These figures include no living expenses, land costs, interest on equipment, or insurance.

STATEMENT OF J. STEPHEN GABBERT, EXECUTIVE VICE PRESIDENT, THE RICE MILLERS' ASSOCIATION, ARLINGTON, VA.

In connection with the Committee's March 7, 1978 hearings involving rice, we submit the following statement on behalf of members of The Rice Millers' Association (RMA). Founded in 1899, the RMA is one of our nation's oldest agricultural trade organizations. Members are located in Arkansas, California, Louisiana, Mississippi, and Texas. Membership consists of independently-owned and farmer cooperative-owned rice milling firms. The Association's main office is located in the Washington, D.C. area. A representative is maintained in Thailand. After much debate and division, target price legislation was passed for rice in February 1976. The new rice legislation applied to the 1976 and 1977 rice crops. It was a dramatic change from the previous program of acreage restrictions and high price supports. In 1977, target price legislation for rice was incorporated with little change under its own title in the 1977 omnibus farm bill.

HOW RICE HAS FARED UNDER TARGET PRICE

In 1976, CCC acquired about 19.1 million cwt. of 1975 crop rough rice. This was produced under the old high price support program. 1976 was the first year under target price. Farmers responded to large supplies by reducing 1976 rice acreage by 10 percent. All of the 1976 rice crop subsequently was marketed. In 1977, CCC acquired an insignificant 11,000 cwt. of 1976 crop rice. Only 65,000 cwt. was placed under the reserve program. During 1976-77 over 23.0 million cwt. of rough rice was placed under loan and redeemed. During the period August-December 1976 the average farm price received was below the established target price. The target price program assisted eligible rice farmers who needed help by providing deficiency payments.

In 1977 rice farmers further reduced acreage by twelve percent. This represented a 22 percent decline over two years. Bad weather caused an additional production reduction of about 20 percent. Consequently, 1977-78 rice prices doubled compared to 1976–77. No deficiency payments were required in 1977. It is now expected that the entire 1977 rice crop will be marketed and that a large portion of the 1975 crop taken over by CCC will be sold to the trade to meet export commitments. CCC will sell its rice stocks at a profit allowing the government to recover a significant portion of deficiency payments. The following table describes how rice under target price has been a success story:

Exports are the lifeblood of the rice industry. Over sixty percent must be exported. The commercial portion of rice exports has steadily increased. In the early seventies cash export sales accounted for only about thirty-two percent of total rice exports. For the 1977-78 marketing year commercial export sales are expected to account for over seventy percent of total rice exports. This represents an all-time dollar export record.

TABLE II.-U.S. RICE EXPORTS BY CATEGORY FOR THE PERIOD 1971-78

Rice prices are good. Rice exports are strong. The rice section of the current farm bill is working the way it should. We strongly urge the Committee not to include rice in any emergency measures that increase support prices for other commodities. Rice does not need it. Such action would be regressive, result in reduced exports, and put rice farmers back in the business of producing rice for the government.

We respectfully urge the Committee to consider the following progressive measures designed to increasing farm income:

1. The Secretary of Agriculture already has at his command a ready-made tool for increasing farm income. This is the PL-480 program. Bolstering farm income was the original objective for which PL-480 was designed. The Committee should reexamine the PL-480 program to determine if it is being administered properly and utilized as originally intended.

2. Consideration should be given to establishing bilateral commodity trade agreements with OPEC countries whereby the United States would agree in principle to provide minimum quantities of specific commodities over a multiyear period. Our farmers would benefit by a stabilized market demand. OPEC countries would have reasonable assurances of obtaining needed food supplies. Our farmers should be receiving a piece of the oil action. It is time that the U.S. had an aggressive and innovative agricultural sales policy.

3. A long-term CCC Export Credit program should be developed providing up to ten years of credit lines. This program would be another valuable export tool designed to increase exports and bolster farm income at no cost to the taxpayer.

4. The Multilateral Trade Negotiations in Geneva currently underway will have much to do with shaping the future of agricultural trade. U.S. farm products must have access to export markets particularly in the European Community. We urge the Committee to take the necessary steps to assure that agriculture is not sacrificed on the altar of the industrial sector. Any trade package negotiated without significant changes in current EEC agricultural trade barriers would be useless and should be rejected.

We thank the Committee for providing this opportunity to present our views.

STATEMENT OF W. F. CARLE, PRESIDENT, RICELAND FOODS, STUTTGART, Ark.

I appreciate the opportunity, Mr. Chairman, to present this statement to the Committee on behalf of Riceland Foods.

Riceland Foods is a farmer-owned marketing cooperative which receives, processes and markets rice, soybeans and other grains grown by its 25,000 farmermembers in Arkansas, Missouri, Mississippi and Louisiana. It operates six rice mills, three soybean processing plants, two rice parboil plants, two vegetable oil refineries, an edible vegetable oil hydrogenation plant and a vegetable oil canning plant. Riceland Foods' sales average about $500 million a year, split about evenly between rice and soybean products. Approximately half of Riceland Foods' sales are exported.

Riceland Foods strongly supported the rice provisions now included in the 1977 Food and Agriculture Act when they were being considered by the Congress. We continue to support those provisions today. The rice provisions in the 1977 Food and Agriculture Act essentially continue the policies set forth in the Rice Production Act of 1975. Riceland Foods also strongly supported that Act.

The rice provisions in the current Act provide target prices and commodity loans similar to those in the 1975 Act. The target price for the 1977 crop was $8.25 a cwt and the loan rate was $6.19 a cwt. There have been no acreage limitations on rice since 1973. In the view of Riceland Foods, the present target price/ commodity loan system for rice provides growers with adequate protection from severe price declines while giving them an opportunity to develop markets and expand production in line with market demands. This is in contrast to the system in effect prior to the Rice Production Act of 1975 which restricted production through an acreage allotment system based on production patterns of the late 1940's and the early 1950's.

Rice growers in the area where Riceland Foods operates are generally satisfied with the new system. Production has expanded in new areas suitable for rice production, and market demand for U.S. rice continues relatively strong. Disappearance of U.S. rice during the 1977/78 marketing year will be 113 to 115 million cwt on a rough rice basis. This will be 5 percent higher than last year, and 17 percent higher than two years ago. The average price received by U.S. farmers for rough rice during February was $11.40 a cwt, which was 65 percent higher than a year ago. The average farm price for the 1977 rice crop should be 35 to 40 percent higher than for the 1976 crop.

In our view, Mr. Chairman, the rice provisions of the 1977 Food and Agriculture Act appear to be working well and we do not believe that they should be altered at this time.

As previously indicated, Mr. Chairman, Riceland Foods is also vitally affected by the soybean provisions of the 1977 Food and Agriculture Act. We generally support the provisions now in the Act. We believe there should be a mandatory loan rate for soybeans but that it should be set annually by the Secretary of Agriculture. In setting the loan rate, we believe that the Secretary should take marketing conditions into account as well as farmers' costs for producing soybeans. We do not believe that the loan rate should be set so high as to encourage. uneconomic production in other countries. We have recommended to Secretary Bergland that he sets the loan rate at $4.00 a bushel for the 1978 soybean crop. We do not believe it should be set higher than this. We see no need for a target price for soybeans.

Riceland Foods strongly supports the provisions in the 1977 Food and Agriculture Act which prevents a land set-aside program for soybeans during the period of the Act. We see no need for a set-aside program for soybeans. Historically, soybean growers have shown that they can make the necessary adjustments to bring production in line with market demand without action from government.

We do not support the provision in the 1977 Act that enables the Secretary of Agriculture to require cross compliance between soybeans and other commodities when determining eligibility for price support and commodity loans. Since soybeans is not a set-side crop and does not have a target price, we do not believe that the cross-compliance feature should apply to soybeans. We would like to see this provision eliminated in future legislation.

Although Riceland Foods does not recommend at this time any changes in the 1977 Food and Agriculture Act, we believe there are a series of actions which the Congress and Administration could take to help bolster prices of farm commodities. Among these are:

The granting of most-favored nation tariff rates on products imported into the United States from the Soviet Union, the Peoples' Republic of China, the German Democratic Republic and the Czechoslovakian Socialist Republic; Extension of government credits to the Peoples' Republic of China for the purchase of U.S. agricultural products;

Increasing the funds available for export of agricultural products under Titles I and II of Public Law 480;

Providing credits from the Commodity Credit Corporation for export of U.S. agricultural products with repayment terms of between 5 and 10 years;

Taking steps to ensure that the Human Rights provisions of current legislation involving Public Law 480 shipments are given the broadest possible interpretation by all agencies and departments of the Federal Government to expedite agreements with recipient countries so that maximum quantities of these commodities can be exported as quickly as possible;

Negotiating aggressively for improved access for U.S. farm products to European and Japanese markets during the trade negotiations now underway in Geneva ;

Negotiating bilateral agreements with certain petroleum exporting countries such as Iran and Nigeria to assure these countries purchase minimum quantities of U.S. farm products each year;

The judicious application of the new grain inspection procedures so they do not unnecessarily slow grain exports; and

Establish an intelligence network in major producing, importing, and exporting countries throughout the world so that foreign crop supply and demand information can be disseminated promptly to United States farmers.

We believe governmental action in these areas, Mr. Chairman, would provide impetus to our agricultural exports and hopefully would help us regain the export momentum of earlier years.

We will be pleased, Mr. Chairman, to furnish any additional information that the Committee might find helpful in assessing the current situation of American agriculture.

STATEMENT OF E. LINWOOD TIPTON, ECONOMIST AND EXECUTIVE ASSISTANT, THE MILK INDUSTRY FOUNDATION AND THE INTERNATIONAL ASSOCIATION OF ICE CREAM MANUFACTURERS

Mr. Chairman, my name is E. Linwood Tipton. I am the economist and Executive Assistant for the Milk Industry Foundation and the International Association of Ice Cream Manufacturers. We accept your invitation and appreciate this opportunity to appear before you and the Committee to share our views on the economic and marketing conditions prevailing in the dairy industry.

The Milk Industry Foundation is a trade association representing fluid milk processors and distributors located throughout the United States. Its 500 members process and distribute about 75% of the fluid milk and fluid milk products consumed in the United States. The International Association of Ice Cream Manufacturers as the name implies, represents manufacturers of ice cream and the many other related frozen desserts. It has about 325 members which manufacture approximately 85% of all the ice cream and similar type frozen desserts which are produced and marketed in the United States.

To help place the dairy industry in its proper perspective to the economy, it should be noted that currently total sales of dairy products at the wholesale level amount to about $25 billion. Sales of fluid milk, fluid milk products, ice cream and other frozen dessert products which are represented by our two associations amount to about 60% of that total or $15 billion. In terms of dollar sales, the dairy industry is the second largest segment of the food in

dustry, exceeded only by the meat industry, it is the largest in terms of quantity of product consumed. Total sales of all dairy products rank 5th when compared to sales of all other manufacturing industries.

Our comments today will be directed primarily to the supply-demand imbalance for dairy products and the proposed reduction in marketing research by the USDA.

THE IMBALANCE OF MILK SUPPLY AND DEMAND

U.S. milk production has significantly increased during the past few years. However, unfortunately, consumption of milk and dairy products has not kept pace. The result has been increased purchases by the USDA and a substantial build up of storage stocks.

In calendar year 1977, CCC purchases included about 5% of the milkfat and 5% of the nonfat milk solids marketed by farmers. These were the highest annual percentages purchased since 1971. Purchases are expected to increase further in 1978 when they might cost in excess of one billion dollars.

Despite these surpluses, under the dairy amendments passed to the Farm Bill last year, the Secretary of Agriculture will be required to increase the milk support price by 40 to 45¢ per hundredweight, effective April 1st based on the change in the parity index since October 1, 1977. This is a mandated adjustment to be made semi-annually for which the Secretary has no discretion. It will result in a milk support price of $9.40-$9.45, which will be slightly above 80% of parity. In addition to requiring semi-annual indexing of the support price, last year's Farm Bill also required milk prices to be supported at 80% of parity through March 31, 1979. We estimate this will require another increase of about 15 cents at the beginning of the next marketing year on October 1, 1978. In our opinion, these mandatory increases will further increase milk production and discourage consumption.

Consumption of some dairy products has increased significantly in the past few years, e.g., cheese and yogurt. However, when one looks at consumption of milk fat and nonfat milk solids in all the forms in which they are consumed, one sees a very static situation. The appended table indicates per capita milkfat consumption has been quite stable at about 20 pounds for several years. Consumption of nonfat milk solids has declined from about 40 pounds per capita in 1967-73 to 39 pounds in the last two years.

This decrease is occurring during a period when large quantities of nonfat milk solids in the form of whey are being recovered and entering marketing channels. Thus the surplus of nonfat milk solids is quite burdensome. The price of milk relative to beef and the cost of dairy feed indicate further increases in milk production will be forthcoming. The milk beef price ratio is most attractive to milk production. Therefore, the number of cows being milked will decline quite slowly, less than 1% per year. The increase in the milk feed price ratio since mid1977 is causing increased rates of feeding and will result in substantial increases in milk production per cow.

Mr. Chairman, we believe the mandatory 80% of parity and the requirement that it be indexed every six months is resulting in substantial increases in milk production. Prior to the 1977 Farm Bill, the Secretary was required to set support prices between 75% and 90% at the beginning of the marketing year and had the authority but was not required to increase them during the year. There have been some suggestions that the entire milk support price programs should be substantially changed. While it well may be that it can be improved, we believe the major reason for the increasing surpluses of milk products is a support price in excess of the level actually needed and especially one which is indexed for 6 month adjustments.

MARKETING RESEARCH-USDA

Another concern that we bring to this Committee is the Administration's Budget Proposal for the United States Department of Agriculture, specifically the reduction in funds for marketing research. Realizing that the Appropriation Committees of the Congress are responsible for these funds, we urge your participation in these deliberations.

Marketing Research under USDA has been concerned with finding ways of getting the highest quality commodities from the farm to the consumer at the lowest cost possible. There has been projects to increase the markets for agricultural products and find new uses for dairy ingredients in other foods.

This research effort is especially important to the dairy industry now that environmental restrictions have forced modern technology to be developed to