« PreviousContinue »
significant thing about this is that all through these years the more highly organized industries processing the products of the farm have had a level of prices for the raw products which is below the level of the unprocessed ones, of the unprocessed farm products; that is to say, that butter, which is processed, of course, but not in the highly organized states that flour is, or wheat, not by such highly organized industries-chickens, eggs, potatoes, apples, have all been at a constantly higher level of price relatively with what the farmer had to buy than have the products of these highly organized industries.
Senator SHIPSTEAD. Yes; including pork.
Mr. PEEK. Meaning particularly livestock and grain. Now, there is another thing that has appeared—and I think I can agree with Senator Kendrick on this. A few years ago, it was the usual thing for the packers particularly, and other processors more generally, to finance their business largely through the sale of commercial paper to banks throughout the country. I know I could not go into a country bank anywhere that I did not find Armour or Swift paper, particularly, and the country banks were taught to believe it was their duty to help process the raw products which they were shipping out of their communities. In the last dozen years most of those country banks have disappeared. These highly organized industries have not had that source of credit open to them. The financing has had to be done through other channels and to a considerable extent through the big financial institutions which are in the limelight under another committee today.
I think that whenever these processors have been told that they must reduce the amount of money required to conduct their business, the natural result has been to depress the price of the things that they buy.
Senator KENDRICK. If I may interrupt you there—undoubtedly, the more important thing is the price at which they can sell and the volume they can sell.
Mr. PEEK. Well, Senator, we have 12 or 14 million unemployed and we have perhaps two thirds of our people who could afford to pay a fair price, probably more, and because we have a limited number who are unable to pay a reasonble price, I think is no reason for taking the farmer's products away from him or permitting them to be taken away from him for less than they are fairly worth.
Senator THOMAS. Mr. Peek, do you understand that this bill from the broad conception is intended to raise the general level of farm commodity prices to more nearly enable them to be on a parity with the manufactured prices ?
Mr. PEEK. Yes.
Senator THOMAS. Will you tell the committee how much money it will take, in round figures, to accomplish that purpose ?
Mr. PEEK. I think no one can tell the committee that, Senator, for this reason: I believe that upon the announcement of the passage of this bill by Congress and the determination of the administration to stand behind the farming industry of this country, the prices paid to the farmers will increase.
Senator THOMAS. Nevertheless, that will cost something. The Secretary told us the other day that he thought it might take $800,000,000. Do you share in that opinion?
Mr. PEEK. I have seen figures presented by the packing industry showing that it will amount to that for livestock alone.
Senator THOMAS. The other question I want to follow up with is this: Whatever it takes, whether it is $100,000,000 or $800,000,000, or a billion, who is to pay that sum, whatever it may be ?
Mr. PEEK. I think that some of 'it can be squeezed out in the distributive system so that it need not be passed on to the consumer. And to demonstrate what I mean, I will say that before the war, wheat was selling at over 90 cents a bushel in Kansas City, and bread was selling at less than it is today when wheat is less than half that price in Kansas City.
Senator THOMAS. If the farmers collectively get whatever sum this is, $500,000,000 or $800,000,000, of course some one must pay it, and they must pay more then than they are paying now. Do you see any other way, eventually, for that sum to be raised save through the consumers of farm products?
Mr. PEEK. Yes; I see things that can be done in the channels of distribution. I think we have a wasteful system of distribution as compared with foreign countries. For instance, in France, Germany, and Italy, even in England at present, the foreign producers are getting a dollar a bushel or more, and have been, with the exception of England, for several years, more than our farmers are getting for their wheat, and bread is selling at less than it is here, so there is something inherent in our distributive system here which is consuming, which is taking a larger toll from the producers and/or the consumers than it does in those countries.
Senator THOMAS. Does this bill, in your opinion, grant sufficiently broad powers to enable the Secretary and his colaborers to adjust that feature of this matter?
Mr. PEEK. I think it will go a long ways, Senator. I do not think it will do it all. It does not cover railroad transportation, and some of these other items.
Senator BONE. Mr. Peek, what do you consider some of the most prominent factors of waste in our distribution system, and if you enumerate them, or part of them, how do you think they might be corrected under this bill? How are we going to get at excessive freight rates and other factors that enter into the selling price of a commodity ?
Mr. PEEK. I think, Senator, you are not going to get at the excessive freight rates under this bill, except as the influence, as the result of the administration of this bill is brought to bear on the freight-rate structure. I think that there are elements of waste in distribution, and I have referred to them 2 or 3 times, in the practices of buyers and sellers both, which results in an unreasonably low price to the producer of the commodity.
Senator BONE. What language is in this bill, or what mechanism is set up that would enable the Secretary of Agriculture to get at any of those unhappy practices?
Mr. PEEK. Both the agreement section and the licensing section.
Senator SHIPSTEAD. The licensing section would give control of the distributing system, in your opinion?
Senator BONE. Do you think the powers are broad enough to give the Secretary of Agriculture power to require these men to remove men from their payrolls to cut operating costs?
Mr. PEEK. No; I do not think that, but I think where there is a very vicious practice going on of a large buyer conducting his business in such a way as to break down the market price to the consumer, that practices of that kind may be eliminated under the · provisions of this bill.
Senator BANKHEAD. I understood you to say that over a long period when the raw materials had passed through the most highly organized handlers, the level of prices had been lower than others that did not pass through highly organized agencies. How do you account for that, Mr. Peek?
Mr. PEEK. I account for it by the practices among the highly organized agencies.
Senator BANKHEAD. In other words, they have been taking the price out of the producer?
Mr. PEEK. I think so.
Senator SHIPSTEAD. Is that due to monopoly control of the market?
The CHAIRMAN. I want to call the committee's attention to the fact that Mr. Simpson has been here for quite a time, and the committee has asked him, at considerable sacrifice to him, to appear.
Senator BANKHEAD. Mr. Chairman, before this witness leaves the stand, there is one thing that I want to get into the record on this discussion of the acreage program, and, if Mr. Peek will give me his attention, I want to ask him just one question.
Mr. Peek, I understood from your testimony that you rather minimized the effect on production as the result of decreased acreage, and you emphasized the effect of changing weather in large part. That is true; but over a period, an average of years, do you attribute it largely or most exclusively to weather conditions ?
Mr. PEEK. Oh, no, Senator; I think I did not make myself clear.
Senator BANKHEAD. Now let me call you attention to a statement on cotton, because you were discussing cotton. In 1915 to 1919, the 5-year period, the average acreage was 34,000,000; the average production was 11,500,000 bales. From 1925 to 1930 the acreage went up to 45,000,000, and during the same period the average production went up to $15,000,000. So, from that statement, would you not say that the acreage has a very large influence over an average period of years on the production?
Mr. PEEK. I will answer your figures by citing some of my own.
Senator BANKHEAD. Jusť from what you know, would you not say that?
Mr. PEEK. No.
Senator BANKHEAD. You think the increase in acreage over an average period of 5 years has nothing to do with the increase in production ? Mr. PEEK. No; I do not think that. Of course,
Of course, I say that productive acreage in well-established productive areas has a great deal to do with the amount produced, but I refer to the fact that in all the cotton States the average per acre in 1930 was 147 pounds, in 1931 it was 201 pounds, and in 1932 it was 162 pounds.
Senator BANKHEAD. That varies by the year, but I am bringing to your attention the fact that over an average period of years you get the same proportionate increase in production that you have for the proportionate increase in acreage.
Mr. PEEK. Well, my observation is that over a period of years, in the case of cotton, that 5 years' production, taking a 5-year period, any 5-year period, has been consumed, that the world takes the cotton over a period of 5 years, but the violent fluctuations in the market occur as the result of market influences.
Senator BANKHEAD. Well, you would not say it had been consumed for the last 5 years, would
Mr. PEEK. I have figures here which
Senator BANKHEAD (interposing). When we have wound up with a surplus now of 13,000,000 bales that has been accumulating every year, increasing every year for 4 or 5 years.
Mr. PEEK. But what did we do? We refused to sell it. The policy adopted by the Farm Board was to withhold the supply and not keep the channels of trade open. The policy of the Farm Board was to withhold cotton, while on the other hand England had a pool of a million bales of cotton which they used to depress our price all the time.
The CHAIRMAN. We cannot control England.
Mr. PEEK. That may be so, but we can control our policy within this country to combat it.
The CHAIRMAN. Certainly; and the point that I want to make is this, and then there are some other questions, and we want to hurry on. I want to ask you if the logic of this bill is not to restrict production to domestic consumption? Now, use as an illustration, we export 50 percent plus of American cotton; we consume nearly 50 percent. Now, if it is profitable to grow cotton for domestic consumption but is unprofitable under present conditions to grow for export, then as you raise the domestic price you encourage curtailment to just produce what we can sell profitably here and produce none for export. Now, that may be all right in an emergency of this kind, but we do not want to give up our export market until such time as these clouds clear away; we do not want to give up our export market, and we want to have such encouragement as to maintain that export market; but every element of this bill is to restrict our production to domestic consumption, because it is under our control, and we therefore, under these artificial methods, can raise the price perhaps to a profitable level for that portion that is sold domestically. That is the logic of it.
Mr. PEEK. Senator, your understanding of it is just exactly the opposite of mine. My understanding of it is that we are going to put the power of Government behind the farmers and the processors of farm products, to the end that we may raise prices to a fair level within the United States and meet world competition without the United States without having the price break down within the United States. I agree with you thoroughly in the case of cotton. I think we have a world monopoly of cotton growth, and it is a source of great national wealth, but I think it is the time of all ages that we should permit the very great resources that we have to destroy us as a nation, and that is what we are doing. We are permitting our ability to grow cotton perhaps as cheaply as any nation in the world under the present marketing system, to permit the marketing of the proportion of the crop used in the United States at the world level of prices, and the system is being encouraged by governmental action. to do that very thing.
The CHAIRMAN. But this condition does not arise from the world prices fixing ours, because we have commodities here of which there is not enough to supply domestic demand, the prices of which are as disastrously low as those that show a surplus.
Mr. PEEK. Senator, I can not agree with that. I would like to know what they are.
The CHAIRMAN. Sweetpotatoes, for one, which formerly brought a dollar a bushel, and now they are 10 cents a bushel, and you can not give them away, hardly.
Senator WHEELER. Let me interrupt you. Of course, if the two large basic commodities, such as wheat and cotton, are depressed and there is no purchasing power in the people that produce those great basic commodities, it is bound to bring down every other commodity, whether it has a tariff or whether it has not, or whether we produce a surplus or whether we do not produce a surplus.
Mr. PEEK. But not to the same degree.
Senator WHEELER. No; not to the same degree; but if you do not have the purchasing power in the people that purchase the great basic commodities of cotton, wheat, and corn, there cannot be anything else happen excepting that all other commodities, whether we produce more than we consume or otherwise, but what has got to come down to some extent, and that is evidenced by the absolute collapse that has taken place in every industry in the United States.
Mr. PEEK. Now, add to that condition the fact that on the two commodities you mentioned the prices we receive generally for the products are the world's level of prices and the price that the farmer pays for what he buys is a protected-level price.
The CHAIRMAN. Now, you take the article of eggs. We import vast quantities of eggs from China, and yet eggs went down to where they were hardly worth gathering and selling.
Senator WHEELER. That is because of the fact, as I pointed out awhile ago, that at the present time the currency of China is depreciated something over 50 percent, and the reason why you are buying some manufactured goods at such a low price, notwithstanding the fact that you have a tariff on them, is because of the depreciated currencies of these countries; and why in the name of goodness the Congress of the United States cannot see that situation and try to remedy it is beyond me.
Senator THOMAS. Let me ask this question, Mr. Peek. Immediately before the bank holiday, and immediately after, the Government placed in theoretical circulation in the banks of the country more than $1,000,000,000 of new money. During that time commodities of all kinds, including real estate properties and stocks, went up substantially; wheat went up, say, 7 cents a bushel, other things in proportion. Then all at once the process turned, and last week, the second week ago, the Government took out of circulation $269,000,000, and on yesterday, the second week, the Government took out of circulation $638,000,000. So in 2 weeks' time the Federal Reserve System, or the Government, has taken from circulation $907,000,000 and during the time that money was taken from circulation, commodities went right back down again. Do you associate the putting of money into circulation, making it more plentiful and cheaper, with rising prices; and conversely, the taking of money from circu