Mr. JOHNSON. Yes, about soybeans. Because once the palm oil is in production, they don't stop. It is a minor cost to harvest. The cost is the investment of planting these trees. So once they are onstream, you have that competition from here on. Soybean producers have to adjust by reducing acres to respond to it. Subsequently we have lower soybean prices or lower corn prices or cotton prices because of the competition.

So it is a matter of trying to stop these things now before they come on stream.

Mr. GRASSLEY. Well, it is at least an investment that is good for 35 to 40 years.

Mr. JOHNSON. Yes.

Mr. GONZALEZ. It is estimated that by 1980, 15 percent of the total world production will have been financed by these institutions. Where is the other 85 percent? Where would the other 85 percent come from? Would that come from the subsidization by the producing country or commercially or do you have any information?

Dr. KLING. Well, sir, the answer is that, as far as I can see-and I know some people who have gone into the palm oil business—it is a bonanza. It is a sure-fire proposition where you just can't lose.

The cost of production is so low and the profits are so great that quite a bit of commercial money and investment money have gone into palm oil production.

Now remember also that a good deal of palm oil production was brought into being some years back. We are talking about increments now. So the bulk of palm oil production has probably been financed either by commercial investment or by investment of government. development banks in the various countries such as Malaysia, Mr. Chairman, and also by some of the large American corporations that operate in countries like Malaysia and Indonesia, who have found— well, I know one case where it is profitable for them to shift from rubber to palm oil because palm oil is such a good thing.

Our question is if it is such a darn good thing, why does production. have to be subsidized?

Mr. GONZALEZ. What is the price differential between soybean and palm oil?

Mr. JOHNSON. I think today about a 4-cent differential.

Mr. GRASSLEY. But last winter it was extremely

Mr. JOHNSON. The prices of palm oil and soybean oil were about the same last winter.

Mr. GONZALEZ. In other words, they just don't put that much palm oil into Palmolive soap?

Dr. KLING. Well, the palm oil is used primarily today in shortening. Most of the additional palm oil is going toward edible use. Now there is another development. They have developed new technology for palm oil which makes it possible to use palm oil in the manufacture of margarine and salad and cooking oils.

Palm oil is a hard oil. You don't have to hydrogenate it in order to give it the consistency of shortening. But they have developed methods of fractionization whereby the palm oil can be used for margarine and for vegetable oil; not very much yet but it is growing like the dickens. I think it has doubled in the last year-doubled from

But we can see the handwriting on the wall that it may not be too far off when a good part of the margarine and vegetable oil consumption in this country will come from palm oil-despite the fact that palm oil is a highly saturated oil and is really not indicated for people with cardiovascular disease.

I think consumers would benefit by being educated about the saturation of palm oil. And finally, even palm oil producers are sensitive to this because they are now trying to develop varieties of palm oil that are not quite as saturated as the old varieties. They have said there is a little success in this.

Mr. GRASSLEY. Congressman Poage made the same statement on the House floor when we had this up for debate and pointed out how it could really affect the health of the American people.

Mr. GONZALEZ. Congressman Poage will be a witness this morning. I notice our distinguished fellow Texan, Mr. de la Garza, is also here. Congressman Robert Stephens, who is also a member of the subcommittee and a very distinguished member of the full Committee on Banking, Currency, and Housing, is also here. Unfortunately he has decided to take leave from the Congress. I haven't heard that he is going into palm oil investment. Mr. Stephens, do you have any questions?

Mr. STEPHENS. Thank you, Mr. Chairman. This is a very interesting development because in my State of Georgia we have a great production now of soybeans. We have over the years increased our production. When the soybean price went up about to about $12.50 a bushel, everybody learned about soybeans. That was about 3 years ago.

But the thing that is interesting to me is the fact that we have been developing the underdeveloped countries by various and sundry types of loans. Most of the loans that the Inter-American Development Bank has engaged in, to my knowledge at least, have not been this kind of agricultural development.

They have been in the realm of reservoirs for water supply like in Guatemala and the development of recreational facilities like in Cancun and Mexico.

Now I know that we have had in our assistance program the development in Santo Domingo of a very fine agricultural cooperative system like we have here with the county agents in the United States, but I did not realize we were making this kind of loan.

Of course, in the realm of cotton, in the past we in the South went along with lots of the cotton restrictions and we found out that we didn't reduce the production of cotton; we just lost the acreage in our section because it went out somewhere else beyond Mississippi and on out to California.

I think that is what you are talking about now, that is, the fact that you would lose this to some foreign countries.

Mr. GONZALEZ. Pardon me for interrupting you, but a minute ago didn't you make reference to loans by the Inter-American Development Bank?

Mr. JOHNSON. Yes, sir.

Mr. STEPHENS. It is in the statement that that Bank and the Asian Development Bank have both participated in lending.

Mr. GONZALEZ. I was looking over the Council's report. They show two Inter-American Development Bank loans in their listing.

Mr. GRASSLEY. Most of the money has been invested in the Far East. Isn't that right?

Mr. GONZALEZ. Yes; I believe so.

That is what I had reference to because he mentioned the InterAmerican Development Bank.

Our statistics from the National Advisory Council show that in Peru in 1966 eight-tenths-well, $800,000; Ecuador would be $3.3 million for a total of $4.1 million out of a grand total of $305 million. So I would say that the Inter-American Development Bank is minimal in this area.

Mr. GRASSLEY. Mr. Chairman, is all the money that we have invested, is it in full production yet? Has all of the impact of our investment really hit us? I don't think it has really hit us fully yet. Mr. JOHNSON. Not fully.

Mr. GONZALEZ. No; because they were talking about the fine language. They were pointing out that the policy is "no further loans except those in the pipeline."

Mr. GRASSLEY. Those are loans where there has not yet been a tree planted yet?

Mr. GONZALEZ. Right.

Mr. JOHNSON. It would probably be a year or two before they get in place.

Mr. GRASSLEY. And 5 years before they get in production and then another 5 years. So we really don't know how bad this situation is yet.

Mr. GONZALEZ. I think that is the thrust of the statement.

Mr. JOHNSON. Yes; we don't think we can do anything about what is there and we are willing to compete with it, but the future is what we are worried about.

Mr. GONZALEZ. Gentlemen, do you have anything further you would wish to say?

Mr. JOHNSON. No.

Mr. GONZALEZ. Do you have anything further questions, Mr. Stephens, or Mr. Grassley?

Mr. STEPHENS. One of the comments I would like to make is the fact that it has suddenly been realized in the past 10 years that if we are going to really make any impact on the balance of payments situations and that has been out of adjustment for quite a number of years that agricultural exports are going to be the way we are going to make up the difference between our deficit of payments. And this certainly would have an effect, wouldn't it, on the balance of payments?

Mr. JOHNSON. Very definitely, yes.

Mr. STEPHENS. So we do export soybeans?

Mr. JOHNSON. About $4 billion worth of exports.

Mr. GONZALEZ. Gentlemen, we must move along.

Mr. GRASSLEY, Mr. Chairman, I suppose we could have the staff get this information and I am not sure we can do anything about it, but I would like to know whether, when we first got involved in this as American taxpayers through these development banks, were we doing this just to increase production for domestic consumption? Mr. GONZALEZ. Yes.

Mr. GRASSLEY. Or were we doing this so it could compete on the