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THE SOIL BANK

We have recommended that the conservation reserve program of the soil bank should be strengthened, and the acreage reserve program terminated after the 1958 crop. This was one of the major recommendations in the President's special message of January 16.

The conservation reserve shows promise in four important areas: (1) Retiring marginal acres from crop production; (2) aiding soil, water, forest, and wildlife conservation; (3) retiring whole farms from production when the operators choose to do so; (4) aiding farm family adjustments, such as might stem from impaired health, old age, or more off-farm employment. During the first 2 years of the conservation reserve, about 14 percent of participating farmers placed all their eligible land in the program. Thus they took out of production their best acres as well as their marginal land. This is an effective way to cut production.

The acreage reserve was hampered in 1956 by late enactment and by the inclusion of measures intended more for relief than for production adjustment. The 1957 program succeeded in reducing wheat production by about 175 million bushels below what it would otherwise have been. Cotton production was similarly reduced by about 2 million bales, and corn by about 225 million bushels.

However, only 3.9 million acres of winter wheat allotment land were placed in the 1958 program as compared with 10.3 million acres

in 1957.

In contrast, unfavorable weather last fall at harvest time apparently caused increased interest in the acreage reserve programs for the spring-planted crops, especially corn and upland cotton. The signup closed February 20 for corn, upland cotton, and spring wheat. Preliminary reports indicate that producers of these crops, together with winter-wheat growers, had offered about 17.9 million acres to the program. To accept all these offers would require about $702 million. These offerings and the additional offerings of rice and tobacco acreages would require about $741 million in payments. However, this total includes corn acreage offered which would require $12 million more than the $300 million maximum authorized for corn by the Soil Bank Act.

The House has recognized the situation and has taken action to increase the program level by $250 million.

Because legislative changes which have been recommended for 1959 provide for elimination of corn acreage allotments and authorization of increasing allotments for other basic crops under certain specified criteria, we recommend termination of the acreage reserve after the 1958 crop year. It is contradictory to provide for an acreage reserve program on the one hand and an expanded acreage allotment on the other.

We should, therefore, shift emphasis within the soil bank from the short-time approach of the acreage reserve, aimed at reducing surpluses of the basic crops, to the long-term approach of the conservation reserve, aimed at overall production adjustment.

A conservation reserve program of $450 million is recommended for the 1959 calendar year.

This recommended shift in emphasis would aid the small farmer, who would be able to retire all his eligible land from production if he wished. It would also aid the large farmer who desires to reduce the size of his operation, or to make long-term land use changes. All producers would benefit pricewise from the production adjustments which would ensue.

An expanded conservation reserve can be an effective instrument of adjustment if it is accompanied by needed changes in price supports. It should not become merely a means of offsetting the production stimulus supplied by price supports held continually at incentive levels.

The Department is continuing its evaluation of the bids submitted by farmers, in a trial or experimental bid program in Illinois, Nebraska, and Tennessee, to place all eligible land in the conservation reserve program. These findings will be considered in a continuing study of ways to make this program more effective.

The first evaluation of the bids was to determine the relationship between the productivity of the land offered and the rental rates the farmers bid to take all eligible land out of production for 5 to 10 years. The initial review clearly showed that the great majority of bids were at rates too high in relation to productivity and rental values. The level of bids was such that approximately double the average rate per acre of the regular program would have been necessary to take any appreciable amount of cropland out of production in Illinois, Nebraska, and Tennessee.

In view of these facts, the Department announced February 7-1 week after the closing date for submission of bids in Illinois, Nebraska, and Tennessee that all bids received in those States were being rejected. This decision was made as quickly as possible to enable farmers who had submitted bids to plan their 1958 farming operations, and to decide to what extent they wished to participate in either the regular conservation-reserve program or the acreage-reserve program. In announcing this experimental call for bids the Department made it clear that any or all bids might be rejected.

In Maine, where the bidding ended February 28, the Department was able to accept one-fourth of the some 1,400 bids made by farmers. The 354 bids accepted added 20,273 cropland acres to the conservation reserve program of that State.

These acceptances in Maine were based on a State average rate of $11.57 per acre. Under the regular conservation-reserve program in Maine, the State average rate is $9 per acre.

Of the land covered by bids accepted, about one-half is in the better cropland area in Maine, a State which has no acreage-reserve program. Because the average payment rate at which we could accept such a high percentage of Maine bids was not too much greater than that available to farmers under the regular conservation-reserve program, the Department felt justified in taking this action. Similar conditions did not exist in the other three States where the trial bid program was offered.

The regular conservation-reserve program remains available to all farmers in all States. The deadline for signing contracts effective in 1958 is April 15.

21494-58-pt. 4——17

The Department has established a goal of an additional 10 million acres for the conservation reserve in 1958. The latest reports from the States indicate that the 1958 sign-up had reached 2.7 million acres on February 28. This is in addition to the 6.5 million acres placed in the conservation reserve in 1956 and 1957.

THE RURAL DEVELOPMENT PROGRAM

Some 44 percent of our farms can probably be considered as efficient commercial units. They produce 90.8 percent of all farm products that go to market. The remaining 56 percent of our farms do not have the same problems as these efficient commercial farmers. They produce only 9.2 percent of marketed farm products. An effective farm program must recognize the basic differences in these two agricultural groups and plan to meet the needs of both.

No recent development in the Nation's agricultural policy holds greater long-term importance than the present effort of our departments and agencies to so strengthen and redirect educational and service programs as to provide practical help and guidance for families on small farms. The rural development program, now going forward in 30 States and Puerto Rico, has a central place in this effort.

During the past 2 years, committees of the Congress have issued 3 major reports calling for private and governmental programs in rural areas which would provide increased educational aid and guidance for low-income farm people, develop more extensive off-farm job opportunities, and increase skills through retraining programs.1 The reports of these committees are summed up in a statement issued recently by the Joint Congressional Economic Committee. A main line of attack on the farm problem, it is stated, "should consist of programs to develop local nonfarm resources, to improve the education of farm people, to make training in industrial skills available to them, and to overcome obstacles faced by people who wish to make the transition from farm to nonfarm work."

The rural development program is putting into action many of these congressional recommendations for improving living conditions on small farms in underdeveloped rural areas. In close cooperation with State, farm, educational, employment, and other agencies, we are continuing to expand and perfect this practical, long-range approach to the farm problem in these areas of the Nation.

I want to emphasize that the rural development program is not separate from our regular activities for improving living standards in underdeveloped rural areas. Nor is it limited in scope and objectives to specific areas. This program is one method, among many, of supplementing and redirecting the work of governmental agencies in order to gain more effectively the fundamental objective-area economic development.

1 A Program for the Low-Income Population at Substandard Levels of Living, report of the Joint Committee on the Economic Report, January 1956.

The Family Farm, report of the Committee on Agriculture, House of Representatives, August 1, 1956.

Policy for Commercial Agriculture, report of the Joint Economic Committee, February 10, 1958.

THE 1959 BUDGET

Since this committee has been discussing in detail the budget for, the fiscal year 1959, there is no need for me to go into our estimates at any great length. There are, however, 2 or 3 items which I would like to mention.

The first of these is our proposed program for utilization research.. As you know, the special commission appointed by the President to study the need for utilization research has reported to the Congress that the utilization research program should be very substantially increased. We in the Department have given careful consideration to this report in the development of our recommendations for 1959. There is urgent need for research which will increase the total market demand for farm commodities by providing new uses and new markets for surplus agricultural products. It is equally important, however, that the development of this program be kept in balance with other types of research as well as other program needs. It is also necessary, if we are to budget realistically, to take into account the manpower available for research and how the available manpower can best be allocated to meet the most imperative needs for all types of research. Taking all these factors into account, we have recommended a program which we believe will provide the greatest practicable impetus to utilization research in 1959. In addition to a $5 million increase in appropriations to the Department, we estimate that approximately $5 million in foreign currencies will be available for contract research with foreign laboratories to develop new uses and greater acceptability for American farm products abroad. A keen interest is developing in this phase of our utilization research program which, as you were earlier advised, we have initiated this year. I feel that it has great potential for increasing our foreign market for surplus commodities.

In general the 1959 budget proposes that our programs be continued at the 1958 level. There are a few exceptions to this which it might be well for me to mention.

An increase of over $5 million is proposed to provide for the mandatory inspection of poultry as required by the law enacted by the last session of the Congress.

With respect to Rural Electrification Administration loans, legislation has been proposed which would make it possible for the borrowers to obtain credit from private sources as well as directly from the Federal Government. The 1959 estimates have been submitted on the basis that such legislation will be approved. We believe it is essential that the credit base for the rural electric and telephone systems be broadened to provide for their continued growth and adequate service to consumers. It is estimated that capital funds needed to finance the growing demand for electric power in rural areas during the next generation will far exceed the $32 billion loaned by the Federal Government to REA borrowers during their first 22 years of operation. The magnitude of these requirements and the urgency of meeting national security and defense needs make it imperative, we believe, to find an adequate source of funds for REA loans other than the Federal Treasury. The objective of bringing central station electric services to rural areas envisaged when the law was

passed 22 years ago has been 95 percent realized. Furthermore, the characteristics of rural areas have changed substantially through the development of industries, commerce, and other nonfarm activities. Among new users of power from REA financed electric systems nonfarm users now outnumber farm users nearly 3 to 1. The proposal in the 1959 budget, and the proposed legislation on which it is based, provide the mechanism for meeting realistically the very substantially increasing needs of REA borrowers. At the same time, by providing for direct Federal loans of $175 million for electric and $59.6 million for telephone borrowers, it would continue the Government's interest in fostering the further development of these systems.

We are recommending that the advance authorization for the 1959 agricultural conservation program be reduced to $125 million. This reduction is proposed because of the general necessity to allocate expenditures only to the most essential needs so as to permit major effort in the national defense areas. We believe that by careful administration the lower authorization will be sufficient to give attention to the more essential needs for conserving agricultural resources. It is contemplated that the Department's total conservation effort will continue to be maintained at a substantial level.

Two 1959 budget amendments, recently submitted to the Congress by the President, propose an additional $10 million for watershed protection and $4,780,000 for flood prevention. These increases provide for accelerating works of improvement in the small watersheds and on the 11 flood-prevention projects. By providing construction work, which is done by local workers and contractors, the additional funds would also help to stimulate business activity.

One additional matter I should like to mention is our belief that it is important to take such steps as we can to get the Commodity Credit Corporation out of operations which are purely banking in nature and have no relationship to CCC programs. As a step in this direction, we are proposing, as you know, a direct appropriation to the Agricultural Research Service for the expanded brucellosis eradication program. We hope the committee will see fit to approve this proposal.

LEGISLATIVE PROGRAM

We have been talking about recommended programs and program changes as they show up in the 1959 budget. In the stress of dealing with current problems-problems of the present moment-it is easy to forget the progress of even the immediate past. We have, therefore, included in an appendix some of the highlights of accomplishment in recent years.

I should like to take a few moments now to refer to some of the other legislative proposals in the message which President Eisenhower sent to the Congress during January. The particular recommendations I have in mind are these:

Authority to increase allotments of the basic crops.

Elimination of corn allotments.

Elimination of the escalator clauses.
Widening of the range of price supports.

Extension of Public Law 480.

Authority to increase acreage allotments for cotton, wheat, rice, pea

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