It does seem to us, however, that approached from an insurance standpoint, its success depends upon almost entirely, not so much upon what you outline in the legislation, as what is done by the corporation that is set up.

Our experts who met with the Department were impressed with the volume of data which was available in connection with wheat, and felt that a workable rate program could be developed on an equitable basis, which from an insurance standpoint would be sound. Whether or not placing so great a weight on the individual experience, so to speak, of the farms, as modified by the experience in the surrounding territory of a county or so, will produce in certain sections a rate so high as to discourage voluntary applications for the insurance, is a question subject to debate.

My personal feeling was that in certain territories, even limiting the farmer in what he has to pay, the cost, the loss cost, and the bare administration cost of the committee, would still produce a very high rate. Now, insurance has, because of some experiences, some misgivings as to the possibility of ultimate success. We perhaps share in that in a measure, but we do feel that inasmuch as this is a much broader question than that of insurance, and is part of a tremendous problem which we all ought to cooperate in working out, that these farm companies, especially those in the hail field that have been dealing with the farmer in one part of his coverage and his growing crops, can assist very materially when the corporation is set up in the practical working out of the insurance plan in the States.

Senator POPE. Do any of these companies insure against tornados? Mr. GRUHN. Yes, there is tornado insurance, and windstorm insurance, but the information that I have is based purely on the hail insurance, and I was interested to find that in the States I have mentioned, and the greatest volume of data comes from Iowa.

Senator FRAZIER. That is on buildings and not on crops, of course. Mr. GRUHN. These companies that I am speaking of have not sent me the information if they do write tornado insurance on farm buildings, and what information they have sent me is on hail insurance, and in connection with hail insurance on growing crops.

Senator FRAZIER. We have had tornado insurance on buildings in North Dakota.

Senator POPE. That applies only to the farm buildings?
Senator FRAZIER. Yes.

Mr. GRUHN. But the 13 companies reporting to me, reported on losses on hail insurance and in the last 6 years just in the limited territory, of three and a half million dollars. I would guess that there is only a small volume in connection with wheat, in that amount, but I think, of course, these exclusively hail companies that have been built up by farmers and have served farmers in this capacity for many years, are naturally somewhat concerned as to the effect of the program, on what they have built up, but nevertheless, as the gentlemen back of me will testify, they appear perfectly willing to cooperate with the Department, and with the committee, and I am sure will cooperate with you in an attempt to work out a satisfactory

program.

Senator POPE. I suppose that if this should interfere with their hail business, since they are losing a substantial amount of money, they wouldn't very seriously object.

133719-37-9

Mr. GRUHN. That wasn't the amount of losses, from the standpoint of the statements, the financial statements side of the companies' operation, and the amount of losses paid to growers covering hail during that period.

You will understand that these farm companies are nonprofit companies, operating principally on the assessment plan. Their expense ratios are very low, and their principal outlay is in connection with losses, such inspection services and adjusting services as go with that. Senator POPE. The losses refer to the losses paid.

Mr. GRUHN. Yes. They have found, at least some of the farm companies' secretaries, report to me the very natural inclination to insure at times when there has been a disaster, and ride along at other times, and the sale problem, of course, has been a very difficult one, even in that limited connection. So rates do play a very important part, and the natural inclination of the individual to take a chance does also. Senator SCHWELLENBACH. Do you know what the loss ratio was on that?

Mr. GRUHN. Over all companies?
Senator SCHWELLENBACH. Yes.
Mr. GRUHN. No, I don't know.

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Senator POPE. Now, Mr. Gruhn has offered very generously to supply the committee with any data that he has, or he can obtain, and I wonder if the members of the committee have any thought as to just what data would be of help to us here. I was anxious to have this general statement of Mr. Gruhn, as to the attitude of his companies, and as to any opinion that he might have on this sort of operation.

Does it occur to any of you that we might benefit by any further data from his companies?

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Senator SCHWELLENBACH. I would like to ask him about this: Mr. Gruhn, we have had some suggestions made to us that might be thought desirable in certain parts of the country, to add other agricultural products than wheat, and the testimony of the Department is that the statistics that they have on other crops are meager, that is, that they have available at this time, and they feel that they have on a sufficient basis as far as wheat is concerned, or at least, will have by the middle of the year, to prepare to start in 1938.

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I would like to ask you as an insurance man the extent to which you consider it important in proper underwriting to have this data. Mr. GRUHN. We have said from the beginning, and I believe I made the statement at the meeting with the President's committee, that it was the part of wisdom to limit the prorgam in the beginning to that crop, in connection with which the greatest volume of data was available.

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Now, we in the insurance business consider that very important, because the insurance companies, and the success of insurance companies, and the success of any insurance scheme, depends upon the adequacy of the rate, and its dependability, and of course that depends on the data which is available.

Now, if you base your program largely upon guess, you endanger the plan by reason of the fact that you start out on an inadequate rate basis, and in certain territories, and then when you attempt later to lift the rate to the level which it should be, you meet with a resistance of those who were favored with the inadequate rate in the beginning, and if you start out on too high a basis, of course, your plan falls because no one is interested in paying what they regard as too much.

Now, the superintendent of insurance of the State of New York, who has had considerable experience in connection with the failures of insurance companies, has made the statement that in practically every case of an insurance-company failure, the rates played a large part, and in my opinion this plan-of course, there are other considerations, but will largely succeed or its failure will be due to the adequacy and the equity of the rates which are promulgated.

It was our suggestion at the time that with wheat, with the volume of data that was available, you could develop a workable plan which would in a very short time bring additional experience which would enable the adding of other crops.

As Dr. Valgren has said, if private insurance has failed in the matter of crop insurance, that was largely due to the limited extent that it was tried out because of lack of experience, and lack of data, and perhaps engaging in the activity at a time when this disaster happened before. Now, you may hit a year or two when things will go along swimmingly and start the thing off on a very even and successful basis, and you might again find the first year or two very difficult, but I wouldn't do much tinkering with the rates for several years, until you have gotten a pretty good volume of experience.

In my opinion, the principal difficulty is going to be with the socalled experience rating, and that you will find a little interest in the plan, in the low-hazard territory, and you will find in the high-hazard territory the necessity of charging rates again, to use insurance terms, which would make the plan rather unattractive to many from that standpoint.

It is a real problem, and it is one which we don't envy the Department of Agriculture experts having, but we think that they need all. of the help that they can possibly get, and they are entitled to it, and we are prepared to do just that within the limits of durability.

Senator POPE. They had have some very difficult problems, of course, in the administration of the Agricultural Adjustment Act, and in the present Soil Conservation Act, so I presume they are not unaccustomed to problems.

Mr. GRUHN. I am sure not, but our experts who met with the committee were very much impressed with the reliability of the data, and with the approach to the problem by those in the Department charged with the responsibility of meeting it, and felt rather secure in the belief that it could be solved, and it could be worked out.

Senator POPE. That is very interesting, and we are very thankful to you.

Mr. GRUHN. If you want any of these men here who have the prac tical experience in the hail field of insurance of crops, and some cover

all crops, and some a limited number of crops, and I would be very glad to ask a few of them to come down, secretaries of these farm companies, closely identified with the farm problem in their particular territories, and they may have something to offer which you might find of value, or at least interesting.

Senator POPE. Would it be convenient for us to have one or two men of that sort, say a week from today?

Mr. GRUHN. I could ascertain and let you know by tomorrow, if you would like to have that.

Senator POPE. Do you think that would be valuable?

Senator SCHWELLENBACH. Yes.

Senator POPE. Very well. If you do that, we expect to continue these hearings, and on next Monday and Tuesday we hope to close them, and during the coming week there are other hearings. I understand Senator Frazier has a hearing that will take place this week, and I will be out of town for 2 or 3 days, so that we expect to continue these hearings next Monday and Tuesday, and if you could have one or two of them here, perhaps that would be enough.

Thank you very much, Mr. Gruhn.

Now, Mr. Marsh, do you have some comment to make on this?

STATEMENT OF BENJAMIN C. MARSH

Mr. MARSH. My name is Benjamin C. Marsh, and I am appearing here this morning personally, because I have been very keenly interested in this problem of farming, having come down here exactly 19 years ago today, with the Farmers' National Council, which was a group of progressive farm organizations; so I am speaking purely personally. The organization with which I am connected as secretary, the People's Lobby, which does not appear in this, favored specifically a Government farming corporation, feeling rather emphatically that there are a great many farmers who cannot face the impossible situation themselves, and the Government must operate many farms, but I am not going to discuss that.

I merely state in passing, in order that I may make it clear that in raising some questions on this measure I am doing so because of my own personal interest, particularly as I worked with several others back in 1922, to get the investigation of the feasibility of crop insurance, and I would like to read a brief statement, if I may, and then elaborate on it, and raise a number of questions [reading]:

The Federal Government has an obligation to afford a chance to earn, or to maintain people, but it has no obligation to underwrite fictitious farm values at the expense of consumers, as it would under this administration bill.

The United States Department of Agriculture reports that in 1935 land rent for wheat lands was $189,060,640. It has increased somewhat and is probably nearly $200,000,000 this year. This rental, capitalized at 5 percent, means a wheat-land value of about $4,000,000,000.

The average land rent for wheat was $3.68 per acre and it amounted to 25.2 percent of the costs of production. The alleged purpose of the bill among other things, is "maintaining the purchasing power of farms." Of the seven stated causes of loss in yields, only threehail, wind, and tornado-are due to inscrutable Providence, while drought and flood are largely due to anarchistic practices of other

farmers even if not of the insured.

Wheat insurance and any other crop insurance should be limited to farms reasonably adapted to the crop insured, regardless of the market.

Secretary Wallace states that of the 610,000,000 tilled or tillable land in the United States "some 50,000,000 acres have been ruined as productive land and another 50,000,000 acres have been seriously damaged." Obviously to attempt to insure any crop on such land is futile, and the proposed wheat-insurance principles are apt to be cited as a precedent for insurance of other crops.

Insuring crops on ruined land is highly uneconomic and will be disastrous for the farmers whose crop is insured.

Measures to make fertile land available to farmers at fair rentals are necessary.

One result of the proposed plan might well be to drive small farmers off their land, and they could not meet carrying charges, and there are about one and a half million too many farmers in commercial production now, for our present economic set-up.

I want to state some of the reasons for reaching those conclusions, and raise questions, not in criticism of the bill, but as to how it is going to work out.

First, I would like to quote from this report of the President's Committee on Crop Insurance as to the objective.

Crop insurance would undoubtedly be of real value to banks, insurance companies, and other institutions extending farm credit.

It would be of vital importance to the farmer in maintaining his credit, following a crop failure, so that he might borrow for production need, in subsequent years.

Wheat crop insurance would probably find its greatest usefulness in the Great Plains States where it is perhaps needed the most, because of the wide fluctuations in yields, and where most of the Nation's wheat is produced.

Now, that raised a question in my mind when I read it as naturally I read this full report rather carefully, "What is back of this cropinsurance plan? Is it the idea of protecting the creditors of the farmers, or of insuring the farmers a given income?"

We are all practical enough to know that it isn't the number of acres of wheat or the number of bushels that you raise on a farm, but what you get for it that counts and what your money income is with a given standard of living, and the same way with labor. It isn't whether you get $2 a day of $3 a day or $5, but it is what you can buy with that income, and the real instead of the nominal or money wages count. It wasn't clear in reading this bill just how this thing was going to work out.

I would like to raise some, if I may-two or three specific questions which would probably be answered by the committee, or upon which you can get information, and I do it because naturally having been with the farmers' organization, and travelled from coast to coast, I am as perturbed as I know the members of this committee, without exception, are and the public generally, are perturbed over the situation.

For instance, the last speaker intimated one of the extremely difficult problems which was raised in the earlier and rather hasty inquiry into the question of crop insurance.

Take a farm--a wheat farm-in which wheat is the only crop covered by this bill-with a small yield per acre, and the farmer needs to sell in the best of years, in many of these farms, we all know, every