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operation. This does not mean, however, that special consideration may not need to be given to certain small inefficient producers until they are able to locate a more productive means of earning a living.

Any limitation on payments will doubtless take the form of a limit on the number of cents per pound that may be paid, regardless of who receives the payment. In my opinion, if there is to be a limitation of any kind, it is far more likely to be a limitation on the amount of money a producer may obtain under the loan program. Such limitations have always been completely ineffective since the market price stays at or slightly below the loan level. The discounts, if any, the large producers take have been insignificant. This question of limitations has been discussed so much it has been blown completely out of perspective and frequently is used to cloud the real issue under dis

cussion.

Advocates of the "last seller" approach have also attempted to make it appear this is the only way cotton could be made available to our domestic mills at the export price immediately upon passage of new legislation. The problems to be confronted in administering a new program, including the granting of immediate relief to the domestic mills, will largely depend upon whether the new legislation applies to cotton produced in 1963 or to all cotton carried over from previous years. In any event, these administrative problems will be relatively simple since the bulk of all carryover stocks will be held by CCC.

Based on many years of experience in administering the cotton programs of the U.S. Department of Agriculture, I can unqualifiedly assure you a PIK payment program operated through the "first buyer" would be far simpler to administer than one operated through the "last seller."

The major part of the machinery and qualified personnel needed is already available in the county offices throughout the Cotton Belt and in the New Orleans commodity office. It would merely mean assigning these additional functions to an existing organization. Relatively few, if any, additional personnel would be required.

Despite the many conflicting interests, it appears the prospects are better today than they have been since 1958 for the industry to obtain sound one-price cotton program. It would be a tragedy to the whole country if the few dissident elements in the cotton industry are again successful in defeating the passage of a sound cotton program or if the program were established in a manner that prevented cotton from moving through private trade channels to both the domestic and foreign markets.

Mr. Chairman, I wish to thank you and the members of the committee for the privilege of appearing before you and presenting our views on the need for new cotton legislation.

Senator TALMADGE. Senator Jordan?

Senator JORDAN. I just want to ask one question. All the textile mills that spin necessarily have quite a large quantity of cotton in their warehouses. Now, what is going to happen to that segment of the industry? If you put it on the first buyer?

Mr. RHODES. It could be put on the first buyer and still protect the inventory of both mills and merchants. In my opinion the inventory of both merchants and mills should be protected. It can be done just as easily, in fact, in my opinion far more easily, by doing

It will depend on the time of the year the program goes into effect. You may have to have some special rules covering the first 60 or 90 days, depending on when it becomes effective.

Senator JORDAN. Even a very small textile mill has 50,000 bales of cotton in its warehouse and that could be the difference in the mill going broke or not going broke. He is going to go anyway if something does not happen, but it is a little slower this way. That would be sudden death.

Mr. RHODES. I certainly agree that we must protect the inventory of the mills, and I think we should also protect the inventory of the merchants.

But

Senator JORDAN. You are talking about cotton merchants now? Mr. RHODES. That is right. They have a better chance than mills of disposing of their stocks if they have some advance notice. I think it is fair and proper that we take care of both. Senator JORDAN. A mighty good statement.

Senator TALMADGE. Thank you very much, Mr. Rhodes.

The next witness is Mr. C. Layton Merritt, president of the New Orleans Cotton Exchange.

STATEMENT OF C. LAYTON MERRITT, PRESIDENT, NEW ORLEANS COTTON EXCHANGE, NEW ORLEANS, LA.

Mr. MERRITT. Mr. Chairman and members of the committee, my name is C. Layton Merritt. I am a native and lifelong resident of the city of New Orleans, La. I have the honor at this time of serving as president of the New Orleans Cotton Exchange. I have the privilege of appearing before you at the invitation of your chairman, Senator Ellender, and under authority vested in me by the board of directors of the New Orleans Cotton Exchange. It shall not be my purpose to criticize, to find fault, or to engage in recriminations. Rather I am here to discuss a vital problem relating to the cotton industry of the United States.

It is my considered judgment, as well as that of the board of directors of the New Orleans Cotton Exchange, that a solution to the problem is available. That solution would consist of some form of domestic allotment or compensatory payment plan. I might say here that we approve the principles incorporated in the Talmadge bill (S. 1190) or any other bill which uses this approach to the problem. We have heard only two objections to the suggested solution. The first has reference to cost.

With regard to cost, let me say this. All agricultural programs dealing with price supports, acreage control, and related activities are designed to subsidize agriculture, regardless of the nomenclature used to describe them. Under high-support type programs the day always arrives when selling programs are adopted in an effort to move huge surpluses. All that can be obtained for these surpluses is the market prevailing at the time of sale. In the meantime, untold millions have been spent in carrying charges.

Therefore, losses sustained by the Government because of price declines are the same under any system of subsidizing. It is only a question of time as to when that loss will be realized. The difference in cost to the Government, therefore, will be enormous savings in

Mr. Chairman, if I may inject a thought here in connection with your bill, aside from administrative expenses, it is conceivable that the operations of that plan would cost the Government nothing because the world price for cotton could approach and possibly equal the support price, in which event it would cost the government nothing.

The second objection to the compensatory or domestic allotment plan is the fear on the part of the farm organizations that succeeding administrations might fail to make the necessary appropriations. The answer to that is found in the "snap back" clause as embodied in the Talmadge bill under which, in event of failure of the Congress to make the necessary appropriations, we would revert automatically to the old system.

There is also the element of straight-forwardness to be considered. We all agree that the cotton producer is entitled to some form of financial assistance. It is not within our province to determine this nor to discuss the extent to which the American people must go to provide such assistance. We do say, however, that the manner in which to achieve this is directly rather than be resorting to devious schemes which are complicated, costly, and accomplish little.

As a member of the New Orleans Cotton Exchange, I, as well as my fellow members, have been concerned over the years with the effect of our various cotton programs on the operations of the New Orleans Cotton Exchange. In fact, I am authorized to say to you gentlemen that unless the Congress does enact some type of legislation which will permit the futures exchanges to function normally, we plan to liquidate that institution at the end of our fiscal year.

The New Orleans Cotton Exchange was established some 90-odd years ago. As a price insurance medium it has served all elements of the cotton industry and has made of cotton the soundest form of collateral for banking purposes. It has survived wars, plagues, and panics.

It has through the years been the center of the civic, social, cultural, and economic life of the city of New Orleans, and we like to believe that during its lifetime it has served very necessary purpose in the marketing of the American cotton crop. Its liquidation could undoubtedly prove to a tremendous economic loss to the city of New Orleans and to the State of Louisiana.

Summarizing, the members of the New Orleans Cotton Exchange feel, and have always felt, that the American cotton farmer is entitled to support and that benefits should be paid directly to the beneficiary.

We are anxious to continue to operate as a cotton futures exchange, but we cannot do so under the present system. We have operated during recent years at a tremendous loss in the hope that remedial legislation would be enacted. Our philosophy is beautifully expressed in the preamble to Mr. Talmadge's bill which reads:

To maintain the income of cotton producers, to permit cotton producers to grow and market cotton on a free enterprise basis, to protect the welfare of consumers and of those engaged in the manufacture of cotton textiles, to encourage the exportation of cotton, and for other purposes.

All we ask is that cotton be permitted to flow under a system of free enterprise through normal channels at a world competitive price level.

Mr. Chairman, we are grateful for this opportunity to present these

Senator TALMADGE. Thank you.

Senator Jordan?

Senator JORDAN. I have no questions, Mr. Chairman. A good statement.

Senator TALMADGE. Mr. Merritt, thank you very much for appearing before us.

The next witness is Mr. John W. Edelman, Washington representative of the Textile Workers Union of America.

Is Mr. Edelman present?

The staff has contacted his office and he was not there. If he desires to testify, we will try to set him down at a later date or insert his statement in the record at this point.

(The statement is as follows:)

STATEMENT FILED BY JOHN W. EDELMAN, WASHINGTON REPRESENTATIVE, TEXTILE WORKERS UNION OF AMERICA

On April 26, 1963, the 22-man executive council of the Textile Workers Union of America, AFL-CIO, adopted the following declaration in support of the principles of the Talmadge-Humphrey bill, S. 1190.

"A new approach to the problem of cotton prices is badly needed. system of Government supports creates an intolerable inequity.

The present

"Domestic cotton prices are inflated while exports of American cotton are subsidized for the benefit of foreign mills. As a result, imports of cotton textile products have skyrocketed, while domestic mill consumption has fallen. The 82-cent-per-pound differential in cotton costs enjoyed by foreign producers imposed an impossible burden on the U.S. textile industry.

"The inequity of the two-price system has long been recognized. In May 1961 President Kennedy directed the Department of Agriculture to find the means of eliminating 'the adverse differential in raw cotton costs between domestic and foreign mills.' The Department's effort to accomplish this through an equalization fee on imports was frustrated by a Tariff Commission ruling in 1962.

"It is now up to the Congress to deal with this problem at its source; namely, the cotton price support program. This program has failed to fulfill its purpose. The high level at which prices are supported has stifled consumption and induced growers to expand production despite acreage limitations. Huge surpluses have piled up. The carryover of cotton is expected to reach 10.6 million bales on August 1, 1963—2.8 million over the previous year's level and the largest total since 1957. The total cost of the cotton support and export subsidy programs will come to over $1 billion in this fiscal year.

"It is high time that we faced up to the need for establishing a domestic cotton price equal to the world price. This can be achieved without reducing the income of the cotton farmer.

"Senators Talmadge and Humphrey have introduced a bill, the Cotton Domestic Allotment Act, S. 1190, which would allow the market price of cotton to fall to the world price level and provide producer payments necessary to sustain farm income on an equitable basis. Under this plan, the great majority of cotton farmers who produce less than 15 bales a year would be assured of the same return per bale as at present, but the market price would not be inflated and the Government would not be burdened with the expense of storing and selling cotton.

"Adoption of the Talmadge-Humphrey bill would reduce the domestic cost of cotton by one-fourth and would lead to an increase in mill consumption of at least 10 percent. New job opportunities would be created for some 35,000 cotton textile workers. And the American consumer would benefit from the ability to buy cotton textile products at a savings of approximately $500 million a year. "The cost of this program would be $50 million a year less than that involved in the proposal to provide a subsidy of 81⁄2 cents a pound to compensate the textile industry for the inflated cost of cotton under the two-price system: Therefore, be it "Resolved by the Executive Council of the Textile Workers Union of America, AFL-CIO, CLC, That we urge the Congress to enact the Talmadge-Humphrey bill as the best approach to the achievement of a one-price cotton system.'

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The Textile Workers Union makes no pretensions of expertise in regard to agricultural problems. We have attempted, however, over a period of some years to

Mr. Chairman, if I may inject a thought here in connection with your bill, aside from administrative expenses, it is conceivable that the operations of that plan would cost the Government nothing because the world price for cotton could approach and possibly equal the support price, in which event it would cost the government nothing.

The second objection to the compensatory or domestic allotment plan is the fear on the part of the farm organizations that succeeding administrations might fail to make the necessary appropriations. The answer to that is found in the "snap back" clause as embodied in the Talmadge bill under which, in event of failure of the Congress to make the necessary appropriations, we would revert automatically to the old system.

There is also the element of straight-forwardness to be considered. We all agree that the cotton producer is entitled to some form of financial assistance. It is not within our province to determine this nor to discuss the extent to which the American people must go to provide such assistance. We do say, however, that the manner in which to achieve this is directly rather than be resorting to devious schemes which are complicated, costly, and accomplish little.

As a member of the New Orleans Cotton Exchange, I, as well as my fellow members, have been concerned over the years with the effect of our various cotton programs on the operations of the New Orleans Cotton Exchange. In fact, I am authorized to say to you gentlemen that unless the Congress does enact some type of legislation which will permit the futures exchanges to function normally, we plan to liquidate that institution at the end of our fiscal year.

The New Orleans Cotton Exchange was established some 90-odd years ago. As a price insurance medium it has served all elements of the cotton industry and has made of cotton the soundest form of collateral for banking purposes. It has survived wars, plagues, and panics.

It has through the years been the center of the civic, social, cultural, and economic life of the city of New Orleans, and we like to believe that during its lifetime it has served a very necessary purpose in the marketing of the American cotton crop. Its liquidation could undoubtedly prove to a tremendous economic loss to the city of New Orleans and to the State of Louisiana.

Summarizing, the members of the New Orleans Cotton Exchange feel, and have always felt, that the American cotton farmer is entitled to support and that benefits should be paid directly to the beneficiary.

We are anxious to continue to operate as a cotton futures exchange, but we cannot do so under the present system. We have operated during recent years at a tremendous loss in the hope that remedial legislation would be enacted. Our philosophy is beautifully expressed in the preamble to Mr. Talmadge's bill which reads:

To maintain the income of cotton producers, to permit cotton producers to grow and market cotton on a free enterprise basis, to protect the welfare of consumers and of those engaged in the manufacture of cotton textiles, to encourage the exportation of cotton, and for other purposes.

All we ask is that cotton be permitted to flow under a system of free enterprise through normal channels at a world competitive price level.

Mr. Chairman, we are grateful for this opportunity to present these

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