some to the farmer then the suggestion made by Mr. Brenckman and Mr. Gray would be excellent, and I would very much like to have this organization become self-sustaining. It has been mantioned that such an organization does serve the public and heretofore the Government has provided large sums for relief of flood and drought victims, and victims of all sorts of natural hazards resulting in damage. Senator MCGILL. That gives the reason for it but the thought I had in mind is that when you start into appropriating money to pay expenses, it is a rather difficult thing to stop. Senator POPE. I agree that is true of any appropriation you make, bureaus or boards or anything. It is not so hard to start but it is. tremendously difficult to ever stop one. Mr. BRENCKMAN. Exactly. I am pleased with that feature of the bill that deals with the percentage of the crop to be insured. Manifestly it would not do to insure a crop on a 100-percent basis. That would mean there would have to be an adjustment every year with every farmer insured and make the cost prohibitive. It could not be compared with fire insurance. Assume there is a company with 10,000 members and there are 10 fires in a year, and there are 10 adjustments naturally, and it is a very simple matter. But if you were to insure a crop to the extent of 100 percent and had 10,000 members you would have to make 10,000 adjustments which would be very very difficult to do. Senator POPE. Mr. Brenckman, my thought was the Government should insure against unusual and extraordinary hazards, and so in the bill which I introduced last year, which is a skeleton of a plan, extraordinary and unusual hazards are insured against. For instance, this year your crop might be a little less, due to cold weather or a little too much rain or drought. Those are ordinary hazards and the farmer ought to assume them. That is one of the hazards of his business. Mr. BRENCKMAN. Yes. Senator POPE. Therefore, I used those terms extraordinary and unusual hazards. Now, by limiting the coverage to 75 percent, these ordinary hazards due to his own inefficiency as a farmer or due to ordinary cold weather or ordinary dry weather and do not cause a large loss, this percentage coverage idea would take care of that. Mr. BRENCKMAN. Yes; and that would be about as high as it would be safe to go and would greatly lessen the work of administering the act. Knowing that there was likely to be legislation on this subject at this session of Congress, Mr. Chairman, I invited Dr. John Lee Coulter, formerly president of the North Dakota Agricultural College, and more recently a member of the United States Tariff Commission, to make a radio address. Dr. Coulter is himself a practical farmer and has given a lot of thought to this question, not only studying crop insurance in this country but has been quite an extensive traveler and has studied the systems of crop insurance set up over the world. His opinion is therefore valuable, and with your permission I would like to place in the record a copy of his address which is very informative. Senator POPE. Yes; we will make that part of the record. (The paper referred to appears at the conclusion of this day's proceedings.) Senator POPE. Are there any other questions? There seems to be none. Thank you very much, Mr. Brenckman. Your suggestions have been very helpful. Mr. BRENCKMAN. I thank you for the opportunity of appearing here. Senator POPE. Do you know whether Mr. Taber will be here soon? Mr. BRENCKMAN. He will soon be here and if these hearings are in progress he will be glad to come and give you his own views on the subject, but what I have given you is substantially in accord with the action of the National Grange and meets with the approval of Mr. Taber. Senator POPE. Thank you very much. Now, is Mr. Hood here? Senator MCGILL. No; he has not arrived. Is there anyone here representing a farm organization that desires briefly to express himself?" We assigned this hearing today for representatives of the farm organizations. I think he will adjourn if it is agreeable with the other members of the committee for an indefinite time for the reason we are in negotiation with representatives of insurance companies that have had experience with some form of crop insurance. Senator MCGILL. Mr. Chairman, before you do that, this party down here with the Farm Credit Administration who was mentioned by Mr. Brenckman may be available. Senator POPE. Yes. Senator MCGILL. It would seem to me it would be well to get him before the committee. Senator POPE. Yes, sir. Senator MCGILL. And see what he has to say and what information he can give us. Senator POPE. I will get in touch with him and find out when it would suit his convenience to appear as well as our own, and we are very anxious to have him. I notice his testimony in the 1923 hearings, and I also noted that he had considerable information there as to the subject, and I think it would be very helpful to hear from him. Senator MCGILL. I would like to get these hearings along as rapidly as we could in order to get through before the 10th of March. I know that there are going to be other hearings start with another committee at that time and I will have to attend. Senator POPE. The 10th of March? Senator MCGILL. Yes. I am inclined to think they are going to be important. Senator POPE. Yes; Senator Frazier has a committee hearing and I think he will want to use this room for the hearings. Senator MCGILL. I think it might be possible to hear this man at the Farm Credit Monday. Do you suppose we could hear him Monday? Senator POPE. I will try to get in touch with him and if we can hear him Monday I will let the members of the committee know and we will hear him at 10 o'clock Monday morning. I believe there are one or two others who have very brief statements to make that we will hear Monday morning. I could attend next week's hearings of the committee at any time and it may be representatives of these insurance companies could also appear during the coming week; but I had agreed with Mr. Thatcher that his committee members who were scattered out over the country might appear on the 8th. That is a week from Monday. Well, if agreeable, we will now recess at the call of the chairman and I will undertake to get Mr. Valgren for Monday morning. (The address of Dr. John Lee Coulter referred to by Mr. Brenckman appears as follows:) PROBLEMS RELATING TO CROP INSURANCE Address by JOHN LEE COULTER Farmers and members of farmers' families, like other citizens especially in the United States, are large buyers of life insurance. Great numbers of owners of farm buildings, like owners of nonfarm buildings, buy all sorts of protection, such as fire, wind, tornado, and other forms of insurance. Frequently this covers the contents of the buildings, such as furniture in the homes, grain, hay, and other feed materials in the barns, etc. Farmers to a very large extent carry insurance on livestock, especially horses, mules, and cattle, and especially against death from fire, lightning, diseases, etc. INSURANCE THROUGH DIVERSIFICATION To a degree generally not realized, large numbers of substantial farmers carry a form of insurance which does not call for the payment of annual premiums to insurance companies. This is the form of insurance carried by the operator of the family-type farm where well organized, diversified agriculture is the rule. Here the farmer provides for a substantial part of the food supply for the family, such as vegetables, fruits, poultry products, dairy products, meats, etc., so that if cash crops are unusually damaged or prices are unusually depressed the family none the less is able to carry on confortably until better conditions prevail. This form of farm insurance is even more distinctive than might be indicated by what I have just said, because it is well known that the same type of insect pest and plant disease seldom attacks a number of diversified crops. Perhaps the corn borer passes by the potato field. The black-stem rust of wheat passes by the corn field. Smut, wilt, scab, etc., attack special crops at special times in special areas. Root rots and other root diseases and insect enemies, likewise, have their special tastes. And so on and on. But it is not only that different crops and livestock are attacked by different insects and diseases. They have different times for planting and for harvesting and different periods for maturity. Certain types of barley may mature in 45 days; certain types of oats in 60 days; certain types of wheat in 90 days; certain types of corn in 120 days; etc., etc. Thus hot winds, excessive or deficient moisture, and other climatic factors may affect one item in the farmer's program without destroying all of his cash or feed crops. In other words, a late frost in the spring or an early frost in the fall may catch one crop but do no injury to the others. Hail at a given season may damage one crop beyond recovery but another crop in the adjoining field may entirely recover. INSURANCE THROUGH RESERVES But there is still another form of farm insurance largely carried by great numbers of the more responsible and successful farmers of the country. This insurance takes the form of providing a nest egg for a rainy day. During a year of large yields or exceptional prices, the farmer may either pay off mortgages or if he has none of these may store some of the nonperishable crops, like wheat, either on the farm or in elevators, or he may sell and maintain savings accounts, or perhaps in some cases even purchase bonds or other dependable securities. Ordinarily such farmers take advantage of these good years to extensively rehabilitate fences, buildings, machinery, etc. CROP INSURANCE But I would not want to give the impression that all of the six or seven million farmers in the United States are adequately covered by insurance. I recall 35 years ago, in 1901, I was a college student studying agricultural problems and especially the economic phases of agriculture. In that year there was a great drought in the Corn Belt which reminds me of the drought in 1934 and 1936. At that time we had no organized crop reporting service or political campaign in progress, but the press recited that it was the worst drought in 20 years and reference was made to the drought of 1881. It is interesting to note that in the period of 50 years (from 1866 to 1916) the yield of corn had fallen below 20 bushels per acre on only two occasions (1881 and 1901), and went above 30 bushels in only two years (1905 and 1906). For a period of 10 years, beginning in 1901, I undertook to investigate the statistics or mathematics and actuarial features of crop insurance and not only talked about it and wrote about it but conducted classes in agricultural colleges dealing with the subject. During that period much was said about the 7 good years and the 7 bad years in Egypt and the plans made by Joseph for everready granaries. During these studies I spent years at the agricultural colleges and universities of Iowa, Wisconsin, Minnesota, and North Dakota, where the subject was most prominently discussed. One of my students at Minnesota in 1910 went so far as to write a con prehensive college thesis on the subject and that great United States Secretary of Agriculture, “Tan a Jim" Wilson of Iowa, thought so highly of the thesis and of the young man who wrote it and of the possibilities of crop insurance that he ordered the establishment of a crop-insurance office in the Department of Agriculture. All crop estimators and crop reporters throughout the United States were instructed to organize and com pile data pertaining to the possibilities of crop insurance. THEODORE ROOSEVELT INTERESTED IN SUBJECT As an aside it should be mentioned here that this subject was very much in the mind of President Theodore Roosevelt at the time of his appointment of the Rural Life Commission, and the idea was given serious consideration by President Taft. When President Wilson came to the White House he requested the newly selected Secretary of the Department of Agriculture (Hon. David Franklin Houston, now president of one of the Nation's greatest insurance comanies) to pursue the studies. This was done year after year and at the close of the World War con prehensive results covering a 10-year period were prepared. In order to illustrate the extent of this study, it is important to note that the investigation was carried on in every State in the United States and pertained to deficient moisture, excessive moisture, floods, frost, hail, hot winds, storms, other climatic factors (such as winter killing of grain) and also included plant diseases, insect pests, animal pests and other causes for loss of crops, such as defective seed, etc. For each year for 10 years each of these factors was carefully checked and studied for each State for a long list of crops, including not only grains and seeds but such special crops as potatoes, tobacco, cotton, hay, etc. During this period every effort was made to lay a definite actuarial foundation upon which crop insurance policies might be based. It is interesting to know that a number of crop insurance companies were formed and a number of other large insurance companies established divisions of crop insurance and great numbers of crop insurance policies were written. A number of farm bulletins were written upon the subject, two of the most interesting of which were United States Department of Agriculture Bulletin No. 912, which covered the subject of hail insurance and United States Department of Agriculture Bulletin No. 1043, published in 1922, pertaining to crop insurance, risks, losses, and principles of protection. President Harding and President Coolidge kept up the investigations after the ground work had been laid by Presidents Theodore Roosevelt, Taft, and Wilson, and the basic studies were continued under President Hoover. The truth of the matter is these investigations have continued down to the present time and a tremendous volume of data is available for those who would seriously go into the subject at this time. It is not to be presumed that this form of crop insurance was introduced and then abandoned. The truth of the matter is crop insurance, covering several types of policies, is in use to some extent at the present time. NORTH DAKOTA FURNISHES HAIL INSURANCE A number of States actively took up a study of crop insurance under State governmental auspices. Reference may be made especially to such States as North Dakota, South Dakota, Nebraska, and Montana. The North Dakota State Hail Insurance Department was created about 20 years ago. The seventeenth consecutive annual report of that department covering business for the season 1935 came to my attention a few days ago. The report indicates that the total risks written in 1935 by this State crop insurance department was almost $35,000,000 and the premiums paid amounted to about $3,000,000. More than one-half of the farmers of North Dakota applied for and secured policies during 1935. Losses paid amounted to nearly $3,000,000 and on January 1, 1936, the department had a surplus fund of about $3,000,000. This leads me to a d'scussion of one or two details which deserve special consideration. When the North Dakota law was first passed it provided for compulsory crop insurance. In other words, every farmer in the State was provided with insurance whether he wanted it or not. Furthermore, the insurance premium was collected from him along with and as a part of his taxes by the regular tax collectors in each county in the State. Farms could be sold for failure to pay premiums. After a few years of experience, the people of North Dakota decided that the compulsory feature was not characteristic of the people of the United States and the law was changed to make the insurance voluntary. It is, however, of great interest to note that in 1935 after nearly 20 years of experience considerably more than half of the farmers in the State applied for insurance and paid their premiums and those who suffered damage got paid for their losses. Another rather interesting feature of the North Dakota law was the fact that in the beginning a flat rate per acre was imposed throughout the State as a premium against loss from hail. After a few years had passed a study of actual experiences showed that hail was very much more prevalent in some sections than in others and much more damage was done in some sections than in others. After prolonged discussion the State system was again changed and now the State is divided into zones according to the prevalence of hail and the premiums differ according to the section of the State in question. Time does not permit an extensive discussion of the whole question of farm insurance. It only permits me to direct attention to the fact that at least since the beginning of this century the subject has been extensively and thoughtfully studied by large numbers of farmers and farm leaders and students of farm economics It is important to note also that there is a large body of experience upon which to be drawn so that many of the mistakes made in the earlier years need not be repeated if the subject is further developed as a result of the recurrent discussion at the present time. It should be noted that the question of percentage of coverage-i. e., whether 60 percent, 75 percent, or 80 percent of a long-time average crop-is one that has been extensively investigated. For the United States corn yield has fallen below 20 bushels four times and exceed 30 bushels four times, during the last 70 years. But on individual farms it has run all the way from zero to 70 bushels, over and over again for a hundred reasons. Whether premium should be paid in money or product—and whether only in good years is also a subject long studied. Whether payment of losses should be in money or product has likewise been studied. It is interesting to know that in agriculture great numbers of farms are bought and sold on the basis of a share of the cash crop for a given number of years; and perhaps on 2,000,000 tenant farms the rent is paid, not in cash, but in the form of a share of the crop. STEERING CLEAR OF COMPLICATIONS Whether the present interest in farm insurance is due to recent world-wide price disturbances, or to the extent and character of recent droughts, or to the fact that these two situations have happened concurrently with a great political campaign, it will be important that students of the subject do not allow themselves to confuse world-wide price fluctuations or extraordinary drought years or political expediency with so important a subject as farm-crop insurance. For a number of years farm leaders and a number of States have been studying the question of the ever-ready granary, especially from the standpoint of farm storage, local elevators, and terminal warehouses. A number of State legislatures have passed necessary laws and in a number of States farmers may now store their grain on their farms or at local elevators, or terminal warehouses 113719-37-8 |