back period than someone else that is not in the market constantly, or something may have happened in the country which has caused a drain on their ability of their reserve to pay back loans.

I think that is what we are trying to do, is make the program flexible enough that we can get in and meet these demands.

Senator STONE. I would suggest that it would be helpful for the Farm Bureau to give us some of your thoughts, possibly in writing, about the issues raised by the previous witness, that is, simulating support facilities for the use of feed grains, and finding meat imports coming back to trouble the domestic economy, and some form of policy statement which might address that problem, as we can go about expanding the port facilities of our customers.

We have seen palm oil, citrus, and some other problems. We do not want to our customers ability to buy, but do we not also want to give long range attention?

Mr. DATT. We are very much aware of the point that you make, both as related to palm oil and citrus, and in terms of the potential that might develop, as related to the livestock area.

Senator STONE. Senator Stevenson made a proposal here, in a previous hearing, and it was similar in many ways to the bill of Senator Lugar, in which the nonmarket approach would be by formulas that would extend the credits immediately to the Peoples' Republic of China, and to the European bloc countries-with the exception of the Soviet Union at this time-as a way of maximizing the expansion efforts of these bills, without slowing any of the bills down, at least a year or two years, as a way of getting a bill this year.

And I think the Farm Bureau ought to think about that, and let us know how you feel about that. We are looking for a way in the subcommittee to pass the strongest possible bill we can to expand exports. And we do not enjoy the administration's support at this time, which does give up a little difficulty in moving swiftly legislatively.

There are some practical problems, but we want to go as far as we possibly can, and still try as hard as we can to pass a bill this year. So we certainly could use your advise and counsel in this very difficult area. I would like you both, particularly Mr. Hammer, who is involved in these negotiations in Geneva, to give us a little advice. Mr. DATT. We will be delighted. As I say, Mr. Hammer is really the one who is much more knowledgeable in this particular area. We will make his talents and ability available to you in any way that you would like to have them.

Senator STONE. One last question.

We had some testimony here, in the previous hearing, and you have addressed it in your prepared statement, about the desirability of a high official, sub-Cabinet level, for international operations within the Department of Agriculture. But we also had a very interesting suggestion raised by Senator Bellmon yesterday, about the concept of an Assistant Secretary of State, or high Secretary, or high State or Agriculture Department official. That concept is just as interesting

as yours.

What I would like you to do, for the Farm Bureau, is to evaluate the benefits of both of those proposals. Whether or not we can put it in this committee bill, I am not sure.

On the other hand, I am a member of the Foreign Relations Committee, so what we could not do here, maybe we can do over there with other Agriculture Committee members jointly on that, Senator Clark, and there are others.

Mr. DATT. Well, this idea has been discussed, and we will be happy to, you know, give you our point of view. It has been discussed even at the Department of Trade, International Trade, or something. We have some reservations about going that far, but we will be happy to give you our comments as it relates to Senator Bellmon's proposal. I do not think we are prepared this morning to comment. Senator STONE. We have time before the markup, and I want to thank you very much for your testimony. We are going to work together and see if we cannot come up with something-it is not good if it rots. It is very good if we can sell our agricultural exports. Mr. DATT. That is our attitude. We have been in the forefront of this area. We are the only ones of the general farm organizations that has anyone like Mr. Hammer, who is involved in this day-today Geneva negotiations, and as I say, we will be happy to make his talents available to you and the subcommittee any way that you can use them.

Thank you very much.

Senator STONE. Thank you very much. We appreciate it.

[The following information was subsequently submitted by Mr. Datt:]

Hon. RICHARD STONE,

AMERICAN FARM BUREAU FEDERATION,
Washington, D.C., May 3, 1978.

Chairman, Subcommittee on Foreign Agriculture Policy, Committee on Agriculture, Nutrition, and Forestry, U.S. Senate, Washington, D.C.

DEAR SENATOR STONE: During your Subcommittee's hearings on the various bills to increase export sales of American farm commodities, you asked the Farm Bureau to respond to three questions.

Your first question concerned the level of beef imports into the United States and the impact that increased feed grains sales abroad may have on beef imports.

The problem of beef imports is not due to the large volume of feed grains which we provide to foreign markets. The beef that comes into the United States is primarily "grass-fed." The United States is the largest market in the world for exported beef. We also are the largest beef producing country in the world. We would like to have the opportunity to export more of our "grain-fed" beef to overseas markets; however, these markets are protected by a variety of restrictive barriers which largely prohibit imports of U.S. beef. Our meat import law is rather mild in comparison with the practices used by the European Community and Japan to control the level of beef imports. If the U.S. trade negotiators are successful in achieving significant reductions in the trade barriers affecting our beef exports, there will not be as much resistance to liberalizing our own meat import law.

Your second inquiry basically asked which of the many pieces of legislation Farm Bureau prefers. In our statement to the Subcommittee, we stated that we supported S.2385, S.2405, S.2504, and S.2968. It is our belief that no single bill should be chosen to the exclusion of the others. We strongly favor a more flexible system of Commodity Credit Corporation credits and the extension of CCC credit to the so-called nonmarket economy countries.

The four major pieces of legislation to which we have responded form an excellent basis for providing tools that are necessary to aggressively promote the sale of U.S. farm commodities abroad.

The final questions which you posed to us referred to the possibility of setting up a position for a high agricultural official in the State Department. While this idea sounds attractive on the surface, Farm Bureau has always contended that what is really needed is that the importance of agriculture to

the national economy be recognized in the determination of government policies. We feel that this can best be done by insuring that the Department of Agriculture is given not only a prominent but the leading role in determining what actions are in the best interests of a market-oriented agriculture. We believe that this approach would maximize benefits of trade not only to the farm sector but to all other sectors of our economy. We are studying the proposal to establish a department of international trade, but would have serious reservations if the decision to establish such an agency did not provide for the proper coordination of domestic farm programs and international agricultural trade policies. Failure to coordinate domestic farm programs with international trade policies would seriously affect the ability of our farm commodities to compete in the world marketplace.

We appreciate the opportunity to respond to your questions on this very important matter.

Sincerely,

JOHN C. DATT, Director, Washington Office.

Senator STONE. Our next witness is Mr. Robert Lewis, the national secretary of the National Farmers Union.

STATEMENT OF ROBERT G. LEWIS, CHIEF ECONOMIST AND NATIONAL SECRETARY, NATIONAL FARMERS UNION

Mr. LEWIS. Mr. Chairman, I will submit a copy of my statement for the record.*

I will abbreviate my remarks, and I will be prepared to respond to your questions.

The Farmers Union, and I am sure I speak for all farmers, welcomes the initiative of the committee and the authors of this legislation to do something about farm prices and income. We think that there is no question that an increased effort of salesmanship should be aimed at assuring our customers that they will get a good quality for what they pay for. This will be very helpful, to our commodity export efforts, and these are among the purposes of the bill to which we subscribe.

But I think that we just cannot lose sight of the fact that the bottom line of the farmer's concern is not merely the volume that is sold, but also the price that he gets for his product. And on that score, some of the provisions, some of the proposals might do more harm than good.

Senator STONE. Which?

Mr. LEWIS. I think the long-term credit provisions may have the effect, in actual practice, of cutting prices in the world market. When you understand the structure of the world market, for cereals—as we do-I think we can see that there is no improvement in farm income that can be achieved by cutting prices.

In the first place, let us examine who is the world market. Well, we have about 2 million American grain farmers, mostly family farmers. Ninety-five percent of all grain produced and sold in this country is produced on family farms. And we have a dozen governments. That is the world market

Senator STONE. You mean the customers are half a dozen

Mr. LEWIS. No. The competitors are about half a dozen governments, and the customers, for the most part, are 100 or so govern

*See p. 183 for the prepared statement of Mr. Lewis.

ments. Now, that is not absolutely the case, but that tends to be, in general, the way most of the supply is going to be handled.

The price that will be paid in the world market, and the price at which our competitors' products will be sold, is determined by the actions of governments, by the Canadian Wheat Board, an agency of the Canadian Government; the Australian Wheat Board; the Argentine Wheat Board, the equivalent of the Swedish Government, and I do not know just what agency does it but in effect the Turkish Government, and so on. Whether the U.S.S.R. is in the market as an exporter, which they sometimes are, or as a buyer, which is sometimes the case, it is obviously the U.S.S.R. Government, and not the U.S.S.R. farmer, that is the seller.

There are a couple of million American grain farmers matching wits with 100 governments who do the buying, and half a dozen governments who are their competitors. And the price will be set at the point where the independent American farmers, matching wits with half a dozen governments, decide that they should hold the product off the market. And that substantially is dependent upon the U.S. price support loan rate.

Now, farmers have been able, on some occasions, to hold their crops off the market in anticipation of higher prices, when they and their bankers expect that there might be higher prices in the offing.

We had that experience in 1973 and 1974, when 112 million bushels of wheat were held almost entirely by farmers, in reserve status. They were getting support from their bankers, and production credit associations, because everybody thought maybe the price would stay up. But as soon as everyone became convinced that we had a little bit more than barely enough grain in the world, then the price began to weaken, and the farmers' creditors began pressing them for money. And the farmers had to liquidate, and you had American farmers turning loose their grain and breaking the price down, and by June 1977, it was down at $2.02 per bushel. And very, very cheap dollars they were, too.

Now, in this situation, the Canadian Wheat Board and the Australian Wheat Board anticipated what would happen. As soon as the new administration demonstrated that it would not raise the U.S. loan rate, contrary to what many of us had expected would happen, including people in these other governments, they saw the handwriting on the wall, and they anticipated what would happen to prices better than 2 million independent farmers could be expected to do. They anticipated that the price was going down, and the Canadians, Australians, and Argentina, and everybody else, started making their sales for as much above the U.S. loan rate as they could get.

And, of course, that accelerated the race downward, and the price did go down.

That is the nature of the so-called free market. And I think that we have to recognize that some of the people who advocate dependence upon that system, do not make their money on the price. They make their money on the volume. The grain traders make more money on the more bushels they sell, at whatever the price. There are, of course, also opportunities to make money, if they can anticipate

correctly that the price might go down, or that it might go up. There is that kind of speculative opportunity also.

But the farmer is dependent upon getting a price that will cover his cost of production.

Senator STONE. How should he do that?

Mr. LEWIS. I think the farmer needs, and deserves, help from the U.S. Government. It is unrealistic and unfair to put American farmers into this arena with a handful of governments as competitors, and a few dozen governments as buyers, which for the most part is what the "world market" is and expect that the farmer should fend for himself with a loan rate below his cost of production.

I think the U.S. Government needs to raise the loan rate for grain to the point where it will cover the farmer's cost of production, and give him a fair return on his investment, his labor and management, and then negotiate with the other countries to agree to withhold their fair share of stocks off the market, in order to maintain a respectable world reserve, which the world needs, and the present administration acknowledges that. I think we all do. The world needs to have more than just barely enough grain.

In that way we could maintain prices to the farmers at a fair rate. of return.

I have been assured by officials, high ranking officials, in every one of these grain exporting country governments, that they would be prepared to raise their selling prices, if the U.S. would raise its loan rates. They are prepared also-and this is something new, for the first time in history-all of the major grain exporting countries have a capability and willingness to hold stocks as a part of a concerted program by the exporting countries to hold stocks in reserve.

Senator STONE. Is our Government moving in that direction, our executive branch?

Mr. LEWIS. I think our executive branch is resisting this approach. I think that is where the problem is; the problem is in Washington, D.C. I think that Ottawa, Canberra, Buenos Aires, and the other main exporting countries-I think also in Brussels headquarters of the European community-these other governments would collaborate in some program of this kind to rationalize this grain market.

Senator STONE. We had a description by a previous witness, of the Argentina price-cutting in the Brazilian market. How does that square with what you have just said?

Mr. LEWIS. The Argentina system is the weak link in this whole picture. We are all familiar with the great difficulties, the political difficulties, that that country has endured. They now have a stable government, at least it appears to be stable, and it appears to be fairly competent to get such things done.

I think, in any event, that Argentina accounts for only one-eighth as much grain in the world market as we do, and we can take a chance that they would perform well enough.

Senator STONE. But you think these other governments, with their wheat boards and grain boards, would cooperate with a higher loan policy in this country?

Mr. LEWIS. I have no doubt about it.