I also wish to point out to you, merely to show you how interest and storage charges can accumulate by holding onto grain too long:

During the days of the Grain Stabilization Corporation, in 1933 and 1934, I tried to buy the last lot of wheat which was owned by the Government, and made a firm bid; that is, made an offer to buy this wheat, to Mr. Milner, who was then head of the GSC.

He said that he would have to have 1 cent per bushel more for the wheat; since, if he sold it at our price, it would show on the books of the Government organization that they obtained nothing for this wheat which had cost them $1.25 per bushel. So, if I could pay them 1 cent per bushel more, it would at least show that they got a half-cent per bushel for the wheat after storage and transportation.

I also wish to point out to you that a few years ago the United States was not considered as grain exporters in the world market; but, since we have accumulated these surpluses, we have been one of the larger exporters of grain, brought about through the International Wheat Agreement subsidies, et cetera.

When I recall these different situations, it is amazing to me that I must appear before you gentlemen today-and that you are required to spend your valuable time-due to the fact that someone in the Department of Agriculture conceived the idea that our sales through barter transactions were displacing dollar sales; which, of course, is not correct, as evidenced by the Humphrey report, showing by statistical tables prepared by the Department of Agriculture, that barter did not displace dollar sales.

Instead of being very pleased that we were able to dispose of $978 million worth of agricultural commodities through barter transactions, the Department decided to place every obstacle in the way that they could think of, in order to disrupt this program.

Now, gentlemen, shortly you will hear from the largest grain exporters in the world; and I believe that they, also, will express their approval of the barter program in connection with disposing of agricultural surpluses.

I have made many visits to Washington over the past years to attend committee meetings in the Department of Agriculture, and on these various visits, I continually expressed my opinion that we should dispose of our surpluses as fast as possible, and not wait for the Argentine, Canada, or Australia, and other countries to compete with us when their export surpluses were available. But whether it was due to lack of experience in the handling of export grain throughout the world, or whether some of these people were not familiar with what we call trading, I do not know.

Let me give you an example of what happened within the last few years:

Two and a half years ago, we had a firm bid from India for 200,000 tons of American wheat, payment in dollars. This bid was slightly under the price the CCC was asking. I mentioned at the time that if they didn't accept this bid, it would be only a matter of months before they would be giving it away, or accepting payment in rupees. But certain individuals and, incidentally, one of these individuals was the man that put in all of these objections into barter-could not see their way clear to accept the bid; and it was just several months later

that the wheat was given to India, thereby, of course, turning down the opportunity of collecting close to $15 million-I repeat, dollars.

I was more than pleased when the barter program was expanded in 1954, because I realized this program would help to move our agricultural surpluses, saving the Government millions upon millions of dollars in storage charges, to say nothing of the losses in deterioration on grain, in addition to stockpiling metals required by the Government, and which stockpiling seemed to be a godsend only a short time ago when the Middle East situation did not look too good. I recall an article in the newspaper which said: "Thank God we have this stockpile this time."

Another reason given by the Department of Agriculture for putting restrictions on barter was that we were offending_Canada by using barter to undersell them in the world's market, but I would like to point out to you that since the barter program has been restricted, our exports, up to the end of April, have decreased from 411 million bushels to 299 million bushels of wheat; or roughly, 30 percent; whereas Canadian sales of wheat alone have increased 750,000 tons-which sales include sales to Red China; and within the last few weeks, large sales to East Germany, as well as over 200,000 tons of wheat to Russia, which go from Vancouver to Vladivostok, probably.

It certainly is not our fault if the Canadian Government decided to wait for either a crop failure in their country or somewhere else in the world, which would mean that they could obtain higher prices, and then objected to our disposing of our agricultural commodities.

It has been stated by the Department that barter sales tend to lower prices. This, to me, is unbelievable, since I am at a loss to understand how a large demand for any commodity will tend to lower prices.

On the contrary, it will tend to allow the seller to obtain higher prices, and allow the CCC to reduce their inventories.

I firmly believe that had the Department not put on these restrictions, we would have

1. Reduced CCC's inventory of agricultural commodities;

2. We would possibly have found new outlets for our agricultural surpluses sales;

3. Increased existing ones;

4. We definitely would have reduced storage costs;

5. We would also have reduced deterioration losses; and

6. Of course, by doing this, we would have helped our farmers to a greater extent.

Now, in conclusion, let me mention another obstacle which was placed in the way of the barter program-and, while I am not in the metal business, I happen to be familiar with the thinking of the CCC in connection with these restrictions.

Suddenly it was decided that processing foreign ores in this country was too expensive, as compared to processing in foreign countries; and where originally under the program you could process 100 percent in this country, this was changed so that you could only process 50 percent in this country and 50 percent in a foreign country.

Finally, you were not allowed to process in this country at all, and had to process 100 percent in foreign countries.

So here we have a situation where we are paying foreign labor and, at the same time, depriving labor in our own country from making a

living by processing ore which is going into our own Government's hands.

As an example, antimony is required by our Government for stockpiling.

One of our largest metal firms mines this ore in Mexico, processes it in Laredo, Tex., and delivers it to the Government. But under the present restrictions, I believe their mines in Mexico are closed, and the people in the processing plant in Laredo, Tex., are today unemployed, and the same has happened in the Pittsburgh area and other places in the country.

I believe you gentlemen will agree with me that we are doing everything possible to the extent of billions of dollars in foreign aid, to help our friends abroad; but it doesn't seem fair to me to have employment abroad and unemployment in our own country, when it can be avoided.

If there are any questions you gentlemen may care to ask me in connection with the handling of grains for export, I will be very pleased to try to answer.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much for your statement, Mr. Crofton.

Mr. CROFTON. There is one more thing I would like to say-do you have any questions?

The CHAIRMAN. I believe we have.

Mr. Anfuso has, I understand.

Mr. ANFUSO. Yes.

Thank you, Mr. Chairman.

Mr. Crofton, I notice that you are considered one of America's greatest experts in the grain field.

Mr. CROFTON. Thank you.

Mr. ANFUSO. And you are very much familiar with the distributing business over the years, are you not?

Mr. CROFTON. Yes, sir.

Mr. ANFUSO. And you know now that there has been some talk here about the discount given to grain merchants.

Would you mind explaining that to the committee?

Mr. CROFTON. I would indeed. I would be very happy. And I will give you an example, and it will not take long.

In this French housing deal, a $50 million deal, which, of course, I thought was wonderful for this country, the Bunge Corp. made the deal, and it put them in a position where they had to dispose of $50 million worth of agricultural commodities.

It happened that I happened to contact Bunge, and I arranged to dispose of those agricultural commodities to cotton people at 1 to 14 percent discount, and the cotton people took the commitment of exporting this cotton, which helped to do a good business in cotton-and everything that goes with it.

When these restrictions were put on, this discount of 1 percent was dropped, and it is 10 percent and in some cases 12 percent. Why?

Because no grain exporter will take the commitment of exporting an agricultural commodity on a restricted list which practically contains the names of countries that are not importers of grain at all, and that list was made up definitely to restrict the movement of the commodity.

So that is the reason when somebody wants to bring in a metal, he goes to the grain exporter and he says:

“Well, now, you take this commitment, and I will give you 10 percent."

That 10 percent comes out of the foreign metal price but Mr. Berger mentioned the other day about this cable from Germany, which was ridiculous, because the duty on the commodity is 10 percent in Germany if it stays there, but if it is processed and kept in bond, then there is no duty; and that would not be 10 percent except that Mr. Berger made it 10 percent, and now he is making an issue of that.

If this list had not been restrictive, we would be going along with three-quarters or 1 percent discount, which enables the people with the 1 percent discount to undersell their competitors abroad. It helped to get rid of the commodities.

The CHAIRMAN. What was it you said about Mr. Berger creating this?

Mr. CROFTON. Yes, he is the man responsible for it.
The CHAIRMAN. Why?

Mr. CROFTON. Because if he had not put these restrictions on, we would still be doing business at 1 percent, and I just gave you an example of where we get rid of about $45 million in about a week at three-quarters percent.

Senator Aiken on the floor of the Senate inferred that business is being done in dollar-paying countries at 4 to 10 percent; but nobody in the grain business can say where you are replacing dollar sales that it is impossible; these international grain exporters sell in a foreign country, and they accept foreign currencies, and they make all kinds of deals in order to facilitate business; and, in doing that, by having barter and having that advantage, they then can sell cheaper than other foreign countries.

The CHAIRMAN. Who benefited by that?

Mr. CROFTON. Nobody. It benefited nobody.

The CHAIRMAN. Somebody must have been benefited.

Mr. CROFTON. The degree of the 10 percent

Mr. Chairman, it is on account of the metal seller abroad. He has got to reduce his price to bring it in here 10 percent, so somebody will take over the liability of assuming the exporting of the grains or the cotton; but with this restricted list, you cannot export it.

The CHAIRMAN. I must say that I am not sure that I can follow a statement of the kind that you are making.

Mr. CROFTON. Let me say this, Mr. Chairman:

Before the restrictions went on, you could get a grain firm to accept the responsibility for export grain against a barter contract. The CHAIRMAN. Yes.

Mr. CROFTIN. And they would be glad to pay you 1 percent discount. Now, the metal people paid that in order to get rid of the commodities, because they were not in that business.

The CHAIRMAN. All right.

Mr. CROFTON. Now these restrictions were put on so you go to the same exporters who at one time would take $30 million or $40 million worth of deal, and they say:

"We don't want it. We won't take it at 10 percent."

Where are we going to go with the grain?

And Mr. Berger is the one that brought it about. Mr. Berger is responsible for the 10 percent discount.

Is that clear?

The CHAIRMAN. The discount on the imported metal?

Mr. CROFTON. Well, instead of metal, we will say, it being dollars, that they sell to you for 90 cents and then this 10 percent that they pay to a grain exporter to assume the responsibility to export the grain.

Mr. JENNINGS. Mr. Chairman, I think that what is meant is that when they had a broad field, they could trade with all people, and they were willing to trade with everyone at 1 percent or three-quarters percent, but, when it is restricted, then they immediately lost that. Mr. CROFTON. That is just exactly right.

Mr. JENNINGS. So placing the restrictions causes it to go up.
Mr. CROFTON. That is absolutely right.

Mr. ANFUSO. And that has affected the mining people of this country?

Mr. CROFTON. Well, I am not in the metal business, Congressman, but I am very familiar with that particular situation, and I will say this and I would like to say it to you, Mr. Hill, that in my opinion through years of trading, I believe that some of these restrictions that were put on here, as soon as they had started to show or make a little effect, the world metal price went down-why? Because they say, "Well, the United States is not in the market any more."

The London metal market dropped and the copper stocks dropped. But, Mr. Chairman and Mr. Hill, I believe just as I am sitting here today, just as surely, that if barter were reinstated properly, the way it was, you will have metal prices going up all over the world and your people will be back working in the mines again-it has to be, one has to follow the other.

The CHAIRMAN. Thank you. I will not call Mr. Schilthuis.

STATEMENT OF W. C. SCHILTHUIS, EXECUTIVE VICE PRESIDENT, CONTINENTAL GRAIN CO.

Mr. SCHILTHUIS. Mr. Chairman and gentlemen

The CHAIRMAN. We are glad to have you with us, Mr. Schilthuis. Mr. SCHILTHUIS. I am very grateful to you for inviting me to appear. It is going to be my purpose to try and throw some light on this general question of barter. I have prepared a statement, which is very short, and I think I will read it to you, with your permission. The CHAIRMAN. All right.

Mr. SCHILTHUIS. And then you can either interrupt me or ask questions afterward.

The CHAIRMAN. You may proceed, Mr. Schilthuis.

Mr. SCHILTHUIS. Mr. Chairman and members of the committee, in this statement I shall confine myself to observations on the controversial barter program under title III, Public Law 480, and the desirability of its extension and modification as provided for under a modified version of H. R. 10487.

Generally speaking, barter transactions are characterized by the following features:

1. Disposal of agricultural surplus commodities;