2. Rigid allocations to counties shall be by one of these methods:

a. Announce that agreements may be signed, but delay making any allocation until a sufficient number of progress reports (weekly or oftener) have been received to indicate the probable pattern of participation in all counties. Then, when about 70 to 80 percent of the State allocation for the commodity has been obligated through signed agreements, notify each county of its allocation, based on funds currently obligated through signed agreements, and consideration of the amount obtained by multiplying the county allotment for old farms times the county compensation rate per acre. (Tobacco county compensation rates per acre are obtained by multiplying the county normal yield by the national rate per pound). Under this method, proper consideration for small farms is assured and a small State reserve should be ample; or

b. Hold a larger State reserve and immediately apportion the remainder to counties primarily on the basis of the old farm county allotment times the county compensation rate per acre, with some upward adjustment, if desirable, for counties having a high proportion of small allotments. Additional allocations should be made from the State reserve as required by the participation pattern as it develops later.

c. Under either method participation in 1957 should serve as a valuable guide where conditions affecting participation have not changed materially.

3. Make certain that counties understand the method used and their responsibilities for control and reporting to the State office.

4. The State office is not authorized to transfer funds from one crop, or kind or type of tobacco to another, but it may increase or decrease a county allocation by transfer from or to the State reserve for that commodity or kind or type of tobacco, subject to restrictions in 5 below.

5. The State office, regardless of availability of funds, may not authorize counties to approve acreage reserve in excess of the applicable farm maximum limits until authority to do so is received from this Office. Therefore, until such authorization is received, increases in county allocations shall be limited to amounts needed to cover acreage offered within the farm maximum limits. 15. CHANGES IN STATE FUND ALLOCATIONS.

A. The State committee shall request the Soil Bank Division to increase the State fund allocation if the current allocation proves inadequate to cover the compensation of all acreage offered.

B. Funds Not Needed.-If the State allocation exceeds the amount needed to cover all acreage offered within the State for a commodity, the Soil Bank Division shall be notified of the amount not needed as soon as possible so that it may be withdrawn for use elsewhere, if necessary.

Mr. McLAIN. We cautioned them that this might happen, because nobody knew. After that went out, we immediately began to realize that there was a terrific demand in the cotton area particularly, because of the poor quality crop that was harvested and later in the Corn Belt. Therefore, we immediately called a halt to the operations and made our allocations and advised each State that they could handle the allocation either on the basis of first-come, first-served, or on a pro rata basis, and that they could figure out for themselves which would be most acceptable in their State.

The only added thing was that provision that proceeded with this second alternative notice that would let us know how they planned to do it.

Those instructions went out just as quickly after we realized that was necessary as possible.

It has been our experience, and Mr. Manwaring can speak on this better than I, that there is a difference of opinion in the various States as to how this should be best handled; and I think he has a report on that.

LIMITATION ON INDIVIDUAL PAYMENTS

Now, I would just like to say a word as to the $3,000 limitation, Mr. Whitten, because we, after the act was passed and after reading

and our General Counsel reading it carefully, and our Operating Division reading it carefully, the language of the act that is, and the wording that went out about it, were not sure what it did mean.

The fact is I think any fairminded person could read various passages of the statements made and could get two interpretations. I did not want to proceed and Mr. Farrington did not want to proceed without knowing for sure what the Comptroller General meant, and so I think we did what you would expect us to do: Our General Counsel went to the Comptroller General for his clearance of what we thought was the proper interpretation of the language.

Mr. WHITTEN. Let us keep the record straight. I have asked that the findings on this point by our Appropriations Committee investigation last year and this year be incorporated in this record. The Department wanted to continue without limitation, so that you could continue the program on an unlimited basis; is that not correct? Mr. McLAIN. No, sir.

Mr. WHITTEN. You did not recommend any limitation or anything of that sort. The Congress has, in its wisdom, put a $3,000 limit on it.

You immediately construed it, and asked the Comptroller General to go along with you, in such a way as to let you escape the $3,000 limitation. In the face of the findings of our committee, of which you were advised, there was a request for the Comptroller General to go along with you, as I understand it.

Mr. McLAIN. Mr. Whitten, it was because of our desire to give an interpretation of what the act really meant that we went to the Comptroller General.

It was not for the purpose of trying to avoid and circumvent it or do anything else. I think it is not quite fair to say that we had any desire to do anything else than what the Congress wanted us to do. Mr. WHITTEN. I do not mean to infer any ulterior motive. However, at the outset the Department let these tremendous sums be paid to certain people who in turn let production be encouraged in other

areas.

One exaggerated case was Arizona, I believe, where several hundred thousand dollars was paid out and used by the farmer to grow cotton. Mr. MCLAIN. All I can say to you Congressman Whitten, is that it was our desire to find out what the Congress meant and, as is customary, we went to the Comptroller General.

Mr. WHITTEN. I have a copy of a letter here dated August 9, 1957, from you to the Comptroller General, in which you state:

It is our view that the $3,000 limitation should be applied to each producer's share of the compensation payable for all commodities with respect to a particular farming unit—i. e., farm—rather than to the compensation payable to him with respect to all farms in which he may have an interest.

You construed it, and asked for approval, it appears to me. Mr. McLAIN. That is the construction of our General Counsel, and I think you would say that before we went to the Comptroller General, we ought to put our own construction on it.

Mr. WHITTEN. I am not saying you were right or wrong. It is my belief that the limitation imposed by the Congress constituted or called for a complete change in construction.

Mr. ANDERSEN. May I interject at this point?

Mr. WHITTEN. Yes, Mr. Andersen.

Mr. ANDERSEN. Mr. Chairman, I want to make this clear that, in my opinion, it was clearly the intent of the conferees that that limitation should apply to each producing unit, regardless of the number of producing units owned by any one man; and I recall that Mr. McLain contacted me by telephone on that issue to get my opinion of what the conferees did mean.

Of course, in any dispute of this nature, I do not see any course open for anyone the Comptroller General or anybody else other than trying to determine what was clearly the intent of the Congress in enacting the legislation.

I believe that Mr. Horan will agree with me that that is his recollection of the intent of the conferees.

Mr. HORAN. That is right.

Mr. MCLAIN. You are saying that you upheld the decision of our General Counsel and the Comptroller General; is that not right? Mr. ANDERSEN. I say that decision was in line with the intent of the conferees, as I recall it in conference.

Mr. WHITTEN. I would repeat again that I was speaking of my own belief. When you pass an act without limit for the purpose of taking out the most acreage you can, whomever it is from, and then when you put a $3,000 limitation on the amount paid each producer, it would be my opinion that you had changed the original intent of the act. I would think any number of farms might be included but a man owning a number of farms would be limited to $3,000, though each tenant on each farm could receive his share of the $3,000 for that farm.

Mr. ANDERSEN. Now, Mr. Chairman, if you will permit a further enlargement of my viewpoint.

Mr. WHITTEN. Yes, Mr. Andersen.

Mr. ANDERSEN. I recollect that the conference took that viewpoint-that certainly it could be done in only 1 manner, and that is that the limitation should apply to the 1 farming unit, because if it did not, and if that limitation of $3,000 applied to 1 producer regardless of how many farms he might own

Mr. HORAN. You mean an owner.

Mr. ANDERSEN. Yes, thank you. One owner, regardless of how many farms he might own, then it would do an extreme injustice to the class we call tenant farmers.

It would make it impossible for them to even come under the program in any way. I was talking to a gentleman from my district yesterday who gave me that as a reason why he joined.

He told me that he owned several farms, but that certainly he would never have permitted his tenants or partners in those particular farms to go into the program unless he could himself enjoy the same division upon each farm, regardless of the amount of money in his total investment in his number of farms. So, Mr. Chairman, I think that the construction of the Department of Agriculture in that regard was right.

Mr. WHITTEN. Well, the bill and committee report speak for themselves.

Mr. ANDERSEN. That is my opinion. That is right.

Mr. WHITTEN. I am not trying to belabor the point. I am trying to determine the reasons behind the decision. You acted in line with the

Comptroller General, so there is no question but what legally you had the right to take that action.

Proceeding further, I would like to know if you can give us any estimate as to how much of the available money from the ceiling was paid out by reason of that interpretation as against what would have occurred if you had construed it otherwise, Mr. McLain.

If that could be placed in the record, I would be glad to have it. (The information requested is as follows:)

No objective estimate of the possible additional funds paid out as a result of the application of the $3,000 limitation to separate farm units rather than some other construction of this limitation is available at this time. We do not know what the total signup will be since the deadline for some commodities is March 7, but preliminary reports indicate that final signup, plus offers by applicants on waiting registers, will materially exceed the size of the program authorized. Accordingly, we believe that all funds authorized would be committed under either interpretation of the $3,000 limitation.

Mr. WHITTEN. You acted within your rights in following the Comptroller's opinion.

Mr. McLAIN. I would like to say only this other thing for the record, - because we had talked to both sides of the conferees: I had only one desire in the decision we made, and that was to get the decision.

That is why we took it to the Comptroller General. We were not prejudiced to do anything else. I had some personal views on the matter, but they did not enter into it, and any views of our operating people did not.

It was our desire to carry out the meaning of Congress.

Mr. WHITTEN. You enjoy and deserve a record with this committee for fair play.

DIVISION OF FARMS TO COME WITHIN LIMIT

Mr. WHITTEN. Our investigation shows that many families and groups divided their land so as to get around this $3,000 limit, and the Department of Agriculture, even though they divided their lands for that purpose, went ahead and signed them up on the contract.

Mr. MCLAIN. First of all, Mr. Whitten, I think there are no contracts signed whatever yet, with the exception of the fall wheat contracts.

On spring contracts, all we have had is an application for the contract to be signed by the applicant. The counties have not executed these contracts yet.

I think we ought to point out for the record that we sent out to our State and local committees a directive in which we told them that if there was any monkeybusiness that went on, it could not be tolerated. If you have any evidence that that has been violated, we want to know about it, and we will do something about it.

Mr. WHITTEN. We are glad to have that information. We will see that this investigator's report is made available to you.

ORIGINAL FUNDS TO VARIOUS COMMODITIES

Mr. WHITTEN. Proceeding on then you were limited by act of Congress to a $500 million program. How did you allocate those funds originally to the various commodities?

Mr. MCLAIN. I think Mr. Beach can read that off to you.

Mr. WHITTEN. All right, Mr. Beach.

Mr. BEACH. Do you mean for the 1958 program?

Mr. WHITTEN. Yes.

Mr. BEACH. On August 2, 1957, an announcement was made that $178 million would be allocated for the wheat acreage reserve for 1958, for both winter and spring wheat. In January 1958, the 1958 program allotment for wheat was adjusted to $100 million, and allocations for the commodities were established as follows: $180 million for cotton; $180 million for corn; $13 million for rice; $27 million for tobacco.

Mr. WHITTEN. While you were limited by the figure that was in that section, you had considerable leeway where you could shift from one commodity to another.

What is the requirement of the law so far as determining the rate of pay per acre is concerned?

Mr. McLAIN. I would have to get a lawyer here to tell us the exact terminology of the act.

Mr. WHITTEN. Could you have him read that?

Mr. McLAIN. Mr. Coffman will do that.

Mr. COFFMAN. It is to be found in section 105 (a), and in substance it reads as follows:

Compensation shall be at such rate or rates as the Secretary determines are a fair and reasonable rate for reducing his acreage for the commodity, taking into consideration the loss of production of the commodity—

and so forth.

Mr. McLAIN. Mr. Chairman, there are some other adjustments that may be made. Do you want to read this?

Mr. WHITTEN. Suppose you just include all of that in the record. We will have the whole section in the record then.

(The section is as follows:)

COMPENSATION OF PRODUCERS

SEC. 105. (a) Producers shall be compensated for participating in the acreage reserve program through the issuance of negotiable certificates which the Commodity Credit Corporation shall redeem in accordance with regulations prescribed by the Secretary (1) in cash upon presentation by the producer or by any holder in due course or (2) at the option of the producer in the case of certificates issued with respect to grains and upon presentation by him, in grains (such grains to be valued by the Secretary at such levels as he determines will not materially impair the market price for such grain yet will, to the maximum extent practicable encourage acceptance of payment in grains in lieu of cash): Provided, That disposition of quantities of stocks hereunder in any one year shall be limited to not more than two-thirds of such quantities of such commodities as the Secretary determines would be a reasonable estimate of what would have been produced for marketing during such marketing year on the acreage withheld from production under the provisions of this title: And provided further, That such stocks shall not be released prior to the end of the normal harvesting season for the particular commodity being released. Compensation under this section shall be at such rate or rates as the Secretary determines will provide producers with a fair and reasonable return for reducing their acreage of the commodity, taking into consideration the loss of production of the commodity on the reserve acreage, any savings in cost which result from not planting the commodity on the reserve acreage, and the incentive necessary to achieve the reserve acreage goal. The Secretary shall make an adjustment in yields for drought, flood, or other abnormal conditions in estimating the loss of production for purposes of establishing rates of compensation. The rates of payment offered under this section shall be such as to encourage producers to underplant their allotments more than one year. Commodities delivered to producers in redemption of such certificates shall not be eligible for tender to Commodity Credit Corporation under the price-support program.