TABLE 11B.-ESTIMATED RETURNS ABOVE VARIABLE COSTS AND ABOVE TOTAL COSTS FOR DIFFERENT YIELDS

TABLE 11C.-SEQUENCE OF OPERATIONS AND ASSOCIATED PERFORMANCE RATES AND EQUIPMENT COST PER

TABLE 3A.-ESTIMATED COSTS AND RETURNS PER ACRE, COTTON, SANDY OR SILT LOAM OIL, 6-ROW EQUIPMENT, SOUTH DELTA, ARK., 1978

TABLE 3B.-ESTIMATED RETURNS ABOVE VARIABLE COSTS AND ABOVE TOTAL COSTS FOR DIFFERENT YIELDS AND

TABLE 3C.-SEQUENCE OF OPERATIONS AND ASSOCIATED PERFORMANCE RATES AND EQUIPMENT COST PER

TABLE 11.-ESTIMATED COST AND RETURN PER ACRE FOR RICE PRODUCTION, ARKANSAS GRAND PRAIRIE !

1 Cost estimates based on data from "Crop Budgets for Eastern Arkansas, 1976 Season" by Waymon A. Halbrook, University of Arkansas extension farm management specialist.

CHART NO. 7.-ESTIMATED COSTS AND RETURNS PER ACRE FOR RICE PRODUCTION, ARKANSAS GRAND PRAIRIE,

1 Machinery costs were based on estimates developed by Joseph Musick, James H. White, and Waymon Halbrook. "Estimated Production Items. Costs and Returns for Crops and Livestock Enterprises for Eastern Arkansas." MP-123. Costs can vary considerably depending on prices and usage.

STATEMENT OF J. DOYNE HAYES, SEDGWICK, ARK.

DEAR MR. CHAIRMAN: Thank you for the opportunity to appear before this Committee to present a statement on behalf of our farmers.

COMPETITIVE SITUATION

The American agricultural system seems to be the last vestige of a modified form of a purely competitive marketplace. As long as farmers are induced to trade among each other, there are many buyers and sellers, no limits on entry and exit to or from the market, full knowledge, and an equilibrium price.

Our problem begins when the production function attempts to market to the distribution function, which is characterized as Oligopolistic and in all practical terms functions as an Oligopsony. With a few buyers controlling a large number of sellers, agricultural producers become price takers in a buyers market. From the time the distribution system first accesses the agricultural product until it reappears in the retailers inventory, practically all aspects of pure competition are lost. Through the ability of these few buyers to control their own destiny, each step in the distribution system is a recurring pattern of value added pricing. Full returns to land, labor, and capital are realized through pricing systems based on "present value" of future input costs.

ECONOMIC SITUATION

With this seemingly proteced distribution system where all current and forecasted costs plus reasonable returns on investment are recovered, we the farmer have very little economic or financial flexibility. Any price changes that are to occur, outside the distribution system, must of necessity be at the producer level. The ultimate consumer is placed in a market environment whereby he has nominal control over price and becomes a price taker also.

The economic truism of "sticky prices on the downside" has and continues to play an overwhelming role in our fully integrated agricultural business. Our production, distribution, and consumption functions were distorted by a sequenceof events in the early 1970's which allowed economic and financial opportunism to upset the input/output cost/price relationships. These events were: 1. Devaluation of the dollar and subsequent floatation of currencies. 2. Imposition of wage and price controls.

3. The Arab oil embargo and emerging cartel.

4. Crop failures on a worldwide basis.

5. Changes in the comparative advantage among nations.

Total fallout of these events has, through apparent political necessity, accrued to the American agricultural producer. Food production is the only comparative advantage that America possesses today. Yet the economic situation has produced one of the largest transfers of income ever witnessed in modern agricultural history. The inability of the producer to control his own destiny has resulted in massive subsidy to the ultimate consumer (both domestic and foreign) through a system of volatile producer prices with average price levels less than the true full cost of production. This requires that the producer monetize his equity in the sale of each unit of production. Farm debt to farm income has risen from a ratio of approximately one to one in the early 1970's to more than seven to one today. The "real" equity base of our agricultural system has been completely consumed.

THE ISSUE IN FOCUS TODAY

At issue is the concept of a fair and reasonable price. With the American Farmer currently bearing the burden of world commodity price fluctuations, it is imperative that we create a market environment which is conducive to the farmer controlling his own destiny. The farm sector desires the freedom to plant the crop that has the comparative advantage geographically and financially. Geographic migration of crops enhance productivity therefore lowering unit costs since the crop can be more closely matched to the most productive land for that crop. Our potential productive base is larger than the potential consumption base