In 1930 a very large crop of grapes coincided with large crops of other fresh fruits and with low urban purchasing power. The fact that the control plan did not function in 1930 as well as expected does not mean that it could not function under more favorable conditions. The control board is being continued; future years will determine its full usefulness.

POSSIBILITIES IN COOPERATIVE SURPLUS CONTROL

In other commodities prevention of surpluses by cooperative action has been more successful. It has involved the same principle of diversion of the excess supply to lower-value uses, so that the remaining quantity could be sold in the usual channels at remunerative prices. With fluid milk, the surplus may be dried, condensed, or churned; with lemons, it may be made into by-products; with grapes and peaches for canning, the grower may be paid to leave it unpicked. The grower benefits from the stabilized price when the increased return from the "basic " disposition more than offsets the decreased return from the "surplus" quantities. So long as the weighted average price received by the grower exceeds the price which would prevail if the surplus was permitted unduly to depress price, he gains.

Action by cooperatives to stabilize price by surplus-control measures or by holding operations may benefit producers outside the organization equally with those inside the organization and can succeed only when nearly all producers affected are members. Otherwise when the costs of the operation were charged back to members it would become more profitable for individuals to remain outside the organization than to come in, and the cooperative would tend to decline in membership and in support until the surplus-control measures had to be abandoned.

Cooperatives which handle most of the product within a given market area may even prevent the production of surpluses by the development of special-price arrangements. Such a system insures a dependable supply at fair prices and thereby benefits consumers as well as producers. The arrangement may involve paying individual producers separately for basic and surplus quantities. If this is carried to the point where the basic quantity is prorated among individual producers, it becomes exceptionally effective, for then any producer exceeding his allotted amount knows that he will be paid only the lower surplus price for it.

This system has been extensively developed in the cooperative selling of fluid milk and has helped materially in reducing the fluctuations of milk production and prices to the benefit of producers and consumers alike. Local fluid milk associations have been aided in

developing methods to stabilize production by high transportation costs on fluid milk, the necessity for a steady daily supply, and frequently the desire on the part of local health authorities that all their milk come from a restricted territory so that inspection of herds and barns and provision of high sanitary standards might be more readily and completely maintained.

It is doubtful how far cooperatives in other lines can use similar special methods to stabilize prices or production. The more generally a product is produced, the more it is scattered at widely separated points over the country, and the more varied the ways in which it is utilized, the more difficult it becomes for a cooperative to handle all the product and the more complex becomes the necessary business organization. Where the costs of surplus control can be borne by individual members, surplus control operations may at times be successfully developed. The board, however, does not feel that cooperatives can safely assume financial hazards in connection with such ventures.

PRODUCTION READJUSTMENT

The agricultural marketing act instructs the board to aid in preventing surpluses through orderly production, as well as to control their distribution after they are produced. The board would need to do this even if there were no specific instructions on the point, for marketing can seldom be handled effectively independently of production.

When the Farm Board was organized it found that the United States Department of Agriculture already had developed an effective agricultural outlook service, which was supplying farmers dependable economic information on which to base their production plans. Rather than duplicating this service, the board has devoted its efforts to cooperating with the existing agencies and supplementing their efforts.

The efforts of the board during the past year in aiding orderly production have been as follows:

1. Urging reduction of acreage of particular crops for which an excess acreage was indicated in the coming year.

2. Collaborating with the United States Department of Agriculture and State agricultural colleges in their agricultural outlook service. This service furnishes needed information as to production, demand, and prices for the products of each region. It also aids farmers in interpreting these facts and in applying them to their individual farms.

3. Analyzing the possibilities of reducing agricultural output by measures designed to transfer land from agricultural to other uses.

ACREAGE REDUCTION

During the spring and fall of 1930 the board conducted a campaign to induce farmers to plant a smaller acreage of wheat. The 1930 spring-wheat acreage showed little, if any, effect of this campaign. The net reduction was only 2 per cent. Winter-wheat plantings for 1931 as a whole were not reduced, except in the soft winter-wheat areas. Spring-wheat acreage for 1931 harvest was reduced 4,000,000 acres, or 19 per cent. Winter wheat came through the winter with only a 4 per cent loss from abandonment as compared with an average of 11 per cent, and, together with exceptionally heavy yields in the main winter regions, this resulted in a large crop in spite of reduced acreage, drought, and low yields for spring wheat.

The experience with these attempts to secure definite percentage reductions in acreage indicates that farmers are apparently not yet ready to follow advice when administered in this form.

Such a procedure commonly does not indicate clearly enough the crops that may be grown instead. Combined with a declining price, advice to reduce acreage may accentuate reduction, especially if continued for several years. Many farmers hold a theory that their neighbors are likely to increase their acreages whenever general advice is given to reduce, with a view to cashing in on the higher prices that may be in prospect. Perhaps a few do increase their acreages at such times. As long as farmers hold to such ideas, little progress can be expected along these lines.

AGRICULTURAL OUTLOOK WORK

The principal service which the board has rendered along the lines of outlook work has been to supplement the efforts of the United States Department of Agriculture in the Southern States. Members of the board's staff assisted in preparing the outlook analyses in the discussions at the outlook conference held at Atlanta in November, 1930, and in the extension work presenting to farmers the conclusions of this conference. It also distributed on the basis of requests from bankers, county agents, and others a total of 490,000 copies of a special circular called "Outlook for American Cotton," in which particular emphasis was placed on the need for adjustments in southern agriculture in view of the outlook for cotton prices and acreage in 1931 and later. In this bulletin it was pointed out that—

It is quite probable that the supply of cotton for 1931-32 will be at least as large, if not larger, than for 1930-31. Substantial improvement in the price of cotton of the 1931 crop depends, therefore, upon a recovery in business activity to normal, or better than normal, by late 1931, unless farmers reduce the acreage of cotton next spring to a greater extent than they have done in any previous year of low cotton prices.

** * There is no indication yet, however, that farmers plan to decrease acreage more than 8 or 10 per cent. This is not sufficient to bring about the needed adjustment of supply to prospective demand next year.

Neither is there any positive assurance that business will return to normal levels by late in 1931. The outlook, therefore, is for a continuation of relatively low prices for the cotton crop of 1931 unless a drastic cut in acreage is made by farmers.

During the next 10 years the price of cotton may be expected to average considerably lower than during the last 10 years. Declining price levels for all commodities, increased use of machinery in cotton growing, increased production of cotton in Russia all point to lower prices than have prevailed since the World War.

So far as shifts in acreage were concerned, the principal recommendations were as follows:

This prospect makes it imperative for many southern farmers permanently to readjust their farming program so that cotton will not be their only source of cash income.

Each individual farmer is urged to adjust his farming program in 1931 so as to produce cotton only on the more fertile land, thereby reducing the cost per pound of the cotton produced. This of necessity is a year of retrenchment and reduction in cash outlay for food, feed, and fertilizer.

This bulletin contained a direct statement to bankers of the South, in which it was pointed out that—

Farmers who are willing to reduce their cash outlay for 1931 and in future years (by increasing the production of vegetable and feed crops, poultry, hogs, and milk for home use) are likely to prove a better credit risk next year and over the next few years than farmers who continue on the old basis of cotton and corn. The farmer who can add some other source of cash income, such as hogs, poultry, eggs, or milk, where market conditions permit, will probably be in a much stronger financial position five years from now than his neighbor who depends entirely on cotton for cash income. ***

Bankers of the South are urged to take into consideration both the immediate and the long-time outlook in financing farmers in their locality.

These statements were in harmony with information contained in the Agricultural Outlook for the Southern States, 1930-31, and the World Outlook for Cotton for 1930-31, published by the Bureau of Agricultural Economics, following the conferences and discussions above mentioned.

The principal changes in acreage appearing in the 10 leading cotton States in 1931 were an increase in corn acreage of 8 per cent, small grains 19 per cent, including a 13 per cent increase in wheat. An increase of 11 per cent was shown for hay, 22 per cent for soybeans, 34 per cent for cowpeas, and 28 per cent for peanuts. In interpreting these results one must realize that there is a definite limit to the acreage adjustments that can be made in one year on an individual farm. Although the acreage of cotton was reduced only about 10 per cent in 1931, the results of the adjustments which were made in the farming program in the South were highly significant and in the

right direction. Most important of all, cash outlays from the farms for food and feed have been greatly reduced; this has cut the cost of growing cotton as well as the prospective need for credit in produring the crop of 1932. Together with good yields and low wage rates, this reduced the cash outlays in producing cotton to the lowest expense per pound since before the World War.

These adjustments have greatly increased the productivity of human labor in the South, in that the time of the farm laborer is more fully utilized throughout the year than when cotton is the only crop. In addition the increased use of legumes and other soilimproving plants has increased soil fertility. As in other cases, one can not say how much of the foregoing changes were induced by the outlook program and how much would have occurred without these efforts, but there is reason for believing that the outlook program contributed a valuable part.

The board also supplemented the outlook work of the bureau in connection with tobacco and potatoes. Statements calling attention to the prospective oversupply of these commodities and the unfavorable outlook for satisfactory returns to growers in 1931 were sent to extension workers, vocational agricultural teachers, bankers, the press, and others. The tobacco acreage was decreased 7 per cent, but the sweet potato acreage was increased 24 per cent and the white potato acreage 23 per cent.

In addition to the special southern work, members of the board's staff participated in the work of preparing the general outlook statements for all commodities published by the United States Department of Agriculture early in February and in some of the extension work following.

Farmers have not yet an organized system of guiding or directing production. Until they do it will be necessary to continue to approach the problem of production readjustment from the viewpoint of the individual. Farmers must be educated and helped to make the choices for their own farms which seem likely to give them, as individuals, the largest possible incomes. The agricultural outlook service has been developed for this purpose. Begun in 1922, it has developed into one of the most important economic activities of the United States Department of Agriculture and of the State agricultural colleges. It has achieved an enviable record of accuracy, correctly indicating in most years the future trend of market situations in 8 to 9 commodities out of 10.

The board recognized the value of the outlook service to farmers by assisting in the development of the foreign agricultural information service. This was needed to supply more adequate information on changes in demand and competition in foreign countries, infor