national minimum acreage allotment, with further advances in yields per acre and good growing conditions with present production practices, may not completely relieve the overproduction situation, this reduction of 5 percent is a step in the right direction.

We further commend our peanut producers for their proposal to establish a fund for surplus diversion. In making such a recommendation, they realize the uncertainties of production will lead them to a point from time to time where the supply of peanuts will be greater than the need of the market. We feel that such a proposal is sound and recognize that while the allotment and marketing quota program is beneficial to peanut producers, it should be so developed that the cost to the taxpayer in general will be held to a minimum.

In view of our desire to develop farm programs which recognize competitive conditions, we would question the manner in which this fund is to be created. Since this fund is to be created by increasing the price-support level of peanuts, will it further reduce the opportunity of our peanut producers to compete in the world market and increase the opportunity for producers of competitive products in the edible nut and spreads for bread field to displace even more peanuts in the domestic market.

There is an earnest desire that the net income of peanut producers be increased to the highest possible level, but to do this we feel that measures which restrict their market and increase the opportunity for his competitors may be of questionable value. It is our firm belief that such competitive factors as price, quality, and availability have a direct bearing on the market possibilities for peanuts.

If, however, peanut producers feel that such an increase is needed to assure the establishment of a diversionary fund and are willing to accept the possible further loss in market, we will support the proposal in the proposed legislation.

With respect to the fund for promotional purposes, it is our feeling that this fund should be collected on a purely voluntary basis and not be used to displace or duplicate publicity and promotional funds now being used by the industry to increase the sale of peanuts. We would, therefore, oppose inclusion in the bill the collection of funds by Federal legislation for promotional purposes but support efforts by producer organizations to collect funds on a voluntary basis for this purpose. If such funds are needed, and there is always a possibility that general advertising would not increase consumption of a commodity, we feel that peanut producers will support such programs on a State, local, or organization basis.

With respect to the peanut program in general, the Virginia Farm Bureau Federation supports the present allotment and marketing quota program, but urges peanut producers to develop ways and means whereby their production facilities, land, labor, and capital may be used to the highest degree of efficiency to the end that our economic condition might be improved by producing for the market.

Mr. Chairman, genetlemen of the committee, we appreciate this opportunity of appearing before you and presenting our views on this

matter.

Mr. MCMILLAN. Mr. Abbitt, do you care to ask any questions? Mr. ABBITT. No. I would just like to commend Mr. Davis on his fine presentation. I want to express my appreciation to you for coming up here to appear before the committee.

Mr. DAVIS. Thank you, Mr. Abbitt.

Mr. MCMILLAN. Mr. Davis, it is evident you have give this legislation a great deal of study. We have had a little controversy, as you know in our committee, as to whether this is the proper time to take this type of legislation up, and whether it should be taken up with the overall farm bill.

What do you think about that proposal?

Mr. DAVIS. Well, sir, in view of the fact that I understand there are some producer representatives-and I may be in error, since I did not attend the earlier hearing-that are not completely together on this, I would be inclined to question the advisability of pushing too far or too fast.

It seems to me it would be very highly desirable to develop a program that would certainly have the support of the producers from the several production areas.

Mr. MCMILLAN. We all feel that it is very essential that we get all the peanut growers together on any proposed legislation, at least. Only a very small percentage of the House Members are even interested in peanuts, and, of course, we do not want to do anything to hurt the peanut cause if we can help it.

Mr. DAVIS. I would certainly like to see legislation of this type move forward. And it was certainly my hope that the producers from the other areas would see fit to support, at least in general principles, the proposal.

Mr. MCMILLAN. If they cannot get together, you would suggest that they take it up in a separate bill?

Mr. DAVIS. I would question moving it too fast, and possibly treating it as a separate bill.

Mr. MCMILLAN. Mr. Poage, would you care to ask any questions? Mr. POAGE. Yes. I just want to ask if you feel there ought to be an equalization of price supports for the identical grades in various areas?

Mr. DAVIS. Well, certainly I feel, sir, that they should be based on competitive conditions. If the market for the several types would be as strong for one type as the other, yes.

Mr. POAGE. I really should say the several types. Do you believe we should have the same support for Spanish peanuts in the Southwest as we do in the Southeast! Spanish peanuts of the same grade.

Mr. DAVIS. I would certainly think they should be more nearly competitive than they are at the moment. We feel in Virginia that ours under the present support schedule, the differential is too great, and we would like to see it narrowed, if not totally equalized.

Mr. POAGE. Now, what about the tolerance for foreign matter? Would you agree with me that it should be the same in all types of peanuts?

Mr. DAVIS. Sir, I would have to disqualify myself as an expert on this matter.

Mr. POAGE. I am not asking you as an expert.

Mr. DAVIS. But it would appear that it should be; yes.

Mr. POAGE. All right. That is all. Thank you.

Mr. MCMILLAN. Thank you very much, Mr. Davis. We are glad

to have your statement for the record.

23887-58-8

Mr. TURNER. Give them.

Mr. PACE. You will have a chance to correct them.

Mr. Chairman, let me continue, and let me say a word for the benefit of the members of the committee.

Mr. MCMILLAN. Let us discuss the provisions of the pending bills.

STATEMENT OF STEPHEN PACE-Resumed

Mr. PACE. On this question of differentials, which I am going to reach in a minute, and let me reach it right now, it was referred to this morning by Mr. Sydney Reagan as an artificial standard. It had other references to it. I think maybe just in your thinking, whatever your conclusion is, back yonder when the support price on peanuts was first installed, it became the responsibility of the Department of Agriculture to put it into effect. Through a long period of years when there wasn't any support price, when there was not anything interfering with free trade in peanuts, the trade itself had developed a certain price for Virginia, a certain price for Southeastern Spanish, a certain price for Southwest Spanish, and a certain price for runners. The Department of Agriculture did not feel, in putting a support-price program into effect, that it should destroy what a free market had established, that the free market itself was the best determination of any differential in price. Consequently, they put into effect the same differential in the support program that the trade itself had established through free trade.

Now for some reason, Bob, the Southwest Spanish were cheaper, and the reason given me was way back there you did what you call windrow the Spanish. They would lay on the ground, and therefore you had more splits, and the buyers, the shellers, insisted that they could not pay as much as we did at that time because we did not windrow, we stacked ours.

The heat was less intense, and when you shelled them, they did not split as much.

That is not true today. We windrow ours now just like you do, and I am informed that the percentage of splits in the Southeast now in Spanish is more than it is in the Southwest, but I do want to say this on differentials, that matter has been worked on by the Department of Agriculture. We were all here in Washington a month ago and spent a day over there talking about this very problem. Mr. Thigpen is now having meetings, he is going to have one next Thursday in the Southeast, on this identical problem.

Now I do believe that Mr. Thigpen is a good administrator and probably he can bring about, through negotiations of all of them, maybe a more acceptable undertaking than you can do by emphatic hard rule legislation.

Mr. POAGE. Well, Mr. Thigpen has been working on this since before you left Congress. Mr. Thigpen was working on the same problem, because we had the same problem when you were a member of this committee. And Mr. Thigpen never gets anywhere because he never can get an agreement from the southeastern growers, and as long as he cannot get that agreement, Mr. Thigpen is not going to hand down a decision that wipes out those differentials. I had long since dispared of getting any relief until this afternoon. But now when you tell me

Mr. Duncan, president of the Georgia Farm Bureau Federation, stated there was only one producer from Georgia at the Atlanta meeting.

The minutes show there were nine representatives of Georgia growers at the meeting held in Atlanta November 18 and 19. They were as follows: H. L. Wingate, immediate past president of the Georgia Farm Bureau Federation, H. B. Wilson, chairman of the peanut committee of the Georgia Farm Bureau, Bobby J. Locke, Georgia Farm Bureau, M. E. McDowell, Georgia Farm Bureau, Charles Shirley, Georgia Farm Bureau, D. H. Hardin, manager, GFA, J. D. Gardner, counsel for GFA., R. L. Mauldin, a director in GFA, and Elmer Faulk, a director in GFA. There were more representatives from the State of Georgia than from any other peanut State.

Prior to the meeting, Mr. H. H. Knowles, of Headland, Ala., president of the Alabama Peanut Producers Association, vice president of the Alabama Farm Bureau Federation and a director in GFA, had been contacted and requested to assume the responsibility for selecting and notifying the grower representation in the Southeast. Mr. Knowles very kindly agreed to assume this responsibility and the minutes show there was excellent grower representation from the Southeast in attendance.

Mr. Turner stated that in the salted trade there had been a reduction in the consumption of peanuts.

The USDA publication, Peanut Stocks and Processing of May 23, 1958, shows that for the season through April 30, 1958, there have been 132 million pounds of peanuts used for salting compared to 125 million pounds during the same period a year earlier.

Mr. Turner stated: "They have researched themselves into an awful predicament by producing a greater percentage of Extra Large peanuts that there isn't a market for, and today the Commodity Credit Corporation is outlawing it."

It is true we have made strides in producing extra large kernels in the Virginia-Carolina area and it appears we are in a position to produce adequate Extra Large to supply or reasonably supply the demands of the trade with anywhere near normal growing conditions. However, the statement, "the Commodity Credit Corporation is outlawing it" is totally without any foundation whatsoever. The Commodity Credit Corporation, at the request of growers and others interested in the industry in our area has lowered the support price to 50 percent of parity on a particular variety of peanut which has a number of undesirable characteristics and it was not felt wise to do other than discourage the production of that particular variety. Similar action was taken several years ago with reference to florispan, a variety developed in the Southeast. However, to leave the impression that Commodity Credit Corporation is outlawing the production of Extra Large is fantastic.

Mr. Stephen Pace went into considerable detail and consumed much time in pointing out to the committee that the provision in H. R. 12566 dealing with setting the marketing quota at a figure which would produce 105 percent of a normal supply of peanuts. Mr. Pace went through considerable arithmetic and came up with the conclusion that the provision would result in the production of only 618,000 tons of peanuts and would be 59,000 tons short of actual needed requirements.

In an analysis of the present law, the Abbitt bill and Burleson bill, the Oils and Peanut Division of the Department of Agriculture interpreted the Abbitt bill to produce a quota of 714,000 tons and result in a total supply of 864,000 tons of peanuts.

I am anxious for the record to show that according to the interpretations of the Department of Agriculture this particular provision of H. R. 12566 would have a quite different effect than Mr. Pace pictured to the committee. Attached hereto is a comparison of present and proposed legislation as worked out by the Oils and Peanut Division on June 2, 1958, and I ask that this be included as a part of the record.

Mr. POAGE. I would like to ask Mr. Rawlings what his views are about this matter of a differential in tolerance of foreign matter in various types of peanuts.

Mr. RAWLINGS. Our people feel very strongly that it should be the

same.

Mr. POAGE. So do we.

on the supply deal, that in considering total supply, you shall not take into accounts stocks owned by the Commodity Credit Corporation on which the Commodity Credit Corporation has a loan, or under which it has outstanding purchase agreements.

That wipes out about 50,000 tons. So that will reduce the total supply. When you reduce the total supply, increase the definition of normal supply, it has the effect of kicking the support price up—as testified here, I have not run it-to 90 percent of parity. That is the purpose of the bill. The Southwest is identical except they increase it 27 percent instead of 25 percent.

Now the next change which this committee wants to study very closely, it amends the marketing quota legislation. That is to say, the method by which you should determine how many peanuts should be produced. Then the Secretary takes it on the base of 5-year average yields, converts it to acres, and it says that-this is added-together with the carryover for 105 percent of normal supply. Now in the first section of the bill they take carryover out. In the next one they put it in. One is to increase the price support, the other one has the effect of reducing the acreage, which the average peanut producer does not want.

Now it sets up an entirely new rule. It says now that if this bill is enacted, that the marketing quota each year shall be a normal supply of peanuts. And you have defined the normal supply as being the estimated consumption, the estimated exports and under this bill, plus 25 percent.

Now let me tell you that I have run that figure, and that will not produce an adequate supply of peanuts. Under the present definition of normal supply, that is a 15 percent carryover, it will produce 779,000 tons; 105 percent would be 818,000. If a normal supply is changed to 25 percent carryover, it will produce 846,000 tons, of which 105 percent would be 888,000. Both of those you must deduct for the first time in the history of peanuts-the entire carryover of 200,000

tons.

Consequently, when you built your normal supply up, then he says: You must take into account the carryover. Consequently, under normal supplies as defined today, you would produce only 618,000 tons, and on normal supply you would propose to amend it, adding 25 percent, and it will produce 688,000 tons, and the Department of Agriculture, on its own table, has fixed a minimum demand of 779,000

tons.

Consequently, I do not see how there could be any grower in the United States who would want a bill that under its own language will not meet the demand for peanuts. And that is the effect of this section under the Oil and Peanut Division on tables which I have with me. Mr. POAGE. It is the same thing in the Burleson bill?

Mr. PACE. Yes, sir, I believe it is.

Now, Bob, we understand up to now, for the last 17 years, the marketing quota has been the average production during the last 5 years, adjusted for trend and demand conditions.

Now they leave that language in there and it is rather inconsistent language: So as to provide together with the carryover for 105 percent of a normal supply. I have read that section a dozen times since I saw a copy of this bill and I cannot reconcile what is left in the bill.