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Senator POPE. Mr. Shields, in your examination of the legal aspects of this matter, would you say it might be well to change the language.

Come over here where the reporter can hear you better.
What would be your conclusion on that point?

Mr. SHIELDS. I think the legal principle involved in the consideration of that language is as stated by the Senator, but I would call attention to the fact that the sentence to which you have been referring is followed by another sentence which says that

Such insurance shall not cover losses due to the neglect or malfeasance of the producer.

Reading those two sentences together, I think it gives you a better construction than merely reading the first sentence. Reading both sentences together indicates that the insurance is to be against hazards and risks of the kinds specifically designated and others like those. On the other hand, you couldn't go so far as to insure against things which are the result of the neglect and malfeasance of the producer.

Senator McGill (interposing). Well, now, that second sentence merely provides that if those losses due to the things specified is caused by neglect or malfeasance of the producer, he cannot recover. That is all that does. Mr. SHIELDS. Yes.

Senator McGill. And therefore I cannot see how it changes the general rule of construction.

Mr. SHIELDS. Well, I think this might be an example. Take insect infestation. · Senator McGill. Yes; he could not go out and put grasshopper eggs in a wheat field and recover.

Mr. SHIELDS. In one sense insect infestation might occur despite what anyone would do, and on the other hand as you pointed out a farmer might deliberately cause it.

Senator MCGILL. I do not want to be too precise, but I am fearful you can not change that construction.'

Senator Pops. The interpretation of Senator McGill is “such other causes as may be determined by the board” is the same as if the word “similar” was actually written into that clause.

Would that be your interpretation that the other causes must be similar to insect infestation, drought, hail, wind, flood or drought, and so forth?

Mr. SHIELDS. I think that is substantially correct.

Senator Pops. Then you could not include damage by rodents and ground squirrels, in your opinion?

Mr. SHIELDS. I do not think it is a legal question, but to my mind rodent infestation would be of the same nature as insect infestation.

Senator MCGILL. There would be some similarity, but I would think in order to be sure, Senator, if you would wish to cover that, you ought to just say it in the bill.

Mr. SHIELDS. I think it would be desirable to state as many specific things as you want to cover.

Senator MCGILL. It might be very questionable.

Senator Pope. At one time we had in the bill animal infestation and then we got into the difficulty of determining what we meant by animals. Animals might mean ground squirrels, might be cattle or horses or any other kind of animals, so in the final draft we left that out.

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Mr. SHIELDS. We took that out, Senator, as I recall it, because our experts said there was no such-

Senator McGILL (interposing). A rodent, would that word include squirrels, ground squirrels, and moles?

Senator FRAZIER. And mice?
Senator McGILL. And mice, and all that?

Senator Pope. I think that is true. I found no objection myself to including that.

Senator McGILL. The insect is hardly a rodent. Mr. GRAY. May I observe right here, Mr. Chairman, when these suggestions of the American Farm Bureau Federation were made they were not in the form that I am presenting. The thought then was that crop insurance would not start on a single crop, but on a number of crops, so our explanation of what damages might result from was not confined to wheat alone. We had in mind orchards and other crops which become susceptible to damage by reason of the fact that rodents cut off the roots.

I don't know what the possibilities are for the rodent damage to the crop we are now thinking about, wheat. It may be negligible for that crop, but if we revert to the original idea the Farm Bureau first started with, of including all crops, then undoubtedly rodents and predatory animals should come into that picture.

I am perfectly willing to leave this up to you gentlemen in the western areas as to how much possible damage there might be from rodents and predators to wheat. We may not be able to confine this to wheat because we are running against a legislative situation, as has already been pointed out by Senator McGill.

Senator MCGILL. We met that situation once before since I have been here. We started with a bill to make it applicable to wheat or cotton, but you cannot tell what one House or the other may do to a bill.

Senator POPE. I am in favor of including damage by rodents, but I had thought under this general provision we have referred to that the board would have the right to include that because it is similar enough to insect infestation.

If there is any doubt, I would like to have it included. You might have damage below 75 percent caused by a drought and other causes that would bring the total below the coverage. I think that ought to be included.

Senator FRAZIER. Sometimes rodents do a great deal of damage to wheat crops, and I have seen fields ruined by wild ducks.

Senator MCGILL. That has not happened in my State. You must have all the ducks.

Senator POPE. When the subcommittee considers the matter of amendments, that can be discussed. I think there is no difference in opinion.

Mr. GRAY (reading on):

The plan must be on a mutual cooperative basis with financial structure, credits, and so forth, under the control of the assured.

We have a quarrel, may I so state it, with the Farm Credit Administration, and prior to that with the old Federal Farm Loan Board, which extends through 15 years, because the supposed cooperative aspect of the Farm Loan Agency, and more recently in the Credit Association, are not allowed to function. That is, the farmer bor

rower theoretically controls the mechanism when as a matter of fact he has very little control. So when the Farm Bureau began studies of crop insurance, realizing the Federal Government would have some hand in it, we included a very significant statement that it must be on a mutual or cooperative basis, must be on a voluntary basis and as much as possible be under the control of those who are insured.

Now, there is a section in your bill, Senator Pope, that touches upon that somewhat indirectly. It recommends associations of producers and committees to be appointed, which, as under triple A and under the Soil Conservation Act, in theory tells the farmers they are recommending and somewhat dictating or directing the administration of these laws. But I would suggest, to carry this thought further that either in the section to which I am referring or in another section more definite recognition and more definite integration be given to the Capper-Volstead type of organization.

There are few producers better organized than the wheat group. It has a national organization, and in many States there are State cooperatives of one name or another. It seems to us, the cooperative principle must be more definitely recognized than contemplated in your bill. And, may I say in that regard, that efforts are being put forth now, and in the past months, to write drafts of legislation which will carry out the purposes of the conference of February 8 and 9, and all farmer organizations have agreed that Capper-Volstead cooperatives should fit into the legislation being drafted not merely as associations of producers, but that the cooperative principle be definitely recognized in administering the laws.

We have committees of associations under the triple A and under the Soil Act. They are partly, but not wholly, successful because they are Government set-ups and Government appointments. We want the cooperative recognized in this picture as they are recognized in the other fields of insurance, namely, automobile, life, fire, and lightning, and I will make the suggestion that you have your draftsmen put some language in the measure so that the great grain cooperatives will be in the plan of crop insurance and can speak for their members, and will have an important role to perform in the administration of this form of crop insurance.

“The plan should include original capital from the Federal Government, something like the land bank secured, such capital to be amortized in due time,” says the Farm Bureau letter from which extracts are being presented.

It will be remembered when the original Farm Loan Act was passed, $10,000,000 were provided and many millions of dollars have been provided since. So we say in crop insurance the original capital should be appropriated by the Federal Government, which under the bill as drawn is $100,000,000. We further say that capital should be amortized in due time.

I don't know whether amortization is necessary or not. That seems to be the thought evolved in Farm Bureau studies; but it might be well instead of paying back to the Federal Treasury to consider a revolving fund, permanently to be used year after year.

The thought in this would be to avoid the necessity of going back to the Federal Government repeatedly for additional capital stock.

Senator POPE. That was our thought, too, in connection with the appropriation for a hundred million dollars for capital stock that it would not be necessary to go back year after year for money, except for expenses.

Mr. GRAY. The next point: .

The plan must not be a subsidy from the Government with Congress required to appropriate annually enough to pay crop damage, but it must be a selfsupporting plan by premiums paid by the insured.

There have been advocates of Federal crop insurance who were willing, if their statements should be taken at face value, that the Government pay for damaged crops without the payment of premiums.

Senator McGILL. These premiums as provided in your bill must be paid in the commodity?

Senator POPE. Yes; or its cash equivalent.
Senator MCGILL. The premium can be paid by cash?

Senator POPE. Yes. If the farmer wants to sell his wheat and pay in cash he can do that.

You will note in the bill, page 8, it provides, “To fix premiums for such insurance, payable either in wheat or cash equivalent as of the due date thereof” and I take it at the option of the farmer.

Senator McGill, Suppose the farmer pays his premium in cash now and the liability for damage comes later on, and with that cash payment, how could the claim be handled?

Senator POPE. I think that would make no difference.
Senator MCGILL. It might not harmonize.

Senator POPE. The board is under obligation to immediately use the money that is paid to buy wheat and put it in storage so that if he suffered a loss then the indemnity will be paid again in wheat, or if the farmer indicates he wants it in cash the board will sell the wheat and pay in cash. But it is the same operation if premiums were paid or indemnities paid in wheat because it will be translated from wheat into money at the time.

Senator McGill. Do you not think it would be better if the assured had to pay his premiums in the commodity?

Senator POPE. I do not think it makes any difference. In the first. place he might not have the commodity, but may have the money. If he had sold all of his wheat and had none on hand he would have to buy his wheat for the premium, and since the Government can buy wheat

Senator McGill (interposing). He would have to buy right away in order to buy at the price.

Senator Pope. That is a requirement of the bill that when the premium is paid in money or cash equivalent of the wheat, then it is the duty of the board to immediately invest that in wheat at the time and at the price prevailing. Mr. GRAY. The last extract I wish to call attention to is this:

The plan should be administered so far and so long as Federal administration is necessary either by the Farm Credit Administration or the United States Department of Agriculture in order that it fit into whatever farm laws are operating.

The bill pending provides the administration shall be in the Department of Agriculture through a corporation which will give greater fluidity and elasticity than administration through the Department.

We have a great number of corporations in recent years acting for the Government. They can act with expedition, they can administer whatever duty is laid upon them, they can meet a situation as it

of Agriculticity than aof corporationdition,

changes under corporate form quicker than an entire department can meet those varying and changing conditions.

So, it would appear to us, without intending on my part to be definitely final in this, but judging by the approval we have given to Government corporations and the benefits we have gotten from them, that the corporate form in the Department would be the proper method of administering this crop-insurance plan so long as it may be necessary for the Government to administer it.

Senator McGILL. That should be under the supervision of the Department of Agriculture.

Mr. GRAY. Absolutely. . Senator McGill. So that whatever the policies and programs of the Department might be they would have to conform to it.

Mr. GRAY. So it will not conflict with but rather integrate into the other services which the Department of Agriculture is performing for agriculture.

The Farm Bureau from many years of study has the hope that this insurance plan for crops will ultimately be taken over by the farmers, run and operated and owned by the farmers, just like lightning, fire, tornado, automobile and life insurance are today.

I do not know whether that is a development too far distant to be visualized at the present time, but the present bill contemplates the Federal Government will stay in this field. At the present we would not oppose the Government having control, nor can we go on record as to whether or not the farmers may get so enthusiastic about crop insurance that they will take it over and run it themselves.

If they do in future years get that strong for it, then the law can be changed and turn it over to them, but that is a possibility in regard to laws in the future. At the present time we are just entering into a field of crop insurance as was said first, cautiously, feeling sure the trials and errors we have experienced in the past have given us at least some hopes upon which to start practically. We cannot be sure we will not have more trial and error in the future before we finally know the answer as to wheat. When we learn more and more about wheat we may cover other crops that are similar to wheat in annual production and storage of products.

It has taken us half a century to come to fire, lightning, tornado, and automobile insurance as farmers operate them today. It might take that long to get crop insurance worked out, but the final thought is we recognize that with Government capital and Government direction, crop insurance may progress more rapidly than the other forms of insurance have progressed, if it does not get completely out of step with farm thought, and some Government activities have gotten out of step.

Senator Pope. Mr. Gray, I think I speak for the committee when I state we very much appreciate your statement and information given us, and the conclusions reached and I think your testimony with that of Mr. O'Neal has been very valuable to the committee.

Now, Mr. Brenckman, if you will give the reporter your full name, we will hear from you.

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