Mr. MARSHALL. My other associate is Mr. George Mikkelson, who is president of the North Dakota Farm Bureau.

Mr. ALBERT. Mr. I. W. Boone did not come.

Mr. MARSHALL. We will be very pleased, indeed, to hear your statement, and you may proceed in such manner as you desire.

STATEMENT OF THE AMERICAN FARM BUREAU FEDERATION BY CHARLES MARSHALL, MEMBER OF THE BOARD OF DIRECTORS AND PRESIDENT OF THE NEBRASKA FARM BUREAU; ACCOMPANIED BY FRANK WOOLLEY, LEGISLATIVE COUNSEL, THE AMERICAN FARM BUREAU FEDERATION; LEWIS MUNN, PRESIDENT OF THE OKLAHOMA FARM BUREAU; AND G. H. MIKKELSON, PRESIDENT OF THE NORTH DAKOTA FARM BUREAU

Mr. MARSHALL. Mr. Chairman, the American Farm Bureau Federation appreciates this opportunity to discuss the wheat situation and the development of an improved price-support-adjustment program for wheat.

I am happy to have with me in addition to Mr. Woolley, Mr. G. H. Mikkelson, president of the North Dakota Farm Bureau, and Mr Lewis Munn, president of the Oklahoma Farm Bureau. They represent producers from two great wheat States.

In many respects wheat is our most difficult commodity problem. This is true in terms of

The level of accumulated surpluses and current output in relation to firm markets;

The limited crop alternatives available in important producing areas;

The spread between the domestic support level and world prices; and

The total cost of current support and surplus-disposal

programs.

Wheat farmers are face to face with two basic trends:

First, the decline in per capita wheat consumption; and, second, an increase in the efficiency of wheat production.

Throughout depression and prosperity, per capita consumption of wheat has declined. Some of this has been offset by an increase in population.

Consumption per capita was 254 pounds in 1929, 225 pounds in 1939, and only 165 pounds in 1957. Total wheat consumed as food in the United States was 492 million bushels in 1939 and was down to only 468 million bushels in 1957 despite an increase in population of approximately 40 million people.

While per capita consumption declined, striking increases occurred. in the efficiency of wheat production. The man-hours required to produce a bushel of wheat are only one-third of a generation ago.

This increase is due to substitution of machinery for labor, and improved varieties, tillage practices, summer fallow, insect, and disease control.

The efficiency in the production of wheat is five times greater now than in 1910-14, while the production of livestock is less than twice as efficient.

Under present programs we have accumulated an extra year's supply of wheat which is approximately five times the carryover established as normal by current law.

This surplus developed although some major wheat-producing areas have experienced drought conditions for several years prior to 1957, and despite the fact that record quantities of wheat have been disposed of abroad during recent years under special programs.

There is little prospect of liquidating our wheat surplus for years to come under present programs. Even with marketing quotas to control production and extraordinary disposal programs, the wheat carryover has increased in the last 5 years from 256 million bushels as of July 1, 1952, to over 900 million bushels as of July 1, 1957.

Wheat supply is not being balanced with effective market demand at present support prices. Experience not only with wheat but also with other crops has repeatedly demonstrated the inability of acreage restrictions to control production. Other factors of production can and have been substituted for land to overcome effects of acreage restrictions.

Also, in the case of wheat, the limited effectiveness of the acreage allotment and marketing quota approach has been further undermined by numerous special provisions of law.

Under the law, the national wheat allotment cannot be reduced. below a minimum of 55 million acres. The allotment has been at this level each of the last 3 years and is again at the minimum for 1958.

Since the minimum was originally established, compliance has been shifted from a seeded to a harvested acreage basis, and the output per acre has been substantially increased as shown in appendix table No. 1.

Increased yields in recent years have added greatly to realized output of a given wheat acreage. Based on average yields for the 10 years, 1947-56, 55 million harvested acres of wheat would normally produce about 962 million bushels.

Yields during each of the last 4 years have been above the 10-year average, however, despite the rather serious drought over this period. In 1957 with nearly 13 million acres of the national wheat allotment in the soil bank, we still produced 947 million bushels of wheat. Signup for the soil bank was much smaller this year, and it now appears quite probable that production will be appreciably above that of last year. In any case, the acreage reserve phase of the soil bank is supposedly a temporary program.

Based on the actions of the Congress, the acreage reserve program will not be effective after the 1958 crops. Therefore, it seems conservative to expect an average wheat production of something over a billion bushels annually with a minimum national allotment of 55 million harvested acres.

The total output will likely continue the long-time upward trend which has been experienced over the last several years.

The outlook for greater utilization than that of recent years is somewhat doubtful.

In the 10 years, 1946-56, which includes all of the high export years, the average disappearance of wheat annually was 1,043 million. bushels. Domestic consumption appears to have leveled off at about. 600 million bushels a year after the decline resulting from reduced

22856-58-pt. 2- -4

use of wheat for feed and seed. Wheat exports hit an all-time high of 549 million bushels, bringing total disappearance for the year 1956-57 to 1,137 million bushels.1

This is encouraging, but we should not be misled by the high exports of last year. These record exports reflect the combined effects of short crops in other counties-particularly in Europe, a low protein in the 1956 Canadian crop, and a multitude of Government export programs.

Thus, the fact that the carryover was reduced by 124 million bushels during the 1956-57 marketing year should not be interpreted as a lasting improvement in the underlying wheat situation.

Exports are expected to decline this year as the result of better crops in other countries and somewhat less favorable economic conditions in importing countries.

On the other hand, the 1958 crop appears likely to be the largest crop produced under marketing quotas during the postwar period. Although the carryover is expected to decline about 40 million bushels during the current marketing year, it will remain far in excess of a "normal carryover" as defined by the law.

The carryover is almost certain to rise substantially in the 1958-59 marketing year and to continue to increase in future years, if nothing is done toward changing the present program.

The effectiveness of the wheat-control program has been reduced not only by the changes mentioned above but, also, by outright legislative exemptions.

Producers are exempt from marketing quotas if they seed fifteen acres or less, or if the normal production of the seeded acreage is less than 200 bushels. In at least one State, Missouri, the 15-acre exemption has permitted total acreage to expand under marketing quotas, although acreage nationally has been substantially reduced.

States with allotments of 25,000 acres or less may be designated as noncommercial and exempted from quotas and allotments entirely. Currently, 12 States are so designated.

In as least five of the noncommercial States-Albama, Mississippi, Louisiana, Arizona, and Nevada-the exemption of wheat production from controls has stimulated a rapid expansion in acreage. In the 1957 crop year, these 5 States would have received allotments totaling 77,662 acres if they had been considered commercial; however, producers in these States actually seeded 571,000 acres for harvest in 1957. In the past, wheat producers have been encouraged to overseed by provisions of law which permit them—

(1) To sell the normal production of their allotted acreage without penalty; and

(2) To store excess wheat under bond until it can be sold within quotas.

In addition, some farmers have been paying the penalty and selling overquota wheat as a result of these various exemptions and special provisions. The Department of Agriculture recently estimated that around 100 million bushels of wheat or, roughly, 10 percent of the total output, is being produced in excess of allotments each year.

1 Wheat exports as well as total disappearance over a period of years are shown as appendix table 2.

Wheat exports at present are almost completely dependent on Government programs. For all practical purposes, every bushel of wheat and every pound of flour that we export carries some kind of a subsidy.

The direct subsidies which are paid in kind on commercial exports under the International Wheat Agreement averaged 81 cents per bushel last year. In recent weeks these subsidies have been running from 53 to 86 cents per bushel.

Similar subsidies are paid on commercial exports outside the wheat agreement, but direct subsidies are only one of several Government aids to wheat exports.

Despite the high direct subsidies which are available on commercial exports, both within and outside the International Wheat Agreement, we have had to depend on Government gifts, barter, loans, and foreign currency sales-which may turn out to be largely gifts for the bulk of our recent wheat exports.

In the 1956-57 marketing year, for example, 361 million bushels of wheat-the equivalent of 66 percent of total wheat exports-were financed under Public Law 480 and the Mutual Security Act.

The present wheat program not only has resulted in the accumulation of burdensome surpluses, it has also penalized producers in the old established areas which historically have supplied the market with high-quality wheat.

Although the national wheat allotment is the same in 1958 as in 1939-55 million acres-North Dakota has lost the right to grow 990,000 acres of wheat and the Kansas allotment has been reduced by 429,000 acres. In the same period, Colorado has gained the right to grow an additional 1.4 million acres and Oklahoma's allotment has been increased by more than 1 million acres.2

I think Mr. Munn will make a comment on that figure a little later.

These State figures do not disclose large shifts in acreage that have resulted within States due to acreage allotment programs.

In many States, old, established areas most adaptable to profitable production of the single crop wheat have had their acreage reduced; while, at the same time, other areas within the State have had their allotments increased even though such areas were adaptable to production of many other crops.

Many such shifts are uneconomic from the cost of producing wheat as well as from the quality of the wheat produced.

The old, established, efficient producing areas of some States, for example in 1955, could produce a bushel of wheat for approximately 80 cents per bushel, while some of the newer areas to which acreage has been shifted through force of Government programs might have a cost of production of around $1.50 to $1.75 per bushel.

Thus, not only has the individual right to produce been interfered with by the Government, but the ability to this country in general to produce wheat competitively with other countries has been impaired. In some traditionally low-cost-of-production quality-wheat areas, land values have increased considerably more than the national average. While this results in some benefits to the original owner, it also

Changes in allotments for all States between 1939 and 1958 are shown in appendix table 3.

increases his costs if he continues in production. A new owner must include these inflated land values in his costs, and the area generally ceases to enjoy the advantages of being a low-cost producing area.

Another effect of the present program has been to unbalance the supplies of the different classes of wheat.

Many of the areas which have increased their share of the national wheat allotment under the control program produce hard, red, winter wheat. As a result, the present surplus problem is much worse for hard, red, winter wheat than for other classes.

We have also had a very serious surplus problem with white wheatat least partly because the present program has made it impractical to feed wheat in the Pacific Northwest. This condition has been temporarily alleviated, however, by exceptionally heavy exports recently under Public Law 480.

The following table compares July 1, 1957, wheat supplies with 1952-56 average disappearance by classes:

I am not going through this mathematical table because it is for your reference.

! Includes imports of 8 million bushels.

Total wheat based on 1957 annual crop report. Breakdown by classes does not add to totals due to ecent revision of totals.

The foregoing figures indicate that the hard red spring wheat situation is becoming unbalanced. This becomes even more significant when the hard red spring wheat surpluses of Canada are taken into

account.

Wheat producers clearly need a better program.

If we are going to solve the wheat problem, we must face up to the fact that present programs virtually insure the continuation of wheat surpluses for years to come. With the moisture situation improving in the Great Plains, there are good prospects that wheat yields will be higher in the next few years than the somewhat better than average yields of the recent past. There is little prospect, however, for any substantial increase in domestic consumption.

On the average, exports are likely to fall far short of the high total reached under the unusual conditions of 1956-57. World-wheat production is high, and other countries, particularly Canada, are becoming increasingly critical of our export programs.

We cannot continue to ignore the attitude of countries that are important to us as allies in the struggle against communism and as markets for other products.

If we are going to solve the wheat problem in the near future, we must face up to the hard realities of our present situation.