Dairy products: Total utilization of price-support purchases in domestic and foreign outlets, and stocks, 1950-631

[In millions of pounds]

1 Data based on contracts executed. Does not include purchases specifically for sec. 32 but includes transfers from CCC to sec. 32 account.

2 Total is less than sum of individual items due to inventory reduction, including claims actions, rejections, and returns to sellers.

* Includes 69,600,000 pounds of uncommitted butter in the form of packaged butter, butter oil, and ghee, 1962; 17,000,000 pounds, 1963.

Excludes payment-in-kind exports for 1962 and 1963.

In terms of correcting it, the recommendations made by the President are at this status. The pay excess plan which you know is a proposal which would no longer permit the blending of class 1 and class 2 price which encourages more production, but which would continue for the producer his share in the given milk order of the class 1 milk, and he would be paid for it at the class 1 price and would be paid at a class 2 price for additional production, thereby discouraging additional production which is stimulated when he is permitted to blend these prices.

This base excess plan has passed the Senate and is pending before the House committee. In the Senate, a proposal to apply the payments system to reduce production was brought up on the floor by Senator McCarthy from Minnesota and did not pass.

That same proposal is pending before the House committee and has not been acted upon. It would apply particularly to the manufacturing milk areas and would envisage payments to farmers who held or reduced their production, based upon the volume of their production. This legislation, therefore, is pending and it has not been active recently because the attention is focused more directly in both the House and Senate on cotton and wheat in the past few weeks.

BUDGETARY CONSIDERATIONS

Mr. WHITTEN. Following up the points Mr. Michel has made with regard to other commodities, is your budget recommendations based on proposed change in the legislation?

Secretary FREEMAN. They are based on the assumptions that this would pass and a reduction in the amount involved in the dairy program of $30 million.

Mr. WHITTEN. Now, in the event that legislation should not pass prior to our actions, do you and the President intend to send us a budget estimate down to make adjustments? Or if we finance these programs without new legislation, will we have to exceed the budget? Secretary FREEMAN. In this instance, I think this committee in its wisdom has recognized it is pretty hard to "cross the t's and dot the i's" in terms of these commodity programs where we are in a position that the Secretary of Agriculture has to maintain the prices at this given level and the chairman well knows through the Commodity Credit Corporation and as such, this estimate is made for budget purposes, but there are wide variations which are not within my control.

Mr. WHITTEN. I point out again that the law requires you to support commodities under certain conditions. Another law says if you do it without money you are in trouble. So I would presume that the Congress would bail you out of the difficulty if the Corporation began to run short of funds.

Secretary FREEMAN. I think you probably would be able to do more than that, Mr. Chairman.

Mr. WHITTEN. We on this committee could come near doing it if we had a budget estimate to match it against. But we will cross that bridge when we get to it.

Turning now to the next problem area, we are developing these problems fairly well by questions and I am giving you a chance to supply full information.

I couldn't help but think that your prepared statement, where you didn't touch on any of these problems, reminds me of the fellow with all these problems who thought if you just ignored them, they might go away.

So I couldn't help but think in your prepared statement, these problems are so very serious, maybe you thought if we just ignored them they might go away, but we are filling it in now.

Secretary FREEMAN. Mr. Chairman, you have been needling me quite consistently about my prepared statement. I am sorry you don't think more of it. Might I say

Mr. WHITTEN. I think it is very good insofar as it goes. But it is a mighty short road.

Secretary FREEMAN. May I say I would like the record to show, and the chairman's points have been very appropriate, that this committee and those people who are concerned with agriculture are well aware of these problem areas in these commodities. But in the changes that are taking place in agriculture, the solutions are not exclusively to be found around these commodities but also in the other areas-trying to bring about a reallocation of our resources in rural America, and to alleviate poverty. These are new and pioneering efforts and I know of this committee's interest in them. I am very grateful of your support and tolerance in connection with them, and I felt that you would be interested in a full report on them. I was sure that the other items could be dealt with more accurately, and with a saving of your time, because you know so much about them anyway, by asking questions to refresh your memory and to bring you up to date, that we could expedite the important work of this committee.

Mr. WHITTEN. Thank you, Mr. Secretary. I think that your answer is certainly appropriate and, I am sure, correct.

SUGAR PROGRAMS

Now, the next problem that the President in his formal message pointed out related to sugar, and I quote from the message:

The rise in sugar prices in 1963 reflected a reduction in world supplies. The Cuban crop was about one-half the pre-Castro level. Europe had two poor sugarbeet crops. But the fears voiced last year that the United States would be unable to obtain sufficient sugar proved groundless. Action by the Department of Agriculture assured sugar users an adequate supply and helped halt the price increases that attended heavy buying in anticipation of shortages.

However, the experience of the past year--and the fact that foreign sugar quotas expire at the end of 1964-highlight the need for some action at this session of Congress to assure ample supplies of sugar to consumers at fair prices. I recommend the removal of marketing restrictions on the sale of domestically produced sugar during the calendar year 1964. This legislation will relieve the pressure on world market supplies at a time when these supplies are short. The effectiveness of our present arrangements for foreign sugar procurement are under intensive study. On the basis of this study I shall-early in this session-make recommendations for remedial legislation.

Apparently the recommended legislation has not yet come downSecretary FREEMAN. That is right.

Mr. WHITTEN. I think it well at this point in the record that you trace the history of the sugar situation, the law, and how it was carried out, and what changes the Castro situation and Cuba has brought about. We want the record to show the information that led the President to believe the statements that are here.

(The material referred to follows:)

SUGAR

Prior to the Castro regime, about three-quarters of all the sugar imported by the United States came from Cuba where ample supplies for our market were maintained at all times. Cuba supplied about one-third of our total sugar requirements and had the ability to expand production at will.

The Congress amended the Sugar Act in July 1960 and authorized the President to discontinue importations of Cuban sugar and to obtain supplies from friendly foreign countries. Many of these countries had surplus sugar at that time which they eagerly shipped to the premium-priced U.S. market.

The Congress further amended the Sugar Act in March 1961 to continue the authorization to the President to prohibit the importation of sugar from any country not in diplomatic relations with the United States and to procure our replacement import requirements of sugar from foreign countries with special consideration to Western Hemisphere countries. The bulk of the sugar which previously had been obtained from Cuba was obtained during 1961 and 1962 as nonquota sugar from the Republic of the Philippines and countries in the Western Hemisphere.

World production of sugar from the 1960-61 crop was at a record high of a little more than 60 million tons. Thereafter, a drastic and continuing decline in Cuban production under the Castro regime and two successive poor crops in Europe caused a shift from abundant world supplies to the tight supply situation which developed last year. World consumption continued to increase until late last year and substantially outran production from both the 1961-62 and 1962–63 crops.

The Sugar Act was last amended in July 1962 when Cuba's former share of our sugar requirements was reduced by about one-half which was retained on a reserve basis. Quotas for other foreign countries were increased by more than a million tons and quotas for domestic areas as a group, were increased by more than 600,000 tons. The mainland cane and sugarbeet areas were also to share pro rata in 65 percent of increases in total sugar requirements above the basic 9.7-million-ton level. The amount retained for Cuba, was placed in what is frequently called a global quota to be filled by friendly countries with special consideration to Western Hemisphere countries. The act also provides an import fee on foreign sugar except from the Philippines to be calculated on the basis of the excess of the U.S. price of sugar which will fulfill the price objective of the act over the world price. Global-quota sugar was subject to the full fee and country quota sugar, to a fraction of the full fee. The Congress also for the first time, included a provision for the growth and expansion of the beet sugar industry by requiring the Secretary to set aside a reserve acreage each year for allocation usually to new localities on the basis of specified criteria. Pursuant to this provision, the Secretary has committed reserve acreage to four localities for the construction of this number of new processing plants.

World sugar prices in January 1962 averaged 2.24 cents per pound, but by January 1963, had increased to an average of 5.41 cents per pound. Thereafter prices rose sharply as fears developed in trade circles that the shortage of sugar in the world would create a similar situation in the United States before a new crop could be harvested. Although these fears proved groundless, there was a rush to stockpile sugar in April and May of 1963 and sugar prices reached the highest level in more than 40 years. The domestic raw sugar price at New York advanced from an average December 1962 price of 6.54 cents per pound to an average of 11.08 cents per pound for May 1963.

The Department of Agriculture took a number of actions to assure sufficient supplies of sugar to the American consumer and to increase our domestic production. During August 1962, the Department announced that there would be no restrictions on the production of the 1963 crop of sugarbeets and also announced that the 1963 crop of mainland sugarcane could be as high as the level of the restricted 1962 crop. In March 1963, acreage restrictions on mainland cane were relaxed and then in early May were removed. At the same time, announcement was made that there would be no restrictions on the 1964 crop. It was also announced in March, that the 1964 sugarbeet crop would be unrestricted and on May 6, that the 1965 crop would be unrestricted.

In view of the buildup in sugar stocks by industrial users and secondary distributors principally during April and May 1963, and the spurt in sugar prices which resulted, the Department on May 6, 1963, increased total sugar requirements by 600.000 tons to 10.4 million tons for the calendar year. By May 23. all of this additional sugar supply was assured and prices declined sharply at first and thereafter more slowly until August when the price of raw sugar averaged 6.6 cents per pound which is in line with the price reference point of the Sugar Act.

The trend in domestic price was reversed during September and October in sympathy with an upward movement in world sugar prices which in turn was initiated by news concerning the failure of the grain crops in the Soviet Union and fears concerning the sugarbeet crop. Shortly thereafter the sugarcane crop in Cuba was severely damaged by Hurricane Flora which hovered over the island for 4 days. By November 4, the price of raw sugar at New York had risen to 10.25 cents per pound. It was obvious that the mainland cane and beet crops were progressing extremely well and would be about 800,000 tons larger than the sugar production from the preceding crops. The Secretary of Agriculture announced on November 5, 1963, that he would recommend legislation, limited to the year 1964, to permit unlimited marketings of domestic sugar. The price of raw sugar at New York began to decline immediately and by November 26 had dropped to 8.6 cents per pound.

On December 5, 1963, the Department announced its intentions to establish U.S. sugar requirements at 9.8 million tons and to authorize the importation of only 1 million tons of the 1.5 million tons of global quota sugar which would result from the 9.8 million total. This, together with the high level of sugar stocks at the beginning of 1964, would substantially reduce import requirements and thus lessen the upward pressures on the tight world supply situation. This proposed action was finalized on December 16. The million tons of global quota sugar was fully subscribed by January 21, 1964. During the period December 16 to January 21, the price of raw sugar duty paid at New York increased from 8.4 cents to 9.5 cents per pound and thereafter began to decline and as of February 26, was 8 cents per pound. While this price is almost 1.5 cents per pound above the price reference point in the Sugar Act, it is also about 2 cents below the price on a comparable basis for sugar delivered to other destinations. The world supply situation is still very tight. Sugar stocks in 45 selected countries totaled 5.8 million short tons at the beginning of the 1963-64 season. This compares with beginning stocks of 8 million tons a year earlier and 9.3 million tons 2 years earlier.

(The following are the laws applicable to sugar at the present time :)

AN ACT To regulate commerce among the several States, with the Territories and possessions of the United States, and with foreign countries; to protect the welfare of consumers of sugars and of those engaged in the domestic sugar-producing industry; to promote the export trade of the United States; and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Sugar Act of 1948."

TITLE I-DEFINITIONS

SEC. 101. For the purposes of this Act, except title V

(a) The term “person” means an individual, partnership, corporation, or association.

(b) The term "sugars" means any grade or type of saccharine product derived from sugarcane or sugar beets, which contains sucrose, dextrose, or levulose. (c) The term “sugar” means raw sugar or direct-consumption sugar. (d) The term "raw sugar" means any sugars (exclusive of liquid sugar from foreign countries having liquid sugar quotas), whether or not principally of crystalline structure, which are to be further refined or improved in quality to produce any sugars principally of crystalline structure or liquid sugar.

1 Includes operative amendments made to the Sugar Act of 1948 (P.L. 388, 80th Cong., approved Aug. 8, 1947), by P.L. 140, 82nd Cong., approved Sept. 1, 1951, P.L. 545, 84th Cong.. approved May 29, 1956, P.L. 592, 86th Cong., approved July 6, 1960, P.L. 15, 87th Cong., approved March 31, 1961, P.L. 535, 87th Cong., approved July 13, 1962, and P.L. 539, 87th Cong., approved July 19, 1962. (7 U.S.C. 1100)