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He could not start with calves. With the result he would be removing those cows from milk production from somebody else. Mr. LOVRE. Mr. Chairman?
Mr. ANDRESEN. Mr. Lovre.
Mr. LOVRE. I am sorry I was delayed. Perhaps you have answered this question. Does this proposed bill carry authorization for an appropriation of any Federal money to start this revolving stabilizing fund which is being suggested?
Mr. WALTZ. Yes, sir; to this extent: The authority to borrow $500 million from Commodity Credit Corporation if and when needed, and repayable at an interest rate equivalent to the cost to the Government for money.
Mr. ANDRESEN. You may proceed.
Mr. WALTZ. This is fairly short and I believe I will do a better job if I read the 2 pages and then comment on the tables with your permission.
Would dairy farmers receive a higher or lower net price under a self-help program than under a Government-support program? The answer would depend primarily on three factors:
1. The relative level of supports under the two types of programs. 2. The proportion of total milk production that would need to be purchased.
3. The percentage that losses represent of the value of purchases. The Bureau of Agricultural Economics has estimated that milk production in 1954 will exceed consumption by 3 billion pounds.
We are starting out with the idea we are going to buy 3 billion pounds of milk equivalent in manufactured products. It has further stated that the level of dairy prices for 1954 will be determined in large measure by the level at which prices are supported in the year beginning April 1, 1954.
With these estimates as a background, and assuming that the equivalent of 100 billion pounds of milk will be marketed from farms in 1954, we have a basis for comparing net returns to farmers under a self-help program as against Government supports.
With the assumption that producer average weighted prices would be equivalent to the support level, table I shows producer average weighted market prices for all milk sold from farms, with supports at varying percentages of parity.
TABLE I.-Producer weighted average milk price at varying percentages of parity
Mr. WALTZ. These average weighted market prices range from $3.26 per hundred pounds with supports at 75 percent of parity to $4.35 with supports of 100 percent of parity.
You see, there is $1.09 per hundredweight difference between 75 and 100 percent of parity. Any farmer can understand $1.09 per hundredweight in his milk check.
Assessments to offset losses: Under a self-help program the assessment per hundredweight necessary to offset losses on purchases would
need to be made in order to compare with Government supports. Table II shows what these assessments would need to be with self-help supports at 90 and 100 percent of parity, and with losses on purchases ranging from 25 to 100 percent.
TABLE II.-Self-help producer assessments 1
These calculations are arrived at by using $4.71 and $5.12 as the purchase cost of 100 pounds of milk equivalent at 90 and 100 percent of parity, respectively. These prices are based on September 1953 parity for manufacturing milk and allowing $1 per hundredweight for processing.
Mr. WALTZ. For example, with supports at 90 percent, assessments would range from 3.5 cents per 100 pounds of milk, with 25 percent loss on purchases, to 14.1 cents per hundredweight on milk with losses amounting to 100 percent on purchases.
That answers the question raised a few minutes ago. If supports were at 100 percent of parity, assessments might range from 3.8 to 15.4 cents per 100 pounds of milk equivalent marketed, dependent of course on the disposal of the accumulated products. Under a selfhelp program these assessments would have to be deducted from the market prices shown in table I to obtain farmers' net prices.
Producers' net prices under self-help and government are compared in table III.
TABLE III.-Net price to producer under different programs
Mr. WALTZ. The producers' gain or loss in cents per hundredweight of self-help supports at 90 and 100 percent of parity, as compared to Government supports of 75 to 90 percent of parity, are shown in table IV.
TABLE IV.-Estimated gain in producer milk prices under a self-help program, with supports at 90-100 percent of parity, compared with Government support program, with supports at 75-90 percent of parity (1954 conditions assumed)
Mr. WALTZ. If self-help and Government supports are both at 90 percent of parity, producers would lose from 3.5 to 14 cents per hundred pounds under a self-help program, depending on the losses involved in disposing of the purchases. But of the comparisons shown, this is the only situation under which the producers self-help net price would be less than that realized under Government.
It is obvious that if the producers maintain supports at their expense at the same level that Government maintains supports, at the taxpayers, expense, that farmers would get more money under the Government program.
But with the assumed volume of purchases, Government supports at 85 percent of parity and self-help at 90 percent of parity, the producer would net from 7.9 to 18.5 cents more per hundred under self-help, depending on the rate of loss on purchases. With Government supports at 75 percent of parity and self-help at 100 percent, the dairy farmers would gain 93.6 cents to $1.05 per hundredweight under the self-help program. The 93.6 cents would be the figure if the losses on purchases were 100 percent. In other words, if the stabilization board did not get anything for the products that they purchased.
In terms of total net income to dairy farmers, even with 100 percent losses on purchases, self-help and Government support programs might compare as follows, under the assumed surplus conditions:
Mr. WALTZ. Six comparisons are presented, showing type support, support level as a percentage of parity, and income after assessments. In comparison 1, as you will observe, at the 90-percent level, the income from self-help would be $3.779 billion, and under Government support it would be $3.920 billion.
So with both programs at the 90-percent level the self-help program would cost the dairy farmer $141 million. Or, it so happens, since we are dealing with 100 billion pounds of milk, it would also cost him 14.1 cents per hundredweight of milk.
What would happen to the dairy farmer in 1954 if the Secretary determined that he would support at 85 percent of parity instead of 90 percent.
Under a self-help program at 90 percent, after assessments, you will see that income would be $3.779 billion. Under Government at 85 percent, income would be $3.70 billion, or $79 million (comparison 2) more under self-help or 7.9 cents per hundredweight of milk.
Carrying it further (comparison 3) you will see that self-help at 90 percent, would return $299 million, more than Government at 80 percent or 29.9 cents per hundredweight of milk. In comparison No. 4, self-help at 90 percent against Government at 75 percent, you get a difference in favor of self-help of $519 million or 51.9 cents per hundredweight for milk. Under No. 5, self-help at 100 percent as compared to Government at 90 percent gives self-help an advantage of $276 million or 27.6 cents per hundredweight for milk; and self-help at 100 would net the farmer $936 million more, or 93.6 cents per hundred more than Government at 75 percent of parity.
In summary, we should point out again the following:
1. For a self-help program to require that Government assume responsibility for surpluses due to imports and diverted acreage is not a departure from the principle of the present support program. Under the present program the Government is obligated to buy any quantity of dairy products from any source that has the effect of pushing market prices below support levels.
2. Estimates of producer assessments are based on the Government's estimate of a surplus of 3 billion pounds of milk. In this we assume that there would be little variation in this quantity of surplus in the limits of support levels considered in our tables.
Should the actual surplus chargeable to producers vary from 3 billion pounds the amount of assessments would be expected to vary up and down accordingly.
3. Finally, no claim is made that producers would enjoy a higher price under a self-help program than under Government, if supports are at the same level under both programs. The advantages of the self-help programs would be apparent when the self-help support level is somewhat higher than that which would have been established under a Government support program.
Mr. WALTZ. I have Mr. Cotton here if you wish any detailed explanation of any of these figures. I am sure he would be very happy to explain them.
Gentlemen, I would like very briefly to review the proposed disposals in foreign countries without interference with friendly relationships with foreign countries.
If we have surpluses and want to market these products in foreign countries knowing full well, as an illustration, if we should go to a country like India and build up a business on dairy products, we are eventually, going to lose the business to some foreign country because we can't compete in costs of production with foreign countries.
But we propose to take a substantial sum of this money, from this assessment, and conduct big, good advertising and sales programs. We also propose to spend a part of that money for research. By research I mean several things. I mean research into problems that will assist the producer in reducing his cost of production.
Another one, research into the cost of processing, manufacturing, and distributing to see if we can help that segment of the dairy industry that manufactures and distributes this product in reducing their costs, contemplating that we will not ask the dairy farmer if he makes reduction in costs of production, to give it all up in the way of lower prices to consumers.
We believe that we can get lower prices to consumers through research into processing, manufacturing, and distributing that can reduce costs. I know of a couple of programs that can work along that line.
Mr. TALLE. May I ask a question?
Mr. ANDRESEN. Mr. Talle.
Mr. TALLE. What can be done to induce restaurants, cafes, and hotels to serve butter patties that would be visible to the eye?
Mr. WALTZ. I did not understand the first part of your question. I am sorry.
Mr. TALLE. I am talking about butter patties that are served in hotels, restaurants, and cafes. I love butter. So do many other