Price support is made available through loans, purchase agreements, purchases, and other operations, and, in the case of wool and mohair, through incentive payments based on marketings. The producer's commodities serve as collateral for price-support loans. With limited exceptions, price-support loans are "nonrecourse" and the Corporation looks only to the pledged or mortgaged collateral for satisfaction of the loan. Purchase agreements generally are available during the same period that loans are available. By signing a purchase agreement, a producer receives an option to sell to the Corporation any quantity of the commodity which he may elect within the maximum specified in the agreement.

Disposition of commodities acquired by the Corporation in its price-support operations is made in compliance with sections 202, 407, and 416 of the Agricultural Act of 1949, and other applicable legislation, particularly the Agricultural Trade Development and Assistance Act of 1954 (7 U. S. C. 1691), and title I of the Agricultural Act of 1954 (7 U. S. C. 1741) and title II of the Agricultural Act of 1956. Reimbursement for strategic and critical materials acquired in the Corporation's barter activities which are transferred under title II of the 1956 act to the supplemental stockpile is obtained by appropriations authorized by that act. This is described in the estimates under the heading "Special Commodity Disposal Programs, Commodity Stabilization Service." To the extent that price-support commodities are disposed of for foreign currencies, redemptions in CCC commodities of acreage reserve certificates under the soil bank program, and similar operations, such disposals for accounting purposes are treated as price-support program disposals.

In order to expand the domestic market for fluid milk, as one means of reducing the volume of dairy products being acquired by the Corporation, a special program was authorized by section 201 of the Agricultural Act of 1949, as amended. This authorization provided that beginning September 1, 1954, and ending June 30, 1958, funds of the Commodity Credit Corporation shall be used to increase the consumption of fluid milk by children in nonprofit schools of high-school grade and under and in nonprofit nursery schools, child-care centers, settlement houses, summer camps, and similar nonprofit institutions devoted to the care and training of children. The authorizations for each fiscal year were: 1955, $50 million; 1956, $60 million; 1957 and 1958, $75 million each.

As a further means of increasing the utilization of dairy products, section 202 of the Agricultural Act of 1949, as amended, authorized a special program to operate through December 31, 1958, under which the Corporation is donating butter, cheese, and dried milk to Veterans' Administration and the armed services upon certification by them that the usual quantities of dairy products have been purchased in the normal channels of trade. The Corporation is also reimbursing these agencies at the rate of $4.10 per hundredweight for purchases of fluid milk made in addition to their usual purchases.

Section 407 of the Agricultural Act of 1949 authorized the Corporation to make available farm products for use in distress areas and in connection with any major disaster determined by the President to warrant assistance under Public Law 875. Under this authority the Corporation has donated stocks of corn, oats, barley, and grain sorghums in a manner which enabled stockmen and farmers in drought stricken areas to buy livestock feed at reduced prices.

2. Supply and Foreign Purchase Program: This program is carried out under the authority contained in the Corporation's charter, particularly sections 5 (b) and (c) thereof. The Corporation procures foods, agricultural commodities, their products, and related materials to supply the requirements of Government agencies, foreign governments, and relief and rehabilitation agencies and to meet domestic requirements. Foods, agricultural commodities, and their products are procured or aid is given in their procurement to facilitate distribution or to meet anticipated requirements during periods of short supply. The Corporation may also, through purchases, loans, or other means, make available materials and facilities required in connection with the production and marketing of agricultural commodities.

Operations involving procurement for other Government agencies are conducted in accordance with procedures and policies reasonably calculated to assure compliance with section 4 of the act of July 16, 1943 (15 U. S. C. 713a-9). which requires that the Corporation be fully reimbursed for services performed. losses sustained, operating costs incurred, or commodities purchased or delivered to or on behalf of any other Government agency from the appropriate funds of such agency. Operations not subject to section 4 of such act may involve losses

if such are necessary to the accomplishment of the objects of the particular operation.

3. Storage facilities program: This program is carried out under the authority contained in the Corporation's charter, particularly sections 4 (h), 4 (m), and 5 (a). The Corporation (a) purchases and maintains granaries and equipment for care and storage of grain owned or controlled by the Corporation; (b) makes loans for the construction or expansion of farm storage facilities; (c) provides storage-use guaranties to encourage the construction of commercial storage facilities; and (d) undertakes other operations necessary to provide storage adequate to carry out the Corporation's programs.

4. Commodity export program: The Corporation promotes the export of agricultural commodities and products through sales, barters, payments, and other operations. Such commodities and products may be those held in private trade channels as well as those in CCC inventory. This program is carried out under the authority contained in the Corporation's charter, particularly sections 5 (d) and 5 (f), sections 407 and 416 of the Agricultural Act of 1949, as amended, the International Wheat Agreement Act of 1949 (7 U. S. C. 1641), the Agricultural Trade Development and Assistance Act of 1954, and title I of the Agricultural Act of 1954. In general, transactions involving foreign currencies are conducted pursuant to the Agricultural Trade Development and Assistance Act of 1954. However, other such transactions may be conducted under the charter authority.

Current obligations for operations under the International Wheat Agreement and title I of the Agricultural Trade Development and Assistance Act of 1954, which operations are described in the estimates under the heading "Special Commodity Disposal Programs, Commodity Stabilization Service," are paid by the Corporation. Appropriations have been authorized to reimburse the Corporation for its costs incident to these programs and pending such reimbursements the net costs of these programs are reflected in the records of the Corporation as accounts receivable.

Currently, in addition to exports under the International Wheat Agreement, CCC wheat is available for export trade under barter programs of CCC at competitive world prices. CCC wheat is also made available to exporters in payment of the price differential between the prevailing world export sales price and the domestic market price which is earned on exports of free market wheat outside the International Wheat Agreement and under this agreement. Cash payments are made on all exports of wheat flour either under the IWA or outside the agreement.

Since August 1, 1956 the Corporation has conducted a cotton products export program designed to protect the competitive position of the domestic cotton industry in relation to sales of cotton products manufactured abroad from American cotton purchased at export prices. Equalization payments, based on the raw cotton content in the products exported, are made to exporters on cotton, products of upland cotton grown and wholly processed in the United States.

The Corporation also furnishes agricultural commodities and products for distribution or exhibition at international trade fairs to aid in the development of foreign markets for such commodities.

5. Special activities: These are intragovernmental transactions and other miscellaneous activities carried out under authority of section 5 (g) of the Corporation's charter and specific statutory authorizations or directives with respect thereto which are currently in effect or which may be subsequently enacted.

Among the current activities of this nature are loans to the Secretary of Agriculture in connection with the Agricultural Conservation Program as authorized by section 391 (c) of the Agricultural Adjustment Act of 1938, as amended (7 U. S. C. 1391); advances to the Agricultural Research Service for eradicating contagious diseases of animals and poultry as authorized by annual Department of Agriculture appropriation acts and for accelerating the eradication of brucellosis as authorized by section 204 of the Agricultural Act of 1954; advances to the Agricultural Marketing Service for grading tobacco and classing cotton as authorized by the acts of June 29, 1949, and August 31, 1951 (7 U. S. C. 440, 414a); the furnishing of stocks of agricultural commodities to the President for emergency assistance to friendly peoples in meeting famine or other urgent relief requirements as authorized by title II of the Agricultural Trade Development and Assistance Act; transfers to the Secretary of Agriculture for financing the soil

bank program during the fiscal years 1956 and 1957 pursuant to section 120 of the Agricultural Act of 1956 (7 U. S. C. 1808 (a)); and transfer of CCC grain to Interior Department for migratory waterfowl feed pursuant to the act of July 3, 1956 (7 U. S. C. 443–446).

Current obligations for these activities are paid by the Corporation and appropriations have been authorized to reimburse the Corporation for its costs. Pending such appropriations the net costs of these programs are reflected in the records of the Corporation as accounts receivable.

A more detailed description of the operations under these programs may be found in the explanatory notes under appropriations pertaining to the Agricultural Conservation Program Service, the Agricultural Research Service, the Agricultural Marketing Service, the Commodity Stabilization Service, and the soil-bank program.

Public Law 85-96, approved July 10, 1957 (71 Stat. 290), authorizes the transfer from the national stockpile to the Corporation of 50,000 bales of long-staple cotton for sale. Proceeds, less costs incurred, including administrative expenses, will be covered into the Treasury as miscellaneous receipts.

Financing. The programs of the Commodity Credit Corporation are financed by capital stock, borrowings, guaranties to purchase loans held by lending agencies, appropriations for restoration of capital impairment and receipts from operations.

The Corporation has an authorized capital stock of $100 million held by the United States, and authority to borrow up to $14,500 million.

Funds are borrowed from the Treasury and may also be borrowed from private lending agencies when the Corporation desires to utilize such agencies in carrying out a particular program or financing operation. All bonds, notes, debentures and similar obligations issued by the Corporation are subject to approval by the Secretary of the Treasury as required by the act of March 8, 1938 (15 U. S. C. 713a-4). Interest on borrowings from the Treasury (and on capital stock) is paid in accordance with a policy of the Treasury Department 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. In connection with loan guaranties, the Corporation reserves a sufficient amount of its borrowing authority to purchase at any time all loans and other obligations held by lending agencies.

Pursuant to the act of March 8, 1938, as amended (15 U. S. C. 713a-1), an appraisal of the assets and liabilities of the Corporation is made each year by the Secretary of the Treasury to determine net worth. If the net worth is less than $100 million, the Secretary of the Treasury restores the amount of capital impairment; if net worth is more than $100 million the Corporation pays the surplus to the Treasury (15 U. S. C. 713a-2). The appraisal of assets is on the basis of cost to the Corporation. The capital impairment, therefore, represents realized losses.

Receipts from operations include proceeds from sales of commodities, loan repayments, interest income, advances, reimbursements for special activities financed by the Corporation and miscellaneous income, refunds, and collections. Pursuant to section 120 of the Agricultural Act of 1956 (7 U. S. C. 1808) the Secretary of Agriculture utilized the funds of the Corporation to finance the soil bank program through June 30, 1957. A supplemental appropriation to reimburse the Corporation for funds used under this program, as well as for 1957 costs of the special commodity disposal program, will be submitted later in the fiscal year 1958.

On the basis of the assumptions used in the 1959 budget presentation, the estimated program requirements do not indicate a need for additional borrowing authority. However, subsequent developments in program or financing activities could result in the necessity for an increase.

BASIC ASSUMPTIONS

The Corporation's budget estimates for 1958 and 1959 are based on the general assumptions (a) that employment, production, and national income will rise moderately both in 1958 and 1959 from the present level; (b) that prices will change little, on the average, from the present level; (c) that developments in international relations will not be such as to affect Government civilian programs generally; (d) that exports of agricultural products generally will be slightly lower than during 1957; (e) that acreage allotments and marketing quotas will be in effect for the 1958 crops of peanuts, rice, wheat, cotton, and certain kinds of tobacco and acreage allotments will be in effect for the 1958 crop of corn, in accordance with existing legislation; (f) that substantial acreage of applicable 1958 crops will be placed under the soil bank program and base acreages established for each participating farm will restrict planting of other crops on acreage placed under the program; (g) that yields for the 1958 crops will equal the high yield of the past 3 years; and (h) that the percentage of estimated production of the 1958 crop placed under price support will equal the average percentage of the production of the 1954 through 1956 crops placed under price support. Wheat, grain sorghums and soybeans are exceptions to the latter two assumptions. Changes in the Corporation's wheat export program, providing for the sale of wheat for export from free markets rather than from Commodity Credit Corporation stocks, are expected to result in lower proportions of that commodity being placed under support. The estimates of grain sorghums and soybeans reflect the more recent trends with respect to acreage being devoted to these crops and the resultant effect of increased production upon quantities to be placed under support.

In considering these estimates, it should be recognized that it is difficult to estimate requirements for the fiscal year ending June 30, 1959. They are dependent upon weather conditions, volume of agricultural production in this country and abroad, economic conditions generally, food needs in occupied areas and other foreign countries, availability of dollar exchange, and other complex and unpredictable factors.

PRICE SUPPORT OPERATIONS

General outlook. On the basis of the above assumptions and taking into consideration estimated supply and utilization factors which were calculated individually for each commodity, the estimates reflect a decrease in overall volume of price support operations in 1958 and in 1959. They indicate in the aggregate that if dispositions materialize as currently estimated, the investment in price support will be reduced in both years.

Loans. The budget estimates contemplate that loans made will decrease from $2.4 billion in 1957 to $2.2 in 1958 and increase slightly to $2.3 billion in 1959. The estimated decrease for 1958 is due principally to decreased corn, tobacco, cotton, and wheat loans on the 1957 crop, offset in part by increased loans on the 1957 crop of grain sorghums and soybeans. The increase in loans estimated for 1959 reflects primarily corn and tobacco loans.

A comparison of the estimated loan activity for each of fiscal years 1958 and 1959 with the actual volume in 1957 is summarized as follows:

Inventories.-The budget estimates contemplate that the value of price support inventories as of June 30, 1958, will decrease about 2 percent below that of June 30, 1957, and that a 7 percent decrease below the June 30, 1958, level will occur by June 30, 1959. The major decreases in inventory expected to take place during each of the fiscal years reflect the disposition of more cotton and wheat than will be acquired. A comparison of the estimated inventory activity for each of

the fiscal years 1958 and 1959 with the actual volume for 1957 is summarized as

The value of the estimated inventory both as of June 30, 1958, and June 30, 1959, includes the "commodity set-aside" as provided for in title I of the Agricultural Act of 1954.

Investment in price support.-As a result of the loan and inventory activity shown above, it is estimated that the investment in price support-that is, inventories and loans outstanding-as of June 30, 1958 and June 30, 1959, will be about $6.8 billion and $6.4 billion, respectively, compared with $7.3 billion as of June 30, 1957.

Commodity program summaries.-The following summaries describe the price support and other operations which the Corporation anticipates will be required during each of the fiscal years 1958 and 1959 and the basis for such estimates. It should be noted that any variations from the conditions assumed may result in changes in the volume and character of the Corporation's operations, thereby necessitating changes in the program and administrative expense estimates.

PRICE SUPPORT PROGRAM, BASIC COMMODITIES

Summary of latest operations

CORN

Objective. To support the price of 1957 crop corn at not more than 90 percent nor less than 75 percent of parity as required by law.

Eligibility.—To be eligible for loan, corn must be ear or shelled corn produced in 1957 grading No. 3 or better, or No. 4 on test weight only meeting moisture requirements, and sanitation requirements of Food and Drug Administration. Corn delivered under a purchase agreement shall meet the above requirements, and must grade No. 5 or better, or may bear the special grade, "Weevily" in addition to the numerical grade.

Corn produced on federally owned land in violation of restrictive leases, or on newly irrigated, drained, or reclaimed land within any Federal project authorized after May 28, 1956, shall not be eligible.

Eligible participants are 1957 crop corn producers who are in compliance with applicable regulations approved by the Secretary governing eligibility for price support.

Operations.-Nonrecourse loans are available from harvest (about August 1, 1957) through May 31, 1958, maturing July 31, 1958, or earlier on demand. In areas where the ASC State committee determines that corn cannot be safely stored throughout the full storage period, the final date of availability shall be earlier as determined by the committee. The national average level of support in the commercial corn area is (1) $1.40 per bushel for corn produced in compliance with acreage allotments, which reflects 77 percent of parity as of October 1, 1957, the beginning of the marketing year, and (2) $1.10 per bushel for corn produced not in compliance with acreage allotments. The support rate outside the commercial area is $1.27 per bushel, or 70 percent of parity. Loans may be obtained from approved lending agencies, through eligible financial insitutions, or direct from the Corporation through the agricultural stabilization and conservation county committees. Loans are on a note-and-chattel mortgage basis for farmstored, and note-and-loan agreement basis for warehouse-stored corn.

Purchase agreements are offered to producers from harvest (about August 1, 1957) through May 31, 1958. A producer desiring to deliver corn under a purchase agreement must declare his intention to sell within a 30-day period ending on July 31, 1958. The producer will not be obligated to sell any specified quantity; however, the number of bushels specified in the purchase agreement will be the maximum quantity that may be delivered.