With a conservation payment of 8.1 cents a bushel and a parity payment of 10 cents a bushel, farmers who seeded within their 1940 allotments could earn a total of 18.1 cents per bushel on the normal yield of their allotments. And, with the anticipated loan value of at least 63 cents per bushel added to the A. A. A. payments, the 1940 cooperators were assured on the average at least 81 cents a bushel on the normal yield of their allotments.

Wheat payments for 1939 by States with participation estimates are shown in table 2.

TABLE 2.-Estimated 1939 wheat conservation and parity payments, by States, and participation

Wheat loans in 1939, as in 1938 at the beginning of the new farm program, proved an effective price protection and gave wheat producers a chance to exercise greater independence in their marketing operations than otherwise would have been possible. The loan policy. which enabled them to get a floor under the price of wheat and avoid a market jam, was aimed at the middle ground between two alterna

tives: Allowing prices to descend to the world level, which would have lowered wheat income disastrously; or maintaining prices so high that excessive supplies, above market outlets and reserve needs for emergencies and national defense, would have accumulated.

Under the act, the Commodity Credit Corporation is directed to extend wheat loans to producers cooperating in the agricultural conservation program if the farm price of wheat on June 15 or at any time thereafter during the marketing year is below 52 percent of parity, or if the July crop estimate indicates a wheat crop larger than a normal year's domestic consumption and exports. The loans are made on the security of stored wheat.

It is provided that the loan rate must be not less than 52 percent and not more than 75 percent of the parity price of wheat at the beginning of the marketing year. Country loan values are calculated from basic terminal rates with differentials for freight and handling.

WHEAT INCOME PROTECTED

Under the 1938 wheat loan, about 73,000 loans were certified, secured by approximately 85,745,000 bushels of wheat, at an average of 53 cents per bushel to producers. The amount loaned by the Corporation, including terminal loan values, totaled about $46,430,000. Warehouse charges, interest paid to lending agencies, and other expenses brought the total disbursements to about $48,770,000. The Corporation received about $43,150,000 in the form of repayments by producers, interest, and the sale of wheat collateral. The difference of $5,620,000 represents the cost of the 1938 wheat loan. While this amounted to about 6.6 cents per bushel on the wheat in the 1938 loan, it has been estimated that the loan program and the wheat export program, at a combined cost of $31,600,000, added a total of 17 cents per bushel, or $57,000,000 to the income of wheat growers from their 1938 crop.

THE 1939 WHEAT LOAN

In 1939, more than 237,000 loans, secured by nearly 168,000,000 bushels, were extended to wheat producers cooperating in the program. This was more than triple the number of loans and about double the volume of wheat in the 1938 loan.

The Commodity Credit Corporation reported that, as of June 30, 1940, producers in all States had paid off loans and redeemed 22,649,018 bushels of farm-stored wheat and 133,047,959 bushels of elevator-stored wheat, a total of 155,696,977 bushels. The Corporation had taken deliveries of 37,650 bushels of farm-stored and 1,611,436 bushels of elevator-stored wheat-a total of 1,649,086 bushels. This left outstanding loans on 10,299,869 bushels. Virtually all of these outstanding loans were on farm-stored collateral and were extended to April 30, 1941.

The loan values to producers averaged 63.3 cents which was 56 percent of the parity price during the 1939-40 marketing year.

In July and August 1939, during harvesttime, farm prices of wheat in the United States averaged about 55 cents per bushel. This was at least 30 cents above the world level. In March and April,

when most of the loans were repaid, the United States price had advanced 30 cents and more per bushel, averaging 85 cents in March and 89 cents in April. Thus the producers who obtained loans on their 1939 crop and repaid the loans in March and April were able to sell their wheat for 60 cents more per bushel than they could have received on the world market at harvesttime. Deducting 10 cents for storage and interest, it is conservatively estimated that the loan added 50 cents a bushel on at least 160,000,000 bushels, or a total of $80,000,000, to the income of those who participated in the 1939 loan. The Corporation by August 1, 1940, had collected $622,000 interest on the 1939 wheat loan, and all loans except those extended had been paid in full. It was expected that by the time the entire loan was liquidated the loss on the small amount delivered to the Corporation would be less than the interest collected. In that case, the 1939 wheat loan would have been conducted without loss to the Federal Government.

Besides the help to borrowers, the loan, through its support of the price of wheat, helped those producers who were able to hold their wheat without a loan. Many of these producers probably would have found it difficult to obtain necessary local credit if the Govern ment loan program had not been in operation.

Table 3 shows the wheat loan operations for 1938 and 1939, as of June 30, 1940.

TABLE 3.-Statement of 1938 and 1939 wheat loans, as of June 30, 1940 1

1 As shown by records of the Commodity Credit Corporation. Does not include 5,557,000 bushels on which loans were liquidated by banks and other lending agencies.

FARM STORAGE PLAN SUCCESSFUL

Farm storage of wheat received a severe test under the 1939 loan program. Because of high moisture conditions throughout most of the growing season, the heaviest weevil infestation on record threatened to damage a large part of the crop if adequate protection were not given. The fact that farm storage came through the season without loss to the Government establishes this type of wheat storage as a successful part of the Ever-Normal Granary plan.

In the 21 western and midwestern States, where virtually all of the 1939 wheat loans were made, 33,643 loans were on farm-stored collateral. This collateral wheat was in approximately 65,000 bins. An inspection report following the loan expiration date, April 30, 1940, indicated that only 1,251 bins, or less than 2 percent, were weevily. Most of these bins were treated and brought back into good condition, and in the few remaining cases the loans were redeemed voluntarily by the borrowers, following the inspection reports.

The good farm-storage record is due mainly to the stringency of the loan provisions covering storage. These provisions, including inspection of bins and tests to determine that the wheat is acceptable before the loans are approved and periodical inspection of bins thereafter, serve as a protection to both the borrower and the Government. During the 1939 season, many producers received reports of weevil from the inspectors soon enough to enable them to sell their wheat without loss before there was any deterioration.

4. THE EXPORT PROGRAM

The wheat export program was launched in August 1938, under authority of Federal legislation designed to help the farmers of this country maintain their fair share of the world markets. As an emergency measure supplementing the A. A. A. acreage adjustment plan, it was adopted after an unsuccessful attempt by the United States to bring about an agreement on the division of the world wheat trade by the surplus-producing countries.

Under the export program for 1938-39, for both wheat and flour, the Federal Surplus Commodities Corporation, an agency of the Department of Agriculture, purchased wheat at market prices and sold it to United States exporters at prices which enabled them to sell in the world markets. Flour exports were assisted by specified export payments made directly to the exporters.

Export sales of wheat and flour in 1938-39 totaled approximately 118,054,000 bushels of wheat. Of this amount, about 93,754,000 bushels were assisted through the export program at a cost of about $25,700,000-an average cost of about 27 cents a bushel.

A revised program was worked out for 1939-40. It included three methods of assisting in the export of wheat: First, the flour export plan was continued; second, authority of the Federal Surplus Commodities Corporation to buy wheat and resell it to exporters was continued, thus enabling the agency to handle loan wheat held by the Commodity Credit Corporation; third, other exports were assisted through direct payments to United States exporters, determined from competitive bids by the exporters. This resulted in moving the wheat into export more completely through the normal channels of trade.

EXPORT PLAN RESTRICTED

As a result of the adjustments in wheat production and the exports that had already been made through the export program, and because of changing world conditions, the export program was put on a restricted basis on December 29, 1939. Assistance was limited to exports of flour from the Pacific coast ports to the Philippine

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Islands. On January 19, 1940, the program was extended to include exports of flour from the same ports to China and Hong Kong, as well as to the Philippines, and exports of wheat to the same destinations. Further extensions to permit contracts for exports of wheat from the Pacific coast to European destinations were made effective March 12, 1940. These extensions were designed to help find outlets for the Northwest wheat surplus.

From July 1, 1939, through June 30, 1940, contracts for exportation of 35,079,000 bushels of wheat and wheat in the form of flour were made under the export program. Of this total, contracts for the export of about 10,643,000 bushels were made after December 29, 1939. Export payments from January to the end of the period averaged 26 cents a bushel.

All exports of domestic wheat and flour (in terms of wheat) during the 1939-40 marketing year totaled about 45,000,000 bushels.

5. ENCOURAGING GREATER USE OF SURPLUSES

An important objective of the A. A. A. farm program has been the greater use of surplus agricultural commodities. The effort to accomplish this has taken the form of research to discover and develop new uses and programs to help needy persons buy surplus farm products, including wheat.

Two of the four regional laboratories for research which were authorized by the Agricultural Adjustment Act of 1938 have been assigned to work on the development of new uses and expansion of industrial uses for wheat. Construction of these laboratories, located at Peoria, Ill., and Albany, Calif., was under way during the latter part of 1939 and 1940.

Purchases of surplus wheat and other farm products for distribution to needy persons on relief have been carried on by the Federal Surplus Commodities Corporation, and the agency that preceded it, since October 1933. From that time until July 1, 1938, the Corporation purchased and distributed wheat products totaling $22,490,000. Purchases during 1938-39 included 840,000 barrels of wheat cereal, 315,000 barrels of graham flour, and 908,000 barrels of white flour, at a total cost of $5,900,000.

During the 1939-40 fiscal year, the purchases of surplus wheat products amounted to $19,350,000, and included 670,000 barrels of wheat cereal, 1,725,000 barrels of graham flour, and 2,800,000 barrels of white flour.

The Food Order Stamp Plan, another phase of the program for distributing surpluses to low-income groups, was developed in 1939. This plan gives certain low-income groups in designated areas a 50percent increase in their food purchases by giving them 1 dollar's worth of surplus-food stamps free for each 2 dollars' worth of food-order stamps they buy. Wheat flour and wholewheat or graham flour have been included in the official list of surplus foods for which the surplus-food stamps could be exchanged.

6. CROP INSURANCE

Provision for crop insurance on wheat was included in the Agricultural Adjustment Act of 1938, and the insurance was first made