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deal to the farmer may be devised and applied as an implement to those farm programs now in effect.

The more important farm programs now available are:

A. The Soil Conservation and Domestic Allotment Act, which provides income to participating farmers for agricultural conservation and for some degree of production control.

B. The Commodity Credit Corporation—which has the funds and the power to make loans upon stored agricultural commodities for the purpose of increasing farm income by attempting to create fair prices.

C. The impounding of 30 percent of the customs receipts as financial assistance to the A. A. A. for the provident distribution of burdensome supluses of agricultural commodities.

All farmers producing wheat for sal have a common interest in one or all aspects of the new and additional farm program here under consideration,

To protect the income of all wheat producers, we may contemplate the following important aspects:

1. Adjustment of production.

2. Ever-normal granary. Efficient warehousing of wheat premium 'reserves and the storage of wheat for deferred sale---awaiting demand at fair prices.

3. Reasonable loans against stored wheat upon à collateral basis and made in relation to a fair price, rather than a speculative price.

4. Yield insurance upon a coinsurance basis.
5. Provident disposal of burdensome surpluses.

6. Requirement of adherence (excepting special cases) to the agricultural conservation program and acceptance of yield insurance as part of the qualifications for eligibility to the benefit of the ever-normal granary fair-loan program.

7. The administrative expenses and warehousing costs with a very substantial portion of yield insurance costs to be borne by the Federal Government until such time as a system of production and distribution of wheat has been effectuated which will permit the producer to manage and conduct his business and enjoy the degree of social security indicated by the President in his letter to the Crop Insurance Committee and his repeated statements to the electorate.

The temporary committee for this Wheat Conservation Conference has attempted to outline a most general five-point program in an effort to meet what we believe to be the needs of wheat growers and within the general views expressed by the President as a further step toward social security for the wheat farmer and a fair deal to consumers, as follows:

1. Assumption of responsibility by the Federal Government to provide adequate capital to establish the program.

2. Appropriation for acquisition and maintenance of warehousing facilities. 3. The program to be administered by a corporation. 4. Voluntary but capable of integration with other farm programs. 5. Cover all unavoidable hazards.

(Signed) M. W. THATCHER,

Chairman.

Members of the Wheat Conservation Conference meeting in Washington, D. C., December 2–3, 1936: Anderson, J. Edward, Buffalo, Minn., secretary-treasurer, Cooperative Union

activities, Minnesota. Buettel, C. A., Burlington, Colo., president, Colorado State Farm Bureau. Cordeal, John F., McCook, Nebr., director, Farmers National Grain Corporation. Cummings, Art, Fowler, Kans., Wheat Farmer-Meade Co., director, Kansas

Farm Bureau. Dodd, N. E., Baker, Oreg., wheat grower, on State Agricultural Adjustment

Administration board.
Daheny, L. W., Brady, Mont., Montana Farmers Union,
Ehermountraut, Plentywood, Mont., State soil conservation commission.
Everson, E. H., St. Charles, S. Dak., National Farmers Union, national president.
Fine, C. W., Sheyenne, N. Dak., representative, Farmers Union.
Fosheim, Oscar, Howard, S. Dak., Farmers Union..
Gall, Emil, Bellefont, Kans., President, Farmers Cooperative Commission Co.,

Hutchinson, Kans.
Gentry, Lee M., Oregon, Ill., Agricultural Conseryation Committee.
Hague, Lyle L., Cherokee, Okla., Oklahoma Grain Growers Association.
Harman, D. J., Fleming, Colo., Śtate soils conservation committeeman.
Henry, Howard I., Westhope, N. Dak., member, Farmers Union.

Hobbs, Geo. W., Kansas City, Kans., Farmers Union.
Hodgson, E. H., Little River, Kans., member, Farm Bureau.
Huff, C. E., Chicago, Ill., Farmers National Grain Corporation.
Patton, James G. Denver, Colo., Colorado Farmers Union.
Hyde, C. H., Alva, Okla., copresident, Farmers Union.
Johnson, Ambrose W., Nampa, Idaho, State soil conservation commission

(Idaho).
Lassen, S. H., Brookings, S. Dak., State member, soil conservation commission.
Loriks, Emil, Arlington, S. Dak., president, South Dakota Farmers Union.
McGregor, John M., Hooper, Wash., wheat grower.
Maddock, Walter, Plaza, N. Dak., Farmers Union Terminal Association of

St. Paul. Mayhugh, L. T., Amarillo, Tex., Texas Wheat Growers, Inc. Montgomery, A. H., Darrouzett, Tex., member, State agriculture conservation

commission. Novak, Anton, Alexander, N. Dak., Farmers Union Live Stock Commission Co. O'Connor, D. L., president, Farmers Union Terminal Association, St. Paul,

Minn. Preuet, W. H., Wheatland, Wyo., Wyoming Farm Bureau. Praeger, H. A., Claflin, Kans., chairman, State soil conservation committee. Reed, George G., Pine Bluffs, Wyo., Wyoming State committee, soil conserva.

tion. Schooler, H. N., Brookings, S. Dak., chairman, South Dakota Agriculture Con

servation Committee. Shumway, A. R., Milton, Oreg., North Pacific Grain Growers. Stryker, Alva, BÍue Rapids, Kans., president, Marshall County Farm Bureau. Talbott, C. C., Jamestown, N. Dak., president North Dakota Farmers Union. Torpinger, Homer, Salina, Kans., Farmers Union. Thatcher, M. W., Washington, D. C., Washington representative, Farmers Na

tional Grain Corporation. Thompson, A. M., Cogswell, N. Dak., Northwest Grain Association. Tharp, E. G., Comanche, Kans., Comanche Farm Bureau. Wallace, Fred, Lincoln, Nebr., chairman, Nebraska Agricultural Conservation Committee.

FURTHER STATEMENT BY MR. THATCHER In view of the suggestion in the report of the President's Crop Insurance Committee that crop insurance for wheat would contribute something toward reducing Government expense for farm relief, I have looked into the probable size of indemnity payments in some of the large wheat-producing States. Since there is a general appreciation among farmers as to what payments under the Agricultural Adjustment Administration program meant in protecting them against a complete loss of income, I wish to direct attention to the results of a study of Agricultural Adjustment Administration records that I have made and had checked. The sole purpose of the figures I shall call attention to is to emphasize the possible size of indemnity payments in years when they are nost needed. Of course such payments being mainly for insurance purposes will not be the same figure each year but will be largest when losses are largest and the grower is in greatest need.

POSSIBLE NET INDEMNITIES IN LARGE WHEAT-PRODUCING STATES The reasons for benefit payments under the original Agricultural Adjustment Administration Act were so different from those back of the main purpose of crop insurance that there is no direct comparison of payments under the two plans. However, as the benefit payments under the Agricultural Adjustment Administration did serve to insure the farmer some income even if he had no crop, it is of interest to note the size of probable insurance indemnities in years of heaviest losses alongside the annual payments under the Agricultural Adjustment Administration in the case of a few of the largest wheat-producing States.

The probable indemnities shown in the following table are based on the assumption that all wheat acreage is under insurance, whereas not 100 percent was signed up under the Agricultural Adjustment Administration. This should be noted in attempting to apprize the size of insurance benefits in the years of heaviest losses. It is also to be noted that loss payments under insurance will naturally be where wheat production is the most extensive and premiums and losses are greatest. The figures shown, however, are net, or the amounts in excess of premium payments that would be paid out to producers.

Estimated net indemnities in years of largest crop losses compared to estimated adjustment payments on wheat in the same year under the Agricultural Adjustment Administration program for wheat

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Estimated net indemnities in years of largest crop losses compared to estimated adjustment payments on wheat in the same year under the Agricultural Adjustment Administration program for wheat

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This table is with the same percentage of acreage under insurance as was under contract in Agricultura Adjustment Administration instead of counting 100 percent of acreage as in table I.

Mr. THATCHER. I thank you very much for this opportunity.

Senator POPE. Now, a few days ago, Mr. Green, who testified before the committee, prepared a memorandum on one or two points that have been raised by members of the committee.

Mr. Green, I would be glad to hear you now on that matter.

STATEMENT OF ROY M. GREEN, CHIEF OF DIVISION OF AGRI

CULTURAL FINANCE, BUREAU OF AGRICULTURAL ECONOMICS, DEPARTMENT OF AGRICULTURE

Senator PoPE. Mr. Green, in order that those who are present may know what position you occupy, you might state to the reporter again your official position.

Mr. GREEN. I am in charge of the Division of Agricultural Finance, Bureau of Agricultural Economics, Department of Agriculture.

Now, I prepared a brief statement in regard to that question that has been up a number of times, and a question that has been brought to us a number of times with regard to grain reserves that are being stored against insurance liabilities; and as that came up again today, your chairman suggested that I might just read this statement:

As your chairman has indicated there are prevalent two views with respect to the relationship between grain reserves against insurance liabilities in the plan being discussed and market supply of wheat. One view is that unless in good crop years farmers are permitted to deposit premiums for several years in advance, the grain reserves built up in good crop years will not withdraw enought wheat from trade

channels to be the price-sustaining influence it should be. The other view is that the building up of reserves in a succession of good crop years will create such a large reserve as to form a constant threat to the market. A few additional remarks on the subject, therefore, may be in place that this time.

It is a foregone conclusion, as several witnesses have pointed out, that if more wheat is produced than the domestic and foreign markets can consume, that the carry-over of wheat will be built up. That will be true whether there is crop insurance or whether there isn't. That is a production and marketing problem to be taken care of in any complete agricultural program. The question with respect to grain reserves in connection with crop insurance is whether they will add to or subtract from the difficulties.

It is first to be observed that the premiums paid in any year will be partly consumed in the payment of the losses of that year. Only the balance will be available for the purchase of reserve stocks of grain.

Senator POPE. It would be expected in any year, even with good crops there would be a certain amount of indemnities to be paid.

Mr. GREEN. Yes, that would be true, and even though there are areas like Illinois and Ohio where they have steady production, they will not be so much interested in insurance and in losses, yet, if you refer to the seed loan record you will find that practically every State in the Nation, including Rhode Island 1 year, had some seed loans at least 5 years out of the last 11 or 12. So that even in the good States there was some losses.

I believe it was 1928 when Illinois had a winter kill to the extent of 5 or 6 percent in some of their counties.

The heaviest premiums will be paid in those areas where annual losses average the largest. It should be the policy to maintain grain reserves as near areas of probable loss as practical and in such quantities as loss experience indicates may be necessary. Increased premiums from any increased acreage will merely offset increased insurance liabilities. Partial or only a percentage coverage, and coordination with the soil conservation program further restrict possible building up of reserves.

It therefore appears that the chief danger is from that portion of production that is for sale, and from acreage outside the insurance plan rather than from the insurance reserves. The premiums used in building up reserves are taken in at the market and do not therefore obstruct the flow of wheat into consumption except to the degree that the removal of a part of supplies from trade channels in good crop years raises prices. Even here the competition for supplies is only that necessary to cover most probable future crop losses. Only more good crop years in succession than usual and fewer bad crop years would build reserves in excess of loss liabilities. This would mean premium rates were too high and should be lowered somewhat.

Now with regard to the second viewpoint, which is concerned mainly with the disposal of reserve stocks of grain. To the extent that premium rates are accurate, to that extent, there was a predetermined outlet for the wheat stocks when they were put there, namely, to meet future crop losses.

If, as suggested, the policy of maintaining reserve stocks of grain near the area of production is followed, the price effect of disposal of stocks in short crop years will be absorbed partly in market differential

adjustments between local and terminal points rather than completely as a change in the basic price.

Now, what is meant by that, I can point out by this example. As an example, disposal of wheat stocks held at Dodge City, Kans., and you are going to find higher rates in southwestern Kansas, if you follow the plan of storing those stocks as near points of production as possible. You would expect in Kansas a fairly sizeable share of your stocks to be Dodge City, Hutchinson, and Wichita, that territory to which southwestern Kansas is tributary. But to repeat, as an example, disposal of wheat stocks held at Dodge City, Kans., in a year of subnormal wheat crops in that area would tend to put the local price at nearer 12 cents under Kansas City, the normal shipping difference, rather than leave it at only 6 cents under or less than the shipping difference as is the case now in years of short crops locally.

Farmers with insurance would have something to sell at this price whereas, now even though the local price is high, most farmers have little or nothing to sell in the bad crop years. Such price stability would be in line with progress that improved transportation, financing, storage, and other instrumentalities have made possible toward lessening the disturbing effects of local surpluses and shortages. I think the point to be considered even in those short crop years when you are disposing of that surplus you will be disposing of it in a territory where the loss was high and a lot of price increase will be observed by charging the differential rather than completely depressing the central market or basic price and that has the effect of keeping that local point nearer the steady relationship to the central market. It does not go up in position with 1 year as normal shipping, and at the end of the crop year, a similar shipping distance and therefore the mills or industries in that section as well as the farmer has to put up with that fluctuation due largely to local surpluses and shortages.

Furthermore, a large share of the wheat now carried over from one crop year to the next is mixed to a grade deliverable on future contracts, and is hedged in these futures. Bankers require that before they will permit the wheat to be carried over from one year to another, it is mixed down to the contract grade so it can be hedged. Otherwise, they are part of the losses that might be impaired by carrying wheat 2 percent premium over the future and in 3 months it may be down to the future or not.

Financing requirements that this wheat carried over be hedged leads to this situation. The insurance reserve stocks of train could be kept much more suitable for the mill trade. This would apply particularly in the spring-wheat and hard-winter wheat areas. Soft-wheat areas to the east and northwest would gain from having some of the wheat in the spring- and hard-winter wheat areas removed from the market in good crop years. When there is a good crop over the spring- and hardwinter wheat areas, it usually means a large total crop. In years of short crops the shortage is most extensive in the spring and hard winter wheat areas as a general rule. Reduction of storage stocks in those areas to pay losses there would tend to reduce differentials between the different wheat areas to a greater extent than it would act as a general price-depressing influence.

Considering then what has been said and the fact that there is no overbidding the market to induce supplies to be dumped onto the insurance corporation, I am inclined to the first-mentioned view, that the major problem, as far as the insurance program alone is concerned, will be getting volume of wheat stocks large enough in good crop years

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