We urge that no increase be made in the minimum wage and that none of the cotton-handling exemptions be repealed but that on the contrary they be strengthened and clarified in a way that will not permit them to be distorted and substantially nullified by administrative action. Mr. ELLIOTT. I would like to ask the gentleman one question, Mr. Chairman. When this cotton is brought to Greenville, to your cotton compress company, you take it and hold it usually for the order of the Government which has made a loan against it, do you not. Mr. Mock? Mr. Mock. That is up to the producer. We store it for him, and if he wants the Government to handle it for him, we still hold it for his action. Mr. ELLIOTT. In other words, you handle it as actually warehousemen or agent for whoever want to put it in your warehouse. But let us take in the Cotton Belt. In an ordinary year, a fairly sizable amount of the cotton produced goes into what we call the Government loan. The farmer draws his 90 percent of parity, a loan equal to 90 percent of parity, and then it is placed in the warehouse and it is held there? Mr. Mock. That is right. Mr. ELLIOTT. Now, if the farmer wants to pay off the loan which the Government has made him, of his 90 percent of parity price, he must pay the compressing or warehouse charges on the cotton from he time it was placed there until such time as he pays off his Government loan or makes other disposition of his cotton? Mr. Mock. That is right. Mr. ELLIOTT. About what do those storage charges or warehousing charges run on a bale of cotton? Mr. Mock. In our vicinity, the storages would run approximately 43 cents a month. I do not know what the interest would run through his agent. I could not answer that. That would be plus about a (5 cent handling charge in there. It is 43 cents per month for the stor age plus 65-cent handling charge. Mr. ELLIOTT. But the 65 cents is not per month, is it? Mr. Mock. No, sir. That is the first month, that includes receiving and handling and processing papers, and making distribution or whatever he may want made of it. Mr. ELLIOTT. The 65 cents is just 1 charge? Mr. Mock. That is right. Mr. ELLIOTT. And the other charge of storing the cotton and warehousing it, runs about 43 cents per month per bale? Mr. Mock. In our vicinity, yes. Mr. ELLIOTT. And it is different in different areas of the cotton belt? Mr. Mock. I think so, sir. Mr. ELLIOTT. Thank you very much. Chairman BARDEN. Thank you, sir. STATEMENT OF PAUL KELLER, REPRESENTING THE NATIONAL COTTON COUNCIL AND NATIONAL COTTONSEED PRODUCTS ASSOCIATION, CLAYTON, N. C. Mr. KELLER. My name is Paul Keller, of Clayton, N. C. I am president and manager of the Central Oil and Milling Co. We operate a small cottonseed crushing mill and cotton gin. I speak not only for myself, but in support of the stands taken by the National Cotton Council of America and the National Cottonseed Products Association. The latter organization has as members 288 of the 310 cottonseed crushing mills operating in the United States. During the past 13 years, our crush in Clayton has ranged from 4,000 to 8,000 tons of oil seeds. We have operated from 5 to 9 months with a peak payroll during the fall of the year of 38, including office and supervisory help. This ranks us among the smallest units in the country. We pay 78 cents an hour, which last year gave us a direct labor cost including foremen, during the crushing period, of $5.57 per ton. Idle season expense added $1.92 per ton to the labor bill, which gives us a total labor cost of $7.49 per ton. If the minimum wage is increased to 90 cents, the direct result would be to increase our labor cost $1.16 (15.5 percent) per ton, a $1 minimum would increase our labor cost $2.11 (28.2 percent) per ton and $1.25 minimum would increase labor cost $4.52 (60.3 percent) per ton. In addition to the direct increases, other workers already above the minimum would have to be raised somewhat in the same proportion. Increases in salaries other than those included above cannot be calculated accurately. I would like to say here that the other expenses which are based on wages, that is the insurance, liability insurance, and the hospital insurance which we carry, and various other fringes, amount to approximately 12 percent of the wage cost. That naturally would be increased in direct proportion. Chairman BARDEN. You carry hospital benefits for your men? With cotton under decreasing acreage allocations, we cannot anticipate any improvement in the tonnage figures in the near future. Decreasing tonnages mean increased cost per ton during both the operating and the idle season. If increases in operating costs could largely be passed along to the consumer, the burden of a wage increase would not be so heavy. However, this is impossible because of the nature of the industry, which I will review briefly. Cottonseed comes from ginners in boxcars or trucks. It is unloaded into storage either by power shovels, jacklifts or pneumatic unloaders. From storage, the seed passes over cleaners to remove sticks, sand, leaves, and other foreign material. After cleaning, the seed is conveyed to the linter room where it is reginned to remove the short fibers or linters, which are baled. The next stage is hulling, to separate the oil-bearing kernels from the hulls. This requires cutting the hulls and then passing the materials through a series of beaters and aspirators to separate the hulls from the meats. The hulls are then ready for sacking or bulk shipment. The oil is then separated from the meat either by solvent extraction or pressing, leaving a residual cake, which is ground into meal and sold as such, or may be pelletized. All of these products are sold in a highly competitive market. Cottonseed oil competes principally with soybean oil and lard domestically and to some extent with the world production of all types of vegetable oils and edible fats. Cottonseed meal competes with other oilseed meals, grains, animal proteins, and synthetic nitrogen products. Linters compete with woodpulp, cotton mill waste, foam rubber and other bedding materials. Cottonseed hulls compete with hay and silage, ground corncobs and shucks, and other inexpensive roughages. Because of the nature of our products and the interchangeability with other competitive products, our prices are fixed by the oldfashioned law of supply and demand. We sell at the market or we do not sell. And I would like to remind you of the fact which has been forcibly brought to our attention during the past few years, that even the financial might of the United States Government was incapable of maintaining the prices of oil, meal, and linters at a high level in the face of a declining market. It is acknowledged that we, unlike the steel mills, cannot increase our selling price to offset increased labor costs, then there are only three possible ways to offset higher wage costs. One is a reduction in profit margins. This presupposes a profitable operation, which has been far from general in the past several years. This is indicated by a persistent decline in the number of oil mills in established cotton areas, without equivalent increases in tonnage crushed by the remainder. Oil mills which operate profitably do not ordinarily go out of business. The second method of offseting higher wage costs is through increased efficiency, which means, to a large extent, the substitution of horsepower for manpower. This is rapidly taking place in many mills. However, in low tonnage areas the advantages of further mechanization at present wage levels are not clear cut. At higher wage levels, one is faced with the unpleasant choice of either making a heavy investment in labor-saving machinery or going out of the crushing business Either alternative reduces the number of jobs available, primarily in rural areas where seasonal industrial employment is a must for many agricultural workers. And, as the number of mills decline, cottonseed must be hauled greater distances at higher and increasing freight rates, thereby offsetting a substantial portion of the saving effected by mechanization. Cottonseed, being bulky, carries a rather high freigh rate in relation to value. This brings us to the third method of offsetting higher costs, one all too familiar to those of you who represent agricultural areas. That method is to reduce the price of the raw material. In this case, it would reduce the price which the farmer receives for his cottonseed, but the problem is not restricted to that. Almost everyday we read of some commodity for which the farmer is receiving a smaller propor tion of the consumer dollar, because of increased handling, processing, packaging and transportation charges. Investigations and requests for investigations follow on each other's heels. Yet here is the cotton farmer beset by sharp acreage reductions, which have increased hs production costs, beset by increased competition from synthetics, foreign cotton, unrestricted production of soybeans, enormous feed-grain surpluses, woodpulp and many other competitors, beset by already declining prices and possible changes in the whole support system, the effects of which no one can foretell. And what do you offer him to ease his pains? An increase in his cost of production through higher wages rates for the labor he hires and the things he buys, and a de crease in his income from the products he sells. Surely this type of discriminative legislation cannot be the intent of the Congress. We are not opposed to the worker's desire to better his income. Ba we vigorously oppose legislation which would take that income ou of the pockets of the farmers who are an indispensable component of our business, both as suppliers of our raw materials and consumers of a large part of our products. An increase in the minimum wage can only serve in this industry to intensify the economic pressure on the only major segment of the American economy which has suffered a serious decline over the last 5 years. The prosperity of the cotton farmer and of our industry is inseparable, and I must wholeheartedly endorse the resolution adopted on May 24, 1955, by the 59th annual convention of the National Cottonseed Products Association, which reads as follows: Whereas strong efforts are presently being made to sharply increase the legal minimum wage to levels as high as $1.25 an hour, and to narrow or eliminate existing agricultural processing exemptions; and Whereas such action would greatly increase the cost of processing cottonseed and such increases would eventually fall upon the producer of cotton: Therefore be it Resolved, That this industry, in convention assembled, express its disapproval of the proposed increases and elimination of the exemptions and urge all members to inform their Congressmen and Senators of their views on this issue. Chairman BARDEN. Thank you. Are there any questions? STATEMENT OF H. H. HUDDLESTON, VICE PRESIDENT OF THE MISSISSIPPI FARM BUREAU FEDERATION, REPRESENTING THE NATIONAL COTTON COUNCIL, LAMONT, MISS. Mr. HUDDLESTON. My name is H. H. Huddleston. I reside in Lamont, Miss. I am vice president of the Mississippi Farm Bureau Federation. At this hearing today I am representing the National Cotton Council. Mr. Chairman, the three witnesses representing the Cotton Council who have preceded me have given a clear picture of the services rendered by the first processors and handlers of cotton and cottonseed. The description of their operations and their charges show clearly that the farmer pays for their services. They show with equal clarity that any increase in their cost resulting from increased wages are of necessity passed on to and paid for by farmers. So that I can give the entire picture as the farmer sees it, I would like to just briefly sum up the testimony of the three gentlemen who have preceded me. The ginner separates the lint from the seed and packages the cotton into bales. He does not buy the cotton. For the ginning service he charges the farmer a fee. To stay in business, he must pass on cost increases, which means that he charges the farmer more. The warehouseman provides bonded warehouse service, protecting the cotton from the elements and other hazards, such as fire. In addition, the furnishing of negotiable warehouse receipts and Government-approved sampling for grade determination is an absolutely essential service in the marketing of cotton. The warehouseman does not buy or sell cotton, but merely furnishes a service, and when his costs increase they must be passed on to the farmer. Although the cottonseed crusher buys the seed, he is in effect rendering a processing service for the farmer so that the seed may be converted to the usable products which are sold. The cottonseed crushing business is highly competitive, and without question an increase in his costs will result in the crusher being able to pay less for his seed. He cannot raise the price of the oil, meal, or linters as they are sold in a highly competitive market, and represent only a small part of the total supply of the edible vegetable oils, protein meal, and cellulose needed in industry and for livestock feed. When we analyze the effects of raising wages or increasing the coverage of the minimum-wage law, we find that the farmer pays the bill in the processing and handling of farm commodities. That would be bad enough if that were the only effect, but in addition to being saddled with those increased costs the farmer's own wage bill would go up sharply, since he competes for his labor with the handlers and first processors in the small towns, villages, and rural communities where the gins, warehouses, and oil mills are located. In addition to these direct-cost increases, it is reasonable to assume that increased labor costs in the production of such things as farm machinery, fertilizer, and so forth, will be passed on to the farmer. So the farmer in effect pays three times for wage increases. First, in the processing and handling of the farm commodity he produces; secondly, through the increase of wages of farm workers; and third, through an increase in the cost of materials purchased for use in connection with crop production. In the main, industry is already paying more than the present minimum or even the proposed increase in the minimum wage. For example, in the Nation as a whole the average wage per hour for all manufacturing was $1.80 per hour in 1954. All of this adds up to the absolute fact that increasing the minimum wage is aimed directly at agriculture, and nobody else. Since the wages in the "old" Cotton Belt are the lowest in agriculture, that area would bear the greatest burden and suffer more severely from an increase in the minimum wage or an extension of the coverage. Farmers resent being singled out for special treatment in this fashion. Aside from being the lowest paid group in our economic system, they repre sent about the only group which cannot pass on the increased cost. Let's review briefly a few facts which show the relative position of agriculture generally, and Cotton Belt agriculture particularly, to the rest of the economy. 1. Overall hourly earnings in agriculture are less than the present minimum wage rate. They were 73 cents an hour in 1954-down from 96 cents in 1947. 2. Average wage rates for hired farm workers exceed the average return per hour for farm operators and their families. In 1954 the average wage rates for hired workers were 81 cents an hour. Yet the average hourly earnings of farm operators and their families were only 71 cents an hour, which included the all-important function of management. 3. Farm wage rates very substantially throughout the United States. For example, in 1954 the average wage for hired farm workers without room and board was $1 per hour or more in 20 States, principally in New England, the Midwest, and Far West. In the eight "old" Cotton Belt States of the Midsouth and Southeast, the average wage per hour for hired workers was less than 60 cents. Mr. Chairman, I would like to submit for the record at this point a map showing the farm wage rates by States and a map showing the low income and level of living areas in agriculture. Your attention is called to the facts that the area with the lowest wage rate is the area where the |