Storage use guarantees were negotiated under agreements with commercial firms, including cooperatives, operating under the Uniform Grain Storage Agreement, who agreed to construct additional storage capacity for grains and oilseeds. Optional plans provided for guarantees of (1) 75 percent occupancy for a period of 3 years, to be reduced to 40 percent for the next 2 years; (2) 60 percent occupancy for 5 years; and (3) 50 percent occupancy for 6 years. The Corporation fulfills the guarantee, either by actual storage of CCC-owned commodities, or by making a payment. CCC has the option to require warehousemen to reserve space for storage up to the maximum amount of the occupancy guarantee level. The annual rate per bushel for unused space under the guarantee is 75 percent of the applicable annual area rate under the Uniform Grain Storage Agreement for wheat for the year the occupancy did not reach guarantee level. Applications for new storage agreements were accepted until April 30, 1955, for storage capacity which was to be ready for occupancy by June 1, 1955.

Recourse loans for financing the construction or purchase of farm-storage facilities and mobile drying equipment may be obtained direct from CCC through the agricultural stabilization and conservation county committees, and, if specifically authorized, from lending agencies loans are for a maximum period of 5 years on facilities and 4 years on equipment, payable in equal annual principal payments with interest at the rate of 4 percent a year on the unpaid balance. The maximum amount to be lent on facilities is 45 cents a bushel of capacity ($30 a ton of cottonseed capacity) up to 80 percent of cost, and 75 percent of delivered cost on equipment. Loans are secured by chattel mortgages. Any past-due, payable or prepayable installment may be deducted and paid out of any amount due the borrower on any program conducted by the Department of Agriculture.

Authority. Commodity Credit Corporation Charter Act, as amended (15 U.S.C. 714-7140), particularly sections 714 b and c thereof.

Basis for estimate

Purchases of bins.—While it is difficult to foresee what the storage availability and requirements for the fiscal year 1960 and the remainder of fiscal year 1959 will be, it is estimated, for budgetary purposes, that in 1960, bins of 100-million-bushel-storage-capacity may be purchased for storage deficit areas. A similar estimate is included for the fiscal year 1959 in the event it becomes necessary to purchase bins to provide for large estimated deliveries to CCC of the 1958 crops. In the fiscal year 1958 no purchases of bins were made. As of June 30, 1958, CCC owned bins of 988 million bushels capacity.

It is the general policy to procure emergency storage facilities for the storage of Commodity Credit Corporation owned grain only in those instances where the anticipated takeover (by CCC) of grain under price support programs will be greater than the quantity which can be handled by commercial facilities existing or planned for the immediate future within the area of such anticipated takeover. It is necessary to establish requirements for additional storage facilities early enough to assure the procurement and erection of such facilities in time to be available for the takeover of grain. It is difficult to forecast to any degree of accuracy, the quantities of grain that will be delivered to CCC in any particular area in view of the many counties participating in the price support program and the market and price situation which will exist at the time of such delivery. Since contracts for the purchase and erection of the bins must be executed far in advance of actual needs, subsequent developments in program activity and economic conditions could result in some of the bins proving to be in excess of immediate requirements. In such instances, bins could be moved to other deficit areas, or if not required elsewhere, could be leased to others or remain available for possible future use. Unused space is also maintained in each area to allow for turning and cleaning purposes to minimize loss of grain by spoilage and deterioration.

Storage use guarantees.-Space covered by outstanding storage occupancy contracts entered into in prior years totaled 175 million bushels as of June 30, 1958. It is estimated that such agreements will be outstanding on 90 million bushels at the end of the fiscal year 1959 and will decrease to 75 million by June 30, 1960. Payments under such agreements during the fiscal years 1960 and 1959 are estimated at $100,000, compared with actual payments in the fiscal year 1958 of $34,977.

Storage facilities and equipment loans.-During the fiscal year 1960 it is estimated that loans of $9.5 million will be made on farm storage facilities having

a 35.2-million-bushel capacity, compared with anticipated loans in the fiscal year 1959 of $10.4 million on 38.6-million-bushel capacity and actual loans of $8 million made in the fiscal year 1958 on 30.1-million-bushel capacity. Loans to finance the purchase of mobile drying equipment during fiscal year 1960 are estimated to be $1.7 million compared with $1.9 million anticipated for the fiscal year 1959 and actual loans made in the fiscal year 1958 of $1.7 million.

SUPPLY AND FOREIGN PURCHASE PROGRAM

Summary of latest operations

Objective.—To procure agricultural commodities in the United States and abroad to meet the needs of U.S. Government agencies (principally those administering relief programs abroad), cash-paying foreign governments, international relief agencies, and domestic requirements. The production or stockpiling of agricultural commodities under sections 303 and 304 of the Defense Production Act of 1950 is also carried out under this program.

Operations.-Procurement for this program is usually made during peak marketing seasons and is closely coordinated with the price support program to provide the maximum benefit to American agriculture. Transfers to claimants are at prices designed to reimburse the Corporation for all costs incident to carrying out the program.

Generally, purchases are made at the best price obtainable at either an announced price or on an offer-and-acceptance basis in quantities, although purchases may also be made under formal competitive bids.

Purchases for any claimant, other than a Federal Government agency, re quire (1) a firm requisition or a firm contract from the claimant and (2) a deposit with the Treasurer, Commodity Credit Corporation, of cash or its equivalent, or other acceptable financial arrangements. Purchases for Federal agencies require a written order constituting a firm obligation. Purchases may be made in advance of firm commitments and prior to deposit of cash only upon specific authorization of the Board of Directors when it is anticipated that no risk of loss is involved. In addition, the Board of Directors may authorize the purchase and stockpiling of commodities in the interest of national security. The defense production activities include a program to encourage and develop sources of supply of castor beans within the continental United States and to insure a supply of castor beans, oil, and planting seed for industrial uses and stockpiling in connection with national defense.

Authority.-Commodity Credit Corporation Charter Act, as amended (15 U.S.C 714-7140), particularly section 714c thereof; act of July 16, 1943 (15 U.S.C. 713a-9); sections 303 and 304 of the Defense Production Act of 1950, as amended (Public Law 774 approved September 8, 1950; Public Law 96 approved July 31, 1951; and Public Law 429 approved June 30, 1952).

Basis of estimate

Activities currently being carried on include procurement of commodities for other Government agencies and the maintenance of a small stockpile of castor beans under the Defense Production Act. Total acquisitions and carrying charges are estimated to total $0.5 million during the fiscal year 1960 primarily for foundation seeds and feed compared with $0.6 million in the fiscal year 1959 for similar commodities and actual acquisitions during the fiscal year 1958 of $2.3 million, of which $1.9 million represented nonrecurring purchases of wheat flour. Sales proceeds during the fiscal year 1960 are estimated to total $0.5 million compared with $0.8 million anticipated for the fiscal year 1959 and actual sales in the fiscal year 1958 of $2.2 million, representing nonrecurring sales of $2.0 million of wheat flour.

Summary of latest operations

SPECIAL MILK PROGRAM

Obiective. To provide a special milk program for children in the interest of improved nutrition by fostering the consumption of fluid milk.

Operations. For each of the 3 fiscal years in the period beginning July 1, 1958, and ending June 30, 1961, not to exceed $75 million of CCC funds shall be used to increase the consumption of fluid milk by children in nonprofit schools of high school grade and under and in nonprofit child-care institutions. Payments are made through the facilities of the school lunch program upon certification

of use of additional milk by local schools or institutions. This operation is administered by the Agricultural Marketing Service.

Authority.-Commodity Credit Corporation Charter Act, as amended (15 U.S.C. 714-7140), particularly 714c thereof; and Public Law 85-478, approved July 1, 1958.

Basis of estimate

It is estimated that in the fiscal years 1959 and 1960 expenditures will amount to $73.1 and $73.2 million, respectively, compared with $66.1 million actually spent in the fiscal year 1958.

UNDISTRIBUTED EXPENSE AND INCOME

Summary of latest operations

There are a number of expenses which are not allocated to a specific program. These include administrative expenses applicable to the limitation, and nonadministrative expenses such as interest on the capital stock of the Corporation and on borrowings from the Treasury, administrative equipment, expenses of the agricultural stabilization and conservation county committees, Federal Reserve banks and other agencies in connection with the Corporation's programs. Such expenses are partly offset by income from interest on loans and on special programs financed by CCC and other miscellaneous income.

Administrative expenses.-These are for the operating staff, including the services of employees of the Commodity Stabilization Service engaged in Commodity Credit Corporation activities, services performed by other agencies of the department, costs of audit, and payments to the General Services Administration for space in the District of Columbia and rent of field office space. Estimates for 1960 include a limitation of $45,300,000 for costs of administration including a reserve of not less than 7 percent for contingencies. Administrative expenses will be accounted for on an obligation basis consistent with past practices.

The requested authorization excludes administrative expenses in connection with the supply and foreign purchase program, the wool and mohair program under the National Wool Act of 1954, the International Wheat Agreement, and the sale of long staple cotton transferred from the national stockpile, since it is contemplated that full reimbursement will be received for these expenses. Such reimbursement will be obtained and used in 1960 in the same manner as in previous years.

These reimbursements are generally obtained through a markup on invoices evidencing sales, which are credited on the books of the Corporation to an income account which, in turn, is charged with all of the administrative expenses incurred in connection with this program. Balances remaining in the account at the end of any fiscal year are used in succeeding fiscal years to defray administrative expenses incurred in liquidating all phases of this program. The markup is established at a rate which is so determined and applied as to provide full reimbursement on an overall basis for all administrative expenses in connection with the supply and foreign purchase program and takes into account the fact that with respect to particular commodities, sales, or operations, the markup may be more or less than the exact administratitve expenses incurred. The rate of markup is adjusted from time to time as conditions warrant.

Nonadministrative expenses.-Interest on borrowings from the Treasury is paid in accordance with a policy of the Treasury that the rate shall be based upon the average interest rate on all outstanding marketable obligations (of comparable maturity date) of the United States as of the preceding month. The cost of furniture, fixtures, and other office equipment used in the conduct of the Corporation's programs is charged to capital funds. The cost of all such property has been capitalized heretofore as assets of the Corporation; however, beginning in the fiscal year 1960, the cost of certain items of property charged to capital funds, which have unit costs of approximately $50, will not be capitalized. This will reduce the cost of maintaining property records, and is in accordance with departmental property accountability regulations approved by the Comptroller General (B-48122, dated Dec. 17, 1953).

Expenses in connection with the acquisition, operation, maintenance, improvement, or disposition (including inspection, classing, and grading work performed on a fee basis by Federal employees or Federal or State licensed inspectors and work performed on a contract basis by agricultural stabilization and conservation county committees) of property which the Corporation owns or in which it has an interest have been treated as program rather than admin

istrative expenses. Similarly, expenses of other Federal agencies whose services are utilized in the handling of Commodity Credit Corporation property are treated as program expenses. Such expenses include the fleet storage operation of the Maritime Administration conducted intermittently since 1949 and the services rendered by the General Services Administration in connection with the strategic, critical, and other materials acquired by the Corporation. Also included in this category are costs of having work normally performed by CSS in connection with the acquisition, maintenance, and disposition of property of the Corporation or in which it has an interest performed by others on a contract basis when necessary because of major failures of equipment in CSS offices.

Basis of estimate

Administrative expenses.-Expenses applicable to the limitation are estimated at $41.6 million in the fiscal year 1960, compared with $39.5 million anticipated for the fiscal year 1959, and actual expenses of $33.9 million in the fiscal year 1958. The increase in 1959 over 1958 reflects pay cost increases as well as anticipated heavier program volume, while the increase in 1960 reflects the heavier workload of price support operations.

Nonadministrative expenses.-During the fiscal year 1960, it is estimated that interest costs of borrowings and capital stock will amount to $375 million anticipating an average of 3% percent per annum compared with $150 million estimated for the fiscal year 1959 (average rate of 12 percent and actual payments of $420.9 million in the fiscal year 1958 when the rates ranged from 31⁄2 to 1% percent. Offsetting such costs are interest income, primarily from reimbursable programs, and loans amounting to $37.9 million estimated for 1960, compared with $49 million anticipated for the fiscal year 1959, and actual receipts of $99.5 million in the fiscal year 1958. The decreases in 1959 and 1960 reflect the reduction in rates mentioned above and the acceleration of the reimbursements to Commodity Credit Corporation for special activities.

It is estimated that expenditures for administrative equipment will amount to $400,000 in the fiscal year 1960 compared with $800,000 anticipated in the fiscal year 1959 and $458,826 actually purchased in the fiscal year 1958. The increase in 1959 over 1958 resulted primarily from a nonrecurring purchase of accounting equipment formerly rented.

Other expenses are primarily for expenses of the county agricultural stabilization committees and Federal Reserve banks. During the fiscal year 1960 such expenses are estimated at $11.9 million, compared with $11.3 million anticipated in the fiscal year 1959, and actual costs of $12.1 million in the fiscal year 1958. The decrease in 1959, below 1958 reflects primarily a reduction of about $875,000 in lending agency fees which were discontinued with the central handling of the 1958 crop loans, and a reduction of about $1 million in accounts receivable charged off.

DECREASE IN LOSSES

Mr. MARSHALL. Do you have a further statement you would like to make in connection with this item?

Mr. BEACH. This net decrease of approximately $225 million is simply a reflection of the difference in the realized losses of the Corporation in the fiscal year 1958 from those in the fiscal year 1957 Most of the decrease is in losses related to price support. We have a statement which breaks down these losses by commodities, which we'll be glad to put in the record.

Mr. MARSHALL. We'll be glad to have that placed in the record. Will that be broken down as to interest, storage, transportation, operating expenses?

Mr. BEACH. We'll be glad to show that, as distinct from the losses on disposition of commodities.

Mr. MARSHALL. And transportation?

Mr. BEACH. We'll be glad to place that in the record, also.

Mr. MARSHALL. Without objection, that will be placed in the record at this point.

(The material referred to follows:)

Comparison of realized losses and gains applicable to restoration of capital impairment

1 Denotes gain.

1,760, 399, 886

1,535, 424, 413

-224,975, 473

It is estimated that storage, handling, processing, transportation and other expenses amounting to approximately $708,900,000 and $410,000,000, respectively, were included in the cost value of commodities disposed of during the fiscal years 1957 and 1958.

Does not include an estimated $16,800,000 in 1959 and $10,500,000 in 1960 of interest earned by private lending agencies on individual notes and regular cotton certificates.

A minor portion of interest paid private leading agencies was recovered by the Corporation when the producers repaid their loans. However, the major part of such interest was capitalized in the cost of commodities acquired by the Corporation in settlement of loans which had not been repaid by the producers and on which no interest had been collected because of the nonrecourse nature of these loans. Since commodities in the Corporation's inventory are generally disposed of on a first-in, first-out basis, interest paid to the lending agencies during the fiscal years 1957 and 1958 would not be reflected in any appreciable amount in the realized losses for each of those years. This cost would more normally be included in losses on commodities to be disposed of in subsequent years.