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MONDAY, MARCH 29, 1926
UNITED STATES SENATE,
Washington, D. C. The committee met, pursuant to call, at 10.30 o'clock a. m., in room 326, Senate Office Building, Senator George W. Norris presiding.
Present: Senators Norris (chairman), McNary, Capper, Keyes, Gooding, Smith, Ransdell, Heflin, and Ferris.
The CHAIRMAN. The committee will come to order. Gentlemen, I called this meeting for the purpose of hearing the representatives of the so-called Des Moines conference on the general farm relief situation. We have for consideration this morning H. R. 7893; S. 3446, introduced by Senator Brookhart; S. 3509, introduced by Senator Robinson; S. 2918, introduced by Senator Curtis; S. 2917, introduced by Senator Norbeck; S. 2541, introduced by Senator Frazier; S. 2289, introduced by Senator McKinley; and S. 973, introduced by Senator Shipstead. There has been introduced in the House, but not in the Senate, another bill prepared by the committee from the Des Moines conference. This committee decided that for the time at least it preferred that it be not introduced in the Senate but be used on the hearings, and probably proposed as an amendment to the House bill, the first one named in this list. It is to hear those gentlemen that I called this meeting. Mr. Davis, I understand, is here to be heard on the general subject of farm relief.
STATEMENT OF CHESTER C. DAVIS, REPRESENTING GEORGE N. PEEK, CHAIRMAN EXECUTIVE COMMITTEE OF 22, OF THE NORTH CENTRAL STATES AGRICULTURAL CONFERENCE
The CHAIRMAN. Mr. Davis, just tell us first who you are, and who you represent.
Mr. Davis. Mr. Chairman and gentlemen, I am here representing Mr. George N. Peek, chairman of the executive committee of 22, of the North Central States Agricultural Conference, which was formed at Des Moines; also the several farm organizations, national and interstate and State, which have generally agreed on certain fundamental principles of legislation which they seek to have enacted as a part of the long-time farm policy in the United States. These organizations have been in Washington, through their representatives, for some time. If you will, let me explain the situation over in the House, Senator. When we appeared before the House committee with
a statement outlining these principles, the gentlemen of the House committee asked us to take advantage of the assistance of their drafting service and embody those principles into a draft of the measure which they could consider. Mr. Frank Evans, secretary of the American Farm Bureau Federation, and I, were asked to work with the drafting counsel. Mr. Evans is not here. That, I think, explains the reason why I was asked to appear just to discuss the principles that were embodied in that House draft, which will be before this committee as soon as the sections affecting cotton have been considered by a meeting of cotton growers and their representatives which is taking place in Washington to-day.
The CHAIRMAN. In other words, you think possibly there may be some amendments to that bill suggested from this conference with the cotton men.
Mr. Davis. Amendments, Senator, affecting details of operation, not changing the general principles of the legislation which is being proposed. This proposed measure is really a product of the working together since the adjournment of the last session of Congress of men experienced in commodity cooperative associations handling these basic farm commodities, and the farm organizations which, for three or four years, have been working on the problem of surplus-control legislation. So, the measure which these farm organizations generally are supporting is a combination of the two views of the commodity cooperative associations and those who have been working on surpluscontrol legislation.
The central principle of this legislation is to enable the producers of the principal cash crops in the United States to adjust their supply to the demand by managing the surplus, which can not be controlled by regulating acreages.
This task of controlling or managing such surpluses as come, regardless of farmers' plans, must be handled by each commodity group as a whole, if violent and destructive fluctuations in the price level are to be avoided.
The object, therefore, is to stabilize the prices of these fundamental farm products, a condition which would be to the best interests of the producers and the consumers, as well as the processors of farm crops.
The fundamental difference between the manufacturer and the farmer, I think, is apparent to all the members of the committee, in this problem of adjusting supply to demand. I should like to give just two or three illustrations that will not take long to show that by regulating acreage you can not accurately adjust supply to what the prospective demand is, as a manufacturer can do.
In 1920 the corn acreage in the United States, in round numbers, was 101,000,000 acres, and produced at the rate of 312 bushels per acre.
In 1924 the yield was 22.9 bushels per acre. On the same acreage basis for those two years the variation in total yield due to weather and other factors the farmer can not control was 858,000,000 bushels.
The average United States cotton acreage for the years 1921 to 1924 was 35,000,000 acres. The 1921 yield was 124.5 pounds per acre; in 1924, 156.8 pounds. The cotton yield variation in those years due to uncontrollable influences amounted to two and a quarter million bales on the average acreage.
Taking wheat for the third illustration, 52,000,000 acres which produced on a average 1644 bushels per acre, a total of 862,627,000 bushels in 1924, yielded only 12.6 bushels per acre, a total of 669,365,000 bushels in 1925. The difference, which no degree of foresight or organization on the part of farmers could have prevented, was nearly 200,000,000 bushels of wheat. The problem, therefore, from the standpoint of the farm organizations, is to bring agriculture into the position where it can manage the surpluses and adjust supply to demand in the several markets which these commodities reach, since they can not control these surpluses accurately in the production stage.
Senator GOODING. Mr. Chairman, I merely ask for information, whether the witness has the crop production of Canada and the world production of wheat. We have to go on the markets of the world with wheat, and all of these should go in together, it seems to me. If he has not those figures here, they should be put in the record.
Mr. Davis. I will be glad to put them in, Senator; I can get them. Senator GOODING. That is the significant thing, to my mind.
Mr. Davis. The reason why control of surplus must be considered in
any farm legislation that really reaches the difficulty is that the farmers' troubles have been due to lack of income. I do not imagine, Mr. Chairman, that you care to have me go into the agricultural situation. That has all been brought before this committee many times and you are as familiar with that as any witnesses who could come before you, but in attempts to improve farm income, there are only two or three ways that I know of whereby you can reach the farm situation. One is by reducing production costs; another, by cutting down the distributing costs; and third, by increasing the farm price and stabilizing it. The attempts that have been made in the last direction, by increasing tariffs and by cooperative organization have been defeated by this item of the production of supplies in excess of what the market is ready to absorb at any particular time. In the case of the tariff duties that have been enacted on wheat, for illustration, it is quite apparent that our normal production of wheat in excess of the domestic market's consumption means that the sale of the surplus at competitive prices abroad fixes, generally, the level of prices at which the domestic crop is consumed in this country,
The same thing is true with respect to other commodities for which tariff duties have been enacted, but of which a surplus is produced. In the case of cotton the situation is different, but there still is the problem of controlling variation of production if we are going to adjust supply to demand accurately.
The American cotton supply is the dominating factor in the world price of cotton, and yet there has been no
way devised by which control of an excess supply could be effected in such a way that we could regulate or control the movement to the markets of the world of cotton in such a way as to stabilize the world cotton prices. Perhaps it would be well to consider the limitations on voluntary cooperative effort.
Senator McNARY. Pardon me, before we leave the other subject I read your explanation. How do you propose to handle the cotton situation?
Mr. Davis. The cotton men themselves, Senator McNary, will be before the committee a little later. I would be glad to sketch our idea of that.
Senator McNARY. That is what I want.
Senator McNARY. What is your judgment, however deficient you may be
in your description ? Mr. Davis. The measure which we are supporting and which will be brought before you provides for the creation of equalization funds for each of the four principal cash commodities in the United Stateswheat, cotton, hogs, and cattle. Those are the principal cash commodities in the United States.
If we just consider cotton, the equalization fund would be supported by an equalization charge on the cotton produced in the United States. That fund would be used under the direction of the Federal farm board provided in the measure to support the effort of the cooperative associations handling cotton to control the carry-over or excess supplies at any particular time.
I have shown the variation in yield that results from weather conditions. A practical way in which that might be handled with cotton, which is the way that commends itself to the cotton cooperatives, is to permit them to take from the market, either by withholding the supplies which they themselves control through their membership or by removing from the market by purchase such quantities as are necessary to prevent an undue supply coming on and bringing about violent fluctuations; to borrow from the ordinary commercial channels on the amounts removed or withheld up to the usual banking limit, 75 per cent, say, and then go to the equalization fund for the remaining 25 per cent, which would enable them to settle in full with their members, or settle in full with the sellers of the cotton, in case they buy it to remove it from the market, at the time of its removal.
The carry-over then would be in their control. As it moved out into trade in a subsequent year, or the year after, whenever it was necessary, the loss, if the price at which it was sold was lower than the price at which it was taken from the market, would be absorbed in this equalization fund which the entire cotton industry has contributed to or provided.
Senator McNary. Of course, your mechanics are quite similar to those which have been heretofore prescribed in other proposed legislative measures.
Mr. DAVIS. Yes.
Senator McNary. I am not discussing that feature. I am quite as familiar with that as you are. Do you think that cotton can be handled with the same success, perhaps, as you look upon wheat, hogs, and other staple agricultural commodities?
Mr. Davis. In many ways I think the cotton problem is simpler than the problem with respect to some of the other commodities.
Senator McNary. The reason I ask is that when a measure was studied with respect to this principle some years ago it was thought that it was very difficult to satisfy the cotton growers of the South that any plan for handling the surplus by withdrawing from the market the quantity which was depressing the market price would be successful. I am curious to know, in this modified scheme, if you have more nearly reached a solution of the cotton problem.
Mr. Davis. I believe the cotton growers themselves feel that that is true, Senator, although, as you say, the mechanics of operation do not materially differ from the mechanics of operation then.