June 22, 1977
Page 20440
1977 WHAT AND FEED GRAIN LOAN LEVELS
Mr. ROBERT C. BYRD. Mr. President, I understand that S. Res. 193 has been cleared on both sides for passage by unanimous consent. That is Calendar Order No. 248.
Mr. President, I ask unanimous consent that the Senate proceed to the consideration of that measure at this time.
The PRESIDING OFFICER. The resolution will be stated by title.
The assistant legislative clerk read as follows:
A resolution (S. Res. 193) relating to the need to increase the loan levels for the 1977 crops of wheat and feed grains.
The PRESIDING OFFICER. Is there objection to the present consideration of the resolution?
There being no objection, the Senate proceeded to consider the resolution.
Mr. MUSKIE. Mr. President, currently on the calendar is Senate Resolution 193, a resolution that states:
That it is the sense of the Senate that the Secretary of Agriculture exercise his authority under existing law to increase loan levels for the 1977 crops of wheat and feed grains.
This resolution has major policy implications, and for that reason, as chairman of the Budget Committee, I wish to comment upon it. While Senate Resolution 193 does not require the Secretary of Agriculture to do anything to raise loan levels for wheat and feed grains on the 1977 crops, it does tell him that he ought to raise those loan levels that have already been announced and substantially increase outlays for these 1977 crops. As I pointed out during the consideration of S. 275, the omnibus farm bill, only a few weeks ago, that bill as it passed the Senate will lead to a breach of the first budget resolution for fiscal 1978 by more than $0.5 billion. Now we come along with a sense of the Senate resolution urging more spending which was not contemplated in either the third budget resolution for fiscal 1977 or the first budget resolution for fiscal 1978.
From the budget standpoint, I view this as particularly objectionable.
I would demand a roll call vote to defeat this resolution if I thought that it would have any effect upon the actions required of the Secretary of Agriculture. However, I do not think that it will have any effect. The Secretary of Agriculture has assured me in writing that the administration does not favor this resolution. The Secretary assures me that he does not intend to go above the announced loan levels or those that may be mandated by law.
Let me just briefly point out what could occur in budget exposure if the Secretary of Agriculture chose to raise loan levels to the maximum under current law. This bill does not suggest how high he should go, but does put the Senate on record in urging he use his power to raise loan rates for the 1977 wheat and feed grains crops.
The current U.S. average market price for wheat is at the loan rate of $2.25 per bushel. Therefore, any increase in the loan rate will increase the budget outlays in the agriculture function and will reduce U.S. exports of wheat, because it will raise the U.S. market price. If this occurs, we will have to use export subsidies to make wheat competitive in the world market.
The current loan rate on wheat is above the minimum required by law by $0.88 per bushel. The maximum loan rate for wheat under current law, according to the report of the Senate Agriculture Committee filed with this bill, is 100 percent of parity or $5.09 per bushel. Since this resolution sets no limitation on the loan level, the maximum budget exposure if the Secretary chose to carry out the resolution to the fullest would be about $3 billion above current policy in fiscal year 1977 for loans and export subsidies on wheat alone, according to the Congressional Budget Office.
This calculation assumes a loan level of $5.09 per bushel. Admittedly it is not likely to happen with President Carter in the White House, and Bob Bergland as Secretary of Agriculture, but I say this to show what could happen if the Secretary chose to implement the resolution to the fullest extent of his powers. In addition, I might add, the Congressional Budget Office says that there would he an additional $1 billion maximum budget exposure above current policy for fiscal 1978, under the same assumptions.
Increasing the loan level for the 1977 corn crop would also have major budget consequences. Although the projected average corn price for the 1977 crop is above the current loan rate of $1.75 per bushel, any increase in the loan rate will also risk an increase in budget outlays and perhaps also reduce the competitiveness of U.S. corn in the world market.
The current loan rate on corn is $0.65 per bushel above the statutory minimum. The maximum loan rate under current law is 90 percent of parity. According to the report of the Senate Agriculture Committee filed with this resolution, parity for corn is $3.49 per bushel. So if the Secretary increased the loan level for corn to 90 percent of parity, that would be $3.14 per bushel. Since most of the 1977 crop will not be harvested until October 1977, there would be a negligible impact on the fiscal 1977 budget, but the maximum budget exposure for fiscal 1978 could be an increase of as much of $2 billion above current policy for corn loan and export subsidies.
Because we are assured this resolution will not be implemented, and because I do not want to embarrass any colleagues concerning this resolution, I will not ask for a record vote on this resolution.
But this type of resolution is wholly inconsistent with the discipline of the budget process. I hope that we will not be faced with another such resolution which urges the administration to exceed the target levels of budget resolutions that have been agreed to by the Congress.
Mr. President, I ask unanimous consent that a letter dated June 17, 1977, from the Department of Agriculture be printed in the RECORD.
There being no objection, the letter was ordered to be printed in the RECORD, as follows:
DEPARTMENT OF AGRICULTURE,
Washington, D.C.,
June 17, 1977.
Hon. EDMUND S. MUSKIE,
Chairman, Committee on the Budget,
U.S. Senate,
Washington, D.C.
DEAR Mr. CHAIRMAN: This is to advise you that this Department opposes S. Res. 193. S. Res. 193 expresses the sense of the Senate that the Secretary should exercise his authority to increase the loan levels for the 1977 crops of wheat and feed grains.
Loan levels for 1977 crop of feed grains have already been increased substantially over those announced by the previous Administration.
The feasibility of increasing 1977 crop loan rates for wheat has also been thoroughly reviewed by the Department and others of the Executive Branch. It was concluded that a further increase in the 1977 loan rate for wheat could not be justified.
The 1977 crop wheat harvest is already in progress. Because any significant increase in loan rates would likely affect market prices, an increase in wheat loan rates at this time would be highly inequitable for wheat farmers who have already sold all or part of their1977 wheat crop.
In view of the foregoing, we would not expect the Secretary to exercise his administrative authority to increase the 1977 crop wheat and feed grain loan rates, even if S. Res. 193 were adopted.
Sincerely,
JOHN C. WHITE, Acting Secretary.
Mr. MUSKIE. Mr. President, I ask unanimous consent that a memorandum with reference to Senate Resolution 193 be printed in the RECORD.
There being no objection, the memorandum was ordered to be printed in the RECORD, as follows:
COMMITTEE ON THE BUDGET,
Washington, D.C.
MEMORANDUM
To: Senator MUSKIE.
From: John Giles and Dan Twomey.
Date: June 17, 1977.
Subject: S. Res. 193, a Resolution Relating to the Need to Increase the Loan Levels for the 1977 Crops of Wheat and Feed Grains.
S. Res. 193 is on the Senate Calendar. The leadership would like to move this to the unanimous consent calendar, but there is currently a Budget Committee hold on the bill.
S. Res. 193 states that it is the sense of the Senate that the Secretary of Agriculture should administratively adjust the price support program in a way that would increase outlays in FY 1977 and FY 1978. There is no comparable House resolution, and the Administration position is that no such administrative change should or will be made. The Department of Agriculture has assured you in writing that the Administration does not intend to increase the announced loan levels.
Staff recommends that you make the attached floor statement indicating your concern about the resolution's implications for the budget process. Staff recommends that you make this statement at your earliest convenience and then permit the bill to be moved to the unanimous consent calendar.
DESCRIPTION OP THE RESOLUTION
S. Res. 193 states (1) "that it is the sense of the Senate that the Secretary of Agriculture should exercise his authority under existing law to increase the loan levels for the 1977 crops of wheat and feed grains," and (2) that "the Secretary of the Senate shall transmit a copy of this resolution to the Secretary of Agriculture."
This resolution does not require Secretary Bergland to do anything and it recommends no specific increase in wheat and corn loan rates. It has policy implications as a Senate recommendation.
The resolution urges the Secretary to use discretionary authority vested in him to increase loan rates under current law (the Agriculture Act of 1949, amended by the Agriculture and Consumer Protection Act of 1973). Under that authority the Secretary could set loan rates for wheat as high as parity ($5.09 per bushel as of May 15) and for corn as high as 90 percent of parity ($3.14 per bushel as of May 15).
Loan rates are the support levels which eligible farmers can receive as Government loans on their crops. Farmers can either repay the loans and redeem their crops, or forfeit the crop in full satisfaction of the loan depending upon the market price and which is more advantageous.
Outlays occur when the loan is made. Offsetting receipts occur when loans are repaid or when forfeited commodities are subsequently sold by the Government.
For wheat, the current U.S. average market price is at the loan rate of $2.25 per bushel. Any increase in the loan rate, therefore, will increase budget outlays and will reduce U.S. exports, because it will raise the U.S. price above the world price. If this occurs, export subsidies will be needed to keep wheat competitive in export channels. CBO estimates that the maximum budget exposure (above current policy) would be about $3 billion for FY 1977 for loans and export subsidies with an additional $1 billion in budget exposure for FY 1978 in wheat.
For corn, the projected U.S. average price for the 1977 crop is above the current loan rate. However, any increase in the loan rate will also increase budget outlays and perhaps also reduce the competitiveness of U.S. corn in the world market. CBO estimates that there would be no FY 1977 impact from this resolution, because most of the 1977 crop will not be harvested until October 1977, but that the maximum budget exposure (above current policy) would be $2 billion in FY 1978. This includes both loan and export subsidies for feed grains.
The following table indicates the relevant information concerning the Secretary's authority to set loan rates for the 1977 wheat and corn crops, and possible budget impact:
[Table omitted]