had a perfect right to do. But I might point out that we have no cotton legislation and the prospects do not look as good now as they did in January.

Instead of differences being submerged, they have been emphasized more and

more.

There is general agreement on one phase of the matter; namely, that a problem does exist and cotton is in trouble. Even here, there are differences of opinion as to how serious the trouble is. It sometimes seems to me that various spokesmen are competing with each other to see who can make the most extreme statement about the seriousness of the situation. I would not for one moment wish to minimize the gravity of this problem, but I don't believe I can add much to what has already been said on the subject.

The problem in the cotton industry has existed for a number of years. As we worked with our Cotton Advisory Committee in the fall of 1961 and the spring of 1962 on proposed legislation, we saw only limited opportunities for improvement. We were searching for a formula which would maintain or increase the income of cotton farmers, which would make cotton more competitive, and would at the same time reduce Government costs for the cotton program. This was a formula which made the task extremely difficult.

A major new element was introduced into the picture last fall when President Kennedy indicated that additional Government funds might be used to help solve the problems of the cotton industry and to eliminate the inequity of the two-price cotton system. It was his judgment that the general welfare might be best served by the expenditure of these additional funds. It seemed to me that this decision of the President's was the key to the solution of our problemthe magic ingredient that would solve the dilemma of cotton with which we had been wrestling so earnestly. However, this has not been the case-at least not yet. Too many people-too many interests are still insisting upon maintaining conflicting positions.

I think it should be understood that the administration, in its desire to help find a solution of the problems of the cotton industry, has agreed to a plan which would add many millions of dollars to the estimated cost of the cotton program. Let me hasten to add that we believe this expenditure would be fully justified in the resulting benefits to the entire Nation. Consumer savings alone would largely justify the expenditures-since prices to consumers would, it is estimated, be reduced the equivalent of twice as much as the increased Government costs. In addition, the stimulating effects on the entire economy through greater prosperity and activity in the very important cotton industry would be most beneficial to everyone.

However, the added Government costs present a very practical problem of great magnitude in budgetary terms. Government expenditures have to be paid with tax money that is actually collected by the Government. I want the record to be perfectly clear that the President has gone very far indeed, and has more than made good on his commitment to recommend legislation which would eliminate the inequity of the two-price system for cotton.

Indeed, I think the President has gone as far as he should be expected to go. His responsibility to manage the Federal budget is a very heavy one, and no one can rightly contend that the share he is willing to allocate to cotton is less than its fair share.

The administration has not taken, and is not taking, a dogmatic attitude about this matter. It recognizes the problem. It has suggested solutions, it has accepted modifications and counterproposals, it has been and is willing to agree to almost any reasonable solution that other people will agree to.

Nevertheless, there are limits beyond which we cannot go.

I believe the solution to the problem, if it is to be found at all, must be found within the limit of Federal expenditures which the President has already indicated he is willing to accept. There is no assurance that the Congress will agree even to expenditures of this magnitude-there is very little chance the Congress would agree to more.

Where then is the solution to be found? Should we raise the export price of American cotton so as to reduce the cost of the export program? Few knowledgeable people with whom I have discussed the subject would advocate this course. If American cotton is to be exported at all, it can only be exported at world prices. Otherwise, no one will buy it. The exports must be maintained. They are too important-not only to the cotton industry-but to our balance of payments-to the entire national economy-to even think of

Is the answer to reduce the support price for cotton? Many people are saying "yes." They say they know American farmers cannot produce cotton at the world price of around 24 cents a pound, but that 30 cents a pound would be about right. That would be a reduction of 22 cents a pound. Before you settle on this as a painless and easy answer, do a little bit of simple arithmetic with me. See what would happen to cotton farmers' income. Suppose the cotton farmers' total costs of production is only 24 cents a pound-and surely that is not a high estimate. His present support price is 321⁄2 cents-leaving a margin of prifit of 82 cents. If we simply reduce his price 22 cents, he loses more than one-fourth of his profit-his net income. But you say, his volume will be increased-and in due time it may. Our economists estimate that for each 1 cent reduction in price, mill consumption could increase by as much as 200,000 bales. So a 21⁄2 cent cut would mean 500,000 bales more cotton. This would mean that the American cotton farmer instead of losing 29 percent of his net income loses only 27 percent-instead of losing $175 million, he loses only $160 million.

This is not a consequence to be accepted lightly. In the Department of Agriculture, we have found it a very painful prospect. We are committed to helping maintain farm income--not reducing it. Nevertheless, there have been many spokesmen for cotton producers who have advocated or acquiesced in a reduction of the support price to 30 cents. If this is really what producers want, what are we to say?

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.

Is it necessary to a solution that a payment be made on cotton consumed domestically which is equal to the entire difference between the export price and the domestic price of cotton? If so, the squeeze is going to be awfully tight somewhere else.

I have identified some of the questions about the cotton problem. Finding answers is more difficult. We have conducted a diligent search for answers. From time to time, we have thought we were finding some.

I referred earlier to the program recommended by our advisory committee last January 14. We thought that was a satisfactory answer and still think so. But somewhere along the line, it failed to provide what some people thought they had to have so it was derailed. Various modifications were proposed. We have considered them one after another and agreed to them whenever we could. Most of the administration's difficulties in considering these proposals have revolved around budgetary considerations. In that area we feel that we have gone about as far as we can go.

As you all know, we recently sent to Congressman Cooley, chairman of the House Committee on Agriculture, our views on a draft bill he had sent to us for comment. We agred to the main points in the draft he sent to us, subject to the minmium changes necessary to bring it within our budgetary limits and provide a measure of protection for small producers.

This draft bill would provide for payments with respect to cotton consumed in the United States to eliminate the inequity of the two-price system. These payments would be in an amount determined by the Secretary of Agriculture, subject to the proviso that on and after August 1, 1964, the payments would have to be sufficient to make cotton available for domestic consumption at the same price it is available for export. These payments would be made to "someone other than the producer," but there is not one word about whether they should be made to the "first buyer" or "last handler."

The draft bill also provides for the planting of cotton on "export acres" outside the national allotment and at the world price. It also would authorize a lower price level for that part of the production from each farm which exceeded 30 bales. Finally, it would authorize a stepped-up program of research aimed at reducing the cost of producing cotton, and would provide for a reduction in support price commensurate with such reductions in costs of production as might be achieved.

A number of person interested in cotton promptly said they would oppose this proposal. They probably will be able to defeat it if they persist in this attitude. I understand that various producer groups are still considering this

Hearings on cotton legislation are scheduled to begin before the Senate Committee on Agriculture and Forestry on May 20. The bills before that committee will include one introduced by Senator Sparkman of Alabama which embodies the recommendations of our advisory committee to which I referred earlier. The Department of Agriculture will, or course, indicate to the Senate committee that it believes this proposal to be a suitable way of dealing with the problem.

The Senate committee will also have before it another bill proposed by Senator Talmadge of Georgia. This bill has some very constructive possibilities. Briefly, it would provide for each grower a domestic allotment-his fair share of the domestic market-expressed in bales. Each grower could produce and market as much cotton as he pleased at world prices. Then, in addition to what he received in the marketplace, the Government would make payments to him on his domestic allotment to achieve specified levels of total returns per pound for this share of his production.

The proposal would permit cotton to move freely through private trade channels at price levels approximating world prices. It would be possible under this proposal to increase the net income of cotton farmers and, at the same time, lower Government costs in comparison with other programs. It would be the lowest cost way of achieving a "one-price system" for cotton. It would be simpler to administer than the present program. We believe that this bill deserves the most careful and objective consideration.

There is, in some quarters, strong opposition to one of the features of the Talmadge bill; namely, the direct payments to cotton producers. One of the reasons for this opposition is the fear that limitations might be put upon the size of payments so as to ruin large producers. However, the bill has a safeguard against this. It requires that price support be provided in one form or another no matter how large the producer. Thus, if funds were not made available for paying part of the support price in the form of direct payments, the Secretary would be required by the law to provide the total support price by loans or purchases just as he does now. This has been referred to as the "snap back" provision. We regard it as very wise. We regard it as essential that large producers as well as small shall receive a fair return for their cotton. There is one curious phenomenon related to the Talmadge bill and similar proposals involving direct payments to cotton producers. Many, many people-many of them in high places-say "We know this kind of proposal makes senseit would be best for everybody-and I'm for it," they say, "but the trouble is we can't get it passed-the Farm Bureau leadership is against it."

This leads me to a question which I wish to pose to your group here today. I think I know how you feel about the Talmadge bill and other like proposals. But my question to you is: What are you going to do about it? How long are you going to continue to listen to people who say they agree with you that this is the best kind of proposal but it can't be passed?

I want the record to be perfectly clear from this point on that the Department of Agriculture is not responsible for the ills which beset the cotton industry. You ought to know who your friends are; and, if you are going to aim your fire anywhere, you ought to aim it at the right places.

We, in the Department, are going to keep right on doing the best we can to get cotton legislation passed. But the fate of this matter does not rest in our hands. It rests in yours, and in the hands of cotton producers, and textile mills-and all the groups interested in the welfare of people in the cotton industry. We will do our part. But we cannot do your part. The outcome rests in your hands just as much as it does in ours.

It will take the best efforts of all of us to get the job done.

Comparison of freight to U.S. mills and freight on export shipments

[Per 100 pounds]

Domestic mill: Railroad freight, Memphis to group B Carolina mill points- $0. 77 Export freight:

Freight average interior point to port such as N.O. Houston-Galveston__.

Ocean freight: N.O., Houston-Galveston to European ports'

1

Total freight: Export shipment_-_

.50

1.65

2. 15

1 Minor additional charges for high-density compression, extra bands, patching, etc., on

export shipments.

The CHAIRMAN. Any questions?

Senator TALMADGE. No questions.

Senator COOPER. No.

The CHAIRMAN. Thank you very much.

All right, may I have your attention, please? Off the record.

(Discussion was had outside the record.)

The CHAIRMAN. Let's proceed. Mr. Weil, will you identify yourself for the record and those who are with you, unless each of you have a separate

Mr. WEIL. Yes, they have a short statement.

STATEMENT OF ROBERT S. WEIL, PRESIDENT, AMERICAN COTTON SHIPPERS ASSOCIATION, MONTGOMERY, ALA.

Mr. WEIL. My name is Robert S. Weil of Montgomery, Ala., president of the American Cotton Shippers Association which represents the cotton merchandising industry of the United States. We have six affiliated regional associations each of which are represented here with me today by witnesses who are appearing after me. They are Tracy D. Jones, president, Arkansas-Missouri Cotton Trade Association, Little Rock, Ark.; James E. Kilgore, president, Oklahoma State Cotton Exchange, Muskogee, Okla.; Robert D. McCallum, Southern Cotton Association, Memphis, Tenn.; R. W. Williamson, vice president, Texas Cotton Association, Dallas, Tex.; T. M. Perkins, Western Cotton Shippers Association, Fresno, Calif.; and J. M. Gloer, executive vice president and secretary, Atlantic Cotton Association, Atlanta, Ga.

Mr. Chairman, we appreciate the opportunity to appear before you to discuss cotton legislation. We have come before you today because we are vitally concerned with the desperate plight of American cotton. We have come before you because immediate legislation is required to meet a rapidly deteriorating situation. While we strive to be analytical, we come not as critics.

You, as well as we, are aware that the welfare of cotton is identified with the welfare of our Nation. We recognize first and foremost then that the farmer's income must be protected.

You are well aware of the importance of cotton to our farm economy, as well as its contribution to the gross national product in terms of allied industries, such as seed, fertilizer, machinery, railroad, trucks, gins, banking, insurance, warehousing, and so forth, all of which feed on the volume of cotton produced; and also in terms of its contribution to our balance of payments in international trade. The expansion of cotton production, of cotton markets, and of cotton consumption is in the national interest.

The question whether cotton is gaining its share is answered when we compare our relative performance with that of the 5 years just prior to World War II. Had cotton maintained its same share of our markets of those years, we would today have an annual offtake of 20 million bales (based on an equivalent share of the domestic market of 12 million bales and an equivalent share of the export market of 8 million bales). In terms of recent yields, we would have almost 22 million acres in useful production. It is obvious to see the beneficial effects such normal growth would have meant to farm income, farm employment, gross national products and balance of payments.

Conditions have changed. Steadily production of synthetics and foreign grown cotton have found inroads into our markets. As a consequence, today under most stringent acreage controls, we are producing in excess of 14 million bales per annum and at the current offtake of 12 million bales, we are adding to our surplus at the rate of 2 million bales per annum. Government stocks (including cotton in the current loan) have risen to a level of almost 10 million bales. Here, in the month of May, there are more than 5 million bales in the current loan-almost twice as much as we have exported during the