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6. To make allowance for statistics of the Federal Government more recent than those used in the original determination of the marketing quota or acreage allotment; or

7. Because of any combination of these factors.

Section 312 (b) of the Agricultural Adjustment Act of 1938, as amended, provides that the Secretary may increase the national marketing quota for tobacco above the formula determination by not more than 20 percent, if he determines that such increase is necessary

in order to meet market demands or to avoid undue restrictions of marketings in adjusting the total supply to reserve supply level.

This authority has been used for a number of years.
May I say this thing further, Mr. Chairman?

I have, as I say, many good friends in the rice industry, many of the leaders. When they are in Washington, and they call on you, they call on me, also.

I am convinced that they are ready and willing to take some steps in the direction of what we are suggesting here if this good subcommittee can see their way clear to do it. 2. The escalator clauses in the basic law should be abolished.

The President pointed out that under present law, price supports must be raised as the surpluses are reduced in accordance with the schedule of the Agricultural Act of 1949.

This means that incentives are provided to build new surpluses. Thus, farmers will continually face the problems created by price depressing surpluses. Elimination of these escalator clauses is necessary if these programs are to achieve their purpose.

3. The overall range within which price supports may be provided should be substantially widened.

Under the President's recommendation, price supports for rice would be determined administratively on the basis of following eight guidelines now provided by law for practically all commodities except the basics.

1. The supply of the commodity in relation to the demand therefor;

2. The price levels at which other commodities are being supported and, in the case of feed grains, the feed values of such grains in relation to corn;

3. The availability of funds;
4. The perishability of the commodity;

5. The importance of the commodity to agriculture and the national economy;

6. The ability to dispose of stocks acquired through price support operation; 7. The need for offsetting temporary losses of export markets, and

8. The ability and willingness of producers to keep supplies in line with demand.

Thus, price-support policy would provide a means to expand markets, increase acreage allotments, and reduce the threats of price depressing surpluses.

In the President's recent veto message, he stated that if given the authority requested in his agricultural message of January 16, 1958, that the acreage allotments for 1959 would be equal to or higher than the levels prevailing for 1958.

In view of the allotment situation under present law, this is of great significance to rice producers.

These changes will not solve all of the rice producers' problems overnight. However, they will be concrete steps forward in our long-range efforts to bring about a better balance between supply and demand.

Along with these changes, we have requested the Congress to further extend Public Law 480—to help maintain a good rate of rice exports.

Before concluding my remarks, may I urge your subcommittee to act with all speed possible on the President's recommendations.

We cannot afford to lose another year in our battle to bring about a better adjustment between supplies and need.

We need adequate tools to solve the rice problem. I firmly believe that we have the tools in the President's message.

We now shall be glad to answer any questions which your subcommittee may have on the Department's recommendations.

I think that concludes what we would like to say formally here.

I will ask Mr. Sorkin, Mr. Dean, and Mr. Miller, and Mr. Satterfield, whom you all know, plus our legal counsel, Mr. Schoonover, to help answer any question that you might have.

If you have any questions on the way we have handled our exports, we will be glad to give you that.

I would like to just again urge with all the spirit I have in me that we move on Public Law 480, because, if this legislation is delayed up until the close of Congress, it could seriously hurt the rice industry.

Mr. THOMPSON. I certainly agree with you, Mr. McLain. Let me just ask one little practical question. You know, of course, that we are in a situation in the Congress where we can kill almost any legislation, but we are having a terrible time ge ting almost any legislation passed in behalf of agriculture. It is a peculiar situation, but we might as well face it. That is the fact.

It is easy enough to kill a bill which we think is meritorious, and have difficulty to pass one.

If we pass one we think is meritorious, sometimes it is unfortunate enough to catch a veto when it gets downtown, but that is neither here nor there. We are trying now to deal objectively with the problem at hand.

What will happen to the rice industry if we don't succeed in passing the legislation that you suggest ?

Mr. McLain. I think it will be tragic if the acreage allotment dropped back to where it would under present legislation. Everyone in the rice industry that I respect thinks it would be disastrous. I don't think the industry could stand it. I think it would be unwise.

Mr. THOMPSON. You would have a cut in acreage of about how much?

Mr. McLain. It would be as we have indicated here in the statement. Our best estimate now would be around a million acres.

Mr. Trompson. Percentagewise, it is about how much?
Mr. McLAIN. About 40 percent.
Mr. Thompson. Between 35 and 40 percent. I agree

with cannot stand it at all.

Now, in getting together the figures on which you base that particular acreage estimate, you take into consideration respective foreign sales?

you they Mr. McLain. That's right; exports, of course.

Mr. THOMPSON. Exports. Do you happen to know what the Cuban situation may be? Do you know about what the outlook is in view of their revolution and so forth?

Mr. McLain. Well, we, of course, get into that on sugar as well as rice.

Mr. Satterfield here may be able to answer what their intentions are better than I. I think from the standpoint of the turmoil that has been stirred up down there, my latest information is that we have seen the worst of it.

If that is so, it will improve the chances of raising a crop, not only of rice but of sugar.

Mr. Satterfield, do you have any comment on the intended plantings?

Mr. SATTERFIELD. Not for 1959. 1958 is down a little bit from 1957. We are going to export about 4 million hundredweight of milled rice to Cuba this year as compared with 31/2 million.

Mr. THOMPSON. Exported to Cuba?

Mr. SATTERFIELD. Yes, sir. It means if their acreage goes down further next year, there is a possibility we may further increase our exports.

Mr. THOMPSON. In other words, the turmoil in Cuba leads to additional sales on our part rather than of curtailment.

Mr. SATTERFIELD. That plus the fact that their income from sugar has been pretty good and they can afford to eat pretty good, I suppose. Their per capita consumption runs somewhere about 120 pounds, somewhere in that neighborhood.

Mr. THOMPSON. So we can anticipate, then, that the disappearance in the direction of Cuba will probably not fall materially?

Mr. McLain. There wouldn't be much change, in my opinion.

Mr. THOMPSON. An educated guess is all we are asking, Mr. McLain. Nobody knows. When you have a revolution, you don't know what is going to happen.

Mr. SORKIN. In the case of Indonesia, where there is revolution currently, their exports of copra are down to practically zero. When there is a revolution it is a dangerous thing to forecast what the exact implications are.

Mr. THOMPSON. Now, on page 3 of your statement, you set up an anticipated export of 16 million hundredweight. Do you know the history of that figure, where it came from and why it was so set?

Mr. McLAIN. Of course, as one of the members of the Board of Directors of the Commodity Credit Corporation, I am generally familiar with these decisions.

This, of course, again is projecting ahead. It is projected on the assumption, No. 1, that Public Law 480 is going to be extended. If that were not done, this figure could be down considerably, in my judgment.

Mr. THOMPSON. If it were extended ?

Mr. McLAIN. Of course, if extended, we project it on the basis of what we would use for rice if the billion and a half dollars were granted.

Mr. THOMPSON. The hearing that we held a few weeks ago developed some rather interesting data. Among other things, that figure, when it was originally submitted to you, was up around 19 million, was it not?

Mr. McLAIN. We have all kinds of tables submitted to the Board, Mr. Chairman, on all of these commodities.

This is one of the difficulties that you have, even in determining acreage allotments or price support.

Of course, it all depends on the set of facts that you want to use. It depends almost completely on how much added funds you get in Public Law 480 and the proportion used for rice or how much rice you give away.

We probably had several different sets of figures. We do generally with most of these commodities.

The fact is that many times we have them set up a table with different set of figures in order to give us a picture of what the results would be.

I would say, however, that the decision that was made was based on what we thought was fair and reasonable to rice, as compared to other commodities. I think the figures will back us up on that.

Mr. THOMPSON. The 19 million hundredweight figure would have left rice in substantially the same position that it is now!

Mr. McLAIN. It wouldn't change it materially.

Mr. THOMPSON. And the figures that were then arbitrarily set would put the rice industry to a considerable extent, out of business?

Mr. McLain. I think you would put it the other way, if you put it at 19 million, it would change the level of price support a little.

Mr. THOMPSON. It would increase it a little.
Mr. McLAIN. Yes.

Mr. THOMPSON. But instead of using a set of figures that would leave the rice industry substantially in status quo, at least for planning purposes, we arbitrarily take a set of figures that would put them out of business?

Mr. McLain. I think we have ample proof that if you look at the Public Law 480 funds used for rice, you would agree that we have treated rice fairly.

Mr. THOMPSON. Possibly so; we haven't run into them yet.

The State Department tells us that they would like to have more rice for sale in India, Pakistan, I think, and Indonesia, and they say that they have put in the request for additional rice.

If that rice were developed, the surpluses, by the end—what is it, the end of July when we start the thing, the 1st of August, those surpluses would be practically gone.

Mr. McLain. I think rice is the one commodity that if we would program, and out of proportion amount of funds available and under 480 we could probably find an outlet for all of it.

Mr. Thompson. Why not do it rather than put the rice industry out of business or put so much of the rice industry out of business?

Mr. McLAIN. Your area of the country, and all you good gentlemen here, have crop interests other than rice. We have to look at all commodities, as required by law.

We don't think the law intends that a disproportionate share of the funds should be used for any one commodity.

We have many of these commodities that are in the surplus situation. The cotton allotment coming up is going to be much below the present minimum. Wheat would be down, if it didn't have a minimum permanently on the statute books, to around 20 million acres instead

Mr. THOMPSON. It has a minimum.
Mr. McLain. That is right.
Mr. THOMPSON. What is protected.

Looking at Public Law 480 under which we operate, in which we are primarily interested at the moment, trying to see just exactly what the policy is that we are trying to carry out-taking out of context from section 2, it saysTo make maximum efficient use of surplus agricultural commodities in furtherance of the foreign policy of the United States, and to stimulate and facilitate the expansion of foreign trade and agricultural commodities produced in the United StatesAnd so on.

It would seem that there is ample authority under the law to move this surplus that may prove so troublesome in rice.

Mr. McLain. Weil, again, as custodian of the funds, and considering all of the inventories, I think the record will show, that rice has fared probably better than any other single commodity.

Mr. THOMPSON. That may be true.

Mr. McLain. I don't think it was the intent of Congress to treat rice differently than any other crop. That is what I am saying.

Mr. THOMPSON. But it wasn't the intent of Congress to use it or to refrain from using it in such a manner that it would have this market effect on any one industry. This seems to be the only one.

Mr. McLAIN. No; cotton.
Mr. THOMPSON. Is in the same?
Mr. McLAIN. Cotton is in the same boat.

Mr. THOMPSON. Are we going to face a great curtailment in the production of cotton?

Mr. McLAIN. Our best estimate now is a little over 14 million acres. Mr. THOMPSON. That is not because of any overhanging surplus ?

Mr. McLain. That is because of the 81/2 million bales carryover. It is down from what it was but this is a factor, that has much to do with

the price support level and the acreage allotments. Mr. THOMPSON. Apparently, then, our only hope is that some new legislation Mr. McLAIN. We had all assumed that that was so.

Certainly we have approached it on that basis, Mr. Chairman, I know all the people in the rice industry that I have talked to think it inconceivable that we wouldn't have some new legislation.

Mr. THOMPSON. I hope that we will be able to give it to you.

On the other hand, in the event that we don't get the new legislation, somebody in your shop can accept the figures that were originally sent to you, estimated exports, 19 million-if we could get you to use those figures instead of 16 million

Mr. McLAIN. Mr. Chairman, I happened to be Director of the Grain Division for 21/2 years. I think that I, as much as anybody in this room, have sat in on meetings that determined acreages and price supports because all of the grains have been problem areas.

I can ask 5 or 6 technicians to go up by themselves and come up with a set of figures. I think you would get each of them to come up with a different set. This has always been true.

This constantly happens anytime any of these matters comes up with respect to any of these dockets in the time that I have been on the Board. I am sure it was true ahead of that time.

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