Shippers Association. It is attached to this statement as appendix "A" for your detailed consideration if you so desire, but with your permission, I wish to quote excerpts from it as a part of my testimony. I believe the address is illustrative of the attitude of the Department of Agriculture in regard to cotton.

One statement by Secretary Murphy which attracted my particular attention was the comment made in defense of the Department's pricing policy. The statement, which is found in the fourth paragraph on page 3 in the attached appendix, is as follows:

"I will say this. We feel a special obligation to the small farmer, one whose voice is heard least in the corridors of Washington, but one whose need is greatest. We are willing to accept his proxy in this matter, and we don't propose to vote it in favor of a price support cut for the little man as a part of a legislative package."

I'm confident that Secretary Murphy's use of the terms "proxy” and "vote" are merely for illustrative purposes, but even if they were not. I can assure you the Department has neither the proxy nor the support of the small farmer in Louisiana when these pricing policies result in such a drastic reduction in allotted acres.

The Department's action in reducing allotted acreage reveals a basic lack of knowledge of the relationship of volume to production cost and fixed costs, especially for small farmers. To illustrate this point, let me cite the example of a Louisiana producer who had a 40-acre allotment in 1961. Our average of the crop is Strick Low Middling, inch and a thirty-second, and our average production is nearly a bale per acre. At the current support price, therefore, the average farmer can expect a gross of about $162 per acre. When Agriculture Secretary Freeman raised the support price in 1961, a 40-acre farmer in Louisiana received approximately $7.50 more a bale, or about $300 more than he had received the previous year, for a gross income in the neighborhood of $6,500. But the 12-percent reduction in allotments ordered by the Secretary in 1963 slashed more than 5 acres off this 40-acre allotment, and reduced gross income from cotton by nearly $800 per year.

I know that you gentlemen are familiar with farm problems by virtue of your service on this committee, but I feel that I should delve into this fixed-cost subject. I have noted with interest that many economists always seem to ignore this subject when computing related data. By "fixed cost" I refer to costs that go on each day and each month, over which the farmer has little or no control. I refer to costs such as food, clothing, insurance, and so forth. Living costs that must come from the dirt that the farmer farms. The fewer acres the farmer works, the higher per acre cost of his fixed cost. When Secretary Freeman slashed the average cotton allotment 12 percent, the immediate effect was to increase the fixed cost of each farmer affected, for I doubt very seriously if any cotton farmers approached his wife and children and demanded that they reduce immediately their living expenses by 12 percent. Too many so-called economists overlook the fact that the cost of living for a farm family has to come out of the soil-and this can be achieved only when all the acres can be put to use. As far as the cotton industry in Louisiana is concerned, I am firmly convinced that the greatest service this committee and the Congress can provide is to grant smaller farmers the opportunity to get

In this respect, I most vigorously urge the committee to reject any proposal which seeks to establish quotas on a bale basis. It is inconceivable that anyone who represents producers in the nonirrigated areas of the Cotton Belt could seriously propose this type of production control unless they are totally unfamiliar with the tremendous variance in individual production on a year-to-year basis. I know of no farmer in the Rain Belt who could confidently predict within half a bale per acre what his yield will be this or any other year. I might also add that I am convinced that the traditional production areas of the Rain Belt can—and will-reestablish themselves as the rightful residence for king cotton, if the incentive for more efficient production is not destroyed through quantity control. No farmer who intends to remain in cotton production in the traditional area can accept bale quotas. Such action would bring a halt to the marvelous advances we are making throughout the Rain Belt in technology and research, and destroy incentive for more efficient production. I for one am confident that we will be able to produce cotton at a profit at considerably less than the present price in the not-too-distant future if we continue the progress we are making.

With the foregoing statements as background, I urge the committee to give their most serious consideration to the measure introduced by Senator Ellender, S. 1458. Our senior Senator most accurately reflects in this legislation the viewpoint of the Louisiana cotton industry. S. 1458 goes to the heart of the problem-declining sales for cottonand presents a solution based on experience and realities.

This committee initiated the basic language and philosophy of the Agricultural Act of 1958 under the leadership of its present chairmen, and guided it to final enactment. The facts reveal that within 2 years after its enactment, most observers agreed that we were almost out of trouble in the cotton industry by virtue of vastly increased sales, both at home and abroad. S. 1458 seeks to re-create the situation which existed during this period. We in Louisiana think this legislation can and will move cotton into the same favorable situation of 1959 and 1960.

Let's examine the situation which existed, and the results which were achieved, during the 2-year period beginning August 1, 1959, and ending July 31, 1961. For your reference, I have atached as appendix B to this testimony a series of tables which support our contention tht S. 1458 can solve our problem.

During the first full marketing year following enactment of the Agricultural Act of 1958, the U.S. cotton industry disposed of 16,200,000 bales of cotton (see exhibit 1). The following year, total offtake was in excess of 14,900,000 bales or a 2-year record of more than 31 million bales of U.S. cotton. I call your particular attention to the average price of cotton during these 2 marketing years, as shown in exhibit 1. The two tables contained in exhibit 2 illustrate graphically the relationship between actual export price and the volume of exports.

It is our firm conviction in Louisiana that if more than 31 million bales of cotton could be sold at a price which averaged about 31 cents, basis Middling inch, we should at the very least be able to expect comparable sales with the 30-cent support called for in S. 1458.

I noted with some interest that Secretary Murphy gave some limited

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page 3, he states, "Our economists estimate that for each 1-cent reduction in price, mill consumption could increase by as much as 200,000 bales. So a 212-cent cut would mean 500,000 bales more cotton.' would term his economists' estimates somewhat conservative in view of the indisputable fact that domestic mill consumption has dropped about 600,000 bales as a result of a 12-cent increase in the effective price of cotton. But even if we are to accept the more conservative estimate of 500.000 bales, this would restore most of our domestic market loss, and reestablish mill consumption in the neighborhood of 8,900,000 bales annually.

In passing, I also would point out that Secretary Murphy's contention that such a price-support reduction would cost the American cotton farmer 27 percent of his net income ignores another integral part of S. 1458-the fact that the national minimum will be increased by 1.5 million acres from the current minimum of 16 million acres. cannot believe that the small farmers the Secretary makes reference to will refuse to increase their production if more acres are made available.

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Let me add here that on the basis of even the highest average-yield figures, total production on these 1.5 million acres will not exceed 1.1 million bales. This will result in total production for 1964 and 1965 of an estimated 14.6 to 15 million bales annually-well below the average offtake during the marketing years of 1959-61. I call your attention to the average harvested acres shown in exhibit 3 as an indication of what could be expected in this respect.

One major point needs to be emphasized in regard to the domestic market. Each of you have heard many remarks about how cotton is suffering in competition to rayon. Rayon is the only synthetic fiber whose price range is even remotely comparable to the cost of cotton— all the others are much higher. One of the three major suppliers of rayon, American Viscose, raised the price of standard rayon staple to 27 cents a pound in early April, and it is my understanding that the other domestic producers either have followed suit, or will do so in the very near future. I call to the committee's attention the fact that rayon was at the 27-cent level when we made our sales breakthrough after enactment of the 1958 act.

It is our belief that there has been too little emphasis on what has been the major cause of the current cotton problem-lack of exports. The facts of the matter are that we haven't been competitive, despite the increase of the export subsidy to 8.5 cents a pound. Exhibit 2 of appendix B shows that the actual cost of U.S. cotton to the oversea buyer actually was increased when the Secretary raised the domestic support level in 1961. From 7.1 million bales in the 1959-60 marketing year, we dropped to 4.5 million bales in the current year-a 37percent market loss in less than 3 years.

S. 1458 again goes to the heart of this problem by providing an effective decrease in the price of cotton to our oversea customers, while at the same time providing much more price protection to our domestic mills than has been offered during the past 2 marketing years. Let me hasten to add that we consider the domestic mills our most consistent, and consequently, our most valuable customers-but we also recognize that without adequate exports, the cotton producer in these

We are thoroughly in agreement that the present price differential is unfair, and action should be taken to narrow this differential at once. S.1458 will move in this direction through the quite simple procedure of reducing the cost of raw cotton to our domestic customers by $12.50 a bale, and reducing the export subsidy by $10 a bale. Let me emphasize that this is a real relief—and not an artificial one dependent upon annual appropriation from an already overburdened budget.

I call your attention to exhibit 4 of appendix B, which shows comparable freight costs to the Carolina mills and to European ports. You will note that it costs about $10.50 per bale for a one-way trip to Europe, exclusive of dock-to-mill handling once the cotton arrives. If we can assume it would cost at least that much to ship the equivalent weight of cotton textiles back to this country, it would appear that total costs of raw material should be very nearly competitive. An additional indication that this is the case can be drawn from the fact that there was an encouraging increase in domestic consumption during the 2 marketing years which immediately followed enactment of the 1958 act.

I also want to emphasize that the reduction in the export subsidy will substantially reduce the per-bale expenditure of tax dollars. About $190 million will be required to finance the export of 4.5 million bales during this marketing year. With a reduction of $10 a bale in the export subsidy, nearly 1.4 million more bales could have been exported at the same cost. I believe Senator Ellender is in agreement that a minimum export of 6 million bales is anticipated under the provisions of S.1458-a one-third increase in total exports for about a 3 percent increase in the export program's cost.

In summary, S.1458 represents an honest effort on the part of Louisiana cotton farmers, under the guidance of Senator Ellender, to solve the problems of our industry. We believe that the reduction of the selling price to 30 cents a pound, basis middling inch, is the price we can and must-afford to pay in return for acreage opportunity. A price higher than this level restricts our markets—a lower price, we believe, will unnecessarily force out of business many farmers who don't have to go.

The provisions of S. 1458 are based on facts, experience, and the realities of farm production-they do not represent the crystal ball gazing and assumption of virtually unlimited access to tax dollars which have characterized most of the other cotton proposals advanced this year. We believe Secretary Freeman's intentions were good when he raised our support price in 1961-but the results have been bad. We can no longer afford good intentions-and it is apparent to us in Louisiana that the increased supports have not served to encourage farmers to remain in cotton production. I believe each of you will find, as we have, that the number of farmers actually producing cotton in each State has continued to decline despite the increased support price. We predict this decline will be aggravated this year as a result of the slash in allotted acres, because it's the fixed costs that make or break farmers. In Louisiana this year, 11,137 farmers-about 43 percent of the cotton farmers in the State, requested 145,449 more acres than they were allotted-and even our most vigorously pursued release and reappor

In conclusion, I again would refer you to Under Secretary Murphy's address, when he stated on page 5 that:

"I want the record to go perfectly clear from this point on that the Department of Agriculture is not responsible for the ills that beset the cotton industry."

I submit that the record is inescapably clear that most of our ills are the responsibility of the Department-that had Secretary Freeman and his advisers not chosen to ignore the intent of the 1958 act, which you initiated, and the subsequent advice of the chairman of the Committee on Agriculture and Forestry-we would not now be in trouble. We believe that now is the time for an intelligent decision by the Congress-based on the principles of sound economics and representative government-to correct the administrative mistakes of the past 2 years, and to launch cotton once again on a program of progress and growth.

Thank you for your attention and courtesy, and I respectfully request favorable consideration of S.1458.

(The attachments to Mr. Ransom's statement are as follows:)

APPENDIX A

ADDRESS BY UNDER SECRETARY OF AGRICULTURE CHARLES S. MURPHY BEFORE THE AMERICAN COTTON SHIPPERS ASSOCIATION, ROOSEVELT HOTEL, NEW ORLEANS, LA., MAY 10, 1963

I have spent a lot of time during the past 2 years working on proposed cotton legislation. This has been a most interesting experience. However, at this time it appears that the degree of success which is likely to be achieved is a matter of conjecture.

I said last December that I thought the prospects for new cotton legislation were excellent because there were so many people who needed cotton legislation so badly they would simply have to get together-submerge their differencesand work to get a bill passed. It now seems that I may well have been wrong in my estimate of the situation. Differences have not been submerged.

I spoke again on this subject in January. At that time, I said: "The hope for enactment of new cotton legislation remains alive. Whether this hope is in fact realized will depend to a great extent on whether the different groups in the cotton industry can and will submerge their respective viewpoints sufficiently to provide the essential degree of accommodation to the viewpoints of others. No one is going to be able to have his first choice as to what the new legislation will contain. It is possible, however, to have new legislation under which everyone would be better off than with no new legislation at all. That is the real choice. "Even if the cotton industry is united in its efforts to obtain prompt passage of a new bill, there are many pitfalls along the way and many difficulties ahead in obtaining the necessary concurrence and support from noncotton groups. Substantial opposition or dissension within the cotton industry itself can and almost certainly will prevent passage in time for the planting of the 1963 crop.

"I believe the recommendations of the Secretary's Cotton Advisory Committee of January 14, 1963, offer the best, and perhaps the only basis on which there is a reasonable hope of agreement. These recommendations were arrived at by the Advisory Committee after deliberations extending over many months and after thorough discussion of many alternative proposals. They represent a degree of agreement which was reached only after much give and take. Anyone who might wish to upset them now should recognize (1) the difficulty of finding any other basis of agreement and (2) the necessity for agreement if legislation is to be passed.

"No one is entirely satisfied or happy with proposals recommended by the Advisory Committee. I expect I have heard more objections to them than anyone else. Nevertheless, they still seem to me to be the only basis on which there is a reasonable hope of achieving an early agreement.”

There were evidently a lot of people who didn't believe what I said in January, because they went off in a good many other directions. This, of course, they