Therefore, I list a number of questions which I believe the U.S. Department of Agriculture should be asked to answer so as to clarify in advance a number of situations which are likely to arise. Either the committee should obtain a clear record of administrative intent or specify more guidelines:

1. Will the Department agree to announce at the beginning of the marketing year a range in quantities it expects to acquire for national

reserves?

This is important because it is only fair to the producers of all of the five classes of wheat for at least a preliminary announcement to be made in June. The wheat harvest begins in a few areas in late May, and in other areas harvest is completed during June or early July. The potential contribution CCC purchases will make to aggregate demand should be made known to all farmers before they sell their wheat. The same is true for the other commodities for the respective marketing years.

2. Will CCC agree that procurements for Public Law 480 programs continue to be drawn from the open market, particularly title I sales in exchange for local currencies or made on approved credit?

3. In the event the carryover exceeds the percentages stated in section 3 of the bill, what resale price formula would be employed by the Department? Would it stay with the 135 percent resale figure and use its supply-management authority, or would it lower the boom on market prices by cutting its resale price?

4. Will the Department be willing to state specifically what exceptions will be needed to guidelines provided by the bill?

One that will be required, no doubt, is in the case of commercial export sales of wheat from the Pacific Northwest in the case of Hard Spring and Winter wheat classes where free stocks are limited.

It should be asked if it foresees needs for any special exceptions. for feed grains and soybeans so the matter will be entirely clear in advance.

Mr. PURCELL. Thank you very much.

You have made a very good analysis. We hope to be able to work with this.

Are there any questions, Mr. Swach?

Mr. ZWACH. Mr. Hendrickson, in what way do you feel that these reserves could best be insulated, so that they will never act as a price depressant?

Mr. HENDRICKSON. I think that the main points are two: First, for what purposes they could be released? Certainly, they ought to be released for acute emergencies.

The second is with respect to the pricing formula which, I think. should be related to the support price or the acquisition price.

I do not know exactly where the figure 135 percent came from, but it is there as a figure. I am not sure that I have studied the matter sufficiently. I tried to find a rationale to support the idea of 120 or 125 or 130 percent. I find it very difficult. I think it would be up to the Congress to make the decision on that.

Mr. ZWACH. Do you think that "a percentage of the support price" is a better use than to say "fully parity"?

Mr. HENDRICKSON. Yes, I think it is. I think it is, because I think that parity, in my opinion, has a great many defects and has had for

a great many years, from the standpoint of this subject. The Department of Agriculture and the technical people, and so on, have had objections to many aspects in respect to parity for a long time. I am against throwing it out until something better has been found to replace it. I do not think it is a substantial or desirable measure for this purpose as the support price. The support price will adjust. There is some need to adjust it from time to time, taking into account what is happening in the marketplace.

Mr. ZwACH. And this would be of benefit to everybody; the producer, the processor, the speculator, if they knew exactly at what figure these commodities would be released?

Mr. HENDRICKSON. I think if you do that, you reduce speculation. You do not have to speculate about it; you know what the facts are. Certainly, it would be helpful to everyone concerned to know. The producers would be helped most, because they are the last to hear, usually. Mr. ZWACH. And those are the ones I am concerned about.

Mr. HENDRICKSON. That is right. I know, the people in your district. Mr. ZWACH. Thank you.

That is all, Mr. Chairman.

Mr. PURCELL. Mr. Kleppe?

Mr. KLEPPE. Mr. Hendrickson, you have pointed out some things in your statement that are of real concern to me. I am very delighted that you brought them out. Certainly, your organization represents some people in the hard winter-spring wheat area.

Mr. HENDRICKSON. Right.

Mr. KLEPPE. I notice on page 8 of your testimony you have used the words "floor" and "ceiling" in quotes.

Mr. HENDRICKSON. That is right.

Mr. KLEPPE. Unquestionably, you put some thought behind putting those words in quotes.

Mr. HENDRICKSON. Yes.

Mr. KLEPPE. What concerns me is the "ceiling" that will be placed on the price of wheat if we enact this legislation here.

For example, in the hard northern spring wheat area, Bismarck, N. Dak., where I come from, wheat right now-No. 2 wheat-is selling at $1.48 a bushel, and this has gone down 12 to 14 cents just in the last few weeks or so. I do not know if it is because of some announcement by the Department or because of the time of the year, or what it is, but the point is that from the market standpoint our price is such that we would get much benefit out of this legislation. The concern that I have is the ceiling that would be placed on the market price, and the way I figure it, it could be $1.69 per bushel. It was not very long ago that our market price was over $1.69. And it would be placing on this a ceiling which would be a disadvantage to us.

As I look at this legislation and as I have heard some of the testimony this morning, it appears that some folks, at least, think that the Secretary has plenty of authority presently to take care of adequate stocks if he exercises the authority that he has.

Do you know that the support loan rate is the floor?

I certainly would like to receive your observations about this ceiling situation, which could become prevalent under these conditions, particularly as it pertains to the hard northern spring area.

Mr. HENDRICKSON. I would not be able to be precise on this, but let me point out that the dollars-and-cents figures used have been in terms of national averages for all of the farms. You are in an area which benefits from the fact that you have a type of wheat which frequently has a large amount of premium attached to it. I do not know exactly how your price up there relates to the national price. It is true that you do have a very heavy freight load from that area to Superior and Duluth, but that is one of the facts of life that we cannot do very much about. I think, of course, that is perfectly true with any return of any farmer to a certain extent that does contribute to "ceiling" in quotation marks.

On the other hand, we do feel that in the case of wheat, and for that matter, other grain prices-and this is my view-for a nation of 200 million people, in the present state of world conditions, we certainly ought to have a degree of protection that goes over and beyond what we have seen to be the need in the past.

I do not think that we should run the risk of running out. I think it would be an undue risk on top of that.

Mr. KLEPPE. I do not think, Mr. Hendrickson, that there is any basic disagreement in this area.

Mr. HENDRICKSON. I am sure that I am not disagreeing with you. I would like to add one more point.

It is perfectly true that the ceiling is going to inhibit somewhat the advance in price which might otherwise be possible, but that is one of the factors, one of the prices that we have to pay for the fact that we do have a free market and a useful free market, extremely useful but with a very high volatility-excessive volatility at some times-which the majority of the Food and Fiber Report just recently spoke about in getting wrong signals to the farmers.

If you will recall, there were some very wrong signals given last August, September, October, and November, both by Government programs and by the marketplace.

Mr. KLEPPE. I am a little concerned if that is the price that we have to pay. Maybe it would be too high a price, particularly as it pertains to our area. That was the reason for my question.

Mr. HENDRICKSON. I realize that there is a point of view, a legitimate point of view contained therein, but my own judgment is-and I went through the situation when we had to pay a 30-cent bonus to get the wheat out there to meet a really urgent international requirement back in 1946, and I learned at that time a lesson that I will never never forget-never run out of stock. Shortages are much worse than surpluses.

Mr. KLEPPE. Thank you.

That is all, Mr. Chairman.

Mr. PURCELL. Mr. Dole?

Mr. DOLE. You mentioned a point that I made earlier with reference to Public Law 480. Could that not be helped by eliminating section 3 on page 3 of the Purcell bill?

Mr. HENDRICKSON. I do not know that I would eliminate all of it. I am not sure but what you ought to retain it.

Mr. DOLE. How about title I?

Mr. HENDRICKSON. I would have title I. I think that the Commodity Credit Corporation should have the right. And then I think also of one

point which is hard to describe; you have got to visualize it to a certain extent, and that is the need of the President of the United States, in the present state of affairs throughout the world, to have a free hand, to be able to move fast with respect to some situations that might very well develop. We cannot even think about them at the moment. I like to see such stock available with plenty of power for him to move.

Mr. DOLE. I know you have given considerable consideration to this question. What will happen, so far as the farmers are concerned— what good will this bill be to the American wheat producers; what will it do for them?

Mr. HENDRICKSON. Well, I would think that two or three things would happen. One of them is-I am not trying to forecast prices. Perhaps, the Canadian crop has made some change. But it looks to me as if we were headed hight toward the loan level in the case of wheat this year. I think we are headed for the loan level, in the case of corn right now. The situation can change. This, I do not think was contemplated entirely when you legislated in 1965.

I think that there has been a missing link with respect to this legislation throughout-and that is in this reserve area. I think a great many farmers view it this way.

Mr. DOLE. Do you think that it will increase the price 10, or 15, or 20 cents a bushel?

Mr. HENDRICKSON. I have no doubt that it will increase it somewhat. My figures indicate that the Commodity Credit Corporation has something like, I believe, 125 million bushels of wheat in its stocks. This would authorize the purchasing of about up to 290 million bushels on the basis of the new wheat situation forecast made yesterday. This would mean a purchase, if they wanted to go ahead under this, of about 165 million bushels of wheat during this year to build this reserve up to 290 million bushels. Certainly, the impact of that is a factor that would have an effect.

Mr. DOLE. Do you suggest that the Commodity Credit Corporation will take over some of this stock with the price situation as it is? Mr. HENDRICKSON. Yes; I think that there will be some takeover. It is too early to make any forecast about that. Yes; I think that there will be a takeover on the loan program.

Mr. DOLE. If that would be the case, why not raise it to 125 percent, and make it possible to meet the Commodity Credit Corporation stocks with a parity, and we would not then need this.

Mr. HENDRICKSON. I would want to sit down and think that one through and use a pencil on it, before I answer it.

Mr. DOLE. As you know, under this bill, the Secretary can acquire at least 115 percent of the loan rate and he can dispose of it under section 407 at 115 percent-he can buy and sell at the same price. That is why I asked the question.

Mr. HENDRICKSON. There is no point in that kind of cycling at all— no point to it.

Mr. DOLE. That is my concern.

Mr. KLEPPE. Will you yield?

Mr. DOLE. Yes.

Mr. KLEPPE. You would then agree that there should be a substantial difference between the two?

Mr. HENDRICKSON. There is no question about it.

Mr. DOLE. Those are all of the questions that I have.

Thank you.

Mr. PURCELL. Are there any further questions?

Mr. Foley?

Mr. FOLEY. I wonder if you would refer to page 3 of Mr. Purcell's bill.

Do you feel that the provision for relieving distress in the United States is really a meaningful section in your judgment; that it is a practical way to do that?

Mr. HENDRICKSON. I am not quite sure what that means now.

Mr. FOLEY. As a matter of fact, it has to be something else to release the grain from Commodity Credit Corporation to meet a deficit situation.

Mr. HENDRICKSON. Yes.

Mr. FOLEY. But they cannot get that as food.

Mr. HENDRICKSON. That is right.

Mr. FOLEY. Would you have any objection, then, to seeing that removed?

Mr. HENDRICKSON. NO.

Mr. FOLEY. I do not know why it is in there. I, personally, do not see that it amounts to very much.

Mr. HENDRICKSON. I think we should leave that up to the author of the bill.

Mr. FOLEY. Your comment would be that you would not see any harm in removing it?

Mr. HENDRICKSON. There may be arguments for it. I just do not happen to know of them. That is all.

Mr. FOLEY. Thank you.

That is all, Mr. Chairman.

Mr. PURCELL. Mrs. May?

Mrs. MAY. One quick question: In section 5 of the bill before us, purchase and sale provisions expire in the year 1969. After that onethird reserve stocks could be disposed of each year. Do you see any danger in that provision acting as a price depressant?

Mr. HENDRICKSON. I do not like it. I think that you ought to have a longer period on this. I am not sure that I would suggest that. I suppose that part of the idea there is that you-in connection with new bills on farm legislation-would review the whole general situation and that they were trying to have an equivalent expiration date here. I did not object to it specifically, because that is my assumption.

Mrs. MAY. Do you feel that it should be part of the reserve bill as such, though?

Mr. HENDRICKSON. Well, I certainly feel that the reserve bill could encounter great danger or damage in that period of time.

I think I would suggest their making that 1971 right now.

Mrs. MAY. Thank you.

That is all, Mr. Chairman.

Mr. PURCELL. If there are no further questions, we thank you, Mr. Hendrickson.

We will next call on Walter W. Goeppinger, president of the National Corn Growers Association.

We will be glad to hear from you now.