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Mr. MAYNE. Well, I don't want to exaggerate, and you did pay some passing attention to the matter of price on the bottom of page 5 when you said "even with the present prices of fertilizer it makes economic sense to finance the fertilizer rather than the grain" but it does seem to me very odd, and really not very illuminating to have no discussion at all on the comparative prices that the fertilizer industry can get for their products overseas as compared to here at home.

That would seem to me to be a matter of very decisive importance and I would be glad to hear whatever you can contribute on that.

Mr. CAMPBELL. Before Mr. Schmeisser comments I would like to go back to my statement where we pointed out that the exports that AID financed are 11 percent of the total export. Now, I think Mr. Schmeisser is going to say that we do keep in mind prices and with this small percentage we are not the factor that is pushing the export market up. Bill?

Mr. MAYNE. The fact is, is it not, that prices overseas are very, very much higher than the prices which manufacturers are permitted to charge here at home?

Mr. CAMPBELL. About 30 percent, sir.

Mr. MAYNE. Yes; I would be glad to hear what Mr. Schmeisser has

to say.

Mr. SCHMEISSER. Well, we have been very mindful of the question of price and the fact that there is a limitation on the domestic price and that there is not on the international scene.

For example, we recently had a tender which was out and we received bids, two of which I considered to be excessive as I looked over the international market, and we turned them down because we felt they were too high.

One of the companies, which is a well-known American company, was quite upset at our feeling the price was too high and they took the cargo they had offered to us and offered it in the international market. I forget whether it was Brazil or Venezuela but they took the cargo away from us in a matter of 24 hours at the price we had refused to pay.

My point is that, if AID is going to tender, the market price is not made by its 11 percent of the market. And if we are going to get the fertilizer, to a certain extent we have to pay what the going market price is.

In our statement, we do allude to the one step that we can think of— and which we have discussed with the other agencies-which may help in our pricing situation. Right now we usually buy only from the United States. Some months ago, we attempted to expand that to buy fertilizer from other sources, mostly less-developed countries, such as Korea and Taiwan.

Since that time, as everybody knows, the Philippines has placed an embargo on shipments. It has been followed by Korea and Taiwan, so that this pretty much cuts us back to the American market again. For example, everybody in this country knew-when bids were going out in June and July-how much fertilizer was available from Korea and from Taiwan and they could just adjust their prices accordingly. Now, if we were to further broaden our policy to permit worldwide procurement, this would mean, particularly in the nitrogen field, that we would be soliciting invitations from the new producing facilities

at Quatar, and from Kuwait, Italy, and other European countries and from Japan.

Now it is possible that if the producers realize that they are competing completely across the world, that they may hold prices down. On the other hand I am aware of a bid that came in yesterday where the Government of Pakistan did go out into the open market worldwide, and nonetheless the bids they received were 10 to 20 percent above what we paid just 5 weeks ago.

My point is that we can't make the market at 11 percent. We have done what we can think of and merely ended up by losing the fertilizer. We will take the next step we can think of, by permitting worldwide source procurement, and will be glad to have anybody's help in thinking of other steps that would keep the price down and still enable us to get some fertilizer.

Mr. MAYNE. Well, the information that I have been receiving from manufacturers in this country is that the price differential is even greater than you have mentioned. You say 30 percent? Terra Chemical Co. which manufactures urea in Sioux City advises that their fixed price is between $64 and $72 a ton, but they are being offered at least $105 a ton for urea for export and sometimes as much as $120 a ton. Is that in line with your observations, of what the situation is?

Mr. SCHMEISSER. Let me ask Mr. Hill, who has those figures, to respond.

Second, I am aware of international tenders, in the commercial field at $105 and above and up to the range of $120 which I think was the last I heard of.

John?

Mr. HILL. I think the first thing that we have to take a look at is whether Terra Chemical is talking in terms of a short ton or material moving in the import market, marketed in terms of the metric ton, and there is a 10 percent right there so that does make a difference. Mr. MAYNE. They are talking about the same kind of tons when they talk about $64 as when they talk about $120. They are not talking about apples and oranges. It is the same.

Mr. HILL. The next aspect is, pricing in export markets is normally priced in bags, f.o.b. vessel. So that means transportation to the port of loading and, sir, in looking at the numbers we have seen-and we have also looked at some domestic prices on urea, particularly-it will run anywhere from 30 to 40 percent depending on the particular manufacturer prices that he has to operate under.

For example on the west coast and California, urea from Collier Chemical Co. under phase 4 is $80 a ton in bulk in short ton in the Portland area. The same material, urea, is being imported from Canada by quantity, and imports are exempt from price control and Canadian material is selling for $86 to $88 a ton in the same market

area.

So you are right, the export markets are higher 30 to 40 percent on urea. Now, DAP will not be so high. Potash is probably not over 10 percent.

So it does depend on the particular type of fertilizer being discussed. But 30 percent is a good average.

Mr. CAMPBELL. Prices are higher in the export market.

Mr. MAYNE. So there is no question at all that unless something is done to remove domestic price controls the urea is going to flow overseas and we are going to have an acute continuing drastic shortage here at a time when farmers are being encouraged to plant more instead of less?

Mr. CAMPBELL. Yes.

Mr. MAYNE. Thank you, Mr. Chairman.

Mr. DE LA GARZA. Thank you, Mr. Mayne. I might say that the Fertilizer Institute is present in the hearing room this morning. He is not on the list of witnesses but I would defer to my distinguished colleague from the State of Kansas to introduce him and invite him to the table, if you care to at this time.

I understand he is from the great State of Kansas?

Mr. SEBELIUS. I would like to introduce the president of the Fertilizer Institute, Edwin Wheeler. He is willing, after the regular witnesses have been questioned, and if there is time available, to respond to questions from the committee.

Mr. DE LA GARZA. Fine.

Do you have any questions?

Mr. SEBELIUS. I have a question for this gentleman here, Mr. Campbell. Has AID resumed shipments of fertilizers? Are you at the present time making purchases and shipping fertilizers?

Mr. CAMPBELL. Yes; we are.

Mr. SEBELIUS. And do you have any tonnage projections of AIDfinanced exports as far as the U.S. fertilizer products from 1973 into 1974?

Mr. SCHMEISSER. Yes. I can give it to you in larger magnitudes and then can we give it to you or submit it in greater detail?

In fiscal 1973 we shipped 949,000 metric tons of which about 202,000 or 203,000 were from offshore, meaning roughly rounded, 747,000 from the United States. These are product tons and not nutrient tons.

I am glad Mr. Hill called that to my attention because we do have to separate them. Most of the Government statistics are in nutrient tons, but we who do buying and selling are used to the product tons.

For fiscal 1974 we estimate that we will be running at about the same level, if we can obtain the product, although frankly our experience in the last 3 or 4 weeks has been that everybody who goes out for the product is being offered a half of it or maybe a third of it.

Mr. SEBELIUS. Well, you say that about 949,000 tons for 1973. How about back in 1972, have you increased your volume in 1973? Mr. SCHMEISSER. Well, we have those figures.

The general picture looks somewhat like in this chart I have. It has gone drastically down since 1966 and 1967 and up since about 1971. Let's give you the figures.

Mr. CAMPBELL. 1970-71 it was 604,000. 1971-72 it was 708,000. The figure that was just given to you is 949,000.

Mr. SEBELIUS. It is now back on the upswing?

When you look at that chart, it is up on the upswing?

Mr. SCHMEISSER. What was the high, John?

Mr. HILL. In 1968 it was 3.4 million tons of fertilizer with an FOB value of $186.8 million.

Mr. SEBELIUS. So you hit a low of about, well, in about 1970-71 and now you are starting back up again?

Mr. HILL. For two reasons: (1) our prices have gone back up and this chart is a dollar-volume chart, but the truth is the volume has also increased.

Mr. SEBELIUS. Could I ask whether or not AID feels they are in any way responsible for the current domestic fertilizer shortage?

Mr. SCHMEISSER. No; we do not.

Mr. SEBELIUS. Although you did increase your percentages in 1973 of about 200,000 tons?

Mr. HILL. We also bought 200,000 tons in 1973 off-shore so that from the United States we are approximately even.

Mr. CAMPBELL. That would be about 700,000 metric tons.

Mr. SEBELIUS. I appreciate that point. Due to the current fertilizer shortage, though you believe it would be our best national interest to suspend and I know that this is kind of leading and you are probably going to say no, but-but to suspend the fertilizer exports, until our domestic situation gets in better shape?

Mr. CAMPBELL. I think you weren't here when I made the statement that we had agreed that no fertilizer shipments would be made from February through May of 1974. We have suspended during the peak season, and this was done some months ago when we anticipated there would be a fertilizer shortage.

Mr. SEBELIUS. Well, I appreciate that, and I wasn't here at the beginning of your statement, for which I apologize, but I was interested in the overall picture. I thank you for your responses.

Thank you, Mr. Chairman.

Mr. DE LA GARZA. I beg the indulgence of the witnesses. I had to appear at another subcommittee for legislation which I introduced. That was the reason for my short absence from the chair.

Mr. Price?

Mr. PRICE. Thank you, Mr. Chairman.

Gentlemen, I would like to know how much money is being used to finance the AID program?

Can you furnish that for the record?

Mr. CAMPBELL. Yes. The figure is $93 million.
Mr. HILL. $93.1.

Mr. CAMPBELL. $93,178,000.

Mr. SCHMEISSER. That is for the product and then we do ship 50 percent of it on U.S. vessels and we only pay for shipment on American vessels and vessels of a few less-developed countries so that would bring our total expenditures up closer to something like $120 million because freight runs about one-third.

Mr. PRICE. Could you furnish the exact figures to the subcommittee? Mr. CAMPBELL. Yes we can. Be very happy to.

Mr. PRICE. I would appreciate that material and also the figures regarding purchases from outside the country. The money that you purchase with, as well as what we furnish.

(See p. 11.)

Mr. CAMPBELL. Yes, sir.

Mr. PRICE. In your statement you said:

Up to that point AID-financed fertilizer had come predominently from the United States, but, with the concurrence of the industry, we broaden the sources from which fertilizer would be eligible for AID financing.

Now what portion of this is shared by other nations? What I am referring to is the United Nations as a program. Is your area involved with United Nations commitments as far as our country is concerned? Mr. CAMPBELL. These figures, sir, are only for AID. They do not include any United Nations' shipments. We are not involved with the United Nations in this regard.

Mr. PRICE. You also said that you have already advised your host countries, that AID-financed fertilizer procurements must be limited to those quantities essential for the next plant.

In your estimate, how much fertilizer is this going to take?

Mr. SCHMEISSER. Well this was the figure that I gave. We think it will be about the same this fiscal year as it was last, which was 949,000 metric tons, of which 700,745 was the U.S. origin portion.

I also indicated that this is what our planning would be. I can see it going a little bit less than that. On the other hand we have another situation like the Pakistani flood, it may go up a slight amount, but I would say that I am counting on it being the same as we have had this year.

Mr. PRICE. Well, I think it certainly shows a lack of foresight on your part by telling them that we do have a shortage, that we do not expect to increase this quantity, and you will review this situation on an emergency basis.

You further say that you have been discussing with the Department of Agriculture and the Fertilizer Institute, the advisability of broadening the shore sources' availability to include almost all free world countries.

Now I am wondering as we are moving in the area of the Communist countries, in our foreign affairs and negotiations, have you considered that these countries' sources of fertilizer might be available to us? Are they short also, or what can they contribute?

Mr. CAMPBELL. Mr. Congressman, under the present legislation, I don't believe that we would be permitted to buy from Communist countries, but of course the climate is changing and I would be happy to look into that possibility.

Mr. PRICE. Well it seems to me that if we buy other products from them what is it, iron ore or chrome?

Mr. SEBELIUS. Chrome.

Mr. PRICE. Chrome made in Rhodesia. It would seem certainly that we could buy fertilizer.

Mr. CAMPBELL. I was speaking about the restrictions on the foreign assistance program itself.

Mr. PRICE. But there are other examples?

Mr. CAMPBELL. That is correct, yes. We would be very happy to investigate that possibility too.

Mr. PRICE. To your knowledge, are Russia and China short of fertilizer or do they have a pretty good supply?

Mr. HILL. Red China is probably one of the largest importers of nitrogen fertilizer. Russia has been doing some exporting. However, the Communist countries, as a whole, and thinking particularly in terms of the European bloc, are purported today to be in the best position of having quantities in excess of their immediate requirements.

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