remove dairy derivatives from the waste stream and recover them for future use. This helps explain the monumental task of finding uses for wheys, a highly nutritious by-product, from cheese production as well as additional uses for milk solids nonfat. Several resolutions have passed Congress asking for more research, particularly to develop new uses for whey. Marketing research can alleviate this situation and many more like it. For this reason, we support whole-heartedly the document entitled "Rescue Marketing Research-USDA" prepared by the Committee to Rescue Marketing Research. This document enumerates in detail the value of marketing research for the agricultural community. We bring this to your attention and urge you to support efforts to restore funds which would be sufficient to undertake a creditable program. Again we thank you for the opportunity to express our views on economic and inarketing conditions in the dairy industry and welcome any questions you may have. ECONOMIC FACTORS AFFECTING MILK PRODUCTION AND CONSUMPTION 1 Pounds of beef cattle equal in value to 1 lb of manufacturing grade milk. STATEMENT OF GEORGE B. WATTS, PRESIDENT, NATIONAL BROILER COUNCIL Mr. Chairman and members of the Senate Committee on Agriculture, Nutrition and Forestry, I am George Watts, president of the National Broiler Council. The Council is a non-profit trade association representing producer/processors of approximately 75% of the broiler/fryer chickens produced in the United States. We are pleased to have this opportunity to participate in these hearings scheduled for the purpose of exploring solutions to the current farm crisis. The National Broiler Council is concerned over the current economic crisis faced by many sectors of American agriculture. We are also troubled by the fact that many farmers are facing economic ruin as a result of their inability to recover the cost of production in the marketplace. The problems are much too complicated and severe to be solved with quick and easy answers. We would simply caution that in seeking solutions, we must be careful not to destroy those factors that have made America the world's most productive nation. We must not jeopardize the free enterprise system. We do not believe that excessive government controls are in the best interest of the producer, the consumer or the economy in general. We believe that the farmer deserves to make a reasonable return on his investment-a profit in the marketplace. The uncertain nature of the business of farming and its vital role in the overall economy demands from government adequate loan rates and target prices which will encourage sufficient production to feed the American people and contribute to our balance of payments through exports. This, we believe, can be accomplished through setting loan rates at levels which will assure the American grain farmer a stable farm income and, at the same time, allow the cattle, hog, poultry and dairy industries (which use most of the grain produced in the United States) feed grains at prices they can convert to products the American consumer can afford. As Chairman Talmadge has pointed out, the Food and Agriculture Act of 1977 gives both the President and the Secretary of Agriculture broad and flexible authority to increase loan rates for corn, wheat and soybeans. This is the approach we are suggesting. However, I would like to make it clear that we are suggesting reasonable loan increases which will serve to encourage sufficient production. We do not feel that it is the responsibility of government to guarantee anyone 100% parity. In view of the fact that the poultry industry converts grain into meat at a very low conversion ratio, we have always favored reasonably high grain markets. We would further encourage the government to control imports of red meat so that more cattle and hogs could be produced domestically and, at the same time, implement an aggressive export program for American-produced grain. Speaking for the National Broiler Council, we prefer to handle our problems in the marketplace. What we do want from government is less interference, fewer burdensome regulations and more access to world markets. STATEMENT OF HOMER SIMPSON, JR., PRESIDENT, NORTHEAST EGG MARKETING ASSOCIATION Mr. Chairman and members of the committee, on behalf of the members of United Egg Producers, I wish to thank you for this opportunity to present our views on the proposed legislation which attempts to alleviate the serious price situations which currently face American farmers. This Committee is to be commended for its search for a means to assure America's food and fiber producers that the government is serious in its attempts to provide programs and supports which reflect the increasing costs of production. Many times, farmers get the feeling that they are the forgotten segment of America's economy. My name is Homer Simpson, Jr. I am Chairman of the Government Relations Committee of United Egg Producers (UEP) I also serve as President of the Northeast Egg Marketing Association and have served a number of years on the UEP Board of Directors from that region. I am an independent egg producer from Winthrop, Maine. United Egg Producers is a national federation of egg marketing cooperatives which represents commercial shell egg producer members in every state of the United States except Alaska and Hawaii. There are six regional egg marketing cooperative members affiliated with United Egg Producers, and their members are all independent egg producers. Our purpose is to aid our producer members in improving efficiency in production, distribution, and marketing of shell eggs. Our headquarters office is located in Decatur, Georgia, and we maintain a government liaison office in Washington, D.C. Our member cooperative offices are located in Norcross, Georgia; Durham, New Hampshire; Davenport, Iowa; Tacoma, Washington; Oakland, California, and Yucaipa, California. Last year, a spokesman from our organization appeared before this committee in support of the 1977 Farm Bill. At that time he stated: "We believe it is important to American agriculture that we protect the imagination, personal initiative and free spirit of its producers. If the government is to guarantee one segment of agriculture that it cannot go broke in its business, why not extend the concept to all segments? We definitely do not want this to happen! Therefore, we support legislation which will cushion the farmer against those perils over which he has no control, but we do not think government should rob him of his pride in doing a good job and his incentive to do an even better job than his neighbor." In those 1977 Farm Bill Hearings, United Egg Producers suggested that target prices be set at a level which would reflect about 80 percent of the average cost of production. We recognized that this figure would not guarantee grain farmers a break-even price should supplies be grossly in excess of demand, but neither would it encourage producers to grossly overproduce since they would know that the government would not bail them out. These levels should remove the likelihood of outright bankruptcy, encourage greater efficiency in production, represent sufficient encouragement for grain farmers to produce sufficient supplies for projected market demand, and lessen the need for government held reserves and other intervention. We recommended at those hearings, and we continue to support this position, that the methods and figures recommended by Senator Talmadge in his introduc tion of S. 275 be used in computing the average cost of production. We believe that his figures, based on a 35-year average of land acquisition costs, are more realistic in determining land values than those compiled by the Congressional Budget Office which used current land values in computing their average costs of production. The use of the latter figures would, we believe, further influence the escalation of farm land values. As you know, this is a critical problem today. Relative to the question of parity for grain producers, Mr. Chairman, which you requested that we address at this hearing, I think I am accurate in saying that egg producers are not opposed to grain producers being guaranteed 100% of parity by the federal government. However, grain users, such as egg producers, must be given adequate, advance warning so that certain adjustments can be made within our industry. It must be recognized though, that the target prices for feed grains will be reflected in the ultimate price that consumers pay for eggs at the retail store. There is no other feed grain equal to corn in a chicken feed formula. The other ingredient is soybean meal which is becoming more important each year because of its superior protein quality. Therefore, our industry is greatly concerned over the target or loan rates on feed grains. What would happen to the egg industry if grain producers received 100% of parity for their grain? Based on data from the U.S. Department of Agriculture, U.S. shell egg farm prices, in December 1977, averaged 53.6¢ per dozen. This was equal to 57% of parity based on the 1910-1914 base period. If eggs had been guaranteed 100% of parity in December 1977, the price to producers would have been 81.3¢ per dozen. Using the current marketing costs—that is, getting the eggs from the hen house to the retail outlet-then the retail price in New York City for a dozen large eggs, would have been $1.24 a dozen in December 1977. This figure would have represented a 52% increase to the producer and a 51% increase to the consumer. If feed grain producers had received 100% of parity prices for their products in December 1977, and the egg, poultry, and livestock industries had not, then we would have had the following situation1: Corn (at farm), $3.47 per bushel instead of $1.98 per bushel. If this was passed on to the consumer at regular market margins, consumers would have paid 94¢ a dozen for large eggs instead of 81¢ a dozen—an increase of 16%. Mr. Chairman, these figures give adequate testimony of what will occur in the egg industry should grain producers and/or egg producers receive 100% of par ity. We must also recognize that the effect does not stop at the producer level, but circulates throughout the economy. Similar results would occur in the poultry, meat, and red meat industries. It is estimated that the snowball effect would ripple through the economy for at least five years before stability among all affected industries would be achieved. It is difficult to estimate the total effect this would have on the total economy. What would the consumers do in response to higher egg prices? This is always of concern to egg producers, and we have historical information which indicates that the first course of action by consumers is to reduce demand on a temporary basis. However, this result would be short-lived since other sources of protein, namely meat products, would also cost more. Cereals would not be a good substitute because they, too, would reflect the higher grain prices. Therefore, fruits and vegetables would be the alternative choice for a while. This, too, would be short-lived as the increased demand would result in higher prices. On a temporary basis, egg producers would be forced to cut back production approximately 4% in order to satisfy the consumers' adjusted demand to the higher egg prices in order to achieve December 1977 farm prices. As I said earlier, December prices for eggs were 57% of parity. To achieve 100% of parity, an additional 10% cutback in production would be necessary. Where and how would these cuts in production be accomplished? Without government supply-adjustment plans, these cutbacks would be almost impossible and I hasten to point out that our industry has historically been opposed to such programs. 1 Source: Poultry and Egg Fax. Stone Mountain, Ga. 2 Soybean prices in December 1977 were at 74 percent of parity while corn was at 57 percent of parity. 3 Based on a 4.2-pound feed conversion. In conclusion, Mr. Chairman, I'd like to say that America's shell egg industry is totally dependent upon a healthy feed grain industry in the United States. Unlike some segments of the livestock industry, we cannot turn our chickens out to pasture. We can not feed more silage in place of corn. Unquestionably, the decisions made by Congress, relative to the problems facing grain producers, will have a rippling effect across the U.S. economy. Our industry firmly believes in the free enterprise system. We think government programs should be geared to cushion grain producers against these factors that they themselves cannot control, but we do not believe that the government should guarantee producers a profit. We believe there are sufficient economic incentives in the marketplace to guarantee a profit to efficient producers. Therefore, we would encourage this Committee to recommend target prices, which could be adjusted regularly by the Secretary of Agriculture, based on average production costs. Such targets should provide incentives without guaranteeing a livelihood, thus leaving the desire and the necessity to strive for efficiency in production and marketing of his products in the hands of the independent producers. Thank you for this opportunity to present our views. STATEMENT OF G. L. WALTS, EXECUTIVE VICE PRESIDENT, NATIONAL TURKEY FEDERATION Mr. Chairman, members of the Committee, I am Lew Walts, Executive Vice President of the National Turkey Federation, with headquarters in Reston, Virginia. The National Turkey Federation is the only national trade association representing the interests of the turkey industry in the United States. The 2,300 members of the National Turkey Federation include turkey producers, primary breeders, breeder flockowners, hatcherymen, processors, and marketers. Also included are allied members, who are non-producers, but who are dependent upon a viable turkey industry for the sale of goods and services. The membership of the National Turkey Federation is responsible for the production and marketing of the major portion of the nation's turkey crop and is characterized by many producers whose sole income is derived from the production of turkeys. At this point, Mr. Chairman, we wish to compliment you, and other members of the Committee, in scheduling these hearings on the current cost/price squeeze now being experienced by grain producers. There is no question that members of the National Turkey Federation are vitally interested in appropriate programs which could bring reasonable price stability to the grain-producing segments of agriculture. Such appropriate programs hopefully would assure the necessary and continuing production of feed grains to supply the demand from poultry and livestock producers, as well as other users. The producers of meat, poultry, milk and eggs in the United States are the largest consumers of domestically-grown feed grains. According to the report, "Agricultural Supply and Demand Estimates," No. 66, January 26, 1978, USDA reported that 62 percent of the feed grains produced were used in livestock feeding during the 1976/77 period. Breaking this down still further, the producers of animal protein foods utilized 62 percent of the corn crop; 76 percent of all soybean meal produced; and 6 percent of the wheat crop. Based on these figures, it is obvious poultry and livestock feeders have a vested interest in the economy of those involved in the production of feed grains. We are aware, of course, of the various bills which have been introduced in an effort to bring some measure of financial relief to grain producers. A tremendous amount of publicity has focused attention on the demand of some farmers for 100 percent of parity. It is our position a move to the 100 percent of parity concept for feed grains would be a very serious mistake. Such action would trigger widespread reverberations throughout the domestic economy and have a shattering impact on the ability of the United States to maintain a strong and viable export market for grains. For a moment, let's take a look at what 100 percent of parity would mean based on farm prices for corn and soybeans on February 15, this year. This information was obtained from USDA's “Agricultural Prices." Before proceeding further, it must be stated that the cost of feed, primarily soybean meal and corn, represents about 70 percent of the cost of producing a turkey. Translating price for these feed ingredients based on parity, would increase a turkey grower's cost by 35 percent. Due to the very thin margins involved in turkey production, there is absolutely no way a grower could absorb this additional cost. This increase would have to be passed on to the consumer. And, if this were not possible, many turkey growers would suffer severe financial losses and could be forced out of business. Those growers who might be better equipped financially to weather such losses would be forced to reduce production. This then, would result in higher food prices to the consumer and a drastically reduced market potential for the feed grain producer. This would ultimately result in a continuous surplus of these feed grains. Should this happen, then Congress could be called upon to implement a strict acreage and production control program. Please be assured, Mr. Chairman, that we are not oblivious to the current plight of grain producers. However, I'm sure price statistics will support the contention that grain farmers have had at least six good years back-to-back from a financial standpoint. It is not unique for producers of agricultural commodities to get caught in a financial "wringer" from time to time. This has certainly been the history of the turkey industry. Turkey people, characteristically, are cut out of the cloth of free enterprise. They want freedom of choice in their own operations . . . freedom of choice to make a profit, or conversely, they're ready to accept losses. When such losses occur, turkey growers then become much more sensitive to supply and demand factors in planning their production for the succeeding year. We feel grain producers should do no less. It's not difficult to figure that 100 percent of parity for feed grains would gurantee a profit to grain producers. We feel the Congress should not offer such a guarantee. But should this occur, then at some later time, the Congress will be forced to act to guarantee a profit or a 100 percent of parity, whatever the case, to the major users of feed grains . . . the producers of meat, poultry, milk, and eggs in these United States. It's readily apparent the current situation with grain farmers does not lend itself to an easy solution. However, we recommend consideration of the following points: 1. Offer to those grain farmers who wish to participate, the opportunity to set aside additional land in return for per-acre performance payments. 2. Take whatever steps are necessary to make credit more easily available to finance basic operating expenses. 3. Immediately remove any restrictive trade barriers impeding the flow of grain to all world markets . . . friends and foes, alike. . . and at the same time, develop very aggressive market promotion and development programs in these markets for U.S. produced grains. In conclusion, Mr. Chairman, we want to again caution against any action which would significantly and artificially inflate feed and food grain prices. This would be disastrous for the economy of this country; it would place the United States at a competitive disadvantage in the world grain market, leading to an even greater imbalance in our balance of trade situation, and perhaps, call for the expenditure of huge sums of taxpayer's money to subsidize the grain export trade. Thank you for the opportunity of presenting these views. STATEMENT OF ODIS CHAPMAN, SCOTT, Ark. Mr. Chairman, members of this committee; I am Odis Chapman, Cotton, Rice and soybean farmer from Scott, Arkansas. |