‘at i opel 534 AS] 3 oh . rs A oe di —~ 3 1 % : Ta errs LE . - v LC ! . bow Be ch We 5 8 " hung yi ELIEF 5 Bus Vow A AGRICULTURAL =~ HEARINGS BEFORE [HE COMMITTEE ON AGRICULTURE HOUSE OF REPRESENTATIVES SEVENTIETH CONGRESS FIRST SESSION FEBRUARY 6 anp 7, 1928 Serial E—Part 4 UNITED STATES GOVERNMENT PRINTING OFFICE WASIIINGTON W. 1) | 32K COMMITTEE ON AGRICULTURE House or REPRESENTATIVES SEVENTIETH CONGRESS, FIRST SESSION GILBERT N. HAUGEN, Iowa, Chairman FRED S. PURNELL, Indiana. JAMES B. ASWELL, Louisiana. T. S. WILLIAMS, Illinois. D. H. KINCHELOE, Kentucky. C. J. THOMPSON, Ohio. MARVIN JONES, Texas. JOHN C. KETCHAM, Michigan. F. B. SWANK, Oklahoma. THOMAS HALL, North Dakota. H. P. FULMER, South Carolina. HARCOURT J. PRATT, New York. THOS. L. RUBEY, Missouri. FRANKLIN W. FORT, New Jersey. THOS. A. DOYLE, Illinois. FRANKLIN MENGES, Pennsylvania. JOHN McSWEENEY, Ohio. AUGUST H. ANDRESEN, Minnesota. CHARLES ADKINS, Illinois. JOHN D. CLARKE, New York. CLIFFORD R. HOPE, Kansas. VICTOR 8. K. HOUSTON, Hawaii. [.. A. DARNELL, Clerk «CT z Statement of — Dr. B. W. Kilgore. ~ - Ji -v Page 255, 277 AGRICULTURAL RELIEF House oF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, Monday, February 6, 1928. The committee met, pursuant to adjournment, at 10 o’clock a. m., Hon. Gilbert N. Haugen (chairman) presiding. The CrAIRMAN. The committee will be in order. Doctor Kilgore, the committee will be pleased to hear you. STATEMENT OF DR. B. W. KILGORE, CHAIRMAN BOARD OF TRUSTEES AND CHAIRMAN OF LEGISLATIVE COMMITTEE OF THE AMERICAN COTTON GROWERS’ EXCHANGE; PRESIDENT NORTH CAROLINA COTTON GROWERS’ ASSOCIATION, RALEIGH, N. C. Mr. CrarkgE. I have been absent at Albany attending a meeting of our State forestry commission and did not get the gentleman's name and what he represents. Mr. Kircore. My name is B. W. Kilgore, chairman board of trustees, American Cotton Growers’ Exchange, and chairman of the legislative committee of the exchange. Mr. Crarke. Will you explain what that is? Mr. Kmncore. I will. I am also president of the North Carolina Cotton Growers’ Cooperative Association, the association of my home State. Mr. CLargE. How much of an acreage do you represent? Mr. KiLGore.. If you will wait just one minute, I will try to give you that so as to have it connected. For 20 years I was the director of the agricultural experiment sta- tion of my State and during 10 of those years I was also the director of the agricultural extension service. In those 20 years my interests and my efforts were given entirely to the production of crops. With the exception of Virginia and Florida, which produce only small amounts of cotton, the other 14 cotton-growing States from North Carolina through New Mexico and Arizona and California, have cooperative cotton marketing associations. All of these cooperative marketing associations, except the two in Mississippi, the staple growers and the short-cotton growers, the State cotton cooperative marketing associations in all the States are federated in what is known as the American Cotton Growers’ Exchange. The purpose of the exchange is to perform general services for all of these cooperative associations, aducational work, membership relations, legislative matters, other general things in connection with the public and sales service. The exchange maintains sales offices in all of the leading cotton markets in the South, in New England, and in foreign 255 256 AGRICULTURAL RELIEF countries which are available and are used by all of the State asso- ciations. That is the set-up and the purpose of the American Cotton Growers’ Exchange. Mr. AsweLL. Doctor, will you tell us right there how the exchange was created; by your officers or how? Did the individual producers help create that cotton exchange? Mr. KiLcore. Each cooperative association is under the control of a board of directors elected by members, one director from each of a number of districts. Mr. KincaeLoe. How many cooperatives are in that federation and what is the total membership of the federation? Mr. KiLcore. I wonder if you will not let me give you that a little bit later? Mr. KincueLoe. All right. Mr. KiLcore. The exchange is under the control of a board of trustees, made up of three of the directors from each of the State board of directors elected by the boards. That would mean the American Cotton Growers’ Exchange is under the control of a board of trustees of 36, three from each State. The trustees is the policy- making body for the exchange. I am going to answer your question, Mr. Kincheloe. Mr. KincaeLok. That is all right, in your own way, Doctor. Mr. KiLcorE. The trustees of the American Cotton Growers’ Exchange on May 6, 1927, after hearing the report of the legislative committee, took action as follows [reading]: On conclusion of the report it was moved, seconded, and duly carried that a resolution of approval be voted to the work which had been carried on, and that the American Cotton Growers’ Exchange go on record as being against any form of legislation except the principles as embodied in the McNary-Haugen bill passed oy the last session of Congress. That was last May. Again, on October 4, 1927, the trustees passed this resolution [reading]: That the trustees reaffirm their former position in regard to farm surplus con- trol legislation and instruct its legislative committee to consider and weigh additional legislative proposals with full cooperative consideration with our asso- ciates and allies and with a view of securing the most effective form of legislation. After such cooperation with allies and associates, the committee is given power to act in behalf of the respective States and the exchange. The membership in the exchange at its height was about 300,000 members. It is considerably less than that at this time, and I will give you the reasons for that as I proceed. Mr. AswerrL. What do you mean by 300,000 members? Were wiey members who cooperated and acted when you were elected for “ce, or do you merely claim to represent that many? Tr. KiLcorE. There were that many members in all the States. 1. ASWELL. Are they the members of your exchange? va. KILGORE. Sure. Mr. AsweLL. Let me get this point clear in my mind; it is not dong to me now: When you met, I think it was at Memphis, was it nor KILGORE. Yes; that is the headquarters of the exchange. \ AsweLL. How many members were present at that meeting? +. KiLeore. Thirty-six trustees. AGRICULTURAL RELIEF - 257 Mr. AsweLL. Then you have never submitted that to any of the local cooperatives anywhere in the country? Just the officers did that? Mr. KiLcore. They are the representatives of the State associa- tions, and then the State associations are made up of the membership. Mr. AsweLL. Let us get this point clear. You had 36 men there. They were officers, and they met and established a new organization and elected officers. In what way do they represent the little cotton producer down in the country? Mr. Kivcore. Just like you gentlemen represent the individual farmers and other citizens back in your district. They elect you as their representatives here in Congress. Those farmers in the differ- ent States voted for directors in the different districts. There are usually 11 directors for each association. The members in each of those districts elect those 10 members. There is one director at large. Then those 11 men elect three in the exchange to go to Mem- phis, and they are the policy-making body for all the associations. Is that clear? Mr. AswerLL. How many members—cooperative associations— does the exchange represent now? Mr. KiLcore. About half what it did at its height, and I am going to tell you why that is so. You are getting my conclusions ahead of my story. Mr. WiLLiams. Mr. Kilgore, at the time your organization was at its height, we will say, what percentage of the cotton crop did you represent? Mr. KiLcore. About 10 per cent. These cotton cooperatives in the several States were organized just during and following the period of distress in agriculture—1920, 1921, and 1922. Mr. KiNncHELOE. You mean the beginning of the distress? Mr. KiLGorE. Yes, the beginning of the distress, thank you. They were organized during this period. Three of them handled the cotton crops of 1921 of their members. Most of the other associations were organized and handled the crops of 1922, 1923, 1924, 1925, 1926, and 1927. The crops of 1922, 1923, and 1924 were barely in amount equal to the needs for consumption of cotton. The average price for these three crops of 1922, 1923, and 1924 was 24.82 cents per pound, according to the Department of Agriculture. During that period our membership grew to its largest number; that is, to around 300,000; because the supply of cotton being prac- tically, or nearly the same as the consumption, we got good prices. We had a satisfied membership, and we grew in that time to handle the largest amount of cotton that we have handled before or since, then came the large crop of 1925, being 16,000,000 bales. The pro- duction amounted to about 2,000,000 bales beyond the needs for immediate consumption. With an increase of 13 per cent in pro- duction, there was a decrease of 25 per cent in the price; that is, in 1925 the crop started off, when the estimate was below and up to 14,000,000 bales, at almost 25 cents. When the estimate came up to 16,000,000 bales, which carried us 2,000,000 bales beyond the needs for consumption, the price dropped very quickly to 18 cents a pound. The next year, 1926, we got our largest of cotton crops, with a pro- duction of 18,000,000 bales. The price started out at 18 cents a pound when the estimates were up to 15.000.000 to 16,000,000 bales, 258 . AGRICULTURAL RELIEF but quickly after it passed beyond this and reached a forecast of 18,000,000 bales the price dropped from 18 cents to 12 cents and 11 cents and even 10 cents; it averaged 12 cents. The crop of 1925 at 18 cents had just about brought us the cost of production according to Government estimates. With the big crop of 1926, with around 3,000,000 bales beyond the needs for immediate consumption, the price went to 12 cents; or, in about 12 months, it was cut half in two. So that the Secretary of Agriculture on July 1 of this year said that this large crop of 1926 brought us $505,000,000 in the cotton-growing States less than the 2,000,000 bale smaller crop of 1925. Because of the higher prices of cotton in the fall of 1925, brought in part by the general public not knowing what the crop was going to be and in part because the cooperatives carried more than their share of the surplus, the price in the fall was better than it was in the spring, the rest of the year. The same was true to an extent, though not exactly so, in the fall of 1926. As a result of those two surpluses and higher prices in the fall of 1925, the cooperative associations did not pay their members, because they attempted to sell somewhat orderly—they were not able to pay their their members during those two big years of surplus produc- tion as much as the outsider got. Now, I said the cooperatives were one of the factors in holding up and to an extent stabilizing the price in the fall of 1925 and in the fall of 1926. At one time in the fall of 1925 we had in the cooperatives handling 10 per cent of the total production about 30 per cent of the surplus. | Mr. KincaeLoe. How much cash do you pay on delivery, Doctor? Mr. KiLcore. About two-thirds—65 per cent. | Mr. KincHELOE. So they held the bag while the other fellows got the increased price and cashed in? Mr. KiLcorE. Yes, sir. Mr. Hore. You pay two-thirds of the market price on that day? Mr. KiLGore. Yes; that is what we can borrow from commercial banks and the intermediate-credit banks. : Mr. KincHELOE. Doctor, how many are in your organization? You said three hundred and some odd thousand to begin with. Mr. KiLGore. I can not tell you just the number. Mr. KincaeLok. I thought you had some idea. Doctor, if you will excuse me there, I am asking for information; I do not want to get into the cotton business, because I do not know anything about cotton. I have heard it said by gentlemen who are supposed to know about cotton that the equilization fee would not work on cotton, that it would be impracticable. I just wanted to get your idea about it—if you think it will, why it will, just as a matter of information. Mr. KILGORE. It will. We have indorsed, as you noticed in the resolution, the principle of the McNary-Haugen bill, with the equali- zation fee. } ’ . Mr. Aswerr. Does that mean the fee or nothing, by your resolu- tion? & by y Mr. KirLcore. I am going to cover—— Mr. AsweLL. You can answer that now, yes or no. woud rope, Susuinlly, I do not like to answer, because it [ say yoo e truth fully. If you want to insist on yes or no, Mr. AsweLL. You stand for the fee or nothing? : AGRICULTURAL RELIEF 9250 Mr. KiLcore. I stand on the fee, if you want me to answer yes or no. But I am going to amplify that a little later, if you gentle- men will permit me. In answer to your question, Mr. Kincheloe, my main purpose in the statement that I am beginning to make to you, gentlemen, is to show in my judgment the absolute necessity for the equalization fee in effective form for surplus control legislation. Mr. AsweLL. Now, Doctor, would it disturb you to be interrupted? Mr. KiLgore. No. Mr. AsweLL. You made a statement that your cotton exchange demands the equalization fee or nothing, in substance? Mr. K1Lgore. You remember just how I answered. Mr. AswerL. I remember what you said. What part of the cotton producers do you claim that your exchange represents richt now? Mr. K1LGorE. At its best it represented 10 per cent of them. Mr. AswerLr. May I interrupt you here to read the report of the Department of Agriculture, prepared at my request, and it is a detailed report of an official of the bureau, and I would like the committee to get this [reading]: The average of the United State. That is, the cotton sections: 1921 and 1922, handled by the cooperatives was 5.3 per cent; 1922 and 1923, it was 7.4 per cent; 1923 and 1924, it was 8.9 per cent; 1924-25 it was 8 per cent; and 1925-26 it was 9.1 per cent. That is the highest? Mr. KiLGore. That is the highest. Mr. AsweLL. That was not 10 per cent. The year 1926-27 they handled 6.7 per cent of the entire cotton crop produced in the United States; that is, that year there was 18,000,000 bales produced and the cooperatives handled a little over one million bales. So, if your exchange represents all the cooperatives—which you do not—-— Mr. KiLgore. All except two, and they are for this bill. Mr. AsweLL. What two? Mr. KiLgore. Staple and short staple in Mississippi. Mr. AsweLL. Is the cooperative in Oklahoma for this bill? Did they not send you a telegram about it? Mr. Kingore. They are for it; they voted for the resolution. Mr. Frailey moved—— Mr. AsweLL. They do not stand for the fee or nothing? Mr. Kircore. Of coutse, they are for it. Mr. AsweLL. What about Georgia? Mr. KiLcore. Mr. Conwell last year was against the McNary- Haugen bill. I stated in my testimony before the Senate committee last year that all of the cooperatives in the exchange except Georgia were for the bill. Mr. Conwell, who is the general manager—— Mr. AsweLL. 1t is not necessary for you to prove it; I will accept your statement. Mr. KiLgore. This year, Mr. Conwell, the general manager, said {reading]: [ want farm legislation as badly as anyone. Referring to the McNary-Haugen bill and to his representatives he says: They all know that I am in favor of farm legislation— 260 AGRICULTURAL RELIEF “They” refers to his Senators and Representatives— And I believe I have their confidence. I have confidence in them; I believe ‘hat they will support any measure that they believe will be of any real benefit 0 the farmers. If they see fit, and some of them did, last year, to support the McNary-Haugen bill, well and good. But I have not asked them to support it or any certain measure. Mr. AsweLn. Then he is not for the fee or nothing, is he? Mr. KiLcore. With the exception of Mr. Conwell, who was against it last year—— } Mr. AsweLL. Last year, 1926-27, Georgia handled 6.8 per cent of the crop production. A cotton man told me the other day that they would not handle more than a third of that much this year. Do you know that? Mr. KiLgore. That may be around that. Mr. AsweLL. You are speaking for them; you ought to know. Mr. KiLGorE. I have not the figures right before me, but that is around right. Mr. AsweLL. How about North Carolina—and that is the last year I have a report on—it handled 9.6 per cent. I was told the other day they did not have more than half that this year. That is your tate! Mr. KiLgore. That is so. Mr. AswgLL. One more statement, and I am through with that. [t will be noted here that Arizona produces a very small amount of cotton, long staple, and they are largely in the cooperative business. That brings the average up. You take a State like Texas, in 1926-27 it only handled 3.4 per cent of its crop. So I want the committee to note, if they will, that the American Cotton Exchange does not represent the cotton growers of the South; it only represents 6.8 per cent if they are all in it—I am a member of one of them myself— I do not agree with what Doctor Kilgore says. If he represented all the cotton cooperatives it would only be 6.8 per cent, and this year less than that by about 50 per cent; and, Mr. Chairman, I have a statement here from the Department of Agriculture about this pro- duction State by State and the amount handled by the cooperatives. May I insert it in the record right here? The CuairmMaN. Without objection, it is so ordered. . Mr. Jones. Doctor Kilgore might prefer to have it-after his state- Mr. AswerL. Mr. Kilgore has been talking about it right here. Mr. KiLcore. Doctor Aswell is just helping me tell my story. Mr. AsweLL. I am glad if I help vou. AGRICULTURAL RELIEF 261 (The documents referred to and submitted by Mr. Aswell are as follows:) Percentage of cotton marketed by large-scale cooperative associations in specified States by seasons, 1921-1926 1 State Alabama__._______ Arizona. _________ Arkansas...._.__.__ Georgia. __._________ Louisiana. _._ Mississippi... __. Missouri ______.____. North Carolina. _____. Oklahoma______ South Carolina... Tennessee... __._. Texsa 1921-22 Per cent ©2378 ‘8 1922-23 Per cent 7.0 21.8 6.6 75 1923-24 Per ron 21 IC. 1924-25 Per ¢ ni £ 1925-26 Per cent 7.9 13. 7.7 8 1926-27 Per cent 7.2 10. 2 4.4 5.¢ 6. & 4.5 2.5 9.6 10.0 6.9 23 4 United States ! Based on total production as reported in Yearbook of Agriculture, 1926, Table 23x 269 = ” —f 1 aN ~~ AGRICULTURAL RELIEF 4 t r 2 t ' V ' 2 ! 2 a 1 oh 1 4 1 ' tL] 2 21 ’ : | 1 ' » 1 | © Tet Vo "ow [rs Va ed > er nd ag gag ng ig |X Bd 1g 15 D-IL] 1s hoe Ry Rx 1 1B 18 iN 1 | © Com d Ce Ue loa ' Ld 3 | } — Let el 1 no | og x= ud ~ ~ |; 2 CN OK 1 = i — 2 bom Cop ~ wt Vero Tg 3 11) 16s i 100 PR “lala oat = nn 100 . IN = tr IO — v= ' be oF, 5 = Yo 3 — N -- » «3 6 “ ‘ . 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JES Poke 6a EE 3 Qe. 1 REL o 29d 5 18g 11° r= A B28 13 iE sien ce 8458 0 =e 1B EPEELEEEY ESEE 199 Sai 88d! ea SEETLE< Ed HESS dF SB wl rm R=0 Tad © 3 S<5< jy (Bee itnad 2t ° (E500 i8 . = 5 1 IEE g< B¢ SiieEeeiiiri gig a 4 - £2 gaa Bigiisrniienn = fo SZ gone 2s 2885xS 82a | @ £ 8578 a 2 gz S25 3548 5 pl —_ = — Te 1550 QL "aD s oS — nn a3 > = 2 a el ec 2 8 8 A 2 2 ' 1 ' ‘ « —_ a - ° = 263 Mr. Fort. The figures represent cotton handled, do they not, for members and nonmembers alike? Mr. Kincore. We only handle cotton for members. Mr. Fort. In your cooperatives? Mr. KrLcorE. In eur cooperatives. Mr. Fort. Mr. Bledsoe testified that they handled for nonmembers. Mr. KiLcore. Those people that put cotton in were members. They can become a member of the staple growers and then withdraw. That is practically so of all cooperatives. You can be a member for one year and then withdraw. They became members to put cotton in. Mr. Fort. None of them handle for nonmembers? Mr. KiLgore. Not for nonmembers. Mr. CrLArRgE. Your contraet is just from year to year? Mr. KiLcore. They are long-time contracts, but with yearly withdrawal privilege. Mr. Apxkins. It seems from those figures that Doctor Aswell has presented here that the amount that you have been handling has been gradually going down. Now, with your experience in trying to con- trol the surplus through your cooperatives, to stabilize the price; with your experience with that, if you can not find some way of making the entire production come in, will not the idea of controlling the surplus have to be abandoned entirely; in other words, can vou control it unless the rest of them help carry the load? Mr. KiLcore. Absolutely not. Mr. Apkins. And that attempt will be entirely abandoned if you can not have the rest carry the load? Mr. Kincore. 1 was leading precisely up to the point that Mr. Adkins has made, and I should have made that as part of mv state ment. Mr. # ay I interrupt you here? Mr. ucor: es. Mr. AswELL. in response to what Mr. Adkins said, why is the fee necessary on cotton, when it is agreed by every man who studies it that there need not be any loss on cotton? Mr. KiLgore. That is not agreed. Mr. AsweLL. Everybody I have heard that knows anything about it, says so. You can always handle cotton so you will not lose if you have the money to hold for better prices. Mr. KiLGore. You have never heard of a cotton merchant failing, have you? Mr. FuLMer. What about this season’s cotton going from 16 to 23 cents. They could organize and take it off the market and hold it. Mr. AsweLL. The reason they are not organized is that they lost half of the organization last year, because of the lack of legislation to induce folks to come in. Mr. FuLMer. I had a good bill and you refused to let it pass, pro- viding for $100,000,000. The gentleman was so carried away with his own bill that he would not vote for anything else. Mr. K1mLgore. Doctor, may I ask you a question? Mr. AsweLL. Yes; sure. Mr. KiLGgore. As I understand it, the bill you have introduced is the McNary-Haugen bill minus the equalization fee. Mr. AsweLL. Without the fee. Mr. KiLcore. We have hopes for you. You have come a good long ways. 264 AGRICULTURAL RELIEF Mr. Aswers. I have; that is as far as I will go. 1 will not go as far as the equalization fee. May 1 interrupt you there just a minute? [ can show you why my bill is better without the fee than the McNary- Haugen bill. It is not the kind of a bill I would write, but it is the best thing we can get now. I am for legislation of some kind. I will not vote for a bill'that I know can not become a law. Mr. KiLgorE. But you would like to get the very best bill you could—you would like to get the very best bill to be had? Mr. AsweLL. It is not a debatable question. Mr. KiLcore. That is what you stand for, the very best bill you can possibly get. Mr. AsweLL. I repeat my statement; it is clear to everybody who is at all informed that you can not pass a bill with the fee in it. That is perfectly clear, that you can not get it into law. Mr. KincaeLoE. Why can you not, Doctor? Mr. AswerL. 1 think it is a childish question to ask me why. Because you can not get it signed by the President. Mr. KINcHELOE. 1f you can get a two-thirds vote we can pass it over the President’s veto. Mr. AsweLL. You do not have the two-thirds vote. Mr. KiLcore. May I tell you this little story? Mr. AswerL. No; I want to tell you one first. Ixcuse me for referring to my own experience. A year ago and a little over I was informed that the tenants on my little farm had the cotton but the price was so low they could not pay their debts. I telegraphed a triend of mine to buy the crop at a cent a pound above the market price that day—gave them a bonus of 1 cent—put it in the warehouse and took a chance: this is really what I believe these boards could do. He made a mistake in interpreting my telegram. Good middling that day was worth 11 cents a pound. So he paid 12 cents all around. But some of it was low ordinary, when I got down there and looked at it. He paid as high as 314 cents a pound that day more than the market price on some of it. [ put it in the warehouse and paid storage and insurance, and the food came on and I got busy with the flood and neglected my own affairs. I left word with my friend that when it got high enough to pay out to sell it; and I lost $7.32 on the whole transaction. That 18 what I want the board to do. That is a little example, a very small thing, but the whole cotton crop can be handled just that way, without any fee. Mr. Kircore. I feel extremely hopeful, Doctor Aswell. There was a Jew who went out to a gentile to solicit a contribution for his church. Mr. AsweLL. I have heard that. . Mr. Kircore. And he asked him for a hundred dollars. The gentile gave him $500, and the Jew said, “Almost thou persuadest me to be a Christian.” I think, Doctor Aswell is almost persuaded to become a McNary-Haugenite. Mr. AsweLL. 1 am, if you will cut the fee out. Mr QLARKE. Let me read something just to strengthen his faith. Mr. AsweLL. Whose faith are you going to strengthen? Mr. CLarkE. Under the President’s veto—— Mr. AsweLL. Whose faith are you trying to strengthen? AGRICULTURAL RELIEF 265 Mr. CLARKE (reading): This so-called equalization fee is not a tax for purposes of revenue in the accepted sense. It is a tax for the special benefit of particular groups: As a direct tax on certain of the vital necessaries of life it represents the most vicious form of taxation. Mr. KiLcore. The bill has been changed this year. Mr. Chair- man, may I make this point now? The President’s objection there was that last year we had six staple crops. He objected to it on the ground that it was proposed to help those staple crops and leave the others out. The bill this year takes in all crops. So that objection does not apply. We are trying to meet the President’s objection, and make this a better bill as we go along. Mr. FuLMER. Doctor, Mr. Aswell in his statement just now stated that he mmstructed a certain party in his district to buy up the cotton of his tenant at a cent per pound above the market price. Now, is there anything in the bill that he is willing to vote for here without the equalization fee that will even give this board the authority to pay the present market price, let alone a cent a pound above that? Mr. AsweLL. I would leave it with the board to say anything they want. My bill allows 5 cents above the price. Mr. Fort. You so testified. Mr. AswerLL. My bill allows them to give 5 cents, if they so desire. Mr. KiLcore. What would have happened to you, if vou had paid 5 cents above when it was 15 cents? Mr. AsweLL. It went to 20 cents right away last year. Mr. KiLcore. Yes; it did for a while last fall. Mr. AsweLL. It went to 24 cents one or two days. Mr. KiLGgore. You know, hind sight is better than foresight. Mr. KixcHELOE. Doctor, let me ask you that, in connection with Doctor Aswell. 1 think that would be a good proportion and work- able, if there is any way that you can keep down overproduction. How can you keep down overproduction of cotton? I will go along, so far as I am concerned, if you could convince me that you could keep down overproduction in this country. Mr. AsweLL. I have a bill to do that. You have not read my bill. Mr. KiNcHELOE. You admit that it is a gobd one, I understand. Mr. KiLGore. It comes a long ways. The Cuairman. Would you prefer to proceed without interruption? Mr. KirLcore. It is a matter for the committee. I can tell a better story, I think, if you will let me go along. Nevertheless, I want the question developed, and I want to give the facts; and I admit that what Mr. Aswell has given here about the cooperatives are facts. They are facts I was going to call attention to myself, as a part of the experience with cotton cooperatives, and my purpose in telling this story, was so that you might see what a surplus has meant to the cooperatives, that the members of the cooperative associations in doing what they have done to stabilize the price of cotton have had to carry the burden of that stabilization to the extent that they did stabilize it, that the nonmembers on the outside have gotten the benefit of it, and because they have gotten the benfit without having to pay for it, we have lost tremendously in our membership and in the volume of cotton which we have handled. Mr. Jones. Doctor, is not that the trouble with most of the bills that have been proposed? They all permit, even the loan bills 266 AGRICULTURAL RELIEF require, the cooperatives to carry the noncooperatives on their shoulders? Mr. KirLcogre. I think so. Mr. Jones. A bill furnishing a lot of money to cooperatives has the fundamental defect of making the members of the cooperatives bear the burden for both themselves and the noncooperatives? Mr. KiLgorEe. Precisely, from my experience. Mr. Jones. And the advantage of the equalization fee is that it distributes that burden over all of them? Mr. KiLGoRE. Yes, sir. Mr. JonEs. If you can develop any plan other than the equalization fee that would keep from putting a greater burden on the coopera- tives than upon the moncooperatives, that would accomplish the same purpose, would it not? Mr. KiLGORE. Yes, sir. Mr. Jones. Now, does not the debenture plan do that? Mr. KiLcore. I wonder if you will not—— Mr. Jones. You do not have any objection to the debenture plan, do you? Mr. Kircore. I want to be perfectly honest and straight with you, Mr. Jones, in saying that I want to be constructively helpful in the debenture plan. ~ I certainly do not want to be destructive or hurtful. I have given some thought to the debenture plan. I have a folder or a file for the debenture plan. I have heard Doctor Stewart present before the directors, and friends of the Progressive Farmer, of which I am a director. We listened to him with a great deal of interest more than a year ago to his presentation of the .debenture plan. I have had correspondence with Doctor Stewart about the debenture plan, trying to develop and get into my own mind just how the debenture plan would work. I want to be helpful. If it is better than the equalization fee I would be for it. Note I said if it is petter. Mr. AsweLL. Would you face your resolution? Mr. KiLGcorE. The resolution says—— Mr. Jones. Let him make his statement. Mr. KiLgore. Let me read you, now, Doctor Aswell [reading]: That the trustees reaffirm their former position in regard to farm surplus con- trol legislation and instruct its legislative committee to consider and weigh additional legislative proposals with full cooperative consideration with our associates and allies and with the view of securing the most effective form of iegislation. Mr. AsweLL. That is not what you read before. Mr. KiLcorE. Indeed, I read that right at the beginning. Mr. JONES. Then, according to that resolution, if you could not get the equalization fee program, you would not object to the deben- tute program, Won you? r. KILGORE. 1t wi i this LGR will accomplish the purpose. Let me make Mr. Jones. All right. Mr. KiLcore. If the debenture plan is a little better than the equalization fee, I would be willing to accept it and I would ask the legislative committee—— it Mr uve If you express your personal opinion, is it better or is AGRICULTURAL RELIEF 267 Mr. KiLcore. I would say, if you would let me handle it that way, in other words, a great deal of time—more time I think has been put upon the equalization fee plan than upon any other. It has come to be pretty well known and pretty well understood, much better back home than Doctor Aswell I think would admit. Mr. AsweLL. Back where? Mr. KiLcore. Back in the country. Farmers know about it. This form of legislation is better understood right now than any other proposed farm of surplus control legislation. Unless there 1s something else better I think we ought to go along with it rather than take a new proposal and then have to educate the people up to the point that they know about it. Mr. AsweLL. Let us have the record straight. You say it is better understood. That is true, perhaps. Mr. KiLGgorEe. Yes. Mr. AsweLL., > agitation for th. country? Mr. KiLcore. Sure there has, and that is the reason they know about it. Mr. Jones. Let me ask this further question—and I am just ask- ing this for information and for your reaction: Would you object, even in the Haugen bill, to putting in the debenture plan as an alter- native proposal to be used in the discretion of the board without interfering with the fee, to be used if the board saw fit to use it rather than the fee—to give them permission to use it and put it into effect? Mr. Kincorg. I think that would be a proposal that is worth sitting down and talking over. I would not want to say just stand- ing up here, without thinking and working over it and discussing 1t with the people with whom I have worked and discussed this other legislation, without sitting down and talking to them I would not want to say, but I think that would be a proposal that we might sit down and talk over. I will just give you the summary of the thought I have about the debenture plan. I really did not want to go into this, because 1 wanted to hear the gentlemen proposing the debenture. Rd JoNEs. I will not ask you the question if you prefer to go ahead. Mr. Kincore. And so I might understand it as they may have it in their minds right now. The McNary-Haugen plan has been developed; it has been refined. Mr. Jones. So has the debenture plan, very much. Mr. KiLgore. It (the McNary-Haugen plan) has been improved each year, I think—each year I have gone along with it, so that I think it is a better bill this year than it has ever been. I would like for that reason to hear the latest, the most refined form of a debenture plan, and then take it as they present it and not as I may have it in mind from reading, and from correspondence. Mr. Jones. I was not asking that to create any embarrassment at all, Doctor Kilgore; I was trying to get a re-action in reference to it. One reason, as I understand it, the McNary-Haugen Bill provides for collecting the fee on a part of one commodity at the point of export; most of them are at the processing point, but I think in one com- 86160—2S8—SERE, PT4—2 2068 AGRICULTURAL RELIEF modity there is provision for collecting part of it at the point of export; and it is Just a question of getting the money, and it does not seem to me there is any particular halo or charm about where you get the money, just so you get it in such a way that there is not a burden upon one group of people. © Mr. KiLcore. If you can understand, Mr. Jones, that I am sym- pathetic—— Mr. Joves. I understand you are and I appreciate your position. Mr. KiLgore. And I will not go on then, and say just what the debenture plan is and what you do, in my mind; I am going to leave that unsaid. Mr. Kercaam. Doctor Kilgore, I would like to get your reaction to this rather practical situation that we as a committee face. There is a very substantial demand among the small groups, whatever plans they may favor, for the earliest possible enactment of a law, if you will agree to that. Now here is the practical situation, as I see it, that we face in the committee: The President of the United States will remain the President of the United States under ordinary con- ditions through the next two crop years—1928-29. Granted that under the most favorable considerations following March 4, 1929, a President would be in the White House who would be in favor of the equalization fee. Congress does not meet, unless by special call, until the following December. Early in 1930 would be the earliest possible date we night expect to get the equalization fee written into the statutes. I think the proponents of it admit that there is a con- siderable degree of question as to the constitutionality which is run- ning through probably a good share of the next year, so, as a practical matter, very likely the first crop year that could be affected by this proposed plan would be that of 1931. Now, as practical men—and I want to say I appreciate the statement you made a moment ago with reference to your desire to have some form of farm-relief legisla- tion—can you not see the situation that we are trying to meet, namely, to get some sort of legislation that would be effective before two or three crop years have gone by? Mr. KiLcore. I will agree with you absolutely there, with the qualification that you put in “effective.” If we can get effective legislation before then, by some other plan that would be equally as effective as the equilization plan, then I would be for it—but it should be effective. Mr. Kercuam. Then you will not object, under the discussion of the debenture plan, to being recalled to the witness stand and then discuss it? I think it is very proper that you should not take your time to discuss it now. You would have no objection to that? Mr. Kincore. No, I think I would then be in better position. X Mr. Kercaam. And speaking for you, I should be very glad, because of the limitations upon it, certainly those of us who believe it to have the most of value and the least of objection. want to hear certainly the objections. . Mr. KiLgore. We all want the facts and we want to fit the legisla- tion to the facts in this situation. If we do not fit the legislation to the facts, it is not going to be effective. Mr. AsweLL. Doctor, let me ask you one question, and I will try aot to disturb you any more. - Mr. KiLcore. I am always glad to talk to you. AGRICULTURAL RELIEF Mr. AsweLL. The last remark you made there is directly applicable to my bill. (Liaughter.) Mr. KiLcore. I am very much interested in your bill. Mr. AsweLL. I would not want a better statement for my bill. That is exactly what I stand for. I have been discussing this farm legislation for a generation, almost—my generation at least—in the House—with the cotton farmers; and really this bill, with a clause in it restricting production, without the fee and with the insurance plan, as seems sympathetically accepted here, I am honest in my belief that is exactly the kind of bill that the cotton folks have been wanting all these years I have been in Congress. I believe that covers the whole situation. It is a cotton bill as it stands. I do not know about the other commodities, but this bill, without the fee and with the insurance plan, is a cotton bill from beginning to end. Ar. Kivcore. Doctor Aswell—— Mr. Aswerrn. That is my honest judgment. Mr. KiLcorE. You know merely writing a restriction clause into a bill like this will not restrict production. There has got to be some- thing real there. The equilization fee would be an economic deter- rent and would not be merely a restriction in the bill. Mr. AsweLL. Perhaps. Do you not agree that this bill with the insurance plan is a good cotton bill, without the fee? Mr. Kincore. You understand, we are absolutely for the imsurance plan? Mr. AsweLL. Yes, sir; I am. Mr. KiLgore. All of the cotton cooperatives want the Bledsoe insurance provision. Mr. AsweLL. I think the committee is sympathetic. Mr. KiLcore. We think that is one of the best contributions that has been made to this for of legislaticn. Mr. AswerLL. That is the reason I am for the Haugen bill without the fee. [Laughter] Mr. KiLcore. We are absolutely for the insurance provision. Mr. Chairman, Doctor Aswell says that.with the insurance provision it would be a cotton bill. It would more nearly meet the needs of cotton than it would any other crop—general staple crop—than any other crop which carries tariff protection. I would not want—I may be wrong in this—a cotton bill that did not apply to other agricultural commodities; I would not want a bill that would work for cotton—and I do not think this bill without the equalization fee would work effectively for cotton—I would not want a bill that would work for cotton that would not work for wheat—— Mr. AsweLL. I did not say that, and nobody else says that. Mr. KiLcore. Cotton, tobacco, rice, hogs, corn, and the other staple crops—I would not want that for two reasons. Mr. AsweLL. Doctor, I did not mean that. Nobody else wants it if it does not work. Mr. Kircore. I understood you to say this would do for cotton. Mr. AsweLL. I said cotton, and you represent 6 per cent of the cotton of the country only and are talking for cotton. Now, I said this is a good cotton bill. It will work on tobacco and rice just as well as on cotton. Mr. KiLcorEe. I do not think it would be effective on any tariff- protected commodity. 269 270 AGRICULTURAL RELIEF Mr. AsweLL. I did not ask you that. Mr. KiLcorE. I think it would more nearly meet the needs—more nearly work for cotton than anything else. Mr. AsweLL. 1 think this is primarily for cotton and you are speaking for cotton. Mr. Kincore. I am speaking for cotton. I would not want a bill that would work for cotton that would not work for these other commodities. . Mr. AswiLL. I would not; but I do not admit it will not. ' Mr. KiLcore. I think we disagree very sharply. Mr. AsweLL. Yes, we do, undoubtedly. Mr. KiLgorE. I think this bill would more nearly meet the needs of cotton, because cotton does not have any tariff; it is largely exported I think the conditions with the other main staple corps are quite dif- ferent from cotton. Mr. Fort. Doctor, is it not a fact that there is a very distinct line between the remedy needed for tariff-protected crops and the remedy needed for a non-protected commodity? Mr. Kimncore. They might find by experience that that was so. But I think that an equilization fee is necessary for cotton. Mr. KincaeLok. I do not mean by “tariff-protected commodity” all those that simply have a tariff; you mean really protected? Mr. KiLcorE. I mean when they have a tariff. Mr. KincueLoe. The reason I am asking that is, you take tobacco. There is a tariff on tobacco, but I will say on dark tobacco it does not have any effect at all. Of course, ours is 80 per cent export. Mr. KiLgore. Let me finish my thought, Mr. Chairman, about cotton. Its presentation here by Dr. Aswell is not the first time we have heard this. It has been suggested a number of times through- out the year that a bill without the fee would be a good cotton bill and that we as cotton people might accept such a bill, that would rive us results, and that possibly we should be satisfied with results for ourselves. Now, I do not think it will work effectively for cotton without the equalization fee, in the first place; and I would not want it merely for cotton. And that would not be based merely on loyalty or patriotism to the group of people with whom I have been associated and been working in trying to develop this legislation. It would not be based upon loyalty and patriotism to that group of people, but it would be based upon economic reasons. Any stabilization bill for one commodity that does not stabilize and is not effective for other commodities will break down for the one that you attempt to apply it to. I do not think you will need to go very far to see that is so. And I would be against it for economic reasons, and I believe sound economic reasons would indicate that it would fail; and I would not want a bill without the equalization fee, even if it would work for cotton, because it would not last. [ I am wondering, Mr. Chairman—I have gotton off of my story—if [ might Just dovelop Woiher phase of this question? Doctor Aswell hein, on] para one American Cotton Growers’ Exchange at its et y represented a little more than 9 per cent of the cotton pro ue ion and cotton membership, and it represents considerably ronson To ip now, which I admit; and there is an awfully good . » t00—just the reason I am going to impress upon this committee when I come to take up my story again. AGRICULTURAL RELIEF 271 Now, Doctor Aswell has suggested that perhaps I do not repre- sent very much. I have never claimed to represent more than cotton farmers that are in the cooperatives. I do not claim to represent them fully. Some of them are, like him, not for this bill; on the other hand, a great many on the outside are for this bill, and it is only the organized groups of people, you gentlemen know, that can have representation, except as they might write you individual letters and {armers are not much given to this. Bo I represent the only group of organized cotton farmers there is in the cotton-producing States. I do not ask you gentlemen to attach any more weight or importance to that than it really deserves. But I want to say this to you: In the two years that this legislation has been discussed in the South—the cotton group only came into it two years ago—that it has become pretty generally known. There has been a great deal in the press—general press and the agricultural press—about this measure. There is scarcely an issue of our agri- cultural papers that does not carry something about this. 1 happen to be a director in a farm paper with 500,000 circulation, that circulates in the cotton territory from Virginia through to Texas— the Progressive Farmer. 1 contribute now and then to that paper, and I have had a number of contributions in the paper on this subject. I have not had so many letters from farmers approving it, but I have had none disapproving it. In the talks I have made I have not had so many word-of-mouth approvals of the measure, but I have had practically none disapproving it. Now, just before the holidays, in fact, as a holiday message, I sent out this statement, and it went in the State organs of practically all of the cotton cooperatives throughout the South, as a holiday message. I want permission to read this, Mr. Chairman, along the line of developing the thought that this matter is better understood than many would want to admit, among the farmers of the country, and it has far greater support now than it has ever had. [Reading.] Tae NEED FOR FEDERAL FaryM RELIEF LEGISLATION AND ITs PURPOSE There is greater need to-day than there has ever been for farm surplus control, or Federal farm relief legislation, as it is commonly called. While farm condi- tions in the cotton growing States are better this year with a smaller crop and better prices than they were last year with a large crop and low prices, the loss on last vear's hig crop will not be evened up, much less overcome by the larger returns from the smaller crop of this year. The Department of Agriculture in Washington is authority for the statement that the 18,000,000 bale cotton crop of 1926 brought the cotton farmers $505,000,000 less than the 16,000,000 bale crop of 1925. The 1925 crop averaged the grower about 18 cents, which is around the average cost of average production throughout the territory, accord- ing to Government estimates. The 16,000,000 hale cotton crop of 1925, there- fore, brought the producers just about the cost of production, and the $505.000,000 less obtained for the 18,000,000 bale crop of 1926 was loss, and came out of the invested and operating capital of the farmer. The Department of Agriculture on December 1, 1927, estimated that the 13,000,000 hale cotton crop of 1927 would bring the growers $330,000,000 more than the 18,000,000 bale crop of 1926. It is, therefore, easy to see that the tremendous loss on the 1926 cotton crop can not be overcome by the better prices for the 1927 crop. There have been like swings in prices disastrous to the producers in other vears of surplus production of cotton and other crops, and until there is some national legislation giving the farmer the necessary maclinery for handling these temporary surpluses as they occur, disaster will continue to come to the farmers of the country in the future as it has in the past in consequence of these surpluses. It is generally agreed that overproduction or crop surpluses of our 272 AGRICULTURAL RELIEF : main staple crops in certain years is the main cause of the present farm situation n that the surplus production has made the price on the entire crops. The facts stated above as to cotton substantiate this, and the same is true with reference to other crops. Because of weather conditions and insect and other enemies, the farmer is not able to control his production and adjust it to the reasonable needs of consumption. In years of good weather and low insect injury large crops are produced and low prices are obtained. In other years of unfavorable weather conditions and high insect injuries low production results and better prices are obtained. The farmer is not able, because of these uncontrollable Factors, to adjust production to the needs of the world for varioug staple crops. Manufacturers are able to do this reasonably, and because of this ability they have had reasonably stable prices for their products. The proposals for farm surplus control legislation, or farm relief, are directed toward handling the surplus in years of overproduction and distributing it into years of underproduction so as to prevent surplus in years of overproduction from having the disastrous effects they have had in the past. In the McNary- Haugen bill the surplus of cotton in years of overproduction would be bought, stored, and held until there is a reasonable demand for it. A Government revolving fund to be used as a loan fund is proposed for financing such purchase, withholding and sale. In case of loss incurred in handling the cotton in this way, the equalization fee assessed against each bale of cotton would be used to take care of such loss. The equalization fee used in this way is equivalent to the producer buying back and holding his own surplus production until there is a need for it in world consumption. National devices of this kind have been furnished manufacturers, labor, railroads, and banks for either preventing or handling surplus in their several lines. The farmer is the one big group of citi- zens which has not had such help in preventing surpluses or handling them when they occur. It is believed by those who have given careful study to the McNary- Haugen bill that it will work as experience is obtained in operating it in the handling of farm surpluses so as to prevent them from having the disastrous effect on the growers that they have in the past. It would prevent the wide swings in prices that have occurred in the past, and which the cotton growers have experienced with the last three crops, and periodically heretofore with cotton. This would bring about stability in prices such as has been done already reasonably in manufacturing, with organized labor, with transportation, bank- ing, and with other business groups. This is the principle involved in the McNary-Haugen bill for farm surplus control. Farming can not be put on a reasonably safe basis until stability can be brought to the farming industry by some measure or device which will make this effective. I say this went out in practically all of the State organs of the cotton cooperatives. Mr. KiNCHELOE. Doctor, in view of our varoius and divergent views on this bill, that is a good statement. Mr. KercuaM. 1 can only see one improvement that can possibly be made. Of course, modesty prevents my suggesting what that improvement would have been. Mr. AsweLL. I could give him a suggestion that would help him a good deal. [Laughter] . Mr. KiLgore. Mr. Chairman, my only reason for reading that : Wy 1s to show that this matter has been presented to our people in he press, at meetings, reasonably, soundly, based on economic prin- Tiples. We have not appealed to the prejudice of the farmer; we ave not fried to excite him, because I have known—and that is the oe on N at the group I work with takes—that if it is to be effective and th De practical, it must be sound, it must be economically good; and itl 1S my purpose In presenting that to you gentlemen here, and par y as a result of the suggestion of Doctor Aswell that I do hich sen very many farmers—that they do not know about it. Bi ASWELL. did not say that they do not know about it. I say 4 oF hoe roptesent a large proportion of the growers, and they have anything much except about the Haugen bill. Mr. KiLcorg. The farmers generally, not merely the members of ~~ cooperatives, read statements of that kind, and they have been numerous. They hear the talks that have been made. vo Mr. CLarkE. Let me interrupt you right there. Whether-it be a million or a thousand farmers, this represents really a sincere effort for cooperation, don’t you think so? Mr. KiLcore. Absolutely so. Mr. CrarkEe. This Haugen bill, if put into effect, is a compulsory poel bill, is it not? Mr. KiLcore. It is a compulsory surplus pooling bill. Mr. CrarkE. Now, do you believe if all of a particular commodity were compelled to be put into or placed in a pooling proposition where it made no difference as to whether a man were in or were not in cooperatives, that it would be an inducement or encouragement or any way help the movement of cooperation? Do you believe it would? If the Haugen bill were put in effect, what inducement would there be for any man to join a cooperative, to help us along in what you believe in, and I believe in, and the members of this com- mittee believe in—cooperation? Mr. Kircore. That is a very fine question. Mr. Crarke. I am hook, line, and sinker for cooperation, and am director in a little cooperative up in our State. Mr. AsweLL. It is not a very little one. Mr. Kirncore. I think it would do this: The MeNary-Haugen bill would be compulsory pooling of the surplus. That would get that out of the way. It would leave the cooperatives in a position to orderly market the crop of its members—the portion not surplus. Mr. AsweLL. Would he not pay the fee on all of it, not only the surplus? Mr. Kircore. He would pay the fee on his entire production. Mr. AsweLL. On all he produces? Mr. KiLcore. Absolutely; every man—they all pay. Mr. CLArRkE. In addition to the fee that all in the particular commodity would pay, would not he, in addition, be also supporting his own organization and be paying a tax for the cooperative move- ment itself? Mr. KiLcore. He would be paying the operating costs. Let me get 1t clear. I believe I understand you and I believe you are going to understand me. The surplus would be pooled through the use of the equalization fee paid by all the growers, proportionately, each on his production, as I stdte in here [referring to clipping from North Carolina Cotton Grower read above]. The equalization fee is equiv- alent to every man buying back and holding his own surplus. If he produced 100 bales of cotton, and 10 bales of that is surplus, the equalization fee would either buy that back or guarantee against any loss in buying it and carrying it until it is sold. All of the growers would pay alike the equalization fee to buy and pool the surplus; and we would call that compulsory because they had to pay the fee to handle the surplus. The member and the nonmember would be on the same footing; it would be just a question whether a coopera- tive could operate in such a way as to make it advantageous for a grower to be a member of the cooperative, or whether there would be greater advantage in staying out of the cooperative. As it has been in the last few years with cotton, the advantage has been against the cooperative member and in favor of the nonmember. AGRICULTURAL RELIEF 273 Q 274 AGRICULTURAL RELIEF Mr. FuLmer. Doctor, right there. Is it your understanding that with a normal crop and fair prices there would not be any equaliza- tion fee; that they could operate without it? Mr. KILGORE. Yes. . Mr. FuLmer. And then if there should be a surplus it would bring about the equalization fee, which would bring to the notice of every rower the overproduction, which would tend to stabilize pro- duction? - Mr. KiLcore. Yes, sir. And I want, Mr. Chairman, to get straight with Mr. Clarke. You gentlemen are good judges of human nature. A man in public life must be either a good judge of human nature or a man of unusual parts; he may be both—Congressmen are. Mr. CrLarkE. Or his constituents may be poor judges. Mr. KiLcore. I believe if we take the human nature side of people into considration, other things being equal—I only mention that to illustrate my point—that they want to belong to cooperative asso- ciations and, as Mr. Bledsoe said here the other day, they will belong to cooperatives if you give them equal advantages in price in the cooperatives; because they get the advantage of their own technical employees in grading and stapling their cotton or other crops, so that they will get the advantage of quality in price. Now, there is a very distinct advantage there that a man would have to pull him over into a cooperative, providing the other things are equal, even. And then you have this other big advantage that we hear a great deal about, and that is the combined bargaining power that would go with a group of farmers and which the individual farmer does not have. I think there are those two main advantages if we had this compulsory pooling of the surplus, strictly speaking, compulsory contribution of the equalization fee for use in pooling the surplus or more that would induce the nonmember—he would not be forced— but there would be advantages in getting quality price for quality product and then the bargaining power of volume of product that would carry the nonmember into the cooperative associations. Further than that, gentlemen, public sentiment in this country, I believe, is in favor of cooperative marketing by farmers. There has not been any question, social, economic, or political, that has had the publicity, that has had the support, I think, that cooperative marketing has had in these last five years. Cooperatives are practically a unit for this bill. Congress has passed important legislation in favor of cooperative marketing: The Capper-Volstead Act of 1922, the intermediate credits act of 1923, the cooperative marketing bill in the Department of Agriculture in 1926. The action of Congress has been general for Tooperative marketing. Now, is supported by that public sentinemt. To President has not sent a message to Congress or made an address jn Wars as any appropriateness to refer to agriculture in, except po ade some statement, in favor of cooperative marketing. entiment 1s for cooperative marketing, and with compulsory pooling of surplus, the cooperatives can succeed.’ sal; Us would n% inducement to bring the nonmembers into the rood hime: would not be compulsory, but it would be just real 2 an nature and economic advantage. AGRICULTURAL RELIEF 275 Mr. Aswerr. If that is sound, why is it that only 6 per cent belong? Mr. KILGORE. You are speaking of cotton? Mr. AsweLL. Yes. Mr. KiLgore. The surplus cotton of 1925 and 1926 hurt the cotton cooperatives; that was the story Mr. Kehoe told you of the Burley Tobacco Association; that was the story Mr. Morgan told you of the Dark Tébacco Association. It was the surplus. Mr. CLargE. May I go just a step further with you now? You say the cooperatives would be of assistance in the way of grading and the rest of it. Now then, if a particular commodity goes into this compulsory pooling proposition, does there not necessarily go with it the standardizing and grading of the different trade practices of things, so that the cooperative would not be performing an addi- tional function, but the board set up there would necessarily be com- pelled to take recognition of the trade practices, the standards and all that goes with it. Therefore, if the board would not perform the function of standardizing or protecting the producer or anything else—— Mr. KiLGore. I do not understand the board would undertake to perform any of those functions. Mr. CLARKE. Is it not a necessary corollary of implied power that goes along with the board that it must set up the standards that have been all through the years established with trade practices in respect of any commodity? Mr. KiLcore. That would be set up? Mr. CLARKE. Yes. Mr. KiLcore. Those standards would be set up? Mr. CrarkE. Necessarily. How are you going to protect a commodity? Mr. KiLcore. The cooperative would have its own experts to perform the technical functions. Mr. CuarkE. I do not think the commodity, I think the board itself that is going to control the machinery 1s the one, because a board necessarily set up independently and without the control of the law itself would naturally not reflect the law and would have no power at all. Mr. Jones. The board at most would only grade surplus; it would not grade the other part of it. Mr. KiLcore. I do not understand that the board would have employees that would perform any of these functions, but they would expect the experts, the specialists in the cooperative associations, to do those things for them, including the surplus and the handling of the products of their own members. Mr. Fort. Your idea, Doctor, is that the board would attempt to handle only middling cotton and only do its price work through the price handling of middling, and leave all of the rest of the grades to fall where they may. Mr. Kivgore. I think the board would recognize actual grades. Mr. Fort. Or would it arrange prices according to grades? Mir. KiLgore. The board would operate through the cooperatives or stabilization corporations. Mr Fort. And they would have to deal with each grade as a grade’ Mr. Kircore. I think so. 276 AGRICULTURAL RELIEF Mr. Forr. And to do their grading as Mr. Clarke suggested, would they not? . Mr. KiLgore. Possibly we do not quite understand each other. We would have the same standards for grades and packages and packing that we now have, with such others as might be put into operation by the United States Department of Agriculture. Gen- erally, the Department of Agriculture is the authoritative agency for establishing standards, grades and packages. The States accept those and adopt them. Mr. CLarke. The world trade accepts them, in many respects. Mr. KiLcorE. They would be an operation; they would be used then just as now. But my thought is that you have to have some- body to take a product when it comes in and say what that grade or that staple, is referring to cotton particularly. The farmer does not know what the grades and staples of cotton are; he has to have technical experts to do that. The cooperative would perform that service, and in that way he would get the benefit of the premium on grade and staple, which the individual farmer has not gotten in the past. Mr. Fort. You do not think then that the board would protect the proper price for the growers on the cotton that graded differently from middling? Mr. KiLgore. The standard—I mean the basis for loans would be middling seven-eighth-inch in the case of cotton; that would be the standard. Of course, the premium that was above or below, the grower would get that. Mt. Fort. I am talking about purchases that the board makes to sustain the market. : ~ Mr. Kineore. The board would expect the cooperatives to do that if they were going to handle the surplus for it. Mr. Harr. Then, Doctor, you do not feel that the enactment of the law carrying the equilization fee is going to discourage the organiza- tion and the building up of the cooperative societies? Mr. KiLcore. I think it would encourage them. Mr. Kercaam. Doctor Kilgore, just before you leave the stand, one question: A little while ago I think you, in speaking of equaliza- tion fee plan called it a compulsory surplus operating proposition. Taking your cotton crop the last year, then, and supposing that the equilization fee has been determined by the board would be $2 a bale, and your production the last year was 18,000,000 bales. Then, if I understand you correctly, that $2 a bale would be spread not only over the surplus but over the whole crop? Mr. KivGore. Over the whole production; yes, sir. The Crairman. Will you go on to-morrow, Doctor? Mr. KiLGore.. Yes, sir. The CHAairMAN. Then, the committee will stand in recess until to-morrow morning at 10 o'clock. (Thereupon, at .12 o’clock m., the committee adjourned, to meet to-morrow, Tuesday, February 7, 1928, at 10 o’clock a. m.) AGRICULTURAL RELIEF House oF REPRESENTATIVES, COMMITTEE ON AGRICULTURE, Tuesday, February 7, 1928. The committee met, pursuant to adjournment, at 10 o’clock, a. m., Hon. Gilbert N. Haugen (chairman) presiding. The CuairMaN. The committee will be in order. Mr. Kilgore, we will be pleased to have you resume your statement. |, STATEMENT OF DR. B. W. KILGORE—Resumed Mr. KiLGore. Mr. Chairman, I had gotten yesterday in a rather carefully-thought-out plan I had in mind to present to this com- mittee, through the account of the rise of the cotton cooperative marketing associations; and with the help of Mr. Aswell, the decline of these cooperative associations. I want to thank Mr. Aswell for his assistance in this latter part, for the adding of the weight of his authority to that portion of my statement. In the decline of the cooperative associations, we have the reason for farm relief legislation. Mr. AsweLL. Doctor, I can help you more if you will let me inter- rupt you. I do not want to interrupt your statement, but I can give you some more information. Mr. KiLcore. I am going to tell you some more facts, too. Mr. AsweLL. Who pay the expenses of the American Cotton Exchange? Does that come from the cooperatives? Mr. KiLGore. Yes. Mr. AsweLL. Do you know how much the whole exchange execu- tives, and all, is costing the cooperatives? Mr. KinGore. Thirty cents a bale is the regular assessment for the exchange, and in all of the five years that 30 cents a bale has covered the cost of all expenses of the exchange, including the sales organization throughout the country. Mr. Aswerr. Then, if you have a million bales how much would that amount to? Mr. KiLcore. That would be $300,000. Mr. AsweLL. Then the exchange cost that much? Mr. KiLcore. Yes; that would be so. Mr. Aswern. When I go to the South, I get the information that the cooperatives are not failing because of the lack of the equaliza- tion fee, but they are failing because of the extravagant expense of the overhead; that is what they tell me all over the South. In one State the cooperatives paid an attorney $35,000 attorney’s fee. So the average farmer said, “I am tired of paying overhead.” That is what is the matter. The equalization fee wouldn’t help. Mr. KirLcore. I think you are mistaken. There have been no such attorney’s fees paid by the exchanges or associations that I know of. Mr. AsweLL. I did not say the exchange. I say your exchange is costing $300,000 on top of all that overhead the cooperatives pay. Mr. KiLcore. I do not know what you are referring to: I know nothing about any such costs or attorney’s fees. Mr. AsweLL. Do you know how much the manager of the cooper- ative in Georgia received at one time? Did he not receive about $20,000 salary? 278 AGRICULTURAL RELIEF Mr. KiLgorE. No, sir. Mr. Aswern. Or something like that? Mr. KiLcore. Not that much. Mr. AsweLL. It might be around that? Mr. KiLcorEe. I think—— Mr. AsweLL. And the manager in Alabama, how much did he get? Mr. KiLgore. Around, I think, $7,500 as general manager. Mr. Aswiir. The farmers claim there is too much overhead cost; and then your exchange comes along and adds another height to the sky of $300,000. That is what is the matter with the cooperatives— it 1s overhead expense. Mr. KiLcore. I think you are wrong. Thirty cents a bale is not a large expenditure. Mr. AswerL. That is on top of the cooperative expenses. The $300,000 is extra, what you might call a super-superb capstone, that is the word. Myr. KiLcore. That is a very popular position taken by those who are not over enthusiastic about cooperative associations. Mr. AswrroL. I am a member of a cooperative, and 1 think the overhead is what is causing the trouble. Mr. KiLcore. There is not any such extravagant expense In any of the cooperatives that I know about. There is not in North Carolina; and the expenses in the exchange—- Mr. AsweLn, How many people came up here from North Caro- {ina with you this time? Mr. KiLcore. I am by myself. Mr. AsweLL. You are? 1 thought you had some help. Mr. KiLcork. No; I have no help; in fact, there is no one here from the exchange except myself. Mr. ANDERSON. You are keeping your expenses pretty well down, are you? Mr. KiLcore. Yes. The position I hold in the exchange as chair- man of the board of trustees and, in my own State, as president of the association, are honorary and not salaried positions. I stated a minute ago that in the decline of the cotton cooperative marketing associations, with the weight and burden of the surplus of the crops of 1925 and 1926 on their backs, is the reason for farm relief legislation—the McNary-Haugen bill without the equilization fee with Doctor Aswell, and with the equalization fee with me and my group of associations. Mr. AnprESEN. Doctor Kilgore, when you appeared before this committee two years ago, the equalization fee was somewhat of a contention at that time. If I recall correctly, your organization did not want the equalization fee; you did not believe it was feasible, and you did not think it would work out as to cotton. So, at that time you asked for a loan fund for cooperatives. You have changed your opinion altogether. Mr. KiLcore. We asked for a deferment of the equalization fee mn often two years. It was a new thing with us at that time. H angen bill. Jou gentlemen know, had not supported the McNary- hers , with the exception of just a scattering vote here and The cotton cooperatives did not become interested in the McNar " . "yy -~ Haugen bill until the surplus crop of 1925: and we came here first in AGRICULTURAL RELIEF 279 January, 1926, after we felt the effect of a surplus crop in our opera- tions. The matter was new to us and to our people. Our farmers did not know about it, and not only ourselves but our Representatives in Congress felt that we should not, without having put the matter before our farmers, place the equalization fee on them; and we asked for two years’ deferment, so that the matter might be discussed. I covered here yesterday the way this matter has been put before our farmers in the last two years, so that they might know about it, and so they do know about it now. We asked for a deferment at that time, for these reasons: We want the equalization fee now because our farmers have had an opportun- ity, as the farmers of the Mid-West had had at that time, to know about this entire proposition. So we came along and put ourselves in the same position, the same category with all of those who are ad- vocating this legislation. There is a difference in the situation then and now as regards the South. Mr. Apkins. You heard Mr. Bledsoe’s testimony here, did you not, before the committee? Mr. KiLcore. Yes. Mr. Apkins. And I think it is pretty generally understood by the members of the committee, at least, that Mr. Bledsoe is about as representative a planter and cooperator as has come before our com- mittee. I think if you will look into the record you will find stated that he had been opposed to the equalization fee until their actual business experience and attempting to carry the surplus had demon- strated to them that without such a fee to make the whole crop carry the cost of marketing the surplus that they could not operate. That was their actual business experience that had converted them from Opposing the fee to supporting it and that had led him to change his mind. Mr. KiLcore. That was so with us; and Mr. Bledsoe and his tes- timony came in here after we did, and you did not have the tobacco associations here until last year—the Burley and Dark Tobacco Asso- ciations, until they had had this experience; and then they came as a result of that experience, advocating this measure. It is not the theory with us, gentlemen; it is an actual experience representing a condition. Mr. Kercaam. Doctor Kilgore, will you take your cotton and take any equalization fee that you think would be a fair equaliza- tion fee and, based upon conditions this last year, just take about five minutes, or whatever time might be necessary, to explain exactly how you would think it would work out with cotton. Mr. KiLcore. It was suggested in the fall of 1926, when it was known that we were going to have about 18,000,000 bale cotton crop, with an indicated surplus of 3,000,000 to 4,000,000 bales, that the 3,000,000 to 4,000,000 bales, or as much Of that as was found neces- sary, should be taken off of the market. Cotton averaged in 1926 practically 12 cents per pound. That would mean $60 per bale, with 500 pounds to the bale. We had 18,000,000 bales of cotton. An equalization fee of $5—I am using round numbers so as to make it easy to follow—per bale would have meant $90,000,000; and $90,000,000 would have bought outright one and a half million bales of cotton at $60 per bale. If it had been desired, 50 per cent of the value of that cotton could have been borrowed from the intermediate 280 AGRICULTURAL RELIEF credit banks, or from commercial sources. So that with $90,000,000 three millions of bales could have been bought and have been taken off of the market, paying 50 per cent of their value from the equaliza- tion fee, and 50 per cent from commercial sources, or the revolving fund; that is, the revolving fund would have been used there as a loan, up to some amount—I do not want. to say just what, because that would be invading the realms of the operation of the board with the law in effect. But $90,000,000 on a 50 per cent basis for 3,000,000 bales of cotton, which represented the surplus for this big crop as it turned out after the year’s operations were over, would have taken care of the surplus of that crop. Mr. Kercuam. If I have vour figures correctly in mind, the levying of $5 a bale would have made $90,000,000. Mr. KiLcore. Yes; it would have brought $90,000,000. Mr. KercaaMm. On that basis, with that fee levied, and with the price as you gave it, on the average of 12 cents a pound, how would you have especiad that the price of the whole cotton crop would ave been aflected! Mr. KiLcore. My thought as to the way that would have operated had the board been established at that time—— Mr. Kercaam. That is what I am getting at. Mr. KiLcore (continuing). Would have been that the equaliza- tion fee—possibly not $5, but maybe a lesser amount, would have been. levied by the board on the entire production of 18,000,000 bales. The board would have begun operations, however, before cotton reached 12 cents. According to the figures of the Department of Agriculture the average cost of average production of cotton is about 18 cents a pound. The board would have begun somewhere below 18 cents a pound. It might have been 16 cents a pound, it might have been 15 cents a pound or it might have been 14. Mr. Kercuam. What is your best judgment of what it would have been; would it have been as much as 15 cents a pound? Mr. KiLcore. I would think so; yes. Mr. Kercaam. That would be fair—15 cents a pound? Mr. KiLgorE. Yes. The board would have begun operation in taking the surplus of cotton off of the market, and would have stabil- ized the price at that point, and likely gradually above that point. Mr. AgweLL. Would there have been any loss there, do you think? di Kincore. Doctor, we can see behind better than we can see ’ tr. ASWELL. You were describing what would have taken place in your at? in operation. Now, what would have taken place, Mr. KiLcore. There would 1Sus last year for profits on the in oR sausualiy good shares Mr. AsweLL. If you had stabilized the price at 15 cents but had bought at 12 cents, there necessarily would not h b los Mr. KiLGoRre. I said I should have begun at 15:1 51d not have : : : I would not have let it go down to 12 cents. | ink we ought to get this in mind right at that point, that if B10 GOIN 10, Watt point, that if we and so yt Rime on ; care ul and cautious as not to buy until it has reached bottom. av, 10 Conte. or oven 9 cents as it was last year, then our buying don: cris, Ov gvey 8 would have given no relief to th ging down a logy point o the fellow who needed it most, the man AGRICULTURAL RELIEF 281 who had to sell, because he could not hold, while the one who was better off and could hold up to 15 cents got the benefit. Mr. AsweLL. If you had stopped buying when it reached 15 cents and stabilized, would you not have sold for 18 cents? Mr. KiLgore. I do not know. I think with hind sight we would have sold at 18 cents, and maybe something better than 18 cents. Mr. AswerLL. Then there would not have been any loss in that operation. Mr. KiLcore. If we had bought the cotton at 15 cents and sold it at 18 cents, certainly there would have been a profit. Mr. AswerLr. What would you have done with that equalization fee, if you had had an equalization fee? Mr. KiLcore. That equalization fee would now be a part of the stabilization fund for cotton right there, ready to be used in future years of operation. Mr. Apkins. You could have used it to repay the money borrowed from the Government? Mr. KiLGore. It could have been used to repay the money bor- rowed from the revolving fund. Mr. FuLmeR. Doctor, if we had the machinery now proposed to be set up under this bill, and the money at hand, do you believe cotton would be going down as it has been for the last two months, in the face of a very short crop for the past year? Mr. KiLGore. I do not think so, Mr. Fulmer. Cotton is below the cost of average production now, and has been for the last two months. It may not be enough below the cost for the board to come in there and say, “We will pay 17 cents or more for cotton, but I do think that under a bill of the kind that the McNary-Haugen bill is, with its equalization fee which guarantees the return of any losses to the revolving fund, the board would be more liberal; that it would take greater chances in stabilizing a price more nearly the cost of production of cotton than it would on a mere loan bill where there is no such guarantee for the repayment of loans such as the equalization fee affords. Mr. KercaaM. Now, Doctor, let me come back to the illustration and ask you to give a moment to it. Mr. KiLGoRE. Yes. Mr. Kercuam. I want to follow that through with a few more questions. If I understood you correctly, we assumed that the price last year was 12 cents a pound on the average, and that the production was 18,000,000 bales, and you said you thought a fair price would have been attained had the equilization fee been in opera- tion and the board set in operation, of around 15 cents a pound. ry KiLcore. That would have been conservative and none too iberal. Mr. KercHaM. It is none too liberal? Mr. KiLcore. None too liberal. Mr. KercaaMm. I want it to be that way. Let us see if these figures are right. If I have made the computation correctly, I find that, in the first instance, that at $60 per bale his receipts from the cotton crop would have been $1,080,000,000, and, in the second Instance, $1,350,000,000. I have not checked the accuracy of those figures, but I think they are approximately correct—illustrating the difference to the farmers it would have been realized in the return from the crop 282 AGRICULTURAL RELIEF Now, you said that a fee of $5 a bale would have been fair. That would make $90,000,000. Then, taking the $1,080,000,000 from the $1,350,000,000, leaves $270,000,000 more for the cotton crop in the first instance than in the other. In view of the fact that the cotton farmers pay the equilization fee, it would be fair to deduct what they had paid of their own pockets for that fee.. That would leave you then $180,000,000. Where does your $180,000,000 come from, in the last analyses? Mr. Kingore. That $180,000,000 would have been distributed over the entire production, and all of the farmers would have gotten the benefit of that in proportion to their production. Mr. Kercaam. Would it not be spread all over the people of the United States who consumed cotton? Mr. KiLcore. Well, it would have gone to the producers of cotton directly, I think. Mr. Doron, But it would have gone to the producers of cotton. But where is the point it would have gone back to? Mr. KiLcore. It would have gone into the channels of trade. Mr. Kercaam. The channels of trade means eventually all the people who have consumed cotton? Mr. KiLGore. Yes. | Mr. Kercaam. They would have paid, then, $180,000,000 to the growers of cotton? Mr. KiLGorE. Yes. Mr. Kercuam. That was collected through the agency of a board set up by the United States Government? Mr. KILGORE. Yes. Mr. Kercaam. $180,000,000. I am glad to have that point, because under the plan in my bill all the people of the United States would have been assessed $80,000,000 for cotton instead of $180,000,- 000. I was getting back, of course, to the illustration we hear a great deal about, that we must oppose the debenture plan because it is a subsidy. I just wanted to call attention to the fact that the people of the United States pay $180,000,000 in one instance and $80,000,000 1n the other. Mr. FuLmer. May I ask the gentleman from Michigan right on that point: I gathered from your remarks, then, that because of holding this cotton at, say 15 cents, a fair price, which would be a 4 cents above the low price, that it would come out of the consumer of the manufactured goods? Mr. KercaaM. Yes. Mr. FuLMER. As a matter of fact, for your own information, last year, 1926, when we produced 18,000,000 bales of cotton, the trade in the United States and for export took 19,000,000 bales of cotton; and because of the short crop for the last year they are feeding the 1926 cotton back into the market this fall not at 15 cents but at 20 cents and 22 cents a pound, either in cotton or manufactured goods, bo the consumer; and if we had been able to have held this price at ound 1 gt cents it would not have cost the consumer a th 1d cost the consumer; in fact, it would not cost Rumer bs much as the consumer had to pay, because this cheap le to pee onto ho hands 2 the speculators and mills that were poke Into the wpa 7s) os a short crop and they are feeding it short crop at high prices. AGRICULTURAL RELIEF 9283 Mr. KercHAM. I am not dealing with that side of it, because the situation you have given would work identically the same in one bill as the other. What I am trying to get at is this: The argument our friends hold up thir hands in holy horror about is that the deben- ture must be frowned upon because it is a subsidy. I do want to call attention to what a subsidy is. The CrarrMAN. How many bales of cotton are exported? Mr. KiLgore. Eleven million bales of the 1926 crop. The CHAIRMAN. A subsidy of $5 a bale? Mr. KiLgore. Two cents a pound, or $10 a bale, and on 11,000,000 bales it would be $110,000,000. The CuarrmaN. $110,000,000, and you operated without expense to the Treasury and with profit to the producer. Now, then, so much is said about the cost to the consumer. We recall the statement of the representative of labor—and they are the consumers. Mr. Edgar Wallace, representing the American Federation of Labor, stated: “What benefit is it, if we can buy meat at 10 cents a pound, if we haven’t the 10 cents? The farmers are our customers. When they have no money we can not work. Hence I think it in the inter- est of all workers. I can not see any hope for improvement except the farmer can buy. We are with you.” And they were the first to come to the rescue of the farmer in bringing about farm relief. So we accepted their word for it. Mr. AsweLL. This $400,000,000 is in the Treasury. You have a bill carrying $400,000,000. What do you want with that if it is not going to cost the treasurer anything? The Crairman. It is to be loaned to the board on ample security. The Government has been loaning to others. The Government not only loaned millions of dollars to the railroads and others, but paid $2,000,000,000 out of the Federal Treasury, the cost of Government operation. In this case, it is proposed to loan the board $400,000,000 at 4 per cent interest, on ample security. Mr. AsweLL. You say the Government would not be at a penny’s expense, and yet you ask for that $400,000,000. The CrairMaN. I am using Mr. Ketcham’s own figures. Mr. AsweLL. I am quoting your figures as contained in the bill. Mr. KiLgore. Mr. Chairman, in what I have stated here, in reply to the questions relating to the operations, and particularly in con- nection with the debenture bill, I think you gentlemen fully under- stand from my statement of yesterday that I am keeping an open mind. I would not want what I have said, beyond what the actual facts would justify, to’ have the effect of changing the thought I expressed to you yesterday. I am advocating the McN ary-Haugen bill with the equalization fee. I am not taking a position on the debenture bill. I stated a bit ago, if I may go back to my story, that the cotton cooperative—and also the tobacco cooperatives—suffered a decline because of the large surplus of production of cotton in 1925 and 1926, and that they are in this decline because of the burden of the surplus which they have helped to carry beyond what they should have and which the nonmember has profited from, that has brought about this grievous situation of the cooperatives, and it is responsible for the general agricultural situation. R6160-—28~—SER E, PT 4——3 284 AGRICULTURAL RELIEF There are two proposals for handling or controlling this surplus production when it occurs. One of them is a simple loan from the revolving fund, such as would be in the McNary-Haugen bill without the equalization fee; in the Fess-Tincher bill of the Congress before ast, in the Crisp-Curtis bill of the last session of Congress, and in the Crisp bill of this session—they represent a simple loan from a revolving fund. . The other suggested plan is the same loan from a revolving fund, with an equalization fee levied upon every marketed unit of the com- modity, spread over all of the producers in proportion to their pro- duction, in order to raise a fund which would guarantee any losses and the return of the revolving fund in its entirety. Now, those are the two proposals. Mr. Former. Doctor, right there may I ask you a question? In all of these other bills mentioned by you, there 1s a provision that would give the board the right to have this agency collect a commis- sion or certain fee so as to create a fund to pay back that loan, the only difference being that it would be out of folks who operated through this agency, and under the equalization fee it would come out of all the producers? Mr. Kingore. That is correct. I believe in the equalization fee plan for two or three reasons: In the first place, the equalization fee means that every producer in a measure buys back his surplus pro- duction. If I produce 100 bales of cotton, and there are 10 bales of surplus, or 10 per cent, then my equalization fee either buys back and holds the surplus, or else it is used to guarantee any losses, costs, and charges of the agency which holds 1t for me, and to make ood the loan to such agency from the revolving fund. In that way, every producer has an interest, if he does not actually own the surplus. The farmer or the producer is the only man interested in the surplus. If he owns the surplus, that surplus of this year is not coing to let him go next year and produce another big crop to the extent that he can prevent it, to break the price on the crop that he produces next year and also of the surplus which he already owns. To me that is fundamental. One of the most difficult things in connection with farm legislation is the matter of restraint on pro- duction or control of production within reasonableness. The equali- sy fee does that in a way that the simple loan proposal does not reach. Right here I think I had better emphasize how strongly I am for the equalization fee. From some of the questions you gentlemen asked yesterday, I rather get the idea that you think I am a mild- mannered man, and that because of this I may not be impressing nor that I am as strong for this as I really am. Down in my part of the country there is an evangelist, well known and highly thought of, named Ham. One day Mr. Ham, with a number of his admirers, was standing talking, and another gentleman came up who had not inet Mr. Ham; and a friend of both of them undertook to introduce this gentleman to Mr. Ham, and he said to him, “I want you to meet my friend, the best part of a hog.” This gentleman extended his hand and said, “How do you do, Mr. Chittlings?”" ’ ! The equalization fee is the ““chittlings”’ of this bill. AGRICULTURAL RELIEF 285 Now, I might use stronger language, but I am sure that it is not necessary, and that because I do make these statements possibly in a mild sort of way, I am none the less strenuously in favor of them and believe in them. In the second place—— Mr. AsweLL. Doctor, you do not mean to intimate that the crushing payment of this fee would make chittlings out of the farmers themselves, do you? That is what I got out of that story. Mr. CLarkE. Tell it again. [Laughter.] Mr. KiLGore. I think he understands it. In the second place, I want to give you this illustration of how the simple loan from the revolving fund or from any other loan fund would operate. You gentlemen remember that in” the fall of 1926, when 1t became known that we had an 18,000,000-bale cotton crop, when the price descended from 18 cents a pound to 12 cents and then 11 and 10 cents, that the South was greatly disturbed; the Nation was aroused. There was a big mass meeting of thousands of growers held in Memphis, and it was proposed that 4,000,000 bales of this cotton be taken off the market so as to steady the price. The admin- istration through Mr. Coolidge appointed a cabinet cotton commit- tee, made up of Secretaries Mellon, Hoover, and Jardine, and Mr. Meyer of the then War Finance Corporation. They held confer- ences, and they decided finally that they would set up in each cotton State a finance corporation with sufficient capital to get loans from the intermediate credit banks, or from the commercial banks, to take this cotton, with liberal loans, off of the market. It had the prestige and the force of the Government behind it. There was nothing that was more generally known or better advertised in the South than these loan financing corporations, with ample credit facilities for taking cotton off the market; and yet these finance corporations, set up in every cotton State of the South, handled practically no cotton. It was a mere loan. And why did they not handle cotton under those most strenuous conditions? It was this, in my analyses, that it was proposed in these finance corporations that individuals would take loans on their cotton. As individuals they were asked to take their cotton off the market, to take the risk in stabilizing the price for all of the growers. They would not take the risk. When you ask a cooperative association to take a loan of this kind— not exactly the same kind, but in principle the sa#me—when you ask a cooperative association to take a loan of this kind, either through a subsidiary or stabilization corporation, you ask a group of indi- viduals to take risks and to perform a stabilization operation which individuals would not do. I have been a director in a cotton cooperative association for five years, as the elected director from my district. My own thought and my own feeling is that the management of a cooperative associa- tion would be more sensitive about taking risks for their members to whom they are responsible than individuals would be in taking risks for themselves. And I think, therefore, it is logical and reasonable to say that cooperative associations, or subsidiaries or other organiza- tions that they might set up, would feel and act this way toward a loan which would be carried in any of the loan bills to which I have referred and which have been considered in Congress. 286 AGRICULTURAL RELIEF Mr. AsweLL. Doctor, you overlooked the fact that in my bill there is $250,000,000 in addition to loan fund as a direct operating fund. without the fee. Mr. KiLgore. That is the revolving fund? Mr. Aswern. No, this is the operating fund, the same as the aqualization fee. Mr. Kicore. I understood that your bill was the McNary- Faugen bill minus the equalization fee? Mir. AsweLL. Plus this $250,000,000 operating fund. -r KiLgore. The revolving fund. +. AsweLL. The fund to assist in operating and marketing crops. vir. KiLcore. That would be a loan. Mr. AswerLn. Oh, no. I have got an extra $150,000,000 beside that. You haven't read my bill; I see that. Mr. KiLcore. I asked you yesterday if yours was the McNary- Haugen bill minus the equalization fee, and you replied yes. So, I was taking your word for it. Mr. AswerLL. It is plus these other good things. My. Kirgore. All right. Then, I will pass over that. All these bills that use a revolving fund as a loan fund, which must be paid back—— Mr. Apkins. Do you yield? Mr. KILGORE. Yes. Mr. Apkins. I think one of these men representing the tobacco cooperatives—maybe both of them—1I think I asked both of them the same question—where they have not gone out of tobacco and not supplied any other commodity, and undertook to stabilize the market with their own money and notwith losses. When they money was cone they had to get out of business, of course; and they specifically stated before this committee that if such a bill provided for a fund with no provision made where the entire production of that commodity should bear the expense that they would not attempt to get their men to sign up to operate under it, because they would have the same experience they had with their own money. Now, that was the result, I take it, from their talk, and that has been my own thought, that if you can not work out a scheme to make an entire production carry the load you have to do away with the idea of surplus control? Mr. KiLcore. I think so. Mr. Apkins. You spoke several times about the stabilization of the price here. In the event that that could be done, the chances are in a great many instances the general public would never notice any difference in the price of the commodity. For example, when cattle sold at the top price here not long ago of 18 cents a pound we people did not notice any difference in our beefsteak prices, and the only protest that went up throughout the country was what was recorded in the newspapers as an attempt to boysott on the part of hotel men in Boston against beef, that they were not making quite so much money. But the.consumer was not paying the difference? i iuony, Yes. Mr. Apxins. Now, you talked awhile ago about passing this on to ihe public, to the laboring man. Last session we had ad here favor Wallace, representing the American Federation of Labor, iri g 18 sort of legislation, and I asked him specifically myself, p g out an outline to him. that if this did do what we hoped it AGRICULTURAL RELIEF 287 would do, stabilize the price of farm commodities, if he was aware that they might pay a little more, and this was his reply—I have said that time and again to the committee that they were willing to pay the bill, and he wound up his statement and said, “I would like very much to go back to the farm if I could do anything to maintain the rural population and maintain an equality for the rural popula- tion; to maintain an equality for the rural population, an equality of opportunity on the farm, is to our interest, and that is why I am here. Now, the consuming public appreciates this whole situation and we are here defending this bill.” In other words, if this does what we hope it will do—it is hoped that it will stabilize the price and not subject it to such violent ups and downs, probably the consuming public will not be hurt, and if we can not charge what loss may come through that operation back to the entire production, we will have to abandon that idea of trying to control the surplus, and that seems to be the chief reason of reaction I get that if they do not get the fee they will not try to operate under this bill. Mr. KirLcore. That is so. That was distinctly the position of the Burley Tobacco Association’s representative and of the Dark Tobacco Association’s representative. Both of those associations have suspended operations as cooperatives. The Burley Association Is operating its warehouses under the old auction system, for the very reason that you have stated there that they will not go out and attempt to sign up a membership without an equalization fee that will enable them to handle the surplus, and they have gone back to the old method of marketing, so as to use their facilities which they have accumulated in these past years, and to hold themselves to- gether in the hope of legislation of this kind that will put them on their feet. Mr. Apkins. The idea I have got from these organizations repre- sented here before this committee—one of the chief things that they hope to accomplish through this legislation is to prevent, if possible, the violent ups and downs of the market. The proposition, whether it be a bounty or debenture, simply adds to the existing price, what- ever the tariff may be or whatever agreed on the side for the deben- ture, will in no way stabilize the market so far as ups and downs is concerned. If the speculator, as charged—I am not saying that, but it is charged freely here—that if the speculator bulls put the price up high, or if they put it down low, the debenture would simply be the addition to what tariffs would be, but would have no influence in stabilizing the market and preventing the violent ups and downs of the market. You would just simply add on a little to whatever was the existing market created by such agencies as control the price. Mr. KiLcore. I did not want to get into the debenture side of it. Mr. Apxkins. I know, but I am presenting that feature. If the theory that you are advancing on this equilization fee plan does stabilize—and that is what we hope to do? Mr. KiLcore. Yes. Mr. Apkins. The fact if you adopt a debenture or a bounty, or whatever you may do to add so much to the price, you add that to the price whatever it may be. Your markets will function just as they do now. You will have the same ups and downs in the market, but the debenture or bounty added to it, and the feature that you 288 AGRICULTURAL RELIEF hope to bring about—the stabilization of your market; a more steady market-—that would have no influence on that, would it? Is that your notion about it? Mr. KiLcorE. 1 promised yesterday to reserve an expression of opinion on the debenture plan until I had seen the exact proposal that you had. I would like to keep faith there, if you will allow me. Mr. Kercaam. Will you answer this definite question, whether the equalization fee of itself, without the additional features of the bill— and I may say that I favor those—would the equalization fee in and of itself contribute to the stabilization of prices? Is not the whole aim and proposal of the equalization fee to bring a better price for the product to the men who produces it? If it is not, of course, I do not know what we are here for. Mr. KiLcore. It is to stablize and to get a better price. Mr. Kercaam. Will you just tell me how in the wide, wide world the equalization fee in and of itself applied to the men who produce it, can affect the speculator’s interest? Mr. KiLcorE. I think I made very clear yesterday in the state- ment I made just how the surplus had ruined the price of cotton, and that that would apply to other staple crops, and how by taking the burden of this surplus off of the market would have prevented those ruinous prices. Mr. Apkins. That has been brought out several times here now. Was it not brought out by Mr. Bledsoe, and was it not also brought out by the Burley and Dark Tobacco fellows? The only function the equalization fee performs is a means of making up your losses that are incident to this stabilization idea; that you are bound to have losses, except when buying on a rising world market, and that you would not be doing very many times; and the only function it provides is a means to keep you in funds, to keep you in business, in other words? Mr. KiLgore. That is right. “Mr. Apkins. And it is the operation of your board and the opera- tion of the money invested in that that does your stabilizing, and the function that the equilization fee performs maintaining those losses necessarily incident thereto. Mr. KiLcore. It is guaranteeing sound financing. Mr. Apkins. In other words, when you lost all of the money you would be out of business? Mr. KiLGcorE. Yes, sir. Mr. Apxins. If you did not have some means of going back and assessing it on the commodity? That has been brought out time and time again by these men. . Mr. Hain. And without the equalization fee those losses would ave to be borne by the few fellows who belonged to the cooperative associations. These co-called loans are, after all, charged back to the responsible members of the copoerative socitieies. Of course, ~ Jn not carry that load and would be out of business, and we Would pave sy go back to the Government again to get a new loan. . epend on how much tax money we had in there to deter- nips how many times we could go back and get new loans. | squ oli SonrEr Let me see if you agree with this statement: The lo carry out this plan? e an additional fund to the revolving fund Mr. KirLcorEe. That is right. AGRICULTURAL RELIEF 280 Mr. FuLmer. And would only be used when we would find out we had a surplus which was depressing the price of cotton? Mr. KiLGore. Yes. Mr. FuLmer. And only to the extent of buying cotton in a suffi- cient number of bales to bring about a fair price, and then withdraw from the market. Then, for instance, as the gentleman stated awhile ago, the speculator would want to take advantage of that to boost the market. You could then feed back the surplus you had on hand and put him out of business and hold a stable market. Mr. KiLGORE. A stable market; yes. Mr. Harr. Doctor, you would go in or out of the market to the extent of stabilizing the market when you had a surplus; when you did not have a surplus the market would take care of itself? Mr. KiLGorE. Yes. Mr. Apkins. And out of that fund you could repay the money bor- rowed from the Government? Mr. KiLGorEe. It is a guaranty that the money borrowed from the Government will be returned to the Government and kept intact. Let me follow just the thought there expressed as to the ineffective- ness of a loan fund in the loan bills, by this statement, prepared with some care: The effect which any “holding movement” would have on the cotton market would depend to a large extent upon the trade's judgment as to both the intent and the ability of the holding agency to keep the cotton off the market as long as necessary I want you to get my thought there, gentlemen—that the effective- ness of any holding of the surplus off of the market will depend to a large extent upon the trade’s judgment as to both the intent and the ability of the holding agency to keep the cotton off the market as long as necessary. Any proposal to merely loan money to finance withholding cotton from the market would not carry conviction to the trade’s mind and would, therefore, have the minimum effect on the market. If with- holding were financed by every grower contributing his pro rata share to the cost of withholding a surplus, and a payment of such con- tribution were assured beyond question, then such a move would Carry conviction to the traders in cotton as to both the intent and the ability to withhold. That would be true with an equalization fee as a guaranty of the integrity of the loan through the revolving fund. It would not be so with mere loans from thé revolving fund of the loan bills. I believe this is fundamental, and it is a serious obstacle to the effective operation of any of the loan bills. In this connection I want to call your attention to two provisions in the latest loan bill. The Crisp bill, introduced December 5, 1927, contains this provision [reading]: (f) Whenever, in the judgment of the board, sufficient loans can be secured by the corporation at reasonable rates from other lenders, it shall suspend the further making of advances. That shows conservatism. Our cooperative this year borrowed some money at 4 per cent—less than it could get it from the inter- mediate credit banks. Under those conditions this bill would not likely operate to handle the surplus, because we have already reached the point where we can get money at as reasonable a rate as the intermediate credit banks or the Government source would furnish it. 290 AGRICULTURAL RELIEF And then this other provision, in section 10 [reading]: The corporation receiving such advances shall make purchases of such com-~ modity with the proceeds thereof only— Referring to the loan from the revolving fund. (e) If every reasonable effort shall be exerted by the corporation to avoid losseS and to secure profits on resales—— Mr. Former. May I add right there, under the same bill, section [1 [reading]: The corporation shall enter into an agreement with the board to— Subdivision (d) [reading]: Set aside a reasonable per centum of its profits each year for a reserve fund; which reserve fund may be transformed into a fixed capital and certificates repre- senting its ownership issued to cooperative associations. stockholders -in the sorporation. In connection with the commodity concerned. In other words, the amount of cotton handled by the corporation they would set aside and reserve, and every man on the outside who would be able to take advantage of any advanced price would not take any opportunity in liquidating the indebtedness or creating a reserve to handle this surplus cotton. Mr. KiLcore. The thought I want to present as between these two systems of handling the surplus, that is, a straight loan which must be paid back and the same loan the integrity of which is guaran- teed by the equalization fee, the difference is that the straight loan is limited by conservatism by which the Government will not loan if the cooperative can borrow money at as reasonable rates from other sources; and then operations must be such as to make profits and not sustain losses. To show just how conservative some of these Government insti- tutions are, this year the intermediate credit bank has required the remargining of cotton in at least one association when commercial banks did not require such remargining. Mr. Fort. Are you through with that point, now, Doctor? Vir. KiLcore. Yes, sir. Mr. Fort. In either what would you call the “loan bill,” the Crisp jill, as an example, or the Haugen bill, the loan to the corporation ‘hat is buying cotton is controlled by the identical board, is it not? Mr. KiLcore. The boards would be the authority in both cases. Mr. Fort. They are appointed in the identical manner? Mr. KiLGORE. Yes, sir. Lor Fort. The loan is for the same purpose in both cases, is it Mr. KiLGoRE. Yes. Li Lown. Then your idea is that the loan under the equalization Lifforercs in th an e oan under the Crisp bill not because of any Diforencs in the source of the money, since that is in the control of the money shal 8 agency under either bill, or the purpose for which comes out of the 6 e nse , but solely because in one case the money Sg qualization fee and in the other out of the revolving Mr. KiLgore. No. Mr. Fort. What else? AGRICULTURAL RELIEF 291 Mr. KiLcore. It is in the way that the money may be used. The way that it would be used, in my judgment, with a straight loan is that there would have to be extremely conservative operation, buying low in order that you might sell high and not lose any money, but to make money according to the section that I just read. There would be no such necessity as that under the equalization fee bill, because you would have the equalization fee to make good any losses that might be sustained from more liberal operations, and by liberal operations I would mean this: It has been suggested by some who have advocated the loan bills that cotton would have been bought last year at 12 cents. That would have been of very little value to the man who needed money from his cotton most. To have done most good the stabilization should have taken place at a much higher price than the low price of 12 cents or below. That is the way, I think, they would operate, that the loan bill would have to be conservative; they would have to buy very low down, and then the benefits would not come as against buying at a higher price, nearer the cost of production, and thus extend the bene- fits to those farmers who need help most; that is, those who do have to sell and get their money. Mr. Fort. I was going to come back to that in a moment, Doctor. I am trying to get down to the essential difference in principle, first, as to the purpose of the loan. As I get it, then, your reason for be- lieving that the equalization fee principle is essential is that the board should deliberately operate under that principle in contemplation of loss, whereas in the loan bill you think they must only operate on a basis that offers a reasonable prospect of profit. Mr. KiLcore. I think that latter is the meaning as stated in the loan bills, that you would buy at such a price that you could resell without a loss, and make a profit. Mr. Fort. I have no disagreement with you on that. Mr. Kingore. All right. Mr. Fort. The point as to where we disagree is as to the economic soundness of ever going into an operation deliberately to take losses. I have not looked at the Crisp bill for some time, but have just now secured a copy. In reference to the price at which under the Crisp bill it is proposed to purchase, you suggested they would have bought at 12 cents. I think perhaps I made that suggestion to you last year at the time that the Crisp bill was under discussion and when cotton was already down to 12 cents—that if it was then put in operation, of course, we would step in and buy—any corporation would. But, referring again to the language of the Crisp bill, that language is that it shall buy “when prices are below or, except for such purchases, may fall below the cost of production to efficient producers.” In other words, that bill does not contemplate waiting until they are below, necessarily, does it? Mr. KiLcore. Well, if you take that section, you might justify your interpretation. But if you take the other sections that I referred to, I think your interpretation is not just right. Mr. Fort. You and I perhaps read the bill differently, and maybe if we read it the same we would agree. Mr. KiLcore. I doubt whether we could read it with the same mind or not; our positions are entirely different. Mr. Fort. The limitation on purchase—and the only limitation on purchase, as I recall the bill, as to price—is that those purchases 292 AGRICULTURAL RELIEF shall be made only “when the prices are below or, except for such purchases, may fall below the cost of production to efficient pro- ducers.” Now, the limitation that you have referred to, Doctor, in para- graph (d) of section 10, as I read it as a matter of statutory construc- tion, follows a clause. which relates to what shall happen after the commodity has been purchased, not to the original act of purchase, but after the act of purchase has been made. Clause (d) relates to the safeguarding, conditioning, preserving, and storing of the commodity after it is purchased; that is what (d) refers to. Now (e) comes along, the commodity being pruchased before you reach it, and says that [reading]: If every reasonable effort shall be exerted by the corporation to avoid losses and to secure profits in resales— In other words, is not that simply a limitation upon the price at which the corporation shall sell after it has bought, and not a limita- tion on the price at which it shall buy? Mr. KiLcore. Let us read the first part of section 10. Mr. Fort. The first part—I have it. Mr. KiLcore. “The corporation receiving such advances’ —— Mr. Fort. Yes. Mr. Kirgore. “Shall make purchases of such commodity with the proceeds thereof only.” They shall only make purchases under those conditions. Mr. Fort. And only when prices are or except for such purchases may fall below the cost of production, only of those grades and quali- ties the production of which is desirable; only so long as ensuing production does not show increase in planting or breeding; only if the commodity so purchased shall be properly conditioned, preserved, stored, and safeguarded. Necessarily, the selling must follow the purchase, must it not; that can not come before the purchase, but must come after—only if after the purchase, when you come to reselling it, because the word there is “on resale.” Every reasonable effort shall be observed by the corporations to “avoid losses’ and ‘“to secure profits.” pai that is strengthened by the further limitation in that same clause: but the corporation shall not withhold any commodit i f the pies thereof has become unduly enhanced, Pity re in ogo Gail Maret Now, as I read that—and I think the people who have been the proponents of this bill, if that language is not sufficiently clear, wor 2 have no objection to a clarification of the language to indicate 3 exactly what I mean; it means that after it has purchase oS cotton, if it is buying cotton, the corporation must ondestor 0 operate at a profit and not proceed to dump the cotton at a op Your proposal as to the reason for the equalization fee, instead of a loan, as you said here a moment, ago, is that you contemplate opera- tions looking toward losses? : Mr. KiLgore. No; but with more possibilities of losses, so as to stabilize the price at a more reasonable figure than it would be pos- sible where you had to insure yourself practically, as under this, from sustaining losses. AGRICULTURAL RELIEF Mr. Fort. Do you think it ought to be stabilized at above the cost of production? Mr. KiLcorg. No. Mr. Fort. You do not? Mr. KiLcore. I have not suggested that. Mr. Fort. I am just seeing how close you and I are, to ascertain if I can not get you to come around. We agree it should not be stabilized, then, above the cost of production. Under this bill, under that language, you will concede, will you not, that if the board was willing to do so it could stabilize at the approximate cost of pro- duction? Mr. KiLcore. Now you are asking for something that would result or be effective from operation of this bill, I take it, and I am not willing to venture into the field of prophecy. Mr. Fort. No; I said if the board—I am asking the premise—if the board under this bill determined that it would advance sufficient funds to stabilize the price of the cotton at the cost of production, it could do it under the structure of this bill, could it not, with $250,000,000 or so available? : Mr. Kingore. Not and follow the provisions of the bill, I think. Mr. Fort. Why not? Mr. KiLGorRE. You are a lawyer, I am not; you have the advantage of me there; I might be wrong. Mr. Fort. I have reformed. M. KiLGore. I can use only common sense, and as I see it, I do not interpret the first part of section 10 there like you do: ‘““A corporation receiving such advances shall make purchases,” that is, with that advance—only if every reasonable effort shall be exercised by the corporation to avoid losses and to secure profits on resales. That means they have got to buy at a price, that is, use the money that has been loaned them to purchase the product so that they can resell it so as not to sustain losses, but to make profits. Mr. Fort. Let us get back to another fundamental: Do you or do you not believe that purchases of any essential human commodity, made at or approximately at the cost of production, will eventually turn and produce a profit? Mr. KiLcore. I believe they will, if bought low enough. Mr. Fort. If they are bought approximately at a cost of produc- tion? . Mr. KiLcore. I will not say that—at or approximately, but if Dot sufficiently below—I would not want to commit myself on that. Mr. Fort. I mean, cost of production to a man of reasonable pro- ficiency; I do not mean a man who is getting 30 pounds of cotton to the acre, but a man whose land should be employed in growing cotton and who is getting a reasonable crop at a reasonable cost. Do you not think that a purchase of that cotton at that price will always show a profit, if you have the financial ability to carry it? Mr. Kincore. I think there are conditions under which it would not. Mr. Fort. How long would you have to carry it? Mr. KiLGore. Suppose, for instance, cotton were purchased at 17 cents a pound—— Mr. Fort. Is that the cost of production? 293 294 AGRICULTURAL RELIEF Mr. KiLgore. And the cost of production was 18 cents, we will say. Suppose you had to carry that cotton for 12 months, and it cost 114 or 2 cents a pound to carry the cotton. You might not be able to sell that cotton for 1815 or 19 cents a pound; and then if you carry it two years you have got from 3 to 4 cents. Mr. Fort. Have you ever known a year, Doctor, when it sold below cost of production, when it was not a purchase, if you had the strength to carry it? Mr. KingorE. Right then you hit the nail on the head. The position I take is that the confidence that traders in cotton have in any movement, depends upon the ability to carry, and that depends upon the assurance that the loans are going to be taken care of and any losses reimbursed. Mr. Fort. I appreciate all that, Doctor. But under your bill that you are urging, the board can terminate the operation at any time it pleases, and withdraw the loans, can it not, and discontinue the equalization fee. It can do all those things overnight, if it wants to? Mr. KiLgorE. Oh, they would not do it in mid-season. Mr. Fort. You think this same board—you have got the same board under both bills? Mr. KiLcore. That is right. Mr. Fort. And will they not do it in one case if they do in the other? Mr. KiLcore. That does not enter into the financial soundness or differences of these two propositions: One is financially sound in that any losses would be replaced. Without the equalization fee there is no way to keep intact and to insure the integrity of the loan under a loan bill. Mr. Fort. Unless you concede—you shifted away from it a mo- ment ago; I do not think intentionally—I would say you are right, unless you concede that commodities bought at production costs— commodities of human necessity will turn a profit. Every investiga- tion I have ever made—and I have made a good many on that sub- Ject—has indicated that with sufficient financial strength—— Mr. KiLcors. In that there is a big difference between the two measures. Mr. Fort. Of sufficient financial strength to hold commodities purchased at or around production costs and held will show a profit some time. Mr. KivLeore. I would not want to say that is so, for the reasons that I have just given, that a commodity that is purchased at or right near the cost of production, has got to have added to it the carrying charges through the period it 1s carried, before it is sold. If that is a year, two years, or three years you are piling up in the case of cotton 114 or 2 cents a pound a year. If you put up 4 or 5 ents, at 1s $25 a bale, that goes into money mighty fast. 1926. (ORT. I know it does. But last year if you bought cotton in ha a agen i you have had, at 17 cents, which you say is ors hog . Pp ocuction hgure, and had to carry it, you would not carry 1t two years to get out at 23 cents. Mr KirLecore. That is hind sight. pal or wien you ton Tome any time in the economic history of seen carried and sold at a Dough at production cost could not have AGRICULTURAL RELIEF 205 Mr. KiLgore. If you buy it sufficiently low down—— Mr. Fort. I said, bought at production cost. Mr. Kirogre. If you buy it sufficiently low down—I do not know. [ will not commit myself. Mr Fort. I would like to have somebody put such figures in the record. I have studied it and I can not find it. I had a great wheat miller tell me I was wrong in this theory, and to prove it he told me how long it took a great pool of wheat millers to work out whole on a similar operation, engaged in to prevent the market from breaking wide open in a period of depression. But he admitted they got out whole in seven years. That is the only proof I have ever had offered me as to the unsoundness of this bill. Mr. KirGore. I think there is a lot of experience that this board has got to get in operating under any surplus-control measure to answer Just the question that you raised, or just how high up or how near the cost of production the board can afford to enter the market and buy and stabilize, and yet not run too much risk of sustaining osses. But whatever that may be or whatever they may determine in the course of operation, they can take greater risks in stabilizing nearer the cost of production under the equalization fee bill than they can under simple loans. Now, you have in a nutshell my thought as to the necessity of the equalization fee. Mr. Fort. In other words, the only real difference between us on the economic side of it is that you feel that the equalization fee would give added psychological strength to your holding corporation? Mr. KiLGORE. Yes, sir; psychological and financial strength. Mr. Fort. And it seems to me that in contradistinction to your psychological proposal that anything which has the Treasury of the United States back of it is going to have sufficient psychological strength to induce the trade to believe that the commodity is not going to be dumped on the market. Mr. KiLcore. We had the prestige of the United States Govern- ment behind the finance corporations that were set up in 1926 in the several cotton States to loan money to get cotton, and they did not handle any cotton. R Mr. Fort. They did not offer to loan a hundred per cent of the value of the cotton. Mr. FuLmer. Is there anything in the Crisp bill about, loaning a hundred per cent on cotton? . Mr. Forr. It offers to ‘advance the working capital of the corpora- tion and permits it—gives it the whole margin, loans it all the funds to operate. And one other thing, Doctor, on that point: You will concede, will you not, that the two boards—let us suppose that a bill was passed containing the Crisp features and also containing an alternative provision to the same board, if it saw fit, to put the equali- zation fee in effect. In other respects the bills are identical in lan- guage, and there would be no distinction in your mind between the point at which the board in one case would authorize purchases and the price at which it would authorize purchases in the other, would there —the same group of individuals setting the price at which it would authorize purchase? 296 AGRICULTURAL RELIEF Mr. KiLcorE. I think that this very distinct difference exists there: As I understand your proposition, it is that you would have the same board provided in the Crisp bill, the same provisions, with the alterna- tive to loan from a revolving fund? Mr. Fort. You have got it in the Haugen bill. Mr. KiLcore. That is right. In other words, to loan from the same revolving fund; with the equalization fee to make good any losses? Mr. ForT. Yes. Mr. KiLgore. I think it would do this, that when you put it up to a cooperative association or its subsidiaries, or a stabilization corporation, that it had the responsibility for directing, that it would hesitate to operate under the loan provision and would ask for putting the equalization fee provision into effect. Mr. Fort. But they would fix the same price in either case, would they not, if they fixed the prices at all, as I think they would have to under the equalization fee? Mr. KiLgore. I do not think so. I think they would have, with the equalization fee provision—if they were going to have the equalization provision there—that they could afford to stabilize the price at a higher level than they could under the loan provision. Mr. Fort. All right. Now, if that is true, what happens to the argument that the equalization fee will be a curb on production if it is going to be used to get a higher price than could be otherwise gotten? Mr. KiLGORE. As a deterrent on production? Mr. Fort. Yes. Mr. KiLcore. In the case of the equalization fee it is used— mean the equalization fee is a contribution—a compulsory contri- bution, I will put it, to a fund that is used to buy surplus or to guarantee any losses on a surplus that is bought with a loan from the revolving fund for handling the surplus. Mr. Forr. I asked you a different question this time, Doctor: I say if your proposal is to use the equalization fund to stabilize at a higher price than the loan bill fund would permit you to stabilize at, what then happens to the argument that the equalization fee will be a deterrent on overproduction? You are contending the equalization fee proposal is going to get a higher price than mere stabilization would? Mr. KirLgore. Yes. Let me tack this right onto the statement I made there about what the equalization fee is: That the equalization fee would be used in effect for each producer of a surplus to buy back and own his own surplus. Mr. Fort. In effect, but he would not carry it in his own yard. Mr. KiLcore. No; but he would know thaf he owns it. Mr. Fort. No. Mr. KiLcore. Well, we would agree to disagree there. Mr. Fort. He might know that his cotton sold at 18 cents in New elon, but he got 1714. He might know that. + r. KiLcore. But do you not believe that a cooperative, through ! js subsidiary or stabilization corporation that had a hundred ; oun bales of surplus cotton that had been bought with the qua xagiion, ioe or the equalization fee had guaranteed the loan, OTS ore rowers know that they had and owned in their on a hundred thousand bales of cotton? AGRICULTURAL RELIEF Mr. Fort. How about the 94 per cent of the farmers that are not in the cooperatives? Mr. Kircore. They would all own the surplus alike, whether they were cooperatives or noncooperatives. Mr. Fort. Who is going to let them know that? Mr. KiLgore. The cooperative associations; county agents and farm organizations. People have means of communication and of information to-day that they did not have few years ago. They are pretty well informed. Mr. Fort. I would like to go on, Mr. Kilgore, but it is 12 o'clock. Mr. FuLMER. Just one question in connection with his argument. Mr. Fort. I want to proceed with the witness later, if we are going to continue to sit. Mr. Fuimer. The producer would know about the increased production, because he would be called upon for a larger fee if he increased the production. Mr. KiLcore. Yes; quite so. Mr. Apkins. Nobody that ever underton- but what broke up. Mr. KiLGorE. 1':¢ large ones where tnev territory. Mr. Apkins. And none went in with the intention of losing money? Mr. KiLgore. No. Mr. Apkins. But past experience has shown you can not do it and depend on good merchandizing to do it. The CrAIRMAN. Are you through, Doctor Kilgore? How much more time do you need? Mr. KiLcorE. Mr. Chairman, I had another thought I wanted to present. I could do it in 15 or 20 minutes, if not interrupted. The CrarRMAN. How long would it take you to conclude? Mr. KiLcore. I have a concluding statement I had prepared which it would take me about 15 minutes to state. The CuairMaN. The understanding is that we will hear to-morrow Doctor Taber and Professor Stewart, on the debenture. The committee will now adjourn to meet to-morrow forenoon at 10 o’clock. (Thereupon, at 12.03 o’clock p. m., the committee adjourned to meet to-morrow, Wednesd>v. Februs— 1928, at 10 o’clock a. m.) 4 AGRICULTURAL RELIEF 271 Now, Doctor Aswell has suggested that perhaps I do not repre- sent very much. I have never claimed to represent more than cotton farmers that are in the cooperatives. I do not claim to represent them fully. Some of them are, like him, not for this bill; on the other hand, a great many on the outside are for this bill, and it is only the organized groups of people, you gentlemen know, that can have representation, except as they might write you individual letters and farmers are not much given to this. Bo I represent the only group of organized cotton farmers there is in the cotton-producing States. I do not ask you gentlemen to attach any more weight or importance to that than it really deserves. But I want to say this to you: In the two years that this legislation has been discussed in the South—the cotton group only came into it two years ago—that it has become pretty generally known. There has been a great deal in the press—general press and the agricultural press—about this measure. There is scarcely an issue of our agri- cultural papers that does not carry something about this. 1 happen to be a director in a farm paper with 500,000 circulation, that circulates in the cotton territory from Virginia through to Texas— the Progressive Farmer. I contribute now and then to that paper, and I have had a number of contributions in the paper on this subject. I have not had so many letters from farmers approving it, but I have had none disapproving it. In the talks I have made I have not had so many word-of-mouth approvals of the measure, but I have had practically none disapproving it. Now, just before the holidays, in fact, as a holiday message, I sent out this statement, and it went in the State organs of practically all of the cotton cooperatives throughout the South, as a holiday message. 1 want permission to read this, Mr. Chairman, along the line of developing the thought that this matter is better understood than many would want to admit, among the farmers of the country, and it has far greater support now than it has ever had. [Reading.] Ture NEED FOR FEDERAL FARM RELIEF LEGISLATION AND ITs PURPOSE There is greater need to-day than there has ever been for farm surplus control, or Federal farm relief legislation, as it is commonly called. While farm condi- tions in the cotton growing States are better this year with a smaller crop and better prices than they were last year with a large crop and low prices, the loss on last vear's big crop will not be evened up, much less overcome by the larger returns from the smaller crop of this year. The Department of Agriculture in Washington is authority for the statement that the 18,000,000 bale cotton crop of 1926 brought the cotton farmers 505,000,000 less than the 16,000,000 hale crop of 1925. The 1925 crop averaged the grower about 18 cents, which is around the average cost of average production throughout the territory, accord- ing to Government estimates. The 16,000,000 bale cotton crop of 1925, there- fore, brought the producers just about the cost of production, and the $505.000,000 less obtained for the 18,000,000 bale crop of 1926 was loss, and came out of the invested and operating capital of the farmer. The Department of Agriculture on December 1, 1927, estimated that the 13,000,000 bale cotton crop of 1927 would bring the growers $330,000,000 more than the 18,000,000 bale crop of 1926. It is, therefore, easy to see that the tremendous loss on the 1926 cotton crop can not be overcome bv the better prices for the 1927 crop. There have been like swings in prices disastrous to the producers in other vears of surplus production of cotton and other crops, ‘and until there is some national legislation giving the farmer the necessary maclinery for handling these temporary surpluses as they occur, disaster will continue to come to the farmers of the country in the future as it has in the past in consequence of these surpluses. It is generally agreed that overproduction or erop surpluses of our : : y | ~gpi >» a Nn Q WJ A DO - BS 2 ot & = # o £ mm ® QO ~ « ~ a ~ QO -— oO oN oO oo o aD o o Az = ” ge -— - lo © n= i © j=} oN 2 wn a ~ oN m ~N [&) <E n | }