GENERAL FARM PROGRAM 1221 



amount of the production payment due the producer who received 76 cent.s per 

 pound for his wool. It should be pointed out, however, that over a period of years 

 wool of the medium grades is as essential to our national economy as wool of the 

 finer count. Therefore, the proposed production-payment plan would at this 

 time tend to provide the greatest payment where least needed. It would be- 

 a substantial aid to the large operator producing fine wool but of little benefit to 

 small farm operators who number approximately 75 percent of those engaged in 

 wool production in the United States. 



A "nonrecourse loan" program would completely eliminate this unsound 

 principle, for any grade or class of wool commanding a higher price than the 

 support level would be redeemed and sold in the open market through usual 

 channels at no cost to the Government. Under the proposed "production pay- 

 ment" program all grades and classes would be subjected to payments if the 

 over-all average price received by growers was below support levels. 



The wool market has already suffered a severe and apparently unwarranted 

 decline. There appears to be no market at primary shearing points. In 1948, 

 however, less than half the clip was sold to the CCC. If the proposed "produc- 

 tion payment" plan had been in effect in the year 1948 and the average price was 

 determined to be below the support level, all growers regardless of the grade 

 of wool produced or the price obtained would have received the same percentage of 

 the sale price as a production payment. It would have been applied to all growers 

 or to none. The additional cost of a "jiroduction payment" program cannot, 

 of course, be accurately calculated. While an analysis of our sales of wool in the 

 year 1948 would provide the best basis for calculating additional costs of such a 

 program, we would be reluctant to even attempt such a calculation. 



The wool clip of the United States is practically all shorn in the months of May 

 and June. The entire wool clip is seeking a market at this time and approximately 

 75 percent is sold bj' the growers during this period to dealers and merchants who 

 carry the wool so purchased and distribute it to the manufacturers throughout 

 the year as their recjuirements demand. A substantial risk is taken bj^ dealers in 

 acquiring the clij) which must be offset by price differential between prices paid 

 to growers by dealers and prices that will be realized through sale to manufacturers 



Because of the tendency on the part of wool growers to sell at shearing tin.e and 

 the financial burden on the part of merchants involved in lifting the clip at shearing 

 time, the spread bet^\een the price the grower receives and the price the manu- 

 facturer pays is usually substantially more than marketing costs. Wool is pur- 

 chased by merchants and dealers from growers on an average price basis in the 

 majority of cases for it is obviously impossible to make an examination of each 

 individual clip and ascertain its true market worth. The production-payment 

 plan would encourage the purchase of wool on an average price level with little 

 or no consideration for extra quality and breeding. ■ 



The application of the production-payment plan, in our opinion, would 

 promote careless breeding and careless preparation of wool. Much of the progress 

 growers have made in the way of better breeding for quality wool and better 

 preparation of v^ool for market in the last 20 years would be lost or discontiimed. 

 If the entire wool clip was forced on the market at shearing time, or any sub- 

 stantial portion thereof, it would have a tendencv to abnormally depress market 

 values and thereby increase the amount of production payments to all growers. 



The present slump in the wool market and the almost total absence of trading 

 at countr}' points affords a striking illustration of the extent to which the ambimt 

 of the production payment would be increased under such circumstances. Such 

 an operation would constitute market glutting which would inevitably increase 

 the spread between the price received by the producer and the average support 

 level named by the Secretary of Agriculture. Such a plan would surely lift the 

 cost to the Government far beyond the cost of an intelligent merchandising pro- 

 gram wherein the wool is sold to manufacturers throughout the consuming year as 

 would be the case with a nonrecourse loan program. 



In Australia, where wool is the principal commodity of commerce, practically 

 the whole clip, which is three times greater than that i)roduced in the United 

 States, is sold at a series of auctions carefully scheduled throughout the whole 

 year. The production-payinent plan now^ before your committee w^ould, in 

 our opinion, represent the antithesis of orderly marketing as practiced in Australia 

 where wool marketing has probably reached the highest degree of perfection. 



Under the production-payment program the producer would not know the 

 extent of his production payment until all of the certificates covering sales of 

 several hundred thousand growers' wool clips were properly computed and aver- 

 aged. This would require many, many months, and would really put the govern- 



