Those 16-cent loans held the price of cotton within 10 per cent of its August level until the following February, during which period about 90 per cent of the American cotton crop was handled and sold by farmers. During the same period industrial stocks dropped 40 per cent or more. Eventually, along with the decline in everything else, the market dropped below the 16-cent level and dropped so far that the cooperatives were unable to sell the cotton at a price which would repay the loans which the Farm Board had made. In June, 1930, therefore, the Cotton Stabilization Corporation was organized, and the Cotton Advisory Committee recommended that the Farm Board recognize that corporation as a stabilization corporation and that it take over from the cooperatives the volume of cotton which had been accumulated under the 16-cent and other loan plans. That was done in either the last of June or the first part of July. The stabilization corporation took over at that time some 1,241,000 bales of cotton which had been previously accumulated under the 16-cent and other loan plans, and took it over at a flat price, with differentials only for freight, due to the location of the cotton itself, and to the quality of the cotton. Senator THOMAS of Oklahoma. What was that price? Mr. WILLIAMS. 16.38 cents per pound average at that time. That was the average price of the entire 1,241,000 bales. Sales were That stabilization stock was held as a whole intact. made from it from time to time of odd lots or special lots that the mills of the world wanted and could obtain from no other source, but as such sales were made cotton was repurchased either in the form of spots or in the form of futures later to be translated back into spots, so that the total volume was maintained. On September 23, 1930, in response to many requests, the stabilization corporation announced that the stock would be kept intact until July 31, 1931, and that promise was kept. No cotton was sold out of it except such cotton as was replaced and only one addition was made to it. In late 1930 the cotton market had dropped steadily, and from the middle of November to the middle of December it went down about 2 cents a pound. It seemed to the board and to the officials of the Cotton Stabilization Corporation that the whole thing was going into a tailspin, and the board therefore authorized the stabilization corporation again to step into the market and buy cotton. It did so, buying futures in the New York market, beginning about December 15. It bought 78,300 bales. The effect of that, apparently, was to steady the market, which, following the purchases made over a week or 10 days, gradually levelled itself out, began to increase in price, and there came a betterment in price conditions running through the remainder of December, all of January and all of February. As a result of that change in the market situation no further purchases were made. That 78,300 bales was kept along with the other, so that the total acquired stocks of the stabilization corporation were 1,319,000 bales. In the course of operations about 9,000 bales have been sold that have not been replaced, so that the present stock as it exists to-day is approximately 1,310,000 bales of cotton. Senator THOMAS of Oklahoma. Where are those bales? Mr. WILLIAMS. Scattered in warehouses all the way from New Bedford, Mass., to Corpus Christi, Tex. I will be glad to file with the committee, if you desire, an exact statement as to the locations, and the number of bales in each. Stock of the Cotton Stabilization Corporation as of July 31, 1981 The CHAIRMAN. What was the average cost a pound of cotton that you now hold? Mr. WILLIAMS. The average cost of the 1,241 thousand bales was 16.38 cents per pound. The CHAIRMAN. What is the value of that cotton? Mr. WILLIAMS. Somewhere in the neighborhood of 6.75 cents. The CHAIRMAN. What do you estimate your losses to be on the transaction of the Stabilization Corporation on the cotton? Mr. WILLIAMS. Mr. Chairman, that question was asked of our own chairman this morning. We admit no losses. That cotton has not been sold. It is in our possession. The CHAIRMAN. That is all right. Mr. WILLIAMS. And we can not tell what the losses will be until we finally sell it. The CHAIRMAN. I appreciate that, Mr. Williams. I was only speaking of estimates. Approaching the matter seriously, anyone can calculate the difference between 16 cents and 6.75 cents in the present market. Mr. WILLIAMS. Of course, you can do a little better than that. You can apply carrying charges on the cotton from the time the 90613-31-6 Cotton Stabilization Corporation took it over and say that the approximate cost per bale as it stands to-day is 18 cents. Senator NORRIS. 18 cents a pound? Mr. WILLIAMS. 18 cents a pound. The CHAIRMAN. That is, you are adding to the purchase price the carrying charges? Mr. WILLIAMS. Yes. The CHAIRMAN. That brings it to an aggregate of 18 cents a pound? Mr. WILLIAMS. Yes, sir. The CHAIRMAN. And to-day it is worth 6 some odd cents? Mr. WILLIAMS. In other words, you have a rough estimate of 11 cents difference between the present value and the average total cost including carrying_charges. The CHAIRMAN. What agreement have members of the board come to with respect to further handling and disposing of the cotton? Mr. WILLIAMS. An agreement entered into between ourselves and southern bankers at New Orleans on October 12, 1931, whereby in consideration of a promise by southern bankers themselves to finance for their farmers a minimum of three and a half million bales of cotton until July 31, 1932, the Farm Board agreed to carry its stabilization cotton for a like period without net sales, unless in the meantime the price of cotton reached 1212 cents per pound or more. The bankers have in effect carried out their part of the pledge, and the Farm Board has confirmed its own action. Senator NORRIS. When does that expire? Mr. WILLIAMS. July 31, 1932. Senator NORRIS. It has not been carried out yet? Mr. WILLIAMS. No. We agreed to hold the cotton and not sell it until that time. Senator NORRIS. I understand, but what I am trying to get at is: At that time there was an agreement to hold this cotton and the bankers had an agreement to carry the loans on their cotton to July 1, 1932? Mr. WILLIAMS. July 31, Senator. Senator NORRIS. July 31? Mr. WILLIAMS. Yes. Senator NORRIS. That would mean at that time, unless some other agreement was made, all the cotton that you hold and all the cotton upon which the bankers of the South hold mortgages would at once. go onto the market? Mr. WILLIAMS. No. It would merely be free of pledge. Senator NORRIS. Well, I think you are correct there. I don't see much difference in the two things. Mr. WILLIAMs. May I sugest that there might be a good deal of difference, because, as we see it, it would be a physical impossibility to dispose of so large an amount of cotton within a short time without completely breaking the markets of the world. Certainly the Farm Board would not do that. Senator NORRIS. Do you know just how you are going to prevent that at this time? Mr. WILLIAMS. The board has made no plans for its stabilization of cotton further than July 31 of next year. Senator NORRIS. Isn't this true also: The fact that you have that much cotton and that the bankers are going to carry the balance of the cotton up to that time, isn't that very fact having a depressive effect upon the market and won't it increase until your date arrives unless some other arrangement is agreed to? Mr. WILLIAMS. Certainly some other arrangement should be agreed to far enough in advance of July 31 to allay any fear that the stuff would be dumped. As a matter of fact, we have our own tentative agreement, dependent upon what the farmers themselves will do. In that agreement with the bankers at New Orleans we further agreed that if a substantial reduction in acreage takes place next spring, in line with the suggestions carried in various laws passed by Southern States, we ourselves will then hold the stabilization cotton for another year. But that is a tentative promise which depends upon the action of the South itself. Senator NORRIS. I should think with that facing the cotton farmer he would not at least increase his acreage. That might be an effective way to decrease acreage, get that much and hold it above him, and say you are going to turn it loose unless he does. He certainly would not plant much cotton. Mr. WILLIAMS. We hope he will not increase his acreage, Senator. Senator NORRIS. What will he plant on his land? Mr. WILLIAMS. That is one of the problems that all of us are concerning our minds with now. The Department of Agriculture, the teachers of vocational education, the extension service, the Farm Board, are all working very seriously on that problem. Senator NORRIS. I think that is a very serious question. He would not dare plant wheat, even if he could raise wheat. He would not dare to plant it to corn. What could he produce? Isn't it true that much of this land that produces cotton, much of the land that produces wheat, and much of the land that produces corn is not very suitable for the production of anything else? Mr. WILLIAMS. That statement I would suggest is probably more true of the western or plains wheat territory than it is of most of our cotton territory. Senator NORRIS. What is the substitute for cotton in the South? Mr. WILLIAMS. The substitute for cotton, first of all, Senator, is enough feed for the work stock on southern farms, and enough food of all kinds for the families on southern farms. Senator NORRIS. Well, they have done that always, haven't they? Mr. WILLIAMS. I am sorry; I wish we could say that they have. Senator NORRIS. It has not been the farmer's fault, has it? It has been due to some havoc that nature has brought about through devastation of their crop by either flood or dry weather? Mr. WILLIAMS. No. If I may express an opinion, it has been largely due to the credit system which prevails in the South, on a basis of which the banks and other credit agencies have made cotton and cotton alone the basis of credit. Senator NORRIS. I understand that, Mr. Williams. The point I am trying to bring out is that if you reduce the cotton acreage and I should think your plan probably would reduce it, but I am afraid it would play more havoc than the good it would do, unless you can get a substitute that in itself will not aggravate the wheat problem and s what I am trying to find out-what is rechce that relieves the cotton not at the misery felow Mr. WILLIAMS. At Memi nis. Ann., two weeks ago those of us who thinking vod › matter on the Farm Board, together with repcratives of : e United States Department of Agriculture, aii of Southern State te leges, all of the southern State extension diviand the department of vocational education, held a 4-day conve to find the answer to your specific question. We found that ℗ to some degree in the food and feed crop problem in the ator NORRIS. What would that be? What would you produce WILLIAMS. Whatever the family needs to eat in the way of *r* k, meat hoes, vegetacies, fruits, anything else that may i that may be first of all consumed on the farm by the y; and second, a sufficient amount of feed for the work 1 ་ 1 Vpis. Now, is it true that the southern farmer who stat produced enough vegetavies for his own family! mats. I am sorry to say that it is. 1 ידי at is true, is it? And is it true that he has not 1 to feed his work animais! This past seas n. I am sorry to say that I s I Love to the extent that that will cenent ont, beanse that certainly will lein 1 |