lished, all agricultural products produced for such reserve shall be contracted at a minimum of parity, provided this price is determined at the marketplace. And I might add that my board of directors considers parity, cost of production plus a reasonable profit and equitable prices to be synonymous terms.

Third. We support the creation of an entity or structure composed of agricultural producers to assist in devising and approving policies that affect agriculture, both domestic and export.

Fourth. All announcements pertaining to any agricultural producing cycle shall be made far enough in advance so that the producer will have adequate time to make needed adjustments in his operation.

In other specific action, our State board of directors also endorsed the Flexible Parity Act of 1978. And we call upon the Department of Agriculture for a 25-percent mandatory set-aside for cotton acreage during this coming year, and a target price of 70 cents per pound.

Mr. Chairman and gentlemen, these actions were taken only after it was determined that an extreme emergency does exist in the area of production agriculture; and the development of this addition to our present South Carolina Farm Bureau policy in no way circumvents the well established grassroots process through which we develop policy. Our membership is aware and concerned as never before. And this policy is consistent with the majority opinion of the Farm Bureau members in South Carolina.

My final thought is this: There is a legitimate role of Government, a role which assists all citizens of this great Nation. I submit to you that agriculture is now in an economic situation which warrants assistance from the Federal Government. We do not want, nor do we believe that it is prudent in the long run, that agriculture depends on Government payments for its existence.

The CHAIRMAN. Mr. Bell, I congratulate you on an excellent statement. Clemson College which you quoted your statistics from is one of the great agricultural colleges of our Nation. I have been there many, many times, and I am aware of what it means not only to South Carolina but to the Nation.

Senator Dole?

Senator DOLE. I have no questions. I appreciate your testifying today and, of course, your appearance when we were in Columbia, S.C.

I think since that time you have had a chance to take a look what we refer to as the Flexible Parity Act of 1978. Again, I think it is the question of the mechanics of what we do. I think there is an agreement that we have to do something and which would be the least cumbersome and the most effective and produce the quickest results so that the farmer can have some flow of cash, capital.

And I would have when we start on Monday that we could figure out some way to do that which would satisfy most people in agriculture. It is difficult to satisfy everybody. Thank you very much. The CHAIRMAN. Senator Zorinsky?

Senator ZORINSKY. Thank you for a well-thought-out presentation. Thank you.

The CHAIRMAN. Thank you very much, Mr. Bell.

The next witness is Mr. Rod Flannery, representing the Independent Oilman's Association, Wessington Springs, S. Dak. Mr. FLANNERY. Good morning, Mr. Chairman.

The CHAIRMAN. Good morning. Your entire statement will be inserted in the record, Mr. Flannery. Do both of you expect to testify? Mr. FLANNERY. No, sir, we do not. I will be presenting the testimony and both of us will be available for any questioning.

The CHAIRMAN. The full statement will be inserted in the record. You can summarize it in not more than 5 minutes please.*

STATEMENT OF ROD FLANNERY, REPRESENTING INDEPENDENT OILMEN'S ASSOCIATION, WESSINGTON SPRINGS, S. DAK.

Mr. FLANNERY. Members of the committee, my name is Rod Flannery. I am owner and operator of the Flannery Oil Co. in Wessington Springs, a town of 1,500 people in central South Dakota. I am here this morning to represent the State Oilmen's Association, which consists of over 90 percent of the 420 licensed motor fuel dealers in our State.

Together we are the major source of fuel supply for our farmers' needs on the 36,000 family farms in the State of South Dakota.

We certainly appreciate this morning, gentlemen, the opportunity to appear here to discuss briefly the economic interaction that occurs between our business and the agricultural community.

As members of this agricultural community, we are keenly aware, and I am certain that members of this committee are keenly aware, of the present economic crisis confronting our Nation's family farmers. Also, Mr. Chairman, at this time we would like to commend your committee for your perceptiveness in recognizing that this is a real crisis and it is here now. It is not a threatened crisis in the future. We also commend you for your attempt to speed through legislation. that will alleviate the situation.

Gentlemen, let me assure you that not just the American farmer is experiencing a severe crunch, the businessmen of South Dakota's main streets are experiencing a similar crunch.

Results of all of these economic factors, of course, pose a very grim picture for the businessmen who are faced with the same problem with inflationary costs and reduction in net incomes. Together they combine to create a high demand for operating capital, and it precipitates the ever-increasing need for extending credit.

A recent survey of our membership which has been conducted by our executive director, Mr. Dick Tripler, sitting to my right, shows that a typical dealer business in past years has carried negligible accounts receivable balance at the end of the year fiscal low-a negligible balance at the end of the fiscal year.

This past year, due to the necessity of liberalizing our credit policies, this same average typical dealer in the State of South Dakota is showing a receivable balance in excess of $100,000. Now that is the average typical operation that we are attempting to describe to you this morning, gentlemen.

Beginning a new fiscal year with such a deficit staring us in the face and approaching a new growing season-will require cash flow additional on our part from $11,000 to $12,000 just to finance this additional cost.

See p. 468 for the prepared statement of Mr. Flannery.

Now we realize that you recognize the fact that as fuel dealers we are only one segment of the agri-business community supplying the farmers, and multiply this by the other suppliers, the implement dealers, the feed and grain people, the fertilizer people, and you will begin to realize the magnitude of the problem.

We have a deep concern for this problem, and I am sure that the members of this committee also have a very sincere deep concern. And we feel if we are to finance these accounts receivable the only way we can do that and stay in business is to pass these costs on to the accounts that are being carried in the form of either additional interest charges in the next year, or in product increases.

Gentlemen, both of these solutions further fuel the inflationary fire that has been the root of the problem. And we want you to be sure to recognize this, and that in itself is not painting a very nice picture for us for the next year.

Of course, we hope that there will be solutions examined by your committee, and we hope that in these solutions that we will come up with something that does not require us to place additional, unnecessary inflationary costs upon these agricultural producers, and yet a solution which will help us to insure that we continue to meet the farmers' needs of necessary materials.

It is our belief, the belief of the South Dakota Independent Oilman's Association, that if we can overcome this temporary cash flow dilemma without compounding the basic problem and adding these costs to the farm operation, then there will indeed be greener pastures ahead for the Nation's economy.

South Dakota farmers of today, like their fathers and grandfathers, have proven over the years to be sound, business-minded men and women.

The CHAIRMAN. I have to call time on you, Mr. Flannery. I congratulate you on an excellent statement.

You pointed out very vividly the agricultural crisis that affects rural America at the present time. Will not that crisis sooner or later reach Chicago, Atlanta, Philadelphia, and every other city in this country?

Mr. FLANNERY. Yes, sir. I heard it referred to this morning. I just happened to sit on the board of directors of a first bank stockholding corporation in Minneapolis, and they find that their agricultural loan rates are way in excess of 100 percent. And, of course, this is affecting the States of Minnesota, the two Dakotas, Montana, and Wyoming. They find that this situation is happening this year.

The CHAIRMAN. I congratulate you on an excellent statement. Senator Clark will now take the chair. Unfortunately, I have an important appointment that I must go to. Thank you very much for your testimony.

Mr. FLANNERY. Thank you, Mr. Chairman, for allowing us to be here this morning.

Senator CLARK. We will now hear from Harlar Vander Zee, president of the Hereford State Bank, Hereford, Tex., and Robert Gallman of Friona, Tex.

Gentlemen, as you know, you have 5 minutes to summarize your testimony. Your complete statements will be put in the record.* Senators are limited to 2 minutes.

*See p. 470 for the prepared statement of Mr. Vander Zee, and p. 472 for the submitted statement of Mr. Gallman.

So you proceed in any way you think appropriate.

STATEMENT OF HARLAN VANDER ZEE, PRESIDENT, HEREFORD STATE BANK, HEREFORD, TEX.

Mr. VANDER ZEE. All right, sir. My name is Harlan Vander Zee. I am president of the Hereford State Bank, Hereford, Tex.

Certainly, our area is heavily involved in farming of all types and the cattle industry, commercial feeding industry, as well as cow and calf production.

I have been with this bank 11 years as president; 5 years with another agricultural bank in the area. I have seen a lot of the good and a lot of the bad happen to farmers. Most farmers are conditioned to accept most of the adverse situations that arise in their operations, but recent developments across this Nation paint a vivid picture that there are some things they can no longer continue to accept.

They can no longer accept the fact that the very destiny of their lives, and that of their families, is continually dictated by those whose efforts are not concentrated on what might be best for the food producers. They have had to listen to all of the political promises, to all of the economic projections, to all of the new and improved programs for agriculture, but as yet, all have produced few answers to their problems.

The one basic underlying problem to all producers has got to be just one thing, and that is the loss of income for the production of these commodities.

There is no other problem in agriculture today that anywhere reaches the magnitude of loss of income. And to prove what we are trying to say and have been trying to say for years, we only have to refer back to the 1973 Agricultural Act and the report that is made by this committee, the Senate Committee on Agriculture.

If I might, I would just like to read a comment or two that is in this book. It is the renewal and extension of the 1970 act and it says: "A Bill to extend and amend the Agricultural Act of 1970 for the purpose of assuring consumers of plentiful supplies of food and fiber at reasonable prices." And that was the purpose of the act and it certainly is well performed.

Our Secretary at that time, Mr. Butz, said:

Today is the promised land for agriculture. It is near at hand. There are signs, both abundant and strong, that agriculture has reached the vantage point where it can see ahead its promised land to sustain growth, profitable production and income commensurate with returns realized from labor and investment by the nonfarm sector of our economy.

It says:

We ask only that our farmers not be asked to bear the entire risk of unforeseen development that would be devastating to the agricultural community.

And what did farmers receive for this magnificent contribution to our great Nation? This is in reference to things that had happened. previously as far as the capability of agriculture.

First, they received criticisms by the miracles that they performed in providing our Nation and others with an abundance of food and

fiber at very reaonable prices. Second, they received a record high income of $19.2 billion and that was corrected in 1972.

But if I may, in this report, I would like to refer back to 1947 through 1977 and just bring us up to date on what all of the agricultural programs have done in the past. They have not worked; they are not working now; they will not work in the future, not unless we change the entire structure that we now operate under.

And again, I am quoting out of a table that is in this Senate report of 1973 of this committee.

We go all the way back to 1947 and agriculture had a realized net income of $17.1 billion; then we go 24 years to 1971 and we never, never once reach $17.1 billion again. Twenty-four years, and we never got back the net income of agriculture that we had in 1947. And all of these bills are supposed to generate prosperity down on the farm. There is no way in the world, the way they are set up, that they can accomplish this.

So what happened in 1972, we did have an increase to $19.2 billion. That is an increase in 25 years of 12 percent for agriculture-12 percent. In the national income we increased 370 percent in that period of time.

Senator CLARK. Sorry, Mr. Vander Zee. As you know, the time has expired, but I want to hear from Robert Gallman and then we will have some questions. And as I said, your entire statement will be put in the record as presented.

Mr. Gallman?

STATEMENT OF ROBERT GALLMAN, FRIONA, TEX.

Mr. GALLMAN. I am Robert Gallman from Friona, Tex. I am 28 years old. I farm approximately 800 acres. Not only do I have my family in mind, but I have three other families dependent upon me. I rent their land.

In the year 1977 I borrowed $100,000 to operate on. I borrowed through the SBA. I live in a FmHA home on which I am still making payments.

Now, the Panhandle of Texas, I guess, is one of the highest producing areas of the world. One of our major costs in that area is natural gas. Of that $100,000 that I borrowed in 1977, $30,000 was for natural gas. You may think that maybe the changing of the price of natural gas would be the solution to our problem in our area. Clearly, it would help, but it is not the solution. What about the boys in the Corn Belt who spend $3,000 for their land? Their taxes on that land is probably about equal to my natural gas costs.

So that is not the problem. I will not continue much further. I would like to say that in my area, the farmers lean toward the Flexible Parity Act that Senator Dole has introduced. I think it is a good short-time answer to our problems. However, let us not drop the ball after we get this completed. There is a lot to be done in the field of correcting this agricultural problem that we have.

So we need to continue forth in striving for a long-range program. We appreciate the work that you Senators are doing. I pray that God's blessing will be upon you boys. I would hate to have the burden that you all have on your shoulders about this agricultural problem. And we appreciate being able to come to speak to you.