Cotton Programs

is willing to support this modified proposal if it is amended to restore provisions for "export acreage" along the lines recommended by the Advisory Committee. We would recommend, also, that the maximum differential in price support for the first 15 bales be expressed in terms of 3 cents a pound instead of 10 percent.

I understand, Mr. Chairman, that the bill, S. 1511, which you introduced on behalf of yourself and Senator Jordan, is the same as H.R. 6196, and these remarks would be equally applicable.

This committee also has before it another bill, S. 1190, introduced by Senator Talmadge for himself and Senator Humphrey. This bill 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.

This 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.

One other bill is before the committee, S. 1458, which the chairman introduced by request on May 8, 1963. This bill would fix the minimum acreage allotment for the 1964 and 1965 crops at 17.5 million acres, would fix the support price for the 1964 crop at 29 or 30 cents a pound, basis Middling inch, depending on the size of the estimated supply. The bill also would specify the rate of the export subsidy at not less than 6.5 cents per pound, unless a reduction in this rate should be necessary to prevent excessive exports.

It does not seem to us that S. 1458 would make as constructive a contribution to the solution of our problems as either of the other three bills to which I have referred. One particular difficulty it presents is a likelihood of an increase in the already excessive carryover.

Mr. Chairman, we have prepared some tables giving estimates on a comparative basis of the results which might be expected under these various bills in terms of production, prices, producer returns, program costs, and other relevant data. These tables are attached to my statement.

It is apparent from these tables why we have a serious concern about the budgetary effects of this legislation. It was only after the most careful weighing of the various alternatives that the President concluded that the public interest justified legislation that would involve substantial added expenditures. His views as to why the other alternatives are unacceptable are set out in the portion of his farm message I have quoted. I can only add that the President feels the added budgetary costs he has already agreed to accept are the most that can be justified in connection with a solution of the problems, and that the solution must be found within those limits.

I wish to refer briefly to the effect of reduced cotton prices on farm income. Many people have suggested a reduction of about 21⁄2 cents

pound. We believe that the average cost of producing cotton in the United States is not less than 24 cents a pound, leaving a margin of profit, or net income, of less than 8 cents. A reduction of 221⁄2 cents in price then is a cut of more than 30 percent. To some extent, the reduction in price would be offset by increased consumption resulting from the lower price, but even after allowing for this increased consumption, we believe the loss in net income to cotton producers would exceed 25 percent. This is not a consequence to be accepted lightly, and it is the plain and simple reason we have been so reluctant to reduce the support price, especially for small producers.

For the United States as a whole in 1959, there were 188,000 small farms that received over half their income from cotton. Almost half these farms had no off-farm income at all. In addition, there were 173,000 other small farms that produced cotton but received less than half of their farm income from this enterprise.

This means that some 70 percent of all farms producing cotton are small farms whose operators are dependent upon cotton to a significant extent for their total income. Their gross farm sales are less than $10,000 per farm. Since cotton production costs for these small farmers run well above 27 cents a pound, their margin of profit is narrow, even at present cotton prices. Obviously, their net income from cotton is very meager; but when it is all they have, it is important. Some people may feel that since these small farmers produce only a relatively small part of the total cotton crop, their interests should be disregarded. We cannot accept that view. We feel that any new cotton legislation must make adequate provision for protecting their income.

In summary with respect to these pending bills, the administration believes that legislation is badly needed to alleviate the problems besetting the cotton industry. We recognize the necessity for a large measure of agreement among interested groups to make the passage of legislation possible. In order to facilitate such agreement, we are willing to accommodate our views to those of others within reasonable limits. The principal limitations we feel bound to observe are those arising from budgetary considerations and the need to protect the income of cotton producers, especially small producers. In this spirit, we submit to you our judgment with respect to the bills before the committee.

S. 1190, introduced by Senator Talmadge, presents some very constructive possibilities for solving the problems of the cotton industry, and we recommend it to you for careful consideration. However, if the Congress finds this approach unacceptable, we regard S. 608, the Sparkman bill, as a suitable way of dealing with the problem.

S. 1511 is in effect a modified version of S. 608, and while we think these modifications make the bill less desirable, we would support its enactment if the judgment of the Congress is that this is the best approach and if provisions for "export acreage" are restored, as I have indicated above.

We do not recommend the enactment of S. 1458.

Mr. Chairman, we will be glad to be of any assistance we can to the committee in connection with further consideration of legislation on this subject.

I might, if you would like, just refer briefly to these tables that are attached to my statement.

end of 1961 to $811 million at the end of 1962. In addition, $835 million in cotton was under loan on March 31, 1963.

If present conditions continue it is estimated that CCC stocks will rise to more than 10 million bales by the end of the marketing year. A number of legislative proposals have been introduced to solve the problems of the cotton industry. The House Agriculture Committee held hearings in December of last year and again earlier this year, but to date no solution is in sight.

On March 28, I, with the cosponsorship of Senator Humphrey, introduced a new proposal for cotton which is known as the Cotton Domestic Allotment Act. I believe this plan offers the best, lowest cost, and simplest solution to this most complex and difficult problem for everyone concerned.

This proposal is similar to the overall farm plan which I have introduced for all basic farm commodities in the past two Congresses. Senator JOHNSTON. I cosponsored that.

Senator TALMADGE. You cosponsored it; yes, you did.

The cotton textile situation is unique, however, and is becoming so critical that it deserves separate and immediate attention.

The proposal which I have introduced would eliminate all acreage controls for cotton and instead assign each farmer a domestic consumption allotment based on bales or pounds.

Simply stated, this plan would accomplish the following:

First, it would free the farmers to farm once again by removing all Government restrictions on planting and growing cotton.

Second, it would insure the cotton farmer his share of the national income by supporting cotton which is produced for domestic consumption at a reasonable rate of parity.

Third, it would remove the Government from the business of buying, storing, transporting, selling, and giving away cotton, all of which are done at great expense to the taxpayers.

Fourth, it would eliminate the inequitable two-price system for cotton which would allow our mills to once again purchase domestically grown cotton at world prices.

A program of this type, if adopted, Mr. Chairman, would put the cotton business back on a free enterprise basis. The small farmers would be insured a decent income while the large farmers would be afforded an opportunity to produce cotton and compete for the oversea markets without Government restrictions.

When introducing this proposal in the Senate, I went into great detail as to the content of the same and, therefore, I will not take much of the committee's time for this purpose now. It will be helpful, I think, to summarize the principal provisions, which are as follows: First, beginning with the 1964 crop, the Secretary of Agriculture would establish a national allotment for cotton, based on bales for domestic consumption.

Second, this allotment would be apportioned to the States, counties, and farms for the years 1964 through 1967 based primarily on past production history and acreage allotments.

Third, beginning in 1968 the State, county, and farm allotment would be based on average production for the 3 preceding years. Fourth, the release and reapportionment provisions of present

Fifth, all cotton production would be supported at a price determined by the Secretary between 50 and 60 percent of parity or 20 to 24 cents per pound under today's rates.

This would be cotton produced over and above the allotment for domestic consumption. Under those support prices, everyone would be free to produce just as much cotton as he desires.

Sixth, price supports for cotton produced for domestic consumption under allotment would be provided at three levels: 15 bales or less, 80 to 90 percent of parity, or 32 to 36 cents per pound; 16 to 30 bales inclusive, 75 to 85 percent of parity, or 30 to 34 cents per pound. A farmer who produced more than 30 bales, 70 to 80 percent of parity, or 28 to 32 cents per pound.

Cotton produced under domestic allotment would be supported by loans, purchases, or payments in cash or in kind to producers. Seventh, payments in kind for CCC stocks, to persons other than producers, would be authorized, until August 1, 1964, to remove the two-price discrimination which exists against domestic mills.

Mr. Chairman, in discussing any cotton proposal, or farm legislation of any type, one consideration which is always of paramount importance is the cost involved. With the political influence of the farmer steadily declining and the public becoming more conscious of the high cost of maintaining the present cotton program, it is imperative that we find a solution to the cotton situation and at the same time hold the cost within reasonable limits.

Here again, I think my proposal compares favorably with the existing program as well as other proposals which have been offered. Last year the cotton program cost the taxpayers in excess of $1 billion. Even though a portion of this will be recovered from the sale of CCC stocks of cotton, this is far too heavy a burden for the taxpayers to carry for a program which is not meeting the needs of either the farmers, the mills, or the consumers.

It is estimated that the program which I am proposing will cost approximately $650 million annually.

That includes, Mr. Chairman, a continuation of our present export program to dispose of those stocks which have been accumulated. When we get the program which we have proposed operating, its maximum will be about one-half billion dollars in cost, and its minimum cost could be, conceivably, around as low as $300 million a year. That would be true because we will take the Government out of the business of acquiring, shipping, selling, warehousing, and giving away cotton. We could meet competition on the nose with our free enterprise marketing system, and whatever expenditure the Government would make for the cotton program would be paid to the farmers to help farm income, and for that purpose alone.

In addition, there would be the cost of the cotton from CCC stocks to carry out the 1-year transitory provision. Considering the longrange benefits which would be obtained from such a program, I think this is the most economical approach to this problem which has been put forth.

It is estimated that a complete return to a one-price system for cotton would result in a savings to the consumer of from $400 to $600 million annually. This alone would go a long way toward paying the cost of the program which I am advocating.