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simplified form, I think a greatly improved form. I don't know whether you are familiar with that or not?
Mr. PEEK. Yes.
Senator McNARY. That also made specifications that I think will safeguard the administration of the bill both to the public and the producer and the processor and all involved. Here this short brief authority doesn't specify in what manner to treat the surplus, whether the allotments are to go to all a farmer raises to where it reaches a point that consumption balances production or whether we take a portion of the farmer's crop and say so much can receive allotment benefits and the other he can hold. There are no specifications of that. Do you think it is a good bill to go along and leave it wholly to the Secretary to treat without any legislative specifications or safeguards in what fashion it is to be done? I want your opinion.
Mr. PEEK. May I answer you in this way, Senator? The ramifications governing these different farm commodities are so great that I think it is impossible to incorporate in a single piece of legislation all of the necessary provisions for dealing with each one. As I said a few minutes ago, I think the whole question of the people's confidence in the present administration on the farm matters was settled last November. I think the farmers of the country are willing to trust the President of the United States in the administration of the widest powers, and I think at the same time that the entire consuming public is protected by the limitation of the bill that it is inoperable when it gets up to what is called the fair exchange value. I want to repeat that my criticism is that that isn't enough and not that it is too much.
Senator McNARY. Assuming that this bill is adopted in the form that it has passed the House and the fair exchange value plus the current price is the value fixed in here for the commodity to bringthat is true, isn't it?
Mr. PEEK. No; the fair exchange value-perhaps I didn't understand—is the market price plus an amount
Senator McNary. Which is based upon the average price for Che period named. In many instances wouldn't that exceed the tariff barriers now imposed by our tariff act?
Mr. PEEK. Yes.
Senator McNARY. What is in here that would permit the Secretary of Agriculture to raise the tariff rates due to importations due to higher prices in this country?
Mr. PEEK I think that is covered in the bill The processing tax is imposed on the wheat in addition to the tariff.
Senator McNary. Suppose this raised cotton from 7 cents to 11 cents a pound. Necessarily, cotton not being protected, there would be an influx of cotton to this country. Do you think there is a provision in there to protect the cotton grower or the wheat grower? Where is the provision that would protect the grower?
Mr. PEEK. I think there is a tariff provision in here for cotton; is there not?
Senator McNARY. I am asking you. You are familiar with the bill; you have been with the Secretary of Agriculture and have had more time to study it. I don't find it.
Mr. PEEK. Mr. Lee tells me that is not in this bill.
Senator McNary. I didn't see that. You realize the Secretary himself would have no power to meet those contingencies by any
edict of his uld have no power see that. Your res
Senator WHEELER. Wouldn't that be covered by the fact that he would have the power to put this process tax on importations?
Senator McNARY. That is based upon exchange value plus the current value. It is an arbitrary figure. It can be lowered only when there is a decrease in consumption due to a higher price level. It has no relation to tariff.
Mr. PEEK. Senator MeNary, I think that is covered in paragraph (e) page 18.
The CHAIRMAN. Don't take the committee bill. Take the House bill.
Mr. PEEK. This reads-
It provides for a compensating tax equal to the amount of the processing tax.
The CHAIRMAN. Let me get that clear. Suppose the duty on wheat was 42 cents a bushel and it was necessary to impose a tax of 40 cents a bushel to bring it up to the parity .spoken of, then automatically you would impose your import rate of 82 cents ? Mr. PEEK. That is right.
The CHAIRMAN. So that you have a protective tariff domestically applied and applied as to foreign importations?
Mr. PEEK. Yes.
The CHAIRMAN. In other words, we are committing ourselves to a protective tariff raised to about the nth power both domestically and as to imported foreign goods?
Mr. PEEK. I think you are assuming an extreme condition. The CHAIRMAN. The condition exists now? Mr. PEEK. Yes; but here we have a condition in prospective crop which is the most various we have had for many years of wheat. In all probability we would be on a domestic basis with wheat this year if it were not for the accumulated surpluses which we have on hand. The winter wheat situation is very bad.
The CHAIRMAN. You see that within a year our production will about equal domestic consumption.
Mr. PEEK. I think the prospect is for around 600 to 650 million bushels of wheat right now, but, of course, there is no telling what the spring wheat will be. That is merely based upon the normal production of spring wheat, since so much depends upon the planting and growing conditions, and it is not yet in the ground.
The CHAIRMAN. Under conditions other than now exist—this terrible lack of money--what would be the effect on the trade if they were reasonably sure that the incoming crop would not more than supply domestic consumption?
Mr. PEEK. I think the effect upon the trade of the announcement of a governmental policy to stand behind agriculture and the processors of agricultural commodities so that burdensome surpluses will not break down, the market would be bullish, of course. I think prices would go up.
The CHAIRMAN. I am not speaking about surplus. I take it for granted that what surplus remains of wheat plus the prospective incoming crop will not greatly exceed domestic consumption.
Mr. PEEK. I don't think that is quite right. I think there is, roughly, around 350 million bushels of wheat on hand and a prospect of 600 million bushels.
The CHAIRMAN. What is the domestic consumption of wheat?
Senator McGILL. We have that at this time. By July we will not have that amount of surplus ?
Mr. PEEK. Yes.
Senator McNary. I think that subdivision (e) you called to my attention refers only to process and manufacture. It doesn't touch the raw article at all.
Mr. PEEK. In the instance you named, Senator, cotton, that would have to be processed.
Senator McNARY. Well, wheat from Canada; it comes in a raw state. Wheat from Argentina would come in a raw state.
Mr. PEEK. But you have got the tariff on wheat from Canada.
Senator McNARY. On your own statement that would far exceed in value the protection afforded by the tariff. However, I don't want to proceed with that further. I just wanted to bring that out.
I want now to ask Mr. Peek a question regarding the description of basic agricultural commodities.
Mr. PEEK. If the wheat comes in raw, it pays the processing tax when it is processed, and it has to pay the tariff besides.
Senator MCGILL. The processing tax plus the tariff?
Senator FRAZIER. That would practically amount to an embargo in the case of wheat?
Mr. PEEK. That depends upon the price. It would be very helpful in that direction, Senator.
Senator McNary. Mr. Peek, referring to another matter, on page 12, section 11, the term “ basic agricultural commodity” means wheat, cotton, corn, hogs, cattle, sheep, rice, tobacco, and milk and its products. Will you discuss that, whether you think it is practicable to include these so-called basic agricultural commodities in the operation of the allotment plan or the acreage-reduction scheme?
Mr. PEEK. I appeared before the Senate Finance Committee on February 14 and presented a very complete memorandum as to our position as to the allotment plan that passed the House. In that I recommended four commodities—wheat, hogs, cotton, and tobaccogiving discretion to the President to extend the list to other livestock and other grains, so in effect it is substantially what it is here in respect to those four commodities.
Senator McNARY. We had in our hearings a great many hog growers and feeders here, and I think representatives of the packers, opposing the inclusion of hogs in the domestic plan. I think this committee by unanimous vote excluded hogs. Do you think it would be practicable to apply the allotment plan to hogs?
Mr. PEEK. I think it is practicable to apply the recommendations I made to the Senate Finance Committee to hogs, because that had that agreement section which the allotment plan did not have.
Senator McNARY. In this bill?
Senator FRAZIER. Mr. Chairman, I want to say I voted to eliminate hogs because beef cattle and sheep were not included. If they had been included, I think hogs could have been kept in.
Mr. PEEK. It is on page 6, Senator, of this committee print, which is the only one I have, title II, section 8(2) of the old bill.
Senator WHEELER. Mr. Peek, why do you think that will make it work with hogs? I don't know, I would like to have your opinion.
Mr. PEEK. Well, I will give you a particular example. I have been told by some of the packers that with a little assistance from the Government they could export a considerable quantity of lard right now and some other meat products. It would involve some exchange of commodities contemplated by agreements with other nations. For instance, one case in point was Russia. I have been told that Russia would take a very considerable quantity of our fats and textiles, if we could take something in payment.
Senator NORRIS. What would we have to take ?
Mr. PEEK. We do take manganese and probably some wood pulp, which we now import from Canada, and I think the Empire agreement possibly would make it to our advantage, for a while at least, to take some of their imports from some other place.
Senator NORRIS. Mr. Peek, in order to bring about such an agreement, which I concede would be a very desirable thing, is it necessary in order to do that that we retain hogs and lard, that we retain hogs and put in lard as two of the basic agricultural commodities in this bill? Why couldn't they do that anyway just as well without this legislation as with it?
Mr. PEEK. I think there are other things in connection with the agreement, Senator, besides that. I think there are practices in connection with the agreements and licensing sections, there are practices within the industry of buying and selling, which serve to demoralize the whole market situation, which could be corrected by the agreement section between the Government, producers, and processors.
Senator NORRIS. I don't get the idea yet; I am not saying it isn't true, but I can't get it through my head some way or other that in order to carry out that kind of agreement with Russia we will say, for illustration, that it is necessary that we should put the product that we desire to export in this bill here. I don't see why they can't do that anyway without this legislation.
Mr. PEEK. I said awhile ago, so far as hogs are concerned, that is almost peculiarly a situation within the country where exports have very little bearing on the situation. Hogs are one of the essential things and the grain and livestock sections have been the most desperately affected of any of our farming areas over the period of the last 12 years. I think it would be fatal to the whole Middle West section of the country economically to leave them out, and politically I think it would be worse than that.
Senator NORRIS. I am not worried so much about the political question but I am about the other question. I am seeking for light. I would like to put them out unless they are necessary, because I don't want to enlarge this program any more than is necessary, and I don't yet understand, excepting your opinion, which I value very highly, that it is necessary to put them in. I wish you would make it plain to my dense brain, if you can, why they should be kept in, in order that we could carry out, for instance, the very kind of deal you mention.
Mr. PEEK. I tried to refer to that a while ago; perhaps I didn't make myself clear. In the first place, when I say " politically" I speak of it in the broadest sense, and when the things are going on that are now going on throughout the country in respect to interference with normal processes of law, which threaten the very structure of our Government itself, I think that we are all vitally concerned with the political consequences. Referring now to the particular agreements, I referred to the practices which are ocurring by reason of large buyers using their power to buy, to break down the whole structure of prices with the people who have to sell. That is true not only of the particular commodities named in this bill but I think that is true largely in the coal industry.
Senator NORRIS. I agree with you. Mr. PEEK. So I say within the limitations of fair prices to the consumer, if we can straighten the back of the industry so that they can correct these bad practices themselves through the control of the licensing system, we will have gone a long way to remedy that thing.
Senator WHEELER. There is only one way you can remedy it, and that is the licensing system?
Mr. PEEK. Yes. Then by imposing the tax so they must pay a fair price, you will get some kind of agreement between them and Government which will correct the difficulty.
Senator Norris. I still don't see how that affects our ability to ship our products to foreign markets.
Nr. PEEK. I said that is another angle of the situation. That is a second point. There are two unrelated points.
Senator BANKHEAD. I want to ask a question on that point, Senator. The corn crop is a very large crop, isn't it?
Mr. PEEK. Yes, sir.
Senator BANKHEAD. What proportion of that is processed on which a processing tax could be collected ?
Mr. PEEK. Not over 85 percent leaves the county.
Senator BANKHEAD. How much of the total crop; 10 percent or 15 percent ? Mr. PEEK. Yes; not over 15.
Senator BANKHEAD. Out of that small proportion of corn by itself you couldn't collect enough process tax to aid the corn grower, could you?
Mr. PEEK. The Board of Trade people have made the statement frequently that 25 million bushels of corn over and above what the market normally takes breaks down the price of the whole product.