and then enter into agreements with cooperative associations or corporations created by them, or with the processors engaged in handling this commodity, or for a period of two years, in the event there are no cooperative associations competent to do this work, with any other agency it may select, in the withholding or removing and providing for the storage, sale, or other disposition of such surpluses as are handled under those agreements.

The equalization charge provided for in bill now before the House committee is provided there to be collected at the processing point as the commodity moves from the farm to the consumer. That is because that is the narrowest point in the movement to market. That is one of the things that we are discussing to-day with the representatives of the cotton associations. It may be that some modification in that section will be recommended when the measure comes before the Senate committee, in order to provide some option with the board as to where the equalization charge is collected. What we want to get at is the most practicable point for its collection. In your bill, Senator McNary, the provision was that the fee should be collected in the first sale in commerce of these commodities. It may be that the cotton men would like to recommend that that charge be collected at the ginning point, or it may be at the first movement in commerce, or it might be at the processing point. One reason why we were not able this morning to come before the committee with a completed draft and with a comprehensive statement, which will be placed here later embodying the principles and the purposes and the workings of this measure, is that we want to be able to be in complete agreement with the cotton people on that point. Senator McNARY. Merely for the purposes of the record-because I have given your bill and the statement I received from Mr. Peek some study-I think you ought to amplify those remarks and state what you mean by processing. What is the processing point? Take hogs, for instance. What quantity does reach the point of processing?

Mr. DAVIS. I have not with me, Senator McNary, the exact figures that I would like to put in the record in answer to a question of that sort. I would like to be able to put them in, though, to-morrow morning.

Senator MCNARY. That is, with regard to the quantity, now, or the hog population, to use your rather new term, that are processed. What do you mean by the processing of a hog?

Mr. DAVIS. Slaughter for market is the definition used for processing in the bill.

Senator MCNARY. That is, the killing of the hog on the farm? Is that processing?

Mr. DAVIS. If a man killed a hog on the farm, and then marketed the product, that would be processing under the definition of the bill. Senator MCNARY. Whether it went to a cooperative organization, a packer, or the town butcher?

Mr. DAVIS. In any event, the definition is "slaughter for market." Naturally you would get the great bulk of it at the packers. That is the processing point where you would get the great bulk of it. Then you would pass out into what you might call the smaller packers, who do a relatively small amount of business; and then there is a very small fringe of the kind you mention, where a man might slaughter,

used industrially and commercially, which gets into the primary market and is exported, seldom reaches 10 per cent of the crop produced. That was in the statement of the Department of Agriculture. last week.

It is felt that the first thing to be done in the corn situation is to get at the livestock problem. It should be borne in mind, too, that under this bill the board is instructed to study the problems of surplus or excess supply in other commodities, in addition to those four basic commodities, and to recommend to Congress its findings and recommendations through the proper channels whenever it has worked out a practicable plan dealing with other commodities.

Senator MCNARY. You have a provision here for the relief of the corn emergency.

Mr. DAVIS. That is a part of the House bill.

Senator MCNARY. That is a part of the proposed legislation.

Mr. DAVIS. The reason that is carried there is that after you have stabilized your livestock population, then if you are going to guard against a condition that forces a reduction of herds, you have to insure a corn carry-over from years of high production against the exigencies of the short crop. Nineteen hundred and twenty-five was a year of high production in relation to livestock. Therefore, if the board were in operation to-day, under that emergency section it would go out and select corn and buy corn to start this carry-over program. What happened to us in 1924 was that we had a short corn crop and a large livestock population, and we did not have a sufficient carryover to fill in the valley there of corn supply. The result was that corn rose in price and people got rid of their hogs, which put the hog price down, and we reduced our hog population materially. So, to stabilize Corn Belt agriculture, if you stabilize pork prices and livestock population, and then insure a corn carry-over, you will go a long way toward doing it, in the judgment of men who have given a great deal of study to that problem.

On the other hand, it is recognized that this board should be studying other surplus problems, and the men who are presenting this, as a result of earnest study on their part, recognize that subsequent amendments will be desirable and necessary.

It has been called to our attention that the Federal reserve act, passed in 1913, has been amended by 16 separate acts of Congress affecting a total of 39 sections, so that the total space occupied by amendments to the Federal reserve act is now almost as large as the space occupied by the original act itself, and it is not supposed for a moment that this bill will not have to be changed if enacted to include other commodities as fast as the opportunity might work out to recommend a practicable method to do it.

It is provided in the measure that the operations of the board shall commence with any one of these four commodities when two conditions are found to obtain: First, that there is or may be an excess supply over current requirements; and second, that a substantial number of the organizations of the producers are in favor of such operation. In that event it is provided that the board shall determine upon and announce its period of operation and determine upon the amount of the equalization charge necessary to build up and maintain the equalization fund for that commodity, prescribed the rules and regulations for the collection of that equalization charge,

and then enter into agreements with cooperative associations or corporations created by them, or with the processors engaged in handling this commodity, or for a period of two years, in the event there are no cooperative associations competent to do this work, with any other agency it may select, in the withholding or removing and providing for the storage, sale, or other disposition of such surpluses as are handled under those agreements.

The equalization charge provided for in bill now before the House committee is provided there to be collected at the processing point as the commodity moves from the farm to the consumer. That is because that is the narrowest point in the movement to market. That is one of the things that we are discussing to-day with the representatives of the cotton associations. It may be that some modification in that section will be recommended when the measure comes before the Senate committee, in order to provide some option with the board as to where the equalization charge is collected. What we want to get at is the most practicable point for its collection. In your bill, Senator McNary, the provision was that the fee should be collected in the first sale in commerce of these commodities. It may be that the cotton men would like to recommend that that charge be collected at the ginning point, or it may be at the first movement in commerce, or it might be at the processing point. One reason why we were not able this morning to come before the committee with a completed draft and with a comprehensive statement, which will be placed here later embodying the principles and the purposes and the workings of this measure, is that we want to be able to be in complete agreement with the cotton people on that point. Senator MCNARY. Merely for the purposes of the record-because I have given your bill and the statement I received from Mr. Peek some study-I think you ought to amplify those remarks and state what you mean by processing. What is the processing point? Take hogs, for instance. What quantity does reach the point of processing?

Mr. DAVIS. I have not with me, Senator McNary, the exact figures that I would like to put in the record in answer to a question of that sort. I would like to be able to put them in, though, to-morrow morning.

Senator MCNARY. That is, with regard to the quantity, now, or the hog population, to use your rather new term, that are processed. What do you mean by the processing of a hog?

Mr. DAVIS. Slaughter for market is the definition used for processing in the bill.

Senator MCNARY. That is, the killing of the hog on the farm? Is that processing?

Mr. DAVIS. If a man killed a hog on the farm, and then marketed the product, that would be processing under the definition of the bill. Senator McNARY. Whether it went to a cooperative organization, a packer, or the town butcher?

Mr. DAVIS. In any event, the definition is "slaughter for market.” Naturally you would get the great bulk of it at the packers. That is the processing point where you would get the great bulk of it. Then you would pass out into what you might call the smaller packers, who do a relatively small amount of business; and then there is a very small fringe of the kind you mention, where a man might slaughter,

and go on and sell it. It is a good deal the same problem that is involved in your measure, Senator.

Senator MCNARY. Does a hog that is slaughtered on the farm, and goes to the country butcher or the small butcher in the city, or to a neighbor, or group of neighbors, come under the term "processing"?

Mr. DAVIS. In the case of cattle and swine the term "processing" means slaughter for market. That is the definition used, and I do not think you can draw a line there between that and the man engaged in slaughter for commercial purposes.

The CHAIRMAN. That would be a very intricate matter to control that all over the United States.

Mr. DAVIS. There is a relatively small percentage engaged in that business.

The CHAIRMAN. I know it is small, but in nearly every town there is a butcher who buys hogs and cattle in the community and kills them and sells them at retail. They would all have to be included. Mr. DAVIS. They are included under that definition.

Senator MCNARY. The question never embarrassed me at all. I can see the light beyond the first mist, but if you recall, when the bill reached the House two or three years ago, some Members of the House attempted to show the intricacies of the bill as applied to hogs and no other commodity. I am wondering if this is a simplification of the old bill.

Mr. DAVIS. I think it is a simplification to this extent, Senator, that since you provide for its collection at the processing point, or, we will say, the slaughtering point, rather than the first sale in commerce, you would get the largest bulk of it at central markets, and so it simplifies the collection to that extent.

The CHAIRMAN. Suppose a farmer kills a hog, as he does in a good many places, and makes it into sausage, and smokes the hams and shoulders and bacon, and sells it around or sends it through the mail, as some of them do. They would be included here?

Mr. DAVIS. They are included.

The CHAIRMAN. Do you not think they represent such a small part of it that the definition ought to be modified so as to exclude some people of that kind?

Mr. DAVIS. That may bring up a question where we ought to consult the drafting service.

The CHAIRMAN. I was only interested to know what you want to do as to the language that should be used.

Mr. DAVIS. Practically there is a great deal of that in that branch that would escape the collection. I do not think there is any question about that.

The CHAIRMAN. I think it would. It would not pay to try to collect it; but, at the same time, those people would be violating the law.

Mr. DAVIS. Yes. You would collect from every man who was important enough in such merchandising as that to attract the attention of a competitor who was paying the tax and who would naturally see to it that this man paid it.

The CHAIRMAN. He would not want to go into the business knowing that he was violating the law. For instance, I do not happen to know of anyone now, but a year or so ago I knew of a farmer

down in Virginia with whom I dealt for two years. I had a regular standing order with him. Once a week he was to send me 2 pounds of sausage. Whenever he had something extra on hand he sent out circular letters, and I always got one. I presume a good many people bought meat, such as hams and bacon, and he sent them by parcel post. I do not know how extensive his business was, but I imagine it was quite extensive. At the same time, in a scheme of this kind it costs more to go out and collect a fee from a man like that then it would to let him go. I presume no one would follow him up, but he would be violating the law if this provision were not changed.

Mr. DAVIS. The volume of that would probably be simply a fraction of 1 per cent of the total.

Senator CAPPER. Mr. Davis, in the last few days I have had quite a number of letters from Kansas millers who seem to be greatly disturbed about this equalization fee. Their communications indicate that already there is an organized movement among the millers of the West to defeat this legislation. I am wondering whether it will be possible to perfect this plan so that the miller will be satisfied that he is not the man who is going to carry the burden of this program.

Mr. DAVIS. I believe that a careful study of the measure, Senator Capper, would show no disadvantage to the American miller.

The CHAIRMAN. I do not believe it would, but, as I look at it, there is no way to leave the miller out if you are going to collect that from the processor. Every miller would have to be included. It would not be very much trouble. There are not so many millers as there are little retail butchers.

Mr. DAVIS. It would not place them at any disadvantage at all. The price that they pay would have to take into account the amount of the equalization charge that they expect to transmit.

The CHAIRMAN. And they would know in advance just what that was, so that they would not be going blindly.

Mr. DAVIS. Not at all. They would not have to absorb it, and they would not absorb it, Senator. Since it is all there, it simply widens the charge at the processing point by the amount of the equalization charge, but that equalization charge is used to benefit the entire wheat industry, so that there would be no objection on the part of the producer, who, in the case of wheat, would probably be the one who would pay the charge. There would be no reason for objection on his part, and I can not conceive of any reason why the millers should object to that. In the case of the miller who is operating for export, the equalization charge which is provided in the bill would be refunded on export, so that he would not be at any exporting disadvantage as compared with his foreign competitors in the contracts covering export movement of flour. This bill is so drawn that it will encourage the movement of wheat abroad in the form of the finished commodity, because we want to employ the capacity of the mills and the mill labor, and keep the by-products in this country. The miller would be compensated by the difference between the domestic price level at which he purchased his wheat and the prevailing world price at which he sold it, so that the miller would not be at any disadvantage whatever, and I believe that the thing to do, from the standpoint of the millers, would be to try to