ment of CCC inventories be circumscribed by, or made dependent upon, export sales. Through the price-support programs CCC has become the owner of essentially all surplus grain. Each year practically the entire carryover of grain is held by CCC. This will continue to be true as long as CCC offers to take title to all eligible grain tendered to it at fixed prices which are higher than competitively determined supply and demand prices. Under these circumstances the Government's surplus disposal problems must encompass the entire supply of grains, not just presently owned CCC stocks. No progress toward surplus disposal is made by selling 100 million bushels of CCC-owned grain for export if that grain is replaced at the end of the year by the takeover of 100 million bushels of the same kind of grain which might have been exported in lieu of the CCC grain exported. Likewise, no contribution toward inventory management is made by selling for export presently owned CCC stocks in order to make room for a resulting increase in next year's takeover of grain by CCC. These general principles have an immediate application as regards the 1957 corn crop. The poor keeping quality of the current corn crop makes it essential and urgent that CCC adopt a program which will move a maximum amount of the 1957 corn crop into export channels, as well as promoting immediate domestic use. A large percentage of the 1957 corn crop failed to mature and dry out in the fall of 1957. As a result, much of this corn has been artificially dried. An unusually high percentage of moldy and damaged kernels and a high foreign material content resulting from brittle easily broken kernels characterize the 1957 corn crop in many areas. Such corn should be put into immediate use. Attempts to store it over extended periods of time will be fraught with heavy losses and endless difficulty. CCC should adopt all reasonable means of minimizing its takeover of such corn and be prepared to sell out quickly any of such corn which comes into its possession. The most effective action which could be taken by CCC at this time to minimize its takeover of 1957 corn would be to put the corn export program on an export subsidy basis so that exports could be drawn from free stocks of corn rather than from its owned stocks of corn. Generally speaking, CCC's owned stocks of corn will store much better than 1957 corn which CCC will acquire in the summer and fall of 1958, if such corn is not forced into consumption prior to that time. It is recognized that for the past month or two CCC has tried to withhold its stocks of corn from the export market, presumably in the hope that free stocks of corn would flow into the export market at domestic price levels. This hope has been realized to a limited extent and for a limited time. With the prospect, however, of large quantities of United States corn being tied up under the loan program and increased competition from the oncoming Argentine corn crop, it is evident that large quantities of free corn will not flow into the export market at domestic prices, and United States exports of corn will be seriously restricted if such corn is not continuously available for export at competitive world price levels. It is recognized that CCC repeatedly has been faced with this dilemma on the one hand of wishing to curtail its export offerings in an effort to broaden the market and improve market prices of feed grains, but-on the other hand-of realizing that such action would result in the loss of export outlets. Obviously the answer is a continuing program of export subsidies either in cash or in kind-to bridge the gap between domestic prices and world prices for price-supported grains which are in surplus supply and are dependent upon export outlets. The grain trade is well aware that CCC, with its tremendous stocks of grain, continuously is faced with the problem of disposing of grain which is deteriorating or in danger of becoming unstorable. CCC has full authority to sell such grains for unrestricted use. While this authority should not be abused by either CCC or the grain trade, neither should it be abridged or arbitrarily suspended. Disposal of such grain should not be delayed until an export outlet is available, and its value should not be depreciated by incurring excessive transportation costs or restricting its possible outlets. Deteriorating stocks should be sold where they are, and exports should be drawn from the areas which-market prices and transportation costs considered-will permit the lowest possible landed cost in the export market. This will be accomplished by the adoption of the sales and export policy recommended herein. It is not claimed that the procedure recommended herein would, of and by itself, substantially increase the volume of grain exports. The volume of grain exports is dependent to a large extent upon the level of prices at which grain is made available to foreign buyers and the credit or financing arrangements made available by the United States Government. Both of these factors would still be controlled by the Government. We believe, however, that the adoption of the sales and export policy recommended herein for grains will promote the - greatest possible efficiency in the handling of CCC and export grains and the largest possible volume of export per dollar of expenditure by the United States Government. Possible charges of export dumping which may be used against the procedure recommended herein will not be well founded. It is presumed that approximately the same volume of grain will be exported, and at approximately the same export prices, under the procedure as under alternative procedures which the Government might use, and has been using to cause the exportation of grain. The mechanics of the export phases of the policies recommended herein have been developed, and are operating successfully under the provisions of G. R. 345, which now applies to wheat only. A similar regulation should be made applicable to other grains. In connection with such regulation the following suggestions are submitted: "1. Grain exporters prefer that CCC announced daily, after the close of the market, the subsidies which shall be available to exporters, either in cash or in kind, upon exportation of the applicable grains. "2. In the event, and to the extent that CCC finds it impracticable to follow the procedure suggested in (1) above, a bidding procedure should be adopted for determining export subsidy rates for feed grains. After acceptance of the successful bids the exporters who submitted the accepted bids would be obligated to export the specified quantities of the designated kind of grain set forth in the bid, and-upon proof of exportation-the CCC would be obligated to pay to the exporter a cash subsidy, or subsidy in kind certificates, redeemable in CCC grain in export positions, the amount of the cash subsidy or the dollar value of such certificates being determined by the bushels exported multiplied by the rate per bushel set forth in the applicable bid submitted by the exporter. "3. Subsidy for any one kind of grain would be applicable to grain of that kind exported from any coast or to any destination. This would insure that export grain would always move in the most economical manner, and result in the lowest possible cost to the Government per bushel of grain exported. "4. In the event of a subsidy-in-kind program, consideration should be given to the possibility of making the export subsidy certificates redeemable in any kind of grain which CCC has available in export position-particularly among the several feed grains." We believe that the procedure recommended herein will tend to strengthen domestic market prices, and that the cost to CCC of its price support programs will be decreased rather than increased. It is true that Commodity Credit Corporation will use some of its stocks in making subsidy payments in kind, but this will merely offset the loss that otherwise would be sustained between the takeover cost of grain acquired and the price it would realize for its stocks if they were sold directly for export. Under this program domestic consumersin the event of improved price levels-will pay somewhat more for their supplies and producers will receive a correspondingly greater income, but this transfer of income will be strictly in line with the objectives which you and the President are trying to achieve greater return for farmers in the market place. In view of the poor keeping quality of the 1957 corn crop, and—to some extent-the 1957 grain sorghum crop, the staggering inventory management problem with which CCC will be faced if it is forced to take over large quantities of grain of poor keeping quality, and the very low market prices currently prevailing for corn and other feed grains, we believe it is particularly urgent and appropriate that the policies recommended herein be put into effect as soon as possible. We suggest an effective date of April 1, 1958. We urge your prompt and favorable consideration. Grain Marketing Committee: Carl C. Farrington, Chair- Mr. FARRINGTON. That is the extent of our formal statement, Mr. Chairman. As pointed out in the letter, we believe this program, put into effect, would result in economies for the Government; that it would promote orderly marketing of agricultural commodities; that it would substantially reduce the burden on the Commodity Credit Corporation, both in clerical work and merchandising activities and it would substantially reduce their transportation costs. We feel it would be definitely in the interest of all parties concerned to adopt this program. Mr. WHITTEN. Mr. Farrington, thank you for your statement. I might briefly, for the record, review this whole situation as we know it on this subcommittee. First, I can fully appreciate the interest that the trade has in attempting to get the Secretary to work out some plans whereby grain will flow into and out of the hands of private trade as against going into and out of the Commodity Credit Corporation. However, briefly, I would say that the original Commodity Credit Corporation was set up to carry out price-support programs. As all of you people are certainly aware, that Corporation was given the right to buy and sell, and to buy commodities at the support level, or in certain cases to make loans which the Corporation had a right to call after a given period of time if the commodities were not redeemed. It is my opinion that the Corporation Charter Act and the pricesupport program quite definitely provides for a system whereby commodities will flow into and out of the Commodity Credit Corporation in the event the domestic prices are below the loan level. For many years a part of the authority the Commodity Credit Corporation has always had was never used. When the present Secretary of Agriculture came into office he pointed out, after the first year or two, all the commodities which the Corporation has as evidence of the fact that price supports had to be reduced. He said that our domestic support program was pricing the United States out of the world market. It was this committee that pointed out to the Secretary that he had authority in the basic Commodity Credit Corporation Act to export all these commodities in world trade at competitive bid prices, and it was his refusal to use such authority that constituted this umbrella over world production. In January of 1955, according to the hearings which are in print before this committee, the Secretary at that time did not know he had such authority. When we pointed this out to him we had already urged the Corporation to offer a limited number of these commodities in world trade for export at competitive prices. I believe in the year 1954 they sold some $485,000 worth for cash. In 1955 and he still did not know he had the authority-this committee pointed out that he had at that time a $7 billion or $8 billion Corporation that had no sales manager, no sales organization, no sales policy and that most of these commodities were not even being offered in world trade in line with the authority of the act. We set up separate funds for a sales manager and demanded that they set up a sales organization. In 1955 we prevailed upon the Department to offer its commodities, and they began to offer all commodities, I believe 19 in number, except cotton, and they still refused to sell cotton. In 1956 we finally got the Commodity Credit Corporation to offer 1 million bales of cotton. They hoped to sell it within 6 months. The record shows that they sold it in less than 60 days. 22911-58-pt. 5- 28 Then, after the Department on three different occasions promised to continue sales at which time the Federal Government had some 6 million or 7 million bales of cotton in the Commodity Credit Corporation's hands, the Congress was almost forced, I would say, to pass the Agricultural Act of 1956, which demanded that the Secretary of Agriculture use existing authority to sell these commodities in world trade. Behind this action was a strong effort by me as chairman of the subcommittee and the members. When the Secretary first became aware that he had the authority he said that the foreign countries did not have any money. We had an investigation made which disclosed that the United States Government was spending some $3 billion in foreign countries in support of their military, which clearly showed they had that much money. Then it developed that the Secretary said that the trade was opposed to competitive sales in world markets, so we had to investigate the trade and we found out while there was a divided opinion much of the trade was for it. I mention cotton because it is mixed into this. At that time the Secretary had an Export Advisory Committee on cotton. We had an investigation which disclosed that the overwhelming number of that Committee on exports had an interest in the international production. Under this umbrella which the Secretary was holding over world production by offering our commodities at a fixed price, we had another investigation which disclosed that the head of the Bank of America in California, who was on the Secretary's Advisory Committee, had $10 million loaned in Mexico for the production of agricultural commodities under our umbrella. It showed that many of these advisers had certain business interests in keeping our commodities off of the world markets. We finally reached the point where the committee insisted we would recommend he have no money to control acreage on any commodity he would not sell because by holding it he counted it to further reduce acreage. At any rate-and this is the point that I am coming toit was my belief, as chairman of this committee, that in the use of existing law which included competitive sales in the world trade by the Commodity Credit Corporation, that in the process we would learn and it changes were needed in the law we would find out what they should be. I want to say right here we guaranteed wages to labor, the right of labor to organize and the right of railroads to set their rights on the cost of their operations and thousands of things that add to the farm costs, and I think the only way you will get a fair price at the market place is by law. The only other way is to let your supplies beat down the demand to such a level that it would create a tight situation which would not be good for the consumer, the producer, the businessman, the middleman, or who have you. But be that as it may, we have been using that system up to this point, that competitive sales system, and it has developed some ideas of what changes might be made. Now I am wondering if, what you advocate-notwithstanding you are doing it in wheat-would not require some changes in the law. Again, I would be for any kind of change that would put the flow into the hands of trade provided that it in no way affected the price |