Mr. BAKER. I do not think that is a fair question, for this reason: If you are a wheat grower, it is not a matter of concern to you whether the wheat that goes into the general supply at the seaboard comes from a cooperative concern or whether it comes from an individual producer. Anything that would relieve congestion in the great supply of wheat at the seaboard or the great supply of wheat at the principal centers, would have the effect of relieving the situation with relation to supply and demand. Mr. KINCHELOE. Suppose there were not enough farmers in the cooperative systems to relieve that congestion. What would you do then if you did not go to the individuals? Mr. BAKER. This bill does not limit it to cooperative institutions. Mr. KINCHELOE. What else is it limited to? Mr. BAKER. It says they may go and buy it, doesn't it? Mr. KINCHELOE. They may buy it from any person or cooperative organization. Mr. BAKER. It does not say they shall not, does it? It says, "Go and buy." They probably would buy from those who had to sell, and when you do that you are creating an outlet for everybody who has anything to sell, and that is the main point in agriculture, to create the outlet. Mr. KINCHELOE. I do not see but two agencies from which they could buy, and they are the individual persons and the cooperative organizations. Mr. VOIGT. I suppose the word "person" would include everybody. Mr. KINCHELOE. Yes; I suppose it would. Mr. BAKER. Sure. Mr. VOIGT. The term "person" is defined in section 2. Mr. BAKER. The tendency of this, I presume, would be to encourage cooperative organizations of producers, which is a very commendable purpose. Mr. TINCHER. They could buy of corporations or partnerships. Mr. BAKER. Yes; or anybody else. The CHAIRMAN. Is it the purpose to buy and hold in order to relieve congestion? Mr. BAKER. I do not understand you. The CHAIRMAN. Is it the purpose to buy and hold for higher prices? Mr. BAKER. I presume that is a matter of detail that would be disposed of by the board that is provided for in the measure. I suppose they would be expected to use their discretion as business men and proceed along the lines that are best adapted to the situation. Mr. TINCHER. The bill itself contemplates a profit for the organization organized under the bill, because it provides what shall happen to the first $100,000,000 of profits that the organization makes. The CHAIRMAN. Is it the purpose to relieve congestion by buying and holding for higher prices? Mr. BAKER. Oh, there are conditions surrounding the marketing of food products at the present time in the European market, which is our principal outlet, which requires the exercise of the functions of some agencies greater and broader and stronger than the cooperative organizations. If you were not so fortunately situated as to be connected with a business that is of a limited territory, you would find that your tobacco organization would be up against some mighty serious problems which, under present conditions, you are able to avoid. Mr. KINCHELOE. Do you not think the principle of cooperative marketing can be successfully applied to any product raised on the farm? Mr. BAKER. No; not so easily as it can to the Burley tobacco district in Kentucky, because you have a limited area down there and you can organize so closely that you can control the product. When you start to control the product of the wheat farms of the United States, you have an immeasurably different question. Mr. KINCHELOE. I am not in the Burley tobacco district. Mr. BAKER. I simply use that as an illustration. Mr. TINCHER. Do you contend that a cooperative organization can not be successful in reference to wheat? Mr. BAKER. I mean it can not cover the field absolutely. For instance, take your Farm Bureau Wheat Commission of the northwest, it fell of its own weight because they were not in a position to monopolize the wheat market. Now, the prune growers of Oregon are able to monopolize and control the output of prunes and they are selling to-day prunes that will be grown in 1925. Mr. KINCHELOE. The reason they could not monopolize the market was because there were not enough wheat farmers in it. Mr. BAKER. Well, my impression is that when you get the farmers all into an organization and get them all in that frame of mind where they will abandon their individual control of their individual crops then you can do that. That is what your tobacco men did. Mr. KINCHELOE. Absolutely. Mr. BAKER. And you have just as good chance of organizing the wheat growers of the United States on that basis as a man would have of lifting himself over this Capitol by his bootstraps. Mr. KINCHELOE. Why is that? The principle is just the same. Mr. BAKER. Yes; the principle is the same, but you have so many different men to contend with, with so many different ideas, and the economic conditions surrounding the individual are different. Mr. KINCHELOE. I do not know what the chances are to organize them, but I am talking about the principle of cooperative marketing. Mr. BAKER. The principle is all right. Mr. KINCHELOE. If you could get 74 per cent of the wheat growers of the Northwest into the proposition like we got 74 per cent of the tobacco growers Mr. BAKER. Why haven't you got the other 26 per cent? Mr. KINCHELOE. We could not get them in. Mr. BAKER. That is the trouble with the wheat business. Mr. KINCHELOE. We will have them in the organization in another year. Mr. BAKER. The reason you could not get the other 26 per cent was because they did not understand it. Was not that it? They could not be convinced that it was entirely in their own interest. Mr. KINCHELOE. I think the wheat growers are just as intelligent as the tobacco growers, as far as that goes. Mr. BAKER. You might say that in relation to the prune growers. Do you think you could go out among the farmers of the United States and get them to absolutely release their crops for five years to Tom, Dick, and Harry? Mr. KINCHELOE. In Kentucky they did not release their crops to Tom, Dick, and Harry. You evidently do not know anything about this marketing system that we will have in Kentucky if you talk about turning it over to Tom, Dick, and Harry. The directors who are elected by the farmers are the people who employ the officers to sell this tobacco and they are not Tom, Dick, and Harry, but the best tobacco men in the world. Mr. BAKER. You have the wrong conception of what I meant by Tom, Dick, and Harry. Mr. KINCHELOE. I certainly have. Mr. TINCHER. At the last session of Congress Mr. Sinclair had a bill before the committee somewhat on this order except that it fixed a minimum price for grain. Now, this bill, as Mr. Haugen has said, is for the purpose of relieving a congested condition at a time when there is congestion but under the present language of this bill, do you not think it would lodge a little too much power in this board. If we are going into price-fixing or price stabilizing, and that really is the fundamental principle of the bill, beyond extending equal credit to the man who raises wheat with the man who sells clothing, which every one agrees must happen; if we are going beyond that, had we better not really stabilize it than to create a corporation and give them this broad authority? Mr. BAKER. This would have a stabilizing effect short of absolutely fixing the price. If you go ahead and fix the price and the Government is going to take over the surplus, then you must provide the means by which the surplus will be disposed of. Mr. TINCHER. The theory of this bill is that it will fix the price and stabilize the markets. Mr. BAKER. I do not understand it that way. I understand the theory of this bill to be that by entering the market at a time when there is a surplus on the market and the bears of the market are crowding down the price, to stabilize the price, in a sense, by buying and taking that surplus off the market; in other words, when there is a declining price to forestall the possibility of a further decline and perhaps to start the tendency in the other direction. Mr. KINCHELOE. If this law were passed and if we were on the board, it would be left to us when we would stabilize the price, whereas if we decide the principle is right, and if Congress is going into it at all, I wonder whether it would not be better simply to take the bull by the horns and stabilize the price. Mr. BAKER. It seems to me that the minimum you might hope to arrive at in the end would be to secure to the grower the cost of production. That would be the minimum. We have had a lot of experience in the last four or five or six years with the cost-plus proposition, and a great many of the affairs of the Government were conducted upon that plan, and the more cost the more plus; but it would seem to me we would have a safe maximum if we fixed it at the actual cost of production, and you have got a wide field to work on between the price of wheat to-day and the minimum cost of production. You could exercise your judgment a long time before you got up to where you would have to determine as to what your maximum price would be; that is, to fix the proper amount of plus. Mr. TINCHER. We have had some disastrous results by having the Government regulate or interfere with business and by leaving the extent to which the Government should go to some governmental board. Mr. BAKER. Yes. Mr. TINCHER. For instance, I am a wheat producer, but I would be afraid of this board, and I would feel I would want some limitations placed on the board if it was created. Mr. BAKER. If we could hope to exercise the same judgment in the selection of the board that the tobacco growers of Kentucky and Tennessee, according to the gentleman here [Mr. Kincheloe] have exercised in the selection of their officers, we might hope to escape that situation which you fear. Mr. TINCHER. That is not the history of Government boards as applied to agriculture. Mr. BAKER. I think there is an increasing number of people in the country who believe that many of these things that were handled by boards and commissions during the war had, as the ultimate object of their operations, the discrediting of any new system of marketing. Mr. KINCHELOE. If I understand you, Mr. Baker, your idea about this bill, if it should become a law, is that when an emergency arose where there was a congested condition, it would be the duty of this board to buy the surplus in crder to stop a declining price. Mr. BAKEK. Yes. Mr. KINCHELOE. Suppose a condition like that were to arise and the board was to spend the whole $100,000,000 in buying wheat at a price, of course, which they would fix, then they would have to sell that wheat somewhere, and suppose they sold it at less than they gave for it, there would be a loss, and who would stand that loss— the Government? Mr. BAKER. I do not think the bill contemplates anything of that kind. Mr. KINCHELOE. But suppose that happened and they had to sell it for less than they gave for it. Mr. BAKER. That would be a drain on their capital. Mr. KINCHELOE. But who would stand that loss, the Government or the wheat growers? Mr. BAKER. It is up to you to fix your bill to take care of that situation. My idea is the wheat should be bought in contemplation of its being placed in the market in a place which they had already provided. As an individual farmer I do not go out and buy the things I need in my business a long time in anticipation of my needs When I go out and buy cottonseed meal for my cows I know what I am going to do. with it. Mr. KINCHELOE. But if you buy some stuff and pay more for it than you get for it when you sell it, you stand the loss, and I was wondering whether the Government would stand the losses of this corporation. Mr. BAKER. Who is standing the loss on this big fleet of ships down here in the Potomac River? Mr. KINCHELOE. You mean the ships of the Emergency Fleet Corporation? Mr. KINCHELOE. The Government. Mr. BAKER. Who is the Government? Mr. KINCHELOE. I am asking you that question in reference to this bill which is before us. Mr. BAKER. Well, suppose you got into that situation and you lost $1,000,000 or $5,000,000 in an attempt to relieve the situation of the farmers at the present time, would you hold up your hands in holy horror by reason of that fact? Mr. KINCHELOE. I am not saying anything about that, but am simply asking you who would stand that loss under this bill. I presume you have read the bill, if you do not know anything about it. Mr. BAKER. Yes; I have read it. Mr. KINCHELOE. I am asking your opinion about that. Mr. TINCHER. As a representative of farm organizations, what do you think of the tax-free security proposition? Do you think the tax-free bonds are working any hardship on the agricultural section of the country? Mr. BAKER. I find that the tax upon real property is very largely increased by reason of the exemption of certain bonds. Mr. TINCHER. Would you favor a constitutional amendment to abolish tax-free securities? Mr. BAKER. I am just studying that question. I very seriously doubt the wisdom of it. Mr. TINCHER. I had reason to think you had probably given that considerable consideration, because you ran for Senator in a section where the people think about such matters. I did not mean to embarrass you at all. Mr. BAKER. I did not make that a part of my campaign. One of the candidates for Senator in Michigan announced his opposition to the issuance of tax-free securities and gave that as one of the reasons why the State of Michigan should select him from the candidates for United States Senator. My attention was called to that provision in Major Emory's platform and I asked the major to answer to the people of the State of Michigan as to whether the tax-exempt securities of the State of Michigan were issued under Governmental authority or under State authority, and if he found that they were issued under State authority, what he would propose to do as a United States Senator to relieve that situation. We did not hear anything more about taxexempt securities in Michigan. Mr. TINCHER. That question is now before the Congress in this way: There is a bill pending, which has been reported favorably by the House Ways and Means Committee, with a special rule granted for it, by which we submit a constitutional amendment to meet that situation. Congress will have to take the initiative and it is a very important problem to the farmers of the country to be thinking about, as to whether we are for or against tax-free securities, and if this bill was before the House to-day, that would be one of the big questions discussed because it authorizes the issuance of $500,000,000 of tax-free securities. You were speaking a moment ago about this corporation not buying wheat unless they had a place to put it. I believe that would destroy the intent of the bill. I think that is the time we want a corporation to buy wheat, if we are going to stabilize the market, because if they had a place to put it it would probably destroy the intent of the bill. Mr. BAKER. Just as an ordinary business proposition if we are going into the proposition of storing and so on; if it is contemplated that this bill should be broad enough to cover the proposition of holding against a furrther decline or in anticipation of an increase in price, that is a different proposition. For instance, in our potato business I am connected with the Michigan Potato Growers Exchange, which is one of the leading potato sales agencies in the country, and we realize the fact we are dealing with a perishable product and if right at the present time it was possible for some outside agency, whatever it might be, to take 100,000 cars of potatoes and dispose of them by any means whatever by dumping them in the Atlantic Ocean or whatever it might be we know it would be very largely to the advantage of the potato growers of Michigan. When we get around to a point where we find there are 1,400 cars of potatoes going into the markets of the United States every day and we find there are accumulations in Boston, Pittsburgh, New York, Philadelphia, Cincinnati, Indianapolis and Chicago running up to three or four hundred cars at each place, and the next day there are 1,400 more cars going on the market, we are in a situation that is rather hopeless, with regard to any hope for any increase in price, and the price got down to about 18 cents a bushel in the country where I come from. Mr. TINCHER. As I understand it, this bill would help you if this corporation would step in and stabilize the price of potatoes by taking a chance and buying them and doing that at Government expense. If we are simply going to create a $100,000,000 corporation to be an ordinary speculator on the market, I do not think it would have any effect at all because that would not be enough money to handle the agricultural products of the country, and that would not have any effect at all unless they spent the money in order to stabilize the market, and I think we might just as well face that fact. Mr. BAKER. Then we come up against the question which was asked by the gentleman here on my right as to what we are going to do about the loss. Mr. TINCHER. My notion is that your answer should be a very frank one-that the Government is going to stand the loss and that is the purpose of organizing this corporation. Mr. BAKER. That would be a very natural inference, would it not, Mr. Tincher? Mr. TINCHER. Yes. Mr. KINCHELOE. That would be the inevitable result and that is the reason I wanted to get your opinion about it. Mr. SINCLAIR. We believe, however, that this bill will have the effect of preventing such a loss. It will be the determining factor that will change a loss into a profit. Mr. BAKER. Yes; that is the position I was taking. Mr. SINCLAIR. Mr. Chairman, with the permission of the committee, I desire to file a statement by Mr. Ayres, in reference to the Norris-Sinclair bill and the general agricultural conditions in his State and in the country generally. (The statement referred to follows:) 32018-23---SER O--2D SUP- 2 STATEMENT OF MR. TOM AYRES, MANAGER FOR SOUTH DAKOTA OF THE NONPARTISAN LEAGUE, PIERRE, S. DAK. Mr. AYRES. The condition of the agricultural population of South Dakota is such as to demand immediate constructive relief. The condition of the farmers of my State, no matter what may be said by boosters and boomers, or by politicians seeking to mitigate or soften present conditions, is about as desperate as it could well be. If a devastating drought, or a hurricane, or any other calamity had befallen people it could not have put them in a much worse position to meet their basic obligations and live. Their mortgages and taxes are now so heavy that they can not be met by the sale of their products. Interest is not being paid, notes are being extended, and interest compounded at high rates. The crops at the present prices scarcely pay the taxes on the land. Most of the farmers, outside of the comparatively few, who are fortunate enough to own their land free of encumbrance, are remaining on the land because they have nowhere else to go. They are able to get a grubstake to carry them along. So far as it is possible, the banks are furnishing the grubstake, extending paper and urging the farmers to remain on the land, look after the mortgaged live stock and the mortgaged crops, hoping against hope that there may be a turn in the tide of affairs which will save the farmers as well as themselves. Here is a State, one-third of which is composed of the best agricultural land in the northwest. It had had an industrious and conservative farming population. Since I began my residence in South Dakota-nearly 39 years ago the farmers and their families have worked in season and out of season, faithfully, diligently, and intelligently. The land is well improved in most cases, but it is mortgaged now for more than it would sell for. This presents a situation that ought to challenge the attention of lawmakers and of statisticians and economists. It is an indictment against our present marketing system of the worst possible character. These farmers have not been extravagant. They have worked from 4 o'clock in the morning during the busy season until late at night and still their obligations have grown instead of diminishing, while their taxes have increased. The farmers are now at a point where they are simply staying and suffering because they know not what else to do. A part of the farming population is angry-the other part is hopeless. They have lost faith in popular government and in their own ability to remedy affairs through political action or cooperative effort. The present marketing system has stolen three crops from them already and left them in a position where the fourth crop may be stolen with equal facility but with more tragic results. It is safe to say that one-fourth of the land must be foreclosed upon within the next year or carried over through extensions by the mortgage holders, who may prefer to have their buildings inhabited rather than to find new tenants. If the present condition of affairs continues for another year or two, nothing can avert wholesale foreclosure. For the last year I have traveled by automobile 10,000 miles, covering every part of the State of South Dakota, a considerable portion of the State of North Dakota, and parts of Minnesota and Nebraska, and I find this same situation existing everywhere. It will do no good to formulate new schemes for loaning money at cheap rates to these farmers. The War Finance Corporation scheme was a fiasco, so far as the farmers are concerned. It enabled the banks to take a rake-off for handling War Finance Corporation loans, but it did not enhance the equities in the mortgaged property, and the farmers found themselves as bad off or worse than before. I have witnessed, in probably 100 cases, men, women, and little children working in the fields. In instances I have seen women driving plows, hay racks, and mowing machines, carrying an infant in one arm and driving with the other arm. This has been done in a desperate effort to "get by," and still they do not get by. What is needed is a living price for the productions of these people. What they demand and what they should have is a stabilized price for their labor. We have stabilized the banking business; we have stabilized the manufacturing business by tariff duties; we are proposing with all the power of a great administration behind it to stabilize the shipping industry; we have stabilized the returns of the transportation companies, but we have allowed the great basic industry of the Nation to be despoiled, starved, and enslaved by a hideous system of marketing that is as stupid as it is criminal. What the agricultural industry needs and should have is storage for the surplus products, cheap transportation, and cheap credits to hold such products until they can be sold in an orderly way on the foreign and domestic markets. As soon as this is accomplished, cooperative societies of buyers and sellers, foreign and domestic, will be induced to get together on a basis which will destroy gambling and offer substantial relief to consumers; place the agricultural industry on a living basis. I hope |