PROGRESS OF COOPERATIVES IN SECURING ADAPTATION OF PRODUCTION TO MARKETING NEEDS Farmers' cooperative marketing agencies are in effect the sales departments of the farm. Industrial concerns are usually large enough so that each can have its own sales experts; whereas most farms are too small to afford real sales departments. Cooperative marketing gives farmers the efficiency of large-scale selling but maintains farmer control. When farm operators do their own selling, they fit it in with their other work as best they can, ordinarily not giving it the necessary attention, and therefore not doing it very efficiently. To do the job well, producers would need to keep informed currently on conditions of supply and demand for all the products sold from their farms. Farmers, even if they are members of cooperatives, should study their markets as much as they can; but it is clearly impossible for most of them to find time enough for such study to enable them to be competent sales managers as well as production managers for their individual enterprises. One of the results of the separation of farm production and selling is that the two phases of agricultural enterprises are not well adjusted to each other. In too many cases farms produce the amounts, kinds, and qualities of commodities for which the production manager thinks they are suited, or which he likes to produce, with only scant attention to changes taking place in market requirements. The sales departments-that is, cooperative associations, country buyers, and all the other marketing agencies intervening between producers and consumers--are then expected to find outlets that will yield reasonable prices. Consider a manufacturing company in which the production department insisted upon producing what it wanted to, and as much as it wanted to, and put upon its sales department the task of making a profitable disposition of the product. No cooperative system can successfully accomplish its purposes unless production is coordinated with marketing. The agricultural marketing act recognizes this in its reference to orderly production and prevention of surpluses. The board has taken account of it in all its work with cooperatives, although it has not yet been able to give the problem of production adjustments the full attention which it deserves. Moreover, the agricultural marketing act clearly puts marketing, rather than production control, first in order of development. Coordination of marketing and production may relate to grades and qualities, or to volume of production. Cooperatives have demonstrated repeatedly their ability to influence quality and to standardize varieties and types of output. Control over grading is readily accepted as an essential part of a cooperative marketing agreement, and this control has often been extended to help farmer members produce the type and qualities of product desired for the market. The success of many organizations handling products such as fruits, dairy products, eggs, etc., in improving grades and quality is common knowledge. The preceding pages contain many references to developments of this sort in the past year or two to which the board has contributed. There is still room for progress in improving quality and standardizing production, but the procedures for accomplishing this are already well established. Coordination of production and marketing in the matter of volume is far more difficult, and thus far most cooperatives have made relatively little progress with it. Some long-established organizations have learned how to keep production fairly stable. Members have experienced the consequences of overplanting sufficiently, so that they are willing to act individually as well as by groups in such a way as to prevent it. They keep themselves informed concerning trends in production in competing areas and changes in consumption, and know when it is time to alter production programs. Obviously, however, any coordination of production to marketing that arises in this way will be of slow growth. The board's work along this line has consisted in supplying advisory committees and cooperatives with information as to the facts and significance of changes in production and consumption; in assisting the United States Department of Agriculture in the preparation of outlook statements and development of regional adjustment programs; and in supplementing the field work of the Department of Agriculture and the States in presenting outlook material to county and other local meetings, and working out local adjustment programs based on this outlook information. The board has helped in these activities because the personnel and resources of other agencies, State and Federal, were not sufficient to push the work with the vigor which the situation has demanded. In 1930-31 a special board report was prepared on the cotton outlook and the general readjustment in farming which seemed to be necessary to meet it, and was sent to each of the members of the American Cotton Cooperative Association. In 1931-32, the United States Department of Agriculture prepared an effective outlook statement which the board arranged to have sent to each member of the American Cotton Cooperative Association. Studies made by the Department of Agriculture indicate that in 1930-31 members of cotton cooperatives made appreciably greater shifts in their production than did nonmembers. In 1931, the 10 leading cotton States increased their corn acreage by 8 per cent, their small grain acreage 19 per cent, their hay acreage 11 per cent, their soy bean acreage 22 per cent, their cowpea acreage 34 per cent, and their peanut acreage 28 per cent. These increases made possible a decrease of 10 per cent in the cotton acreage. That such shifts have continued is indicated by the further decrease of 9.5 per cent in the cotton acreage in 1932. The serious condition of oversupply of tobacco in 1932 called for especial effort. Representatives of the board held a total of 141 outlook meetings in eight States in cooperation with State and cooperative officials, at which they addressed a total of 32,000 people. The acreage of tobacco in the United States, partly due to unfavorable weather in some States, but no doubt in some measure due to outlook work, is estimated at 29 per cent below that of 1931, which was 7 per cent less than in 1930. The decreases in the six States in which most outlook work was done were 64, 37, 35, 30, 15, and 10 per cent, respectively. As a result of these reductions in acreage, the price of tobacco has already strengthened materially. The continuous current analysis of production, consumption, marketing, and prices of farm products which the board's staff must make as a basis for loans to cooperatives, and to assist them in their selling programs, puts it in a position to render effective assistance to the United States Department of Agriculture in preparing its outlook reports. Many fluid milk associations are using a basic-rate and surplusprice method of paying for milk, which has the effect of evening the receipts of milk from season to season. The basic rate is a market price paid for a quantity of milk based on that delivered during the period of minimum receipts; the surplus price is a lower rate, ordinarily based on the value of the milk converted into butter or cheese, which is paid for milk received in excess of the base quantity. This method, however, has commonly not served to keep the total annual production from exceeding consumption when milk has paid better than alternative products. The canned-peach industry of California has used a somewhat similar plan for temporarily limiting the number of cases of canned fruit prepared, by recompensing producers of surplus unpicked peaches with funds obtained from assessments on each case canned. For the past two seasons this plan has succeeded in holding down the size of the peach pack and in preventing an extreme decline in prices of the canned product. As a result of the better maintenance of cannedpeach prices, however, as compared with prices of pears, apricots, and other competing canned fruits, consumption of canned peaches has shown a serious decline and growers are facing the possibility that their scheme for price maintenance may permanently narrow their markets. Here, too, it is evident that relief from the evils of over and under production requires more complete and far-seeing measures than those designed merely to cope with a single season's surplus, or with only one of a number of competing products. The program for the grape industry in California likewise included an arrangement for restricting shipments by paying growers for grapes not harvested. This can be only a temporary expedient at best. Society will not long countenance any plan for controlling surpluses that involves wasteful production. Industry plans to prevent overproduction must include the prevention of uneconomic planting. The legal status of such arrangements is still very uncertain. There is reason to hope that contracts between cooperatives and growers which specify a given acreage or volume of production will eventually be declared legal, provided they have the effect merely of preventing wasteful periods of over and under production. Marketing contracts between producers and cooperatives had a hard legal battle before they won out. Production contracts are likely to have a similar history. The board is watching all developments of this sort, and assisting them in every possible way. Its legal division is constantly working out contracts designed to meet the needs of all kinds of situations and at the same time to keep safely within a forward-looking interpretation of laws and precedents. PRODUCTION ADJUSTMENTS INVOLVE LAND UTILIZATION Adjustments in production between crops and systems of farming involve important changes in the use of the land. In a period such as the present with failing outlets for the products of American farms, these adjustments are likely to involve the shifting of land to uses that yield a smaller volume of product per acre, such as from crops. to pasture; or even to involve shifting farm lands to nonagricultural uses. Those interested in agriculture are likely to think in terms only of getting land out of agricultural use. But there is much land in the United States at present for which forestry promises no more economical use than does agriculture. Land-use programs must provide for each tract of land that use which will enable it to yield the largest return to the labor and capital employed upon it, whether that be some form of cropping, or of pasture farming, or of forestry, or of pure recreational use, or some combination of these. Obviously, such programs must look a good way into the future, since some of the forms of land use-notably the forest uses-may take several generations to mature. Pursuant to the instructions contained in the agricultural marketing act, the board has given consideration to land utilization as it relates to production and marketing. It has not, however, undertaken any independent activities, preferring to assist the United States Department of Agriculture in developing a program. This has finally taken the form of setting up a national land-use planning committee, whose membership includes representatives of all Federal and State interests concerned with land use, including a representative of the Farm Board. Much of the work of this committee is being done by a series of 12 technical advisory committees, on which members of the board's staff are serving. The board hopes that the national land-use planning committee will shortly reach the point of outlining a positive land-use program with the necessary provisions for its execution. SURPLUS CONTROL METHODS, INCLUDING STABILIZATION OPERA TIONS Although the economic depression continued to exert a downward pressure on all prices during the past fiscal year, no further stabilization purchases were made by the board in view of the large stocks of commodities already accumulated and the limited ability of this mechanism to correct the effects of long-continued economic depression. Instead, attention was centered on disposing of stocks already owned in such a manner as to least affect prices for current production. The disposition of wheat supplies was carried well beyond the halfway mark; in cotton, the reductions in acreage helped to clear the way for subsequent disposition of stabilization stocks. In considering the effectiveness of stabilization operations during the past three years, it must be remembered that the stabilization procedure as provided for in the agricultural marketing act was not originally devised to meet such extremely abnormal economic conditions. Stabilization provisions were included in the act in the belief that farmers' price difficulties arose primarily from occasional bumper crops or glutted markets, and from the severe but temporary declines in prices which occurred under such conditions. It was thought that stabilization would reduce price swings by withdrawing part of the supply from the market in such periods of surplus and selling it again in subsequent deficit periods. The stabilization provisions of the act did not provide any means for influencing production, either directly or indirectly. The attempts to affect production through general advice in accordance with other sections of the act, but without definite organization for the purpose, had little effect. Stabilization was not originally intended to provide a means of dealing with a continuous decline in the demand for all products, or a continuous excess of production above consumption, such as has accompanied the longcontinued business collapse over the past three years; and it has not proved an effective means for dealing with such conditions. Stabilization did, however, provide one definite means of action which the board could employ in the emergency to protect farmers, temporarily and to a limited extent, from the full force of the economic decline. Cotton and wheat were among the products in the weakest market position. Agricultural leaders, statesmen of both parties, and |