PEANUT PRICE SUPPORT PROVISION

MONDAY, JUNE 9, 1958

HOUSE OF REPRESENTATIVES,

COMMODITY SUBCOMMITTEE ON PEANUTS

OF THE COMMITTEE ON AGRICULTURE,

Washington, D. C. The subcommittee met, pursuant to call, at 2 p. m., in room 445, Old House Office Building, Representative John L. McMillan (chairman of the subcommittee) presiding.

Present:

Harrison.

Representatives McMillan, Grant, Albert, Abbitt, and

Also present: Representatives Poage and Matthews; and Mabel C. Downey, clerk.

Mr. MCMILLAN. The committee will come to order.

This meeting this afternoon was called specially to hear from the Department on H. R. 12545 and H. R. 12566.

Mr. Miller just called and stated he would be delayed a few minutes. Mr. Thigpen, would you care to make a statement before Mr. Miller gets here?

Mr. THIGPEN. I would prefer if we can to wait for Mr. Miller to make a statement.

Mr. MCMILLAN. Mr. Vance, I believe you have to catch a plane or a train. Would you like to give your statement right now? We would be very glad to hear any statement you would like to make. Give the reporter your name and title.

STATEMENT OF JOHN B. VANCE, PRESIDENT, VIRGINIA FARMERS

UNION

Mr. VANCE. Mr. Chairman and members of the committee, for the record, I am John B. Vance, president of the Virginia Farmers Union and a member of the board of directors of the National Farmers Union. I am appearing before the committee today on behalf of the threequarters of a million voting members of the National Farmers Union as well as the 17,000 voting members of the Virginia Farmers Union.

I appreciate very much, Mr. Chairman, the scheduling of this hearing and the opportunity afforded me to present our views with respect to H. R. 12566 recently introduced by Congressman Abbitt.

The Farmers Union supports the objectives and principles contained in H. R. 12566. We consider the provisions of this bill as most constructive toward bringing about an improved peanut price-support program although it falls far short of being fully adequate. Farmers Union believes that the produccers of peanuts as well as the producers of all other agricultural commodities are entitled to parity of income

and that any legislation which falls short of this objective is less than fully adequate.

We support H. R. 12566 because we believe it will definitely bring about an improvement in the existing program. Commenting briefly on the major provisions of the bill, I would like to point out that the first major provision will change the carryover allowance used in the definition of normal supply from 15 to 25 percent of estimated consumption.

The marketing year for peanuts begins on August 1, and it is necessary that the industry have on hand in the various phases of the supply pipeline a substantial quantity of peanuts on August 1 in order to operate efficiently until the new crop becomes available in the latter part of the year. The records will show that for the past 5 years the industry has averaged approximately 21 percent as of August 1. This is exclusive of CCC stocks. During the same years the holdings of CCC have been rather large. It is conservatively figured that the industry would need to carry at least 25 percent of estimated consumption as of August 1 in order to keep the pipeline open until the new crop becomes available.

In other words, as we see it, the purpose of this provision is to make the legislative allowance for carryover consistent with the established present day practice of the industry. We do not believe it fair to the growers to unduly penalize them with a lower support level by virtue of the fact that the legislative allowance for carryover is considerably less than the established practice of the industry.

The next major provision of this bill would eliminate peanuts held in CCC inventory from the supply in calculating the supply percentage for price-support purposes. This change will not eliminate peanuts carried by CCC from the supply for purposes of determining the marketing quota. The purpose of this provision is to permit the carryover of reserve stock of peanuts in good crop years which can be offset by reduction of quota in subsequent years without having the CCC carryover reduce the level of price support.

The next major provision of H. R. 12566 provides that the quota be fixed at 105 percent of estimated consumption. As long as the minimum allotment of 1,610,000 acres is in effect, it is not necessary to have any particular cushion in fixing the quota as anything near a normal yield will produce or tend to produce more than an adequate supply of peanuts for the trade.

However, when the minimum national allotment is fixed at a slightly lower figure as is provided in H. R. 12566, and we thereby seek to adjust supplies more nearly in line with demand, it is considered highly desirable to have at least a 5 percent cushion in determining the quota in order to serve as a safeguard against a short supply.

The major provision of H. R. 12566 authorizes a referendum of growers on the question of the levying of an assessment to provide funds for (1) paying the diversion cost on surplus peanuts acquired by CCC; (2) paying shellers for diversion of lower quality peanuts; (3) paying the administrative cost of grower cooperatives contracting directly with CCC; and (4) for other purposes-the promotional part of the program.

It is further provided that the price-support level will be increased by 5 percent above that which would otherwise be determined, pro

We feel a cushion of 5 percent, a quota which would provide 105 percent of the estimated requirements, is no more than a necessary safeguard against a short supply and the resulting bad effects that it has on the market.

Mr. ABBITT. How does that change the present law?

Mr. RAWLINGS. No cushion is allowed. I shall get to that point next. Frankly, under the present law we have a minimum national allotment of 1,610,000 acres, which with our trends in yields is producing roughly 10 percent more peanuts than there is need for. As long as we know that the quota with anywhere near normal yield will produce more peanuts than there is a consuming market for, there is no need for a 5 percent cushion.

But when we get to the next point where it is proposed to reduce from the minimum of 1,610,000 and the quota is set more accurately and realistically in line with estimated demand, then you get to the need of a cushion to safeguard against short supply.

Mr. ALBERT. We would not put any minimum acreage in the statute; is that right?

Mr. RAWLINGS. Yes, sir, Congressman Albert. We are proposing that we still have a minimum national allotment, but that it be set at a figure 10 percent below the present minimum, and further provide that the national allotment cannot be reduced by more than 5 percent in any one year. So if the present calculations, as we understand them from the people in the Department, are correct, it would take about a 10 percent reduction in the national allotment if we were to set this thing pretty much in line with demand; it would take a 5 percent reduction for 2 years to approach that.

We cannot tell conclusively what course this trend in yields per acre will take. A major research is being conducted on that right now. Actually we are making rather phenomenal progress in increasing the yields per acre. That is what we are confronted with.

I think that question clarifies the next point I wanted to cover so far as reducing the minimum national allotment but not an outright repeal of it.

Mr. ABBITT. Your information from the Department and others is that the minimum allotment is slightly too much?

Mr. RAWLINGS. That is correct. In other words, we have made faster progress in yields per acre than in consumption. We made modest progress in increasing consumption, but our yield per acre has increased at a little faster rate.

Mr. ABBITT. You are increasing your production per acre more than you are increasing the consumption.

Mr. RAWLINGS. That is correct, sir.

The next major point, which I think consumes more space in H. R. 12566 than any other point, is a program which is intended to put the peanut program on a self-supporting basis and at the same time provide a continuing national fund for use in promoting the increased consumption of peanuts and peanut products. It provides that there will be a deduction from growers of not to exceed 10 percent for the first year, and thereafter 5 percent, in order to take care of four major

items:

(1) The cost of diverting surplus quota peanuts;

(2) To pay for the administrative expenses of the three producer cooperative associations which administer the price-support

phase of the program under contractual arrangement with the Commodity Credit Corporation;

(3) To pay for the diversion of lower quality peanuts in years when there is a surplus, to pay the market price to the sheller in order to justify his diverting them rather than putting them into the edible trade and ending up with higher quality peanuts being crushed and lower quality going to the trade; and

(4) To be used for a national promotion program. The bill spells out that that program would be started on a modest basis, and any increase or pickup in it would be geared to proven results. The most that can be earmarked for that phase of the program would be three-fourths of 1 percent of the current support price for peanuts.

There is also a provision which states that in the event growers have accepted this phase of the program in a referendum-that is, the promotional and self-supporting phase-then the price-support schedule under our flexible support would range from 80 percent to 95 percent of parity instead of the present 75 to 90 percent, to partly compensate the grower from the deduction which will be made in order to pay for these diversion costs and to take care of the overall costs of the program.

They are the main points in this bill. The producers in our area feel the principles of this bill are sound. It is something we spent approximately 3 years considering at numerous meeting, not only in our area but with representatives from other areas.

We recognize there are conscientious differences of opinion. We certainly hope that the bill will serve as a vehicle whereby we can eliminate these areas of differences, to the end that we can come out of here with a constructive peanut provision in any overall farm bill which may be voted out.

I am not familiar in detail with that provision of the other bill, but I would say in general principle it is certainly for promotion. As I understand theirs, it is to promote foreign markets primarily. Mr. ABBITT. Is the self-held based on favorable approval in a referendum?

Mr. RAWLINGS. Yes, sir. That whole phase of the program in this bill would not be operative unless two-thirds of the peanut growers throughout the United States voting in a referendum voted in favor of it. There is nothing mandatory about that phase of it. I would call it permissive legislation or enabling legislation.

Mr. ABBITT. So the self-help program would not go into effect and the deduction would not take place until and unless it was approved in a referendum?

Mr. RAWLINGS. By at least two-thirds of the growers voting in a referendum.

Mr. ABBITT. The purpose of that, of course, is to take the burden off the taxpayers and let the producers carry their own program, and also to put on a promotion program to increase the consumption of peanuts, at the same time limiting the amount that would be put in the promotion program.

Mr. RAWLINGS. That is right. We limit that with an upper limit of three-fourths of 1 percent of the current support price as the maximum limit. Of course, it could be a lesser figure as set by the Secretary.