Mr. GRAY. I think the revolving fund is large enough to start with.

The CHAIRMAN. It is named in the bill at $250,000,000.

Mr. GRAY. Yes. One great defect in the cooperative marketing activities down to date has been, as everybody generally knows, that the cooperative organizations have not had the financial resources available properly to swing the big transactions which their commodities necessitate. In other words, we have the warehousing act. Under the Federal warehousing act, good as it is, the cooperative organizations can not secure enough money to enable them to go ahead as it might be desired they should do. We have the intermediate credit act which is functioning fairly well. We have the hypothecation of association notes, and in many cases the directors have hypothecated their own personal notes in behalf of their own organization. We have all of these credit instrumentalities and they are all working more or less efficiently.

In addition to these presently existing credit machineries we need additional funds, so that the cooperative organizations which do the work covered in the bill, can carry on the big transactions which this Federal Farm Board of necessity will have to grapple with in making its agreements with cooperative associations. That is the purpose of the revolving fund.

Senator SACKETT. If the bill is passed, what in your judgment becomes of the effect upon cooperative organizations as to their growth? Will the farmers continue to make their contracts annually, or will they gradually withdraw from the cooperatives and rely upon the central board?

Mr. GRAY. My impression is that it will be a great stimulus to cooperative marketing because those of us who have been in that activity many years have come to realize that one of the big deterrents to successful cooperative marketing is the fact that the nonmemberand there are many of them--gets practically the same benefit from the cooperative organizations as does the member himself. This is the biggest deterrent, perhaps, to cooperative marketing that we have had to face in the last 10 years.

This bill reverses the situation and requires by the assessment of this equalization fee and the building of these equalization funds from all producers inside and outside of the organization the development of a situation that will so stimulate cooperative organizations that there will be no incentive to stay out as there has been in the past. In years past a man could stay out of the cooperative organization and get practically as much and sometimes more benefit than the member who came in, because the man who stayed out would avoid the payment of fees.

Senator SACKETT. What I was wondering was whether there would be any place particularly for the cooperatives when this board got to functioning and levying its equalization fee to handle the surplus. Would there be any particular reason for the cooperative then outside of that purpose?

The CHAIRMAN. I think the theory of the bill is, at least, that they will be aided in the control of the cooperative organization.

Mr. GRAY. The bill is constructed, Mr. Chairman and members of the committee, so far as its operation is concerned, upon the one idea that the cooperatives alone will be the agencies through which the

mechanism operates after an initial period of two years. In other words, following your question to its ultimate conclusion, the result would be that if the Federal Farm Board does not do its business through the cooperative organizations with cotton, wheat, corn, and the like, then it can not do its business at all, because the bill provides that these cooperative organizations are the machinery through which the contracts and agreements are made. The board itself does not handle the commodities. The Federal Farm Board which enters into the agreements for the handling of the commodities by the cooperative organizations does not handle the commodities themselves. The cooperative organizations which I have in mind are the American Cotton Association for cotton, the National Livestock Producers Association perhaps for livestock, the various wheat pools for wheat, and so on down the line. It will be a stimulus to cooperative marketing such as we perhaps never have had, rather than a deterrent.

Senator SACKETT. There is one other question that has apparently occurred to one or two who have spoken about it, but I have not yet heard it discussed. In the matter of hog products, for instance, suppose there is a surplus of part of the hog and not a surplus of another part of the hog, that is, a part of it can be handled and a part of it does not require any handling. That is perhaps putting the proposition very crudely. It is conceivable that there will be a surplus of lard, for instance, but of other hog products there will be no surplus. How can you work out an equalization fee on that part of the proposition?

Mr. GRAY. The case you have suggested of lard and perhaps all of the by-products of the hog is one that gives the farmer more trouble in getting rid of than any other portion of the carcass. If and when the equalization period is declared on hog products, pork and the like, and there is trouble in disposing of lard by-product, the equalization fee and fund can be used in developing a better sale for that particular product in foreign countries, for instance, Germany, which has always been a great consumer of lard products. The equalization fund has been built up on pork by an assessment of so much per pound of all the pork that goes through the slaughter houses. Let us imagine that they get rid of the lard in Germany, for instance, and that that portion of the equalization fund were to be used for such a particular purpose.

Senator SACKETT. They will charge the equalization fund on the basis of the hog?

Mr. GRAY. The equalization fund will be charged on the entire carcass of so much per pound, and a portion of that will be used in getting rid of the excess lard. It was brought out in the House hearings in that particular connection you also have a relation with the corn surplus, because if you can get rid of more lard you could get rid of more corn. The more lard you produce the more corn you consume. In that indirect way you have a method of getting rid of the surplus of corn.

Taking the particular example of lard, I would say that I believe the Federal Farm Board will find the question very imminently before it almost as soon as it begins to operate. The board will have to take up the question of getting rid of the lard. We have vegetable competition in the nature of oils and fats which are serious

competitors with the hog and the lard. The question of the disposition of the lard is becoming more and more troublesome, but it can be handled by use of the equalization fund in getting rid of it.

The CHAIRMAN. It would sell the lard for what it could get for it on the market and pay the loss out of the equalization fund.

Senator SACKETT. I have sort of a hazy idea in my mind, not being very familiar with it, that some of the pork yields a great deal more lard than other, and there might be a difficulty in arriving at a proper basis in that matter as far as the equalization fee goes.

Mr. GRAY. Every man who sells hogs, if they go through the slaughter house, will pay his equalization fee whenever the necessity for it is declared. The way that fee is used to get rid of the spare ribs or lard or the jelly products which go into Jello and such things is for the board to determine, and the man, whoever he is, who sells. hogs, as I do from my Missouri farm, will not know whether his contribution to the equalization fund is used for one purpose or another.

Senator SACKETT. It would be to his benefit as well as to the benefit of somebody else?

Mr. GRAY. That is a matter to be determined in the wisdom of the board. If they get rid of the lard, it is a beneficial thing for the entire pork industry. The fact that this bill is based on cooperative marketing and revolves around surplus disposition through the cooperative organization, the fact that we have a revolving fund which will enable credit and finances in such degree that the cooperatives never yet have enjoyed, although we have many other methods of credit, and the fact that the surplus is recognized as being a deterrent and a bearish influence on the market, will be taken into consideration, I know, in the minds of the committee in finally making up the report as to whether the bill is a good one or not. The three main things in the bill, to my mind, and I believe generally speaking, are that it is based on cooperative marketing and stimulates such marketing rather than hinders it; that it does get rid of the surplus in a way that will not allow that surplus to be a deterrent on the market values of the farm products generally; and, third, it creates a revolving fund which will enable the board to have the necessary financial underwriting to do the things which it is called upon to do.

The CHAIRMAN. Is that revolving fund ever to be returned to the Government?

Mr. GRAY. In giving a definition of a revolving fund it may be stated in this way, that a revolving fund is an appropriation from the Federal Treasury for a specific use, to be used for and devoted to that purpose so long as the act under which it is operative is in existence. Whenever the act is repealed the fund goes back to the Treasury. I would answer your question specifically by saying that the revolving fund will be used perpetually, in keeping with the provisions of the bill, until the necessity for this kind of legislation has passed and the act is repealed. Then the revolving fund would revert to the Federal Treasury. Until that happens it is a fund for the use of the Federal Farm Board.

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Mr. Chairman, I do not desire to go to any further length in the proposition except to repeat that the American Farm Bureau Federation is in favor of the legislation and in favor of the bill, and hopes the committee can make a favorable report upon it.

(The bill under consideration by the committee is as follows:)

A BILL To establish a Federal Farm Board to aid in the orderly marketing and in the control and disposition of the surpluses of agricultural commodities, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

DECLARATION OF POLICY

SECTION 1. It is hereby declared to be the policy of Congress to enable producers of agricultural commodities to control a supply of such commodities sufficient to stabilize their markets against undue and excessive fluctuations and to, distribute the benefits and costs thereof to all producers of such commodities; to minimize speculation and waste in marketing; to encourage the organization of producers of agricultural commodities into cooperative associations; to protect domestic markets against world prices; and to provide for the control and disposition of the surpluses of agricultural commodities, for the purpose of promoting the orderly marketing of agricultural commodities in interstate and foreign commerce.

FEDERAL FARM ADVISORY COUNCIL

SEC. 2. (a) There is hereby established a Federal farm advisory council (hereinafter referred to as the "council"), to consist of five members from each of the twelve Federal land bank districts. Four of the members of the council from each district shall be elected by the bona fide farm organizations and cooperative associations in such district at a convention of such organizations and associations, to be held at the office of the Federal land bank in such district or at such other place, in the city where such Federal land bank is located, to which the convention may adjourn. One of the members of the council from each district shall be appointed by the Secretary of Agriculture.

(b) The Secretary of Agriculture shall annually, with the advice of such farm organizations and cooperative associations as he considers to be representative of agriculture, (1) fix the date on which such conventions shall be held, (2) designate the farm organizations and cooperative associations in each district eligible to participate in such conventions, and (3) designate the number of representatives and the number of votes to which each such organization or association shall be entitled. The Secretary of Agriculture shall mail, at least 15 days prior to the date on which a convention is to be held, to each organization and association eligible to participate in such convention, notice of the date and place of such convention. The conventions first held after the date of the passage of this act shall be held within 45 days after such date. The Secretary of Agriculture shall prescribe uniform regulations for the procedure at such conventions and for the proper certification of election of the members of the council. (c) The term of office of each member first elected or appointed shall expire one year from the date of his election or appointment, and the term of office of all successors shall expire one year from the date of the expiration of the preceding term. Any member in office at the expiration of the term for which he was elected or appointed may continue in office until his successor takes office.

(d) The members of the council shall serve without salary but may be paid by the Federal Farm Board (established in section 4 and hereinafter referred to as the "board") a per diem compensation not exceeding $25 for attending meetings of the council. Each member shall be paid by the board his necessary traveling expenses to and from the meetings of the council and his actual expenses while engaged upon the business of the council.

DUTIES OF COUNCIL

SEC. 3. (a) The council shall

(1) Meet and organize as soon as practicable after the passage of this act and select a chairman, secretary, and such other officers as it deems necessary.

(2) Nominate to the President three individuals from each of the twelve Federal land bank districts, eligible for appointment to the board.

(3) Meet thereafter at least twice in each year at a time and place designated by the Secretary of Agriculture; or upon a petition duly signed by a majority of the members of the council at a time and place designated therein.

(4) Nominate in accordance with the provisions of section 4 three individuals to fill any vacancy occurring in the board.

(5) Submit to the board such recommendations, and cooperate with the board in such manner, as the council deems most effective to carry out the purposes of this act.

(b) The individuals to be nominated to the President for appointment to the board from any district shall be selected by the members of the council from such district.

FEDERAL FARM BOARD

SEC. 4. (a) There is hereby established in the Department of Agriculture a board to be known as the Federal Farm Board and to be composed of twelve members, one from each of the twelve Federal land bank districts, appointed by the President, by and with the advice and consent of the Senate, from the individuals nominated by the council.

(b) The Secretary of Agriculture shall be an ex officio member of the board.

APPOINTMENT AND QUALIFICATION OF MEMBERS

SEC. 5. (a) The Terms of office of the appointed members first taking office after the enactment of this act shall expire, as designated by the President at the time of nomination, four at the end of the second year, four at the end of the fourth year, and four at the end of the sixth year, after the date of the passage of this act. Á successor to an appointed member shall be appointed by the President, by and with the advice and consent of the Senate, from the individuals nominated, as provided in subdivision (d) of this section, for a term expiring six years from the date of the expiration of the term for which his predecessor was appointed.

(b) Any person appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed, shall be appointed for the remainder of such term.

(c) Any member in office at the expiration of the term for which he was appointed may continue in office until his successor takes office.

(d) Whenever a vacancy occurs in the board or whenever, in the opinion of the chairman of the board, a vacancy will soon occur in the office of a member from any Federal land bank district, he shall notify the council thereof and request that the council nominate three individuals from such district qualified to fill such vacancy. Upon receipt of such nominations he shall submit their names to the President as the nominees for such vacancy.

(e) Vacancies in the board shall not impair the powers of the remaining members to execute the functions of the board, and a majority of the appointed members in office shall constitute a quorum for the transaction of the business of the board. The approval or authorization of any matter by the board shall require the affirmative vote of a majority of the appointed members in office.

(f) Each of the appointed members shall be a citizen of the United States, shall not actively engage in any other business, vocation, or employment than that of serving as a member of the board, and shall receive a salary of $10,000 a year, together with necessary traveling expenses and expenses incurred for subsistence, or per diem allowance in lieu thereof, while away from the principal office of the board on business required by this act.

SEC. 6. The board

GENERAL POWERS OF BOARD

(a) Shall annually designate an appointed member to act as chairman of the board.

(b) Shall maintain its principal office in the District of Columbia. (c) Shall have an official seal which shall be judicially noticed.

(d) Shall make an annual report to the Congress.

(e) May make such regulations as are necessary to execute the functions vested in it by this act.

(f) May (1) appoint and fix the salaries of such experts and, in accordance with the classification act of 1923 and subject to the provisions of the civil service laws, a secretary and such other officers and employees, and (2) make such expenditures (including expenditures for rent and personal services at the seat of government and elsewhere, for law books, periodicals, and books of reference, and for printing and binding), as may be necessary for the execution of the functions vested in the board. All expenditures of the board shall be allowed and paid upon the presentation of itemized vouchers therefor approved by the chairman.