APPENDIX C.-Palm oil imports--United States, January 1971-January 1976

Mr. MATHIS. Mr. Shannon, I thank you for your testimony. Mr. Jones?

Mr. JONES of North Carolina. Thank you, Mr. Chairman. Mr. Shannon, I would assume from your testimony that your corporation has a certain need for palm oil at the most favorable price possible.. Mr. SHANNON. That is correct, Sir.

Mr. MATHIS. Mr. Jenrette?

Mr. JENRETTE. Do you have figures to tell us what percentage of domestic use is taken up by palm oil now? The domestic use beingin your testimony today-the lard and fast food chains. Tell me this. Your company has increased its use of palm oil in the last 5 years by what percent?

Mr. SHANNON. It is deminimous at the present moment.

Mr. JENRETTE. I assume by your testimony that you feel government has no place at all in the free enterprise system. Is that correct? Mr. SHANNON. No, I do not think so, but I do not think the government should interfere in the marketplace when the market is working. I think it is clear from the last table that you see in my testimony, the imports of palm oil into the United States.

Clearly, the heaviest importation was the last quarter, and in January, as I point out, is almost half and even reducing further for February and March and why? Because of the price.

I think that price regulates the market better.

Mr. JENRETTE. Has palm oil increased in price or just soybeans because of the glut in the market?

Mr. SHANNON. They both reduced.

Mr. JENRETTE. Palm oil is cheaper than it was?

Mr. SHANNON. Yes, Sir.

Mr. JENRETTE. But, I believe your testimony is that it is now higher in some markets

Mr. SHANNON. That is correct, Sir. That is correct.

Mr. JENRETTE. Thank you.

Mr. MATHIS. Mr. Johnson?

Mr. JOHNSON. No further questions.

Mr. MATHIS. Mr. Shannon, what is the highest point palm oil was selling for in this country when we had the so-called oil shortage. Mr. SHANNON. The highest price?

Mr. MATHIS. Yes sir.

Mr. SHANNON. I think it is in one of these charts.

Mr. MATHIS. According to that, then palm oil got up to about 34 or 33 cents a pound?

Mr. SHANNON. That is right, 34 cents, in that area.

Mr. MATHIS. And it has now dropped to about 17 cents?

Mr. SHANNON. That is correct.

Mr. MATHIS. I think there are several things here we could probably discuss involving your philosophy that we ought to have a total free marketplace as long as it involves subsidizing foreign producers. Mr. SHANNON. Woud you repeat that please?

Mr. MATHIS. It seems to me that what you are saying is that you are an advocate of a totally free marketplace so long as we have subsidized the foreign producers that we are now competing with. Is that a fair statement?

Mr. SHANNON. No, I do not think it is. What I am saying is that I am not in favor of the subsidies either. I think that the marketplace should react to price and quality and technological advances.

I think one thing we have not discussed at all that could be interjected here is that an avenue open to us on the positive side is to increase our research and development of the soybeans so that we increase our yields.

We get double crops to compete because palm oil is going to be here. We are going to compete with it in the market. I think we have got to get busy.

Mr. MATHIS. Well, we are also competing, are we not, with other nations that have imposed restrictions upon our soy products?

Mr. SHANNON. Yes, we are. We compete in the world market. Mr. MATHIS. It seems that we have been asked to play by one set of rules, and we let other people play by other sets of rules and we call that a free market.

Is it your statement that we must now share this growing market with others and should be prepared to do so on a competitive basis? I do not think there is an American farmer who has an objection to that; but it is not competition when you subsidize the other side and then you have to go out into the marketplace against it.

Mr. SHANNON. My point is, Mr. Chairman, that to the extent that you impede imports into this country that oil is going to find a home. It is going to go to the foreign market.

We are a net exporter of almost half.

Mr. MATHIS. But what you have also said, if I am correct Mr. Shannon, is that if we have another shortage that market of that oil is going to rush to this market. It is not going elsewhere. It is going to rush to the United States again.

Mr. SHANNON. And, that is very good if it does. If we do have another shortage of soybeans that will keep the price down for consumers. That is beneficial.

Mr. MATHIS. Mr. Jones, did you have a question?

Mr. JONES of Tennessee. Mr. Chairman, I regret the fact that I missed part or all of this testimony. I am sure that I would have had some questions, but in view of the fact that I did not hear all of it, I will give you my time back.

Mr. MATHIS. Thank you, Mr. Jones. One other point. There seems to be some degree of irony involved in that we have made loans to subsidize these plantations and now we are told the Malaysian government is imposing an excess tax on palm oil. So, not only have we subsidized the oil, but we are subsidizing the Malaysian government by their imposing an export tax on that product coming back

out.

Mr. SHANNON. That was exactly our policy. Our policy was to aid developing countries.

Mr. MATHIS. Well, I am not questioning the fact that we have done that. It just seems ironic. I wonder where some of the people who were advocating this are now. I was in Georgia working in a peanut patch. Where was PVO then?

Mr. SHANNON. They were in San Francisco.

Mr. MATHIS. Investing in, maybe the palm oil groves?

Mr. SHANNON. No, as a matter of fact, as I pointed out, we are principally the domestic producers of safflower and also importers of coconut oil.

Our share of the market of palm oil is deminimous.

Mr. MATHIS. Who is the major importer of palm oil?

Mr. SHANNON. Palmco.

Mr. MATHIS. Where are they headquartered?

Mr. SHANNON. In Richmond, Calif.

Mr. MATHIS. What percentage of the palm oil market do you think they handle?

Mr. SHANNON. I really do not know. I think that is a confidential figure.

Mr. MATHIS. But, your company, PVO, handles a very small part of the total palm oil?

Mr. SHANNON. At the present moment, Mr. Chairman. We intend to be competitive.

Mr. MATHIS. You have plans for expansion, do you not?

Mr. SHANNON. Yes sir.

Mr. MATHIS. Thank you very much, Mr. Shannon, for your testimony, and we appreciate you being so courteous and remaining behind.

Mr. SHANNON. Thank you, sir. It was my pleasure.

Mr. MATHIS. Our next witness is Mr. Jack Whetstone, who is the executive vice president for Texas Cottonseed Crushers' Association. of Dallas.

Mr. Whetstone, we appreciate your patience in remaining with us also, and we would be happy to hear from you at this time.

STATEMENT OF JACK WHETSTONE, EXECUTIVE VICE PRESIDENT, TEXAS COTTONSEED CRUSHERS' ASSOCIATION, INC.

Mr. WHETSTONE. I am Jack Whetstone, executive vice-president, Texas Cottonseed Crushers' Association, Inc., Dallas, Tex.

The Texas Cottonseed Crushers' Association is a trade association. representing vegetable oil mills and allied interests in Texas. It is among the oldest organizations representing a segment of the vegetable oil processing industry, having been in continuous operation since 1894. Mills on our membership roll process soybeans, peanuts, sunflowers, as well as cottonseed.

We feel probably the most serious problem facing the vegetable oil processing industry is the duty free, unrestricted flow of highly saturated palm oil into our historic domestic oil markets.

We became interested in palm oil production in 1971 when we read of the yield potential of newly developed tree varieties reported at that time with yield potential of around 2,000 pounds or more per

acre.

However, later released figures indicated that the yield in Malaysia was around 3,600 pounds per acre and we understand that some of the trees presently coming into peak production are making around 4,000 pounds per acre.

We think the committee can readily understand our interest and concern when these yields are compared with those of other major vegetable oils.

After becoming interested and concerned in 1971, we became alarmed when we discovered that much of the funds for the development of palm oil production, processing and export were being underwritten by loans through the auspices of international financial agencies such as the World Bank Group to which the United States is a major contributor.

Our tax moneys were being used and continue to be used in about every conceivable way to insure the successful production and exportation of palm oil. Loans have been made for clearing forest, planting trees, research facilities, fertilizer plants, roads, processing plants, power plants, highways and dock facilities. Not all of these things contribute only to palm oil production and exports but they contribute greatly to the success and expansion of palm oil exports. International loans contributed to 26 percent of the increase in production in the 1970-75 period and it is estimated they will contribute to 45 percent of the increase in the 1975-85 period. They contributed 20 percent and 32 percent of the growth in exports for the corresponding periods. These figures only cover loans already approved and do not include estimates of production and exports which might be approved in the future by these international lending agencies such as the World Bank Group.

Just as United States capital has been used to fund a substantial portion of palm oil expansion, the lack of any restrictions on palm oil imports into the United States has made this country the principal market for the increasing palm oil exports.

In 1965, the United States imported about 0.5 percent of the total world palm oil exports about 7 million pounds; by 1975 the United States imported over 900 million pounds, over 22 percent of the total world exports of palm oil. These figures are increasingly significant when we consider the fact that world palm oil exports tripled during this period showing that the United States is absorbing a disproportionate share of world palm oil exports.

But, of even greater concern is what has happened to domestic consumption of cottonseed oil during the same 10-year period. In 1965, domestic disappearance of cottonseed oil was 1,590 million pounds and in 1975 domestic disappearance of cottonseed oil was approximately 530 million pounds. United States used about 900 million pounds more palm oil in 1975 than was used in 1965 and about that much less cottonseed oil. The decline in domestic consumption of cotton seed oil is due in part to lower supplies and increased exports, but what will happen when cottonseed oil production returns to a more normal level?

It is reported that production costs of palm oil is around 9 cents per pound f.o.b. Asian ports and the average price of palm oil for