Mr. BURLESON. May I make one statement? Would the Chair permit me to go off the record.

Mr. MCMILLAN. Off the record.

(Discussion off the record.)

STATEMENT OF SYDNEY C. REAGAN, GENERAL COUNSEL,

SOUTHWESTERN PEANUT SHELLERS ASSOCIATION

Mr. REAGAN. Mr. Chairman, my name is Sydney C. Reagan and I serve as general counsel to the Southwestern Peanut Shellers Association. This morning the Southwestern Peanut Growers' Association has asked me to present a discussion of H. R. 12545 so that what I will be saying will be said for the Southwestern Peanut Grower's Association.

I wish to state that the Southwestern Peanut Shellers Association also are in complete harmony with this bill.

I want nothing that I say at this hearing to be used by the opponents of the price-support program. Our concern is how we can maintain a strong healthy price-support program for peanuts. We feel there is a very urgent need that action be taken to strengthen the program. We are convinced that the opponents of the peanut price-support program are not going to remain idle and inactive merely because we who favor the price-support program remain idle and inactive.

Twice within the last few years we have seen sneak attacks on the peanut price-support program. They came close to being successful. We fear future attacks and what we are concerned with is trying to get this program on a basis so that it can withstand any attack that is made on it.

We feel that there is a golden opportunity confronting the peanut growers today of all areas to develop a program when they are not under pressure of attack, to develop a program that can withstand attack. Twice I have seen the attack made and I have seen that we did not have time then to develop a sound program. The opposition did not give us time.

Now in connection with H. R. 12545 I would like to point out that the bill has three primary objectives.

First, it is aimed at providing a method of increasing the market for peanuts from all areas through a program of advertising, promotion, and research.

Second, it provides for a self-help program for peanut growers in each of the three major areas so that we will be in a position to remove one of the major criticisms directed at the peanut price-support program, which has been the losses that have been sustained.

Third, the bill corrects certain defects which have been revealed during the last 6 or 7 years since there was any revision in the peanut legislation.

I might point out there that we must continue to watch the legislation even though Congress were to pass the proposed bill. We must continue to watch and see how the legislation is working out.

I would like to take up now some of the major details of the bill. I will take them up in the order in which they appear in the bill.

The percentage of carryover contained in the supply percentage calculation-that is, what is considered to be normal carryover-is increased from 15 to 27 percent. Now this is clearly in line with the

facts of life in the peanut industry; 15 percent of normal domestic quota consumption plus exports is entirely inadequate as a carryover. The carryover that has been carried by the industry during the past several years reveals this.

This change has the effect of reducing the supply percentage under any given situation of actual carryover and production. With this supply percentage being reduced, the percent of parity support is increased up to 90 percent. In other words, under the flexible system of supports this provision would have the effect of increasing the minimum support to the growers.

Mr. ABBITT. Before leaving that, may I ask a question?

Mr. MCMILLAN. Yes.

Mr. ABBITT. As I understand it the purpose of this section is to write into the law the present practice of the trade.

Mr. REAGAN. Correct, sir.

Mr. ABBITT. Does that discriminate against any of the three areas? Mr. REAGAN. Absolutely not.

Mr. ABBITT. Could the Virginia type producers fuss about that provision?

Mr. REAGAN. No, sir. The Virginia producers, I believe, favor an increase from 15 to 25 percent and the Southwest area certainly would not quibble over the 2 percent.

Mr. ABBITT. Would that discriminate in any way against producers in the Southeast?

Mr. REAGAN. No, sir. It would help the producers in the Southeast in that under the sliding system of supports it would raise the support to them.

Mr. ABBITT. I just wanted to find out wherein the bill discriminates against any particular area producers. That is the only purpose of the question.

What you are doing here is putting into law the practice of the trade.

Mr. REAGAN. That is correct.

Mr. ABBITT. So that producers can get a fair shake when it comes to figuring the parity percentage.

Mr. REAGAN. Yes, sir.

Mr. ABBITT. Thank you.

Mr. REAGAN. The next point of major concern in the bill provides that in determining the supply percentage the CCC carryover shall not be included in the estimated actual supply. The effect of this change is to decrease the supply percentage and consequently to increase the parity level of support up to 90 percent of parity.

Sir, the reason we are proposing this is to discourage CCC from carrying over peanuts for the purpose, we feel, of depressing the level of support to growers. The Department carried over substantial quantities of peanuts in 1957 and we understand that they plan to do the same in 1958 as of August 1.

The effect of this very large Government carryover is to depress the support price to growers and we object to that, sir. Under this proposal if the Government sees fit to carry over peanuts, whether the peanuts are actually owned by the Government or whether they are under loan to the Government, then they would not be counted in determining the supply percentage.

Mr. ABBITT. As I understand that, it is to correct the situation that developed in the Department last year where under the present law the Department can carry over sufficient peanuts so as to fix the support price at any figure it desires. Is that correct under the present law?

Mr. REAGAN. That is correct, sir.

Mr. ABBITT. My recollection is we had a hearing on that last year before this subcommittee in which all the growers' representatives to my recollection were complaining and stating that the Department in an endeavor to reduce this support price had deliberately carried over an excess amount and therefore brought the support price down to all the growers in all three areas of the peanut producing sections. Is that your understanding?

Mr. REAGAN. That is right, all growers were hurt by the action of the Department; all growers in all areas would be helped by this provision.

Mr. ABBITT. The purpose of this particular provision is to prevent the Department from playing fast and loose with the support price of the peanut producers.

Mr. REAGAN. That is correct, sir.

Mr. ABBITT. Does it discriminate against any one of the three areas?

Mr. REAGAN. In no way, sir.

Mr. HARRISON. I would like to ask a question about this increase from 15 to 27 percent. I wonder if this is not just a paper operation and are we just increasing the amount of carryover from 15 to 27 percent in order to make it appear that we do not have any great amount of peanuts on hand. Are we helping ourselves or just buying time until we catch up with the 27 percent and then be back in the same position with 27 percent carryover rather than 15, which will probably depress the market more than it is depressed at the present time. I just do not understand the thinking with respect to increasing the carryover.

We have done this same thing in the case of wheat. We have increased the carryover from time to time but we get in a worse position by doing that. I wish you would explain the mechanism here by which you are going to increase the price by increasing the amount of carryover. It seems to me the carryover is the one factor that depresses the price.

Mr. REAGAN. Yes, sir. The change that we are proposing from 15 to 27 percent has to do with the estimated normal carryover as defined in the legislation. It does not refer to the actual carryover. The actual carryover could be greater than the 27 percent or it could be less. As I understand it, the purpose of defining a normal carryover is to describe what seems to be reasonably desirable and reasonably in line with practices. The 15 percent which is now in the legislation has generally been below the actual carryover.

So that what we are doing here is bringing the estimated normal carryover more in line with reality. As to the way in which that enters into the level of support, under the sliding system the level of support is determined by taking

Mr. HARRISON. By the amount of carryover?

Mr. REAGAN. That enters in, sir. So that if we increase the estimated normal carryover, then that will result in a lower supply percentage, your supply percentage being obtained by taking the estimated actual supply and dividing it by the normal supply. If you increase the carryover in your estimated normal supply, then you get a lower supply percentage which will increase the level of support under the flexible system.

Mr. HARRISON. By increasing the estimated carryover you decrease the actual carryover; am I right?

Mr. REAGAN. No, sir; it has no direct effect on the actual carryover one way or the other. It simply has to do with what goes into the normal supply figure.

Let me give an illustration. If you increase the estimated carryover by a certain number of tons, then that increases the normal supply by that same number of tons since estimated carryover goes into normal supply. The effect is that when you take estimated actual supply, which does take into account the actual carryover, and divide by the normal supply you come up with a smaller supply percentage which gives you a higher minimum support price.

Mr. HARRISON. I guess I understand it.

Mr. REAGAN. Sir, it is very complicated to me, too.

Mr. HARRISON. If we deal with the actual supply, we will come closer to getting the kind of legislation we need. Are we going to carry over 27 or 15 percent and thus determine the amount of peanuts we need for the coming year? I will yield at this time, not having a perfect picture.

Mr. SMITH. Did that gentleman say he was a lawyer?

Mr. REAGAN. I am, sir.

Mr. SMITH. You sound more like a slide-rule engineer to me. Mr. MCMILLAN. Proceed.

Mr. REAGAN. The next major provision provides for the carryover of peanuts—that is, the actual carryover-to be considered in determining the quota. We feel that this is giving recognition to reality. If we have a very low actual carryover then the quota should be higher. If we have a large actual carryover, then the quota should be lower to bring supply and demand better into balance. Under the present legislation carryover is not considered in setting the quota.

Mr. HARRISON. What is the determining factor in setting the quota l Mr. REAGAN. Today?

Mr. HARRISON. Yes.

Mr. REAGAN. The determining factor is the estimated quantity that has been used during the past 5 years, adjusted for trends and so on, for edible uses, seed, and certain estimated farm uses, and a small export.

The next major provision provides for an upward adjustment of the acreage allotments by States to allow for underplanting and underharvesting so that the adjusted acres will produce the needed quota requirements.

Very frankly this provision would help the southwestern area the most. We have some very real problems there. As a result, on the average we fail to harvest over 20 percent of our allotment.

There is practically no underharvesting in the Virginia-Carolina area and about 6 percent underharvesting in the southeastern area.

tion 359 (b) of the act as it now stands. The problem has been one which could not be corrected through administrative action alone.

We feel that the proposed revision of section 359 (b) is needed, and we favor its enactment. However, since peanuts have already been planted for harvest for the 1958 crop, we recommend that this provision be made applicable in connection with the 1959 and subsequent crops of peanuts.

Mr. MCMILLAN. Any questions anyone care to ask of Mr. Miller? (No response.)

Mr. MCMILLAN. I believe that Mr. Thigpen and Mr. Merrill, who appeared before this committee on the previous discussion of this bill, have just about answered most of the questions that the members had wanted to ask on this proposed legislation.

Are there any further questions?

Mr. GRANT. I would like, with your permission, Mr. Chairman, if I may, to ask a question.

Mr. MCMILLAN. Yes.

Mr. Grant.

Mr. GRANT. Do you contemplate that this legislation would increase the acreage in planted peanuts any appreciable amount?

Mr. THIGPEN. Mr. Congressman, I believe that the tendency would be to decrease it just slightly; otherwise, it would have no effect.

Mr. MILLER. This is just about the same type of legislation in its effect that Congressman Abbitt will recall was passed in regard to tobacco about a year ago.

Mr. ABBITT. That is right.

Mr. MILLER. We intend to take similar measures as we took then. While the Department does not look with too much favor upon restrictions on production, we feel that just so long as we have a marketing quota program, that the noncooperators should not be rewarded as against the cooperators in the program. We feel that we are forced by present legislation to do that very thing.

Mr. ABBITT. Is it not true that the operation under section 359 (b) would cause a reduction in our peanut allotment except for the fact that we have already hit the minimum allotment?

Mr. MILLER. Yes; it would have a tendency to overproduce if it were not for that.

Mr. ABBITT. And it is a protection, more or less, for the cooperators and people that have allotments?

Mr. MILLER. We feel that is the effect.

Mr. ABBITT. Let me ask you this further question: Does section 359 (b) have anything to do with the basic commodities?

Mr. MERRILL. No, sir.

Mr. ABBITT. Off the record. (Discussion off the record.)

Mr. ABBITT. Back on the record.

My understanding is that section 359 (b) and section 358 do not have anything to do with any of the basic commodities?

Mr. MILLER. No, sir; I do not think so.

Mr. ABBITT. Off the record again, please.

(Discussion off the record.)

Mr. MCMILLAN. Are there any further questions?

Mr. MATTHEWs. Mr. Chairman, may I ask this question of Mr. Miller?