additional trees for the production of palm oil for export. That the United States through international organizations encourage palm oil export to upgrade nutritional levels in diet deficient countries.

Two: The United States immediately eliminate support for international financial arrangements that subsidize palm oil and other vegetable oil crops for export.

Three: Negotiate a mandatory import quota on palm oil, based on the volume imported during the past 5 years.

Four: Adopt an import duty on palm oil equal or comparable to prevailing world duties, particularly the EEC.

Five: Place all imported vegetable oils under the same production and processing regulations as required by FDA and other Government agencies for edible oils produced in the United States, and that all costs for inspections and services in connection with such regulations be paid by the exporting countries involved.

We commend the subcommittee for your interest in the palm oil threat and appreciate having the opportunity to present these views. The figures used are from or calculated from USDA reports.

Mr. MATHIS. Mr. Whetstone, we thank you for your testimony. Mr. Jones?

Mr. JONES of North Carolina. Thank you Mr. Chairman. I want to commend and applaud Mr. Whetstone for such a very splendid statement. I had the privilege of reading it before he gave it, and I think there is some real meat in it that we need to take a serious look at before we make any decisions as to what we might do.

But, in the interest of time, Mr. Chairman, I am not going to ask any further questions.

Mr. MATHIS. Mr. Jones of North Carolina?

Mr. JONES of North Carolina. No questions, Mr. Chairman.

Mr. MATHIS. Mr. Johnson?

Mr. JOHNSON. No questions. I just have one comment, Mr. Whetstone. Your testimony was a contradiction to Mr. Shannon's, which is very interesting.

About the only thing you did not recommend was that we drop a defoliant on the palm trees.

Mr. WHETSTONE. It might be a good idea.

Mr. JOHNSON. You want to think about adding that?

Mr. MATHIS. Mr. Jenrette?

Mr. JENRETTE. No questions.

Mr. MATHIS. Mr. Whetstone, we thank you very much for your testimony and for coming here and being so patient and waiting your

turn.

Mr. WHETSTONE. Thank you.

Mr. MATHIS. Our next scheduled witness had a plane problem. He happens to be a constituent, I believe, of Mr. Jones of Tennessee. Do you have a statement?

Mr. JONES of Tennessee. Yes, Mr. Chairman. I would like to ask unanimous consent of the committee to insert Mr. Husbands' statement in the record because he had to catch a plane to go back to Memphis.

Mr. MATHIS. Without objection his statement will be made a part of the record. There are two other statements, one from the Honorable

Richard Nolan who is a member of this Agriculture Committee and another from Mr. W. B. Lawson III, president of the National Cotton Council of America. These, without objection, will be made a part of the record.

[The statements referred to above follow:]

STATEMENT OF FRED H. HUSBANDS, EXECUTIVE VICE PRESIDENT,
NATIONAL COTTONSEED PRODUCTS ASSOCIATION

Mr. Chairman and members of the Committee, I am Fred H. Husbands, Executive Vice President of the National Cottonseed Products Association, which has its headquarters office in Memphis, Tennessee. Our Association represents cottonseed processors who operate in every major cotton-producing state from North Carolina to California.

Our members process approximately 95 per cent of all cottonseed which is manufactured into its products in this country. In addition, about half our members process other oilseeds which are available in their areas of operation, such as soybeans, peanuts, safflower and sunflower seed.

The importation of palm oil into this country has attracted a considerable and increasing amount of attention during the past year.

The growing imports of palm oil first created concern among our processor members in 1972. At that time, palm oil use in edible products in this country had recently shown significant gains. Its low price and duty-free status were particularly disturbing to many in the domestic oilseed processing industry. After thorough consideration of all interests in the processing of vegetable oils, our Association adopted the following statement of policy in May 16, 1972. It has been reaffirmed during the past year.

"The Association expresses its serious concern that greatly increased worldwide supplies of fats and oils have depressed price levels for these commodities and that increased imports of such oils have reduced the income derived from cottonseed by growers, ginners and processors and threaten to continue to do so. "The Association expresses its intention to work with organizations représenting similarly affected industries and with the government in seeking reasonable and practicable solutions to this problem. We believe that such solutions should include:

"1. Coordinated studies, by USDA and industry, of the competitive position of domestic edible fats and oils relative to oils produced abroad,

"2. Intensive analysis, by the Federal agencies involved, of all practicable means to lessen the competitive pressure of imports upon our domestic oil price levels, recognizing that, as a surplus producer of oils, we cannot afford to jeopardize the continued export of our production of oils and many other agricultural products,

"3. An intensified program of market expansion to increase the consumption of fats and oils, both domestic and worldwide,

"4. The provision of labeling requirements that will adequately identify the fats and oils being used in consumer products, and

"5. The discouragement of further U.S. government participation in financing of the expansion of foreign production of edible fats and oils until world consumption has arisen to an extent that will absorb current and prospective production."

In November of last year, the Foreign Agricultural Service, U.S. Department of Agriculture, under date of November 11, moved to invite representatives of the domestic oilseed industry to join in a meeting on November 18 to discuss mutual problems created by growing imports of palm oil.

Its letter of invitation contained the following statements:

"The Department is increasigly concerned over the continued erosion of U.S. vegetable oil export prospects and is inviting representatives of your organization to a meeting to discuss the current and prospective situation. In our view the afternoon of November 18, a period that will coincide with the National Agricultural Outlook Conference, would be an opportune time for such a review. "The vegetable oils that should be reviewed include soybean oil, cottonseed oil and in one special situation, peanut oil. We need to assess commercial export prospects including the potential role of CCC Credit and the need for P.L, 480, Title 1 and 11."

On the preceding day, November 17, Richard Bell, newly appointed as Assistant Secretary of USDA for foreign trade promotion, in a meeting in Kansas City, had expressed growing concern over U.S. imports of palm oil, more specifically Malaysian palm oil. He pointed out that imports of palm oil during the current year would exceed expected exports of soybean oil and expressed the view that the Administration should consider talking palm oil suppliers into voluntarily agreeing to limit shipments to the U.S.

A review of the supply outlook on edible fats and oils at that time may be helpful. The USDA had announced early last summer that it was going to move nearly 400,000 tons of peanuts into the market and intended to offer them for processing. A considerable number of cottonseed oil mills have participated in this program which has recently received an additional quantity of peanuts. World edible oil production for 1975-76 is estimated at a figure 6.6 percent higher than the preceding year. Soybean oil accounts for the largest part of the increase, being up nearly 12 percent. This assumes that nearly nine million tons of soybeans will not be crushed in the U.S. but will be carried over into 1976-77.

Peanut oil will be up 10 percent, and rapeseed oil and olive oil will be increased.

Coconut oil's substantial increase last year will be upped still further, particularly from the Philippines and palm oil may increase from about 20 percent, according to the British Commonwealth Secretariat. Worldwide production of cottonseed oil and sunflower oil will be down about 8 percent.

The very rapid increase in imports of palm oil in the past two or three years has somewhat overshadowed the increased importation of coconut oil and its increased use in food products in this country.

The USDA publication, "Fats and Oils Situation," gives some useful information on the domestic use of these two imported oils compared to cottonseed oil. Cottonseed oil domestic disappearance is down to about 500 million pounds this year from 660 million younds last year. It has sold at a price in recent months averaging 26 cents per pound, down about 10 cents per pound from last season. This is primarily due to a reduction in supply of 20-30 percent. Imports of palm oil in the 1974-75 year totaled 757 million pounds and more than doubled that of 1973-74. Imports for 1975-76 are forecast by USDA at 900 million pounds. Palm oil prices in mid-January, 1976 (c.i.f., U.S. ports) were quoted at 16.8 cents. A year earlier it was selling for about 31 cents.

Imports of coconut oil, mainly from the Philippines, totaled 673 million pounds during 1974-75, which was an increase of about 20 percent over the previous year. Imports for 1975-76 are forecast by USDA at 900 million pounds. U.S. coconut oil prices-crude, Pacific Coast-declined from about 60 cents in the summer of 1974 to about 16 cents at the present time. Currently, coconut oil is one of the lowest priced fats or oils in the world and USDA forecasts it will remain low if Philippine production expands as is expected.

While increased supply of any fat tends to affect the price of other fats, it is interesting to look at usage in the domestic market to reflect best the effect on an oil such at cottonseed oil.

In the domestic market about 24 percent of the cottonseed oil is used in shortening, 6 percent in margarine, 66 percent in salad and cooking oils, and 4 percent in other food uses.

In 1974-75 about 683 million pounds of palm oil were used in domestic foods. Of this, 89 percent was used in shortening, 2 percent in margarine, 3 percent in cooking and salad oil, and the remainder for other food uses. In addition, about 8 million pounds were used in nonfood uses. Thus, palm oil did not heavily participate in domestic cottonseed oil markets but rather took a considerable part of soybean oil use in shortening.

In 1974-75 coconut oil domestic disappearance was about 674 million pounds. of which 395 million pounds were used in foods and 279 million pounds were used for nonfood purposes. Of the 395 million pounds used in foods, 23 percent was in shortening, 5 percent in margarine, 9 percent in salad and cooking oil, and the largest proportion-63 percent-was in other food uses. These other food uses included baking, confections, etc., which are especially suitable to coconut oil characteristics. Again, no high percentage of domestic use was in the salad and cooking oil use which is so important to cottonseed oil.

It would appear that soybean oil might suffer from palm oil imports more than other major oil sources but I am not aware of any really good reasons

why palm oil could not replace a high percentage of the cottonseed oil which goes into shortening. Palm oil contains about 40 percent palmitic acid and cottonseed oil contains about 24 percent. Palmitic acid helps to improve the crystalline structure of shortening.

Incidentally, about 120 million pounds of palm kernel oil was imported in 1974-75. The characteristics of this oil are quite like those of coconut oil.

We realize that the subject of duties, quotas and tariffs are not a concern of this committee but the subject is one which must be of concern to each member of the U.S. Congress. We are living in very troublesome timesperhaps full of more perplexing problems than our country has been confronted with for a long time.

Let me take a few minutes to give you a brief picture of matters we face in the export situation. Nearly all agricultural commodities in this country have vital interests in export markets. Cottonseed, which is a by-product of the production of cotton, has four products-oil, meal, hulls and linters. Meal is a livestock feedstuff and hulls are principally consumed in that market. Linters are used in production of cotton batting and cellulosic products.

Cottonseed oil ranks #2 among the edible vegetable oils produced in the United States. While the volume of production is considerably below that of soybean oil and exports of it have usually been less than soybean oil, the export market is of relatively greater importance.

The U.S. is the world's largest exporter of cottonseed oil. The volume has risen notably in recent years and last year accounted for more than 50 percent of production. The export market is therefore a highly important factor in determining the value of U.S. cottonseed oil and consequently, of cottonseed. The latter accounts for about 15 percent of the value of the cotton crop (seed and fiber combined).

Major export markets for U.S. cottonseed oil are Egypt, Venezuela, the European Community, Japan, Mexico and Canada. In some years, Sweden has been a buyer of some significance. Each of the foregoing nations has some form of barrier-tariff or non-tariff or a combination of both-to the importation of cottonseed oil.

From the standpoint of the cottonseed producer and processor, the modification (elimination or reduction) of all of these barriers would be desirable and beneficial. As the largest import market with effective purchasing power, the European Community should probably rate the highest in priority for this modification of barriers. The compensatory taxes imposed by this trade alliance are especially objectionable; but the tariff is also highly important. It is recognized that modification of these EC barriers will be most difficult but it seems essential that a strong effort toward that objective should be made.

In addition to the tariff and compensatory taxes, U.S. cottonseed oil encounters another disadvantage in the EC market in the form of duty-free preference accorded to competing oils produced in some of the "developing" nations. Such preference might well be a subject for three-way negotiations between the U.S., EC and "developing" countries.

While emphasizing the desirability of the EC market, it is by no means intended to overlook the importance of the other markets named above-and perhaps other areas that are not now buying U.S. cottonseed oil. Several of the Middle Eastern nations are potentially important markets where consumer acceptance exists and foreign exchange, generated by petroleum, is available. These other markets are important and valuable and it is to be hoped that real effort will be applied to modification of barriers in all such marketsactual and potential.

Among the most difficult types of barriers to deal with are those involving government monopolies, licensing and the allocation of foreign exchange. Mexico, Venezuela, Spain and the socialist and communist countries are examples of nations using these mechanisms. While the prospects cannot be viewed with great optimism, the maximum practicable progress toward elimination of such barriers is highly desirable.

In negotiations on as broad a scale as is contemplated under the Trade Act of 1974, requests for modifications in the U.S. tariff schedule applicable to fats and oils will almost certainly be received. That schedule is hardly a model of consistency, as shown by the following examples:

The pending trade negotiations could well provide an opportunity to bring about a greater degree of uniformity in U.S. tariff schedules for fats and oils and, in the process, improve the conditions for the entry of U.S. products into markets abroad.

Over the past 25 years, a number of efforts have made to establish (1) compulsory standards and (2) a commodity agreement applicable to international trade in fats and oils. The Codex Standards provide the outstanding example of #1.

In the case of cottonseed oil, the Codex Standard wholly ignored the legal requirements for U.S. food standards and the well-established and accepted trading rules; it would have barred the sale of crude and of certain grades of refined oil; it would have required a large number of chemical analyses for minor elements and so-called "quality factors" which are not of significance in trading, and it would have required the use of analytical methods which were obsolete. The net result would have been a set of requirements that would be unworkable and extremely costly to producers, processors and consumers. Fortunately, the United States rejected the proposed standards for cottonseed and other oils and it is earnestly hoped that they will not be revived.

An international commodity agreement for fats and oils could very well represent the antithesis of the primary objective of the multilateral trade negotiations, i.e., more open and equitable market access for agricultural trade and the minimization of devices which distort such trade. Such agreements usually involve price control, allocation of markets, limitation on exports and imports and, sometimes, controls on production-all rhetorically described as "rationalization." In view of the U.S. efficiency of production of oilseeds and their products and of the strong worldwide competition among those commodities, American agriculture could only lose as a result of such a development and it is to be hoped that no commitments of any type will be made in that direction.

During the past seven years, with a substantial decline in the production of cotton from the volume which prevailed prior to 1967, our organization has devoted a great deal of work to the development of the production of sunflowers as a domestic oilseed crop in the "cotton-belt" area of our country. We have also worked with agricultural leadership in northern states which have been interested in this crop.

In 1974, we had perhaps 10,000 acres in commercial production of sunflowers in cotton country. In 1975, acreage increased to a level in excess of 300,000 acres. There are indications that volume of acreage in 1976 will probably not reach that figure, but it is very evident that this crop is going to become an important part of oilseed production in this country.

According to the USDA's "Foreign Agriculture" bulletin of January 26, 1976, the "bumper 1975 sunflower seed crop (unofficially estimated at 625.000 tons) set new export records. "The United States currently is the world's leading exporter of sunflower seed oil."

Let me conclude by pointing out that the oilseed industry needs your study of its situation in this very complex problem. Our condition-a mix of both favorable and unfavorable factors-is greatly complicated by the burden of compliance with a host of government regulations imposed in the past five to six years-most in the environmental areas-for which we see very little respect for relief.

The standards in many instances are completely unrelated to reality. In a business with no administered prices, we cannot depend on the customary practice of other business in passing on to the customer the government-imposed costs of doing business. A government-sponsored study of our industry shows the number of companies at a loss in the past 5 years as follows: 197023 percent; 1971-45 percent; 1972-20 percent; 1973—17 percent; and 1974–— 42 percent.

Thank for for this opportunity.