What, then, is a high enough release price?

Consistent with the concept of an emergency reserve, we believe that the release price should be high enough to do two things:

1. It should be high enough to provide very strong incentives to increase production. At anytime that we are working off reserve stocks, we would certainly need more wheat.

2. It should be high enough so that it will not be reached by the market in any but extremely tight conditions. If it becomes available in the normal market range, we again run the risk of having the reserves depleted when they are needed.

We think that the reserves should not be released below 100 percent of parity, not simply because it is 100 percent of parity, but because it is a price adequate to isolate the reserve under normal circumstances. Thank you for your attention. I consider it a real privilege to testify before this committee.

Mr. PURCELL. Are there any questions of Mr. McGregor?

Mrs. May?

Mrs. MAY. If I may, Mr. Chairman, I would like to thank Mr. McGregor for his statement. I thank him very much. This statement is excellent. And for more reasons than that it supports the bill that I introduced.

Would you be willing, Mr. McGregor, to comment just a little further in addition to what you said on page 3 in your explanation of what might happen under Mr. Purcell's, or the administration's, bill's procedure?

You say: "*** because some types at some locations might be selling above his maximum acquisition price while other types at other locations were within the buying range."

What would happen there?

Mr. MCGREGOR. Of course, the demand in one place for one class will vary from area to area. Although I have not checked this out, in my area it is not within the buying range, but it is pretty close to it: whereas, Hard Winter, Spring in the northern area at this point would probably be above it. What the mix of types that you would want in the reserve I would not know. This would be a decision for the Secretary. Presumably, he would want some mix. We would not want to acquire those types of wheat that happen to be low at the time of acquisition. It would have to be only the wheat that was selling within this price range.

Mrs. MAY. What would you say about buying it in under the provisions in one instance and not in another?

Mr. McGREGOR. At about 115 percent of the support level. Soft Red is currently selling below this level, and then you can buy it if it is. If Northern Hard Spring is selling above, you cannot buy it. So that the result might be that you would acquire a disproportionate amount of some kinds of wheat in some locations, but other types which might be desirable in the reserve would not be available because they would be priced above the range.

Mrs. MAY. I see.

One more question, Mr. Chairman:

We were discussing this morning, and we have had discussions both in and out of this committee, on whether or not it is truly possible to have a reserve of this kind that will not act in opening up the gates

to use these stocks to control the market. It is true that we have had experiences in the past that have given all of us concern on this very question. Is it not true that most of the reserve programs that have been set up have sort of grown like Topsy, so to speak? They have not really been planned by design or plan. Would you agree with that

statement?

Mr. MCGREGOR. Yes, I think that they have not for the most part been planned with much attention as to the matter of setting it aside from the market. They have been held much more loosely than your bill provides. In this case, in the case of your formula at least, it would be much more tightly held as a reserve, so that the release price, if the price gets above 100 or 110 percent of parity, then it will come on the market, and at that point will, of course, exercise a depressing effect. But at that price level, the likelihood of this coming on is quite remote. So, I think, if you know that it is not available at that price level, the market under any conditions other than an emergency, would be able to move up and down quite freely without having to worry about it.

Mrs. MAY. And, as I understand the whole thrust of your statement, you would support a truly strategic reserve program, but would not be interested in a reserve plan that acts as a two-edged sword for the producer?

Mr. MCGREGOR. This is entirely correct. We do have some problem with this 100 million bushels this year. We are aware of this. This gives us some urgency in our thinking about this.

However, we have worked off in the last 6 years a surplus which was the equivalent of a full year's crop. That has been, probably, the one major problem of wheat during this period, and we do not want to get back into that situation, even if it is going to give us something this year. We have seen it before. There are some things that can be done to alleviate the situation, such as Public Law 480. But in attempting to do so, other than getting back into a situation like the surpluses we have had in the past, we would rather take a licking; however, if we can set up completely isolated reserves, that is the thing to do.

I believe that 2 years ago there were quite a number of reserve bills before the Congress. The emphasis on reserves seems to have come up quite quickly, because of the consequence of the attention given to the world food situation in the last 2 or 3 years. So, we feel that it would be possible to do this again, and our concern is that if we do something about reserves that we should do it in such a manner that the reserve can be distinguished from the surplus and cannot ever take on that type of surplus. That is all.

Mrs. MAY. Thank you.

That is all, Mr. Chairman.

Mr. PURCELL. Are there any other questions?

Mr. Foley?

Mr. FOLEY. I would like to welcome you, Mr. McGregor. You are Mrs. May's constituent, but for some years I have had the greatest respect for you.

I think he is one of the most knowledgeable people in the general wheat field I have ever met. I know his statement is going to be of considerable value to the subcommittee.

I want to say, Mr. McGregor, that I think your statement is an extremely helpful contribution.

I did want to review with you one or two things that you mentioned in your answer to Mrs. May's question.

I take it that you feel, and I will confess that I feel this way, that a reserve would be desirable but we are not so much in need of a reserve this year if it is one which would cause a later depressive effect on the market.

Mr. MCGREGOR. That is a very cood statement. That is exactly the position.

Mr. FOLEY. This is an extremely important matter to the economy of the wheat industry and that of feed grains and soybeans and the other crops that might be affected by the reserves, and we should approach it with great caution and consideration.

Mr. McGREGOR. Yes.

Mr. FOLEY. It seems to me that the essential problem, really, does focus around the question of the release price rather than the release mechanism which will insure that the reserve will not become a depressant on the free market problem.

Mr. McGREGOR. Yes.

Mr. FOLEY. And on the other hand, do we not have an additional problem that unless we react, maybe not this year or next year, unless we react somehow to create a mechanism, that the Department is likely to want some latitude in the carryover, the takeover, in order to provide for emergencies, either under Public Law 480 or under other statutes?

Mr. McGREGOR. This seems to be one of the purposes of a reserve bill that you would have to have definitions as to what kinds of reserves would be needed and how they would be held. And in the situation we have now, in which the Commodity Credit Corporation has been working off surplus, and now we are going to go back to stockpiling, the question is how much is needed, which is a decision that really is never spelled out. We have the feeling that currently we did not carry enough over last year. But how much is "enough"?

You have to set some kind of a goal for wheat production, to try to adjust it in terms of acreage allotments, and so forth.

Mr. FOLEY. I agree with that, that you have to adjust it in terms of acreage allotments, and so forth."

Mr. McGREGOR. That is right.

Mr. FOLEY. Something could be done by the Department administratively to indicate the kind of reserves and the form and the like.

Mr. MCGREGOR. So that the Department is likely to get some wheat under the mechanism this year, rather than some other mechanism. This simply goes into stock. At what level they want to hold the stock, of course, is a decision that they have to make and will make. They now have in the neighborhood of 123 million-at least it was in June uncommitted reserves or inventory. Apparently, they do not want at this time to go below that level. What they might aim at, of course, is, again, an administrative action, and I do not think that there are any guidelines for it.

If you have a reserve, it would seem to me that Commodity Credit Corporation would want to carry a big enough inventory in a separate inventory.

Mr. FOLEY. I would feel, and I would think that you would, that this is a matter that should be of continuing interest to the subcommittee and the Congress, until we arrive at some solution that we feel is desirable.

Mr. McGREGOR. At present, it is likely.

Mr. FOLEY. Thank you.

That is all, Mr. Chairman.

Mr. PURCELL. Are there any further questions?

If not, thank you very much, Mr. McGregor.

We will now call on Mr. Frank Heffelfinger, executive vice president, producer services, Peavey Co., Minneapolis, Minn., representing the Grain & Feed Dealers National Association.

We will be glad to hear from you and your associates now.

STATEMENT OF FRANK HEFFELFINGER, EXECUTIVE VICE PRESIDENT, PRODUCER SERVICES, PEAVEY CO., MINNEAPOLIS, MINN.; ACCOMPANIED BY WILLIAM J. KEATING, COUNSEL FOR PUBLIC AFFAIRS, AND ALVIN E. OLIVER, EXECUTIVE VICE PRESIDENT, GRAIN & FEED DEALERS NATIONAL ASSOCIATION, REPRESENTING THE GRAIN & FEED DEALERS NATIONAL ASSOCIATION

Mr. HEFFELFINGER. Mr. Chairman and members of the subcommittee. On my left is William J. Keating, counsel for public affairs, and the gentleman on my right is Mr. Alvin E. Oliver, executive vice president of the Grain & Feed Dealers National Association.

I am Frank Heffelfinger, executive vice president, producer services, Peavey Co., Minneapolis, Minn. Today I am appearing on behalf of the Grain & Feed Dealers National Association of which I am president. The Grain & Feed Dealers National Association is industrywide and nationwide in scope whose members range in size from the smallest country elevator to the largest grain and feed complexes. The membership includes 1,700 direct memberships held by individual firms plus 54 State and regional associations representing 15,000 grain and feed firms. Due to the press of time, these affiliated associations have not seen this statement.

I appreciate this opportunity to express the views of our association on H.R. 12067. We have long been concerned with the problems of strategic reserves and domestic price stabilization, which appear to be the subjects of this bill. It does seem to me, however, that an effort to combine in a single bill provisions designed to establish and maintain adequate strategic reserves and provide new authority for domestic price stabilization creates problems of two distinct types.

First, national needs for strategic reserves, on the one hand, and for price stabilization, on the other, are not necessarily served by the same action. Indeed, it may be that Government actions designed to serve one purpose may conflict with the other. For example, in the structuring of a strategic reserve policy primary attention might be given to accumulating stocks which are (1) available at the lowest possible costs, (2) best suited for long-term storage, (3) require the least processing for immediate use and (4) provide the maximum nutritional benefits under circumstances of critical national emergency. These needs may conflict with those of price stabilization which are oriented to accumulating stocks to support producer prices without

regard to their long-term storability, processing requirements or capacity to meet food requirements under circumstances of national emergency. For this reason, the effort made in this bill to develop a single set of standards governing acquisition, maintenance, and disposition of stocks both for national security reserve and domestic market stabilization purposes seems difficult to justify.

A second problem involved in combining strategic reserve and stabilization policies in a single bill involves justification of costs. A strategic reserve policy serves the interests of all people in our society; yet the cost of this type of reserve would have to be reflected in the agricultural programs in the national budget, if national reserves are created and maintained within the framework of a bill which also has as its objective stabilization of farm prices.

We would like to examine H.R. 12067 from the standpoint of its capacity to serve national needs for both strategic reserves and price stabilization.

On several occasions our association has attempted to develop a position on national security reserves because of the necessary involvement of marketing institutions in any such policy. In each case, we have come to the realization that we lacked essential informationthat an effort to structure a response to the need requires a clear statement of the need. Those within our Government who are qualified to do so must first define circumstances which will confront us in a period of national emergency before a fully responsive policy can be evolved. We need to have, for example, projections of how many people must be fed, where they are likely to be, the extent to which storage, transportation and processing facilities are likely to be inoperative and the period in which normal production may be disrupted. Without these essential projections, we have been able to contribute very little to the development of a national security reserve policy which is truly responsive to need.

In this light, the present bill seems premature. If this information has been developed and studied by Government agencies, we are not aware of the conclusions reached.

With this reservation about the absence of essential information, we would like to point out what appear to be obvious shortcomings in the bill from the standpoint of its ability to serve national strategic reserve needs:

1. The bill apparently assumes that national security stocks must be owned by Commodity Credit Corporation. We raise serious question about this conclusion. In circumstances of emergency, all stocks in this country could be made available for distribution and use under Government direction under emergency powers similar to those exercised in prior periods of national emergency. There is no showing that actual Government ownership of all stocks needed for reserves adds much to the flexibility available through the combination of Government-owned stocks under the present program and free stocks in all other positions.

2. The composition of the reserve wheat, feed grains, and soybeans--seems better suited to a stabilization program than to a national security reserve program. A policy designed to provide minimum food requirements in a national emergency should be concerned with the selection and maintenance of food stocks which are least expensive, most durable, and most responsive to emergency food needs.