Agricultural Marketing Revolving Fund HEARING BEFORE THR SUBCOMMITTEE OF HOUSE COMMITTEE ON APPROPRIATIONS CONSISTING OF Messrs. WILLIAM R. WOOD (CramrMan), LOUIS C. CRAMTON EDWARD H. WASON, L. J. DICKINSON, ERNEST R. ACKERMAN ROBERT L. BACON, JOSEPH W. BYRNS JAMES P. BUCHANAN, EDWARD T. TAYLOR, AND WILLIAM A. AYRES IN CHARGE OF DEFICIENCY APPROPRIATIONS SEVENTY-FIRST CONGRESS THIRD SESSION JU) UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1930 COMMITTEE ON APPROPRIATIONS HOUSE OF REPRESENTATIVES SEVENTY-FIRST CONGRESS WILLIAM R. WOOD, Indiana, Chairman LOUIS C. CRAMTON, Michigan. EDWARD H. WASON, New Hampshire. FEORGE HOLDEN TINKHAM. Massachusetts. BURTON L. FRENCH, Idaho. MILTON W. SHREVE, Pennsylvania. [.. J. DICKINSON, Iowa. FRANK MURPHY, Obio. JOHN W. SUMMERS, Washington. HENRY E. BARBOUR, California. ERNEST R. ACKERMAN, New Jersey. (UY U. HARDY, Colorado. JOIIN TABER, New York. MAURICE H. THATCHER, Kentucky. FRANK CLAGUIL, Minnesota. ROBERT G. SIMMONS, Nebraska. WILLIAM P. HOLADAY, Illinois. ROBERT L. BACON, New York. GEORGIE A. WELSH, Pennsylvania. JOIIN ¢. ALLEN, Illinois. RICIIARD B. WIGGLIESWORTH. Massanhinsetts. JOSEPH W. BYRNS, Tennessee. JAMES P. BUCHANAN, Texas. EDWARD T. TAYLOR, Colorado. WILLIAM B. OLIVER, Alabama. ANTHONY J. GRIFFIN, New York, JOHN N. SANDLIN, Louisiana. WILLIAM A. AYRES, Kansas. ROSS A. COLLINS, Mississippi. WILLIAM W, HASTINGS, Oklahoma WILLIAM C. WRIGHT, Georgia. CLARENCE CANNON, Missouri. CLIFTON A. WOODRUM, Virginia WILLIAM W. ARNOLD, Illinois. JOHN J BOYLAN. New York. MARCELLT'S (. SHEILD, Clerk AGRICULTURAL MARKETING REVOLVIN G FUND HEARINGS CONDUCTED BY THE SUBCOMMITTEE, MESSRS. WILLIAM R. WOOD (CHAIRMAN), LOUIS C. CRAMTON, EDWARD H. WASON, L. J. DICKINSON, ERNEST R. ACKERMAN, ROBERT L. BACON, JOSEPH W. BYRNS, JAMES P. BUCHANAN, EDWARD T. TAYLOR, AND WILLIAM A. AYRES, OF THE COMMITTEE UN APPROPRIATIONS, HOUSE OF REPRESENTATIVES, IN CHARGE OF THE SECOND DEFICIENCY APPROPRIATION BILL FOR THE FISCAL YEAR 1930. ON THE DAYS FOLLOWING, NAMELY : Moxpay, December 15, 1930. FEDERAL FARM BOARD STATEMENTS OF ALEXANDER LEGGE, CHAIRMAN; JAMES C. STONE, VICE CHAIRMAN; AND CHRIS I. CHRISTENSEN, EXECU-TIVE SECRETARY AGRICULTURAL MARKETING REVOLVING FUND The Cramyax. We have before us this morning an estimate of $150,000,000 for the Federal Farm Board, under an authorization of $500,000,000. You have had under this authorization an appropriation of $150,000,000 and another of $100,000,000, making a total of $250,000,000, and now you are asking $150,000,000 in the deficiency bill. You are also asking in the independent offices bill for 1932 $100,000,000, making $250,000,000, or the grand total of $500.000.000, which is the amount of the authorization. First, IT wish you would tell us what you have done with the 3250,000,000 already given you. Mr. Lecce. Mr. Christensen, you have the figures there. Mr. CuaristEnseN. I have a statement here, Mr. Chairman, which s rather brief, but it covers the use of the first $250.000.000. Do vou wish to have me read this statement. The CHAIRMAN. Veo GENERAL STATEMENT Mr. Curisrensen. This also covers what we have asked for in the regular budget, as well as the supplemental estimate of $150,000,000. Our loan operations, up to the end of the fiscal year ended June 30, (930, were reviewed rather fully in the first annual report, but I nave also supplemented that in this statement. The board had approved, up to November 30, 1930, net commitments aggregating $373,342.487.15. Of this amount $3926.169 539 ‘RQ 2 AGRICULTURAL MARKETING REVOLVING FUND has been advanced to borrowers, of which $125,183.274.84 has been repaid. In accordance with the nature of the revolving fund, these repayments are immediately available for additional loans. On November 30, 1930, advances outstanding aggregated $200,-986,258.04, and the amount remaining to be advanced against authorized commitments was $47 ,172,954.27. This leaves a balance of only $3.584,140.18 available for new commitments. In addition to the regular requirements of the board, tentative commitments approximately $75,000,000 have been made to the cotton and the grain stabilization corporations for fulfillment within the next few months and estimated commitments for the remainder of the current fiscal year, less estimated repayments, will be possible for the borrowing associations to relase funds will absorb the $150,000,000 which Congress was asked on December 8, 1930, to make immediately available. ‘When improvement in the general business situation develops, it will be possible for the borrowing associations to release funds faster than they are now doing. It is appreciated that any attempt on the part of the board at force liquidation would only result in driving the price level still lower, and would also probably retard for many years the cooperative marketing of the comodity involved, which does not seem the proper thing to do. This statement is as of November 30, 1930, but I can bring that right up to date, as of Saturday, December 13, 1930. The Cmatrman. Let us have that. Mr. CrristeNseEN. On December 13, at the close of business, the board’s total commitment was $376,018,974.40; the total amount advanced by the board, since the beginning of its operations, on July 15, 1929, was on last Saturday $338,996,508.71, while the total repayments during that period were $126,020,134.66, leaving a balance outstanding of $212,976,374.05. In other words, as of last Saturday, the board had liens outstanding amounting to $212,000,000. The Cmamrman. You have received how much in repayment of loans already made? Mr. Curistensen. $126,000,000. The Crmamman. Is that $126,000,000 available for reloans? Mr. CrristeNseN. Yes, sir. The Crrammax. You have that on hand? Mr. CHRISTENSEN. Yes, a part of it. We have advanced, or actually loaned $338,000,000, and the amount repaid thereon is $126,000,000. We have outstanding $212,000,000, and the balance available for advances—that is, for commitments made where the money has not gone out—amounts to $37,000,000. That leaves, as of last Saturday, a balance available for new commitments of only $2,110,731.98. The Cramman. How about the applications? Mr. CuristeNSEN. In addition to our normal requirements with respect to applications that come daily from the associations, there is also the item which I mentioned here of approximately $75,000,000 representing tentative commitments already made to the cotton and wheat stabilization corporations. I helieve Mr. Legge can explain that in detail. AGRICULTURAL MARKETING REVOLVING FUND 3 Mr. Lecce. As a matter of fact, we have already authorized that, but there are outstanding applications of around $75.000,000 on those commodities. The Crairman. What commodities are those? Mr. Lecee. Cotton and wheat, or those two stabilization commodities. It started in this way: When the cotton, for instance, was taken over from several cooperatives, they had money borrowed on it from private sources or private bankers, but the money was not due. Some of the private bankers are perfectly willing to continue to carry a quantity of that money on the commodities, just the same as they had been doing for the local cooperatives. Now, it is just a question of judgment whether these loans should be cleared up when the funds are available, because there will be some saving in interest, although the interest rate they are charging at the present time is not excessive. On many of them the rate of interest at the present time is 3 per cent. The Cumamman. What proportion of this money that you have already loaned is for the purpose of stabilizing the wheat market at the moment, how much for stabilizing the cotton market, and how much is for the purpose of stabilizing the market for other sommodities. . Mr. Lecee. We have outstanding at the present time $86,000,000 an cotton and $77,000,000 on wheat. The CrarMaN. I suggest that you put that table in the record, if it shows the amounts loaned on various commodities. ‘ Mr. CurisTeNsEN. Yes, sir. 1 have a table that tells the whole story. I have a table that shows the amount of money loaned to the cooperative associations, classified by commodities, and the amount of loans to the grain stabilization and cotton stabilization corporations, as of November 30, last. It is complete. The Cramrman. Suppose you put that in the record. {The table referred to is as follows:) Statement by commodities showing amounts of commitments approved, commitments canceled, net commitments, advances, repayments, balances outstanding, and balance of commitments available for advances, in cagnnection with all loans made by the Federal Farm Board under provisions of the agricultural marketing act as shown by the records of the Treasurer's office, Federal Farm Board. as of November 30, 1930 (effective date) Commodity BEANS. o.oo. Cotton o_o... ________. Dairy products... _______. ®ruits and vegetables: ETO ERTIES GER EEA Jrapesandraisins... __._...__.______._.______ em. Other deciduous fruits ____________________________ ___ _ ___ Miscellaneous fruits and vegetables... ____. _____ - Grain____ on Honey. ... J Livestock _______ __ meme NUS i ee Potatoes ._.__._.._....___. cto nd RE Poultry and eggs. _..___ A PROB cari ai mia i Sm Br rm mn BOOB... cn cma wa ios amigo So TES 5 0 0 0 Tobacco... ce eee Wool and mohaijr__________________ Total ei Grain stabilization ...____._...___.__. _ ee Totton stabilization. ____._._ sa Total amount f commitments annroved $564, 438. 41 36,078,037. 99 tA 2%0 000 OO 3, 800, 000. 00 1, 236, 200. 00 2, 454, 500. 00 806, 000. 00 7, 141, 902. 60 135, 000. 00 7. 450, 000. OC 233, 000. 0C 205, 000. 00 130, 000. 00 . 784, 000. 0C 101, 800. 00 3, 250, 000. 00 92 22 ARG Nn 74, 253, 568. O. 08, 000, 000. 00 40, 000, 600. 00 {09 OR 0 An Amount of somimitments canceled $113, 000.00 X0, 652, 657. 42 1.583.130. 25 500, 000. 00 L, 631, 875. 00 125, 322. 64 10,175,367. 66 "70,320,205. 74 779,000.00 15,000. 00 163, 000. 00 22, 874. 24 +304, 731.90 14 R28 NO 5, 911, 080. &¢ 3.000. 000. 00 AR O11 DORN RH Net commitments $451, 438. 41 115, 425, 380. 57 14.716. R69. 7H 3, 300, 000. 00 9, 604, 325. 00 2,329,177. 36 806, 000. 00 6, 966, 534. 94 135, 000. 00 3,129,704. 26 233, 000. 00 196, 000. 00 415, 000. 00 + 321, 000. OC 78,925.76 1, 945, 268, 11 9 IRR RAT NN 228, 342, 487. 1c 105, 000, 000. 00 40. 000. 000. 00 279.249 4R7. 15 Amount advanced $284, 323. 64 19, 098, 144. 48 7 037. 04K 75 2,658, 184. 00 7,330, 701. 53 1,150, 534. 20 69, 550. 00 29, 089, 582. 59 45, 839. 00 2,679, 704. 26 165, 517. 48 196, 000. 00 235, 000. 00 833, 455. 24 41,741. 62 1,423,438. 73 11 709 0dd 10 186, 030, 809. 6: 104, 000, 000. 00 36, 138, 723. 26 196. 160 E39 RQ Repayments $57,760. 34 13,832, 277.25 2.024. 121.27 417,110.87 3. 241, 029. 54 84,777.70 "14,032,324. 30 * 6, G08. 58 1,227,832. 34 77746,000700 Tw oY 6,7. 2 505, 17¢. 7-. 7 112 RAE RT 58, 642, 577. 0 31, 539, 212. 17 5. 001. 485. 87 35. 183. 274. 84 Amount outstanding $226, 563. 30 35, 265, 867. 23 5.012.927. 49 2,241,073.13 14, 089, 671. 99 1, 065, 756. 50 69, 550. 00 25, 057, 258. 2¢ 36, 830. 4° 2. 451,871. ¢ 165, 517, 4° 150, 000. Gt 235,000. 00 6835, 896. 66 35, 000. 0¢ 918, 259. 9" 3 B78 188 9% 17, 388, 232. 6 52, 460, 787. 82 31, 137, 237. 50 200. O88. 25%. 04 Balance of commitments available for advances $167, 114. 77 6, 327, 236. 09 6.779. 821.00 641, 816.00 2, 273, 623. 47 1,178,643. 16 736, 450,00 7,876,952. 35 89, 161. 00 £, 450, 000. 00 RY ARD KO (80, 000. 00 187, 544.76 37,184. 14 521, 829. 37 106 R18 GO 12, 311, 677. 53 1, 000, 000, 00 3,861,276. 74 47.172. 954. 927 4 - 3 7 AGRICULTURAL MARKETING REVOLVING FUND Mr. Curistensex. Would you like to have me read from this statement ? The CuamrmaN. How many commodities are represented there? Mr. CuristenseN. I will give you the column showing the loans outstanding as of November 30, as follows: ] } On beans, $226,563.30. The next item is on cotton. This loan 1s made through the American Cotton Cooperative Association, which is the sales and merchandising agency of the cotton cooperatives. As of November 30, 1930, the amount outstanding on cotton was $55,265,867.23. Now, there should be added to that $55,000,000 loan a loan of $31,137,235.59 to the cotton stabilization corporation. That gives the total amount on cotton. On dairy products, the amount outstanding on November 30, 1930, was $5,012,927.48. Dividing fruits and vegetables into several classes, the amount outstanding on citrus fruits on November 30, 1930, was $2,241,073.13; on grapes and raisins, $14,089,671.99; on other deciduous fruits, $1.065.756.50: and on some other small truck crops, $69,550. On grain, through the Farmers National Grain Corporation, which is the sales and merchandising agency for the grain crops, the amount outstanding on November 30, last, was $25,057,258.29, plus $52,460,787.83 advanced to the Grain Stabilization Corporation. On honey there was a loan of $39,830.42; on livestock there was a loan of $2,451,871.92; on nuts, including walnuts, pecans, etc., the amount outstanding was $165,517.48; on potatoes, the amount outstanding was $150,000; on poultry and eggs, the amount outstanding was $235,000; on rice, including advances to the rice cooperatives of California, Arkansas, Texas, and Louisiana, the total amount outstanding was $685,896.66; on seeds, the amount outstanding was $35,000; on tobacco, the amount outstanding was $918,259.99; and on wool and mohair, the amount outstanding was $9,678,188.23, making a total amount loaned to the cooperative marketing associations of $117, 388,232.62, plus $52,460,787.83 to the Grain Stabilization Corporation and $31,137,237.59 to the Cotton Stabilization Corporation, which gives a grand total of $200,986,258.04. The Crammax. Does that table show the names of the different cooperatives to which this money was advanced ? Mr. CurisTeNSEN, No, sir; this is classified by commodities. The names of the associations do not appear. The CrairyMaN. Do you want to tell us that for the record? Mr. Lece. I would like to respectfully submit that, while we have no wish to withhold any information from you, or a penny, or anything else, I think that the details of the loans to these cooperative associations, or of the loans now outstanding to them, in justice to them, should not be put in a public document. All of that information is here for your own use, of course. The cooperatives have earnestly appealed to us not to make public the details of their individual loans. As I have said, I have that information here for your own use, but when you put it in a Congressional record, of course, other people get possession of it. and they may use it to the detriment of the cooperatives. The Crmatraan. Of course, we do not want anything in the record that would be detrimental to the success of this operation. - < AGRICULTURAL MARKETING REVOLVING FUND ACCOMPLISHMENTS OF BOARD , Thy Cuamman. Mr. Legge, can you tell us of any good you have done? Mr. Liecee. That is a pretty big order, Mr. Chairman. The Cramuan, I suspect that is true; but when this matter comes up on the floor there will be all sorts of questions from those who are in favor of the board, as well as from those who are trying to break it down. We ought to have some information so we can answer those questions. Mr. Lecce. As to what the final outcome will be we do not know. You can not say until the final close of your operations what your gains or losses may be. That is particularly true of grain. The grain market to-day is fully 20 cents above the world parity, or what wheat would bring if ‘it were exported. At the close of the market on Saturday, Liverpool wheat was 6934 while the Chicago market was 7014, and the transportation cost is 1514 cents. It may be that in the end the taxpayer will lose. As I say, we do not know what the outcome will be. In the meantime, we are consuming 17,000,000 bushels per week, with the advantage of this difference in price, which means $2,500,000 to the wheat grower as compared with the export price. Therefore, at the present time the grower is getting that advantage. How much of that we will lose in the final clean-up of the stabilization operations is beyond us. We do not know about that. The Cumammman. Of course, that is dependent on world conditions, on transportation conditions, and other things. This thing is supposed to be built up on the theory that we will not sustain any considerable losses in its operation. Can you look into the future some Sih Jol tell us what the probability is with reference to these oans ? Mr. Leger. It will be just anybody's guess. All the time we are making some progress. You were speaking a moment ago of wheat, and I will say that for 62 consecutive months, up until last month, there was every month an increase in the visible supply of world and domestic wheat over the visible supply of world ‘and domestic wheat in the corresponding months of the previous year. That is, we have pyramided a surplus consecutively, every month, for 62 months. Now, in view of that, what has happened to the market is easy to understand. . The surplus has been building up, bigger and bigger, all the time, until the last month when, for the first time, it took a turn in the other direction. November showed the first decline in the world’s visible supply of wheat and also in the domestic supply of wheat, and in the North American supply of wheat. In November the tide turned, and began working in the pther direction. The CARMAN. With reports showing that the visible supply is decreasing, will you not have a corresponding increase in the price? Mr. Lecee. That has not come yet. There has been no increase in the price. The prices are artificially maintained. It is true today that, low as the Price is, it is artificially maintained, not only on wheat, but on other grains. The CrmairmaN. How is the price artificially maintained? Mr. Lecce. By the operations of the stabilization corporation. AGRICULTURAL MARKETING REVOLVING FUND 7 The Crarman. What have you to say with reference to cotton? Mr. Lecee. Cotton is in very much the same condition at the moment. There is very little improvement in cotton. The spinning business all over the world seems to be prostrate. It is just about as dead as it can be. It has improved a little bit. There has been a little more activity in the last 60 days than in some of the previous months, but it is very slow, and consumption of cotton is not increasing as it is on wheat. The wheat situation is being helped very markedly through the feeding operations. We have a short corn crop this year, and an enormous quantity of wheat is being fed to livestock. The CratrMaN. Some of it is burned for fuel, is it not? Mr. Lecce. I think the quantity that is burned in that way is rather negligible. Somebody who is real cold, and has nothing else to burn, may burn it, but I do not think that affects the visible supply very much. The Crarmax. I take it that the great inexorable law of supply and demand controls the price, and that the low price of wheat is largely due to the fact that there is more wheat in existence than there 1s a demand for. } Mr. Lrace. Yes, sir; absolutely. From the export standpoint I do not see any hope for the American wheat producer in competition with the peon labor of Argentina and the practically serf labor of Russia, with their lower standards of living. The Cramman. If we have lost hope for it, what is the remedy? Mr. Lrcee. The remedy, so far as the wheat grower of America is concerned, except in instances where he can profitably use it for feeding livestock, is to reduce the production to the domestic consumption basis. The CuamMan. Would it benefit the farmer if you could induce him to curtail production? Mr. Lrcee. I have personally canvassed every wheat-producing State in the Union during the last six months, and we are making some headway there. For instance, the spring wheat area of the country had a reduction of 5 per cent last year. The Cuairman. How much would the acreage have to be reduced in order to bring about some beneficial results? Mr. Lecce. Except as feeding to livestock might offset some of it, we would have to have a 22 per cent reduction to put it on a strictly domestic-consumption basis. Taking into consideration the wheat which is fed to livestock, it will take less than that, perhaps, to balance the production with the consumption. The CuammanN. How do you go about that, in your effort to get a curtailed production ? Mr. Lrege. It is purely educational, we try to lay before farmers the facts. We say to them, “ Here is the situation that you have been facing, and it is one that you can not ignore.” We say to them, * These are the conditions, that are depressing the market here, and they have been going on all over the world.” The world’s acreage of wheat has increased some 42,000,000 acres within 14 years. Mr. Byr~s. Do you think that you will reach the point, through aducation or otherwise, where you will be able to curtail the pro- 3 AGRICULTURAL MARKETING REVOLVING FUND duction of wheat and of other farm products down to a point where it. will be only sufficient to meet domestic consumption ? Mr. Leece. I do. Mr. Byrns. Of course, it is a rather black picture that you draw when you say that they can not look further to foreign markets. Mr. Lecce. We are making that statement onlv on that particular sommodity. oo Mr. Byrxs. How much wheat does the Grain Stabilization Corporation have on hand? Mr. Leer. It has 64,000,000 or 65,000,000 bushels of actual cash wheat in elevators and storage, and probably 60.000.000 bushels unler futures contracts. . . Mr. Byrns. Has the board come to any conclusion as to what it nroposes to do with that wheat? } ] } Mr. Leger. A portion of that wheat is going to be required in the domestic trade before the new crop comes in, but not all of it. What may happen to the balance, or what may have to be carried further ahead, is still a question. } } Mr. Byrns. I suppose you propose to feed it out in a manner that will not be calculated to break the market? Mr. Lrage. Yes, sir. Mr. Byrns, As it is needed. Mr. Lecee. Yes, sir. ] Mr. Byrns. It costs a good deal to store it, does it not? Mr. Lrcee. Yes, sir; it is an expensive proposition. We are criticized by the public somewhat because of our dealings in futures. Now, futures is the basis on which wheat has been handled for 70 years. If you should sell a boatload of wheat to a man, nine times out of ten he has futures contracts that he turns in in settlement for the wheat. In dealing with it under the present set-up, the same facilities must be used that everybody else uses in the market. For instance, in the case of the wheat that has recently” been purchased, futures were bought rather than the cash wheat, for this reason, that you would have to pay about 214 cents more for actual cash wheat than for futures contracts for the same number of bushels to be delivered in some other month. The cash wheat has been at a premium. If futures were not bought, the private trader would have an advantage to the extent of that differential. Mr. Byrns. What would have happened if the Grain Stabilization Corporation had not purchased this wheat? Mr. Lecce. I have letters from some of the most conservative millers and some of the largest buyers of grain in this country saying that, except for these purchases by the board, wheat wonid he 25 “ents per bushel throughout the country to-day. Mr. Byerns. What did you pay for the wheat you bought? Mr. Lecce. At the present time, the average cost of the wheat purchased 1s around to-day’s market. which is about 76 to 77 cents per bushel. } "Mr. Ayres. Going back to the statement you made a while ago, you stated that the people would have to be educated to decrease the wheat acreage. I believe you stated that that was the only solution of the problem. Mr. Lucee. So far as export growing is concerned, that is true. There are two things that may be done: We mav develop an in- AGRICULTURAL MARKETING REVOLVING FUND 9 creased use of wheat within the country, or we may reduce production to the quantity which can be used within the country, which, 1 believe, can be done. Mr. Ayres. Do you not think that it is a rather difficult proposition to go out into communities in the wheat country, where they can not produce anything else, and urge that reduction? It may be that they can not produce anything else. There are many localities of that kind in the United States, and to say to those people, “ You have to reduce your wheat acreage,” is a little hard. Mr. Lecce. I do not find it so. I have been out into practically every wheat-growing State and have talked to the people collectively. in large groups, and here is the reasoning that was given: “If the last 20 per cent of wheat you grow only results in your getting less financial return for your crop, why grow it?” We say to them, * What benefit is it to you to go on raising that extra 20 per cent if, by doing so, you lower the price for your whole production ? Mr. Ayres. As you know, there are sections of the country where they can produce practically nothing but wheat. Mr. Lecee. There are a few such sections but not many. Mr. Ayres. There are some wheat-producing States that can, perhaps, produce flax. That can be done in some of the far northern States, and no doubt those people could afford to reduce their wheat acreage and produce something else. I think it is a serious question, whether you could persuade wheat producers in many localities of the United States to decrease their wheat acreage when they have land that can be used for no other crop. The Cramrman. Take the State of Kansas, for instance; Kansas is recognized as being the largest wheat-producing State in the Union, but Kansas can also produce corn. . Mr. Ayres. We can not. I have been there for 50 years. There was a time when they could produce corn, but there are many sections of Kansas now where they can scarcely produce anv corn Mr. Tayior. Why? } Mr. Ayres. Simply because of the lack of moisture. There are parts of Kansas that are as good corn-producing sections as we have in the country, and the average shows a fairly good production in those parts of the State, but if you take certain localities, in middle and south Kansas, those are not corn-producing sections. You can aot produce flax there, and there is no longer any need of producing alfalfa, because we can not feed that to tractors and Ford automobiles. Therefore, there is only one thing left for them to produce 'n those sections, and that is wheat. Mr. Bacox. Do you have any authority to offer money or financial help to aid farmers in putting in other crops? Mr. Lecee. We have no authority in the law for that. I would like to follow your question up a little bit, Mr. Ayres. We have ooth known Kansas for at least 50 years. I know I have known it that long. In Kansas, as you know, we met with a good deal of local opposition to any such proposals as we made. Yet, notwithstanding that, J. C. Mohler is out with a statement that Kansas acreage is 6 per cent down this year. That is against a record for the five previous years of practically 10 per cent per year increase. There was an increase of practically 10 per cent per annum in the five preceeding vears. So since the tide is turnine from an increase of 10 AGRICULTURAL MARKETING REVOLVING FUND 10 per cent in the wheat acreage to a decrease of 6 per cent, it would appear that they are going in the right direction. Besides, you have a lot of prairie that is just coming into wheat in Kansas, or a lot of new ground. In view of that, a 6 per cent reduction in the acreage is a substantial contribution. Mr. McLaughlin, out in Nebraska, a State which produces only about half the quantity of wheat that is raised in Kansas, says that they have raised their winter planting. Mr. Ayres. Did Mr. Mohler give any reasons for that reduction? Mr. Leer. Not in detail. There are various things that con-‘ributed to it. One, of course, is t"e econoniic reason, with the price of wheat so absurdly low. )klahoma has made a larger reduction relatively than Kansas. "hat is in the heart of the Winter Wheat Belt. Mr. Ayres. Yes; but they can produce cotton and many things that we can not produce in the what-producing section of Kansas. There is one other question: You made a very interesting statement a while ago to the effect that the relative price of wheat during this year has been about the same as in previous years—-— Mr. Luger (interposing). Did I say that the price was about the same ? Mr. Ayres. That is what I understood you to say. Mr. Lrcee. That is a mistake. I did not intend to say that. Mr. Ayres. I may have misunderstood you. Was your statement with regard to the wheat purchased in prior months? Mr. Lecer. I was talking in quantities. I did not make any statement with reference to the price, except I said that the price aow is 20 cents per bushel above the export parity, or what it would ring if it were shipped to the Liverpool market. Mr. Ayres. Can you make a comparison of the price of wheat {uring the months of July, August, and September, of this year, #ith the price during the same months in 1929 and 1928? Mr. Lace. They are very much lower than in either of those previous years. That is practically true of all commodity prices. Especially is that true when you make the comparison with 1929, As you may remember, we had a little excitement in wheat in the season of 1929, owing to a short production, which, it was thought, would wipe out the surplus. Some of the oldest men in the grain trade thought that it would wipe out the surplus. Mr. Ayres. How much greater was the production of wheat in the United States in 1930 than it was in 1929? Mr. Lrcee. Do you mean how much it increased? Mr. AYres. Yes. Mr. Lecce. Only about 40,000,000 bushels. "0, Ayres. How much was the vroduction in 1930 over that of Mr. LrcGe. It was less than the 1928 production. 1928 was a urna crop vear. In 1928 the production was around 915,000,000 hushels. . Mr. Ayres. The world production in 1930 was about 30.000.000 sushels more than 1t was in 1929; is that correct? Mr. Lrece. No; I think it is rather more. The world production, so far as reported, exclusive of Russia and China is 5 per cent above the production of last year. AGRICULTURAL MARKETING REVOLVING FUND 11 Hh 3 it 0 ). 18 2 i fi + a iN i) 1, roy Mr. Avrus. You do not hold out much hope for the wheat producer of this country. Mr. Liscee. As an exporter; no, sir. Now, I think there is a great deal of hope. I think there is hope for western Kansas. We have literally thousands of reports from all over the United States as to the results of feeding wheat to livestock. I have yet to receive the first report in which the farmer does not believe that he is getting $1 per bushel in meat prices for the wheat that he is feeding to livestock. [hat may offer a solution of the surplus wheat problem, especially on wheat farms that are far removed from the consuming centers. They are feeding wheat quite heavily. You may take Mr. Long, for instance ; he is feeding at the present time 10,000 sheep and hogs. He 1s very well pleased with the results. Then, if you will take the biggest corporation farm in Kansas, you will find that thev are teeding 35,000 head of sheep on wheat. Mr. Avres. Do the reports you get indicate that wheat is just as 0 atouy as anv other feed. or is it as satisfactory as a cattle eed ? Mr. Lrcee. It is very satisfactory for feeding hogs and sheep especially. Lhe Craryan. It is mixed with some other feeds, is it not, for cattle ¢ Mr. Lecce. Yes; for cattle they use only about 25 per cent of wheat in the feed. Mr. Ayres. Is it all right for hogs and sheep? Mr. Lecce. Yes, sir. Mr. Ayres. It is all right as to hogs and sheep? Mr. Lrcee. As to hogs and sheep; that is not true as to cattle when fed in excess of the 25 per cent. The Cmamman. What interest do these operators pay? Mr. Lecce. You mean on loans from the board? The CuamrmaN. Yes. Mr. Lecce. That varies somewhat in the different sections. Our own rates vary, according to the provisions of section 8 (a) of the agricultural marketing act. They are based on what the return is on certain Government bonds, and on some days it is one rate and on some days it is another, because the rate fluctuates. The Treasary fixes that rate for us; we never make the rate on a loan. The Cmarrman. After you have made a loan to one of these concerns, and the rate is fixed on that dav. does it remain at that figure ? Mr. Lecar. Yes. But these cooperative organizations, with our knowledge and consent, are charging their members something over what they pay us. We think it is a wise thing for them to do, because it provides a sinking fund against anv kind of distress thev may have to face in the future. The CuammaN. How are they keeping up in the payment of their interest? Mr. Lrcce. Pretty well. They have paid us something: over $2,000,000 in interest up to the present time, and there is about $900,000 of accrued interest. Some of it that has accrued is not due. in the same that the loan has not matured. AGRICULTURAL MARKETING REVOLVING FUND : Ma CHristENseN. We have actually collected $2,104,571.72 inerest. . The CrarrmaN. Have any of them defaulted entirely in the payment of interest? Mr. Lrge. There are a few cases where they have not been able to meet the interest. The Crmamman. What do you do with those fellows? Mr. Lrcee. So far, we have not done anything except to nurse them along so that they can eventually pay. There are some pretty good reasons for that. For instance. we had the bean growers’ associations before us this morning. They are going to be sold out unless we put up some more money. They are owing us some interest from last year. But the price of that wi has dropped. I think. from 6 cents to 3 cents per pound, The Cramrarax. What kind of security do you get? Mr. Lecce. We get warehouse receipts on the beans themselves, but they are rather negligible when the price drops as much as 50 per cent, as it has. The Cmamman. Is that because of an overproduction of beans throughout the world? Mr. Lecoe. Throughout the world; yes. They had a very heavy crop of beans this year. Although the crop in New York and Mich-‘gan was not so heavy, the crop in the Western States was very heavy. The Cuamrmax. I want to ask you a further question. You are asking for $150,000,000 in this estimate. I want to see where we are in this matter, and how greatly you are in need of anv immediate help. Chelieve you stated you have a free balance of $2,000,000? Mr. CuristeNseEN. Yes. sir: that is correct as of December 13 1930. The CmarrmanN. And you have loans approved tentatively for $75,000,000 Mr. Liecoe. No; there are $75,000,000 of bank obligations against stabilization commodities which we are supposed to take up, but nobody is urging us to take them up. We expect to pay off a lot nf those obligations with a part of this money. The CusrMmax. Is there any present need for that at the moment? Mr. Lrace. Not all of it. The banks will be willing to carry us along, although it is not a good precedent to renew all of it. The CuarrMaN. Assuming that you pay that off out of the $150,-000,000, if you should get it, von would have a balance remaining nf about $75,000,000. Mr. Lecee. Yes; we would use half of it. The CumatrmaN. In addition to that, to what extent will repayments come in? Mr. Lreoe. Normally, they should be coming in in considerable volume; but with this horrible market condition which is in existence now, where there seems to be no buying. or no immediate need, it is slow. ‘That is one thing that is tying up so much of the money, the fact that the stuff is not selling normally as it ordinarily would be at this time of the year. The CaairMaN. Have you made any estimate of how mu h money vould come in in the next two months from repavments? 12 ir AGRICULTURAL MARKETING REVOLVING FUND 13 Mr. Lecce. We have some rough figures on that, but we have not those here this morning. Mr. CarisTeNseN. I have an estimate here as to the demand during the next six months, based upon the demand on the board since June 30. Up to the present time our net commitments amount to $96,000,000. If we are looking ahead for the next six months, we can expect some figures pretty close to that. The CaarMaN. Suppose you get this $150.000,000, and you get the $100,000,000 in the regular bill. Mr. Lecee. That would not be available until the 1st of next July. The Cmamrman, I understand, but that would make up the total authorization of $500,000,000. What is going to happen when you get rid of all of that? What is the prospect of the Farm Board coming back for $500.000.000 more. or any other considerable amount? ir Mr. Lecee. There is one thing about it, regardless of what we will have from the money available. We will have no disposition to use it except as we feel it is for-a useful purpose. The Cramman. I expect by the time the $500,000,000 is loaned. we ought to know whether it is doing any good, or whether it is not doing any good, and if it is not doing = good it will be about time to quit, it appears to me. Of course. :. it is. the future has got to develop that phase of it. Mr. Leeee. While it is loaned, it is not lost. Of course, on the present market there is a substantial loss in the stabilization operations on wheat and cotton, and if we closed it out to-morrow there would be a substantial loss on those two items. Outside of that the losses would be negligible. We have tried very hard to be careful about the security back of these loans, and I think most of them, while they are slow, will be eventually liquidated. The Cmamman. Let me ask you this further question. T do not know exactly when Congress will adjourn for the holidays. Do you need any considerable amount of this money before the first of the year? Mr. Lreace. We will get along without it as best we can. but we should have it before the first of the vear. The Cramrmax. How much? Mr. Lecce. We would like to have you make the amount of this first request available. The Crairman. That is $150,000,000¢ Mr. Lecce. Yes. The CramrMax. What interest are you paying on the borrowed money ? Mr. Lecce. Three per cent on money borrowed from the banks on warehouse receipt acceptances. . The CHAIRMAN. You say you have about $75.000.000 of that? Mr. Lecer. Yes. . Lo. The Cirairman. And if that is taken up it will release the Government from the payment of that interest? Mr. Lecee. Yes; except that the Treasury has borrowed money for something less than that. } The CHarrmax. Suppose we appropriate $150.000.000: could you take up all of that? 14 AGRICULTURAL MARKETING REVOLVING FUND Mr. Lecce. Not all of it; some of them do not mature until February or March. The Cuamrman. You can not take them up before their maturity? Mr. Lecce. Yes; some of them can be taken up before maturity. But the situation is so uncertain we do not know whether it would be a wise thing to do to pay that off entirely. We would like to reduce it and eliminate that much from the picture. Mr. Ayres. About how much is there of that paper? Mr. Lecce. About $75,000.000—$26,000,000 on wheat and $49,000,000 on cotton. Mr. Ayres. This money has been borrowed from various banks? Mr. Lecce. Yes, a large part of it was borrowed by the cooperative organizations from the banks and turned over to us subject to the liens, and they have been continued, and the banks are perfectly willing to carry them. They are perfectly safe. They have the warehouse receipts for the commodity, so it 1s a sound loan for them. Mr. BucHanaN. You said you felt the price of wheat in this country was to some extent artificially maintained. Have you any figures to show how much more the wheat producers in this country are getting now for their wheat than the wheat producers of any other country producing surplus wheat. Mr. Lace. The easiest comparison, on account of the similarity in listance of transportation, is with Canada, and the Canadian price at Winnipeg is running from 17 to 18 cents a bushel below our price. One day last week it was 21 cents below our price, but that was exceptional. It has averaged about 17 or 18 cents below our price for some time past. Mr. Ayres. About how long? Mr. Lircoe. That has been true for the last six weeks, I should say. Mr. BucaanaN. And with a similar differential in favor of our wheat producers in every other surplus wheat-producing country nf the world ? Mr. Lracr. Absolutely. Mr. Buoraxan. That shows that the operations of the Farm Board are resulting in benefit to the wheat producers? Mr. Lecce. I think that is absolutely conclusive, and the difference, as I said a moment ago, on the weekly consumption is around two and a half million dollars. Mr. BucaanaN. Let me ask vou a few questions in regard to cotton. The world production of cotton is not excessive this year, is it, compared with the average of the last five years? Mr. LEGGE. As to cotton, it is not so much a question of excessive production to-day as it is of low consumption. Mr. BucHanNaN. In other words, there has been about 26.500.000 bales of cotton produced and that is about the average of the past five years? Mr. Liecer. Yes. We had a little accumulation, Congressman, mn cotton, but nothing relatively as bad as it was in wheat. We went into this crop with a 6,200,000 bales carry-over. Mr. BucHaNaN. That is true; but in the world there has been about 26,500,000 bales of cotton produced, and that is about the average of the past five years. Therefore, from a statistical standpoint, the position of cotton is more favorable than the position of wheat. But the under- AGRICULTURAL MARKETING REVOLVING FUND 15 consumption, not only this year but last year, is the cause of the low price of cotton and the depression that is world-wide. Mr. BucHaxan. I am not informed upon the actual status of the wheat men, but I have every reason to believe that there will be a real, substantial reduction in cotton acreage. There are about ten to fourteen million acres of marginal cotton tand on which people plant cotton on which, with normal prices, they make a loss. Mr. Leger. That should not be planted. Mr. BucraNaN. Then with the abnormally low price such as we now have, it is going to prevent that land being planted in cotton right now, and the price of cotton will advance materially in the next 10 months. Mr. Leger. I think that is a fair analysis of the situation. Mr. Bucranan. With the $250,000,000 you are now asking for, do you think you can put this thing across? Mr. Lecee. What do you mean by “ put it across ”? Mr. Bucranan. Make a success out of it; that is what I want. Mr. Leer. If you mean whether under present world conditions we can bring back the price of wheat again to what we think is a fair price, I will say no, it can-not be done. But we can prevent it going lower and make some substantial improvement. Mr. Bucuaxan. Perhaps my question was not exactly plain. Suppose we make this $250,000,000 appropriation and world conditions improve. You will succeed because the products will be sold and you will collect the money for your revolving fund. Mr. Lreee. Yes; and if you are correct about the taking out of the acreage of cotton, we will succeed on cotton. and that is what we hope for. Mr. Brenanan. If the financial condition of the world should improve and the depression passes off, your commodities will be sold and you will collect on your loans, your revolving fund will be increased and you will still have money to operate on? Mr. Lreer. Absolutely. Mr. Bucuanan. But suppose conditions do not improve, we will say, for 10 months; you can not succeed unless vou have more money, can you? Mr. Lecce. I do not know; that is a question as to what the production proves to be. We would be in a condition where some of these country banks would have badly frozen assets. and the money would not be revolving. | Mr. Brcuaxan. This is leading up to the question as to whether or not it would be advisable for Congress to pass another authorization, whether you did use 1t or not, in order that you might have a certain amount of leeway or leverage, so that it might not be said by any financial interest antagonistic to the Farm Board, well, when the $250,000,000 is gone forever, we have got them. If you have another authorization of $250,000,000, they can not say that. Mr. Lecce. There is. no question but that the psychological effect of that might be helpful. } Mr. Bucuanan. But if you should be mistaken—-— Mr. Lecer (interposing). There is one thing we can always do. The Government still has fairly good credit. We can carry these 20415—80——2 16 AGRICULTURAL MARKETING REVOLVING FUND commodities at 75 per cent of their market value on bank loans at any time that we think we have to do so. We are not going to quit just because we happen to run a little short of money. We have not done that. Mr. Bucnanan. I am glad to hear you say that. And I am for giving this experiment, if you want to call it that, a thorough test, even 1f it takes $500,000 more, and either make it succeed or make it a failure, if it is going to be a failure, and have the matter settled. I am for testing it out thoroughly. I want to have it succeed even beyond our hopes, of course, but I do not want it to have half a trial. I want it to have a thorough trial so that we can be sure there is no way for it to succeed, if you do not make it succeed. Mr. Ayres. I wanted to follow up the wheat matter a little further. but I did not want to interrupt Mr. Buchanan. You said a few minutes ago that in the last six weeks the price of wheat was much higher here than in Canada. Prior to that time it was not, was it? Mr. Lecer. Yes; but not to the same extent. Going back to the Canadian picture, a year ago now, in the fall of 1929, the Canadian price ranged substantially above the price in the States. Wheat was hauled across the Canadian border. They paid the 12 cents duty, but they still hauled it across at a profit. People in Congress, especially the Senate Committee, grilled me for hours as to why that was true. I could not answer it except by saying that the Winnepeg price they were paying for wheat was way above the world price at the time. The price being paid in Winnipeg was above the Liverpool price on grain. The Cramrman. What was the reason for that? Mr. Leger. They were dissatisfied as to conditions, and not without a good deal of reason. The 1929 crop did drop below the 1928 crop of wheat by 500,000.000 bushels, around the world. It would seem that should have been enough to adjust things. But then this awful depression came over Europe and restrictions were put on as to the use of wheat. Instead of getting a reduction of 500,000,000 bushels. the reduction proved to be less than 100,000.000 bushels. Mr. Avres. Is it not a fact that a short time ago, last month, I think it was, there was considerable publicity given to the fact that the Farm Board was intending to export, or was exporting millions of bushels of wheat to foreign countries and that they were going on the market to purchase wheat to make up this deficiency, or, rather, the lack of wheat which they had for export purposes, and that this caused the Canadian wheat pool to sell their wheat much cheaper than otherwise becau:e they felt they had to get rid of it in order to get rid of the competition? That is to say, publicity was given to that statement: I am not saying that the Farm Board authorized that publicity, or anything of that kind. Mr. Leer. There was no foundation in fact for that publicity. Mr. Ayres. It was given out, Mr. Leger. Yes: such stories were circulated, but it was pure propaganda on the part of short-selling traders on the market. We were not responsible for it, nor was any such action taken. Mr. Ayres. There is-one proposition I want to develop to some extent. Along early last spring. I think it was along about the AGRICULTURAL MARKETING REVOLVING FUND 17 11 it ft nt Ue it A ‘n A. 10 r. $2 -e 11 1 V 3k © t rs 3 iP Ist of April, the stabilization corporation announced a plan by which they would purchase wheat and store it with the millers and Pe millers could buy it and pay for it as they needed it in the uture. Can you give the committee the details of that plan and tell us what was accomplished ? Mr. Lecce. I can not give you the exact figures as to the tonnage they handled. Wheat at that time was facing a rather nasty storage situation. Chicago, Minneapolis, and Duluth were congested and Kansas City was pretty full also, and the millers had a lot of vacant room. We called them together and asked them whether they could furnish the room free of storage cost, for the privilege of having the first option, at whatever the market was on wheat, when it was needed. It saved a considerable amount of storage expense to the stabilization corporation and was very satisfactory to the millers. . Me, Avres. About when did the demand for the storage space egin ? Mr. Lecee. As the new crop came 11. Mr. Ayres. You had only utilized this storage about two or three months? Mr. Lecce. Some of it ran four months; three months would be the average, perhaps. Mr. Ayres. May I ask whether or not the grain stabilization corporation had to sell the wheat at that time to these millers who were demanding this storage space at a low figure. compared with the market value? Mr. Leger. No, sir; it always had the privilege of taking it out at a lower cost on their part, at a cent a bushel, and putting it back in the cars. It was subject to the order of the corporation, Mr. Ayres. You did dispose of practically all the wheat you had stored at that time and sold it to the millers? Mr. Legge. Not all of it. Some of it was moved and sonie of it was disposed of to the millers. Mr. Ayres. The bulk of it? Mr. Linger. The bulk of it. Mr. Ayres. Do you remember how many million bushels had been stored ? Mr. Lecee. I do not believe IT want to answer that from memory. It was a substantial quantity. : Mr. Ayres. It had to be sold just at the time the new crop was coming in? Mr. Lrcoe. Yes; it made no difference in the quantity because it was immediately replaced by purchase. When 1,000,000 bushels was sold the stabilization corporation immediately purchased on the open market another 1,000,000 bushels. Tt did not reduce their holdings at any time since the 16th of June. Mr. Ayres. You do not think that had a tendency to reduce the price of the new crop? Lt Mr. LeceE. I do not see how it could. There was a lot of noise made about it. There was an option exercised by Hoffman in Kansas City for 300,000 bushels, and the same 300,000 bushels was bought on the Kansas City market. cash eorain. within 48 hours. If he had no- [8 AGRICULTURAL MARKETING REVOLVING FUND taken that he might have taken 800,000 bushels off the cash market and I can not see how it could have had any particular effect on that. I say 48 hours; it was done as the wheat came in and as it could be acquired. Mr. Ayres. There has also been a great deal said about what transpired during the month of August, or the fore part of September of this year, to the effect that the Farm Board had the Chicago Board of Trade on their knees, ready to eat out of their hands, and then all of a sudden that attitude was changed. There has been a great deal of speculation as to why you ceased at that time. Mr. Lecee. I think they are confusing the Federal Farm Board with the Department of Agriculture. The Secretary of Agriculture took up two different things with the Chicago Board of Trade. Mr. Bucuanan. There is one other question I want to ask you, Mr. Legge. We appropriated for your board $250,000,000. You have an estimate of an appropriation, in the regular appropriation bill, of $100,000,000, and you also have an estimate of $150,000,000 in this bill, which, with what you have previously had. makes the total of $500,000,000. Would it be any advatnage to you, psychologically, or be an advantage in your operations, if the whole $250.000,000 was appropriated in this bill? Mr. Legge. It would have this advantage. It would be notice to the people who have been trying to stir up trouble with the board and in connection with the operations of the agricultural marketing act, that Congress was supporting the Federal Farm Board to that extent. So far as the use of the money is concerned—— Mr. Bucaanax (interposing). The only advantage would be to serve notice on those who are antagonistic to the Board, or who are trymg to prevent its success, to let them know that Congress was squarely back of the Board ? Mr. Lecce. Yes, sir; that is always advantageous. Mr. Tayror. Is not that quite important, to let the world know that Congress is back of you, and to show these trouble makers that the United States Government is bigger than they are? Mr. Lecce. It is important, and if you do that it will show that. Mr. Ackerman. Is the Farm Board contemplating making additional loans to the grape growers in California in the near future? Mr. Lrcee. I think there will be very little more called for this season. I think there will be very little more of that. In fact, we are hoping some of the loans may be repaid in a few months. The peak of their movement is over; in fact, it is practically completed. So I think there will be no further loans of any consequence called for there. Mr. Ackerman. Nothing comparable to what you have already loaned ? Mr. Lecce. No; we anticipate they are going to refund that. They are sending us some money. While we have loaned them this large amount of money, they are paying back some of those loans at the present time. st 1 (t 16 = e ir 'e WF - 3 a AGRICULTURAL MARKETING REVOLVING FUND . r Mr. Ackerman. Do you contemplate that in the next:threer months "i= loan will be repaid? Lo eo *. Lecee. Not as quickly as that. Lon rr. ACKERMAN. In six months? Am Mr. Lrece. No. There is $4,000,000 in that, and thats a Tongterm loan on their facilities. The money is coming in, and they will cut it down very substantially. Turespay, Decemser 16, 1930. FAILURE TO ORGANIZE COOPERATIVE ASSOCIATIONS OF TOBACCO GROWERS IN KENTUCKY 1. 11 n 0 Oo 0} 6 Qo Q Q ND Ea xX LU Q The Cramyax. Mr. Byrns desires to ask some questions. Mr. Byr~s. You have not been able to do anything for the. tobacco growers down in Kentucky and Tennessee—and I am now referring to the dark tobacco region rather than to the Burley region; I do i whether you have done anything in the Burley region or not Mr. Stone. Yes; we have done something in the Burley section. Mr. Byr~s. I understand that the reason you have not heen able to render any aid to the tobacco growers there is because of their failure or inability to organize cooperative associations. Mr. Stone. We have three or four groups down there, Mr. Byrns, that are divided as to what they want. One group wants one ‘plan and another group wants another plan. The thing I have been trying to do 1s to get them to join together on some central plan. but so far they have been unable to do that. Mr. Byrns. Mr. Stone, there is an idea on the part of some of the citizens down there, I will not say how many, but at least some of them have expressed the idea that possibly the Federal Farm Board should interest itself to the extent of really telling those growers what they should do, or, rather, dictating the contract. or something of that sort. Do you ever do that? Mr. Stoxe. We have done that with that group, Mr. Byrns: we prepared a contract and sent it down there to then. Mr. Byrns. What was the result? Mr. StoxE. Just as I told you; there was a divided opinion about it. Mr. Byrns. So they never have even accented the contract which vou have drawn? Mr. StoxE. That is correct. Mr. Collins, who is in charge of the tobacco section of the Division of Cooperative Marketing, was sent down there, as well as several other people, with the idea of trying to get those men in the various groups together under a contract that would meet the situation as it is. In the Burley section we did prepare a contract which has been adopted. That section is prepared now to take care of the growers in he event that the price 1s not gi I think that possibility has had a tendency to increase the price. Mr. Byr~s. My understanding of the attitude of the Farm Board— and I have talked to you particularly, and possibly vou are the 20 AGRICULTURAL MARKETING REVOLVING FUND : only member of the Farm Board with whom I have talked—is that the Farm Board is really willing to cooperate with any cooperative Wsheinkion that is organized along the lines of the Capper-Volstead AC. Mr. Stone. Yes. That is right. _ Mr. Byrxs. And you say you prepared a contract for them in the effort to get these groups together? Mr. Stone. Yes. Mr. Byrxs. I presume, however, if that contract was not entirely agreeable, if the groups could get together on some other contract which complied with the terms of that law, it would be entirely acceptable to the Farm Board? Mr. Stoxe. Absolutely. Mr. Byrns. I have not read the act for some time, but is there something in it—I do not know whether it pertains to the loan features or not—but is there something in the act that authorizes the Farm Board to use other agencies? You will understand to what I am referring. Is there anything in the terms of the act which would permit the Farm Board to use any agencies down there for the relief of the tobacco growers? Mr. Stone. I think not, Mr. Byrns. Mr. Byrxs. I ask that question because I know some of them are in distress. I may be mistaken about it, but I think I noticed that in the Russellville, Ky., market the other day tobacco sold for 4.2. I think it was. Mr. Stone. 1 think it was around an average of 414. Mr. Byrys. Of course, that is not half of what it costs to produce it. Mr. Stone. It is way below the cost of production. Mr. Byrns. Some of those farmers undoubtedly are now, or later on will be, in bad shape, if they are forced to sell their tobacco at that price. Mr. Stone. Yes. You will remember, Mr. Byrns, when you came to see me 1 got a bulletin out, published about 12 months ago— Mr. Byrns (interposing). Yes; I remember that. Mr. Stone (continuing). In which I reminded the growers that if they wanted to do anything in regard to this present crop that was the time to do it, that we could only assist them through cooperative-marketing associations, and I advised them very strongly to take the necessary steps for organization at that time. In addition to that, I have had Mr. Collins down there on three or four occasions, and I have had Colonel Rogan down there several times. He met with the various groups. I also had Doctor Bomberger go down there at one time. I have always found that they would go just so far, but that they never could agree on any one plan. There is, for instance, one group, say, in Springfield, who want one thing, and there is another group m another section who are for another plan. The main thing I am interested in is to get them together and have the whole territory agree on a unified plan. Mr. Byrns. And when they do that— Mr. STONE (interposing). We are ready to do anything in the world that we can. under this act, to help them. AGRICULTURAL MARKETING REVOLVING FUND. 21 Mr. Byrns. As I understand you, there is no provision in the law which would enable the board to render this assistance unless they have organized along the cooperative lines vou have suggested. Mr. Stone. That 1s correct. Mr. Byrxs. In other words, you could not use any bank, you could not use any other existing agency, or any agency down there for the purpose of loaning money with which thev could store and hold their tobacco? Mr. Stone. So long as they were organized under the terms of the agricultural marketing act and the Capper-Volstead Act, we could do that. As to the details of operation, we do not try to dictate about that so long as they comply with the terms of the two acts. which enable us to aid them. Mr. Byrxs. I want to say this for the record. My questions are not by any means intended as a criticism, or rather an intimation that you, as a member of the board, and representing the board, have not been entirely responsive. I have always found you are anxious to render them some service, if you could, but I was wondering if there was any possible chance to give those tobacco growers, who, I dare say, are not being consulted about this association very much, an opportunity to get some help and some relief. There seems to be none. Mr. STONE. In the Burley section, Mr. Byrns, the old Burley Association is still in existence. Their board of directors meet about one or twice a year. About six weeks ago I went to Lexington and met with the board of directors of the old Burley Association and suggested that they adopt a new contract and make the necessary arrangements with the existing warehouses, which are now owned by the members of the old Burley Association, to handle this crop in the event that the growers wanted it handled cooperatively. They did adopt the contract and they have made the necessary arrangements, both financially and otherwise, and are now prepared to handle the Burley crop cooperatively, if the members want it. IT think this really has raised the price to some extent on Burley tobacco. The general feeling in central Kentucky was that the Burley crop would start at an average of around 14 or 15 cents per pound and the opening prices so far have heen around 18 to 20 cents on the average. Mr. Byrxs. I have had some suggestions made to me, or rather I have had some conversation with parties with reference to the handling of livestock, Mr. Legge, in Chicago. It has been stated to me, as I recall it, that about $3,000,000,000 worth of livestock is sold on the Chicago market, and that the board is cooperating with the National Livestock Marketing Association, which only handles about $161,000,000 worth of the $3.000,000,000; and that that is really serving, in the last analysis, to handicap the growers in securing good prices for tlfeir product. In other words, it is tending to handicap those who are dealing on the outside in their efforts to sell, resulting in losses to the growers. I wondered if any aneh conditions as that has resulted. 22 AGRICULTURAL MARKETING REVOLVING FUND Mr. Leeoe. Congressman, that situation is a little like the tobacco question you were just discussing. I think we have spent more time with the livestock growers than perhaps any one single group. They were partly organized in separate groups. Finally, after I do not know how many efforts, a majority of them who were organized at all, agreed on this present set-up of the National Livestock Marketing Association. . Since that time quite a substantial nuniber of new organizations and some of the older ones that at first declined to participate, have joined with the association. For instance, Mr. Denman is leaving this afternoon for Kansas City to confer with another group who are considering the same thing. The work is under way, but it has been very slow getting those fellows together. But I really believe it is heading in the right direction now and is going to go forward much more rapidly from now on. Mr. Byrwns. I understand your National Livestock Marketing Association is composed of a number of associations: in other words, it is a combination of a number. Mr, Lrgee. Yes. Mr. Byr~s. Are there any associations out there which are organized under the terms of the Capper-Volstead Act which are not in that association, and which. therefore, under the law could not qualify ¢ Mr. Lzeeoe. Yes, sir, there are some that are holding out and declining to go along on what we regard as pure technicalities. There is no substantial difference of agreement between them and what is now in existence. Of course, the law admonishes us not to encourage competition among the cooperatives themselves, and we have been making our efforts to try to bring these fellows together into one central organization, where they would work with each other instead of fighting each other, as some of them have been doing in the past. Mr. Byrxs. As 1 understand it, your board recognizes the Pro-{uecer’s Commission Co? Mr. Lreor. No, it is the National Livestock Marketing Association. Practically all these old producer groups have joined in. But it is not in any sense the old organization; it is an entirely new organization and it has a complete new set-up. I think they represent probably not less than half of the producers now affiliated with this new national, but practically all of the old producers’ organization have joined and taken membership in the central organization. Mr. Byrys. What is the Farmers’ Union Livestock Co. ? Mr. Lrcos. Several of such units were sot up under the auspices of this Farmers Educational and Cooperative Union of Ainerica, which is a national farm organization, as you know. One of their nnits, which is located at South St. Paul has joined the National Livestock Marketing Association. Mr. Berns. Mr. Legge, has the board ever investigated to determine whether or not these cooperative companies are rendering or have rendered as efficient or high-class or beneficial service to the orowers in marketing livestock as the members of the Livestock Exchange ? 2) 1 of vf 18 2 rr AS 18 o = 8 y g ar (in >t 301 IT J - o —— Ya AT a c} y wy Ay r i wr i) AGRICULTURAL MARKETING REVOLVING FUND 23 Mr. Lecce. We have the records of the livestock cooperatives, and their record is very good, as a class. They are growing rapidly in number and in the percentage of their business. Mr. Byrws. I understand the exchange members, of course, handle the bulk of the livestock. I wondered whether the board could deal with them, even if they wanted to, under the law? Mr. Lecae. I can not see any provision in the law which enables us to furnish aid to private operators. Mr. Byrws. For the same legal reason that Mr. Stone gave with reference to handling tobacco ? Mr. Lier. Yes. Congress, in passing the law, established the principle of cooperative effort among the farmers themselves as a basic principle, and we think you were right. Our experience so far confirms our judgment as to what we think is the right approach, that is, collective action on part of original producers. Mr. Byrns. Would your board have any right to aid livestock growers or raisers, whether they are operating on a large or a small scale, who are not members of this cooperative association? Mr. Lecee. I think we would have the right if they had some set-up that complied with the Capper-Volstead law requirement as to a cooperative organization. There is. a serious question, however, when there is such an organization in existence that we believe to be functioning efficiently, as to whether or not we should encourage the duplication in the same market on the part of another group of producers. : Mr. Byrns. I do not know whether you care to give your reasons for the record or not, but I understand the board has refused aid to livestock growers because they insist on the right to permit commission companies of long service and reputable standing to sell their livestock. Is that true; and if so, why? Mr. Leer. No, that is not technically correct, Congressman. We can not extend financial aid to the commission companies. Take, for instance, the wool cooperative. They have made a contract with an old-time wool firm, one of the largest in existence, and it does all their selling for them. This commission firm gave up all their other business to devote their efforts to the sale of the cooperative’s products, which they are selling for them on a contract basis. So we did not stick to the principle of not dictating how they shall sell. But when it comes to extending financial aid to the commission Snshnnty, we do not feel that the law contemplates our doing that. Mr. Ayres. Even though the commission firm is doing business exclusively with the cooperative? - Mr. Lecce. Oh, no; if the cooperative wants to contract with the commission firm to represent them as an exclusive sales representative, that is another matter. That is what has been done in the case of wool and what is being done in connection with some of the fruit and vegetable groups. Instead of the farmers setting up their own marketing machinery they have contracted with somebody else, on a basis satisfactory to them, to do their marketing for them. Mr. Stone. We would not be permitted to advance money to the commission company, as a company. 24 AGRICULTURAL MARKETING REVOLVING FUND Mr. Leer. Our advance is made to the cooperative; if they make a contract with a commission firm to represent them in selling. that is their business, as we see it. Mr. Ayres. Mr. Legge, there are two national farmers’ organizations handling grain, one being the Farmers’ National Grain Corporation and the other the Grain Stabilization Corporation. Will you be so kind as to explain the difference between the two. or rather, the functions of each? Mr. Lecce. Taking the Farmers’ National Grain Corporation first, which we regard as the more important, that is composed of 26 groups of grain cooperatives covering practically the entire United States where grain 1s grown for marketing. Each of those 26 groups—and they usually represent a State or a region, some territorial group— each of them is composed of a large number of local associations such as local elevators at some local point in the country, and each of them takes stock in this central-marketing organization, based on the volume of business done for them. It is on a percentage basis, according to the size of the cooperative, where their relation to the central organization is on a bushelage basis. The Farm Board has no jurisdiction over their operations beyond that of helping them to organize and iron out the differences that have arisen and still arise between the different member groups, and help them to finance their operations. They started out with a comparatively small amount of capital. and they were rather heavy borrowers. Mr. Ayres. Of the Farm Board? Mr. Leger. Of the Farm Board. Their subscription to the capital stock was on the basis, I think, of 20 per cent being paid down and the balance of it to be paid over a period of four or five years. They are to pay for the stock in the central organization—the Farmers’ National Grain Corporation—in addition to which all the earnings of the central organization until the capital is built up to the authorized amount of $10,000,000 are applied toward the payment on the stock in this central organization. They have a pretty good record up to the present time. Their operations and their financial strength have been growing. They are handling a constantly increasing quantity of grain. They have already handled directly actual sales of something over 60,000,000 bushels of wheat of the current crop, and they are financing for their members a considerable quantity of members’ grain still in storage. That organization is wholly owned by the growers. It is producer owned and controlled. as contemplated in the agricultural marketing act. ] SS ARTIC Sng The Grain Stabilization Corporation is also set up under the terms of the act, as a separate corporate entity, incorporated under the laws of the State of Delaware, and it was organized for the express purpose set forth In the law, in connection with emergency operations in times like we are going through at the present time. That is financed almost wholly by money borrowed from the board. The capitalization is held by the cooperative organizations, that is, the stock, but it 1s nominal, it does not represent any considerable volume of business. . In the operation the profits and losses accrue directly to this revolving fund provided for the Farm Board; while, on the other hand, the Farmers’ National Grain Corporation operates ace the sales agency for its member stock holdine grain cooperatives. TQ r, jj {1 103 €, Ss '$ i 1S h n 3, eo b> 0) ] = Oo oO 0 3 AGRICULTURAL MARKETING REVOLVING FUND 25 Mr. Ayres. Is anyone permitted to join the Farmers’ National Grain Corporation except a cooperative ? Mr. Lecae. The membership has not been extended to individual farmers. They are considering seriously, in some sections where the people are rather scattered and where the organization of a local cooperative is difficult, doing that at the present time. I think that is permissible under the act, if they wish to do so. Mr. Ayres. Just what service does the Stabilization Corporation perform? Mr. Leger. The service of trying to maintain, in the case of extreme depression or a surplus of the commodity, a stabilized price. Mr. Ayres. That is, they go on the market and purchase at times when the price is deemed to be too low? Mr. Leeee. That is the theory. De. Avres. And sell when it is deemed to be too high; is that the idea ? Mr. Lecce. Yes; but we have not had any trouble of that kind yet. I have here a memorandum from the Department of Agriculture which will give you some idea of the benefits derived from the stabilization operations. This is for the month of October, showing an average price at Winnipeg of 68 cents a bushel and an average price at Minneapolis of 83 cents a bushel, or a difference of 15 cents a bushel-average for the month of October on comparable grades of wheat. Our grading system 1s not the same as between Canada and here, but the market recognizes No. 3 Manitoba on the same sale basis as No. 1 Dakota, or our northern spring-wheat grade. and the spread for that month was 36 cents. On oats there was very little difference, the Winnipeg price being 33 cents and the Chicago price 36 cents. On barley, however, the Winnipeg price was 32 cents and the Minneapolis price was 54 cents, reflecting the full 20-cent tariff on barley as between the Canadian price and the domestic price. On rye, the Winnipeg price was 37 cents, and the Minneapolis price was 49 cents; on flaxseed, the Winnipeg price was $1.29, and the Minneapolis price was 80 cents. That was the average for the month, which might be taken as evidence that—— Mr. Dickinson (interposing). Have you anything on corn? Mr. Lrcee. No; the Canadian comparison does not give corn, but I can give you prices on corn using a comparison with the Argentine prices. The Argentine corn price for November averaged 35 cents a bushel at Buenos Aires. while here it averaged 71 cents a bushel in Chicago. The CHamrmay. That difference represents the amount of the tariff? Mr. LecGe. The tariff is 25 cents. I am sorry to say there are considerable quantities of corn coming in and paving the tariff at the present time. . The CHARMAN. You say there is a considerable amount of corn coming in from corn-producing countries? Mr. Leer. Yes; they unloaded 90,000 bushels from Cape Town. South Africa, last week, and paid the tariff on it. The Cuaramran. Then we did not put the tariff high enough. 26 AGRICULTURAL MARKETING REVOLVING FUND Mr. Byrns, Was there any special reason why those 90,000 bushels came in, was it just to satisfy the demand here, or rather, not the demand, but the market; or was it because somebody was buying it for some other purpose? . Mr. Lecee. No; they may buy that corn for the purpose of manufacturing corn products, or some uses of that kind. The freight on corn from the Argentine is less than it is from Iowa. They can ship it regularly by water from Buenos Aires to New York cheaper than the farmers of Iowa can ship corn into New York by rail. Mr. Byrns. There is one question I wanted to ask you. You covered it yesterday, but I want to get it clear in mv own mind. and also for the record. You have asked for $150,000,000 here for the current fiscal year? Mr. Lecce. Yes, sir. Mr. Byrns., If that amount is allowed that will make $400,000.000 of the entire authorization of $500.000.000? Mr. Lrcee. Yes, sir. Mr. Byzwns. I have had the suggestion made to me that Congress ought to appropriate the full amount. Do I understand that if the $150,000,000 is appropriated, as I understand under this estimate it will be, that will be all that you and vour board think is necessary for the current fiscal year? Mr. Lecce. We think we can go through until July 1 with that amount of money. The balance of that money is asked for in the next year’s appropriation. Mr. Byrns. I understand; but you do not need it in this bill at this time ? Mr. Lrcoe. We think not, although I must say that the situation is a bit disturbing. I would like to read you a letter that just came in from a cooperative on that subject. After referring to several other things, the writer says: The second thing they look at is the money question. Hveryone admits we can hold the market if money is available to us, but what they read in the papers about the recent arguments in Congress in regard to the various appropriation bills, ete., make them nervous, in spite of the fact that none of the arguments are about the Farm Board bill. Everyone from bankers to bootblacks takes great pride in the fact that our actions have and are preventing not only a panic, but a disaster. So, broadly speaking, everyone is cheering for us and if they were absolutely positive of our position the question could be laid aside as settled. Summing up, I would say that the biggest single thing that could be done at the present moment to establish confidence is for Congress to take quick action on the $150,000,000 appropriation. Not that we are short of money or anticipate any great use for it, but just because it would be an unanswerable argument that the Government intends to stand behind the Farm Board and what it represents. If there is anything that the writer or our organization can do for the good of the cause, fet us know. In the meantime, we can easily hold our lines and my guess is that with the passage of the $150,000.000 apvrovriation, vou will see wheat 5 to 10 cents higher almost immediately. Mr. Tavror. Mr. Legge, will you state whether there is anything further that occurs to you that you think would be advantageous for the operation of your board for the welfare of the farmers of this country? } Mr. Lrcer. Yes, sir; we think there should be an amendment to the reoulations of Congress governing the exchanges dealing in AGRICULTURAL MARKETING REVOLVING FUND 27 agricultural commodities of any kind, to the end that exchanges would not be permitted to make their own rules and regulations, except as they were approved by the Secretary of Agriculture, or by some officer designated by the Government for that purpose; and that the Secretary of Agriculture be given definite authority to enforce the rules after they have been approved. Those exchange rules and regulations are all built up by the traders themselves. They are not in the interest of either the producers or consumers. They can not be, and they can change them every day at their will. Under the present legislation, there is not anybody I can find that has any authority to effectively deal with such exchanges. For instance, we have been talking about those people who are selling short on wheat to-day, and they are relying largely on going before a tribunal in the grain exchange for an adjudication in the event it turns out to be a bad move on their part. That extends down to private operators, and there is no reason why it can not be regulated. Mr. Dicxinsox. I would like to say, in that connection, that 1 have a bill pending before the Agricultural Committee now that I am going to reintroduce with some additional provisions that cover the suggestions of the chairman of the board. I have been wondering whether or not it would be advisable to include with the Secretary of Agriculture the fhnkemy of the Farm Board Tr. Ayres. The so-called Capper-Tj r Tol : - Volstead bill did not cover that ink bill and the Capper Mr. Lecce. That is the present situation, as we see it. You have within recent times passed three laws dealing with this problem: One is the warehousing act, one is the grain inspection act, and the third is the grain futures act; but the legislation that is operating to-day is under different bureaus, not giving it the strength that it would have if it were consolidated in one regulatory or governing body, or if all the powers for its enforcement were in the hands of one administrative officer. There is one man who deals with the futures trading problem, but that law has no teeth in it, as I understand it. - Publicity is about the only weapon it affords. I do not say that it is wholly ineffective, but there is no provision that enables them to get at it—— Mr. Dickinson (interposing). There is a provision that they may cancel the license of a trader. Mr. Likgoe. I think the law reads that it can only be done upon the joint recommendation of the Attorney General, the Secretary of Agriculture, and the Secretary of Commerce, and, if my memory serves me right, that is something that is hard to obtain sometimes. The CraamryaN. Of course, you realize that this committee has no jurisdiction over legislative matters. Mr. Lecge. I understand that; but you asked the question as to what should be done. The Cramrmax. Certainly, and we want to have vour suggestions. Of course, we want to do whatever we can to improve this business and make the law more effective. Have you talked with the members of the legislative committee about this? Mr. Leer. I have talked with several members of the committee, and, also, with the Secretary of Agriculture. I think you are in touch with this particular legislation. 28 AGRICULTURAL MARKETING REVOLVING FUND The Cuamman. Let me ask you this question: What amount of applications do you have on hand now for loans? Mr. CrristenseN. You have in mind the applications received by the board but upon which action is pending? The total amount of applications now before the board pending action, is slightly over $150,000,000. This includes the amounts applied for by both the cotton and grain stabilization corporations. The Cuamman. There are some gentlemen who are about to appear before the committee and who wish to say something about this Farm Board plan. I wish you would remain to hear what they have to say. Mr. Legge, you have heard the statements of the gentlemen representing the Cotton Shippers Association. From the statement of Mr. Parker, it struck me that there might be something in the suggestion he makes. If you gentlemen have not made a survey with a view to trying to remedy the troubles he is complaining about, and in order to bring about better conditions. it might be worth while to give some attention to it. Mr. Lecce. The matter you refer to has been gone into very carefully and conscientiously. Their objection is similar to what we find in a good many of these other commodities, where there is a middle class group who make a living out of it, always with this effect. It does not make any difference to them whether the price of cotton is 10 cents or 17 cents a pound; their earnings are just the same. It is done on a tonnage basis, and not on an ad valorem basis of earnings. The rules and regulations have all been created by the traders in the commodity for their own protection rather than that of anybody else. As to the statement that they had no assurance, the statement has been made public by the Cotton Stabilization Corporation that cotton amounting to 1,300,000 bales has definitely been withdrawn from the market and none of it will be sold during the current calendar year. That statement has been made publicly and officially, and in every other way, and there is not a member of the cotton industry who does not understand it. Mr. Bucaanawn. It has been published in the papers? Mr. Lecce. It has been published in the papers, and the idea that they do not know it is so absurd that it is not worthy of consideration. I do not know what more can be said about it. Do they insist that the United States Government shall put up a bond to make their word good in an operation of this kind? Mr. Stone. I might also say we have been in touch with the leading cotton growers before any of the steps that were taken have been taken and have fully consulted with the cotton trade, both the spinners and the cotton merchants. The CmamrmaN. I think you have a couple of practical cotton men on the board, have you not? : Mr. Lice. Yes, we have Mr, Williams a member of the board, Mr. E. F. Creekmore, general manager of the American Cotton Cooperative Association and president of the Cotton Stabilization Corporation and Mr. H. G. Safford of Houston is sales manager of AGRICULTURAL MARKETING REVOLVING FUND 29 the same organizations—were both selected because of their recognized experience and ability as cotton merchants. Mr. Stone. Mr. Safford was recommended to us by the best cotton merchants in the country. LL i Mr. Tavror. What do those gentlemen say about this situation ? Mr. Leeer. They rather ridicule the provosition that there is anybody being hurt. ] } The absurdity of all this is shown in the fact that those commodities in which there are ne exchange grades, agricultural commodities, are relatively better off than those where there are. Mr. Tayror. I think there is too much machinery about it. Turspay, Drecemzer 16, 1930. COTTON MARKETING CONDITIONS STATEMENTS OF WALTER PARKER, NEW ORLEANS, LA.; THOMAS HOGAN, NORFOLK, VA.; AND D. H. WILLIAMS, GASTONIA N. ¢ REPRESENTING THE AMERICAN COTTON SHIPPERS ASSOCIA. TION OF MEMPHIS. TENN. The Cuamrman. I understand that you gentlemen wish to say something to us with reference to the operations of the Federal Farm Board. How much time do you wish? Mr. Parker. Just a few minutes. Mr. WiLriams. Mr. Parker is our spokesman and he wishes only a few minutes’ time, Mr. Parker. Mr. Chairman, we appear here representing the American Cotton Shippers’ Association. _ In all the years past, the trade has absorbed our cotton, has financed It, carried it, and has ultimately sold it to the consumers. We have done that in good times as well as in bad times. At the present time business conditions are not good, but, nevertheless, there is quite a large potential buying power for cotton which 1s not now functioning normally. The reason for that is that the Government experiment in the cotton market, for stabilizing the market, has brought into the market a new element that the trade does not fully understand and is not capable of discounting. Therefore there is a fear on their part as to what may happen. The presence of a large concentrated stock of cotton is looked upon by the trade as a menace to the normal market for cotton. The spinhers say, “ There is plenty of cotton and we need not worry; we to not have to buy until we are ready to buy.” The effect on hedging is sometimes disastrons—that is. the effect on the ordinary hedging operations of the cotton trade. Consequently, the purchasing power, which has the facilities for handling the cotton crop, and which has handled the cotton crop heretofore in the United States, is not functioning properly. In 1926 and 1927, when we raised about 18,000.000 bales of cotton, these marketing facilities had the machinery with which to handle it; but, as I have said. that machinery is not now functioning properly. v 30 AGRICULTURAL MARKETING REVOLVING FUND Now, we are not here as critics, and we are not here to object to anything, but we are here simply for the purpose of suggesting that some way might be found to revitalize that normal trade buying power. No economic study has ever been made of the effect on the normal business of the Government’s experiment in market stabilization, and it is our thought that if such an investigation could be made, a way might be found by which this enormous established market machinery, which is financially able, and managed by the finest trained minds in the world for handling the cotton trade, could be brought into normal functioning. That great machinery might be used to great advantage in solving this market problem, which grows worse and worse and worse. We had another big decline in the cotton market yesterday, and we have had another one to-day. Heaven only knows where it is going, because there is not a sufficient absorbing power for cotton. All of this great marketing machinery I have described has had to stand aside, because it does not know what is going to happen. Therefore, we aave come here, with all courtesy, to try to find a solution. The Cmatrmax. Have you ever taken this matter up with the Farm Board? : Mr. Parker. Mr. Chairman, we have had some meetings with the Farm Board. We have discussed the matter in many ways. We have tried to present the matter to the public and to the Govarnment, and we do not know what else to do except to come before you gentlemen, who have this matter under consideration, and simply suggest to you that a study be made of this problem. You have this appropriation before you, but we have not come up here to protest against the appropriation, and we have not come here to ask for the repeal of the Ifarm Board act, but we have come simply to make some constructive suggestions. We simply suggest that a proper investigation, which has never been made, as we understand it, be made into the economic effect of what the Government is doing. Something should be done, as TI have said. to fry to ~evitalize this buying power. The CarMax. Do you have in mind the character of survey that should be made, or have you formulated any plan that you think would bring about the result that you desire? Mr. Parker. We have some considerable equipment, and we will place everything we have got at your disposal. We will place all the information we have at the disposal of the Government. I think that we have clear-thinking men, as capable as any in the country, and if they could come up and sit around the table, and discuss the cause and the effects, in all their various angles, [ think we could reach a conclusion that would at least help in lifting some of the depression that is now over the country and over the world. That is not only true with regard to the growers of cotton, but to the manufacturers of it, who are large employers of labor. That whole machinery has been interfered with, and it is not functioning in a normal way. We are not getting as much benefit from it as we might have, and we now need the benefit of every possible thing that can help us. As I have said, there is a great potential buying power that is not functioning normally. Now, this is too big a problem to discuss at great length with you gentlemen. You have not the time to listen to it, and we did not AGRICULTURAL MARKETING REVOLVING FUND } 31 t 3 R) Oo rey a Sy vf e ud at re Ce 1 st 10 “0 at ale ll all X he ey -es, ftver ‘ers ers it ich of sa rou not some here prepared to go into all the various phases of it. We will be glad, however, to furnish any information within our power, or to answer any questions you may desire to put to us. Mr. Byrxs, Do I understand that the fundamental cause of the condition which you describe is the fact that there is a large quantity of cotton in storage, which you say is serving to depress the market? Mr. Parker. The effect of that storage is this, that there are several million bales of cotton concentrated in the hands of the board. That cotton may come out at any time, and may not only depress the price of cotton which the spinner has already paid for, but may depress the price of goods that he has not yet manufactured. “Consequently, he says, * Why buy cotton in advance; why toad up with cotton so long as this state of affairs exists.” We have before us a wonderful illustration of this situation in the valorization scheme of Brazil. = I believe you gentlemen were told a year or so ago about the wonderful success of this scheme, but since that time it has collapsed. Now, here is what happened: The Brazilian Government was able to control the planting of coffee trees in Brazil. They could say to every single coffee producer in Brazil, “You can plant only one tree, only two trees, or only a dozen trees a year.” The Brazilian Government could say that to its own coffee producers, but it could not control the number of trees planted in Costa Rica, in Panama, in Mexico, or Guatemala. Now, so long as they had that control through the valorization of coffee in Brazil, It gave an impetus to people to go and produce coffee outside of Brazil. So when the show-down came, not a great while ago, they found that they were not in a position to control the market, and for that reason the coffee valorization scheme in Brazil has failed. Brazil is not now attempting to do anything more than merely to sontrol the supply of coffee available for the world, but they do not in any way interfere with the enormous marketing and financing machinery for coffee. i They are leaving all that machinery untouched, so that the buyers and sellers of coffee are still able to function normally, and to conform to the reduced supplies that are released by the Government. Now, we cannot attempt to control either our domestic or foreign supply of cotton, and the effect of what we have done, as we see it, is that it has restrained our normal purchasing power, or the normal purchasing power of the trade in cotton. It has been long established and it har been functioning with its warehouses and financial power. What we have done has served to restrain this buying power, and it is not now picking up cotton as it would normally do. Mr. Byrxs. I come from a part of Tennessee that does not produce otton. Mr. Parker. I am from Tennessee, myself. _ Mr. Byrws. I know you are. I am from the middle part of the State, where they do not produce cotton, and I do not know much about the subject. Of course, the cooperatives are holding this cotton with a view to taking it off the market and securing 2 better price for the cotton grower. I do not know whether they are justified in that or not. I do not know about that: but T was wondering 20415—30——3 32 © AGRICULTURAL MARKETING REVOLVING FUND what might have happened, speaking from the standpoint of the :otton producer, if they had not taken that action. Mr. Parker. I do not know. That is a great big subject, but we have had bad situations in the past. In 1926 we had a 18,000,000 bale crop, a far larger crop than anybody expected. Mr. Bucmanax. When you had that 18,000,000 bale crop you also had an enormous consumption of cotton practically all over the world, while last year the consumption fell off in the whole world, and it has fallen off again this year. It is a matter of underconsumption that has affected the price of cotton rather than an oversupply of cotton. Mr. Parker. Yes; there has been a lack of consumption. Mr. Bucnaxan. We ave speaking now about a sixteen-and-a-half million-bale crop, and that has been about the average for the past five years. Mr. Paxxer. You must bear in mind that last year there was a greater proportion of cotton of foreign growth and a smaller proportion of American-grown cotton. Myr. BucHavan. Yes; that is because cotton production in other sountries is going up while ours is going down. Mr. Parker. Were not our cotton farmers advised to plant short staple cotton in order to beat the boll weevil? Mr. BucnaxNax. I do not know what they were advised to do, but they planted about half and half short staple cotton, which served to ruin the spinable quality of our American cotton. We ruined a good market for our own cotton in that way. Mr. Parker. That is one of the factors that has a large influence on it. There is no question about that, but, on top of that, the normal marketing machinery upon which the cotton trade has neretofore relied is not functioning normally now. Mr. Dickinson. Is there any greater stagnation with reference to cotton than there is with reference to many other agricultural sommodities, or can you speak with reference to other commodities? Mr. Parxer. They are all suffering. Mr. Wirriams. We can answer only for cotton. Mr. Breuaxax. Is there not a world economic condition that is jepressing the market for all kinds of commodities? Mr. Parker. Yes; but that does not alter the statement that I am trying to make. ‘We believe there is an economic stagnation and an economic depression, but there is in this country a marketing machinery which would normally be picking up cotton, financing it, and carrying it to the consumer. That machinery is not functioning to-day, or it is not adequately functioning. It is functioning in a very small way. That is the point I am trying to make before the committee. We hope that some way can be found to adjust all these matters. We are hoping that some way can be found to revitalize this enormous buying power. We think that if this buying power, with its facilities, could be brought into normal functioning, a great deal of this cotton would disappear. which will never disappear without it. . Mr. Byrxs. What percentage of the cotton production is controlled by the cooperatives or what percentage is in storage? Mr. Parker. I do not know. AGRICULTURAL MARKETING REVOLVING FUND 33 d o 2 2 O-{- 0 we f | al ch l=Mr. Byrys. Have you any idea? Mr. Parxer. We have never been told about that. We have never heen told about the inside operations of the Federal marketing machinery. We do not know how much cotton they have; we do not know how many futures they have bought ; and we do not know how much they have sold. All of that is matter that has not come out in their reports. Mr. Byrys. I do not suppose it amounts to 50 per cent of the cotton, or anything like that. Mr. Pager. No, sir. Mr. Byrys. Is it about 18 per cent! Mr. Parker. Normally, I should say, about 10 or 15 per cent. Mr. Byrxs. Do I understand that it is your contention that the storage or holding of this 10 or 15 per cent of the cotton crop is having this effect upon those who handle the other portion of the production, or who would normally handle the other portion, by reason of the fear that they may have, or from the fact that they do not know what might be done with this 10 or 15 per cent of the crop. or when it might be released? Mr. Parker. As much cotton as that, distributed in warehouses, ander the financial responsibility of 1,000 merchants, would not be «uch an influence on the market as it is when it is concentrated under the power of one group of men, or one man, or one single agency. Whether they will dispose of it, or not, we do not know. Nobody knows what will happen, and, consequently, the merchant is inclined to stand aside. Mr. Dickinson. It has been my impression that an effort has been made to hold this up as a “ bugaboo »” rather than as an actuality, and that a lot of people were putting this up rather as an excuse, because of the fact that people are not taking any risks, and they are not buying things. T do not care what line of activity you go into, buying is being curtailed everywhere. Mr. Parker. Yes; I grant that. Mr. Ayres. I am very much interested in your statement that this machinery is available: May T ask vou what constitutes that machinery ¢. Mr. Parxer. It 1s the machinery of the American Cotton Shippers Association, comprising something like 1,000 trained merchants, who are well capitalized, and who have banking facilities for handling cotton. They buy cotton from the farmer, as it is offered, paying cash therefor, and immediately selling futures to hedge it. That, of course, is a bona fide contract for the delivery of cotton. Then, they are able to borrow from the banks practically 100 per cent .of the value of the cotton, because they have the sale already made. Now, they do not necessarily deliver that cotton on the futures contract. It ;5 better to sell it as spot cotton to the consumer, in which case he buys in that contract, so that whatever he loses on one he makes on the other. But if they ean not find a spot buyer, or a spinner buyer, (hen they go through with that cotton on the futures contract. They have their money back, and can pay the bank. That is the primary nachinery. The secondary machinery is for the export of cotton by :ipply merchants, who handle it in Europe, where there is a demand. Now. this new agency has adversely affected the market. 34 AGRICULTURAL MARKETING REVOLVING FUND Naturally, people buy a commodity when it is low and try to sell it when it is high. That is due to the natural human endeavor to make a profit. Now, the effect of the present situation is one that nobody knows. Nobody knows whether cotton is low or high under the present circumstances. That is because of this element in the market that the trade is not accustomed to, and which it is unable to discount. Mr. Ayres. That suggests another question : In what manner could the Government, or the Federal Farm Board, use that machinery? Mr. Parker. Mr. Congressman, there is a great deal that could be said on that subject, but I do not think that any of us can intelligently reach a conclusion as to what could be done or could not be done until a real study has been made of the economic effect of the whole situation, as it riow exists, as a result of this new element, com. Ing into the machinery of business. We have got to find out what 1t 1s. We do not know what the Farm Board has in mind. We do not think that they have anything that can ultimately work, but we may be wrong about that. Mr. Ayres. Have you discussed this matter with the Farm Board ! Mr. Parker. Yes. Mr. Wirriams. There has been a certain amount of discussion. Mr. Ayres. But no conclusion has been reached ? Mr. Parker. No, sir. Mr. Bucmanan. You claim that this cotton now held by the cooperatives being in such great amount, and under one control, constitutes a menace to the market. Mr. Parker. In this sense: It may never be a menace. Mr. Bucaanax. You think it may be a menace? Mr. Parker. You know this, that where a single agency has two, three, or four million bales of cotton waiting to be unloaded at the first chance, or whenever the market shows any strength, you would feel that your business was menaced. That is exactly 1t. Mr. BucnanaN. You feel that it may be a menace to have that cotton concentrated in warehouses, subject to one control. Mr. Parker. Yes, sir. Mr. Bucuaanan. You feel that it may be a menace to the market. Now, is it not a fact that some of this very cotton machinery, of which you have been speaking, have had under their control more cotton than the entire cooperatives have under their control now? Mr. Parker. I do not know. I do not know of any single machine that has ever had any such volume under its control as that. [ do not think it has. ] Mr. Hogan. That is just exactly what is the matter. Mr. BucaaxanN, Do you not think they have more than that under their control? Mr. Hoean. We have 85 per cent of the cotton under our control. Mr. BucnanaN. Do you have that much under your control ? Mr. Hogan. Yes, sir. Mr. BucaanaN. Eighty-five per cent? Mr. HoeaN. Yes, sir. ) Mr. BucaANan. Of course, that is very much more than these other people have. Mr. Hogan. They have the United States Treasury back of them. That gives them the power to market at a loss. It does not make AGRICULTURAL MARKETING REVOLVING FUND 35 any difference whether they lose money or not. Therefore, they can sell this cotton if they want to at any price. I am not making the ‘harge that they are selling it, or will sell it, at any price, but the ooint is that this cotton, being held as it is, with the United States Treasury back of it, can be pushed on the market at a loss at any time. I mean by that on a basis loss. As you see, there are two things we have got to face—— Mr. Bucaaxan (interposing). Do you not know that if this cotton were pushed on the market at a loss the cooperatives would lose any margin that they may have in the cotton? Mr. HocaN. Yes. Mr. BucHanan, You are antagonizing this concern because it has ;aken cotton away from your concern ? Mr. Hocan. No, sir; we are not attacking the cooperatives. We 1ave never attacked them. Mr. Bucuanax. I did not say that you were; but, as a matter of fact. there are one and a half millions or two million bales of cotton that the cooperatives hold throughout the United States, cotton that your concerns have been handling heretofore. Now, I understood you to say that you have control of 85 per cent of the cotton now. Mr. Hogan. Yes, sir; if you gentlemen will let me talk— Mr. BucHANAN Ral lg Looking at it from my standpoint, which is from the producers’ standpoint, because cotton is now selling below the cost of production—you admit that. do you not ? Mr. Hocan. Yes, sir. Mr. Bucuaxan. The farmers ought to get at least the cost of production, and a little profit on it, and 1t seems to me like intelligent management to get this cotton together in their pools, and handle it so that the producers of cotton mav realize some profit from it. Mr. Hocan. I am making this assertion now, and you may check it: Since the merchandising of farmers’ products began under this machinery the farmer's products have been marketed without one sent of cost to him. Mr. Bucuaxan. The Government statistics do not show that. They show that there is a vast spread between what the farmer gets and what the consumer pavs. Most of that spread has cone to the middleman. } Mr. Dickinson. There is a great difference between marketing :osts and the speculative spread. The speculative spread is where these gentlemen come in. Mr. Hoan. We do not speculate. You, the United States Gov-:rnment, are speculating. We are not speculating. Mr. Bucaanax. If it takes speculation to put a farmer on a basis vhere he can live, I am willing for him to speculate. Mr. Dickinson. If buying futures is not speculating—— Mr. Hogan (Interposing). Do not think that the speculator ever hurt the farmer. The speculator has helped him. Mr. Bucaanan. He has made a poor job of it. Mr. Hocan. Is the farmer any worse off than the poor starving yoeratives at Gastonia and Fall River? 36 AGRICULTURAL MARKETING REVOLVING FUND Mr. Bucaaxax. Do you mean the employees of the mills? Mr. Hogax. Is the big capitalistic farmer anv worse off than the mill owner? Mr. Bucranan. I wish you would show me a capitalistic farmer. [f there is one, he should be placed on exhibition somewhere. Mr. Hocax. I saw one in New Orleans, who showed me where he had made 100 bales of cotton on 100 acres of land, at a cost of 7 cents per pound. He showed me the figures. He showed me where he had sold his cotton at a profit-of $1,200. Instead of losing, he had made $100 per month. All of these questions are really extraneous to what we wish to present. What Mr. Parker has been telling you is this, and I will make defiance to everybody here on that proposition. This is not said in ill temper at all, but I am stating my case. E'am a cotton man. I am in the cotton business. My father was a cotton man. He has been a cotton classer and has handled cotton in all its forms. He is 80 years old, and is in the cotton business now. [ came on behind him in the cotton business. Now, that cotton machine was in existence before my time. We avolved a system, through that machine, for handling cotton. Merchandising is just as much an art or a science as being a doctor, a lawyer, or a member of any other profession in the world. It takes trained men to do it. It takes something that has been built up through the generations, like statesmanship. The merchants of this country in marketing cotton in Liverpool found out that when the cotton got there, there was frequently a drop in the market; so they evolved a wonderful system of price insurance, which is known as hedging. Under that system, which was not evolved by farmers, which was not evolved by Congress, or by scientists, but which was evolved by merchants, the cotton crop of the United States has been handled on the narrowest margin of profit, and on the narrowest spread between the farmer and the processor that could possibly be figured on any commodity. Now, all of that has been borne out by the investigation of the Federal Trade Commission which, after investigating the cotton business, in no especially friendly way, came to Congress and gave us a clean bill of health. [t is a wonderfully efficient body of men, functioning on a very reasonable profit. : Congress itself has investigated this price-insurance machinery in the cotton exchanges. In spite of the fact that there were dissensions within and dissensions without, it has never been proved that those exchanges operated as a conspiracy to depress the price of zotton. I doubt if speculation has ever materially affected the great arc of prices. Speculation is a natural human reaction. It is a vitalizing principle, which makes us live in hope. Speculation is the expression of hope. Speculation comes into the market as an eager force and tends to push the market up until it makes the price higher than it would have been ordinarily. However, it does not affect the great arc of prices. Conversely, short selling does not do anything to depress the market. I doubt if any commodity was ever depressed below its supply and demand value because of short selling it on the exchange. I can challenge vou on that statement, and I can prove it. You can not profitably sell a commodity down unless vou start to sell it when it is above its fair value, for the reason that AGRICULTURAL MARKETING REVOLVING FUND 37 the minute you sell short you are a buyer, because in order for you to get a profit you must come back in the market. But, in any event, 1 maintain that the present situation which has developed is due to these causes largely. I am not attacking the Farm Board in any way. I thinkitisa body of honorable men, but they are not cotton men. Now, under the law, or under the agricultural marketing act, Congress ignored 85 per cent of the men who marketed the commodity. As for the spread, I do not think any farmer can claim that he has paid anything like the proportion that is paid for selling a desk, a suit of clothes, a necktie, or anything like that, passing into the retail tride. At any rate, however, we cotton men were ostracized in this case. We were looked upon as being beyond the pale, and not fit to have anything to do with the agricultural marketing act. The Farm Board was created, and they operated, not through the independent trade, but only through the cooperative marketing associations, which were at that time going downhill. As a matter of fact, thev had to be rehabilitated before they could be used. Mr. Byrns. Assuming that the law is retained on the statute Looks, and, in response to what you say with refernce to the law fixing the cooperative associations as the only organizations through which the Farm Board can function, what agencies would you provide in addition to those cooperatives? Mr. Hoax. I would have given the Federal Farm Board discretion in the matter. I would have given them the discretion of using that money, $500,000,000, through any legitimate agencies that were engaged in marketing. I would have made it discretionary. Mr. Byrns. You would have left that to the discretion of the trederal Farm Board. Mr. Hocan. I would not have done it at all, if I had had anything to say about it, because I do not believe that you can stabilize the market in that way. However, at any rate, it was worth a try, and we said, “ Let it be tried.” We could not go to Congress and oppose it, because people would immediately say that we were trying to keep the cooperatives from getting the business. We were perfectly willing for the experiment to be tried. We did not want to oppose it when it was put down the throat of the legislature. I think we made a mistake at that time. I think that we should have come as patriotic citizens and asked Congress not to do this thing. At any rate, things went on to such a state, I will say, aside from any selfish motives, where we were practically put out of business, and I say to you now that the farmers of this country and the mills of this country are in such a fix that it will take 10 years for them to get back on their feet again. Therefore, we are asking that before the rest of this money is spent ‘hat you may see fit to ask the Farm Board to call on some cotton people and some cotton spinners, because the cotton spinners are as vitally affected by this as the farmers, and see what can be done. If the spinners go broke, and it looks like that now, God help the farmer. So we feel that in asking for an investigation we are asking something for the farmer. We are asking that this great independont-marketing machinery be used to help the farmer. If that is Tone. it will be the best thing that can be done at the present time 38 AGRICULTURAL MARKETING REVOLVING FUND to establish confidence. I Lelieve thoroughly that lack of confidence has caused at least 2 cents of the decline in the price of cotton. . Mr. Dickinson. I imagine from your statement, that in connec-Jon with the farm-relief legislation that was before Congress here continually for 10 years, you people did not express yourselves at all. Mr. Hoan. Yes, sir; we expressed ourselves, but we did not express ourselves just exactly as I am trying to express myself now. The Cuarman. You have seen the publicity that has been given to the propaganda against the board that is being financed by some organization—I do not know but what it is some cotton organization—that is trying to secure the repeal of the Federal Farm Board act, have you not? I think it was said that $100,000 was raised in New Orleans. Mr. Wirrtams. That was not true. The Crairman. That statement appeared in the papers. Mr. Parker. The cotton people have an economic committee that is studying that whole matter.” They are trying to bring order out of chaos, and they have raised a little money for that purpose. However, it was not anything like the sum you have mentioned. Mr. Bucranan. That ‘statement appeared in the papers. - Mr. Parker. It does not amount to anything like that. The only thing that this committee has done is on the line of the statement that we have made before you gentlemen, that we desire to help untangle a bad situation and revitalize the purchasing power of this marketing machinery. To that end we suggest that a study be made of the whole situation from the economic point of view, not just from hearsay, but from the economic point of view, with the hope of finding some way to utilize this great marketing machinery. The Cramyan. I agree with you that if there is any way in the world to stabilize cotton or anything else for the benefit of the farmer, for the benefit of the manufacturer, the spinner, or anybody else, it should be done. I can not conceive of any situation that would cause the Farm Board, or those acting for the Farm Board, to fail to take into consideration any advice along those lines that might be given. Mr. Parker. Our experience, I believe, has suggested this thought, that when we got the Federal Government to adopt prohibition. we thought that was the end of drinking. The Cuairmax. There is no drinking now, is there? Mr. Parker. Of course there is. Now, it is perfectly natural that when the great power of the Federal Government is brought to bear suddenly, without any thorough economic study to determine the effect of what was done under that law, further consideration should be given to it. It was a thing that was intended to help, but there has never been a thorough economic study of the questions that are involved in it. There have been partisans, but, as you know, partisan opinion is not always soundly predicated. We have never yet had able men, or men who were able to determine the effect of this act or the effect of that act on the established order of things—that is, the effect of bringing into that established order an experiment and an entirely AGRICULTURAL MARKETING REVOLVING FUND 39 new thing. We have never had that done. Now, what we are suggesting is that that be done now before it may be too late, because it is our opinion that unless some change is made in the situation, conditions will grow worse. We are not here to advise or to say what that should be. That is something that should be determined after an investigation. It is our thought that before long the Government will have to carry all of the cotton. Now, what would be the effect of that? We would have not changed the economic views that have been controlling for many years. Naturally, people will buy cotton where they can buy it cheapest. Great efforts are being made in Egypt to lower the cost of cotton, and a great effort has been made in India to improve the staple without increasing the cost. I have a letter from an engineer who has been employed by the Russian Government to plan plants, including roads, railroads, and down to loading platforms, in Turkestan, where Russia is endeavoring to produce large quantities of cotton in competition with us. In view of that, I think we ought to make an economic study of these things before it is too late. oo Mr. Ayres. Have any of your organizations ever taken this matter up with Mr. Williams, who is a member of this board. and who "gs a cotton man? Mr. Parker. Yes, sir. Mr. Ayers. Have you taken it up with Mr. Creekmore, of Arkansas, who is also a cotton man? Mr. Parker. Yes, sir. Mr. Hocaxn. Let me tell you one thing: The impression I have got, whether we ought to feel that way or not, is that this organization is out to put us out of business. I am saying that without recourse so our association. Mr. Dickinson. The statement has been made time and time again that it would be a number of years before enough of any of the major commodities would go into any hands where it would be anything other than a covering stabilizer in a general way for any particular commodity. Now, in this instance, if 80 per cent wants “o come in and fuss with 20 per cent, I say, they will have to fuss. Mr. Parker. That, gentlemen, is the basis of our suggestion. It is fear of what the Government may have done for the market. It is fear of what the Government is doing. I will not even argue as lo whether it has an opportunity to succeed or not. I will not even state my opinion on that subject, but I do say that fear of what is oeing done has caused these enormous handling plants to be in such doubt in their own minds that they hesitate to stay in the market. Mr. Dickinson. Let me suggest to you that there is that same kind of hesitancy in every line of activity. Mr. Witniams. Mr. Chairman and gentlemen of the committee, we thank you very much for your courtesy in extending us this opportunity to be heard. Like Mr. Buchanan, I own a Farm, and I am also in the cotton business. I am trying to use the farm to support the cotton business and the cotton business to support the farm. but both are about broke now. 39 |g LP J —=0 nN J AY ’ No J n > ‘nN Nt > 0 -~ eh ka | 5, = | NN a a Ty Sr ig i ~~ 2 de) - A = NS - ty QO ~J 0 ~J > J Q on jo] on AGRICULTURAL MARKETING REVOLVING FUND 33 r. Byrxs, Have you any ideal? r. Parxer. We have never been told about that. We have never told about the inside operations of the Federal marketing hinery. We do not know how much cotton they have; we do know how many futures they have bought; and we do not know 4 much they have sold. All of that is matter that has not come in their reports. ‘r. Byrxs, I do not suppose it amounts to 50 per cent of the "pn, or anything like that. Clr. Parker. No, sir, Tx. Byrxs, Is it about 15 per cent? * r. Parker. Normally, I should say, about 10 or 15 per cent. . Byrxs. Do I understand that it is your contention that the tge or holding of this 10 or 15 per cent of the cotton crop is havthis effect upon those who handle the other portion of the proion, or who would normally handle the other portion, by reason he fear that they may have, or from the fact that they do not » what might be done with this 10 or 15 per cent of the crop. then it might be released? r. PARKER. As much cotton as that, distributed in warehouses, r the financial responsibility of 1,000 merchants, would not be an influence on the market as it is when it is concentrated under ower of one group of men, or one man, or one single agency. ther they will dispose of it, or not, we do not know. Nobody vs what will happen, and, consequently, the merchant is inclined and aside. gr. Dickixsox. It has been my impression that an effort has been +e to hold this up as a “ bugaboo ” rather than as an actuality, and a lot of people were putting this up rather as an excuse, because 1e fact that people are not taking any risks, and they are not ng things. I do not care what line of activity you go into, buyls being curtailed everywhere. r. Parker. Yes; I grant that. r. Ayres. I am very much interested in your statement that this shiny 1s available: May I ask you what constitutes that 3 pinery? Th. Parker. It is the machinery of the American Cotton Shippers L icration, comprising something like 1,000 trained merchants, who i frell capitalized, and who have banking facilities for handling m. They buy cotton from the farmer, as it is offered, paying therefor, and immediately selling futures to hedge it. That, of £ se, is a bona fide contract for the delivery of cotton. Then, they able to borrow from the banks practically 100 per cent .of the t e of the cotton, because they have the sale already made. Now, 7 do not necessarily deliver that cotton on the futures contract. better to sell it as spot cotton to the consumer, in which case he m that contract, so that whatever he loses on one he makes on ther. But if they can not find a spot buyer, or a spinner buyer, they go through with that cotton on the futures contract. They their money back, and can pay the bank. That is the primary inery. The secondary machinery is for the export of cotton by ly merchants, who handle it in Europe, where there is a demand. this new agency has adversely affected the market. > oo 0 Tn] A £3