Mr. SMITH. Let me ask you, Mr. Hughes, whether or not you believe Congress can justify attempting to do something for farmers who overplanted when 85 percent of all the other farmers complied with acreage allotments?

Mr. HUGHES. Well, I think in this case the farmer is accepting some sacrifice by doing that, he is denying himself price support and he is making himself eligible for penalty on the excess production if he sells it, and he understood, of course, he could store the excess as crop insurance, in the event he has some loss of crop at some future time, then he would have that, and he accepted some penalties which he should not be relieved of but beyond that I think it is a little unfair to change the rules.

Mr. SMITH. Of course, there are certainly a great many farmers who did not know of the double penalty but there were a great many farmers who simply said, "I am going to plant in excess.'

Can we go back home and explain to all of the farmers in that area what we are going to do here?

Mr. HUGHES. I think so because, you see, actually under the proposal that the Department presented you are forgiving this year because you did not want to change the rules after he has planted the wheat, but beyond that if there is any overplanting of the allotment and he sells one bushel, you pay the penalty, you will get the double penalty, you will get the tax penalty and you will get the penalty of losing allotments in the future.

To me, that will stop the overplanting completely.

Mr. SMITH. In other words, if he overplants one acre, then he is going to have the base cut down?

Mr. HUGHES. That is right, besides paying the penalty.

Now, if they store the excess wheat and do not sell it until such time. as they have a crop failure, then they will not lose the allotment.

Mr. SMITH. What do you think the prospects are for production of wheat in the high plains area compared with what it was, 94 million bushels in 1957, what do you think it will probably be in 1958?

Mr. HUGHES. Well, I think possibly that you misunderstand this 94 million or 95 million, which is the amount of wheat that was produced the last years on farms between the allotment and 15 acres and none of that is subject to penalty and will not be in the future.

The amount in the area you are thinking of, the high plains area, is the 9 million or 10 million bushels.

Mr. SMITH. You are of the opinion it will be considerably larger this year?

Mr. HUGHES. It would appear to be. However, it is a little hard to tell how much of that might be clipped or destroyed, by the farmers, in order to make themselves eligible for price support, because it appears that there is going to be quite tight storage situation and in that event there might be quite a discount of the wheat in loan and I think many of them are going to look at that very carefully.

Mr. SMITH. What do you think the price will be for wheat, and I mean the free market wheat?

Mr. HUGHES. I suspect that if this crop matures, that we would produce 40 to 50 cents a bushel under the loan, late in July.

Mr. SMITH. Do you think there will be $1 wheat out there?

Mr. HUGHES. I think it is possible at the farm level in the western part of that area because if the storage situation is so tight that they cannot get it into storage, the fact that they can get a loan means nothing, they have to have it in store before they get a loan.

Many of these farmers have gone through 2 years or more of drought and they are in a rather bad way financially and if they get this crop, they will sell some of it which means there could be quite a pressure on wheat, on the market, and it could be very depressing, I think.

Mr. SMITH. And you think it is not unreasonable in view of all the factors that we could have $1 wheat out there?

Mr. HUGHES. I would say it is possible, I would not want to predict. Mr. SMITH. What is the cost of producing wheat in the high plains

area?

Mr. HUGHES. More than $1 bushel, I can assure.

Mr. SMITH. That is all.

Mr. ALBERT. Mr. Watts?

Mr. WATTS. One question in order to clarify my own mind on something I know very little about.

What are the factors that will carry wheat acreage back to its historic location?

Mr. HUGHES. The big shift has been caused by the 15-acre exemption.

A farmer, we will say in 1954, when you applied controls, had zero allotment, zero history but because we got in trouble on several of these commodities about the same thing, and we had cotton allotments and corn allotments, and if he had some acres and he decided to grow 15 acres of wheat, for instance he harvests that 15 acres the following year, it must be listed on the sheets as history for that year and when he does that for 3 or 4 years he establishes a base of 15 acres and he is entitled to an allotment on that.

Well, the allotment factor, in our case our allotment is about 65 percent of our base and in some areas it is 75, but in our particular area, 65. Well now, as we move you see, that is how he lost his history.

Mr. WATTS. I understand.

Mr. HUGHES. Now, he gets it back because if he continues to plant 15 acres on 5 acres-allotment he will not get his base or history for what he planted but he will get his allotment and if we move into the future that history will gradually reduce each year.

Mr. WATTS. If he continues to plant will the allotments stay the

same?

Mr. HUGHES. No, because he got his allotment by having a base of

15 acres.

Mr. WATTS. And it is for 10 years?

Mr. HUGHES. Yes.

Mr. WATTS. And he planted 15 acres for 10 years and then by factoring that by 65 percent he got his allotment, is that right?

Mr. HUGHES. About 10 acres.

Mr. WATTS. Now, since he gets no credit and his allotment then at the present time is 10 acres

Mr. HUGHES. Yes.

Mr. WATTS. Since he gets no credit in the future for planting an extra 5 acres his base will drop back to 10 acres and by factoring it, to 611⁄2?

Mr. HUGHES. It will actually have to drop 3 years before.

Mr. WATTS. But that is the effect?

Mr. HUGHES. That will occur and gradually his allotment will be reduced each year.

Mr. ALBERT. Any questions?

Mr. JONES. I do not come from a wheat area although there is considerable wheat grown. I want to see if I have this correct in my mind.

As I understand it, the fellow who started growing wheat, he had not allotment at all, but he could grow up to 15 acres of wheat? Mr. HUGHES. Yes.

Mr. JONES. And then he sells it.

Mr. HUGHES. Then, he can sell on the market, he could not get price support.

Mr. JONES. Everything except price support; he could sell it? Mr. HUGHES. Yes.

Mr. JONES. And as has been brought out, he has 10 years and then he would establish 15 acres as a base from which his allotment was figured?

Mr. HUGHES. Yes.

Mr. JONES. And if he kept within his allotment he could get price support on the allotment if he did not exceed that?

Mr. HUGHES. That is right.

Mr. JONES. And if he exceeded it and planted 15, he could still sell. Could he get price support on that part of his crop within his allotment, or not?

Mr. HUGHES. No.

Mr. JONES. If he exceeded it?

Mr. HUGHES. If he exceeded it.

There is this factor, that if he has got his allotment, if he has earned it and if he stays within his allotment he will not lose any of his allotment, he will lose it only if he continues to plant the 15 and markets it. We will not take anything away from him if he now complies with

his allotment.

Mr. JONES. Under the present law, we are not talking about this proposal, but under the present law he could still retain his allotment and base even if he planted 15?

Mr. HUGHES. No, not the way it is now, the way it was changed last year.

Mr. JONES. In other words, if he planted 15 then he got out of the the support?

Mr. HUGHES. Yes.

Mr. JONES. But he still could sell?

Mr. HUGHES. Yes.

Mr. JONES. But the fellow that went up to the 30 acres, he had to use all of that on the farm?

Mr. HUGHES. That is right.

Mr. JONES. And that is the only difference between the 15 and 30? Mr. HUGHES. That is right.

Mr. JONES. The 15-acre man could sell on the open market without price support. The 30-acre man had to use all of his wheat on the farm?

Mr. HUGHES. That is right.

Mr. JONES. But neither one retained their acreage or their base for history for future years, is that right?

Mr. HUGHES. That is right.

Mr. JONES. I think I have it straight.
Mr. WATTS. One more question.

If I understood,, this fellow that planted 15 acres and acquired a 10-acre allotment or base

Mr. HUGHES. He acquired a 10-acre allotment.

Mr. WATTS. If he in the future plants 10 acres or whatever his allotment is of wheat that may be determined out of the national quota, he does not lose any of the allotment?

Mr. HUGHES. No.

Mr. WATTS. If he overplants under the law passed last year?

Mr. HUGHES. Yes.

Mr. WATTS. And that got these fellows in the trouble you are talking about now.

Mr. ALBERT. He does not change the allotment, the factor could change, but his base would remain the same.

Mr. HUGHES. He would get credit for 5 acres of diversion, so theoretically, he will retain his allotment unless there is a difference in the factor in the whole county; but individually he is protected. Mr. WATTS. May I ask another question, Mr. Chairman?

Mr. ALBERT. Yes.

Mr. WATTS. I want to get this clear in my mind. I thought that if he acquired the allotment up to 10 acres

Mr. HUGHES. And a base of 15.

Mr. WATTS. And a base of 15, that is if he continues for a 15-year period with a 10-acre allotment and 15 acres of plantings, as each year went by, instead of taking his history at 15 acres you would reduce it by

5 acres?

Mr. HUGHES. Whatever the allotment.

Mr. WATTS. You would have 10 years, we would say, the allotment and the base, both-the base would be down to 10 acres and his allotment would be whatever the factor part of it was?

Mr. HUGHES. That is right.

Mr. ALBERT. It depends on the factor in the county.

Mr. WATTS. Actually the fellow in the East growing 15 acres of wheat is not going to be interfered with whatever his base or allotment. Mr. HUGHES. That is right.

Mr. WATTS. He could raise that 15 acres of wheat if he wants to raise it and in the division of the national wheat quota it would naturally go back to those States that have complied with their allotment?

Mr. HUGHES. That is right.

Mr. WATTS. And we would just have more wheat.

Mr. HUGHES. I think that is right.

Mr. ALBERT. Any more questions?

Mr. SMITH. I Would like to ask, Mr. Hughes, in regard to this dollar penalty that the farmer has if he overplants, I would like for you to give us a little more comment about that.

I am wondering if we can reach a more equitable penalty in dollars and cents. Is it not a fact that the good farmer with good land has got an unfair advantage from overplanting than some man on marginal land, in other words, a man with good land can plant it all in wheat and he can raise 35 bushels an acre or 40 bushels while the average in the county is 10 or 12 bushels an acre.

Mr. HUGHES. Yes.

Mr. SMITH. Is there any kind of way you can figure it so as to get at that proposition?

Mr. HUGHES. Yes, that can be done. But it will take no change in legislation, really, to accomplish that. If I say something I should not I hope the folks from the Department will correct me, but the law provides a normal yield be established for the farm.

We have the normal yield for the county, but in the past the Department has not seen fit or at present it does not see fit to establish a normal yield for each farm and make it meet this yield for the county.

Now, sometimes they have done that, established a county average for everyone and in other counties they just established a yield for farmers and adjust to the county average, so if you had somebody that overplanted the county committee could establish a really low yield for that farm and give him a chance to sell that wheat.

We have urged the folks in the Department to tighten up the normal yield and set it as high as they possibly can on the farm, and that would do what you are proposing. That could be done, rather than by changing the dollars and cents penalty.

Mr. SMITH. In other words, let the county administrative agents do that rather than write it into a law?

Mr. HUGHES. Yes, it can be done administratively. I believe I am correct.

Mr. SCHOONOVER. Mr. Chairman, the law provides that both the county and farmer's normal yield shall be based on a 10-year period and since you have had this upward trend in yield in the last 10 years, by using the 10-year period, the 10-year average will be lower than in recent years. The only way to correct that would be to have legislation, but otherwise we could remedy the situation by administrative action, I think.

Mr. MANWARING. Mr. Chairman, we will have to plead, I am afraid, "guilty," on some of these charges.

We have urged our county committees to set up proper normal yields and did not make them weigh out to the county average because there are so few noncompliers compared to the total that we felt that was an undue expense, but we will undertake to put little more pressure on the setting of equitable and proper normal yields and I think we can help considerably.

Mr. ALBERT. Any further questions?

Mr. BREEDING. I would like to compliment you, Mr. Hughes, for your fine statement this morning.

Mr. HUGHES. Thank you.

Mr. BREEDING. Mr. Chairman, we have worked with this organization of wheat growers and also we have grown a lot of wheat ourselves. I think that you have done a fine job here and I want to congratulate

you.

Are you acquainted with the two suggestions offered by the members of the Department this morning?