Mr. ANDERSEN.. But you admit we had 2,500 million pounds this

year

Mr. BUTZ. The increase in production is less, I think, than it would have been if the price support were not reduced.

Mr. ANDERSEN. Well, we cannot say to what degree the production increase was less than it would have been, but I am simply pointing out for the record that here is one point that definitely proves that the decreased price support did not reduce the domestic production. Mr. PETERSON. One other point. That is, the number of dairy cows in the last few years has been trending downward, but there is increased production per cow and improvement of efficiency on each individual farm, which has made a major contribution toward continuing the increase in the total milk output.

Secretary BENSON. I think that the most important thing, however, resulting from the adjustment has been the fact that the downward trend in consumption has been reversed, and the consumption has turned upward on a per capita basis, and on the total basis for dairy products, particularly milk and butter and our markets are expanding. We hope they will continue they have been expanding not rapidly enough to suit us, but we hope they will.

Mr. ANDERSEN. And I would agree with your hope.

Mr. WHITTEN. I think in that connection that it would be well for the record to show the production of the products over the last several years, the amount of money that the Federal Government has expended in purchasing milk for school lunches and other purposes, and what the domestic consumption is independent of these special uses.

(The information requested is as follows:)

Production and civilian per capita consumption of selected dairy products and Federal expenditures for dairy products

1 CCC losses on butter include butter oil, and on nonfat dry milk include whey.

Total cash payments to States for reimbursement of part of cost of meals served which may or may not

include milk.

INCREASED PRODUCTION FOR INCREASE IN INCOME

Mr. WHITTEN. There is a basic thing here. I have always relied on my knowledge of people and human nature, and that knowledge comes from my own experience and background rather than the study of economics as such. I don't think there is any question but that the average farmer has either a fixed or increasing overhead, and he has his investment, and anything he buys has been increasing in price. Where his own sales price is reduced by support-price change or otherwise the only thing he can do is to try to increase his volume to offset his loss in price.

And I think the figures from the Department of Agriculture that we had in the February 26 hearings clearly demonstrate that the farmer does try to make up his loss in income resulting from the reduction of his price by the production of more units to sell. That is about the only thing he can do, and I know many farmers in my area, and I know that is what they do from time to time. That is where the argument has always come about as to the value of price reduction as a means of reducing the actual production on the farm.

Of course, sometimes the reduction in prices might prevent some big financial group from going into farming. But the individual farmer is tied to that land, that is his means of livelihood, and he has got to stay there. If he loses money through reduced prices, the only thing he can do is to make it up on something else. If you cut down on his wheat, he tries to make up his loss by planting something else, and if you cut him down on cotton he plants soybeans instead. Beyond all, it is absolutely necessary for him to have money to pay his taxes, and send his boy to college, and paint his house. He cannot do it unless he gets dollars, and he cannot get them except by sufficient volume.

Secretary BENSON. I am sure we all agree that with a given quantity a higher price would bring a greater return. But the farmer's desire is to produce more and if he can produce more volume, at even a lower price, his income may be increased thereby.

I think that the long-staple cotton people have recognized that, in their way of regaining the markets that they were losing by getting the prices down to a competitive basis. They got it by asking Congress to permit it, and they are asking again this year. And the market has increased-in other words, they have kept themselves competitive in the world market.

Mr. WHITTEN. That is true. However, that is a relatively special crop and a relatively new crop. I am talking about other crops than that, other than the extra-long-staple cotton, which never had much of a market in this country except in wartime or other times when we were cut off from our foreign supplies.

So I think that the facts that you mention do not have the significance across the board that you might attribute to them.

Secretary BENSON. I think the principle involved probably would hold; but certainly in the case of soybeans, for example, they have greatly expanded their market and they have insisted that we keep price suuports down so as to permit them to compete and their markets have increased both at home and abroad.

Mr. WHITTEN. I think that what you say is true. Of course, involved in that is the cottonseed which is competitive with soybeans.

The soybean market was to a large extent built up at a time when there was a difference in the support level between soybeans and cotton, one flowing into the hands of the Government and the other to fill up the market. I just mention that as one of the factors involved.

NEED FOR FARM PRICE PROTECTION

Now, the other thing I do not see that we can avoid and the American press points it out and I tried in several speeches to deal with itwe have protection built into the law for just about everything that we buy. We protect the rights of labor unions through labor contracts, we protect the right of industries to reflect in their sales prices all of their costs, and we have the laws that give the utilities the right to reflect in their rates the cost of operation plus investment plus a reasonable return.

Now, if a farmer has to buy from a market where all of these things are built in, I think of necessity he must have protection. Otherwise, as someone expressed it, he buys on the retail market and sells on the wholesale market, and he has to make up the difference by depleting his land. But the chief difference between the subsidy that these people get and the farmer is that the others get it from the users of their facilities or the purchasers of their goods. The farmer, who has the same need for support, largely has had to look to the Government for price support to support his products.

NEED FOR USE CHARGE ON FARM PRODUCTS

That is the reason I am trying to write a bill now, whereby the purchaser of the farm products would pay for the domestic use and the price to the farmer would reflect a fair income to him.

That is essential, in my judgment. There are those who advocate that the farmers' prices be at one price-in other words, not two prices, one for domestic sales and one for foreign sales. It is my belief and I would like to have your reaction to it-that if the farmer's prices are low enough for his products to move in world trade competitively, against cheap labor in Mexico and other places throughout the world, they are so low that he cannot live in the United States, paying all of those built-in costs like labor and the other costs that are part of the prices that he pays. On the other hand, if his price is high enough to offset all of these high costs for everything he purchases, then it is too high for him to compete in the world trade.

Mr. BUTZ. You want to shift the cost to the processor?

Mr. WHITTEN. Yes; to the processor. I don't believe it would raise the cost of living one bit in the world and I am convinced from my own experience and observation that, if the cotton initially were given to the mills and the farmer grew it free of charge and gave it to them gratis, it would carry the same price at retail, as much as the traffic would bear. We cannot help recognize that if we study the situation. If a farmer produces all of your tomatoes, all of your watermelons, and all of your celery, and did not charge for it at all but gave it away to the retail stores outside the area where they grew it, they would charge what the traffic would bear because that is our system. The result

would be the same as if you paid that farmer his share of the consumer's dollar that has got down to 40 cents.

It raises the question as to whether we would not be able to take care of the farmer on the same basis, that is, give him the same degree of protection in the law as others have. It would largely be absorbed by the group between the farmer and the consumer, because the consumer presumably today is paying all that the traffic will bear. If that were done, then the squeeze would be not on the consumer but the squeeze would be on that group between the consumer and the farmer, and that is the group where this high cost of living has been built up.

I would like to have your comment on that.

Secretary BENSON. Mr. Chairman, of course, you have opened up a very important subject—I don't know whether you want to take the time to explore it fully this morning. I am very pleased that you are preparing a bill on it.

It gets into the two-price plan, generally speaking. We have had a little experience with that, not calling it the 2-price plan but the 2-price principle.

The thing we need to watch out for in some of these programs is that we not get the domestic portion, the price support of the domestic portion, at a level that will tend to stimulate greater producion of competing products.

We have a little of that in our cotton subsidy export program-you know what happened. Synthetics have taken advantage of it and the domestic people who are using cotton have complained that their products are costing more than their competitors abroad can buy it, so they come in for protection.

So we have had to arrange for a subsidy to protect the domestic spinners. We need to look into those things very carefully. I am glad that you are exploring it.

Mr. WHITTEN. I am convinced from hearings before this committee that the competitive situation between cotton and synthetics will be resolved on a use basis. The place where cotton has lost its markets, and I have listened to the experts in your Department and various others, has been in places such as automobile tires where they had the heat problem, the heat that is generated in automobile tires. Cotton lost out to nylon-and this goes across the board-on a use basis.

Secretary BENSON. I think probably you have a point on the question of use in tires, but, on the question of clothing, the percentage of increase in the use of synthetic fibers has been tremendous; much greater than the increase in the use of cotton.

Mr. WHITTEN. That is true, but I still feel that the basic reason is use. Whatever people buy, they buy it for the use. When I go to buy something, I go knowing what I want. I do not believe that I ever bought a substitute for cotton unless it met the need better than the cotton. However, this problem might be met by a tax on such substitutes.

But, be that as it may, I would like to go back to what I mentioned earlier, that the user could pay for it in another way.

Secretary BENSON. Through a processing tax?

Mr. WHITTEN. Through a processing tax which would go into the Treasury and which would justify an annual appropriation by the