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Senator McNARY. I agree with you that if something is not done about it you are going to have a further general collapse of all business and all prices in the United States.
The CHAIRMAN. Mr. Simpson, are you through?
Senator MCGILL. You have got some sections of this bill that you have not covered?
Mr. SIMPSON. No; I have covered all the sections.
Senator THOMAs of Oklahoma. I want to ask one or two questions, Mr. Chairman.
Mr. Simpson, the prices you have just given for farm commodities, of 10 cents for corn, 7 cents for oats, and 30 cents for wheat, and 5 cents for cotton-those prices are not sufficient to pay cost of production? Mr. SIMPSON: Not cost of operation.
Senator THOMAS of Oklahoma. Now, when we hear it said that if we reduce mortgages the farmer will be benefited, is it not true that if the farmer had his mortgage eliminated entirely, he still could not exist?
Mr. SIMPSON. Under the present prices you could not give me the best farm in Illinois or Iowa, I do not care whether it be 160 acres or 160,000 acres, if it was clear and you would say, “Here, you can have it, Simpson, but the prices are going to remain where they are for 10 years and you will have to pay the taxes,” I would not take the best farm of any size anywhere.
Senator THOMAS of Oklahoma. We heard it said this morning that if we just reduce local taxes and State taxes and Federal taxes, the farmers would be vastly benefited. Is it not true that if the farmer had no mortgage and had no taxes to pay whatever, he still could not exist with present prices?
Mr. SIMPSON. He has to exist by eliminating everything that a human being has a right to have in his standard of living. That is the only way he can exist under present prices.
The CHAIRMAN. If there are no further questions, we will thank Mr. Simpson and ask Mr. Fred J. Lingham, representing the National Millers Association, to appear. Please give your name and address and whom you represent, Mr. Lingham. STATEMENT OF FRED J. LINGHAM, REPRESENTING THE NATIONAL
Mr. LINGHAM. My name is Fred J. Lingham, chairman committee on legislation, Millers National Federation, and president of Federal Mill, Inc.
Senator NORRIS. Tell us something about that association. How large is it and where is its headquarters?
Mr. LINGHAM. Our association has about 75 percent of the milling capacity of the country, Senator Norris.
Senator NORRIS. What percent do you have of the number? Mr. LINGHAM. I do not remember, but it includes mills of all sizes, large and small, but as to the percentage I do not know, but mills of 100 barrels or even 25 barrels a day are in the organization.
Senator NORRIS. It is a voluntary organization?
Mr. LINGHAM. Entirely voluntary. The matter of price, for instance, is never mentioned in the meetings.
Senator NORRIS. Contributions are made by the membership in accordance with the size of their mills? Mr. LINGHAM. Yes.
The CHAIRMAN. And what percent of the wheat do you mill, or grain?
Mr. LINGHAM. On that basis we would mill, I presume, about the same percentage, perhaps 75 percent, perhaps a little more, because the mills that are members are naturally the more active mills.
Senator NORRIS. Does your membership extend all over the United States?
Mr. LINGHAM. From coast to coast; yes. So that the committee may know something as to my being able to give testimony, I want to say that I have been in the milling business 40 years this fall. Some years ago
Senator NORRIS (interposing). You do not look that old.
Mr. LINGHAM. Thank you, Senator. Some years ago I was president of the association, and I might say I am now president-elect. During the war I had charge of the milling division of the Food Administration, the last year of the war. The first year I had only part of it, but the last year of the war I was located in Washington in charge as one of Mr. Hoover's dollar-a-year men. In that way I am acquainted with the industry more or less from coast to coast and know men from coast to coast in the industry.
It might be of interest to the committee to know something of the war experience. We found it more difficult to withdraw regulations than to start them. It was comparatively easy, for instance, for us to issue a regulation to the effect that a dealer must sell substitutes with flour; namely, that he could not sell flour unless he sold substitutes. When we tried to withdraw that regulation, we found a very serious situation. The dealers of the country said to us: “You as a governmental body, or Food Administration, have required that we buy substitutes. The market has now gone way down. Now, you are leaving these substitutes on our hands, because no one will buy them when the regulation is withdrawn." The result was that we had to go out and buy these substitutes from the dealers and ship them abroad for war purposes. We were able to do that at that time, of course, when it could not be done now. But, even at that, it put many dealers into bankruptcy, because we bought these substitutes at, possibly, $5 a barrel, when they might have cost them $10 a barrel.
In 1918 you may remember that the President named a guaranteed price for the 1919 crop, a guaranteed price on the wheat for the 1919 crop. That was because we, of course, expected at that time, or through it probably that the war would continue, and we wanted to increase production, and therefore named a fairly high price. But the war stopped and the result was that we had to guarantee to dealers that if they would continue to buy the wheat and keep in its natural flow, we would protect them against loss. That was an implication that came up under those circumstances.
During the war, feed went as high as $80 a ton. Our committee felt that it was entirely unfair to the farmers of the country to charge them $80 a ton when we were buying their wheat at less, so we, possibly in our inexperience, put the price down to around $30 a ton, named that as a maximum price on feed for the protection of the
farmers. Now, what happened? Some of the small mills bought hogs and fed the feed to the hogs so that they would not be forced to sell it at less than actual value which they could get out of the feed in the shape of hogs. Then we were bombarded by wires from all over the country that we had put feed to a value lower than its real value compared with other commodities. We were bombarded by wires from all over the country that we must divert feed to those sections to keep their cattle from starving. I know we got very pitiful wires from New England and from the Pacific coast. The mills wired us that we must do something to let them have more feed. The bankers wired us, the cattle men wired us, that we must get feed out there to keep them from starving.
It got along toward the end of the war and we withdrew the regulations. Within a week or two those same people were wiring us urging us to help them take the surplus off their lands. In other words, we had put feed to an abnormally low price, and it developed they had a shortage; then we took the regulation off and it went up, it developed all of a sudden they had a surplus. It is just an indication of what happens under any artificial regulation.
The proponents have said, “Let us try it out, and if it does not work we will discontinue it.” I think only men who have had practical experience in a national way have any idea of just what that means. To me it is quite like saying, “We will build a bonfire near a haystack, and if the haystack catches on fire we will put it out." After a regulation of this kind, or a plan of this kind rather, is once put under way it cannot be just stopped without very serious injury.
Senator NORRIS. I would like to observe there, I recognize the force of that argument and that illustration, but suppose we were freezing and our children were freezing, and we could not move away from the place where we were that was close to the haystack; we were going to die by being frozen to death unless we had a fire; we recognize that if we build a fire there may be danger of a conflagration. What would we do under those circumstances?
Mr. LINGHAM. Well, Senator Norris, I think there are two entirely different situations. I think I would hesitate about building a bonfire for fear I would be burned up instead of being frozen. You are assuming that the person
Senator NORRIS (interposing). We are certain of death anyway, and it is just a question of whether we would rather freeze to death or burn up. [Laughter.) But I would feel that I would have some hope I might have a good deal of doubt about it, about whether I was doing more damage than good, but if I could not see any way to save my life or the lives of my family I would take a pretty desperate chance on burning the haystack.
Mr. LINGHAM. Well, Senator, if you had known of a hundred or a thousand such experiences and they had all been burned up, I think you might hesitate. In this case there have been hundreds of these experiments made. I believe it is historically correct that there has never been a single instance where they have worked out. Of course, a man might say in reply to that that they are trying it in Europe. We do not know how that will work out, and then the situation is entirely different anyway. They are giving a bonus over there, of course, to increase production. It is quite different from our giving a bonus here which we think will increase the price.
take its place, me this won't financiers,
Senator WHEELER. Let me ask you this: It is all right to come here and say that “this plan won't work out,” but everybody recognizes that knows anything about farm conditions, that unless something is done to get up farm commodity prices you are going to have a further collapse of all of your economic conditions in this country. Now, have you, or do you intend to give us some suggestions for a plan that will be successful, in your opinion? The trouble is that everybody comes in and says, “this won't work”-not everybody, but some of them come here and say, “this won't work" and "that won't work,” but they never propose a suggestion that they think will help the situation. Now, we have been following, as a matter of fact, the suggestions that have been offered by a lot of people in the last two years coming down here, the bankers and a lot of other people coming down here, as to suggestions on what they thought we ought to do to help the situation, and Congress has jumped through a hoop to accept their suggestions and in each instance the suggestions that we have gotten from the financiers have failed and have not worked out. Now, when we propose this bill—when we find a group of people, the financiers, some of the financiers of the country, saying this won't work” but they do not offer anything to take its place, we want to hear something that will take its place.
Mr. LINGHAM. Moreover, Senator Wheeler, I think in the first place the freight-rate situation must have serious consideration.
Senator WHEELER. I agree with you. Mr. LINGHAM. I hesitate at any time to discuss any other line of industry. I know I see men on the stand here that talk about things in the milling industry, and they have no more conception of what they are talking about than a child. Now, I hesitate to talk about the railroad industry, but I understand from railroad men that they begin to believe that rates must be reduced.
Senator WHEELER. It is about time they begain to realize it, because they have constantly been coming before the Interstate Commerce Commission asking for higher rates and higher rates all the time, thinking that they could make the railroads prosperous in that way.
Mr. LINGHAM. And they have gotten their rates, you might say, artifically high, and now they have the competition of the trucks that is making long hauls and they have got to come back to a more normal basis, I think.
Then you ask what I think of Senator Smith's substitute. I would say it has probably the most hope of reasonable assistance to the farmer.
Senator WHEELER. You do not think it would work with reference to wheat, do you?
Mr. LINGHAM. I think it would work decidedly better than the domestic allotment plan. I do not think there is any comparison.
Senator WHEELER. How would it work on cotton? I have been interested to find if the Smith plan would work with reference to wheat, but in my talks and conversations with people who are interested in the wheat situation there is quite a different situation existing with reference to wheat than there is with reference to cotton. I can see how it is possible for it to work out with cotton, but I am at a total loss to understand how it is possible for it to work out with wheat.
Mr. LINGHAM. Of course, Senator Wheeler, it is theoretically possible, at least, that a reduction of acreage should reduce consumption; however, I would rather not take my time to go into that. I am afraid the chairman would be saying-
Senator WHEELER (interposing). But I do not see how it is humanly possible for it to work out with reference to wheat. Now, if you can show me how it can work out with reference to wheat, I would be glad to have you do so, because that is one of the things that you are here for and that we want you here for, to give us some constructive suggestions. Now, if you can show me how it can work out, can possibly work out with reference to wheat-and I think I know something of the wheat situation in the northwest and with reference to the acreage situation in the northwest-I would like to know it.
Mr. LINGHAM. Well, Senator Wheeler, I think it is generally overlooked that the margin or that the supply, rather, has not, over a period of years, been very much beyond consumption.
Senator WHEELER. You mean the world supply?
Mr. Lingham. In the United States. Of course, we have got rid of some for export in the past, but this past year the consumption of wheat in the United States was just about an even bushel per capita less than before the war, the year before the war. If we had maintained pre-war consumption we would have had a serious shortage today, or what would have happened to the farmers of the country is that they would have had to raise more wheat, we would have had to raise a billion bushels more wheat since the war than we have raised if we had maintained pre-war consumption-and by the way, I am not intentionally getting away from your question, but while I think of it I would like to refer to the fact that now we are setting up a barrier against consumption to still further reduce consumption
Senator WHEELER. How is that?
Senator WHEELER. But you would not for a minute contend that if you raise the price of wheat to 90 cents a bushel, it is going to materially raise the price of the finished product, the price of bread to the consumer, would you?
Mr. LINGHAM. Senator Wheeler, when Mr. Simpson on the stand made the statement that he did, to the effect that it would not increase the price of bread, that is absurd.
Senator WHEELER. No; but that is not what I am asking. Mr. LINGHAM. Let me answer you more definitely. I do not like to mention Mr. Simpson's name. He is a very fine man, but I think he is misinformed. Three dollars a barrel might be about the tax per barrel on flour under this plan. A 1-pound loaf of bread contains two thirds of a pound of flour. In other words, it would increase the cost of the flour in the bread 1 cent a loaf. Now, the bakers of the country today as a whole are perhaps hardly breaking even. I have a statement from one of the best bakers in the country showing that he lost money last year, and I do not suppose there is a bakery of any size, unless it is some little family bakery selling over the counter, that is making anything like a cent a loaf. Now, that extra cost must go on, and while 1 cent a loaf seems like a low figure, the fact is that that $3 a barrel is in there, whether it goes through the bakery or whether it goes in the shape of flour, and the public must pay it.