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Mr. CORN. No, because we are not letting nature have her course.
Senator NORRIS. If nature took her course, the price of wheat in the United States would be 30 cents a bushel higher than the price of wheat in Liverpool?
Mr. Corn. I have seen it that way, Senator.
Senator NORRIS. That was on account of some fellow speculating. That wasn't nature taking her course.
Mr. Corn. Everybody was getting along mighty well. I tell you we didn't have any trouble until after you passed that farm bill.
Senator NORRIS. If we abolish the exchanges, if we will just let nature take its course, you say, the price of wheat in the United States would be 30 cents a bushel higher than in Liverpool? Mr. Corn. I believe it would.
Senator BANKHEAD. Why didn't that happen before this bill was introduced?
Mr. Corn. It was caused by having the Farm Board.
Senator BANKHEAD. You have had a good long time since they have done anything?
Mr. CORN. We haven't had such a very long time. They are still selling wheat.
Senator BANKHEAD. A very small quantity? Mr. CORN. I do know I bought 15,000 bushels from them last week. Senator BANKHEAD. You know they haven't so very much? Mr. Corn. I know they had enough to give away to the Red Cross to almost floor us.
Senator NORRIS. With the exception of some instances that have happened here and there on account of some speculator bulling the market, have you ever known a time when the price of wheat in the United States was 30 cents a bushel higher than in Liverpool ?
Mr. Corn. Yes, sir.
Mr. CORN. Why, it has often been that way. I couldn't pick out the years, but you can go to those statistics and find that out.
Senator NORRIS. I have never found that. I would like to have you recite it to me. Did that ever work with cotton?
Mr. Corn. I couldn't tell you about cotton.
Senator NORRIS. How much a bale above the Liverpool market was cotton worth while nature was taking its course?
Mr. CORN. I couldn't answer that question.
A BRIEF SUBMITTED TO SENATE COMMITTEE ON AGRICULTURE BY C. H. CORN,
LILLIE MILLS, FRANKLIN, TENN., IN BEHALF OF THE SOFT WHEAT MILLERS AssocIATION, SOUTHEASTERN MILLERS AssociATION, PIEDMONT MILLERS ASSOCIATION, AND SOUTHERN ILLINOIS MILLERS ASSOCIATION
The above-named organizations have a total membership of over 200 mills, whose business is largely or wholly family flour in the Southern States. They produce about 6 percent of the flour made in the United States and half the family flour sold in the Southern States east of the Mississippi River. A large proportion of their business is in the Cotton Belt.
There is nothing that would help this group more than maintained higher prices for wheat and cotton and we pledge now, as always, sincere cooperation in any efforts to achieve this objective. We will cooperate in carrying out the proposed farm relief bill, but we are convinced that the same principle is involved in attempting to boost prices artificially that were involved in the stabilization operations of the Farm Board. The same elasticity is granted to the Secretary of Agriculture under this measure that was granted to Farm Board officials. If this measure is passed prices will be maintained temporarily just as they were in farm stabilization operations and they will eventually be broken just as they were in the attempts to peg the wheat price.
You are painfully aware of the fact that farm prices broke more than other commodities and in our judgment the sole reason for this is that there was a painful adjustment under the law of supply and demand. Anyone who investigates the full facts can see that the taxes assessed under this measure must be passed on to the consumer. This will mean an increase in the price of a 24-pound sack of flour, the standard package in the South, of about 35 cents, or nearly double the present prices in certain markets having low freight rates. The average profits of the better class of mills is only about 2 cents per bag and it is my belief that taking all the mills, the losses of some mills was greater than the profits of those making money. I know my own mill made money from 1909 to 1914, but have made no money since 1930, when the Farm Board operations caused such great depressions in wheat and cotton prices, and in 1932 we sustained a loss. I have no profit and loss statements from the mills that I represent, but from conversations with many of the mills which were formerly the best moneymakers I find that our own record is representative. The same thing is true of grocers—wholesale and retail-as well as bakers.
It has been stated that the farmer is receiving far less for his wheat than in 1909 to 1914, while flour is about the same. Therefore, it has been reasoned that the miller and middlemen are making exorbitant profits and the increase in prices of agricultural commodities could be absorbed by them without passing the tax on to the consumer. The true facts could be ascertained by the committee, by examination of corporation income tax returns, which I believe would prive the above statements. The premise of the critics is correct, but the conclusions are wrong for many reasons, for example:
The freight cost from Kansas City to Baltimore on a barrel of flour is 50 cents greater than in 1914. Wages are around twice as much and traveling expenses, due to increase in railroad rates and gasoline, living costs, etc., are much greater, mill machinery costs, power cost, taxes and in fact every item that goes to make up the cost of making and selling a barrel of flour have practically doubled. In 1910 to 1914 we figured an allowance in our mill of 50 cents a barrel and now we figure $1 and received as much profit or more in the pre-war period than now.
As further evidence of the unprofitableness of milling, there were according to the Bureau of Census—around 4,000 mills in operation in 1929, while there were only 2,400 at the end of 1932. Taking the milling industry as a whole, it is in as bad, if not worse, condition than the farmer. I could buy you 50 mills today at 20 percent or less of the appraised value fully depreciated, but I would like to know of some farms that I could buy on the same basis, for then I would quit milling and go into the real estate business.
In view of these facts, can anyone doubt that the milling industry is in a sad condition and that it would not welcome sound legislation to help the farmer? Higher priced wheat makes it easier for us to make money. Generally speaking, the higher the price of wheat the bigger have been our profits. Our markets are dependent almost entirely on the purchasing power of the cotton farmer, directly or indirectly. If we thought he could be permanently benefited, we would submit to any sort of regulation voluntarily, purely from a selfish standpoint. We oppose this bill simply because we are convinced that it will defeat its own aim.
We do not now need an experiment, when we have already seen what the same attempts in principle have resulted in, both in this country and abroad. We believe that this measure will hurt the farmer, hurt the miller and hurt the country, even if only tried out for a relatively brief time. If the measure is passed, of course we shall do our very best to cooperate with the officials, but we sincerely trust that you will at least first give a trial to the acreage rental and special cottonaid plan proposed by your committee chairman.
The CHAIRMAN. We will now have a representative of the rice people, Mr. W. M. Reid.
Mr. Reid, please give your name, address, and occupation to the stenographer. STATEMENT OF W. M. REID, SECRETARY OF THE RICE MILLERS
ASSOCIATION, NEW ORLEANS, LA. Mr. REID. Mr. Chairman and members of the committee, I have listened rather interestedly to the various remarks and some criticisms that have been passed on the bill. In the rice industry we do feel that we need some relief. We would like to see a bill passed that would give that relief to the entire industry. While I represent the millers, we realize that our life is dependent upon the producer, that our mills have no value unless the producer is enabled to get a living price so that he can produce a crop. In viewing our situation I think we should understand what the ills are. They are not wholly economic ills of this or the last few years but when we compare present conditions to the stated pre-war period from 1909 to 1914, speaking only of the rice industry because my remarks will be directed to that and not to anything else affected by the bill, there was an average of about 700,000 acres planted to rice in the United States during that pre-war period. The average farm yield during the same period was 33 bushels to the acre. The average production was about 23,000,000 bushels.
During the World War when all crops were augmented, the rice crop was materially increased and we jumped from a price of 38 cents a bushel up to a price of $2.66 a bushel, which led farmers to plant all the rice that they could possibly secure lands for. That condition in itself has helped to accelerate the conditions brought about by the economic crisis. During the last 5-year period, we have had an increase of nearly 50 percent in acreage over the pre-war period. Notwithstanding the increase in acreage, we have also had an increased yield per acre, brought about by better methods and better varieties. Whereas the average farm yield was 33 bushels in the pre-war period, in the last 5 years the average yield per acre has been 45 bushels.
The cost of the production of rice during the present season I would estimate at 55 cents per bushel. The average farm value of rice as of December 1 when all comparative statistics are made was about 40 cents a bushel. In other words, as of that date, we were about 15 cents a bushel under the cost of production. You ask me, then, how we are going to cure that condition, and I say to you that there are remedies provided in the present bill. The acreage should be reduced. While I have heard others in other lines here testify to the inadvisability of reducing acreage, it is readily apparent that an acreage reduction is necessary in our industry.
The industry is small, the section is rather compact; we believe that it could be effectively handled. We feel that the bill grants to the Secretary of Agriculture authority to reduce acreage. We would not like to see that feature stricken out of the bill, certainly not insofar as it affects rice.
I think, gentlemen, that I have told you the story briefly. I have tried to give you a clear picture in just as few words as possible, and I will be glad to answer any questions you might care to ask.
Senator THOMAS of Oklahoma. What should rice be selling for now to enable the rice producers to pay cost of production and enjoy some semblance of prosperity?
Mr. REID. I should say 75 cents a bushel.
Senator Thomas of Oklahoma. Will this bill in your opinion enable them to get 75 cents a bushel if it is enacted into law?
Mr. REID. If enacted into law and properly administered, I would say "yes."
Senator THOMAS of Oklahoma. Are the rice growers in favor of the legislation so far as you know?
Mr. REID. There is a large rice grower present and I would prefer, Senator, to divide my time and let him speak for the growing industry. I am speaking for the milling industry. I think that they would at a price of 75 to 80 cents a bushel find that satisfactory.
Senator NORRIS. One of the things that worries me in considering this bill is why it is that men in the same business differ so radically in their ideas as to whether this bill is good or bad. Is there any reason that you know of why the benefits that the rice miller will get from this bill would not also apply to the wheat miller? Why should the wheat millers oppose it and the rice millers favor it? The same provision of the bill that applies to wheat applies to rice.
Mr. REID. I should say there would perhaps be rice millers that will oppose it, but I think as a general proposition, the rice millers are agreed that relief is necessary and they appreciate the fact that relief of the rice farmer will also be relief to the rice industry.
Senator NORRIS. Isn't that true of wheat also ?
Senator NORRIS (interposing). I am in neither business, but I can't see why it doesn't apply to both of you alike. Maybe it doesn't. There may be some reason for that. If there is, I would like to find it out.
Mr. REID. I think we are all of one mind in this respect, I don't know what is in the mind of the wheat miller or in the mind of others with respect to the bill. It isn't perfect, you know that as well as I do.
Senator NORRIS. We all realize that.
Mr. REID. We all resent centralized government to such an extent. We have heard statements here that it gives to one man dictatorial power. That is probably true, but if it requires drastic measures to bring about the desired relief, I think we should be prepared for a major operation and subject ourselves to it.
Senator NORRIS. I agree with you fully, but the thing I don't understand is why the major operation doesn't apply with equal force and equal equity to the two classes of millers, rice and wheat.
Mr. REID. Well, I want to state this with respect to the bill from the rice viewpoint rather than from the wheat. There are things that we are fearful of in the bill, too. One of them is the question of competing products. Rice is going to compete with potatoes and beans, and I don't know of any processing tax that can be applied on those products. Of course, if the price of rice was unduly raised and the consumption was decreased and consumers would turn to potatoes and beans and things of that kind that might not be brought under the bill, then I would say the rice people would be just as opposed to it as the wheat people or others.
We realize that the thing must be very carefully handled. As I said in the beginning, we don't like the bill 100 percent by any means, but we do want to see some legislation enacted that will bring about a relief of the present situation. We know that it is impossible to continue to produce rice at 40 cents that costs 55 cents to produce.
Senator NORRIS. That is the way with the wheat fellow, just exactly. I want to ask you a question about the competing proposition. There has been a great deal said about it and it is in the bill, the power to levy a process tax on rice may result in your meeting competition from potatoes, you say. So far as I have heard, this competition of one agricultural product is always with another agricultural product. Now, if you view this bill from the broad standpoint of helping the farmer, and you found that rice went up in price and people used more potatoes than before, that would help the potato farmer. After all, one hand would wash the other as far as the farmer is concerned. It might make a little difference with the manufacturer.
Mr. Reid. Well, no, I wouldn't say that, Senator, because I don't think the rice farmer could turn to potatoes.
Senator NORRIS. Well, you said a while ago if you raised the price of rice too high, the consuming public might use more substitutes and not quite so much rice.
Mr. Reid. Yes, sir; that is the consumer. You said with respect to the producer.
Senator NORRIS. After all, if it does that with the consumer, who consumes potatoes, and he consumes more potatoes than he did before, that means the producer of potatoes gets a better market?
Mr. REID. Yes, sir; but you wouldn't put the rice producer out of business to benefit the potato producer.
Senator NORRIS. No. Perhaps it might cause people to buy potatoes instead of rice to some degree. I am asking now on the broad view of helping the farmer why that should be so material, because you are helping a farmer if you help the man who raises potatoes, that would do some good in his case, that ought to be some consolation, anyway?
Mr. REID. That wouldn't be any consolation to the rice farmer.
Senator NORRIS. Of course not, and certainly if it injured him to such an extent as to put him out of business, that would be a serious thing and not be right.
Mr. REID. Yes; and particularly when his lands were not suitable for other cultivation.
Senator NORRIS. You believe in acreage reduction?
Senator NORRIS. When you reduce the rice man's acreage you have pretty nearly put him out of business, because he can't use that acreage in the production of anything else very well, can he, any acreage suitable for rice?
Mr. Reid. It is not suitable for marketable crops. He might produce more feed crops at home, where he would be more self-sustaining; but I feel that he would get more on the 75 per cent acreage in actual dollars and cents than he is getting now on a hundred per cent.
Senator NORRIS. Undoubtedly. He would be in a little better fix. He might not be able to sell quite as much rice, because the potato man would sell more potatoes. If he gets the benefit of less production of rice and sells at a higher price and if he should lose a few consumers that really wouldn't be a loss to the farmer in the aggregate, because some other farmer supplies that deficiency?