companies engaged in the grain trade and the leadership of their organizations informed about impending policy changes?

In a meeting of 11 farm organizations representing producers in the United States and Canada on September 7 in St. Paul, Minn., we discussed the need for a more meaningful international grains agreement with minimum and maximum prices fair to producers. At that time we heard good reports from Canadian leaders on weather and sales prospects abroad, based on information obtained through Canadian channels, but I have yet to receive any timely advice from the USDA on these factors that obviously bear on our producers' prices and we are all paying the bill to gather such information through diplomatic channels.

This may have been a historic grain sale but it also may turn out to be an historic example of the U.S. Department of Agriculture's forgetting who comprises its main constituency. Some of us believe the department should function primarily in the interest of farmers, not the interests of agribusiness and foreign traders.

The handling of the Soviet grain sale has given rise to very serious questions that are now being widely discussed in the news media. We in the NFO support the expansion of foreign trade on American farm products but we are equally firm in believing that export sales should be made at prices that return the cost of production and a reasonable profit to the producer.

In summary, why does the present administration of the USDA continue to oppose an international grain agreement with minimum. price provisions, in spite of Senate Resolution 136 unanimously passed in 1971 urging that negotiations be undertaken pursuant to article 21 of the present agreement? The Soviet Government should pay the full price for American grain.

Why is there not an arrangement for representatives of producers to sit in USDA discussion with trade representatives when program policies, trade arrangements and similar matters are discussed? To do otherwise is to invite charges of secrecy and favoritism.

The export subsidy authority is a valuable tool to protect our position in the world market. Why should there not be a more open system of immediate reporting on companies filing for subsidy, amounts involved, countries of destination and the cost of the program?

At this point it should be noted that in order to rectify the damage already done, we will endorse any corrective legislation, as discussed by Chairman Purcell on September 14, to fairly adjust the value of wheat certificates on 1972 wheat for those producers who sold on the low market because they were not informed about the impending large scale purchases of the foreign traders.

Gentlemen, we have raised questions in the interest of improving the administration of our farm programs. You are urged to pursue them and are assured of our continuing cooperation.

Thank you.

Mr. PURCELL. Thank you, Mr. Frazier, and as I told Dr. Barton, I ask that you step aside and remain available for questions.

We will call at this time Mr. Eugene Moos, president, National Association of Wheat Growers.

STATEMENT OF EUGENE MOOS, PRESIDENT, NATIONAL ASSOCIATION OF WHEAT GROWERS, ACCOMPANIED BY JERRY REES, EXECUTIVE VICE PRESIDENT, NAWG

Mr. Moos. Thank you, Mr. Chairman.

Mr. Chairman and members of the committee, my name is Gene Moos and as president of the National Association of Wheat Growers, I am here speaking for our grower members. Accompanying me today is Mr. Jerry Rees, executive vice president of the National Association of Wheat Growers.

We ask the committee's indulgence as we divide our statement into three parts: (1) the present wheat situation; (2) farm programs and their relationship to the Russian wheat sale; and (3) opportunties to improve U.S. policy to maximize future benefits.

Just about a year ago the National Association of Wheat Growers appeared before this same committee telling of our concern over the threat of overproduction of wheat and feed grains in 1972. Fortunately, and even though it meant additional Federal expenditures, the administration responded by offering additional voluntary diversion programs to grain producers. These additional diversion programs. were successful in that they brought production more in line with expected disappearance.

Producers cooperated by stabilizing their production to anticipated market requirements and it appeared we would have another normal. grain marketing year. USDA projected in early August that wheat prices would remain firm at $1.31 per bushel for the coming marketing year. This would have meant another marketing year when domestic prices hovered at loan levels, a price somewhat less than producer production costs. With this price outlook, the net profit potential for most grain producers rested mainly with the Government payments they would receive. International wheat prices were even lower than domestic prices.

Now, within a few short months, everything has changed. The huge sales of grain by the United States and other exporting countries to the Soviet Union has turned the international grain market around from a buyer's market to a seller's market. Domestic wheat prices as well as international wheat prices have risen significantly and feed grain prices are beginning to follow.

Within a period of 2 months, the income outlook for wheat producers has changed completely. All of a sudden the situation that wheat growers have been looking forward to for years has become a reality. Wheat growers can now look to the market for a larger share of their income rather than to the federal treasury. This, then, is what the Russian wheat sale means to the U.S. wheat producers.

President Nixon and his administration deserve much credit and appreciation from the wheat growers. By taking the necessary steps to open up trade between the U.S. and the U.S.S.R., the grain sale became possible. The positive results from these sales as outlined by Secretary Butz in his testimony to this committee are real. Farmer income has been improved by hundreds of millions of dollars, taxpayers' costs are reduced, new jobs created, U.S. balance of payments improved and probably most important, the prospects for international stability and peaceful coexistence has been greatly improved.

Now that we have reached this happy state of affairs, how do we continue it to the benefit of both producers and national interests? The following facts cannot be overlooked if we are to continue our most favorable position: (1) The size of the Russian grain sale relates more to a shortfall in Soviet production because of adverse weather conditions than it does to sales of a continuing nature. In other words, the United States and the other major grain exporters cannot depend on this volume of Russian purchases on a year-to-year basis. (2) World wheat stocks as well as U.S. stocks will be pulled down to a manageable level by the Russian demand this year. Burdensome surpluses will not hang over the United States or the world market at the end of this marketing year. (3) There still exists the threat of overproduction. Until demand increases further, the world's grain producers do have the capacity to oversupply the existing markets.

Relating these positive benefits accruing from the Russian sale points out the essential role that farm programs can play in the days ahead. As an example, pressure is already building to force USDA to relax production controls in 1973. NAWG sincerely believes that to relax production controls in 1973 would be to court disaster by inviting back the low prices and surplus stocks of just a few months ago. NAWG strongly recommends that the USDA stick with the 1973 program provisions recently announced.

The present Farm Act expires with the 1973 crop. The question arises, then, what effect will the Russian sale have on the chances of passing new farm legislation, especially since public support for farm programs has been diminishing in recent years, partly due to the increasing costs of the programs and partly due to the farmers' own dissatisfaction with the results of the program. Now NAWG believes if we capitalize on the benefits of the Russian sale and combine these benefits with proper production management by USDA, we could change that outlook. Given careful production management by USDA, grain producers could continue to receive a larger share of their income return from the marketplace.

This, in turn, would reduce to some extent government costs for price supports. Admittedly, this could increase food costs slightly but under any circumstances the public is going to have to provide a reasonable return to producers if these producers are going to be able to supply adequate supplies of food. How much better for our free enterprise system if producers could get a greater share of that reasonable return from the marketplace. Reasonable returns to producers will help. keep people in rural areas, strengthen the rural social structure and at the same time reduce the need for rural development programs.

Relating the Russian sale to international wheat prices, one can also see some positive benefits. The present international wheat price is realistic in terms of the cost of production. Now the problem is to keep it at this level. NAWG feels that this is entirely possible if there is a reasonable amount of cooperation between the major wheat producing countries. The precedent for this type of cooperation already exists. NAWG calls on the USDA to cooperate in maintaining existing world wheat prices.

While there are many plus factors to the Russian sale and expanded world trade in grains, we should not overlook the opportunity to improve U.S. policy to maximize future benefits.

NAWG suggests: 1. reevaluation of the U.S. world wheat price policy. The U.S. has contributed to a stable low world wheat price policy for several years. Considerable criticism of this policy has come from many sources, including other major exporting countries. NAWG believes in the response of prices to supply and demand at both the domestic and world level and urges reappraisal of the U.S. policy.

2. The U.S. Government entered into a partnership with the private trade in an attempt to emulate the Canadian-U.S.S.R. type of grains agreement. Canadian-U.S.S.R. sales are a government-to-government contract developed through the Canadian Wheat Board. U.S. interests, Government and private, have been critical of these agreements because of the guarantee of quantity with options and set prices over an extended period of time. This has the effect of severely limiting competitive marketing and the movement of world prices in response to changing supplies and demand.

NAWG believes that every effort should be made to move away from the Canadian Wheat Board type of contract and every influence should be utilized to encourage competitive marketing conditions.

3. To accomplish the Russian sale, the USDA has overused the export subsidy program as a tool to hold world prices down. This has jeopardized public support for the export subsidy program. The export subsidy program is a vital tool to the U.S. producers and the grain trade in their efforts to be competitive in world markets. USDA should do everything possible to protect the creditability of this program.

4. Considerable criticism is leveled at USDA for being too trade oriented in its policy making, primarily because there have been a number of people from the grain trade appointed to high policy positions. NAWG would encourage USDA to restore more policy balance by the appiontment of additional qualified people from the producer sector in policy positions.

5. While NAWG believes in the involvement of private grain trade in U.S. grain sales, many of these companies maintain offices in other countries for the purpose of exporting wheat and feed grains in direct competition with U.S. commodities. We fell, therefore, it would be in our direct interest if efforts and assistance were provided to the farmerowned cooperatives to expand their activities as competitive entities in international grain trade.

6. The timing of the Russian wheat sales caught some of the wheat producing areas of the United States at a disadvantage. In the early harvest areas of the southern and central plains, many producers sold after harvest yet, before the market impact of the Russian purchases were felt. Normally, the income loss suffered by those who sold too early would be just the breaks of the wheat marketing game. However, since the 1970 Agriculture Act ties the value of wheat certificates to the difference between parity and the first 5 months' average market price, a new and complicating dimension has been added.

Prices can and have been influenced by governmental action. Government therefore has a responsibility to provide relief from such action. These producers reason that the Russian wheat sale added to

the volatility of the wheat market, penalizing those who marketed early unfairly.

NAWG, in sympathy with these producers, has called upon Secretary Butz for administrative action or, if necessary, an amendment of the Agricutlure Act of 1970 and solicits his support to correct the inequity created by unusual market conditions.

If legislation is required, one approach would be an additional provision to title IV, wheat, section 379b, setting up an alternative method of computing payment. The alternative could allow payment to be based on the difference between the national average price for July$1.32-and parity July 1. Eligibility would be determined by producers establishing to the satisfaction of county committees early sales of 1972 crop wheat. The number of certificates eligible for the adjusted payment would be the amount sold, not to exceed the certificate allocation for the farm. A blend formula could be included to maintain equity between those qualifying under the original formula and an alternative formula.

There would be no additional funding needed. USDA computation for the preliminary certificate payment made in July was $1.70 per bushel. With the increase in prices, the final payment based on the higher actual average market price will drop to the $1.50 range. This would reduce the value of certificate payments to wheat growers on a national basis $100 million.

Our suggested alternative would increase the income of producers not benefiting by higher prices $20-25 million and still leave a savings to USDA of $75-80 million.

In closing, NAWG thanks you, Chairman Purcell and the members of your committee, for the opportunity to make our statement.

If you will turn to the back two pages, there are some charts there for your reference which give a relationship of the wheat prices of the different classes as a result of the last year or so marketing.

Mr. Rees and I will be very happy to answer any questions later. Thank you very much.

(Attachments to prepared statement follow :)

U.S. WHEAT PRICES-DOMESTIC AND WORLD 1

1 Source: Daily Cash Prices USDA Agriculture Service, Calculated U.S. Wheat Prices USDA, Export Marketing Services. 2 Kansas City.

3 July 8 announcement on Russian grain sale announced.

4 Export subsidy policy change reported effective Aug. 24 all sales not previously registered eligible for increased subsidy. HRW Gulf 0.09¢ and white wheat Portland 0.20¢.