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get the information so that we can test the proposals you are making. I don't blame you if you don't have it, but I am just asking you a simple question and I think it is one that you can answer.
Mr. Johnson. My reasoning is this, that the alcohol made from this grain, and the amount you are going to pay for this grain, it will be sold for less than the alcohol now made from the petroleum products and the greater part if not all of the replaced would be replaced by alcohol from this spoiled grain that you are now making from petroleum products
Mr. POAGE. At what price does grain sell or have to sell to be competitive with this petroleum alcohol? You told us something about it being sold for 68 cents. Now, obviously, the existing grain alcohol manufacturers can buy this grain at 75 cents and they can buy it
Mr. WELSH. I do not think that is correct; I didn't make that statement. I said under $1 a bushel and I thought between 85 cents—but there had been carloads full of corn that were sold as low as 68 cents a bushel.
Mr. Poage. What are you paying at the present time?
Mr. WELSH. I don't know. I did not come down as an expert on that.
Mr. PoAGE. We have been told before that corn coming out of Iowa sold at 72 cents. Is that right? And if it is selling for that, those people probably know about it and probably are paying no more for it, and I think that is a reasonably fair figure and then you are telling me that we cannot compete with petroleum alcohol at 72 or 75 cents for corn; is that right?
Mr. WELSH. No
Mr. Poage. Can you make alcohol as cheaply from corn as from petroleum ?
Mr. Welsh. Well, will you tell me what the petroleum price of alcohol is?
Mr. Poage. I haven't any idea.
Mr. Poage. But you are telling me now that by opening this plant you will be below the petroleum products price, but unless you know the petroleum products cost, how do you know you will be lower?
Mr. WELSH. I told you that I thought the petroleum price was some place in the vicinity of 45 cents a gallon.
Mr. Poage. You think the petroleum price is 47 cents ? Mr. WELSH. That is right. Mr. Poage. I am just told by our staff that Friday's price on corn ethyl alcohol, 190-proof ethyl alcohol, was 20.6 cents. That would mean, would it not, that if these figures are correct they would have to buy this corn for less than 60 cents a bushel? Isn't that about right?
Mr. WELSH. To make 20-cent alcohol?
Mr. Poage. Now you surely do not contemplate buying this corn at less than 60 cents a bushel ? As a matter of fact, isn't this grain alcohol selling because of what it is made of, rather than because of its price? There is no grain alcohol even today selling in price competition with petroleum alcohol, is there?
Mr. WELSH. I am not in the business today, sir.
Mr. WELSH. I am not in the business today. I was in the business in 1946.
Mr. HOEVEN. Mr. Chairman, I would like to get back in the groove here now for just a minute.
I introduced H. R. 11753 on this subject, which is very similar to the Harrison bill and others. I appreciate the fact that that bill rather covers both the short-range and the long-range program. What I had in mind, of course, was to meet an emergency situation as of now, and then the legislation that comes out of this committee would be properly amended to that effect.
I am thoroughly convinced that one of the greatest mediums of alleviating our surplus problem of agricultural commodities is to find new uses, and certainly one of those is using grain in alcoholconverting some of this corn into a type of product.
Well now, on the emergency basis, of course I am disappointed that it is going to take so long to put this Omaha plant into operation, from 60 to 90 days, and from practical experience we know that that is likely to be 120 days.
The thing that disturbs me is that we have an emergency as of now which we are trying to meet. Now we do have a lot of soft corn, wet corn, in the Midwest, particularly in Iowa and Nebraska. A lot of that corn is not eligible for Government loan; a lot of it has to be sold right now, in the coming week or two, due to the spring thawswe have to get rid of it. Some of the wet corn has sold as low as 71 cents a bushel in my area, and particularly from the landlord's standpoint that is not very desirable. Now there is a lot of that wet corn being fed, of course, going in to increase the livestock numbers, both in cattle and hogs, and a lot of the corn is being dried. However, the drying equipment is at a premium. These dryer operators have a long waiting list, and there are many instances where they cannot possibly get to dry this corn within the next 2 or 3 weeks, or when the so-called spring thaw is on. It should be met before that time.
Secondly, the price of drying is rather an expensive business. It is costing from 10 to 12 cents a bushel to dry this corn, and even after the corn is dried it is not always satisfactory--there is still some of that corn that may be wet and will still spoil.
So what we are trying to do here, is sort of a crash program, to take care of the particular situation as the Corn Belt. Now I realize that the long-range program will need a lot of testimony. I am all for that kind of a program, but if we could do something now to meet this emergency–a lot of the corn, as I say, cannot be dried. Some of it is being fed, but some of it cannot be fed, and it cannot be sealed, so it is going to be a loss to the particular farmer or landlord who has this corn in his possession.
Now we have this plant in Omaha, and I sincerely hope it could be opened a lot sooner than it can be. But if it cannot be opened until the 1st of July, I think maybe we have the cart before the horse. Can you make
any comment on that? Mr. WELSH. I would like to know if you have made any investigation of the present prices of alcohol in the writing of your billhave you made any investigation of the present prevailing prices of alcohol!
Mr. HOEVEN. No, I know nothing about that.
Mr. WELSH. I suggest Mr. Berger here, in charge of all the surplus grains for the Commodity Credit, can tell us more about the value of grain than any of us could possibly know.
Mr. HARRISON. Mr. Examiner, I think the Congressman is exactly correct, we have to treat this from the standpoint of an emergency. Now rather than starting a business out here with the idea of selling alcohol from this time on—the reason that corn today is selling for 71 cents a bushel is that it is distress corn. It is corn that the farmer cannot find any other market for. He needs money. He could not sell it at the regular price if it were dried; or, if it were storable corn, he could get $1.10 a bushel for it. At least that is the support price on noncompliance corn. Now he has corn that is going to go out of condition, and I would like for Mr. Smithberger to develop this, as to what the need is. I think it can be developed here, in commercial corn areas and particularly in those areas that grow corn for market only, that there will be at least 50 percent of the farmers out there who will not have a market for their com. And if they do have a market, it will be a distressed one.
So our problem here is to get this corn into alcohol. Maybe we do not have a ready sale for it, but it is a market for this man is going to lose his entire crop—which, as I understand, is about 25 or 30, or maybe 40 percent of the farmers in this commercial corn area. Now that is where we are, rather than trying to develop a market here for this particular product.
Now as far as we have been able to develop, the Defense Department does use about 50 million gallons of alcohol. Now whether or not that is the market for this particular product, I do not know and I do not think anyone else knows.
Mr. POAGE. Are you suggesting that we convert this corn into alcohol and maybe keep it?
Mr. HARRISON. That is exactly right.
Mr. Poage. You will agree, actually, if they go to selling this alcohol in today's market, that it will simply reduce the sales of other producers of grain alcohol by exactly the same amount that they sell into the market?
Mr. HARRISON. Maybe we would have to store this for a year, but it is in storable condition
Mr. Poage. I think that is a good suggestion, but I mean, you do agree that it is true that if you put this plant in operation and produce, say 50 percent as much alcohol as we are now using, that it would simply reduce by 50 percent the sales of the existing suppliers ?
Mr. HARRISON. That is exactly right. If the market is full today, why any additional is going to run over. We are doing here with a completely emergency program, and this farmer is all we are trying to take care of.
Now I do not know that this 100-mile radius that someone has mentioned is the area that can be helped in this particular case. I think the area could be much larger. But the need for it, I think, can be developed by Mr. Smithberger, who is in the grain business, a farmer and a cattle feeder, out in that area, and knows pretty much about what the condition is in his particular county. And I think the thing that is true in his county with respect to this corn is true in many counties, and Mr. Simpson's district, Mr. Hoeven's, Mr. Harvey's, and
the rest of the corn area. I think we need to develop is purely from the standpoint of combining the market for this man who is not going to have a market, or if he does, it is going to be a distressed market.
Mr. Poage. I want to correct a statement which I made a few.minutes ago because Mr. Heimburger just called my attention to the fact that he had secured a wrong figure on the price of ethyl alcohol; it is actually selling for 47 cents instead of 20 cents. Apparently the price of grain alcohol and of alcohol made from petroleum is competitive.
Mr. HARRISON. That is the information that came to me the other day in making inquiry of the Defense Department as to
Mr. Poage. I do not know where we got this 20 cents. Anyway, the Department of Agriculture supplied the figure, and says this is the right price, and I am sure it is.
Mr. HOEVEN. May I ask Mr. Welsh a question ? May I ask this one more question?
Mr. WELSH. Yes.
Mr. HOEVEN. Do you know of any other avenue of approach to take care of this so-called wet corn except to convert it into industrial alcohol?
Mr. Johnson. I do not know of any other approach because at the time that we were using this corn, we also had two pilot plants in our plant that we were working on, on other processes, and we could not find any other use for it at that time, and we worked on it for more than 3 years. When we get into the processing of spoiled cornwe spoil the part of the grain that we can use for other purposes. Now the proteins can be separated in No. 2 corn and used for human food before the corn is processed, and for the long-range program that, in my opinion, is what must be done. Because the entire world is short of proteins in their food, and instead of sending large sums of money to help out with food in some of these foreign countries, we could do a great deal better if we would send them a protein to put in, just the same as the K-food that Kellogg is making now. We went into that process and partially developed it. The Department of Agriculture in their laboratories have gone further with it, and in my opinion, that is going to be the final outcome of this whole agricultural program, to separate the proteins from the starches and put the starches into alcohol, that would be a byproduct at that time and can be sold at most any price because the proteins will then pay for the cost of the grain. Of course, that is the long-range program. But we went far enough into it so that we know that program is a sound program.
Mr. HOEVEN. Well the only thing that disturbs me in this entire picture is the time element involved, and what in the world can we do right now to remedy this situation. We cannot get this plant into operation for 90 or 120 days. That is the thing that confronts this committee. I think, as to the long-range program, we would have ample time to work that out.
Mr. Johnson. Of course my estimate on that is based on full operation. Of course, you would probably get it in operation and use some corn, but I am thinking about using 40 bushels a day. And I think it will take that long before you get it up to full production.
Mr. Poate. We are very much obliged to Mr. Welsh and Mr. Johnson for going into this. We only have a few minutes left.
Mr. Smith. I would like to ask a question, Mr. Chairman?
Mr. Smith. Has anything ever been tried to store this alcohol underground, the same as they store many other commodities now? Do they have to pack
Mr. Johnson. I do not know what the Government is doing about it. We have always stored it in tanks, about the same as oil is stored. At this plant there is storage for more than 2 million gallons of alcohol.
Mr. Poage. That is all. Thank you, gentlemen, very much. We have only a few minutes left, and we must have an executive session before we close.
Congressman Jensen is with us, and he wants to testify and we want to hear from him. We have other expert witnesses from the Department, so I am going to try to enforce a rule that no questions be asked-starting with the chairman-and try to limit the witness.
However, we want to hear from you, Mr. Jensen.
STATEMENT OF HON. BEN F. JENSEN, A REPRESENTATIVE IN
CONGRESS FROM THE SEVENTH CONGRESSIONAL DISTRICT OF THE STATE OF IOWA
Mr. JENSEN. I am pleased, Mr. Chairman, and grateful for this opportunity to come before the committee on this important matter. I am very much in favor of this legislation to open the plant at Omaha. I think it is one of the most important steps that we can take today to finally get started on a program, I hope, that will relieve the farm problem.
Now you have been talking considerably about this wet corn. Of course, we all know that wet corn is in Government storage, it is in the hands of noncompliers, it is in the hands of compliers, and it simply must be used up in some manner rather than just letting it lay and go to pot. Now I am informed by a gentleman who runs an elevator, and he is in this room right now, Mr. Smithberger of Stanton, Nebr., an elevator man, that it cost him 38 cents a bushel to dry corn, and when he gets all through drying it it is worth just about as much as chatf. Here is some of it right here. Mr. Smithberger has a sack full of it.
Now this corn, when it is wet, of course, is worth whatever they can pay for it to feed. After they spend 38 cents a bushel to dry it, it takes most of the oil out of it and the feed value has been reduced. You can see this corn, you can bite into it, like we farmers do, and you will see that it is nothing but chaff. There is not much feed value left in it.
So it is very important that we use this surplus grain that we have, this wet grain, in industrial alcohol. And that alcohol can be used, of course, for many purposes, as the gentlemen have explained.
I have great respect for the two gentlemen who have just testified before you, and they have tried their best to stay on the subject. I think at times they were lead off the subject.