56 



them into the feed lot to feed them. The value of the corn in that 

 area, because of the lightweight and so on, sells for about $1.70 per 

 bushel. Using that factor, their cost per pound of gain on those 

 feeder calves will run about 35 to 40 cents. With 76 to 78 cents per 

 pound, they will show a good profit on backgrounded or finished 

 cattle, they are making money today in livestock. 



Unfortunately, the major reason that they are is because it is at 

 the expense of their feed grain production. The price is simply too 

 low for feed grain. Our national vice president, John Garland, who 

 farms in Indiana in the Corn Belt tells me that his cost of produc- 

 tion for corn is running about $2.50 a bushel. 



In the case of hogs, they are at about a break-even price today. 

 They are selling for 40 to 41 cents per pound. I talked to my broth- 

 ers this morning. They are about 42 cents. Again, a lot of that cost 

 of production is related to the cheaper feed. Using a study that re- 

 cently came out with somewhat higher corn price cranked in, the 

 University of Iowa and the University of Nebraska came out with 

 about $44.23 per hundredweight for finished hogs. 



I also want to talk a little bit about the production costs referred 

 to earlier that are going up. Many of these production costs are at- 

 tributable to factors that farmers really have no control over. Real 

 estate taxes on the farm. As a result, a loss of tax base in many of 

 these communities. The real estate taxes on most farms in this 

 area are going up. On the home quarter where the buildings are 

 located, taxes went up 34 percent last year. They have been going 

 up 10 to 15 percent per year on the unimproved land. 



Another cost factor involved, of course, are some of the environ- 

 mental requirements. I talked to some of the Midwest farmers 

 today and they say that in the case of corn they have approximate- 

 ly 25 cents a bushel for conservation and environmental standards 

 that they must maintain. 



Farm equipment is another factor. There has been some upgrad- 

 ing in recent years. However, a lot of them have delayed purchases 

 of farm equipment. If you go in to replace machinery or buy ma- 

 chinery today, it just simply won't cash flow with the projected 

 prices we're looking at. 



In summary, Mr. Chairman, the good news is that we're close in 

 some of these commodities. A 15- to 20-percent increase in price on 

 some of these commodities would make a world of difference. I am 

 talking in terms of 40 to 50 cents a bushel would make a tremen- 

 dous difference in the outlook. 



The down side of it is that if prices drop by even as much as 5 

 percent, it will literally make the difference between survival and 

 being able to continue farming for several of these farmers, par- 

 ticularly the ones who are more dependent upon cash grain. 



I know the chairman and members of this committee, the new 

 administration and new Secretary are going to be dealing with a 

 lot of important issues that will affect these things. The manner in 

 which the budget is handled will have a very large bearing on the 

 outcome and the way it is handled in the commodity programs, the 

 Russian credit problem, the final outcome of some of these interna- 

 tional trade agreements — all of these obviously will have a direct 

 bearing. It doesn't have to have too much of an impact to tip that 



