and with proper insurance may borrow on the basis of storage certificates. On the other hand, the National Government under the late Farm Board undertook the development of the ever-ready granary idea on a Nation-wide scale.

Corporations were set up to store the surplus wheat and cotton with results well known to all students of agricultural problems. A series of exceptional crops, large surpluses, and a world-wide price collapse found this country carrying the ever-ready granary or warehouse at the expense of the National Treasury.

After a study of this subject for a period of 35 years, both in this country and in some 25 foreign countries, your speaker today would say that there is a tremendously useful field here and one which merits serious consideration by all of the large agricultural organizations of the Nation. It is of first importance, however, that we do not permit ourselves to complicate the question of individual farm insurance with the question of world-wide or Nation-wide ever-ready granary problems. The types of damage to growing farm products have been extensively studied. Types of insurance policies have been studied and extensively tried out. Some have fallen by the wayside, some are still in use. Storage on farms and in local elevators and terminal warehouses has been studied and is in successful use.

The problems of national warehousing have likewise been extensively studied and actively used not only over a period of years in this country but over a period of many years in many other countries. It is sincerely to be hoped that from all of the experience with all of the problems involved mistakes of the past may be corrected and as the years roll by improvements and advancement may be made. National agricultural organizations such as the Grange, on whose radio hour I speak today, will render great service to their members and the general welfare of the Nation by continued study of this most important subject. It is sincerely to be hoped that useful State and National legislation will be promoted, and especially that we may be able to keep the problem of world-wide price movements, extraordinary droughts, the problem of the annual carry-over of nonperishable crops, and all partisan political discussion out of the picture.

(Whereupon, at 12:05 p. m., the committee adjourned subject to the call of the chairman.)

FEDERAL CROP INSURANCE

MONDAY, MARCH 1, 1937.

UNITED STATES SENATE,

Subcommittee of the Committee on Agriculture and Forestry,

Washington, D. C.

The subcommittee met, pursuant to notice, in the hearing room 324 Senate Office Building, at 10 a. m., Senator James P. Pope presiding. Present also: Senator Schwellenbach and Senator Frazier.

Senator POPE. I think we may proceed, gentlemen. We have here this morning Mr. Valgren, who has very kindly consented to discuss this matter of crop insurance before the committee. As was developed in the testimony Saturday, Mr. Valgren has probably made a deeper study of this subject than any other person, and I know for several years he has been writing articles on the subject, and I have had the pleasure of reading his testimony during the hearings before this committee in 1923, and I think Mr. Valgren can give us some very valuable information and that his opinions of this bill and this plan now before us will be very helpful to the committee. So, Mr. Valgren, if you will come forward, we will be glad to hear you. First, you might give us your full name and the position you now occupy.

STATEMENT OF V. M. VALGREN, PRINCIPAL AGRICULTURAL ECONOMIST, FARM CREDIT ADMINISTRATION

Mr. VALGREN. Mr. Chairman and gentlemen, my name is V. N. Valgren. I am employed by the Farm Credit Administration at the present time with the civil service title of principal agricultural economist.

I was with the Department of Agriculture most of the time from 1915 until 2 years ago, when I transferred to the Farm Credit Administration that is, I was with the Department from 1915 until 1935, except for 3 years that I spent in the employment of an insurance company, the Automobile Insurance Co. of Hartford, Conn. which is a fire insurance company controlled by the Aetna Life.

Senator POPE. You might indicate the nature of your studies of this particular subject matter and the period of time it covered.

Mr. VALGREN. I have been much interested in the question of crop insurance for the farmer practically ever since I came with the Department of Agriculture in 1915. Shortly after 1915, as many of you know, bills began to be introduced from time to time in Congress, either authorizing the setting up of a crop insurance corporation or board, or providing for special studies of the question of crop insurance. Several such bills appeared during the World War, and then, as many of you recall, in 1923, a special committee of the Senate held

a series of hearings on the subject of crop insurance, and in my work in the Department of Agriculture I was impressed with the need of crop insurance on the part of the farmer. It seemed to me that other business interests were in position to obtain insurance, if so desired, against practically every type of risk, and I could see no good reason why the farmer should not be in a position to obtain such insurance covering the risks involved in crop production.

As has been pointed out on many occasions, the first insurance written was essentially against weather hazards, particularly in connection with navigation. Well, the hazards of the farmer in the production of crops are very largely also weather hazards, and it has seemed to me that it should be possible to provide the farmer with some measure of protection in connection with the annual investment that he makes in farm crops.

Turning to the present bill, if that is permissible, I want to say that I am in accord with the general principles laid down in that bill, and I have particular reference to the insurance or underwriting features of the bill. I have had no direct personal experience in connection with the warehousing of farm commodities and have given no great amount of study to that question; neither have I made any special study of the management question that is involved in this bill, and if my opinion is worth considering on any phase of it, I think it would be on the direct insurance or underwriting principles involved.

It has been my opinion for a great many years, as I could prove by some of the things I have written, that the most practical form of crop insurance is perhaps what might be called "yield insurance," rather than income insurance, and the present bill, as I understand it, is intended to provide yield insurance on a sane and conservative basis. There are only one or two places in the present bill where I think it is a little unfortunate in the wording. I don't know whether would care to have me point that out.

Senator POPE. We would be very glad to have you point it out. Mr. VALGREN. I am inclined to the view that the intent of that wording is correct, but it does not state the intent, as I see it, very accurately. I have particular reference to lines 8 and 9 on page 7 and lines 19 and 20 on the same page, where it attempts to lay down the principle in line with which appraised yields shall be determined and the rates for premiums shall be determined. It seems to me that what the bill should say on that point is that the board should attempt to arrive at an appraised yield for each insured farm, which may fairly represent the probable future yield. That, as I understand it, is the real purpose.

It seems to me that the board could comply with the provision of the present bill that the average yield fixed for farms in the same area, which are subject to the same conditions, shall be fair and just, without having it fair and just as between two farms located in different areas. It should be fair and just as between all the farms insured.

Senator POPE. Have you thought of any language that you might suggest to accomplish the purpose you have in mind?

Mr. VALGREN. I have suggested the language right here, if you care to take it, Senator.

Senator POPE. Well, in order that we may have it correctly in the record, just indicate by line and page the wording that you suggest.

Mr. VALGREN. I would suggest that lines 8, 9, and 10, on page 7 be made to read as follows, beginning perhaps with the word "board" in line 7:

the board may prescribe to the end that the appraised average yield fixed for each insured farm may fairly represent the probable future yield.

I am not sure that that is the best wording, but I think that it states the purposes somewhat more accurately than the present wording.

Senator SCHWELLENBACH. Will you give me that fully now?
Mr. VALGREN (reading):

the board may prescribe to the end that the appraised average yield fixed for each insured farm may fairly represent the probable future yield.

Senator POPE. Now, would you begin on line 4, at the beginning of the sentence, and read it down to the end of that sentence? I think that would make it a little clearer. Read the entire sentence amended as you suggest, beginning on line 4.

Mr. VALGREN. Or would it be as well then to begin with the beginning of that sentence?

Senator POPE. The beginning of line 4 of this print is the beginning of that sentence. Well, beginning at the beginning of the sentence in whatever line it appears.

Mr. VALGREN. I would have that sentence with reference to fixing the amount of coverage for each individual farm and beginning with line 4 read as follows:

Such insurance shall cover a percentage, to be determined by the board, of the recorded or appraised average yield of wheat on the insured farms for a representative base period, subject to such adjustments as the board may prescribe, to the end that the appraised average yield fixed for each insured farm may fairly represent the probable future yield.

Senator FRAZIER. Then, do you mean to base it on just the yield of that particular farm or all farms that are insured?

Mr. VALGREN. No; let me say that this particular provision in which I suggested that amendment involves the board's right and duty to adjust the average yield that they find for a given farm in such a way that it may be fair and just.

Senator FRAZIER. Where a farm is in that area, according to the language of the bill here.

Mr. VALGREN. Well, it must be fair and just, not only as between two farms in a given area but as between given farms in different areas also.

Senator POPE. Under the language that you suggest, the idea that Mr. Frazier evidently has in mind would be considered. You would not only consider the history or record of the yield of this particular farm, but you would take into consideration perhaps the average yield of farms in that region?

Mr. VALGREN. Yes.

Senator FRAZIER. According to your statement it would be just on this particular farm, as I understood your reading.

Mr. VALGREN. No; I think not. I did not aim to change the method at all, as I think this was intended to imply, but simply attempted to make this state what I believe was intended.

Senator POPE. Well, what the Senator has in mind, evidently, is that you have taken out the language in lines 8 and 9 "average yields fixed for farms in the same area".

Mr. VALGREN. Yes. I do not believe that that statement is broad enough to cover the principle that should be laid down.

Senator SCHWELLENBACH. Do you object to the principle of taking the farms in the area into consideration in fixing the rates? Mr. VALGREN. No; they must be

Senator FRAZIER (interposing). Wouldn't you get at it better, than, by, instead of substituting as you have, adding another sentence in there, saying that in fixing the rates for the area they must be fair and just as compared with other areas?

Mr. VALGREN. I think it could be done that way, by adding another sentence. I simply feel that the present statement does not cover the situation completely. It compels the board to have it just as between two farms located in the same area with similar hazards. It says nothing about farms located in different areas.

Senator FRAZIER. For instance, out in the State of the Senator from Washington, the yield is 40 or 50 bushels to the acre, not an uncommon yield out there, but in the hard spring wheat areas the average is much less than it is out on the west coast, especially in the winter-wheat area. So what would be an average yield out in Washington would be twice as much as the average yield in North Dakota. Mr. VALGREN. Certainly.

Senator POPE. Would you take into consideration in fixing the average yield on a given farm not only the yields of the farms of like character in that community, but would you go out into other communities, as suggested by Senator Frazier, and take into consideration the yields of farms or the average yield in the other communities or other regions?

Why is it

Mr. VALGREN. No; I would fix the coverage, the amount of insurance, as the percentage of the average yield of each given farm as nearly as that can be determined, but inasmuch as the records that we now have of average yields cover only 6 years, the appraisal arrived at by taking into consideration the yield only on that farm for a 6year period must in some cases be modified by the average yield for a broader area, as I understand the present bill intends.

Senator FRAZIER. I think we all agree with that statement. Senator POPE. But now suppose that on a particulrar farm there have been several years in which it happened that you had tornadoes or hail, and the history of the yield on that particular farm would be very low. Because of these unusual hazards during that year, that series of years, it was our idea that we should not hold the man strictly to the average yield of the farm under those circumstances but would take into consideration the average yield for other farms in the community in order to fix an average or appraised yield for his particular farm. Isn't that your idea?

Mr. VALGREN. Yes, exactly. That is, I think that when such a case arises as you have just cited, Senator, then the board must make such adjustments as it may find necessary, in order that the appraised average yield fixed for each farm may fairly represent the probable future yield.

Senator POPE. And in making the adjustments you will take into consideration the average yield for farms in the same area?

Mr. VALGREN. Yes; I would.

Senator SCHWELLENBACH. But what relationship is there between the average yield in North Dakota and in the State of Washington?