Mr. WINDER. May I comment on a question I think Congressman Dixon asked of Mr. Clyde, with respect to the auditing of our accounts? The Department of Agriculture, their auditing department, conducts a very comprehensive and complete audit of our accounts. once a year and furnishes us with the report and, of course, the Secretary of Agriculture, who is in reality a referee in this organization to see that the money contributed by the many growers throughout the United States is not misspent. And we have a very complete and comprehensive audit. We could furnish to the committee, if they think they would like to see it, a copy of that audit at any time.. Mr. MATTHEWS. Thank you very much.

Mr. WINDER. Thank you for the opportunity.

Mr. MATTHEWS. We will have the record show that Mr. Jones wishes to corroborate the testimony so ably presented by Mr. Winder. We have our friend Mr. John Baker of the National Farmers Union, who will testify tomorrow.

Mr. Smith, we will be glad to have you come up here and since you are from the State of Utah I will ask Congressman Dixon here to present you.

Mr. DIXON. Mr. Chairman, and gentlemen, and Mrs. Downey, I am pleased to introduce Mr. Arthur Smith, the secretary and treasurer of the Utah Livestock Production Credit Association of Salt Lake City.

Mr. MATTHEWs. You may proceed and go right ahead in your own way.

STATEMENT OF ARTHUR SMITH, SECRETARY-TREASURER OF THE UTAH LIVESTOCK PRODUCTION CREDIT ASSOCIATION, SALT LAKE CITY, UTAH

Mr. SMITH. Mr. Chairman and members of the committee, my name is Arthur Smith. I am secretary-treasurer of the Utah Livestock Production Credit Association, with headquarters in Salt Lake City, Utah. Our business is financing farmers and livestock operators. We are 1 of 500 production credit associations in the United States furnishing such financing. Our records show that the range sheep operator has invested in ranchland, rangelands, grazing permits, equipment, and other necessities to operate his outfit from $75 to $100 per head for every breeding sheep in his unit, and on which many of them have a sizable unpaid balance.

Present indications are that permits to graze sheep on Federal, mountain, and desert ranges will continue to be reduced, which means that the sheep producer will be faced with the necessity of further increasing his animal unit investment by purchasing additional range, permits, and supporting property, or reduce his sheep numbers accordingly, either of which will add to his expenses.

The National Wool Act of 1954 on which 2 payments, 1 in 1956 and 1 in 1957, have been received by the sheepmen, has been of considerable assistance; in fact, it has been the difference between a profit and loss for them.

Our records and actual figures for the year 1955 on 40 sheep accounts, with a total of 112,372 sheep, shows the fixed operating expenses for labor, shearing, feeds, leases, taxes, and other items of $10.95 per head, and the following income per head from wool, $3.73;.

lambs, $7.62; old ewes, 48 cents; less cost of replacements, 95 cents; leaving income of $10.88, an average loss per head of 0.07.

The average incentive payment received in 1956 on the 1955 wool clip was $1.70, making the average gain, after the incentive payment, $1.63, and interest on the money borrowed would be deducted from the above. The figures for 1956 on 43 sheep accounts, 115,726 sheep, shows $12.25 per head operating expenses, with income of $12.50 per head, a gain of 25 cents per head before the incentive payment. The average incentive payment for 1956 received in 1957 was $1.87, making the total average gain $2.12 per head.

I have seen the records and figures of other livestock loaning agencies in Utah for the same period, and they are similar to the figures I have given. I have talked with other production credit association officials from other areas and I firmly believe these figures would be typical in our other sheep-producing States.

Operating costs continue to increase. Many of the budgets prepared at renewal time last October, November, and December were increased 10 to 15 percent. Many of the sheepmen have been forced to obtain loans on their real estate to assist in the costs of their operating expenses, and they have to depend on the income from their sheep to make the principal and interest payments on their real-estate debts in addition to their other fixed operating expenses. In many instances, it has been necessary for the livestock loan companies to take realestate mortgages, assignment of water stocks and waivers on grazing permits from the sheepmen as additional security in order to continue with their financing.

I have been secretary-treasurer and manager of the Utah Livestock Production Credit Association since 1936, or 22 years. Many of the sheep accounts, in fact, most of them are on the books today that were there in 1936 with but little financial gain, if any, in the 22 years.

We have numerous inquiries from sheepmen each year seeking credit relief, many with the total debt on their sheep so large that we cannot accept them. This means liquidation and perhaps a loss to a man who has spent many years trying to stay in the sheep business. It is evident that considerable liquidation of range outfits would have been necessary without the incentive payment on wool.

The 1954 Wool Act with the incentive program has been most helpful to the sheep and wool industry. We rely on the sheep industry for one of our greatest supports; without it our schools and other activities face trouble.

We earnestly request that the Wool Act of 1954 be extended as a measure of security for the sheep industry.

Thank you.

Mr. MATTHEWs. Thank you very much, Mr. Smith. I wonder if there are any questions that the committee would like to ask? Mr. HILL. At the bottom of page 2 you say:

In many instances, it has been necessary for the livestock loan companies to take real-estate mortgages.

Mr. SMITH. Yes, sir.

Mr. HILL. Then you follow with:

Assignment of the water stocks and waivers on the grazing permits.

How could they-how could anyone sign a waiver on a grazing permit without the consent of the Forest Service?

Mr. SMITH. They do consent to it.

Mr. HILL. They consent to it?

Mr. SMITH. Yes, sir. Their waiver is sent to the regional office and is consented to by the Forest Service.

Mr. HILL. Is that all the bank leaves out?

Mr. SMITH. We do not take it only on necessity-only when we have to.

Mr. HILL. If you have to have assignments you ask for them?
Mr. SMITH. I think we would have to; yes, sir.

Mr. HILL. The sheep farmers are not doing as well as some of the folks would think?

Mr. SMITH. That is right.

Mr. HILL. With this act, if that is extended, you see some hope for the sheepgrower?

Mr. SMITH. Yes, sir, that is right.

Mr. DIXON. I, certainly, compliment you on your presentation here. The data is compiled in a way that I have never seen data compiled. It is very useful. Maybe you cannot answer the question. Maybe someone else here can. As I understand it, the National Banking Act prohibits a national bank from taking grazing permits as part of the security on loans that the industry is supporting legislation which would permit the national banks to take waivers on grazing permits as security.

Mr. SMITH. If I may, I believe that we have had inquiries as to the form we use on a waiver, on a permit, and I do not know whether there is a law against their taking it or not but I think they have endeavored to take it.

Mr. DIXON. They are probably not national banks.

Mr. SMITH. That could be. I can't answer that for you.

Mr. DIXON. Maybe someone can answer that question while the wool people are here.

Mr. MATTHEWs. Is there anyone who could answer that question of Congressman Dixon?

Mr. DIXON. The reason I ask it is that the wool people in Utah face that problem. That is quite a serious handicap to their getting loans.

Mr. McINTIRE. Just one question, Mr. Smith. In the short time that the act of 1954 has been in operation, and I do state it is a short time, do you see the effects of this act as the basis for an increase in sheep population in your area?

Mr. SMITH. Very much so. Some of the smaller operators would not be able to stay in or get in without the assistance and help from the act.

Mr. McINTIRE. But are there increases in sheep numbers going on? Mr. SMITH. Yes, sir.

Mr. McINTIRE. In all sizes of operations?

Mr. SMITH. Yes, sir. Some of the flocks are bringing the herds back up to an economical unit because of the fact that they are getting this additional incentive payment.

Mr. McINTIRE. So the act is

Mr. SMITH. Beneficial.

Mr. McINTIRE. You would say that the act's objective has been helpful-that being to build toward a more adequate supply of wool produced in this country?

Mr. SMITH. Yes, sir.

Mr. McINTIRE. Do you think that phase of the act is showing up constructively and beneficially?

Mr. SMITH. Yes, sir; I do.

Mr. MATTHEWS. Are there any other questions?

Thank you very much, Mr. Smith. We surely do appreciate your testifying.

Mr. SMITH. Thank you.

Mr. MATTHEWS. I would like to acknowledge the fact that I think Mr. Casey Jones, executive secretary of the American Sheep Producers Council, has come in. The committee would like to recognize you if you want to testify.

Although you did not testify you did a good job.

Mr. Winder very ably stated your feelings about this "important legislation" and in the record we have stated that you collaborated with him.

Mr. JONES. Thank you.

Mr. MATTHEWS. If there are no further questions the subcommittee stands adjourned until 10 o'clock tomorrow morning. We are delighted to have had you here.

(Whereupon, at 12:30 p. m., the hearing was adjourned, to reconvene on Wednesday, February 12, 1958, at 10 a. m.)