As I said earlier, this is my seventh consecutive attendance at a convention of this association, and each time I have been here, someone has made the statement that, in the U.S., "We are the most efficient wheat producers in the world, and we have the best marketing system." My question, asked with some temerity, is "Why do you think so?" As I see it, United States' wheat is being sold at below the cost of production. Why is this? Some will say it is because of competition from Canada, Australia, and Argentina, but I submit that this is nonsense. Canada has more or less cleared its surplus up to its new crop. Australian production is down this year due to drought, which means that we will only have sufficient for regular markets; and Argentina has a minimal quantity left to sell. Where, then, is the competition? There is none. You have the only surplus wheat in the world, yet prices are extremely low, and these low prices are detrimentally affecting not only your own growers, but every grower in Canada, Australia, and Argentina. If the position were reversed and the surplus held by Canada and Australia, do you think prices would be at their present levels? I believe the answer is no. To me it is a simple fact of life that the largest exporter of any commodity must expect to: very largely set the global price; and accept the role of residual supplier. The United States is the world's largest exporter of wheat, and its prices set world levels. Canada, Australia, and Argentina follow those levels. They have to. If they tried to set higher levels they would not sell. Given that they have to sell their wheat, then they have to remain competitive with the United States' prices. Additionally, I believe that if you drive your prices downwards, thinking that this will lead to greater sales, you will be mistaken, because the others will stay with you whatever the price level. I do not subscribe to the theory that overall world trade of wheat will be greatly increased by reducing the price. In the circumstances, we ask what is the sense of us all competing at the lowest possible level. Surely it is much better for us to compete at a higher level, which would not only benefit the world's wheat growers, but which would, at the same time, automatically ensure that wheat production is kept up, thus ensuring supplies will be available to the world's importers. What can be done to ensure we compete at higher levels? I am only a simple farmer, but to me there is one quick sure way, and that is for the loan rate to be raised. There is no question that the only floor in the world price of wheat today is the U.S. loan rate; take that away, and who knows to what levels prices would slide? I know that this will sound like heresy in that it would raise internal costs, but we all know that the cost of wheat in a loaf of bread represents only a small part of its retail price. If it were possible for us all to compete at higher levels, the U.S. wheat growers, the world's wheat growers, and the U.S. Treasury would all benefit, and so would the U.S. balance of payments position. You might well say I have had plenty of questions, but no answers. I believe you know the answers; it is how to put them into effect that is a very real problem. If you are going to stay with your present system of marketing, and I believe you will for much longer than the remainder of my life, then it is what you can do to make it work for you that becomes important. From an outsider's point of view, you have only limited room to move. You can cut production, or increase the loan rate. Or you may adopt part of both solutions. I know that many of you would choose increased export subsidies, and this policy has the endorsement of some people for reasons of their own. Let me say to you that such a course could not benefit the world's producers. The Australian Wheat Board could and would match the market, and I would be surprised if the other exporters didn't do the same. I am well aware of the U.S. attitude toward market sharing and I suppose other exporters all tend to feel the same way. I wonder sometimes if we are not "putting ourselves on." The present market division is much less flexible than many would like to think. I am one of those who believe that the world is again heading for a shortage of wheat-I also believe that some importing nations are already of the same view and will demand can be met if growers are given the incentive of a reasonable return for their labors. I trust that my few comments will prove to be of interest and be seen as an attempt to sketch the possibilities for a more constructive approach to world wheat trade. That, then, is our "View from Down-Under." In a nut-shell, we see no sense in wheat growers trying to cut each other's throats at low prices-let's do it at more reasonable levels! 29-974 - 78 - 22 I do not produce corn, but since I think it is essential that corn costs be documented for this testimony I have worked these costs up by combining indirect cost factors developed on my farm with direct cost inputs from one of my neighbors. Variables have been adjusted on the basis of yield and time coefficients where necessary to arrive at accurate cost inputs. It is my judgment that these cost compilations are as accurate as they would have been had this corn been produced on my own farm. |