AGRICULTURAL RELIEF

MONDAY, APRIL 12, 1926

UNITED STATES SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C.

The committee met, pursuant to adjournment at 10 o'clock a. m., in room 326, Senate Office Building, Senator George W. Norris presiding.

Present: Senators Norris (chairman), Keyes, Gooding, Ransdell, Kendrick, Heflin, Ferris, Smith, and Norbeck.

The CHAIRMAN. I have a letter from the committee of the Grain Exchange of Chicago in which they say they submit their views on behalf of several other organizations. I will ask the clerk to read the letter to the committee.

(The clerk, Mrs. Talbott, read the letter, as follows:)

Hon. GEORGE W. NORRIS,

CHICAGO, Ill., April 8, 1926.

Chairman Committee on Agriculture and Forestry,

United States Senate,

DEAR SIR: Word reaches us that, in connection with consideration by your Committee on Agriculture and Forestry of H. R. 7893, you are also considering the advisability of amending such bill by the addition of a draft of a bill submitted by the so-called Corn Belt Committee of Twenty-two or possibly of submitting such draft for H. R. 7893.

If our information is substantially correct, then the grain exchanges listed at the close of this letter wish to be on record as opposed to the amendment or substitution as above outlined.

While there seems to be no new principle involved in this bill "to aid in the orderly marketing and in the control and disposition of the surpluses of agricultural commodities, and for other purposes," as compared with legislation proposed two years ago, on which proposed legislation numerous members of the grain trade expressed themselves quite at length during the hearings before committees in both Houses of Congress, it seems wise, in order to avoid any possible misunderstanding of our attitude, to restate briefly a few objections to the plan proposed by the Corn Belt committee of 22.

1. The bill clearly provides for the establishment of a maximum price for basic agricultural commodities. Any maximum price so established, to meet the demands of the advocates of the proposed legislation, would become the minimum price, and the Government would thereby enter upon the most dangerous of experiments that of price fixing. To provide for the establishment of that principle by congressional action would, in our opinion, create a condition much more intolerable than the condition which it is proposed to improve. Price fixing is economically unsound and would destroy not only the business of those who assist the producer in marketing his products but the independence of the farmer as well.

2. The proposed legislation provides that, when the board (which is created by the bill) finds that there is or may be during the ensuing year a surplus above domestic requirements of wheat or corn, the board shall determine upon and may declare an operation period and prepare for its operations in respect of such basic agricultural commodities.

What board or committee that may be so constituted can look into the future and determine what the yield or surplus will be for any year? The fluctuations in the yield of wheat are sufficiently wide to make the proposed legislation unworkable. The United States production of wheat for several years was as follows:

What will be the production and the surplus of wheat during the present ensuing year? If Congress, assisted by all of its agencies, can not answer this question, how can it expect any board to answer it? This proposal is too speculative and uncertain to require serious consideration, and yet the legislation is bottomed upon this very uncertainty.

3. The avowed purpose of the proposed legislation is to create an artifically high level of domestic prices as compared with the world's level of prices. To substantially increase by artificial means the domestic prices will increase the cost of living very substantially. Every Member of Congress who votes for this proposal must realize that he is voting for a proposition to substantially increase the cost of living to every American, for the avowed purpose of the bill is to increase the domestic price of "basic agricultural commodities." If such prices are not increased the very objects of the bill must fail. There should be no misunderstanding the issue of or the consequences that will certainly follow the enactment of this class of legislation.

4. This export bounty on wheat would not only increase the cost of living, but would stimulate increased production of wheat. Increased production brought about by artificial stimulus in spite of any good advice given by the proposed Federal farm board would eventually increase rather than diminish the hardships of the farmer.

5. The proposed legislation would confer upon the cooperatives with whom the Federal farm board made export contracts, a complete monopoly; as no private exporter could compete with an agency whose losses were guaranteed by Government agency, and paid from funds appropriated in part by Congress.

6. While it is admitted by the proponents of this measure that its enactments into law would destroy future trading in agricultural commodities, it is maintained by them that those engaged in the merchandising of agricultural commodities would not be hampered in the transaction of their regular business. Such would be the case only if it is the intention of the Federal farm board to fix prices. (which we understand is denied by proponents of the measure) and to fix and guarantee the compensation of all those who assist in the marketing of these agricultural products. Otherwise ordinary supply and demand factors being artificially eliminated and in the absence of future trading there is no basis of values, and tolls which would necessarily be exacted by dealers or millers to insure them against wide fluctuations in price, would interfere with the purpose to be accomplished.

7. The bill, by its terms, gives the regular grain dealers two years in which to adjust themselves to entire elimination since, after two years, the Federal farm board could make contracts for handling basic agricultural commodities only with cooperative associations. As a result this would be practical confiscation of property, since cooperative associations would be in position to buy on their own terms the extensive facilities for handling and processing which have been built up by private enterprise under the present grain marketing system.

Such purchases, running into hundreds of millions of dollars, could be made only through the use of funds from the National Treasury. There is no escape from the conclusion that by the adoption of the proposed measure Congress would not only be putting the National Government into business but would be duplicating on a large scale the North Dakota experiment in State socialism.

8. The proposed measure makes no adequate provision for representation on the Federal farm board of the more than 70 per cent of the population of the United States not engaged in agriculture. Nor is there any other safeguard provided for the protection of the interests of the general public, especially in view of the exemptions already provided by Federal legislation for organizations of agricultural producers.

9. Legislation enacted by Congress during the past few years, dealing with grain marketing, has had as one of its main objects the prevention of manipulation of prices. This proposed legislation is designed to legalize such manipulation by a Federal board nominally controlled by a very small propotion of an important industrial class.

10. The opportunities given, by the terms of this proposed measure, for political control of the Federal farm board and for abuse of the powers of the board for political purposes, are too patent to need more than mention.

As stated in the early portion of this communication, the grain trade is already on record, in the hearings on the McNary-Haugen bill, with respect to the principles here involved and we submit this statement on behalf of those we represent to save further time of your committee. If, however, it is your desire that representatives personally appear to further discuss the measure recently submitted, we shall be glad to meet your wishes in this respect. Respectfully submitted.

GRAIN EXCHANGE COMMITTEE, By C. W. LONSDALE, Vice Chairman. L. F. GATES, Secretary.

Submitted on behalf of: Minneapolis Chamber of Commerce; Kansas City Board of Trade; Chicago Board of Trade; Duluth Board of Trade; Omaha Grain Exchange; St. Louis Merchants Exchange; Milwaukee Chamber of Commerce; Toledo Produce Exchange.

STATEMENT OF SYDNEY ANDERSON, IN BEHALF OF THE MILLERS NATIONAL FEDERATION

The CHAIRMAN. You may proceed, Mr. Anderson.

Mr. ANDERSON. Mr. Chairman and gentlemen of the committee, I appear this morning on behalf of the Millers' National Federation, which is the trade organization of the wheat millers of the country and represents about 65 per cent of the output of the industry, the total output represented in the federation being about 70,000,000 barrels. I would like, if I may, to make one or two preliminary observations to establish the point of view from which I am going to speak and to lay the background of the argument which I expect to make.

In the first place I want to say that I am not appearing here in any spirit of hostility to farm relief legislation, nor am I here to make capitious criticisms of the legisaltion which has been proposed. The milling industry is vitally interested in everything which affects the production, manufacture, and distribution of the wheat crop. I think we are good citizens and we will endeavor to comply with whatever legislation Congress may deem fit to enact, but we think we would be remiss in our obligation to Congress and to the country if we did not point out the difficulties which we anticipate will inevitably ensue from the enactment of such legislation as is proposed here. So far as I am concerned what I have to say will be confined to the relation of or the effect of the bill upon wheat production, the manufacture of flour, and the distribution thereof. I am not going to talk at all about other commodities affected by the bill because I want to confine myself to something that I think at least I know something about.

The bill in its terms applies to wheat as wheat. I think it is impossible to regard the merchandising of wheat on that basis. There are produced in this country five distinct classes of wheat: Hard red spring, which is produced very largely in Minnesota, North and South Dakota, Montana, part of Wisconsin, and the State of Washington; durum wheat, which is a distinctly export wheat produced in Minnesota, and more particularly in North and South Dakota; hard red winter wheat, produced mainly in the Southwest; soft red winter, throughout the entire Corn Belt and to some extent in the northern portion of the Southern States; and the Pacific white wheat,

which is to a very large extent an export wheat as durum is an export wheat. The proportions of these different classes of wheat which are exported one year with another vary from year to year as does the production of each one of the classes in respect to the entire total.

The segregation of the surplus, if it may be called such, of each of these classes of wheat under present conditions, is a gradual, continuous and normal procedure. In other words, the exportable surplus is drawn out of the country-not forced out of the country, but drawn out of the country, as a consequence of competition of exporters with mills. That competition is a competition which affects not merely the surplus, but the entire crop and segregation of the surplus is a matter of normal competition. I think it is impossible in consequence to conceive of the surplus problem in the terms in which it is apparently conceived in the bill before the committee. Senator KENDRICK. Would it interrupt you unduly if I were to ask a question at this point?

Mr. ANDERSON. No; I shall be very glad, if I do not make myself clear, to be interrupted and interrogated.

Senator KENDRICK. I do not know that I understood you exactly in reference to the withdrawal from the ordinary channels of the surplus by the milling interests. Do you mean to say that this is done in the natural order of their business as it is now conducted, without any artificial interference whatever?

Mr. ANDERSON. What I mean to say is this, Senator. When a farmer sells his wheat to a country elevator or country mill, neither the farmer nor the country elevator can know whether it is going to be surplus or whether it is going to be exported. When the elevator sells that wheat or transfers it to the terminal elevator, it does not know whether the wheat or any portion of it will go into export. It comes in to the terminal markets in carload lots. It is sold very largely at the terminals on sample, and I shall very briefly relate in a moment the characteristics which determine the value of the wheat. We have the best wheat and flour market in the world. The miller as a rule bids for the wheat in order to obtain the characteristics which he wants in his particular wheat blend. The exporter likewise bids for the wheat which he desires. If the export bid for a particular carload of wheat is higher than the domestic bid, the wheat will go to the exporter; otherwise it goes to the miller. As a rule the class of wheat which is exported is of a more or less nondescript character and more or less of the lower grades, although it is graded up to No. 2 for the most part for export purposes.

The point I am trying to make is that this process of merchandising wheat which proceeds throughout the entire country is a gradual process in which the surplus is drawn out as that surplus appears, and anything which injects an artificial element into it will result in exporting wheat which should not be exported and in leaving wheat in the country which should not be left here. That is the point I wanted to make here. In other words, it throws the entire relationship out of line.

On these five classifications of wheat there are a number of subclasses and four grades, and in addition a "No Grade" wheat which does not fall within any of the four specified grades. Prior to the war these grades were more or less indicative of the value. The