The Secretary is authorized to proportion purchases of the various varieties and grades of each of the above commodities to correspond to usual marketing demands.

SEC. 4. Except when a state of emergency has been proclaimed by the President or by concurrent resolution of Congress declaring that such reserves should not be sold, the Secretary shall offer each commodity in the reserve for sale at a price of 120 per centum of the average price farmers received in the United States during the preceding five marketing years for the commodity involved adjusted to reflect the customary location and grade price differential or at such greater amount as may be obtained through normal market channels: Provided, however, That sales during any marketing year shall be limited to the net quantities by which estimated domestic consumption and exports exceed estimated domestic production and imports.

The Secretary is also hereby authorized to dispose of commodities in such reserve as follows:

(1) For use in relieving distress (a) in any area of the United States, including the Virgin Islands, declared by the President to be an acute distress area because of unemployment or other economic cause if the President finds that such use will not displace or interfere with normal marketing of agricultural commodities and (b) in connection with any major disaster determined by the President to warrant assistance by the Federal Government under Public Law 875, Eighty-first Congress, as amended (42 U.S.C. 1855 et seq.).

(2) For use in connection with a state of civil defense emergency as proclaimed by the President or by concurrent resolution of the Congress in accordance with the provisions of the Federal Civil Defense Act of 1950, as amended (50 U.S.C. App. 2251–2297).

(3) For sale in assistance in the preservation and maintenance of foundation herds of cattle (including producing dairy cattle), sheep, and goats and their offspring, under section 407 of the Agricultural Act of 1949, as amended (7 U.S.C. 1427), and to provide feed for livestock in any emergency area under the Act of September 21, 1959, as amended (7 U.S.C. 1427, note).

The Secretary may buy and sell at an equivalent price, allowing for the customary location and grade price differentials, substantially equivalent quantities in different locations or warehouses to the extent needed to properly handle, rotate, distribute, and locate such reserve. Such purchases to offset sales shall be made within two market days.

The Secretary may accept warehouse receipts in lieu of taking physical possession of the grain, but in such cases the obligor under the warehouse receipt shall be required at all times to have the grade stated on the warehouse receipt or a better grade available for delivery.

The Secretary shall make a daily list available showing the price, location, and quantity of the transactions entered into hereunder.

SEC. 5. The Secretary shall use the Commodity Credit Corporation to the extent feasible to fulfill the purposes of this Act; and to the maximum extent practicable consistent with the fulfillment of the purposes of this Act and the effective and efficient administration of this Act shall utilize the usual and customary channels, facilities, and arrangements of trade and commerce.

SEC. 6. There is hereby authorized to be appropriated such sums as may be necessary to carry out the purposes of this Act.

SEC. 7. The purchase authority under sections 2 and 3 of this Act with respect to each of the commodities specified shall expire at the end of the marketing year for the 1969 crop of such commodity.

Mr. PURCELL. Our first witness will be our colleague on this subcommittee, Congresswoman May, followed by Congressman Smith of Iowa, Mr. Harry L. Graham, of the National Grange, and Mr. Reuben Johnson, of the National Farmers Union.

Mr. Hofer, do you wish to testify today?

Mr. HOFER. I do not think we will be ready today.

Mr. PURCELL. We have you down as tentative.

At this time we will hear from Mrs. May.

STATEMENT OF HON. CATHERINE MAY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

Mrs. MAY. Mr. Chairman, I should like to begin by agreeing completely with the reasons you have given for bringing to the attention of this committee and all of the Congress the need for a strategic agricultural reserve program. I will not again go into the reasons which you have given because I think you have placed the whole matter in good perspective.

With the establishment of commodity reserves however, it is imperative, I think, that certain specific safeguards be implemented so we can protect the interests of the producers, the handlers, the processors, and very importantly, the consumers. Without these safeguards, such a stockpile could create more problems than it would solve.

First of all, I think it vital that farmers be paid a fair price for the commodities they produce for a reserve. I am deeply concerned, as is the chairman, over the fact that the U.S. farmers are consistently faced with unrealistically low farm prices. If they are to be asked to produce for a strategic stockpile, then they must be adequately paid for their efforts.

It is equally important that the resale mechanism of such a reserve should not have the effect of placing an artificially low ceiling on the market price which farmers may receive for their crops. I think the reserve must be established in such a way that it will be impossible for it to be used as a tool for market manipulation in any form.

In order satisfactorily to protect producers, handlers, and processors, the reserve must be effectively insulated and isolated from the marketplace. Specific guidelines for both purchases and sales must be set out. These provisions, then, would allow producers and the trade to know exactly how the reserve inventories will be handled and under what conditions they can expect changes.

I feel that only in this way can we be sure that farm prices will be sufficiently protected and that the normal channels of commodity trade will be least disrupted.

A strategic agricultural commodity reserve will be of little value to the consumer if it is not there when needed. As I see it, the reserve inventory should be available only in the event of genuine emergency such as major natural disaster, a civil emergency, or a period of extremely short supply. If reserves are to be established, a very tight fence must be built around them so that they cannot be dissipated in less than critical situations.

Commodity reserves must be a stable and secure emergency supply for consumers.

I happen to believe all these criteria are met in a bill which I introduced earlier this year, H.R. 9644. The important guidelines and safeguards for the establishment and maintenance of a national strategic agricultural commodity reserve which are incorporated in this measure are, in my view, essential if such a reserve is to be created.

I must frankly admit at this point that I would have serious reservations about any proposal which did not include safeguards of this kind.

With the world situation what it is today, we cannot afford to be complacent about the adequacy of our food supply. Never before in

the history of our country has the need for an adequate reserve supply of food been as essential as it is now. The establishment of strategic reserves is of vital importance to the U.S. consumers and farmers, for it can mean better prices to farmers and the assurance of a stable and secure emergency food supply to consumers.

Thank you, Mr. Chairman.

Mr. PURCELL. Thank you, Mrs. May.

Do any members have questions of Mrs. May or comments on her bill at this time?

Mr. JONES of Missouri. I would like to ask one question.

As I understand, these reserves that you would create could not be used for aid to other countries?

Mrs. MAY. No. Under my bill, we can make reserves available. Under the wording of the bill, cotton and grains are put in reserve to create an emergency supply for America.

Mr. JONES of Missouri. The reason I ask that question, my colleagues, Mr. Dole and Mr. de la Garza, and I were in an area the other day where production was being discouraged in order to hold prices up, and they were not producing to the full capacity to take care of starving people that we continue to feed. I thought that was a rather peculiar situation.

I do not know the answer to it, but when you go into a place where people are hungry and the Government policy is to discourage production in order to maintain prices for their own farmers, and yet expect some other nation to send in the food to take care of their people

Mrs. MAY. Would the gentleman excuse me. A foreign disaster area, such as you and Mr. Dole saw, is covered on page 5 of my bill. Page 5 of my bill spells out how the food reserve might be triggered for release to assist State and local governments to alleviate suffering and damage in connection with any major disaster, and this is under the provisions of the existing act; and then "for donation for foreign distribution, if in the judgment of the President such donation is in the national interest, to alleviate suffering in connection with a major disaster in a foreign country." I am sure, without knowing just what you are talking about, this might go to earthquakes or plagues. As I understand, the wording of my bill would leave it up to the President to determine if it is in our national interest to alleviate suffering in connection with a plague or disaster. We would have to have definitions in those areas. This might or might not cover the situation that you talk about. Mr. JONES of Missouri. You recall that a couple of years ago we included in our legislation a self-help provision, trying to encourage people to help themselves. I am hopeful that we will demand that before we try to feed other people whose government policies are discouraging such production to feed their people.

Mrs. MAY. I do think in some areas it may be germane to this bill, but I do not know whether the special help you are speaking of in the situation which has been brought to our attention would have anything to do with setting up a strategic reserve.

Very frankly, I do not know, Mr. Jones, but it would be possible to help a foreign nation in case of a plague or disaster in that country. Mr. PURCELL. Are there any other questions?

Mr. NICHOLS. Mrs. May, your bill specifically deals with only two commodities.

Mrs. MAY. Wheat, feed grains, and cotton, Mr. Nichols. Soybeans are not included.

Mr. NICHOLS. Cotton is included?

Mrs. MAY. Yes; cotton is included in my bill.

Mr. NICHOLS. I had hoped that cotton might be included specifically, because I think even after the cotton crop we have this year comes in, we may still be in a position

Mrs. MAY. If you have a copy of H.R. 9644, on page 2, section 3, you will see this spelled out, and the following quantities of commodities suggested under the wording of this bill designates 3 million bales of cotton to be set aside for the strategic reserve.

Mr. PURCELL. Any other questions?

Mr. ZwACH. Mrs. May, I have before me the parity figures for the most recent release. Corn is now at 74 percent of parity, down 4 percent in recent times. Wheat is at 52, down 5 percent. Soybeans at 80, down 2 percent.

As a producer, it has appeared to me that surpluses have always been used to hammer down farm prices. They have been used as a lever to hammer down farm prices. I agree strongly with the theory of a reserve, but I am very apprehensive that it will be used again to force down farm prices.

In your bill, at what price can this reserve be released on the markets of our country? At what figure can corn be released or wheat or soybeans or cotton? Say you have 20 million bushels of corn in the reserve, at what figure can that be thrown into the market from this reserve? Mrs. MAY. Actually, my bill is very tightly drawn, to let any of these commodities be drawn only under certain spelled-out emergency conditons. This you will find in section 5, part (2), on page 5. In section 5, which starts:

Any agricultural commodity in the reserve inventories may be withdrawn for one or more of the following purposes: (1) for stabilization of domestic prices under the following conditions

...

If you see this, I do not know whether I want to enlarge on it for the record.

When the domestic market prices of wheat, feed grains, or cotton fall within the following parity ranges, the Commodity Credit Corporation may release for sale from the reserve inventories not more than the following specified parts, but no such sale shall be made at less than the prevailing market price.

Then the bill lists the parity range and the percent of the reserve that may be sold.

Then it goes on to spell out in the second part, only in cases of major disaster within our country, donation for foreign distribution--I have spoken in answer to Mr. Jones' question about that—and use in connection with a state of civil defense emergency.

The third portion is for the purpose of rotating stocks so that stocks will not be lost through deterioration.

Mr. ZWACH. Under any circumstances, Mrs. May, could it be taken out of this reserve until prices reached at least full parity?

Mrs. MAY. This bill is designed to isolate, as I said in my statement, to protect it from that. It is my belief that the wording of this bill does protect us from that. Here again, I think the Department and others might want to comment on my approach to this bill, and that

question might be put to them, because I think we should be reassured that the bill is worded so we can be sure that that cannot be done. Mr. KLEPPE. In stating your parity figure, Mr. Zwach, did I understand you to say 52 for wheat?

Mr. ZWACH. Yes.

Mr. KLEPPE. Where did you get that?
Mr. ZWACH. Department of Agriculture.

Mr. KLEPPE. Fifty-two on wheat?

Mr. ZWACH. Yes. Wheat is now 52 percent of parity, the July ratio. Mr. KLEPPE. That has reference to the support price. All right.

Mr. ZWACH. The market price. It is based on the market price, on parity prices. Fifty-two percent of full parity.

Mr. KLEPPE. I thought the last stipulation of parity from the Department was 74 percent. Isn't there a discrepancy there?

Mr. ZWACH. The Department has started to make a different kind of parity because the true parities look bad. I understand the Department has started to add in various factors in the parity figure. I am speaking of honest-to-God basic parity which has been formulated over the years. Wheat is at 52 percent of the true parity.

Mr. PURCELL. Any other questions of Mrs. May?

(No response.)

Mr. PURCELL. Thank you very much, Mrs. May.

At this time we will call on Congressman Neal Smith to present his

statement.

STATEMENT OF HON. NEAL SMITH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA

Mr. SMITH. Mr. Chairman, Mrs. May, and members of this important committee, I appreciate the opportunity to appear this morning and testify concerning the need for strategic reserves of important storable agricultural food commodities. I commend the committee for holding these hearings and focusing attention on this very important subject. While I am very much opposed to some of the provisions in the Purcell bill, H.R. 12067, it has the same objectives as bills which I have introduced; namely, H.R. 11285 dealing with soybeans and H.R. 12108 dealing with wheat and feed grains, also. I assume Mrs. May also had the same objective in her bill, and I am strongly in favor of the objectives of all these bills.

I do not think the opening statements that were made were inconsistent at all. It appears everybody is in agreement with the need and objective. The only problem seems to be in working out the wording of the bill.

My bill, H.R. 12108, covers the same commodities and is directed at the same objectives as H.R. 12067, but includes some fundamental differences in approach concerning sales policy and removes a great deal of discretion given to the Secretary of Agriculture under H.R. 12067. I hope the committee will carefully consider the provisions of H.R. 12108 and incorporate those provisions into whatever bill is passed. Other bills which I introduced during the past 3 years, including H.R. 11285, deal only with soybeans. Although I believe we also need a reserve bill to protect us against a loss of markets caused by shortages and at the same time protect producers against an unfair loss