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PROVIDING FOR THE DISPOSITION OF CERTAIN COTTON

HELD BY THE UNITED STATES

THURSDAY, FEBRUARY 6, 1936.

UNITED STATES SENATE,

COMMITTEE ON AGRICULTURE AND FORESTRY,

Washington, D. C.

The committee met, pursuant to call, in the committee room, 324 Senate Office Building, at 10 a. m., Hon. Ellison D. Smith (chairman) presiding.

The committee had under consideration Senate Joint Resolution 205, which is as follows:

[S. J. Res. 205, 74th Cong., 2d sess.]

JOINT RESOLUTION Providing for the disposition of certain cotton held by the United States

Whereas the amount of cotton with respect to which loans or advances have heretofore been made by the various agencies and instrumentalities of the United States is approximately six million bales; and

Whereas there is considerable uncertainty as to when or in what amounts such cotton will be disposed of; and

Whereas such uncertainty and the large volume of cotton involved are deterrents to the normal action of the market for cotton: Therefore be it

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That notwithstanding any other provision of law, all cotton held or acquired by the Secretary of Agriculture, the Commodity Credit Corporation, or any other governmental agency or instrumentality, as collateral security for loans or advances made with respect to such cotton shall be merged and transferred to the jurisdiction of a board composed of three members to be appointed by the President, by and with the advice and consent of the Senate, which shall dispose of such cotton as hereinafter provided; but before such transfer is made, (1) any cotton remaining in the Cotton Producers' Pool, both spots and futures, shall be taken over and paid for by the Government on the same terms as the cotton with respect to which what is known as the 1934 12-cent cotton loan was made, and (2) the accounts of the Cotton Producers' Pool certificate holders shall be readjusted, and settlement shall be made with them as their interests may appear, on the same basis as in the case of producers who obtained the 1934 12-cent cotton loans. In the case of any such certificate holders with whom settlement has heretofore been made, readjustments shall be made with them; on the same basis as in the case of other certificate holders in the Cotton Producers' Pool. The members of the board so appointed shall be persons qualified by reason of their knowledge and experience in connection with the production and marketing of cotton properly to represent the interests of the United States and the persons from whom the cotton to be disposed of has been acquired. Each member of the board shall receive a salary at the rate of $ per annum.

SEC. 2. The board appointed pursuant to section 1 shall, after advertisement and submission of bids under rules and regulations to be prescribed by the board, sell not more than twenty-five thousand bales nor less than twenty thousand bales of such cotton each week, and all such sales shall be made to not less than five separate and distinct highest qualified bidders, no one of whom shall enjoy over 20 per centum of the sales allotment and no one of whom shall have agencies or instrumentalities bidding for them: Provided, however,

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That during any week in the month of September, October, or November, these being the months in which the largest amount of the new crop is moving to market, the board may sell less than the amount specified under this Act in order not to compete with or obstruct the movement of the new crop, but no sale of less than the amount so specified shall be made in any month other than September, October, or November. At the beginning of each week the board shall give public notice of the number of bales of cotton to be sold (including cotton futures) and the places where the sales are to be held, and shall provide that samples of the grade and staple of the cotton to be sold shall be displayed for the convenience of prospective purchasers. All such sales shall be held as near as practicable to the warehouse where the cotton to be disposed of is stored. At the end of each week, the board shall make public the amount of cotton so sold, the names of the highest bidders, the names of others who have submitted bids, and the prices bid for such cotton. SEC. 3. All proceeds derived from the sale by the board of any such cotton shall be covered into the Treasury and separately accounted for, and any profits derived from such sales shall be distributed pro rata at the end of each fiscal year among the original owners of such cotton and certificate holders according to the grade and staple of the cotton acquired from them by the United States; but no such distribution shall be made until the full amount of principal and interest of the loans or advances made to such owners by any department or agency of the United States has been deducted, together with the amount of any expenses (including, but not limited to, warehouse charges, insurance, salaries, interest, cost, commissions) and other charges incident to carrying, handling, insuring, and marketing of the cotton so sold.

SEC. 4. Whenever any cotton futures are offered for sale by the board, if the market for such futures is substantially lower than the current price for spot cotton, the board is authorized and directed to take delivery of the cotton under the contract for future delivery.

The CHAIRMAN. The committee will come to order. We have asked Mr. Johnston, who has had charge of the producer pool of cotton, to make a statement in reference to the joint resolution that we have introduced, and to point out what his observations are. We have also asked Mr. Wiley, who is at the head of those who investigated the cotton situation, to be present.

Mr. Johnston, will you please make your statement now?

STATEMENT OF OSCAR JOHNSTON, MANAGER OF THE 1933 COTTON PRODUCERS' POOL

Mr. JOHNSTON. Mr. Chairman and gentlemen, my name is Oscar Johnston; residence, Washington, D. C.; official connection, manager of the 1933 Cotton Producers' Pool under the jurisdiction and direction of the Secretary of Agriculture, and first vice president of Commodity Credit Corporation, a Federal agency which was adopted by the Government in an amendment to the R. F. C. Act in 1935, and which functions under the direct jurisdiction of the Reconstruction Finance Corporation; appearing at the invitation of the chairman of this committee to discuss Senate Joint Resolution 205.

In discussing this measure, I trust, gentlemen, you will understand that I am going to make an effort to be just as helpful and as constructive in the criticisms as I can, consistent with my views regarding the principles and the fundamentals of the joint resolution, which I also discuss based on an experience of a good many years handling cotton, and particularly an experience beginning with June 1, 1933, with the Department of Agriculture, and beginning early in July 1933, of handling the cotton which is now held in what is known as the 1933 Cotton Producers' Pool.

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