138 GENERAL FARM PROGRAM 



of coming before you this morning and expressing some of our views 

 and recommendations with respect to a price-support program. 



This hearing deals with the heart of our farm poHcy. 



The proposition with which I begin is that we are mutually devoted 

 to the task of making om* farm program the soundest and the strongest 

 and best that we can design. 



We have already been dealing this year with a number of important 

 items of legislation relating to agriculture: The Commodity Credit 

 Corporation charter, some acreage allotment and marketing quota 

 legislation, and the international wheat agreement, among others. 

 And now we come to one which touches directly or indirectly upon all 

 the rest. 



It concerns our effort to assist farmers to maintain a reasonably 

 stable income at a fair level — a level which is equitable to farmers and 

 in the best interest of the other economic groups within om- population. 



The principal device authorized by the Congress for this purpose 

 is commonly referred to as agricultural price support. It is, in my 

 opinion, the most effective method yet suggested and must remain an 

 integral part of our national economy until and unless a better method 

 is suggested. 



Some differences of opinion have developed about the exact formula 

 and manner under which agricultural price supports should be made 

 available. This is healthy and can only result in improvement if we 

 all apply om-selves forthrightly to a solution to the issues. 



One issue has been popularized as a simple clash over rigid support 

 of prices at 90 percent of parity versus flexible supports ranging from 

 60 to 90 percent. This is an oversimplification. 



The issue was not simple in the first place, and recent events have 

 not made it simpler. In the last several months we have seen some 

 of the effects of the bumper crops of 1948 and witnessed the planting 

 of another gigantic winter wheat acreage. We have put into effect 

 a new and lower support level for potatoes, yet find the Government 

 still buying considerable quantities of surplus potatoes. We have 

 come closer to the point where we seriously need some shifts in farm 

 production if we are to avoid surpluses. We can now see some im- 

 portant economic trends that were not evident last summer. 



Specifically, prices received by farmers have been coming down 

 much faster than the prices they pay. In March of this year, farm 

 prices were 15 percent lower than they were at the beginning of last 

 year, while prices paid by farmers were down only 2 percent from the 

 peak reached last summer. In this period, some industrial prices 

 continued to rise. Farm purchasing power turned downward in 1948 

 and is now at the lowest level since 1942. 



In short, some additional problems have come out of the realm of 

 theory into the here-and-now. Hence, the preparation of my first 

 recommendations to the Congress on the important matter of price 

 supports has required me to make a rather complete review of objec- 

 tives, legislation, and alternative programs. In addition to consider- 

 ing simple revisions in present legislation, we have taken a new look 

 at various ways of measuring parity and just about all of the program 

 suggestions that have been seriously considered in the past — two-price 

 and multiple-price systems, forward pricing, automatic pricing formu- 

 las, compensatory payments, cost reduction programs, and combina- 

 tions of these alternatives. 



