Mr. REAGAN. The next major provision

Mr. MATTHEWS. Would the gentleman yield for a question?

Mr. MCMILLAN. Proceed.

Mr. MATTHEWS. I believe you are discussing H. R. 12545 by Mr. Burleson? We have 2 on our desk, 1 by Mr. Abbitt and 1 by Mr. Burleson.

Mr. REAGAN. It is the Burleson bill.

Mr. MATTHEWS. 12545.

Mr. REAGAN. Yes, sir.

Mr. MATTHEWS. Will you please check section 358. I believe that is the section you are discussing now. It is on page 2 of the Burleson bill, section 358. I believe that is the section you have been discussing. Mr. REAGAN. That is right, sir.

Mr. MATTHEWS. I wanted to understand that. If you will turn to page 3, let us start with line 5, I read now from (2):

Notwitstanding any other provision of law, the Secretary shall make an investigation not later than February 1 of each calendar year for each area to determine whether the estimated supply as of the first day of the marketing year which begins in such calendar year will be less than 90 per centum of the estimated consumption of peanuts from each area during such marketing year plus 90 per centum of the estimated consumption during the period from the beginning of the marketing year through the first full calendar month in which there normally is heavy movement of new crop peanuts (that is, October for the southeast and southwest areas and November for the Virginia-Carolina area). Will you explain that more in detail, please.

Mr. REAGAN. Yes, sir, may I first give a little background for the provisions and then explain how it would work?

At the present time in the marketing quota and acreage allotment legislation we have provision for the Secretary to add on acres for the producers of types of peanuts that are in short supply. The criteria given the Secretary in the present legislation are along the following lines: If the estimated supply based on the acres as they stand at the moment will be insufficient to sell as low as 105 percent of support plus reasonable carrying charges, then the Secretary will add on sufficient acres to increase the supply so that they will sell at that percent.

Now, each year the Department has had very great difficulty in applying this legislation. Frankly, it is very difficult criteria to apply.

The only purpose of our suggestion here is to give an easier formula to the Department, one over which there will be less controversy than under the present formula. We feel that if acreage does need to be added on, then the Secretary should have that authority. This would give it to him, plus, we think, a workable formula.

I might say that based on the experience of the Southwest under the present legislation, the Southwest would probably never get any acres added on under this proposed legislation. We do feel that it should be in there for the benefit of the producers of some other types of peanuts who might run into the need to have an acreage increase. Mr. ABBITT. In other words, Doctor, as I understand it, this suggests further simplification of present law. Under present law there is no formula for the Secretary to go by.

Mr. REAGAN. There is no effective formula, sir.

Mr. ABBITT. It is in his discretion whether certain types of peanuts should be increased in their allotment for the present year, and he has exercised that discretion on occasion. He had to do it in his discretion without any formula written into the law. This is just a guidepost for him to go by in making that determination.

Mr. REAGAN. That is right, sir.

Mr. SMITH. Does the Secretary take into consideration the weather factors about which you have been talking, in making this estimate? Mr. REAGAN. I presume, sir, he would take that into account in estimating what the production was going to be. It would be necessary to take that into account, yes sir.

The next major provision provides for the establishment of funds for several purposes. The first is to provide for publicity and promotion of peanuts. The second is to provide for research on peanuts.

The purpose of these funds is to expand the market for peanuts. This is something which will help everybody in the peanut industry. Mr. MCMILLAN. That is a fund to be assessed against each farmer. Mr. REAGAN. Yes, sir, that is to be assessed against each farmer. I wanted to explain the uses of the fund and then come back and explain the way the fund would be collected and administered.

Mr. MCMILLAN. Please make your statement as brief as possible. We have a good many witnesses waiting to be heard this morning. Mr. REAGAN. Yes, sir, I shall be very happy to.

For these uses which I have already mentioned, there would be a deduction of not over 1 percent of the average support per ton of peanuts for these uses.

We have certain other uses for which funds would be deducted. One is to meet operating losses of peanutgrower cooperative associations which contract directly with the Commodity Credit Corporation in making price support available; in other words, to help bear these administrative costs.

Next, funds would be used to meet the costs of diverting the surplus of peanuts. This surplus of peanuts might be diverted in the form of lower quality shelled peanuts, or it might be diverted in the form of farmers stock peanuts. These funds would be different from the research and promotion fund in that these funds to bear the costs of the program would be on an area basis; in other words, the VirginiaCarolina area, the southeast area, and the southwest area.

The deduction which is being proposed here would not go into effect unless it had been approved by two-thirds of the growers voting in a referendum. In other words, it would be submitted to the growers. Mr. ABBITT. It would have to be approved by all the peanut producers?

Mr. REAGAN. That is right.

Mr. ABBITT. It would be one referendum?

Mr. REAGAN. One referendum.

Mr. ABBITT. The one referendum would include all areas?

Mr. REAGAN. That is right.

Mr. ABBITT. It would have to be approved by a two-thirds vote of all the peanut producers participating in the referendum before this fund would be set up and go into effect?

Mr. REAGAN. That is right, sir.

Mr. ABBITT. It is the purpose of the program to take the burden off the Federal Government, is it not?

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Mr. REAGAN. That is right, sir.

Mr. ABBITT. You would have a self-supporting program, paid for and financed by the producers themselves. It would relieve the taxpayers of the support of the peanut program.

Mr. REAGAN. That is right.

This would be on an area basis. In other words, the growers in each area would bear the costs of the price support program in their

area.

The legislation provides that the Secretary will appoint an advisory committee consisting of 12 people who will advise and consult with him on carrying out this program. This committee of 12 would consist of 2 grower representatives from each area, 1 sheller representative from each area, and 3 manufacturers of peanut products.

Mr. MATTHEWS. I do not wish to prolong this discussion, but I notice that you do not have a majority of producers. About half of that committee are producers and the other half are divided between shellers and manufacturers. Are you wedded to that particular number? I imagine you gave a good deal of thought to it.

Mr. REAGAN. No, sir, we are not wedded to that particular number. Our concern is that the viewpoints of all segments of the peanut industry be brought to bear in advising the Secretary on this program. That is the major purpose.

Mr. SMITH. Mr. Chairman, may I ask a question?

Mr. MCMILLAN. You certainly may.

Mr. SMITH. What is the general status of the peanut trade if you decrease the price of peanuts to increase their consumption?

Mr. REAGAN. Sir, I will give you my own personal opinion on this. There are many in the trade who disagree violently with me. I feel if you decrease the price of peanuts, then the immediate response, perhaps that year, is only a slight increase in consumption. I think that over time, however, with a slightly lower priced peanut, you would have an expansion of your market.

I might point out that the purpose of this bill is not to reduce the level of support. We have put things in the bill which up it.

Another provision is that when it is determined to handle the diversion through diverting the lower quality edible shelled peanuts, the price which would be paid the shellers for these lower quality peanuts would be not less than 100 percent of the market price and not over 110 percent of the market price of the lower quality shelled peanuts.

The purpose of this provision is to get a workable program of diverting lower quality shelled peanuts. We have seen from the experience of the last few years that the Secretary is unwilling, without legislative direction, to set a price on lower quality shelled peanuts sufficiently high to result in an effective diversion program of these lower quality peanuts, even in the face of acute surpluses. We have seen good quality farmers stock peanuts being diverted into crushing into oil and meal, and lower quality shelled edible peanuts going into the edible trade.

I feel the Department needs legislative guidance on this matter. Another provision is that the conversion table which is used for determining the percentage of parity support would be changed for peanuts so peanuts would conform to the present standards for corn, wheat, and rice. The effect there would be to lower the support. It

would be more than offset, however, by the provision which I discussed with your earlier.

Another provision in the bill is that the peanuts would be supported on a uniform support per 1 percent sound mature kernels for all types, with a premium for the extra large Virginia-type peanuts and for the Valencia-type peanuts which are suitable for cleaning and roasting.

The purpose of this provision is to bring about equality between the various types of peanuts. The southwestern area has seen a severe loss of market to peanuts from other areas, and a major factor here has been that the Department has tended to price us out of the market.

Just to show you what I am talking about, when I speak of a sound mature kernel I refer to a standard of quality of kernels in the farmer's stock peanuts. So the 1 percent sound mature kernels in a ton of peanuts would be 20 pounds of sound mature kernels.

From 1951 through 1955, the Department had the same support per 1 percent sound mature kernels for runner peanuts and for Southwest Spanish. Then in 1956 the Department created a spread between Southwest Spanish peanuts and runner peanuts produced in the southeast area, so the Southwest Spanish were 5 cents higher.

That hurt.

Then in 1957, the Department increased this 5-cent spread to 8

cents.

Frankly, we feel, gentlemen, that the Department needs some legislative guidance on this matter. May I insert this table showing the support price by types per 1 percent sound mature kernels per ton of farmers stock peanuts?

Mr. MCMILLAN. Without objection, it may be inserted in the record at this point.

(The table referred to follows:)

Peanut price support per 1 percent sound mature kernels per ton by farmers' stock, by type, by year, 1951-57

Source: Oils and Peanut Division, CSS Program Analysis Branch, May 26, 1958.

Mr. ABBITT. You are actually talking about an artificial differential which the Department has set up among the types of peanuts. As I understand it, if a producer is selling Spanish peanuts, under the price support program the buyer must pay 8 cents more for each 1 percent sound mature kernels per ton than he would pay for runner. Mr. REAGAN. That is right.

Mr. ABBITT. That is under the present practice.

Mr. REAGAN. That is right, sir.

Mr. ABBITT. While the Department quotes peanuts as such at a certain price per ton, they establish certain differentials as between the types, as I understand it.