Senator WHEELER. What countries do compete with you on pork and lard?

Mr. WOODS. Czechoslovakia, Poland, Germany, but principally Denmark on bacon, and we have some competition from the Netherlands. We have competition from the whole continental Europe on lard, and on bacon we have the countries I mentioned, and the Irish Free State, too.

Senator WHEELER. Then does not the depression of the money of Argentina, for instance, affect the price of cattle in this country?

Mr. Woods. Offhand, I think it has no effect at all. We simply are not in competition with them. They have the beef business, if I may use the expression, "sewed up", the export beef business. They do not export pork products. We simply do not meet them in the market place.

Senator WHEELER. You do not meet them at all?

Mr. WOODS. No, sir.

Senator WHEELER. They just put the United States out of the market entirely?

Mr. WOODS. Yes, sir.

Senator WHEELER. On cattle?

Mr. Woods. We have reverted to the situation existing before the war. We got back temporarily during the pressure of those conditions, but as soon as that was over we lost out again. The reason is that there is nothing to the discredit of the United States-they have these long, tall grasses there and very cheap production cost, and we simply cannot raise the same grade of cattle as cheaply in this country. They can do it a great deal cheaper than we can. I am not trying to evade the question. I would like to run out and meet it, but I cannot make a satisfactory answer unless I know what you are trying to develop, and, as I sense it, it is whether in the markets where we do meet these other exporting countries we find a great deal of difficulty in the depreciated currency.

Senator WHEELER. Yes.

Mr. WOODS. We did for a while. At first there was some confusion but I would not put it as the first factor now.

Senator WHEELER. What countries do you export your lard to? Mr. Woods. England and Germany, primarily. And we take them bacon about equal quantities; Germany a little more.

Senator WHEELER. How was your export trade generally last year? Mr. Woods. Very unsatisfactory.

Senator WHEELER. It has been going down?

Mr. Woods. It has been going down. Our lard held up better than anything else.

Senator KENDRICK. That was due in large part to the rehabilitation of their flocks and herds?

Mr. WOODS. Exactly.

Senator BANKHEAD. What percentage does the depreciated currency have, what percentage effect?

Mr. Woods. I do not think you could measure it in that way. It is not a factor that we find most distressed in our competitive relationships in export trade.

Senator BANKHEAD. When you convert the pound sterling into dollars, you have got to take less, have you not, by reason of their depreciated exchange?

Mr. WOODS. I think where it affected us at all was at first particularly. You know, the British prices did not all go up as much as we thought they would. We were pretty much scared about that. Senator WHEELER. They did go up a very little?

Mr. Woods. Yes; but the way it would affect us was making it impossible for them to buy our stuff in competition with American producers.

Senator BANKHEAD. That is the point I am making, the difficulty of converting their money into our money without loss to them. Was not that reflected in our exports?

Mr. Woods. We can not measure it, sir. It is not our big factor. Senator BANKHEAD. It is a substantial factor?

Mr. Woods. Perhaps. I wish I was more competent to answer that.

Senator BANKHEAD. You have had a 30 percent depreciation. Did not that amount to practically the same percent differential against you?

Mr. Woods. No, sir; it did not, as I understand the situation, because their prices did not respond that way.

Senator BANKHEAD. I mean their dollars compared to our prices. Mr. Woods. You see, where it affected us, Senator, would be if their 30 percent depreciation made our high-priced dollar look awfully high to the British consumer in terms of their prices, and it did not work out that way.

Senator WHEELER. What you had to do was to sell in their prices and then convert the money back into our money.

Mr. Woods. That is right, and it would have made very high prices over there if their prices had gone up in terms of this 30 percent, you speak of.

Senator WHEELER. What it would have meant would be that you would have had to sell at lower prices over there to meet the competition of the depreciated currency of the country.

Mr. WOODS. Or not sell at all.

Senator WHEELER. Yes.

Senator BANKHEAD. And it did have an effect upon the volume of your exports.

Mr. WOODS. Slightly, sir. Let me hasten to add that I have no position on this money question.

Senator WHEELER. I understand that. I am not trying to get at that. Of course, Denmark has not depreciated her currency, and Germany has not depreciated her currency, like some of the other countries have, and consequently it would not affect them to that extent. The fact that England depreciated her own currency would not particularly affect the situation, providing she could not buy goods from some other country which had depreciated currency to the extent that Argentine or Japan did.

Mr. Woods. I think that is a sound proposition.

Senator WHEELER. Now, what is your constructive program that you have?

Mr. WOODS. Maybe that dignifies it too much. I saw you take one or two of these other processors apart. [Laughter]. I decided it was the part of discretion to cut my ideas down.

Senator WHEELER. I had no intention of doing that.

Mr. Woods. It really makes light of them, because we have wrestled with the problem for months, just trying to meet the answer to that question which we think is a perfectly fair one, and we do not offer this as any panacea. We think that it represents some of the things that might be done, some of the things that might be thought of at least as possible.

First, it is not possible to sell a given supply of meat except at a certain price, if other conditions remain the same. I mean, given a supply of meat and given consuming power, that there is some price level that will move that meat into consumption, and that is the only price that will move it into consumption, unless you want to be charitable and take a lower one. So, you cannot change the price of meat unless you also change the supply, and I think that has been pretty clearly brought out here, and is true of any perishable. So the first thing seems to be some means of controlling production, either contracting it or expanding it in line with the need. Our suggestion on that is that the proper use of centralized credit may deserve some study as a means of expanding or contracting production. You gentlemen from livestock sections know that if you were conducting an operation of any size, of a given size, you do it on capital, just as you do in any other business.

Senator WHEELER. Just tell us what your suggestion is with reference to that. You have just stated; now how would you put it in -operation?

Mr. Woods. You have a number of agencies that have been lending money to livestock growers. As I understand it, they are now being pretty well consolidated and centralized.

Senator BANKHEAD. Do they get all of their money from Government agencies?

Mr. Woods. Not all of it. They get very much more of it than they ever did before. There are only a few cattle loan companies left, and I would say that most of the financing is done through Government agencies, and some, as Mr. Farr, one of your livestock witnesses whom I heard, testified, through the Federal reserve banks and their constituent banks.

Senator BANKHEAD. If the Government credit was restricted, are there other sources or avenues for them to obtain money?

Mr. Woods. Nothing that compares with it. You take the Reconstruction Finance Corporation agricultural lending agencies and your cooperative lending agencies, it struck me that perhaps you have a means there of letting out or drawing in rope.

Senator WHEELER. Your centralized bureau credit, is it your idea. that they can control production through the loans that they would make?

Mr. Woods. And through their general credit policy.

Senator WHEELER. Through the general credit policy. In other words, you would plan to contract the production by refusing to loan the producer money, so that he would have cut down the number of cattle produced.

Mr. WOODS. By lending him less money, if it was apparent that lending him more money would react to his own hurt, and lending him more money if a shortage was in prospect.

Senator WHEELER. But you can readily understand the difficulty with a plan of that kind by the Government, for this reason: If you

place that power in the hands of somebody to contract the credit, the party who is making the loan could very easily say to John Smith over here, "We will loan you so much money, but we won't loan it to you, because", and in that way put out of business some cattle men and keep others in.

Mr. Woods. Would that same consideration apply to all the provisions in this present bill?

Senator WHEELER. I would not think so.

Mr. WOODS. Not so much.

Senator KENDRICK. Mr. Woods, do you not think it is more than likely that the whole system would fail, at least that kind of a system would fail, on account of the uneconomic condition that you would impose on the borrower? Suppose, for instance, you take it as it is; every production unit has its line under which it may proceed in an economical way of production, and the moment you interfere with the balanced situation you throw the entire plan out of line and out of balance. You can operate a ranch, a small ranch we will say, with 100 cattle; if you reduce it to 50 or 75 it takes all the earnings of the cattle to pay the expenses, and if you place such restrictions as that upon the borrower, immediately you make his entire unit unproductive.

Mr. Woods. 1 was not thinking of it in terms of, in those terms, Senator Kendrick. In the first place, I will say that we have not gone into it in detail. It does not particularly represent the policy of the institute. It was something, it seemed to me, worth talking about, but we have not thought of it particularly as saying to the producers at all how many or how few cattle he could raise. It would necessarily point toward a production. The suggestion occurred to me in consequence of talking with one or two men in cooperative livestock organizations who are lending money in that branch of activityI do not care to identify the associations because the gentlemen did not bring his ideas forward, but I was told that a good many of the loans that had been made-I do not know whether they were seed and stock loans or some other kind of loans, and I am not criticising any individual or any agency, but a good many of the uses of credit have really been a detriment to the individuals who were persuaded thereby to expand their business at an inopportune time. And the only point I want to make on that is that in the deliberations the committee might care to consider in the new set-up that has been made, whether the centralized use of credit that has been set up could be an influence in the direction of production.

Senator WHEELER. What you want to do, what we want you to do, is to raise commodity prices. If you can raise commodity prices, it is going to be beneficial to the packers, it is going to be beneficial to the manufacturers of all classes, is it not?

Mr. WOODS. I would not put it as narrow as that. Generally I agree with you. I think what you want to do is to raise the producers' total return. It would not do any good to give him $50 a bushel for wheat if he could not sell any quantity of wheat. I do not know whether I make myself clear or not. It is the entire amount he gets, rather than the amount per unit, that gives him his total income.

Senator WHEELER. Well, not entirely, in their present set-up, because of the fact that he has created-he has got this indebtedness

that he has created in 1929 when commodity prices went to a very high point. The dollar had an entirely different value relative to commodities then, and no farmer can pay back a thousand dollars that he borrowed in 1929, or 1926, we will say, because that is more nearly the correct year; but if he borrowed $1,000 in 1929, when wheat was selling at a dollar a bushel, he can not possibly pay it back now, pay off that indebtedness, with wheat selling at 13 to 20 cents, can he?

Mr. WOODS. No, sir.

Senator WHEELER. And no business enterprise in this country, I do not care what business enterprise it is, can do it either; can it? Mr. Woods. We have the same difficulty. I can give you a case from our own industry.

Senator WHEELER. I have no doubt but what a good many other packers are in identically the same condition. So that one of two things has got to happen in this country: Either there has got to be a general liquidation of all business enterprises wherever they are, where they are indebted or have got indebtedness, and the reorganization of all business enterprises, or else you have got to get the commodity prices up; have you not?

Mr. Woods. I think there is a good deal of validity in the point of view that those two things have got to be close together. Senator WHEELER. One or the other.

Mr. WOODS. Or both.

Senator WHEELER. They could not both happen.

Mr. WOODS. I mean, your freight rates, for example, could go down and commodity prices come up.

Senator WHEELER. Yes; but I am speaking generally of the indebtedness in this country. It should be apparent to anybody that one of two things has got to come about; that all of the indebtedness that is owed, whether it is owed by farmers, by industrial corporations, or whether it is owed by individuals, it has got to be completely liquidated, and probably general bankruptcy or general reorganization, or else commodity prices have got to go up, come up, so that the farmer and the manufacturer, or whoever it is that borrowed that money, can pay that money back, pay his debts, I mean, with money that has the relative purchasing power that it did in 1926 and 1929 when he borrowed it. Is not that correct?

Mr. Woods. I do not know whether I would say the same thing in those words.

Senator WHEELER. How would you say it?

Mr. WOODS. It is hard to answer, that yes or no.
Senator WHEELER. You say it then.

Mr. Woods. All right, I will say it as I best understand it. I would say that the fact that the farmers, business men, and others have obligations and are paying taxes that were incurred when the dollar had a very much higher value than it has now, are very hard set and are having an awful time and may have a worse time to try to meet those obligations and those expenses with the dollar basis on the low-priced commodities we have now; and in further substantiation of what you have said and I have said, too, to the degree that we have said the same thing, I can think of a case in our industry, where packers handling almost the same tonnage but the money volume is cut almost in half, and he has that problem that you mentioned of