1220 GENERAL FARM PROGRAM 



So far as the grower is concerned, the manner in which the present purchase 

 program is applied not only provides a floor under the marlcet below which the 

 grower is not obliged to sell his product, but it also establishes a price ceiling 

 above which he cannot sell his wool after it has been tendered to the CCC. In 

 this respect, the present CCC wool purchase program is not flexible enough to 

 permit the grower to enjoy the full benefits of a strong market for a particular 

 grade or portion of his wool clip, whereas a nonrecourse loan type of program 

 allows the grower full freedom within the life of the loan. Under a loan program 

 the producer, so long as he retains the beneficial interest in his commodity, is free 

 to redeem his woji cap by paying off the loan and carrying charges and to sell it 

 in the open market, thereby securing the full benefit of particular demand for a 

 particular grade that may develop within the life of the contract. This privilege 

 is not available to him under the present purchase program which follows the 

 same general pattern as the wartime measure which established a ceiling as well 

 as a floor on wool values. 



It is our belief that a nonrecourse-loan program could be operated at much 

 less cost to the Government than either a purchase progratn, such as we now 

 have, or a production-payment plan such as has been suggested, and at the same 

 time provide greater benefits to producers. We strongly favor this type of pro- 

 gram which would provide maximum freedom in merchandising the commodity 

 and permit the market to function through usual channels with a minimum 

 amount of Government regulation. 



It is not clear what method would be employed to implement the proposed 

 production-payment program nor what machinery would be employed to deter- 

 mine the amount of the production payment to be paid to domestic wool growers. 

 The term "production payments" would .seem to indicate the possible implication 

 that there might be some regulatory measures imposed with respect to production 

 such as is the case in programs covering surplus agricultural commodities. We 

 assume, inasmuch as wool is a deficiency commodity in the United States and 

 obvious.ly always will be, that increased production of domestic wool would be 

 extremely desirable in the int^re^^ts of our national economy and that no suc'i 

 feature would be necessary or desiral)le in any type of wool-su;>port ])rograni. 



Inasmuch as only one method or plan of implementing a direct-payment pro- 

 gram to producers has been evolved or presented, we will attempt, in the light of 

 experience, to point out what appears to be unsound policies involved in direct 

 producer payments and to point up some of the distinct advantages of a non- 

 recourse-loan program. 



The production-payment plan now before your committee provides for a direct 

 payment to growers by the CCC based on a percentage of the sale price of the 

 growers' wool sold in the open market at shearing time or as a result of consign- 

 ment sale. Using the example, which will be found on page 4 of the brief filed 

 by the National Wool Growers Association in which the support price named by 

 the Secretary of Agriculture on January 1 is assumed to be 55 cents per grease 

 pound and the average price received by growers as computed by the Bureau of 

 Agricultural Economics for the year in question is assumed to be 50 cents per 

 grease pound, the percentage of difference would be 10 percent. The theory 

 expounded in this bi'ief would recjuire a production payment by the CCC to 

 every wool grower in the United States of 10 percent of the price he received 

 .through sale of his wool in the open market regardless of whether the price re- 

 ceived by him was higher than the support level on a per poimd basis or lower than 

 the support-price level. 



Let us assume that this proposed plan of production payments had been 

 effective January 1, 1949. Because of a temporary scarcity of fine wool in Feb- 

 ruary a few of the larger fine wool clips of the country were contracted on the 

 sheep's back at 76 cents per grease pound to the grower. This relatively high 

 price was obtained because of a temporary shortage of fine wool. In this month 

 (June) choice clips of medium wool of the quarter and three-eighths grades are 

 selling as low as 43 cents per grease pound to the producer, lender the proposed 

 production-payment plan, as set forth in the National Wool Growers Association's 

 brief now before you, the grower who received 76 cents per pound for his wool 

 would receive a production payment of 7.6 cents per pound and the producer of the 

 43 cents per pound wool would receive a production payment of 4.3 cents per 

 pound. Assuming the fine wool fleece commanding the 76-cent price would 

 average 9 pounds per fleece, the payment in this instance would be 68.4 cents per 

 fleece or per head. In the case of the quarter and three-eighths fleece which was 

 sold at 43 cents per pound, which would average about 7)^ pounds per fleece, the 

 grower would receive 32.2 cents per fleece or per head or less than one-half the 



