year in the case of an emergency. So that the announced price prior to April 1 of each year could, with proper notification to producers, manufacturers and distributors, be adjusted to meet any emergency situation that might develop, either in an emergency of substantially more production than had been estimated, which could result in the determination to lower the price, or an emergency such as a drought condition or a war condition that might make it desirable to substantially stimulate production which possibly would call for an increase in price.

It is presumed that this Board would make every effort to develop export sales into countries of deficit milk production, and not to operate on a hit and miss basis but to make the attempt scientifically to develop export markets that would be permanent for American production while we have that excess production, if any, for export to those countries, knowing full well that we, as American dairy farmers, can not produce milk and compete on an equal price basis with milk produced in many foreign countries.

Mr. ANDRESEN. What particular manufactured products do you have in mind when you talk about exports?

Mr. WALTZ. One that lends itself very well for export is nonfat dry milk solids. I personally happen to be very familiar with an extensive development with that product on the part of a manufacturer who is supplying American troops in Japan, Guam, and Okinawa with an excellent recombined fluid milk made out of high-quality nonfat dry milk solids and so-called anhydrous milk fat which is practically 100 percent good, sweet butterfat.

A glass of milk is produced for our troops in that country that is excellent and has very great acceptance among the troops over there. I have been there and have seen it, and I know that it is a wonderful operation.

Mr. ANDRESEN. Is that only for the Armed Forces, or is that also for civilian personnel?

Mr. WALTZ. The occupation personnel. While the milk was available to them, it was not available to the Japanese public_simply because there was no way of converting yen to dollars whereby they could use the yen for the purchase of the required products in this country. That is where I am sure the American farmer, with a small expenditure for equipment and facilities-and it is small in relation to anything that is considered in the usual way-could operate in countries of big population where there is a very definite need for milk products in the diet of those countries.

A recombined milk plant could utilize a tremendous amount of American dry milk fat solids and butterfat in the production of a fluid milk for those civilian populations of these countries-this possibly would not return to us our full cost of production, but would provide an outlet that in the future could be developed, and as time goes on, possibly a business that could be on a self-supporting basis. But I don't think we are ever going to have it unless we start it on that kind of a basis.

Mr. ANDRESEN. Are you able to sell the products now in these foreign countries or to the Army and Navy without losing any money? Mr. WALTZ. Yes, sir. The Army and Navy, because the Army purchases at American prices. We couldn't compete with some of our foreign countries if they were given the privilege of selling nonfat

solids and anhydrous milk fats to our own Armed Forces in Japan, as an illustration.

Mr. ANDRESEN. Would it be necessary to conduct an educational program of the value of this type of product before you could sell it to the civilians in some of the countries?

Mr. WALTZ. I am sure it would, yes, sir, and it is proposed that some of these funds secured from the stabilization assessment can and will be used not only for educational programs of that kind where needed in the discretion of this board, but also used in the domestic market for participating in and cooperating with existing programs directed toward the expansion of the use of dairy products in our own American diet.

Mr. ANDRESEN. Who would bear the loss on the difference in the price on these exports?

Mr. WALTZ. The cost would be absorbed through the stabilization program, so you can say that the American dairy farmer himself is investing this amount of his milk check in an insurance program for his own future. I will cover that a little later, and in the tables that I mentioned a few moments ago I have some illustrations of the difference between the net income to the American dairy farmer under a program of this kind, taking into consideration the assessment, as against a Government-controlled program wherein the Government supports at 90 percent of parity or down to 75 percent of parity.

Mr. ANDRESEN. Can you see any possibilities within the United States for increasing the consumption of milk or milk powder?

Mr. WALTZ. Definitely. We haven't scratched the surface. Our domestic consumption of milk and milk products can be very definitely expanded by further and more intensive educational and advertising programs. We have lagged substantially as an overall industry in promoting this product in the human diet.

Mr. ANDRESEN. It is estimated that in the next 10 years the population of the United States will increase at least 30 million. Will we

be able to produce enough milk in this country to take care of domestic needs?

Mr. WALTZ. If we can establish any degree of confidence in the mind of the producer that he is not going to be each year facing the possibility of bankruptcy in the operation of his dairy herd, I am certain that the dairy industry can be expanded to fully supply the American public with their complete requirements of milk for many, many years to come.

Mr. ANDRESEN. You will have to have more cows than you have at the present time.

Mr. WALTZ. That is right.

Mr. ANDRESEN. How many milk cows are there in the country? Mr. WALTZ. About 22 million.

Mr. ANDRESEN. What is the milk cow population now as compared with what it was in 1944?

Mr. WALTZ. It is 3.5 million less.

Mr. ANDRESEN. And our population during that period has increased over 30 million?

Mr. WALTZ. That is right.

Mr. ANDRESEN. What will happen?

Mr. WALTZ. Of course, per cow the production is up. Total milk production may approximate pretty closely with 22 million cows that

I don't believe any figures are

of 25.5 million cows a few years back.
too good on the total production of milk.

Mr. ANDRESEN. There is a limit to what a cow will produce even with good feed.

Mr. WALTZ. That is correct, but the production per cow, as you know, from the area that you come from, has been very substantially increased during the past few years by better breeding methods and by better feeding and housing methods.

The sales policies of this Board would be such that in the event of the accumulation of surpluses, while they could not sell back into the domestic channels of trade at less than their own announced prices, they could make sales at reduced prices or they could make gifts of these products to outlets that are not in the usual channels of trade, such as to the school lunch program, charitable organizations, or to those outlets now utilized by the present Government agency handling the surplus disposal problems. They could also sell at competitive prices with other products to the Armed Forces, as is quite well spelled out in the act itself.

In order to start this program we have to have some money. We are not proposing to ask the United States Government to absorb a single cent of the cost of this program. We do need the capacity or ability to borrow up to about $500 million to make certain that our program will operate. We propose that we have this available as loans if we need it. If we don't need it, we don't propose to borrow it. We further propose that we shall pay an interest rate to the Government on any loans made to us at the cost to the Government for money. The stabilization fee has been covered to some extent in our discussion so far. However, I wish to repeat that the Board would have the power under definite restrictions proposed in the act, of making a rate of assessment on all milk and butterfat sold in commercial markets at the first point of sale.

In other words, the first buyer of the milk or butterfat would deduct from the producer's check whatever rate of assessment this Board should determine was required to carry forward their program. It is proposed that the first buyers of milk or butterfat, when they make this deduction, shall remit to the Board through the Internal Revenue Department on a monthly basis, or, in other words, simply make the deduction, pay it over to Internal Revenue, and the Internal Revenue Service would make it available then to the Board for its utilization. Mr. ANDRESEN. And that would be collected on all milk?

Mr. WALTZ. That is right.

Mr. ANDRESEN. Whether it went into the sale of fluid milk or into the manufacture of butter?

Mr. WALTZ. Yes, sir, with the exception of the housewife on the farm who sells a few quarts to a neighbor.

Mr. BYRNES. Could I ask a question?

Mr. ANDRESEN. Yes, Mr. Byrnes.

Mr. BYRNES. Do I understand that the Internal Revenue Bureau would collect this and enforce it in the same manner as a tax imposed by law?

Mr. WALTZ. I would presume the answer to that would be yes. We have not attempted in this proposed bill to spell out how the Internal Revenue shall make the collection. We have indicated that

they shall make it under rules and regulations as promulgated by themselves.

Mr. BYRNES. And this assessment or fee established by the Board would be applicable to all individual farmers who sold milk or dairy products?

Mr. WALTZ. Right.

Mr. BYRNES. Don't you anticipate there will be an enforcement problem there? It is easy enough to say that everybody will pay assessments or fees, but when you come down to a practical application, sometimes it isn't always done voluntarily.

Mr. WALTZ. We have quite a bit of precedent on that. It is a customary practice in the operation of the milk business for the farmer to purchase products or supplies from the concern to which it may sell his milk, whether it be a cooperative or a private corporation, such as filter disks and all that sort of thing, and it is common practice then for the buyer of the milk to make the deduction from the milk check when he pays the farmer for the milk. So there is no problem actually of collecting from the farmer.

Mr. BYRNES. You can collect by withholding?

Mr. WALTZ. That is right.

Mr. BYRNES. Here the Internal Revenue Service doesn't have anything to withhold from, as I understand it. The Board is going to establish a fee.

Mr. WALTZ. Right.

Mr. BYRNES. The farmer is expected to voluntarily pay that fee over to the Internal Revenue Service?

Mr. WALTZ. No. The first buyer is compelled, under the provisions of the act, to make the deduction.

Mr. ANDRESEN. Would this be somewhat similar to the tax on sugar?

Mr. WALTZ. That is correct.

Mr. O'HARA. May I ask a question?

Mr. ANDRESEN. Mr. O'Hara.

Mr. O'HARA. Let me ask you, following up the practicalness of this, the Internal Revenue collects fees and deposits them to the account of the Board. Does that imply then that the Board makes the disbursements?

Mr. WALTZ. Yes, sir.

Mr. O'HARA. And it would be accountable only to itself?

Mr. WALTZ. It is set up that the Board shall make a report to Congress and one to the Secretary of Agriculture. Also that their operations would be audited either by governmental audit services or private, and that is left more or less open, the feeling being that Congress in its wisdom would set up the proper procedure for making certain that these funds are utilized only for the purposes for which they are collected.

Mr. ANDRESEN. The fees collected would go into the general fund? Mr. WALTZ. Not as it is proposed in this bill. It would go direct to the Board for its use.

Mr. ANDRESEN. Then in the sugar case it is collected and goes into the Treasury and then Congress appropriates the money to pay out the benefits.

Mr. WALTZ. We rather felt in our discussions in the drafting of this that that possibly was an unnecessary step to take. There is a definite

amount required or estimated to be required for the operation of the program. Putting it through Congress would slow it up and possibly cause difficulties in financing that could be avoided by a more direct method, and yet fully protect the producer who is paying all of this expense.

Nobody else is asked to participate at all in the expense of the conduct of this program.

Mr. ANDRESEN. In your preparation of this plan, have you discussed any particular figure on the fee that would be levied?

Mr. WALTZ. Yes, sir, and I have some indications of that, if I may defer an answer to that and come to it shortly. I would like to make this observation in answer to your question, Mr. Byrnes: In some States deductions are now made by law from producers' checks for use by commissions set up for the purpose of stimulating the sale of dairy products. I happen to come from one State where that is done, and the problem of collecting from the first purchaser the deductions that he made from the farmer has not been serious at all.

We have had a little trouble at times-they have, rather, I didn't have anything to do with it, with some fellow making a deduction from the farmer and not paying it to the commission. But it has been nominal.

Mr. BYRNES. The cost of enforcement of this fee or assessment or tax would be in general a governmental cost?

Mr. WALTZ. That is right. We have two problems and I have only two more points to cover until I get to the tables. We have had two problems that have always stopped us in an effort to actually pinpoint a self-help program on dairy products. One has been the question of imports. We cannot compete with foreign countries at the prices at which they can produce dairy products, and duties levied on imports are inadequate to protect us because foreign products can jump over the duties, the present duties, and market to their advantage in this country.

The other problem that has always stopped us has been how could we handle the temporary or permanent increase of production from acres made idle by the allocation of acreage on other crops, or reduced acreage. I would like to cover both of those.

The first, as far as imports are concerned, it is proposed in this legislation that in the event there is a surplus of dairy products in this country then the United States Government, at the expense of all taxpayers, shall purchase from this Board an amount of dairy products equivalent to such imports, not necessarily identical dairy products but the equivalent of those dairy products. So this act in no way then sets up any difficulties as far as programs that may be considered advisable, as far as our relationship with foreign countries is concerned. If it is determined to be advisable to permit imports then all we ask is that the American dairy farmer not be required to shoulder the entire burden of the imports. He will shoulder his proportionate share through the fact that he is a taxpayer the same as anybody else. The same is true of stimulated production from diverted acres from other crops. It is a very important part of this program for the United States Department of Agriculture, with the statistics they have, to ascertain as accurately as possible the amount of milk production from these diverted acres. And, in the event of a surplus in the hands of this Stabilization Board bought with the farmer's money,