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provision for the grading of wheat. However, they asked for it, and found after they got it that it meant the loss of a great deal of money to them. The elevators took advantage of it apparently and used it as a means of beating down the price of wheat. There is no doubt about that in my mind.

Mr. ANDERSON. Now, Mr. Chairman, I would like to get along as rapidly as I can.

Senator GOODING. I would like to have Mr. Anderson show more clearly why the bill will not function to the advantage of the millers, or at least without prejudice to them if it should be enacted into law, or any bill with a provision for an export commission because Í can not seem to take that up at all; I can not even get started with the idea of it.

Mr. ANDERSON. They simply think that it can not be made to work. Senator GOODING. You will have a body of competent men to administer it.

Mr. ANDERSON. Anything that can not be made to work will hurt us, but it will hurt the farmer, and it will hurt him more than it will Our opposition, if it may be called such, is predicated solely upon the proposition that this thing can not be made to work.

us.

Senator GOODING. That is what a lot of people said about the Federal reserve law. The bankers were very much divided on that question.

Mr. ANDERSON. I am willing to take the viewpoint that it is a matter of opinion, and so far as we are concerned I believe that 99 per cent of our people, as well as people in the grain trade, think it can not be made to work.

Senator GOODING. That would be interesting. I am wondering that there are left even 1 per cent.

Mr. ANDERSON. We quite realize that our interest in the matter is such that what we say is subject to such discount as that interest legitimately justifies.

Senator GOODING. I think that is a very fine statement, and I like it, too.

Mr. ANDERSON. I am trying to make here a perfectly fair statement of the situation as we see it, and I am making it very frankly from the standpoint of those I represent.

I want now to refer to the equalization fee and what I think is the inevitable operation of it. In the first place I agree with Mr. Stewart, who appeared here in favor of one of the bounty bills, in the statement that the effect of the imposition of the eqaulization fee is to reduce the effectiveness of the tariff by the amount of that fee. If your tariff is 42 cents a bushel and your equalization fee is 10 cents a bushel, the imposition of that tax of 10 cents a bushel upon the domestic production inevitably reduces the effect of the tariff by the amount of the equalization fee, whatever it is. As that equalization fee increases it still further diminishes the effectiveness of the tariff. It see ns to me that the weakness of the equalization fee lies in the fact that it holds out to the farmer the proposition of giving him 40 cents for a contribution of 10 cents, or whatever the equalization fee may be. What the bill in essence proposes to do is to sell the farmer 42 cents for 10 cents or whatever the equalization fee may be. If you would suggest that proposition flatly and the coinage of 10-cent

pieces was unlimited as the production of wheat is unlimited, you would very probably be flooded with an enormous production of 10-cent pieces which would eventually make you go broke.

The CHAIRMAN. Would you not have to modify that statement just a little? In the first place, you say the production of wheat is unlimited. There ought to be a modification of that statement, it seems to me. In the next place, it would depend upon whether this condition made it so profitable that, assuming that everybody could go into wheat production, it would be so inviting that they would all go into wheat production. I see the force of your argument. I am not trying to belittle it. I think you are making a good point from your standpoint, but you are assuming, in order to make your point, two things that it seems to me you are hardly justified in assuming first, that the production of wheat is unlimited and secondly, that after this trade of 42 cents for 10 cents is consummated by the operation of the bill, there would be then such a profit in wheat that everybody would go to producing wheat.

Mr. ANDERSON. I do not think everybody would go to producing wheat, but that more farmers would plant more acres of wheat. However, there is another weakness in the proposition, it seems to me, Senator. These things are all very difficult because they are so complex, and it is difficult to make a complex thing simple.

The CHAIRMAN. Yes; I admit that. I think that is a correct statement.

Mr. ANDERSON. The infirmity of the proposition, it seems to me, arises cut of the fact that if there is an actual surplus above the amount which can be disposed of at a remunerative price, that surplus, whatever it is, has got to be equaled in terms of the price somebody pays. Suppose we had had 50,000,000 bushels of wheat less this year than we actually had, that 50,000,000 bushels less would have been equated in the terms of a higher price here. It would also have been equated in terms of a higher price abroad. Suppose we had had 100,000,000 bushels more than we actually did have? That 100,000,000 bushels would have been equated in terms of a lower price in this country and it would also have been equated in terms of a lower price abroad, so that it seems to me that anything which tends to increase production, even though that increase may not be unlimited, tends to increase the problem rather than to diminish it. The CHAIRMAN. I think we would admit that. I do at any rate. I think that statement is correct.

Mr. ANDERSON. If we have more wheat, it has to be equated somewhere. If it is not equated here, it will be equated abroad.

The CHAIRMAN. That would be reflected in a depression of the price?

Mr. ANDERSON. Yes.

The CHAIRMAN. That is true, and admitting that perhaps at first at least this would tend to increase production, the farmer would have to pay, under the bill, the loss that the increased production brought about, and he would not do that more than once before he would quit it. In the first place, is not this admitted, that there is a surplus of wheat ordinarily?

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Mr. ANDERSON. I would not admit it, Senator.

I would say there has been a surplus of wheat since the war. I do not think that there was one before the war.

The CHAIRMAN. If there is no surplus then the bill would not operate. Nobody would be harmed then.

Mr. ANDERSON. I think you have to remember that there are two kinds of surpluses. One is an accidental surplus which is due to variations in yield, and the other an intentional surplus which results from acreage. We can not control and you could not control that accidental surplus. It will be possible to control that portion of the surplus which is incident to acreage. Our difficulty during the past five years since the war has been wholly due to the fact that we have had 13,000,000 more acres in wheat during that period than we had prior to the war.

I want to submit a statement that is in line with what I started to discuss, because I think it has a very direct bearing on the question and I know you are earnestly endeavoring to solve it. The point I want to bring out is that during the five-year period previous to the war, we had an acreage of 47,000,000, and during the five-year period after the war, we had had an average acreage of 60,000,000. Those 60,000,000 acres produced an average surplus of 120,000,000 bushels more than we had prior to the war. That was a surplus which could have been avoided had it have been possible to control the acreage. In other words, instead of having a surplus which ran around 200,000,000 bushels or more, we would have a surplus of only 100,000,000 bushels, and I venture the assertion that with a surplus no greater than 100,000,000 bushels, the tariff will be as effective in this country as it is possible to make it with any equalization fee that you can apply.

In this connection let me call your attention to some figures I have from the report of the late Secretary Henry C. Wallace to the President on the wheat situation in 1922, which report contains a comparison of the prices per bushel of No. 1 northern Winnipeg, No. 1 northern spring Minneapolis, No. 2 hard red winter Kansas City, No. 2 soft red winter Chicago, and the margins of the domestic prices over Winnipeg, which I have brought down to date. This is by months. I am just going to read the margins for the past crop year. Perhaps I had better go back a little, however. Last year we had a large crop and Canada had a small crop, with the result that our prices were relatively lower than Winnipeg. This year we had a small crop where the Canadian crop was a large one. We started out with a margin in favor of Winnipeg of 3 cents, a margin in favor of Chicago of 1 cent; 29 cents, 36 cents, 28 cents, 23 cents, 32 cents. 28 cents.

The CHAIRMAN. That is compared with what other places?

Mr. ANDERSON. Chicago over Winnipeg. Comparing Kansas City, there was minus 8 cents, minus 3 cents, plus 20 cents, plus 21 cents, plus 18 cents, plus 22 cents, plus 16 cents.

The CHAIRMAN. When you say "minus," just what do you mean? Mr. ANDERSON. I mean that was in favor of the Canadian market. The CHAIRMAN. The Canadian market was that much higher than the Kansas City market?

Mr. ANDERSON. Yes. If we go back over those figures, we find that the tariff has been directly effective in the relationship of the

Canadian production to the American production. In other words, whenever we have a short crop and Canada had a long crop, our prices have been relatively high above the Canadian prices. Whenever Canada has had a short crop and we have had a long crop, our prices have been relatively lower than the Canadian prices.

The CHAIRMAN. Was that due to the tariff or the difference in the crop?

Mr. ANDERSON. Both.

The CHAIRMAN. The tariff did not seem to do any good for the American producer except in cases where Canada had a short crop. Is that a fair statement of it?

Mr. ANDERSON. I would say that it was most effective when we had a short crop.

The CHAIRMAN. Yes; that is what I mean. When we had a short crop the tariff was effective?

Mr. ANDERSON. Yes.

The CHAIRMAN. When we had a long crop and they had a small crop, then the tariff was not effective?

Mr. ANDERSON. No; that is, as against Winnipeg. It was effective as against Liverpool.

The CHAIRMAN. Would not that relationship have been the same in both cases if we had not had any tariff at all?

Mr. ANDERSON. I do not think so.

The CHAIRMAN. I am not putting up my judgment that it would. I want to get the facts as nearly as I can. If the size of the crop in Canada and the size of the crop in the United States varied when we had a tariff of 40 cents a bushel to that point that in one year when the Canadian crop was greater than in the United States our prices were lower, and the next year, when the relation of the crops was reversed, the prices in the United States were higher, how can we determine from that what the tariff had to do with it?

Mr. ANDERSON. I think it is very difficult. It would probably be sounder to make a comparison with Liverpool options. I have such a comparison here. As a matter of fact our prices for the past three years have ranged 31 cents above the Liverpool options, allowing 25 cents for freight.

The CHAIRMAN. So far as the tariff is concerned it seems to me the fairest way to consider it, if we can dispossess our minds and get rid of our prejudice in regard to the tariff and consider it on a strictly fair basis, what defense could you offer for a tariff on wheat at a time when the Canadian price was higher than the American price as it was a part of the time in 1924? If you were defending the tariff then, what would be the argument?

Mr. ANDERSON. Well, I do not see any way, Senator, that the tariff can be effective in the United States in the presence of a surplus which, taken in consideration with the world's crop, is an actual surplus. In other words, I come right back to the proposition, in my own mind, that somewhere the surplus, wherever it is produced, is going to be equated in terms of a price. Now, the price is always going to be relatively higher in a country which produces a short crop than in a country which produces a long crop, irrespective of a tariff.

The CHAIRMAN. I think so, but I can easily see how if we had a short crop

Mr. ANDERSON. As we had this year.

The CHAIRMAN. Yes; if we had a crop that was less, for instance, or at least not greater than our domestic consumption, then I think everybody would concede that the tariff would affect the price here.

Mr. ANDERSON. I will go further than that and say that if we did not have a surplus greater than 100,000,000 bushels, our tariff will, in all probability, be effective, depending somewhat upon the world situation.

The CHAIRMAN. Oh, yes. Depending upon how much wheat is produced elsewhere, but we always have the cost of transportation in favor of the domestic producers.

Mr. ANDERSON. Yes.

The CHAIRMAN. It costs something to get wheat in from the Argentine, but not much to get it from Canada. That is the reason why it seems to me we ought to compare it with Canada if we can.

Mr. ANDERSON. I shall be very glad to submit these figures which are the best I have been able to obtain. I have only one copy and I would like to keep it as I have to appear before the House Agricultural Committee this evening, and I will submit later if I may.

The CHAIRMAN. Very well. Now, incidentally, while I have interrupted you—not now necessarily but before you leave the stand, when you get through with your objections to this proposed legislation, if you have anything in mind that, in your judgment, would be a remedy for what everybody concedes is the deplorable condition of agriculture, we would like to have that. In other words, we are confronted with the fact that it seems to be conceded that agriculture is not getting a square deal. If this is not the way to remedy it and there is any possible remedy, we would like to know what it is.

Mr. ANDERSON. Well, I shall have some suggestions to make. I do not know that they are of any value. I certainly would not call them remedies, but I think they approach pretty definitely the place where the remedy is, if there is a remedy.

I would like to run along a little further on these objections, which you refer to, if I may.

The CHAIRMAN. Certainly.

Mr. ANDERSON. Now, the bill which was presented here in the first place by the committee of 22 provided that the equalization fee should be collected upon the processing of the product. I think that is technically wrong, as well as wrong in practice. Processing is a manufacturing activity. If there is any activity which is outside of the regulation of interstate commerce, it is the manufacturing of a product. If this equalization fee is to be applied, it clearly ought to be applied on something which has a much more definite, distinctive characteristic than the term "processing" implies.

Second, I should like to say that the application of a fee at the point of milling results in a discrimination which I think is wholly unjustifiable and wholly unworkable. In other words, it gives the cooperatives which have contracts with this board an advantage equivalent to the equalization fee over a mill which has to pay that equalization fee. In other words, the mill is taxed, even though it assesses that tax against the producer, and it pays a tax of 8 or 10 or 12 cents, whatever the equalization fee may be, whereas this agency which is buying for export purposes pays no tax. It goes into the markets therefore, with an 8-cent advantage. I can not conceive of how it would be possible for a mill to operate with any degree of safety under such conditions.

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