I would like to make one statement. After this year of study with some of the finest research men in the country, I am completely convinced that there is no other solution to the farm surplus problem other than the industrial uses of the farm crops of America.

Now I would like to back up for just a few years. You are talking about an emergency now. When Senator Butler was alive I came down here and with him when to the Secretary of Agriculture and proposed almost the identical thing that is in this bill here today. I would like to leave this statement for the record, but would you like for me to read it, it is rather short, or would you rather have me just give a synopsis of it and then I would be glad to have you enter it into the record?

Mr. POAGE. As you wish.

Mr. WELSH. The title of this is "Profitable Use for Deteriorating Government Surplus Grains," and it was presented on June 24, 1954:

During the past war, the writer, along with a small group of Nebraska businessmen, formed a private corporation called the Farm Crops Processing Corp. and with RFC funds built and very successfully operated at Omaha, Nebr., one of the world's largest alcohol plants-producing some 70,000 gallons of 190-proof industrial alcohol per day from grain.

The alcohol produced proved to be a very valuable aid in producting butadiene (from which synthetic rubber was produced) to keep our army on wheels. Besides being successfully operated as a private enterprise, we returned to the Government, in fees and taxes during the period of operation, all of the funds used in construction.

Bear in mind that this was built in wartime at very expensive cost.

Now this plant is idle-and I understand is ordered sold.

Certainly, it seems to me we should explore the possibilities of using some of our tremendous surpluses of grain (many millions of bushels of which are spoiling in the temporary storage facilities provided by the CCC) in this plant before disposing of it.

My 40 years of experience in the grain business, along with the operation of this plan for several years, has given me the opportunity to acquire knowledge that I feel sure can be of value in the solution of our national problems that are the direct result of surpluses of grain.

I do not propose to go into detail in this article but all statements made are based upon experience and have been verified by research and actual plant operations.

1. The starch in deteriorated grains is still suitable for conversion to alcohol. Only the starch is used for alcohol.

2. From each 56-pound bushel of grain (wheat, corn, sorghum grains, etc.) can be produced 24 gallons of 190-proof alcohol.

3. From the residue (after the starch is removed in the form of alcohol) can be recovered 16 to 20 pounds of high protein feed concentrates running 32 to 34 percent protein that is very valuable for animal feed and is in short supply at present.

4. The present value of these distillers' dried grains would be about $65 to $70 per ton or 3 cents plus per pound so the value of feed recovered is sufficient to pay the cost of conversion and show a very profitable operation of the plant. Cost of conversion is about as follows: $1.50 per bushel corn will produce about 60 cents per gallon alcohol; $1 per bushel corn will produce about 40 cents per gallon alcohol: 30 cents per bushel corn will produce about 10 cents per gallon alcohol.

FREE CORN-ALCOHOL FOR NOTHING

5. Delivering deteriorated grains to this Government plant at no cost would enable the recovery of practically the full value of the original bushel of grain before deterioration, and in addition, the Government would receive 2% plus gallons of 190-proof alcohol free.

6. Our Government is presently buying large quantities of alcohol as fuel for jet planes, rockets, guided missiles, turbojets, and reciprocating engines. Most of this alcohol is now made from imported blackstrap molasses or from petroleum fractions. Government purchases are probably many times the capacity of this plant.

7. If there were no immediate use for alcohol, it could be stored without substantial loss and much cheaper than the present cost of storing our surplus grains.

8. There are hundreds of uses for alcohol but, of course, it can be made cheaper from blackstrap molasses and petroleum than from high-priced grains.

ALCOHOL FOR RUBBER

9. The alcohol from 1 bushel of grain will produce about 6 pounds of butadiene and this in turn will produce about 6 pounds of synthetic rubber. Should all the synthetic rubber used in America be made from grain alcohol, it would consume some 200 million bushels of grain yearly.

ALCOHOL FOR FUEL

10. Research has been carried on in the Government laboratory at Peoria, Ill., on alcohol for fuel, for automobiles, trucks, tractors, and planes.

11. Automobiles in the United States of America consume some 36 billion gallons of gasoline per year. If they were required to use only 5 percent of alcohol blended in gasoline, it would consume some 700 million bushels of grain yearly. Ten percent would consume some 1,400 million bushels. That's far more than our burdensome yearly grain surplus.

12. Of course, the Omaha plant alone could not solve the agricultural problem but it could demonstrate the feasibility of such uses. This plant was originally built for research on farm crops and there are three other such alcohol plants not now in use.

13. The Omaha plant alone could consume some 10 million bushels of grain yearly and produce some 25 million gallons of alcohol that would replace purchases now being made for Government agencies. At the same time, it would produce some 150 million pounds of badly needed, high protein feed that could be consumed immediately in the territory where it is produced.

There are two ways the foregoing results could be accomplished.

1. The plant could be operated by the Department of Agriculture or the Commodity Credit Corporation. The entrance of our Government in this field might cause considerable opposition and I believe it is the policy of the present administration to avoid competition with private industry. I do not favor this procedure. However, if the decision is made to carry out this demonstration by Government operation, I would gladly donate any assistance I might be able to give to the successful completion of such a program.

2. A private corporation could be formed (such as the Farm Crops Processing Corp. which operated the plant during the last war) and with the complete cooperation of the Department of Agriculture and the Commodity Credit Corporation, the plant could be operated without Government finances. Arrangement can be made with the General Services to acquire this plant either by lease, with option to buy, or outright purchase.

The operation of this plant would be a demonstration of our ability to profitably consume our burdensome surpluses of grains for industrial uses here at home. At the same time, it would recover practically the entire value of the original bushel of grain before deterioration had taken place and return to our Government more than 24 gallons of alcohol for each bushel of grain processed and replace purchases that are now being made of alcohol from other sources. It would enable the General Services to lease the idle plant at a satisfactory rental, and result in the final sale of the property to private enterprise. The additional cost to the taxpayer would be nothing.

The paragraph quoted below is a recent appraisal by a present Assistant Secretary of Agriculture of the possibilities of alcohol for fuel.

The proposed alcohol fuel idea eventually could eliminate existing or future corn or wheat surpluses, and also reduce parity costs if adequate legislation were to be effected. The major fuel use is the only known outlet that is large

enough to absorb the quantities of grain that might be available. Also, it would serve to assist the fermentation alcohol industry which now is in a critical position. Such a scheme might be temporarily economic if the savings on parity, crop storage, and losses by spoilage are taken into consideration, as well as the inroads on petroleum resources. From present indications, storage, deterioration and spoilage of grain stocks represent a high annual cost, and-if the present situation is continued indefinitely-much or all of the stored grain may ultimately be a total loss, in the absence of a use outlet. But the program could not be put into immediate operation.

The alcohol could be sold to another department of the Government, to the Defense Department. I was advised last year that it was some place in the vicinity of 50 million gallons of alcohol and I think that the price today is 47 cents a gallon.

I suggested in this that the plant could be transferred to the Department of Agriculture and could be operated by a private foundation.

I want to tell you gentlemen that I think that the operation of this plant should be in the hands of the cooperatives, and that it should be operated by the cooperatives or by some nonprofit organization and under the complete direction of the Department of Agriculture and the grain should be put in there for free and the corporation or whoever takes the plant should put up the $1 million that Mr. Johnson said was necessary not only to condition the plant and put it in working order but to build a laboratory satisfactory for research, they should be repaid on an amortized basis of 20 percent a year and if they were given a contract for 5 years, then that organization or the cooperative or the company that operates this on a nonprofit basis could have all of their money back that they put in there in a matter of 5 years, and it would not require the funds being approved at this time.

Now, in the study of the commission on industrial uses of farm surpluses last year, of that I would like to read a report on the industrial uses of alcohol from grain by one of the task groups-by the way, I had 18 of these task groups studying the different problems of agriculture and this committee on alcohol said:

Steps should be taken promptly to provide for activation and long-range operation of present Government-owned plants and facilities capable of converting Government-owned suprplus grains into alcohol. Likewise, a sufficient number of butadiene units should be activated to use the alcohol so produced, since it appears that such production can be undertaken without seriously interfering with present synthetic rubber production and with the prospect of finding improved methods that will increase financial returns. Some of the products can probably be absorbed through Government activities. Operation of these plants and facilities would provide the opportunity to initiate many techniques and to develop many applications necessary for the beginning of an agrochemical industry.

The long-range cost of the program that is suggested here would be modest in contrast with the present cost of the governmental program for agriculture and the disposal of surplus agricultural products in international trade. Furthermore, it is anticipated that the long-range economic benefits to be derived from this proposal would repay many times the cost to the Government, just as was true in the development of the Nation's general chemical industry.

Mr. Chairman, I would like that to be in the record, if you don't mind.

Mr. POAGE. Without objection.

(Statement referred to is as follows:)

REPORT OF THE TASK GROUP ON INDUSTRIAL ALCOHOL FROM GRAIN OF THE PRESIDENTIAL COMMISSION ON INCREASED INDUSTRIAL UTILIZATION OF AGRICULTURAL COMMODITIES, APRIL 25, 1957

Task Group: Reit T. Milner, Chairman; James W. Faucett, L. J. Gunson, Julius Hendel, Cecil A. Johnson, John W. Livingston, Edward S. Monohan, William B. Plummer, James A. Reid, George W. Rigby, Carl E. Rist, Earl D. Unger

LONG-RANGE PROSPECTS

The long-range prospects for developing an agrochemical industry at the expense of the National Government, through the use of agricultural products, including grains, as the basic raw material, appear favorable and in the public interest so long as:

1. Surplus supplies of grains are being produced, some of which find their way into Government ownership.

2. Storage costs and market supports are financed in part and at great cost by the Federal Government.

3. Export demand is declining except through subsidized disposal effort. 4. The Government acts to adjust production of various grain crops to meet long-range conservation, economic, military, or national-defense objectives.

Because developing a long-range agrochemical industry through research and development work seems to offer the most economic means of using agricultural products, including grains, which now find their way into Government ownership, it would appear desirable, during the period of development, to make Government grain available to industry for research purposes at near-zero cost. If it appears necessary to make some charge for agricultural products, the cost should not exceed the basic raw-material cost for other basic "natural" raw materials, such as petroleum and coal. It is believed that research achievements to produce "higher use potentials" for end products will ultimately justify a higher charge for the raw material. Thus the long-range objective for developing an agrochemical industry should be to make it free of subsidy. In the meantime, the program should not be required to sustain itself in competition with today's national or international market.

The prominent place the United States now holds in the field of industrial chemistry was achieved through assistance of the tariff and other long-range governmental means that were considered to be needed with the advent of World War I and thereafter. There now appears to be a like need and opportunity for developing an agrochemical industry through adequate research and development. Such work should begin by utilizing existing knowledge, facilities, and raw materials. To the end that private enterprise can lead the way to such achievement, encouragement of research is needed in the form of: 1. Grants of aid in money to educational, industrial research and consulting organizations for research and development work.

2. Free use of Government-owned raw materials over a period adequate to evaluate the new processes and developments.

3. Use of available governmental facilities at low rental rates. Additional financial assistance through Government loans, accelerated amortization of facilities, and tax chargeoffs. Long-term raw material supply contracts at fixed prices (independent of current grain markets) that would assure processors of enough grain to maintain continuity of manufacture at reasonable cost. (Although this would be difficult to arrange under usual Government contract procedures, it appears that such agencies as Commodity Credit Corporation could be authorized by the Congress to make such longterm contracts.)

Steps should be taken promptly to provide for activation and long-range operation of present Government-owned plants and facilities capable of converting Government owned surplus grains into alcohol. Likewise, a sufficient number of butadiene units should be activated to use the alcohol so produced, since it appears that such production can be undertaken without seriously interfering with present synthetic rubber production and with the prospect of finding improved methods that will increase financial returns. Some of the products can probably be absorbed through Government activities. Operation of these plants and facilities would provide the opportunity to initiate many techniques and to

develop many applications necessary for the beginning of an agrochemical industry.

The long-range cost of the program that is suggested here would be modest in contrast with the present cost of the governmental program for agriculture and the disposal of surplus agricultural products in international trade. Furthermore, it is anticipated that the long-range economic benefits to be derived from this proposal would repay many times the cost to the Government, just as was true in the development of the Nation's general chemical industry.

Mr. WELSH. Now, gentlemen, Mr. Johnson mentioned and I would like to impress upon you that I think that the real problem-Mr. Chairman, you asked about the economics of using grain.

In our plant we recovered this feed for animals and about 18 to 20 pounds for a bushel, and we got 3 cents a pound for the animal feed, which is about 55 cents a gallon

Mr. POAGE. What I was actually asking, and I don't want you to get me wrong, or anybody else to get me wrong, because I am sympathetic with the idea of the whole program of using grains for alcohol and everything else and I think it is a great thing and it is something that we need.

However, as I said before, the meeting this morning of this committee is for the purpose of discussing this immediate emergency situation in soft corn.

Mr. WELSH. Yes, I understand.

Mr. POAGE. And we have had bills introduced here early in the session. We have a bill by Mr. McGovern that was introduced February 4 which was for a long-time operation of this plant.

Now, if it is a permanent thing that you are talking about, that is one matter; but the bill introduced by Mr. Harrison and the other bills similar to that were introduced purely as an emergency proposition although I do see that the bills do provide for the Secretary of Agriculture to buy up corn in any condition and so, therefore, if you do not find enough corn in bad condition, then you could buy the good corn, but I had not understood that that was the proposal in this bill, that is, Mr. McGovern's proposal. That is a long time proposal but the committee is not hearing that this morning.

Mr. WELSH. I see.

Mr. POAGE. This is supposed to be an emergency condition to meet an emergency situation, that is, a situation as of how to take care of this corn crop that we have now, so we cannot go into any details upon the permanent aspects of it.

Mr. WELSH. You would like to know-I believe one of the questions you asked was how long it would take to put the plant in operation. Mr. POAGE. Yes, certainly, and how much of this corn would be used and how much it would cost per gallon for this alcohol using only the soft corn.

Mr. WELSH. Well, 60 to 90 days, it can be put in operation and going.

Mr. POAGE. All right. Now, how much soft corn will you use, how soon will that soft corn play out?

Mr. WELSH. How soon will it play out?

Mr. POAGE. Yes.

Mr. WELSH. Never. We are going to have a surplus of wet corn

Mr. POAGE. I understand you have one but you cannot keep this soft corn, can you, you cannot keep it?