GENERAL FARM PROGRAM 61 



not on the basis of freight rates but on the basis of location differentials as reflected 

 in United States average farm prices available by crop reporting districts, broken 

 down by counties. 



Location differentials in the rate of loans constitute legitimate recognition of 

 the fact that market prices of a commodity vary according to the location of the 

 commodity, and that in order to afford all producers equivalent price support 

 from a loan program, it is necessary, therefore, that the rate of the loan should 

 likewise vary according to the location of such commodity. It is also obvious 

 that to the extent that loan rates at different locations are adjusted to reflect 

 differences in normal market prices, the loan program will operate not only to 

 give equal price support to the commodity at all locations but will tend to guar- 

 antee producers of the commodity a price which more nearly represents a pur- 

 chasing power comparable to the percentage of parity prescribed by the Congress 

 as the rate of the loan. 



In breaking down the United States average farm loan rate by location differ- 

 entials, the congressional mandate to make loans at 90 percent of parity is met 

 so long as the schedule of loan rates is calculated to assure a weighted average 

 loan rate equal to 90 percent of parity. 



In determing the corn loan rates by counties average price relationships of corn 

 during the marketing years 1921-22 to 1940-41 are used, adjusted for abnormal 

 conditions Since long-time historical location differentials in corn prices, ad- 

 justed for abnormal conditions, are accepted as a measure for the normal market 

 price for a county, the loan rates for different counties, as determined, reflect the 

 differences in such normal market prices. 



Since 1941, when loan differentials were first employed in the corn loan program, 

 the same method of determining county loan rate differentials has been used in 

 the subsequent programs. 



In weighting the county loan rates so that, if applied to total national produc- 

 tion, a United States average farm loan rate of 90 percent of parity is assured, 

 latest available 5-year average county production data are used. 



Mr. Pace. Mr. Simpson. 



Mr. Simpson. Mr. Secretary, on page 4 of your statement you 

 stated that approximately 80 percent of all the corn produced in the 

 United States is fed on farms where produced. On page 9. you read 

 that unless there is an unfavorable outlook for the 1949 crop, practi- 

 cally all of the supplies of corn put under loan or purchase agreement 

 may be expected to be offered to the CCC. If 80 percent of it is fed 

 on the farms, that %vould leave 20 percent in the hands of the CCC, less 

 whatever is sold on the market, is that right? 



Secretary Brannan. There really is no particular relationship 

 between the two statements except that 80 percent of the corn which is 

 produced in the country, no matter in what position it may be, will 

 eventually be fed. 



Mr. Simpson. The figure I was trying to get at was the approximate 

 percent that would be in the hands of the CCC unless there was an 

 unfavorable outlook in 1949. That would be 20 percent less what 

 went to market, approximately, is that right? 



Secretary Brannan. No, it would not necessarily be that. Even 

 some of tlie corn which may later find its way into nonfeed sources 

 might be kept by the farmer under his o\\Tiership and possession. 

 The reason is that the farmer will put under loan to the Government 

 all of the corn which he does not think he can sell at a higher price. 

 Wliether or not it is being fed or whether or not is it going to some 

 other commercial or industrial use is a secondary factor, an unrelated 

 factor. 



Mr. Simpson. You expect that unless there is an unfavorable 

 outlook for the 1949 crop, practically all supplies of corn put under 

 loan or purchase agreement will be oft'ered to CCC. What I would 



9121.5—49 — pt. 1- 5 



