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One committee, on which I want you to serve as chairman, and in your absence Dr. A. G. Black, Chief of the Bureau of Agricultural Economics, is to work out a plan of crop insurance. The other, which is to succeed the temporary Great Plains drought-area committee, is to work out plans for a land-use program for better permanent protection against drought.
The Crop Insurance Committee will consist of yourself and Dr. Black; H. R. Tolley, Administrator of the Agricultural Adjustment Administration; Wayne C. Taylor, Assistant Secretary of the Treasury; and Ernest G. Draper, Assistant Secretary of Commerce.
The Crop Insurance Committee is directed to prepare a report and recommendations for legislation providing a plan of "all risk” crop insurance. In preparing its report, the committee should utilize the extensive crop-insurance studies now being made in the Department of Agriculture. Final recommendations for legislation should be formulated with the advice and assistance of national farm organization leaders so that the plans can be submitted to Congress with the approval and support of the representatives of the farmers. I suggest that it may be found wise for the first year to limit the application of the plan to one or two major crops as a start. My general suggestions to your committee follow:
In the past 372 years, the Government has helped farmers to meet emergencies of two kinds. The first was a collapse of prices resulting from huge surpluses for which the foreign markets disappeared. The second was a failure of crops in wide areas resulting from drought. Each of these emergencies, except for Government action to assist farmers, would have had devastating consequences to consumers and business as well as to farmers.
The time has come to work out permanent measures guarding farmers and consumers against disasters of both kinds. Crop insurance and a system of storage reserves' should operate so that the surpluses of fat years could be carried over for use in the lean years.
Measures of this kind should make three important contributions to the general welfare of the country as a whole; first, protection of the individual farmer's income against the hazards of crop failure or price collapse; second, protection of consumers against shortages of food supplies and against extremes of prices; and third, assistance to both business and employment through providing an even flow of farm supplies and the establishing of stability in farm buying power. Since 1933, the Agriculture Adjustment Administration payments have proved their usefulness to agriculture as well as business in assuring farmers some income both in time of price collapse and in time of crop failure.
I have been impressed by the work of the Department of Agriculture in developing actuarially sound methods for affording farmers the use of the insurance principle in protecting them against hazards which for centuries have handicapped their occupation. I am especially interested in its studies of a plan providing for the payment of premiums and insurance in commodities. · This should make it possible to base the premium rates on the productivity of the individual farms as shown by records of past production a large number of which the Agriculture Adjustment Administration county committees already have on file. This method should avoid making farmers of one region pay for the risks of another region. By making this insurance available only to farmers cooperating in farm and soil conservation programs, the plan would be safeguarded from the price dangers which the Federal Farm Board operations invited in the years from 1929 to 1932. By using existing records of cooperating farmers and farm committeemen it would appear that premiums based on risk experience could be as fairly assessed as with existing forms of private insurance.
The expense in the past to Federal, State, and local governments of burdens caused by drought shows it is time to begin using the economical principle of insurance to lessen the financial and human costs of drought in the future.
There should be.no question that the welfare of the entire Nation would be served by including, as keystones of our agricultural policy, crop insurance and storage of reserves along with conservation of soil and water, better land use, and increased farm income...!
Crop insurance properly worked out should give adequate abundance to consumers even though there are several years of severe drought while at the same time farmers would be protected from the low prices like those of 1932 which might result from several years of good weather.
I am sending similar letters to Administrator Tolley, Assistant Secretary Taylor, Assistant Secretary Draper, and Dr. Black. 2.1. Very sincerely yours," ve
(Signed). FRANKLIN D. ROOSEVELT. .
TABLE 3.—Net Federal expenditures for agricultural relief during the 10-year period
ending June 30, 1936 1
(1,000 dollars) I. Data supplied by Farm Credit Administration:
Amount Farmers' seed-grain loans, 1921–22.
551 Farmers' seed-grain loans, 1922–23.
337 Farmers' seed and feed loans, New Mexico, 1924–25.-The hurricane loans, Florida, 1926.
135 Loans to farmers in storm-and flood-stricken areas, southeastern States, 1929–30------
1, 004 Loans to farmers in storm-, flood-, and drought-stricken areas, 1930–31.--
1, 674 Loans to farmers in storm-, flood,- and drought-stricken areas, Southeastern States, 1931-32-----
567 Agricultural credits and rehabilitation, Emergency Relief, 1931–32.------
5, 216 Loans to farmers in drought- and storm-stricken areas, Emergency Relief, 1931-32----
------------------- 10, 799
---- 62, 557 Subtotal.---
-----------II. Data supplied by Federal Emergency Relief Administration:
Loans and relief in stricken agricultural areas (transfer to
Federal Emergency Relief Administration, grants to States)
-- 181, 095
78, 615 Subtotal.
259, 710 III. Data supplied by Department of Agriculture:
Loans and relief in stricken agricultural areas (transfers to
IV. Data taken from published reports of Treasury Department:
Emergency Relief, Resettlement Administration, rural rehabi-
tation and relief in stricken agricultural areas.---
stricken agricultural areas through loans and grants.--
stricken agricultural areas.--.
67, 880 19, 448 4, 065 14, 471 12, 204
Grand total. 1 See accompanying memoranda,
TABLE 4.—Net Federal expenditures for agricultural relief during the 10-year period
ending June 30, 1936, by States 1
[In thousands of dollars]
EXTRACTS FROM MEMORANDA ACCOMPANYING TREASURY DEPARTMENT STATE
MENTS OF EXPENDITURES FOR AGRICULTURAL RELIEF The accounts were selected with the specific view of including only those which might be eliminated were an adequate system of crop insurance in force. Such activities as drought relief, flood relief, storm relief, seed and feed loans, forage loans, crop-production loans, rural rehabilitation, and grants to States for rural rehabilitation seem to fall rather cleraly into this category. It is possible, however, that some of the selected accounts may include activities not concerned with agricultural relief. It is conceivable, on the other hand, that other accounts. which, by their titles, would appear to include no agricultural relief, actually represent to some extent either loans or grants for relief to farmers. These questions can be cleared up only by an exhaustive analysis with the assistance of the respective agencies.
Administrative expenses for agricultural relief present a special problem. To some extent they are included in the selected accounts covering loans and grants, but available information is not sufficient to segregate them. They are also handled through specific appropriations. In addition, such expenses are ina
cluded to some extent in regular appropriations made for administrative expenses of the respective agencies. It is impossible to determine the amounts handled in this manner without reference to the various agencies, and the table is incomplete in this respect.
It must be emphasized that this statement must be considered only a rough compilation and analysis of the appropriations and expenditures for agricultural relief. More exact and conclusive data can be obtained only through exhaustive examination of all appropriations and expenditures by the various agencies. It is impossible to include a break-down into loans and grants, though it is likely that loan repayments in the future will reduce the net amount of expenditures to some extent. No attempt has been made to compute the amounts of interest which have been paid on loans, or which might be paid in the future."
It should be pointed out that any attempt to determine what expenditures might have been eliminated had crop insurance been in force must depend on the particular system of crop insurance under consideration, and the figures in the statement must be used with this qualification in mind.
Data for the accounts in group I were supplies by the Farm Credit Administration. The first four accounts represent activities undertaken prior to the period under consideration, but are included because the Farm Credit Administration reports that it is impossible to segregate them on a State basis from the later accounts. This discrepancy is unimportant, however, as the total amount involved is only $1,167,000.
In group HI the figure reflects net expenditures up to November 30, instead of to June 30, but this difference is unimportant since expenditures between the two dates amounted to only about $250,000.
Group IV includes all of the accounts financed from funds provided by the Emergency Relief Appropriation Acts of 1935 and 1936. The figures were obtained from published reports of the Treasury Department. The account “Emergency Relief, Farm Credit Administration, emergency crop loans" is the only one in the entire statement showing expenditures in the District of Columbia; all of the amount so shown is for administrative expenses.
The qualifications described above and in the previous memorandum make it desirable to emphasize that this statement should be considered only a rough compilation of Federal expenditures for agricultural relief during the 10 years ended June 30, 1936. The data have been taken from various sources and are not strictly comparable. Nevertheless, the statement is believed to be substantially representative of the facts.
FIGURE 3.- Relationship between the insurance coverage per acre and the average annual indemnities that
would have been required per acre, 1930–35.1
1 Based on a sample of 75 farms with insurance coverage being 75 percent of the 6-year average yield on the insured farm.
In these charts there appears to be little relationship between the amount of insurance and the average annual indemnities required per acre. For the county in central Kansas the average insurance coverage would be about 8 bushels and the average annual indemnities something over 142 bushels. But those farms with insurance coverage in excess of 8 bushels show in general no different amount of indemnification per acre than farms with less than 8 bushels coverage.
For the county in Texas the insurance coverage would on the whole be lower and the indemnities per acre somewhat higher than for the county in central Kansas. But, as in the Kansas county, farms with cov. erage greater than the average appear, in general, to require about the same amount of indemnities per acre as farms with low coverage.