the farm program we made shortly after we took office, about 5 years ago. We have reviewed it on several different occasions since then. And may I say to you we have a very close, fine working relationship with the wheat groups in this country, and we have always tried to listen to their side of this presentation-those who have been working on it and are sincere in their interest in it, and we have a very high regard for them. So what we are going to say here in no way should be construed that we do not have such.

First, it should be pointed out that we operate the present wheat program as a two-price plan. It is under the International Wheat Agreement, of course. The difference between the domestic and export price is great-some 75 cents per bushel average in recent years. Of course, this is varied according to what our domestic price was and what the world price was. The difference is paid from general taxation-not by a higher charge on the primary users of bread and wheat products who tend to be the low-income families.

The two-price plan was suggested as a solution in the twenties after export markets for wheat decreased sharply. Since then this approach has come to the fore every time a wheat surplus has developed.

Two-price wheat legislation has been passed by Congress on three separate occasions. Each of these plans was vetoed by the President. The last veto was the domestic parity plan for wheat included in the vetoed Agricultural Act of 1956. The other two vetoes were in the McNary-Haugen bill days.

The two-price plan derives its name from the fact that it provides for different prices for wheat sold in two different marketsa primary and secondary market. While the various plans differ as to detail, their common objective briefly is this:

Sales for domestic food use-that is, "primary" market. On wheat sold for this use, plans generally provide for parity or close to parity prices. Domestic demand for wheat for food is relatively inelastic. That is, wheat consumption as food is not affected significantly by price increases. Consequently, farm income from food sales can be increased by raising the price-a change which has little effect on volume. Since about half our wheat consumption goes into domestic food uses, domestic food use is the primary market and an increase in price to parity level could have a significant effect on farm income. Sales for export or for domestic feed use-the "secondary" market. On wheat sold for these uses, plans generally provide for the world market price. Some plans, however, provide for loans to keep the price from unduly interfering with world market prices or domestic feed prices. Demand for wheat in export is somewhat more elastic than demand within the United States; that is a change in the export price will result in a greater use than is the case for domestic food uses. Demand for wheat for feed is also elastic. Consequently, it is claimed that income from these sales can be increased by reducing prices with increased sales more than offsetting price reductions. Generally in recent years our feed use has amounted to about 50 million bushels a year and exports have varied from year to year, depending mainly upon the size of crops outside the United States and disposals under special programs.

I would underline the "special programs." It is in these outlets that there is the greatest potential for expanding use.

Advocates of these plans claim that they have a number of advantages over other approaches. The more important advantages claimed include these:

1. It would be a move toward free market prices and if loans are not a part of the plan grain exporters could compete vigorously for export markets without a direct Government export subsidy.

2. It would widen markets for wheat. It is claimed that permitting prices to adjust freely to equilibrium levels will increase exports and use of wheat for feed.

3. It would eliminate or reduce Government interference with wheat marketings. It is claimed that under this approach Government acquisitions, sales, and export subsidies will be reduced to the absolute minimum.

4. It would eliminate or reduce Government control over wheat production. It is claimed that eventually under this approach acreage allotments and marketing quotas will not be needed.

5. It would eliminate Government costs of price support. It is claimed that this approach is self-financing, not requiring any Treasury expenditures.

With this background, let us now turn to a description of H. R. 4637, 1 of the 5 bills being studied, and the reasons why the Department recommends against enactment of the 2-price approach.

H. R. 4637 provides for supporting at 100 percent of parity United States wheat used domestically as good and for supporting the portion of the crop exported or used as feed at such lower level as the Secretary determines to be in proper relation to the levels at which other feed grains are supported and to be compatible with our wheat export and international trade policies.

Separation of the domestic food market from the export and feed markets would be done by the issuance of marketing certificates to producers covering the domestic food quota. The per bushel value of each certificate would be equal to the amount by which the estimated parity price exceeds the estimated average price received by farmers. The domestic food quota would be apportioned among the States, counties, and individual farms in a manner somewhat similar to the way in which acreage allotments are apportioned under present legislation. Compliance with acreage allotments may be required by the Secretary as a condition of eligibility for price support and for the receipt of marketing certificates.

Processors of wheat would be required to acquire marketing certificates covering the quantity of wheat used in the products made for domestic food consumption. While marketing certificates would also be required to be purchased by processors for wheat products exported, the cost of the certificates acquired would be refunded upon proof of export.

The system of price support would be self-financing to the extent that the funds received from the sale of marketing certificates to processors covering the wheat equivalent of the products made from wheat for domestic food consumption equal to the value of the marketing certificates issued to producers.

The reasons why we oppose this approach are as follows:

1. There is considerable question whether the plan by itself would widen exports and feed use over the volume likely under present

programs.

(a) This bill provides for a loan program designed to curb United States competition in international wheat trade and prevent largescale competition of wheat in the feed grain markets. As a result, the free markets contemplated by advocates of two-price plans will not materialize. These loan programs recognize a dilemma in which advocates of the two-price plans generally find themselves. On the other hand, significant expansion in export markets and feed grain use cannot be achieved without effective competition of wheat in the feed and export markets. At the same time, large-scale competition of wheat with corn and other feed grains (made possible by assured high-level returns by wheat producers from the domestic food market) would be incompatible with the price support and adjustment programs in effect for corn and other feed grains and create international problems. As a result, the two-price bills being considered provide for price support for the entire wheat crop at levels which take into consideration, among other things, (1) the price support levels for corn and other feed grains and (2) the provisions of any international agreement relating to wheat which the United States is a party, foreign trade policies of friendly wheat exporting countries, and other factors affecting international trade in wheat.

(b) We already are exporting substantially large quantities of wheat by export subsidy under the International Wheat Agreement, the CCC export program and under Public Law 480. Increased commercial exports are not likely to occur at the levels of price likely to prevail under the proposed legislation. For 1958-59, these exports are expected to reach at least 400 million bushels.

2. This approach will not reduce Government interference with marketing and production of wheat, nor give farmers more freedom. The loan program provided would restrain competition of wheat in the feed and export markets and result in surpluses for delivery to the Government as under the operation of the present programs. This, in turn, would necessitate stringent acreage controls which the bill authorizes as a condition of producer eligibility for price support and for receiving marketing certificates. At the same time, to enforce the certificate program, there will be many check balances, records, and reports required in the marketing process. The loan program itself also would interfere with free marketings, just as at present, and export subsidies, of course, still would be needed.

In substance, even with a two-price plan the Government would still find itself doing the following things:

(a) Supporting wheat prices;

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(b) Issuing loan schedules with differentials for areas and grades;

(c) Carrying on a wheat storage program;
(d) Acquiring and selling wheat;

(e) Controlling production;

(f) Paying out export subsidies;

(g) Controlling the flow of certificates; and

(h) Policing the enforcement of the certificate plan.

Quite obviously, these plans cannot be a step in the direction of less controls.

3. This approach would not be self-financing since consumers will pay the cost directly instead of indirectly through taxes.

In all likelihood, the certificate plan would be construed by our consumers and the baking industry as a tax on bread. The fact that the returns to producers over and above those obtainable under a system of free market prices would be derived largely from our lowincome consumers would seriously impede the public acceptability of such a program.

Since per capita wheat consumption is largest among the lowincome groups of our population, the burden of providing a pricesupport program for wheat would largely fall upon those in our economy who are in the weakest position to pay for it.

4. Any artificial stimulus to increase the production of wheat for feed would be most untimely. Feed grain stocks at the start of the 1958-59 season are expected to be at an all-time high of 60.4 million tons. Therefore, the disposal of large quantities of low-priced feed wheat could have serious impact on our feed grain markets. We would merely be shifting our surplus problem from wheat to corn, grain sorghums, and other feed grains.

5. Any price-cutting undertaken to increase exports significantly could have international repercussions. These repercussions could take many forms, one of which could be a cutback on foreign imports of other United States crops, such as cotton, where the United States must depend on foreign markets for a substantial part of its outlets. 6. A number of other problems are likely to arise, including these: (a) Wheat producers who have been growing high-quality milling wheat would likely consider as inequitable the program provision under which the apportionment of certificates to producers would be based on total wheat production, irrespective of the market outlet into which the wheat is moved.

(b) Without allotments in effect, this apportionment provision would tend to encourage producers to expand their acreages so as to obtain a greater share of the relatively stable and high-priced domestic food market.

(c) Many complex administrative problems are inherent in the system of marketing proposed in this bill. For example, the Department would have to determine the value of the certificates in advance of the marketing year based on the amount by which the estimated parity price exceeds the estimated average price received by producers. Errors in these estimates may result in consumers having to pay more than parity for wheat and to offset such errors, complex administrative procedures would be required. On the whole, the program would involve the Government more instead of less in the handling of wheat in direct competition with the private trade.

7. The two-price approach also could adversely affect small wheat producers those who harvest 15 acres or less. These small producers would be affected in two ways:

(1) They would have no voice in determining whether the two-price plan would be adopted. This decision would be made in the regular marketing quota referendum by the majority of producers voting. Producers with 15 acres or less are not eligible to vote in the referendum.

The following shows by States the percentage of wheat farms for which farmers would not be eligible to vote in the referendum.

You will notice that, for the United States as a whole, about half of the wheatgrowers would be ineligible to vote.

(2) They would have their net incomes reduced, that is these small wheatgrowers. Under present legislation, a farmer planting 15 acres or less may market this entire quantity free of marketing quota penalty. While he must still plant within his acreage allotment in order to be eligible for price support, he still receives the umbrella effect of price support provided on other wheat. Under the domestic parity plan, however, producers growing 15 acres or less would be required to plant within their allotment to be eligible for certificates. This would mean that they would receive a relatively good price on a much smaller quantity of wheat than under the present program.

Now I will comment on several of the other bills here:

Price support at $2 per bushel, that is, H. R. 10193, H. R. 10204, H. R. 10228, H. R. 10241, H. R. 10269, and H. R. 10837.

These 6 bills would amend section 101 of the Agricultural Act of 1949, as amended, by adding a paragraph (g) providing that the price support level for the 1958 crop of wheat shall not be less than $2 per bushel.

The bills would have the effect of raising the support level by 22 cents from the presently announced minimum level of $1.78.

The $1.78 per bushel level or 75 percent of parity, was determined in accordance with title I of the Agricultural Act of 1949, as amended, which provides for a national average support level of not more than 90 percent of parity nor less than a level determined by the supply percentage as of the beginning of the marketing year. In any event, the minimum level of support cannot fall below the 75 percent. At the time the 1958 crop wheat minimum national average support was announced in April 1957, it was estimated that the wheat supply for the 1958-59 wheat marketing year would be 141.8 percent of the normal supply. In accordance with the legal formula, if the total

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