. Cooley (chairman) presiding. The CHAIRMAN. We will now hear testimony on House Joint ResoAution 313. (The House joint resolution is as follows:) [H. J. Res. 313, 84th Cong., 1st sess.] JOINT RESOLUTION Relating to sales of Commodity Credit Corporation feed grains Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That, notwithstanding the provisions of section 407 of the Agricultural Act of 1949, as amended, or of any other law, the Commodity Credit Corporation is authorized until March 1, 1956, to sell at the point of storage any feed grain owned by the Corporation at 10 per centum below the current support price for the commodity. STATEMENT OF LLOYD CASE, ASSOCIATE DIRECTOR OF THE GRAIN DIVISION, COMMODITY STABILIZATION SERVICE, UNITED STATES DEPARTMENT OF AGRICULTURE Mr. CASE. Mr. Chairman, I am Lloyd Case, Associate Director of the Grain Division. I am here in Mr. McLane's place. He was expected to be able to testify, but it turns out that he is out of town. The Department raises some question with respect to this bill, largely because it seems to cut across the philosophy of the loan and support program which is to take grain and hold it temporarily off the market until such time as the producer can find a more favorable price, or time to sell. A bill of this kind, wherein the proposal is to reduce and make available to buyers and purchasers and feeders grain at less than the loan and support price would of course insure that grain would be sold through the Corporation rather than through private trade and would well result in making it impossible for a local market to be higher. The requirements of the Congress have been that we should sell at a formula price of 105 percent, or market, whichever is the higher, and the tendency of course is for prices to slip downward toward the minimum Government price. If we are to cut under the loan-support price it would simply mean that grain could not be sold at a higher price than that. We have other devices to assist where there is real need, or where, for one reason or another, there is a circumstance which requires making grain available at less than the support price. We have a very successful program in most respects in the drought areas wherein we give certificates which enable a purchaser to obtain his supplies at less than the going price. The certificates do not disturb the sales price of the grains being offered, so, where real need exists it would seem desirable to use the certificate plan, or something of that nature to take care of those who are justified in obtaining grain at a lower price due to some local circumstance. The CHAIRMAN. May I interrupt you? This would be a two-price system for corn. Mr. CASE. Yes. The CHAIRMAN. And the Government would take the loss? Mr. CASE. That is correct. The CHAIRMAN. And our problem in corn now is not as great as it is in wheat; is it? Mr. CASE. It is becoming very great. The CHAIRMAN. In corn? Mr. CASE. In corn it is becoming very great. The CHAIRMAN. I thought that your carryover in corn was about a 9-day supply. Mr. CASE. We have, of course, a tremendous crop coming up. We have a very large sorghum crop coming up. As a matter of fact, all of the grains apparently, if we do not have adverse weather, will be in much greater supply than in a long time. Each of the feed grains of course, competes with the others. With a high production, of sorghums in sight, we are faced with some difficulties in the disposal or even storing of them. Last Friday we concluded it was necessary to buy 47 million bushels more of bin capacity, which we will put in 4 States, in order to take care of the takeover anticipated on corn. The CHAIRMAN. You certainly still have a problem in wheat. We reported out in this committee in the last session what we thought was a well-considered two-price system for wheat. We took it out of the bill in conference after it passed the House. This time we had it in another bill during this session, and we took that out before we even went to the floor because we knew that the administration was in continuous opposition to a two-price system. This has popped up here, a little harmless resolution by our friend from Illinois, who last year was willing to pay 10 percent above support. Now he wants to go 10 percent below. It seems to me we are just having this thing thrown at us, a two-price system for corn. You say it cuts across everything we have been doing with the basic commodities. The administration is giving some consideration now to some sort of a two-price system for cotton which seems to be a dangerous thing if we undertake it. Mr. POAGE. This does not simply affect the two-price system of corn; it affects all grain and feed in the country. I want to ask the witness if it does not affect the price of livestock. If you lower the price of feed, what will happen to the price of cattle and hogs? Mr. CASE. Those who study this are the boys in the Economics Department and they indicate that there is always a relationship between the price of feed and the production of livestock. Mr. POAGE. Of course. The lower you bring down your feed prices the lower you are going to bring down the level of prices of cattle and hogs. I do not believe that there is anyone on this committee that thinks that we ought to go out and deliberately try to break the price of livestock. The CHAIRMAN. And if this 10 percent is not enough below, then you have to go to 15 or 20 percent and you start on the road down, and the tendency would be to bid down the value of the corn. Mr. CASE. We fear honestly the precedent the bill sets. Almost every week we have a group of people who come in to see us down there and through some device or the other want to get their hands on Commodity Credit Corporation grains. The CHAIRMAN. You have a tremendous corn crop coming on. How are you going to support corn at one level and sell it at another? Mr. HOPE. Will this not be establishing a precedent? I do not recall that we have had any program such as this suggested here except as a relief matter in a drought area. We passed a bill last year applying to drought areas which called for sales at 10 percent above the support price. This is the first legislation that I know of which would undercut the support-price program by selling at less than the support price except in the case of the sort I have mentioned-emergencies and drought situations and that sort of thing. Do you not think that if we report this bill, even as a temporary bill, it will establish a precedent that might rise to plague us in the future? Mr. CASE. That is what we fear more than anything else. The CHAIRMAN. The administration is opposed to the bill, as I understand it. Mr. CASE. Correct. Mr. HOEVEN. I think it has been amply shown that this type of legislation would depress the entire grain market, is not that your judgment? Mr. CASE. I believe that it would. Mr. HOEVEN. Would we not be establishing a precedent in this respect that a man, a farmer, could place his corn under loan at say $1.53 in my area, get his money, and keep his corn on the farm in his own crib and then go right back to the Government and buy that same corn back for 10 cents less? Mr. CASE. Once it was taken over and became the possession of the Government. That stock which is in store now would become available to him at 10 percent less than the loan. Mr. HOEVEN. This legislation is applicable to all 48 States; it is not of an emergency nature of any kind? Mr. CASE. That is right. Mr. HOEVEN. Do you know, as a representative of the Department of Agriculture, whether any emergency really exists in the Corn Belt? Mr. CASE. May I answer it in this way: We have the emergency program. When the Secretary declares an emergency exists in any area, we have a program that we can put into gear. We are using it now in quite a number of drought counties and the program is so designed that it does not tend to depress the price of grains because we give the farmer-producer, or the feed buyer rather, a certificate with a stated value. He uses that together with his own cash to purchase his needs in these designated areas. Mr. HOEVEN. Aside from an emergency situation, is there any reason in the world why a farmer buying corn should not pay at least the prevailing market price? Mr. CASE. The prevailing market price is lower, of course, than the loan. Mr. HOEVEN. Yes. Mr. CASE. Except in certain areas where a tax situation has come about because the Commodity Credit Corporation may have made loans on all the corn in that area. It may have had a little drought or something that has reduced temporarily the production so there we have a situation where it is not always possible in a locality for feeders to obtain corn as cheaply as they would like to. Mr. HOEVEN. I understand that the Department of Agriculture now has authority to channel deteriorated corn into use for feeding purposes. Mr. CASE. Yes. We sell anything deteriorated or in danger of deterioration. Mr. HOEVEN. That corn is available for distribution at a lower price? Mr. CASE. Yes. It brings whatever the market will pay, but it may be out of location with respect to some needs and has to be brought in by truck, or shipped in by carload. When you add all the freight it frequently works against an area which may be deficient in supply. Mr. ANDRESEN. About a year ago we had quite a bit of corn down in southern Minnesota. Mr. CASE. You still have a lot. Mr. ANDRESEN. In farm storage. A good many farmers, some from other States, came in and wanted to buy the corn and pay the going local price, but a regulation was then in operation that the corn had to be shipped into a commercial center and by adding on the freight rate and the storage rate then it could be shipped back again and then sold. Is that still in operation? Mr. CASE. No, sir; it is not. Mr. ANDRESEN. I thought that was the most foolish thing I had ever heard of. Mr. CASE. I would agree. Mr. ANDRESEN. Now a farmer can go to a storage place in a certain storage area and purchase corn and buy it at what figure? Mr. CASE. Well, he can buy it at the formula price, which is 105 percent of the loan price, plus carrying charges which include storage and interest, which at this time amount to around 30 cents. Of course, as soon as the new year starts then the storage and the interest charges go off and the corn becomes available at a substantially lower price. This is true of sorghum and barley and other grains under support. Mr. HOEVEN. Do you have any figures at all showing compliance with the corn acreage allotments this year? Mr. CASE. No, sir; I do not. Mr. HOEVEN. I believe that I heard there was at least a 30-percent overplanting. Mr. CASE. It is quite substantial. Mr. HOEVEN. The corn raised on the farms where they overplant their acreage is not eligible for any loan? Mr. CASE. That is correct. Mr. HOEVEN. It would seem to me that corn would have to be sold at the regular market price, whatever the price is, which might be considerably under the support price. Mr. CASE. There is nothing to indicate but it will be considerably under that. Mr. HOEVEN. We might have the gentleman from Illinois observe on that proposition. The CHAIRMAN. I was just going to recognize the author of the bill. Mr. SIMPSON. Corn in Illinois is selling for $1.35 right now. The formula price under your proposition is $1.45. Does that answer your question. Mr. ANDRESEN. But you are going to have that corn binned and graded. Mr. SIMPSON. There was only about 20 percent compliance in the State of Illinois in 1954, and the Republican whip in his office said that he sold his corn at the elevator for $1.35 in order to move it. The CHAIRMAN. Is the support price $1.95? Mr. SIMPSON. The Government selling price is $1.95, but $1.62 is about the support. Last year when I introduced a bill to provide the support price plus 10 percent it was selling for $1.95 in Îllinois, and my bill would have made it about $1.75. It still did not sell, but it helped. Now, may I ask some questions, Mr. Chairman? The CHAIRMAN. Yes, surely. Mr. SIMPSON. Mr. Case, I have talked to you about this over the phone? Mr. CASE. Yes; that is right. Mr. SIMPSON. You say that the Department is opposed to my bill at the support price less 10 percent? Mr. CASE. Yes. Mr. SIMPSON. But last year I believe you O.K.'d a bill providing for the support price plus 10 percent? Mr. CASE. I do not know; I was not here at that time. Mr. SIMPSON. Anyhow it went through the House, and it was incorporated in the flexible bill last year. That was 20 cents under the formula price. That was $1.95 at that time, and it is still $1.95. The Department was sympathetic, I think, although in working it out it did not work. Here is a letter which I received from Mr. Howard Doggett, Assistant to the Assistant Secretary, under date of June 3, 1955, which was written to me relative to trying to get this corn in the bins down. Now, it is true that there was no disaster area declared in Illinois, but there were 41 counties put in a semi-disaster area. Last year when we considered it we talked about this bill on the basis of disaster areas, but that was thrown out for the reason that they thought that somebody would go in needing feed corn and haul it out to another county and sell it. Here is what they are doing in Illinois: They are taking corn out of the bins, 1953, 1952, and 1951 corn, and when it is older than that it is not any good for feed, and they are shipping it out and storing it at Buffalo, and the cattle feeders who are in that area in Illinois cannot understand why they could not get corn for their cattle when they had it right there and it was being shipped out. So, Mr. Dog |