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Mr. BERGER. You mean the cost of producing alcohol?
Mr. BERGER. I am not sure, but I think in the neighborhood of around 60 cents a gallon; was it not? With dollar corn.
Senator DOUGLAS. Is that in excess of the commercial price of alcohol?
Mr. BERGER. I understand it is, or it has been, at least.
Mr. BERGER. Yes. I understand it is considerably higher than the commercial alcohol.
Senator Douglas. Do you know what the commercial price is ?
Senator DOUGLAS. Would you furnish them for the record ?
Senator Douglas. That is right, together with the present production costs of the Omaha plant of converting grain into alcohol.
Mr. BERGER. I am not sure we have it in the Department of Agriculture or not. We may have to get that from some other department in the Government as to just what the production costs were during the war.
(The information referred to follows:) 1. The Oil, Paint, and Drug Reporter, issued March 4, 1957, indicates the price of 95 percent ethyl alcohol, delivered east of the Rockies, is $0.47 per wine gallon.
2. With respect to the production cost of alcohol at the Omaha plant, the following quoted language is from page 26, of the printed hearings on S. 3503, regarding industrial uses of agricultural products. It was taken from the letter of June 11, 1956, to Mr. J. LeRoy Welsh, Butler-Welsh Grain, Omaha, Nebr., from Mr. George E. Johnson, chief engineer of the Central Neb ska Public Power and Irrigation District, who was, until October 1947, president and general manager of the Farm Crops Processing Corp., which operated the Omaha plant. for the last 7 months' operation for the Government, our costs averaged between 50 and 55 cents per gallon of 190 proof alcohol. These costs included the rent we were paying the Government and all of our other costs with credit applied for the distillers dried grains sold.” The Farm Crops Processing Corp. ceased operation of the Omaha plant in January 1949.
Our best information indicates that the cost of corn during the period of operation indicated above, was approximately $1.29 per 56-pound bushel.
Senator CAPEHART. Mr. Berger, you are head of the Commodity Credit Corporation?
Mr. BERGER. Executive vice president of the Commodity Credit Corporation as well as Director of Commodity Stabilization Service.
Senator CAPEHART. You have a surplus problem?
Senator CAPEHART. Have you ever given any thought to converting the grains that you are holding that become spoiled into grain alcohol and simply stockpiling it as we stockpile other strategic materials ?
Mr. BERGER. Yes. I think the Department looked into that about a year ago quite definitely. I believe you and I had a little discussion on it one evening in your office.
Senator CAPEHART. Yes.
Mr. BERGER. And the cost factor there was such that I think that we definitely recommended against it at the time.
I think, Senator, the thing that we have to keep in mind is this: You see, I was down here during World War II, and my responsibility at that time was the distribution of livestock feed supplies throughout the Nation and getting the maximum production of livestock products out of available feed supplies. And one of my great problems at that time, Senator, was the fact that I had to roll so many cars of grain every day toward the distilleries who were making the alcohol at that time, and it was taken away from livestock production, until we got feed recovery units where we saved all of the byproducts including the solubles as well as the grains in these distilling plants. It was cutting our livestock production very, very rapidly.
Senator CAPEHART. But now we have too much livestock production?
Mr. BERGER. Now we have too much of some types of livestock.
Mr. BERGER. Yes; but that is the trouble with the proposal of running grains through the alcohol plant, you see the fact that in my mind is that it does not help us with our surplus problem because we continue to produce the same amount of livestock products even though we do.
Senator CAPEHART. You mean the byproduct of making alcohol out of grain then becomes a problem?
Mr. BERGER. Well, it then goes back and is fed with the other grain as is available, and you produce just as many pounds of meat, milk and eggs, and livestock products as you did before you ran it through the distillery.
Senator DOUGLAS. But you do get alcohol.
Senator CAPEHART. You do get alcohol which we might well need if we got into war.
Mr. BERGER. Yes; but we don't solve the surplus problem if you are doing it for the purpose of disposing of surplus.
Senator CAPEHART. Do you mean to tell me that if you took a million bushels of grain a year and made it into grain alcohol that you would not help solve the surplus problem in respect to grain?
Mr. BERGER. I think you really meant a billion bushels, did you not?
Mr. BERGER. That is right. No, I do not, Senator. Conscientiously, I actually feel that way.
Senator CAPEHART. "You mean it would not help solve the grain problem?
Mr. BERGER. No; it would not, for the simple reason that the byproducts from the distillery are recovered. You have to recover them for the simple reason that you cannot run them into rivers and streams. You have to recover them. So you recover the byproducts and you feed that back to livestock.
Senator CAPEHART. Are you saying after you make grain alcohol out of a bushel of corn that the residue has as much feed value as it did before?
Mr. BERGER. It has more. And it aids digestion and is a highprotein product and help the assimilation of other grain products.
Senator CAPEHART. Of course, I think that is a great thing. You can get alcohol from a billion bushels of corn and you can get a byproduct that will turn out more protein and add more weight on animals, so you are getting two things, in other words, where you are only getting one
Mr. BERGER. The alcohol is free, in other words. But you do not solve the surplus problem a bit.
Senator DOUGLAS. It might be a good thing to have more meat on the table of the American people.
Mr. BERGER. Well, the problem we have now is we are producing about the maximum amount of livestock products that the consumers are able to consume at present price support levels on agricultural grains.
Senator Douglas. I know many breakfast tables, including my own, which could take more bacon.
Senator CAPEHART. I do not think you feed this byproduct to hogs. It is only fed to cattle?
Mr. BERGER. Sure you do. Cattle, hogs, poultry, all the way through.
I might put in the record that when I was down here during World War II and we shut off the distilling programs for the war effort, immediately the distillers, of course, wanted to start making beverage alcohol to restore their stocks of whisky which they had not been allowed to do for a good 4-year period. And I had the responsibility of telling them they could not have any more grain for making beverage alcohol. It did not take them very long to bring in some very definite, emphatic research work, one from Lexington, Ky., which showed the very thing that I am trying to illustrate. And since then there has been lots and lots of research backing up the original experiment.
The original experiment was they took a thousand bushels of corn and I believe it was 10 head of cattle and the same quantity of hay, and they fed the 1,000 bushels of corn and the good legume hay. Then they took another group of cattle, another 1,000 bushels of the corn, and ran 400 bushels through the distillery and recovered all the byproducts, fed the byproducts with the 600 bushels that were left, and got more pounds of beef than they did by feeding just the straight grain.
Senator Douglas. In the language of a novel of yesteryear "all this and heaven too."
Mr. BERGER. That is correct.
Senator Douglas. One final question. You say that if corn sells for a dollar that it would cost from 60 to 65 cents a gallon to product alcohol from that corn.
Mr. BERGER. Please remember, Senator, I am only trying to think of figures that were used during World War II. Senator Douglas. I mean these are approximate figures.
Mr. BERGER. Those are not actual figures that I am giving you at all. As I remember them, the
Senator Douglas. Some of us were instrumental in getting Public Law 480 through which permits you to sell grain abroad at less than the American support price. Now, what has been the average price of the sales under Public Law 480 ?
Mr. BERGER. It may be many years for us to actually know because in the Public Law 480, if you are thinking of title I where you are selling for soft currencies, until we know how much value we get out of the soft currency that we get it could not be determined.
Senator Douglas. Under the current conversion figures in foreign exchange.
Mr. BERGER. Some of that is pretty low, I will have to admit.
Mr. BERGER. Well, that would be a broad guess on my part. I would not want to make even a guess.
Senator Douglas. This is a very important point because if you are selling for appreciably under a dollar abroad, then your alternative cost would not be 60 to 65 cents a gallon, but appreciably less than that.
Mr. BERGER. I think that is true. There is no doubt about it, except for the fact that it does not help us cut down on our surpluses because we continue
to produce the same amount of meat, milk, and eggs. Senator DOUGLAS. Could you give us these figures as to what the average price is of sales of grain under Public Law 480 with the soft currencies and other currencies transferred into dollars at the current rate of exchange?
Mr. BERGER. I would be glad to have that done. For the past year? Would that be satisfactory?
Senator DOUGLAS. Yes, I believe so. Mr. BERGER. That would give you enough information on that! Senator DOUGLAS. Yes. (The information referred to follows:) When a sale of CCC grain is made under Public Law 480 the dollar and cents price to the United States exporter is the same price as would be charged on a purely commercial export for dollars. The foreign currencies received by the United States exporter are converted into dollars by the CCC at the rate of exchange prevailing in the country to country agreement at the time of the sale. The rate of exchange in country agreements is a negotiated rate which in a number of cases has been higher than but never lower than the official rate of exchange. With a few exceptions there has been no change between the official rates of exchange prevailing at the time of the sale and those prevailing at this time.
The attached table shows the estimated losses sustained on CCC-owned grains sold under title I, Public Law 480, during the fiscal year 1956. The column "estimated market value” represents the return to CCC and the column "difference” represents the loss below CCC investment. It should be pointed out, however, that no special price concessions are made under Public Law 480 and this loss would have been sustained if these grains had moved into normal export channels at the prices prevailing during fiscal 1956.
Commodity Credit Corporation investment and estimated market value for selected commodities disposed of under Public Law 480, title I, fiscal year 1956
Senator Douglas. Thank you very much, gentlemen.
I should like to insert in the record at this point letters received from the Secretary of Commerce, the Comptrosler General, and the General Services Administration. (The letters referred to follow :)
THE SECRETARY OF COMMERCE,
Washington, D. C., March 5, 1957. Hon. J. W. FULBRIGHT, Chairman, Committee on Banking and Currency,
United States Senate, Washington, D. C. DEAR MR. CHAIRMAN: This is in reply to your request of February 12, 1957, for the views of this Department with respect to H. R. 2528, an act to authorize the sale of the Government-owned alcohol butadiene facility at Louisville, Ky., known as Plancor 1207.
This legislation would authorize and direct the sale of the Government-owned alcohol butadiene facility at Louisville, Ky., known as Plancor 1207.
The synthetic rubber producing facilities built by the Government during World W II included 11 butadiene plants, of which 3 used al hol and 8 used petroleum products as raw materials. It was known that butadiene produced from alcohol would necessarily cost much more than that made from petroleum products, but the urgency at the time minimized such considerations.
Shortly after the war one of these alcohol butadiene plants was sold, and converted by the purchaser to products other than butadiene. The other two were shut down, then reactivated briefly during "Korea," and finally shut down again. One of these, that at Louisville, has produced no butadiene since late last year.
Concurrently with these developments, production and capacity of lower-cost petroleum butadiene has been steadily increasing, until it is now adequate for the entire requirements of synthetic rubber, as well as the requirements of new uses which have developed. At year end, 1956, petroleum butadiene capacity was 851,800 short tons, per year, of which S-type synthetic rubber production was using only 59 percent. (At full capacity, S-type synthetic rubber would require 93 percent.) Further expansions of petroleum butadiene capacity have been announced, which will bring this total to over 1,130,000 short tons per year, by year end, 1958.
No conditions are foreseeable which would require alcohol butadiene for the supply of synthetic rubber production.
Thus, there appears to be no further need for continued Government ownership of Plancor 1207. If idle, its standby maintenance and obsolescence will prove increasingly costly to the Federal Government; if operated, the Government would find it necessary to subsidize its costs of production in order for it to sell its product.
Under these conditions there would be no need with respect to supply requirements for the preemptive provisions contained in section 7. Further, it appears to us that the provisions of section 7 could limit potential purchasers' interest virtually to the vanishing point as the purchaser could not economically make the product for which it is designed and equipped. Yet he could not modify it to produce a feasible product without incorporating in his redesign "equivalent capacity" for any one, or a number of products, the identities of which are not known. The plant as it now stands could not fill this requirement.
Subject to your consideration of the above comments, this Department recommends enactment of H, R. 2528.
We have been advised by the Bureau of the Budget that it would interpose no objection to the submission of this report to your committee. Sincerely yours,
SINCLAIR WEEKS, Secretary of Commerce.