646 GENERAL FARM PROGRAM 



equal to the difference between the estimated market price or loan rate 

 whichever is the higher and the parity price. 



Here is the way this plan might work as applied to the present law. 

 New parity under the present law for wheat would, I believe be around 

 $1.82 a bushel. If the market price for wheat should be $1.40, which 

 is 72 percent of new parity, then the value of the certificate purchased 

 by the millers would be 42 cents a bushel on perhaps 500,000,000 

 bushels ground for human food in the United States. 



These certificates would be issued to each wheat grower on his pro- 

 portionate share of the 500,000,000 bushels used for human food in 

 the United States. The simplest way to apportion these certificates 

 would be in the same way as was done under the processing tax pro- 

 gram in 1933 and 1934. As many of you will recall each farmer re- 

 ceived payments on 54 percent of the base Mdieat production at that 

 time. Under present conditions it is likely that with increased yields 

 this percent would be lower. For example, if the base wheat produc- 

 tion amounts to 1,000,000,000 bushels and if 500,000,000 bushels are 

 ground for domestic human consumption each producer would receive 

 certificates amounting to 50 percent of his base wheat production. 



The millers would be required to buy certificates from the producer 

 or through banking channels. They would add the cost of the certi- 

 ficates to the cost of the wheat and this would be reflected in the cost 

 of flour. In no case, however, would the miller be paying more thaa 

 the parity price for wheat, a price which we all have considered fair 

 to both producer and consumer. In this way the plan would be self- 

 financing and would not require a continuing drain on the Public 

 Treasury. This is an important feature of the certificate plan which is 

 superior to the present law or the plan suggested by the Secretary of 

 Agriculture. 



The market price for wheat under this plan should be at a level 

 which will permit a maxim^um of volume in export markets. The price 

 range to be set under the international wheat agreement would 

 probably be a satisfactory level to shoot at under a flexible loan pro- 

 gram. This price should be low enough to permit wheat to move into 

 competitive markets. On the other hand, it should be high enough to 

 prevent the cost of the certificate from becoming too large. A loan or 

 market price 60 cents under new parity would probably be as low as 

 it ought to be in order for the plan to operate effectively. This is 

 equivalent to 1 cent on a pound loaf of bread. 



I understand that one question asked by some members of your 

 committee when Mr. Kaseberg appeared before you in April was this, 

 What effect would such a plan have on the parity price for wheat 

 under the formula for computing parity in the present law? Under 

 the present law and under the program suggested by the Secretary of 

 Agriculture parity relation for different commodities will be deter- 

 mined by average price over the most recent 10-year period — inci- 

 dentally, the 2-year lag under the Secretary's plan. If the price of 

 wheat is allowed to decline in relation to prices for other commodities, 

 this would tend to reduce the price support level for wheat as time 

 went on. My answer to this question would be, that the value of the 

 certificate should be included in computing the average price received 

 by farmers. 



Although we have stated as one of our general objectives that we 

 desire acreage allotments only as a last resort, surpluses are already 



