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


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 ob

jectives. 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 long

term 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

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

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.

Nr. 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?

into any

Mr. WELSH. No, except by drying it and each one of these elevator concerns do have drying equipment and that equipment is running night and day drying that corn, taking the moisture out of the corn. Many of the farmers, themselves, are drying their corn.

Mr. Poage. That is, the soft corn?

Mr. WELSH. That is right, and they are working hard at drying that.

Mr. Poage. And after they have done that, after they have dried it, then they have got good corn?

Mr. WELSH. That is right. And I may say, Mr. Chairman, that my elevator is filled with that kind of corn that has been dried out, now. However, the corn-drying facilities are not enough, they are not anywhere near enough to take care of not only the wet corn but the wet sorghum grains.

Mr. ALBERT. Mr. Chairman, if I may interrupt; is this corn that is owned by the Government or is this privately owned wet corn?

Mr. WELSH. Most of it, Mr. Congressman, is in the hands of the private producer.

Mr. THOMPSON. And the problem is processing it?

Mr. WELSH. That is the problem now and the proposal because we are getting to the point where we do have an emergency situation with this wet weather.

Mr. Poage. Let us come back to this emergency, because you did not answer my original question. How long is this soft corn going to last? You said that you can dry some of it. And when you dry it, and as much of it as you dry, then you do not have any emergency?

Mr. Welsh. Well, I agree, Mr. Chairman, if it is all dried, you don't have any emergency.

Mr. Poage. That is right, and as fast as you get it dry you limit the emergency by that amount?

Mr. WELSH. That is right.
Mr. Poage. And how long then will you have an emergency?

Mr. WELSH. Well, if you can get it into proper storage—but as I say, I think that this thing is going to go on because then you are coming into the wheat crop and that will probably have the same difficulties because it will have excess moisture.

Mr. Poage. Do you think it is going to rain all summer? Suppose you don't have a wet summer next year. Suppose you have better conditions, a better summer, then we will have less of that soft corn?

Mr. WELSH. Well, we will have it continually.

Mr. Poage. Well, that does not make sense from any point of view that I have heard of in my life, we do not have an emergency every

Mr. WELSH. Suppose you ask Mr. Johnson. Mr. Johnson. Well, Mr. Chairman, we used in the operation of that plant before, we used every year a considerable amount of grain that was hauled from Minnesota and as far north as North Dakota and that corn was the butt ends of the outside cribs, that is, the cribs that were-open cribs. And you got down about so far [indicating] and then you find that the lower part of the corn is blue and that is what you are going to have at the end of this season for a great deal of that corn, probably 50 percent or more that cannot be used for hog feed and we will use it throughout the winter

Mr. Poage. The winter is pretty near over.

year; do we?

Mr. JOHNSON. Well, we used some one season and over into the next in the plant and probably one-third to one-half of the corn at times was that type of corn.

Now, what happens is that this corn, as it molds, the proteins are the part that is destroyed and the starch is not affected at all, and we produced as much alcohol out of that corn as we did out of the No. 2 corn; so that, for the purpose of making alcohol in that particular plant which was designed to use that kind of material--and I think it is the only plant in the United States that was designed that way-we can use the corn after it has passed the use for any other purpose, and we can make No. 1 or a high-grade alcohol from it.

Mr. Poage. But, now, obviously, you cannot get a bill passed before the 1st of May-because if we pass it out this week, out of the committee, then obviously it cannot get to the floor until sometime in the middle of the next month, and it will be the first day of May before we can possibly get legislation under the very best possible circumstances, and then it is going to take you at least 2 months—your estimate is 2 or 3 months, and I never saw any estimate that did not work out long instead of short—but even if we give you the benefit of that estimate then it will be the Fourth of July before you get it in operation.

Now, on the Fourth of July, are you still going to have some of this bad corn!—and I will grant you that you will have; but, as it disappears, by the last of July, you will not have any. Will not all of this corn be physically rotten? Is it going to be here physically?

Mr. WELSH. Mr. Chairman, Senator Young of North Dakota will verify this--and if you have a Congressman here from North Dakota he will verify it also—that during the year 1946, when they had sprouted wheat, and there was 100-percent damage of the wheat selling, it was selling for as much as $1 a bushel discount as samples, and when some of that damaged wheat was sent to our Omaha laboratories we were amazed to find that it could produce more alcohol than you could get out of No. 1 wheat, and so we put orders into Minneapolis and in the markets of North Dakota to buy all of the offgrade wheat, and Senator Young will testify, and I have heard him testify, that we raised the price of grain to the farmer in North Dakota that year from 50 cents to $1 a bushel.

Now, then, you talk about the amount available or that will be available.

Let me tell you this, that we went on into Canada and the cost of getting it in Canada and shipping it to Omaha, the cost-of course, the war was on, the war emergency situation was on, and we got hundreds of thousands of bushels of frozen wheat, and we made as much alcohol out of it as we did out of the good wheat.

I am trying to indicate to you, Mr. Chairman, that wheat need not be good in order to make this alcohol; and also to indicate that wet corn is not the only problem.

Mr. Poage. Well, I understand that, of course, and you are trying to put me in the wrong light because I would like to say that this whole program of using these commodities is all right and I am for it, but unfortunately the committee is here this morning for an entirely different purpose, and I want to clear it up.


I want it clear that I am not opposed to the program that you are talking about. I am for it. But the subject of this committee hearing this morning, for which this committee was called into extraordinary session this morning, was to consider an emergency program about this wet corn that is now in existence, and the purpose is not to consider the whole program. To do that we have to rearrange our schedule of hearings differently.

Mr. WELSH. I understand, Mr. Chairman.

Mr. Poage. And the question was that we were to consider, what could we do with this Omaha plant right now in order to give relief to the soft corn that is already in existence.

Now, you tell us that much of it is dried, and I understand that the minute that it dries it has the characteristics of good corn.

You also tell us that, if it stays out there, much of it will spoil. Now, let me ask you this. How fast does it spoil and can you keep wet corn throughout the summer? We cannot do it down south; maybe you can but we cannot keep it. Can you keep it?

Mr. WELSH. I think that Mr. Johnson was trying to tell you that even though it was wet and even though it was spoiled, there will be spoiled corn available to us throughout the year and we could make as much alcohol out of it as from the other corn.

Mr. Poage. And the question that I have been trying to get answered and that I have been asking is: Will that corn physically remain there or will it spoil and disappear?

Mr. WELSH. Starch will remain there.
Mr. Poage. The what will remain ?

Mr. WELSH. The starch will remain there. The starch is not destroyed. The proteins are destroyed by the corn going out of condition.

Mr. Poage. Well, it is my observation if you leave it out very long, through our winter, it is going to be gone, the rains will wash it off, there won't be anything there for you to pick up, nothing to put into

Now, I do no say that you cannot do it; I am just saying that we cannot. Let me ask you, Does your corn actually stay there, does the grain stay there?

Mr. Johnson. Well, Mr. Chairman, we are not talking about a theory. We went through this during the war and we did use that wet corn all the year around, what we call wet corn, and there is enough moisture in it for the corn to mold but it will not destroy the starches. The proteins will deteriorate. That corn will yield, per 100 bushels of corn, 60 pounds per bushelfrom that corn we get about 234 gallons of alcohol per bushel and out of No. 2 good cornwe get as much out of that wet corn as we do from the No.2, as was said before, because as it went out of condition the proteins would deteriorate but the starch was not affected; and we found that we got as high as 3 gallons of alcohol on 60 pounds of corn because we were getting more starch in that 60 pounds, and that condition prevailed all through.

Mr. Poage. Is it your testimony that this corn will not deteriorate in such a manner so that it will interfere with your use of it in the alcohol plant and that the corn will be there, next summer? That

your cribs.

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