Mr. HIGHTOWER. Also please indicate any shifts from previous years.

Mr. RANK. A list of States receiving targeted allocations indicates shifts that have occurred in funding each year.

[The information follows:]

Mr. HIGHTOWER. Is the targeting program only utilized for one year on any given piece of land or are funds provided until the specific conservation problem is alleviated?

Mr. RANK. ACP funds have been targeted in some areas for 3 years. Several problems are nearing completion in that most practices being installed have lifespans of up to 10 years or more with proper maintenance. Targeting projects were approved on the basis that funding would only be provided for a maximum of 3 to 5 years. This policy permits the use of future ACP funds in new areas subject to the availability of funds for targeting.

Mr. WHITTEN. Mr. Smith.

WORLD COMMODITY PRICES

Mr. SMITH. Mr. Under Secretary, what countries can produce corn or sell corn for less than we can?

Mr. AMSTUTZ. You will note that I referred to "some commodities" and mentioned rice and wheat.

Mr. SMITH. Not corn or soybeans?

Mr. AMSTUTZ. No. On occasion Brazilian soybeans are quite competitive.

Mr. SMITH. But there is government interference with that market down there when they can do that, isn't that right?

Mr. AMSTUTZ. We surely think so, certainly when they are exporting poultry, meat or soybean meal.

Mr. SMITH. Well, by government edict tell them you can't get more than a certain amount and the result is that a lot of that acreage immediately turns into grass and into beef production temporarily.

ACREAGE CONSERVATION RESERVE

I think the new acreage conservation reserve is a good program and it is the cheapest way to get some of this acreage out of production. It requires that land has been used to grow a crop two years out of the last three and that it be erodable land and that the owner of the land agreed to keep it out of production for five years.

Now, with all of those assurances that you are not getting any land you shouldn't be getting, why do we need to limit that program to land that qualifies for diverted acres in 1984?

Mr. RANK. Congressman, what we are trying to do is develop some ideas and pilots to see whether or not farmers, by receiving higher cost-share rates, can put land into conservation use for longer periods, whether this would get more land into these longterm practices. It is pilot demonstration projects we are working

on.

We have designated $20 million in Agricultural Conservation Program funds to carry out this project. In developing the 1985

farm bill, I am sure there will be commodity program provisions tied to conservation.

Mr. SMITH. The amount of money we are talking about is so small compared to farm programs, it just seems to me that putting that limitation on is unnecessary.

Now, we have got a lot of very erodable land that came out in the last five years as people went out of the cattle business, and they usually don't have much of a base. They shouldn't have any base, but it just seems to me, and I asked the question the other day and I understood you were going to examine it, but it just seems to me that maybe within some limitation that you shouldn't limit the number of acres that we can put in to the number of acres that happens to be 10 percent of their base.

Is there a good reason for limiting it like that?

Mr. RANK. Well, the annual payment limitation, the maximum a person can receive, is $3,500. That wouldn't cover too many acres, so that is a limit in itself.

Mr. SMITH. But in many, many cases 90 percent of 10 percent of their base is under $3,500. You are talking about fertilizer, seed and lime. Ninety percent of those three costs. Nothing for land costs and nothing for cover crop and nothing for all those things, so it comes to a lot more acres than 10 percent of their base on smaller farms.

Mr. RANK. A farmer who doesn't use the $3,500 maximum on reserve acres can go into the regular ACP, so that we could have two types of ACP practices on the same farm as long as the total costshare payment doesn't exceed $3,500.

Mr. SMITH. It just seems to me this is a good program. I don't see why you should put that limitation on it. Are you still looking at that?

Mr. RANK. Well, we have announced the program, and we don't believe we should change it this year.

Mr. SMITH. I understood the Secretary to say the other day that you are going to look at that to see whether that limitation is nec

essary.

Mr. AMSTUTZ. The key here is that the Acreage Conservation Reserve is a pilot project for this year. Certainly it is our hope that we will find it successful and will be able to expand it. We surely will take a look at this matter for subsequent programs. It would be wrong for us to say we could change it this year.

Mr. SMITH. You are having trouble getting a big enough sign-up this year, and this is just one more thing that might encourage a bigger sign-up between now and March 16th.

FARMER-OWNED RESERVE

With regard to reserves four and five, do you have any idea or any estimate on when they will be open again?

Mr. RANK. That depends strictly on the market.

Mr. SMITH. The supply and demand situation appears that they will have to be open.

Mr. AMSTUTZ. My guess is they will, and Mrs. Smith addressed this question earlier when she pointed out that these trigger prices can be disruptive on the market. We are sensitive to that too. This

is one reason we have never considered calling a reserve because we really did not want to interfere with the market process. We thought that would be damaging to farmers, and so it is up to the market. But I agree that it appears the reserves will have to open. Mr. SMITH. There is just no way that this supply could stretch out for this year with the rationing that has been done so far? Mr. AMSTUTZ. My judgment agrees with yours.

FUTURES MARKET

Mr. SMITH. And that leads me to this. Everybody is wondering what in the world is happening in the futures market. I am one who thinks there is a lot to be desired with the way the cattle futures work. It has been proven the last two years that there are some things going there. I believe the volume is so great in grains that it would be very difficult to manipulate those markets.

However, it is just hard to explain how you can be in a market year where there was a severe drought and yet, for the first time I can ever remember, the price of soybeans in the contract a year from now is as high or higher than it is now. How can that be? Mr. AMSTUTZ. Well, it relates to current demand. If you will recall, I said in response to a question from someone else on the Committee that I am personally glad I am not trading this year because I would have lost a lot of money. My own judgment was that we would have prices considerably higher than we do now, and the only reason I know that we don't is that demand just hasn't been as brisk as I thought it would be back at the time of the drought and immediately thereafter.

Mr. SMITH. But that means that in spite of the fact this is a market year that involved a big drought and that next year there is no limit on what we think people could produce, do you think prices are going to be higher next year? That just defies all logic, doesn't it?

Mr. AMSTUTZ. I hesitate to say this, but I will. The book says that futures prices are really not forecasted values but rather they are just stating values of products that are being bought and sold at those particular times in history.

So the deferred delivery month prices for soybeans and corn really are not a forecast of what these commodities will be worth, but it is certainly what somebody is willing to pay to secure price insurance.

Mr. SMITH. Well, how closely are you cooperating with the CFTC? I know you did have a half a manyear allotted within CFTC so that you can exchange information.

Mr. AMSTUTZ. We certainly exchange information with CFTC. Obviously, the entire regulation of the futures market comes under their agency.

Mr. SMITH. I know, but under the law, they are to give you all the information you want on a daily basis. Are you really taking advantage of that?

Mr. AMSTUTZ. Oh, yes. And in all of our price projections and price reportings, we use price information that we get from them. Mr. SMITH. Well, there is this possibility and the open interest doesn't always indicate that this is happening, but, you know, we